Economic recovery: you're doing it wrong
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30-11-2013, 10:14 AM
RE: Economic recovery: you're doing it wrong
@NoSkyDaddy,

It makes more sense if taken in context. Economists are normally number-crunchers. They just look at empirical data and decide what policies to implement. This is Keynesianism, and why Keynesians always insist the data is on their side. Friedman described Keynesian economics as: “What matters is spending, and what matters in particular is government spending and that government must play a major role in guiding the society... He [Keynes] was also an elitist and he believed that there was a group of able, public-spirited intellectuals who should be given charge of society.”

Most libertarians start out as philosophers of morality, focusing on a system that is fully reciprocal and morally just, or they're scientists who try to solve problems through logic and reason, with axioms being the primary tool. Austrian economists, like Hayak and von Mises, are classic libertarians.

Friedman, however, was different because he started as a Keynesian, crunching empirical data. However, Friedman discovered that his fellow Keynesians were cherry picking and altering the empirical data to support their pre-existing beliefs--not using the empirical data to find new truth. He concluded that if you look at the real, raw empirical data, without all the Keynesian "adjustments and filters", it does support the Libertarian view and validates the logic and axioms.

However, the one thing Friedman said the Austrians got wrong was monetary policy. Friedman looked at the horrible misery of the Great Depression and concluded that the fault lie with the Fed because it started out as a garden variety recession, but then the Fed shrunk the money supply, creating massive deflation and making the recession much, much worse than if there was no Fed. He said if the Fed was going to help, they should have done the opposite, a "helicopter drop" of money to inflate the money supply and prevent deflation. He said the Austrians were wrong for not wanting to leverage such a powerful tool as monetary policy.

Just months before his death, however, Friedman seemed to agree more with the Austrians when he said: "The temptation for government to lay its hands on that money is going to be very hard to resist. The fundamental problem is that you shouldn't have an institution such as the Federal Reserve, which depends for its success on the abilities of its chairman. My first preference would be to abolish the Federal Reserve. He also said "There is no institution in the US that has such a high public standing and such a poor record of performance... On the whole it has a very poor record. It's done far more harm than good." [1][2]


The 2008-2009 "stimulus" really was a classic Keynesian response, although the primary tool, QE, was in fact the "helicopter drop" that Friedman initially recommended. The problem with Friedman initial endorsement of it, imo, is it just focused on the data and didn't take into account WHO the helicopter would drop this cash on. Here is where the Austrians got it right. From Forbes: The 147 Companies That Control Everything

After analyzing the corporate records of 37 million companies, there were 43,060 trans-national companies, and if you tracked all the subsidiaries up the ladders to the parents, there were only 147 corporations that controlled 40% of the global wealth. Now look at who those 147 corporations are: They are the same companies that own the world's central banks.

The owner of England's central bank, Mayer Rothschild, famously said: "I care not what puppet is placed upon the throne... The man who controls Britain's money supply controls the British Empire, and I control the British money supply." The Rothschilds also wrote: "The few who understand the system, will either be so interested from it's profits or so dependent on it's favors, that there will be no opposition from that class." IMO, libertarians are so focused on monetary policy because we're the only group that doesn't fall into either camp. We study and understand the system, BUT, we have neither interest in its profits, nor are we dependent on its favors.

Now look at the 2008-2009 stimulus. Many of the major banks were near collapse because of mis-management. Then the "stimulus" happens, and within just a couple years, the US banking sector has record profit, earning $42.2 BILLION in one quarter alone. You have to ask yourself, 'Where did this money come from'? Did the US economy get bigger so the banks got all this money from GROWING the pie? Nope. Therefore, it wasn't new wealth, but just a redistribution of wealth. Who lost wealth during the "stimulus"? The poor and middle-class. The stimulus created no new wealth, it didn't grow the economy, it was just a massive transfer of wealth from the poor and middle class to the 1%, who now own 40% of the nation's wealth! Is this any surprise? That 1% owns the Federal Reserve, and all the world's central banks. And the central banks were implementing the stimulus. Can you really be surprised that they used this massive power to enrich themselves even more?
[1]

In the end I believe the Austrians were vindicated and the use of logic and reason is superior. It is simply a logical statement that when such incredible power to redistribute wealth is concentrated in the hands of so few, and they operate in secret, with no audits, no transparency, no accountability, it's inevitable they will transfer wealth to themselves.
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30-11-2013, 10:34 AM
RE: Economic recovery: you're doing it wrong
@frank
The stock market is a good indicator of the overall economy. It also factors in expectations of
investors about the direction of the economy. So other indicators such as employment tend to lag it.

The problem is not too much government spending.
The problem is that government is not Spending enough.
Are not raising the debt limit and sequestration Keynesian??

The opposite of trickle down economy is true. Put money in the pockets of poor people and they will
spend it and keep the economy going.
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30-11-2013, 10:40 AM
RE: Economic recovery: you're doing it wrong




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30-11-2013, 11:05 AM (This post was last modified: 30-11-2013 11:08 AM by frankksj.)
RE: Economic recovery: you're doing it wrong
@black_squirrel, thank you engaging. But please answer a couple questions to challenge these classic Keynesian assumptions

(30-11-2013 10:34 AM)black_squirrel Wrote:  The problem is not too much government spending.
The problem is that government is not Spending enough.

Well, in the 19th century, when the US had the greatest economic growth, government spending was 3% of gdp. Now it's 40%. You say that's not high enough. So how high do you think it should be? If raising govt spending from 40% to 50% is good, shouldn't it also be good to raise it from 50% to 60%? If it's a good thing and grows the economy, we should have more of it, right? Why stop if it's doing good. Let's go to 70%, then 80%, then 90%, and settle at 99%. That's the "maximum good", right?

Now ask yourself, if we did that, and only 1% of the population were in the private sector, and they had to pay enough taxes to cover the 99% who work for the government, and this 1% of the population also had to run all the restaurants, build all the homes, invent all the new technology, etc. How would that work?

If you stop and think this through and remember that the public sector COMES OUT OF the private sector, increasing the public sector only shrinks the private sector, so the burden of the economy is borne by fewer and fewer. How is this helping?

Now, let's assume that through increased efficiency the government was able to shrink its spending from 40% of gdp, to only 10%, while still maintaining the necessary government services we need. How would that work? If there are 100m people, and govt takes up 40%, that means 60m people need to make all the goods and services for all 100m, and those 60m need to pay taxes to support 40m. In other words, each person in the private sector has almost one whole person in the government they have to support. Reduce govt to 10%, and now you have 90m people making all the goods and services for 100m, and each person in the private sector needs to support only 1/10th of a person in the government.

See the way the Keynesian argument falls on its face is if you use logic and reason to isolate just the effects of government spending. Just assume for the moment the government can provide the necessary services regardless of whether it spends 1% or 99% of gdp. Then it becomes crystal clear that MORE government spending just places a larger burden. If the govt spent only 1% of the gdp, and the average income was $50k/year, everybody's taxes would be 1%, and everybody would have $49,500/year to live on. If the govt spent 99% of the gdp, then everyone's taxes would be 99%, and everybody would have only $500/year to live on. Which is better? $49,500/year to live on? Or $500/year to live on? You are advocating we grow government and head in the direction of $500/year' to live on. I'm advocating the opposite, we head in the $49,500/year direction.

The only reason there should be MORE government spending, is if there's some necessary service which the private sector needs, and which can be most effectively handled by government. But you and the Keynesians are never justifying extra government spending on those grounds. You just want more government spending regardless of what it's used for, without stopping to think that this just adds a burden to those you're trying to help.

(30-11-2013 10:34 AM)black_squirrel Wrote:  Are not raising the debt limit and sequestration Keynesian??

Sure, there was some tea party resistance. But who won? Was the debt limit raised? Is the government spending increasing, or decreasing? The Keynesians won.

(30-11-2013 10:34 AM)black_squirrel Wrote:  The opposite of trickle down economy is true. Put money in the pockets of poor people and they will
spend it and keep the economy going.

BOTH trickle down and trickle up are ridiculous. Let's say the government said "we're going to an extra zero to everybody's bank account". Now everybody with $1k has $10k, and so on. Is that growing the economy? Are there any more factories, jobs, inventions, etc., after adding this 0? No, the wealth of the nation and the economy is still exactly the same. All you've done is an add an extra 0 to every number (salary, rent, bank account, etc.), but nothing changes. So, printing money like that does nothing to solve the problem. The real solution is to grow the economy. Get more factories going. More entrepreneurs. More production.

"Putting money in people's pockets" doesn't grow anything; it just redistributes. So, _IF_ the Fed added an extra 0 to all the poor peoples' bank accounts, it wouldn't get the economy going, but it WOULD transfer wealth from the rich to the poor. However, who owns the Fed? It's the rich 1%'ers, the Wall Street bankers. So when guys like you give the Fed the power to add extra 0's to people's bank accounts, whose bank accounts are they going to add the 0's to? Are they REALLY going to transfer wealth from themselves to poor people? <rofl> We've tried this, and history proves they just add the extra 0's to their bank account, and transfer more wealth from the poor to them.

I say a far better solution is to strip away the power to transfer wealth altogether, not because I want inequality or want to see the poor suffer, it's just the pragmatic, historical fact that when a group of people has the power to transfer wealth, they always transfer it to themselves, and the easiest ones to rip off are poor, uneducated people who don't know what's happening to them.
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30-11-2013, 06:41 PM
RE: Economic recovery: you're doing it wrong
(30-11-2013 10:34 AM)black_squirrel Wrote:  @frank
The stock market is a good indicator of the overall economy.

This is an example where liberals and Keynesians never try to dispute Austrian economists. They just bury their head and ignore the facts.

We went through this debate in the late 90's, where Keynesians were saying "Look how great the economy is doing, as proven by the soaring stock market." And the Austrians said "You can't just look at the stock market, you have to look at the quality of investments. If the stock market doubled because companies doubled their factories and output, great, that indicates a good economy. But right now the stock market has only doubled because of .com hysteria. Some guy starts a blog about his workout routine, a VC offers him $10 million in funding, and he goes public and gets a $4 billion valuation at his IPO for some blog that has no revenue, no business model, nothing of any substance. It can disappear as fast as it comes." Remember, at that time, .com startups with no revenue were valued MORE than, say, Ford Motor Company. You'll find tons of debates where the Keynesians insisted the Austrians were wrong, and insisted that a strong stock market proves there's a strong economy.

Here's the chart. As always, the Austrians were right. It wasn't a strong economy, it was just a bubble, and it came crashing down and all the increases of the late 90's were erased in 2 years. So, history has proven that the stock market index itself is not a good indicator of the economy. It's much more complicated than that and you have to look at what's driving the index, if it's increased production with a reasonable p/e ratio, or if it's just hype. Today, we're in another bubble like the late 90's, with insane valuations that are not justified by fundamentals. But do the Keynesians/liberals EVER dispute what the Austrians said? When the stock market came crashing down in the early 2000's, just like the Austrians predicted, did the Keynesians admit they got it wrong? Did they debunk it? Nope. They still just keep saying, like you did, "The stock market is a good indicator of the overall economy", despite all the historic evidence to the contrary.

And I find it especially hypocritical because liberals CLAIM to be in favor of equality and helping the poorest in society. Yet, it's indisputable the poor have lost ground and are worse off than in 2008, and the recovery has entirely gone to the rich as inequality skyrockets and the 1% now have 40% of the wealth. So liberals SHOULD be condemning this if they genuinely cared about equality. The fact that you guys are so proud of all the massive wealth that's been transferred to the rich the past few years exposes that you don't REALLY care about equality and the poor. It's just a facade.
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01-12-2013, 04:57 AM
RE: Economic recovery: you're doing it wrong
frankksj,

First off, you seem to be defining any interventionist spending as Keynesian. I can see your point, and will accept this as a definition for the purposes of this post. Furthermore, I will state for the record, I do not propose spending as the solution to every problem. Also, I agreed with most of your last response to me so don't get the impression I'm avoiding the subject. I would like to point out, however, that the Federal Reserve is actually a private sector institution although it has control over the money supply. It is owned by the twelve "Federal Reserve Banks" which are also privately owned by their shareholders. I think that decision to give control of the monetary system to an institution not accountable to the public was a mistake and agree fully with your criticism of the Fed otherwise.

I disagree with this:
black_squirrel Wrote:The problem is not too much government spending.
The problem is that government is not Spending enough.
The government is spending too much money helping people who are already well off. If corporate welfare were eliminated other programs could be expanded while decreasing spending. Furthermore, our current tax system rewards extreme greed, overburdens working class people, encourages wage stagnation and outsourcing of jobs.

(30-11-2013 06:41 PM)frankksj Wrote:  
(30-11-2013 10:34 AM)black_squirrel Wrote:  @frank
The stock market is a good indicator of the overall economy.
This is an example where liberals and Keynesians never try to dispute Austrian economists. They just bury their head and ignore the facts.
You're generalizing. Most liberals and Keynesians I know are well aware that the stock market in it's current form is just a public gambling house, and is an indicator of the gambling mood of the wealthy, not the overall health of the economy. It gives no indication of the affordability of necessary goods and services to the public. Low taxes on capital gains has encouraged a short term get rich quick attitude instead of a steady and stably growth mentality. The actual health of stocks and securities has become irrelevant to the investor class as long as they cash out before the bubble pops .

(30-11-2013 06:41 PM)frankksj Wrote:  We went through this debate in the late 90's, where Keynesians were saying "Look how great the economy is doing, as proven by the soaring stock market." And the Austrians said "You can't just look at the stock market, you have to look at the quality of investments. If the stock market doubled because companies doubled their factories and output, great, that indicates a good economy. But right now the stock market has only doubled because of .com hysteria. Some guy starts a blog about his workout routine, a VC offers him $10 million in funding, and he goes public and gets a $4 billion valuation at his IPO for some blog that has no revenue, no business model, nothing of any substance. It can disappear as fast as it comes." Remember, at that time, .com startups with no revenue were valued MORE than, say, Ford Motor Company. You'll find tons of debates where the Keynesians insisted the Austrians were wrong, and insisted that a strong stock market proves there's a strong economy.
Here's the chart. As always, the Austrians were right. It wasn't a strong economy, it was just a bubble, and it came crashing down and all the increases of the late 90's were erased in 2 years. So, history has proven that the stock market index itself is not a good indicator of the economy. It's much more complicated than that and you have to look at what's driving the index, if it's increased production with a reasonable p/e ratio, or if it's just hype. Today, we're in another bubble like the late 90's, with insane valuations that are not justified by fundamentals. But do the Keynesians/liberals EVER dispute what the Austrians said? When the stock market came crashing down in the early 2000's, just like the Austrians predicted, did the Keynesians admit they got it wrong? Did they debunk it? Nope. They still just keep saying, like you did, "The stock market is a good indicator of the overall economy", despite all the historic evidence to the contrary.
Once again, you're generalizing. The "Keynesians" you see in our media are corporate apologists. Many people in this country are critical of the deregulation that has allowed for a low quality, highly speculative stock market. Many of them consider themselves Keynesian. You seem to be of the opinion that there is only one way to spend money and that all Keynesians must agree with the corporatist model of Keynesianism. We do not. I strongly disagree with supply side/trickle down economics, and agree that they are destroying our economy. Those who stand in opposition to supply side economics are marginalized and labeled as "socialists" and "communists" and you generally don't hear from them in our media. You keep blaming liberals for these policies, but, in the American political arena "liberal" is a dirty word and most politicians expend great effort trying to prove how "moderate" if not "conservative" they are. Many liberals are highly critical of these policies, and very frustrated by the supposed "liberals" in our government, but, you wouldn't know it from our media.

(30-11-2013 06:41 PM)frankksj Wrote:  And I find it especially hypocritical because liberals CLAIM to be in favor of equality and helping the poorest in society. Yet, it's indisputable the poor have lost ground and are worse off than in 2008, and the recovery has entirely gone to the rich as inequality skyrockets and the 1% now have 40% of the wealth. So liberals SHOULD be condemning this if they genuinely cared about equality.
This is highly insulting. These were not liberal policies and I DO condemn them CONSTANTLY. They were conservative (you probably call them neoliberal on your side of the pond) supply side policies. Supply side economics is a Republican (conservative) ideology. You keep making statements I agree with as a liberal, then blame liberals for those policies when none of the liberals I support agree with those policies. Most of the policies you're criticizing were Republican policies. Liberals have been effectively been stripped of any voices in the corporately controlled media. Both major political parties in this country are basically corporatist puppets, one labeled as "liberal" (Democrats), and one labeled as "conservative" (Republicans) neither of which is very liberal or conservative. What you see as conservative vs liberal agenda is really the "Republican" version of the corporate agenda vs the "Democratic" version of the corporate agenda. Our our problems are far worse, go deeper, and are more complicated than simply government overspending. The principles of democracy our republic was founded on are under assault from the powers of accumulated wealth, particularly, but not limited to, global bankers and corporate PAC funds.

(30-11-2013 06:41 PM)frankksj Wrote:  The fact that you guys are so proud of all the massive wealth that's been transferred to the rich the past few years exposes that you don't REALLY care about equality and the poor. It's just a facade.
You keep insisting that we like these policies. WE DON'T! I FUCKING HATE THEM GOT IT? YES our government is fucking it up. YES our government has been hijacked by multinational corporate interests that have been transferring wealth from the poor and working class to the rich. Yes, the Federal Reserve is a cartel that steals wealth from the populace and gives it to the bankers. AND we are pissed as hell. I agree that these are the problems, but, the Libertarian solution is to DO ABSOLUTELY NOTHING.
You also don't truly seem to understand the motivations of our current public officials. When our current group of douche-bags says, "we need to cut government spending", they're really saying, "let's undercut the social safety net while leaving our ENORMOUS corporate welfare state intact". You seem to think that punishing the people whom anti-poverty programs were meant to help is the solution to the problem of corporate corruption of our government. Nor do you recognize the effects of the massive corporate deregulation, tax cuts for the extremely wealthy, elimination of tariffs, union busting, repeal of the Glass Steegal Act, the FEC vs Citizens United decision and many other changes our country has enacted in the last few decades most of which (including the policies you're so critical of) are the brainchild of the Republican (supposedly conservative) Party. Even Obama care was cooked up by the Heritage Foundation, one of the most conservative think tanks in the country. Wikipedia:"The concept goes back to at least 1989, when the conservative Heritage Foundation proposed an individual mandate as an alternative to single-payer health care." We defend it for one reason. With the hyper-partisan gridlock in this country, it's the best we can do for right now.
All you seem to be doing is making generalizations about spending and demonizing liberals. What you don't see, being waaaaaaaaaaay over there in Austria, is that on the ground level, both liberals and conservatives are fighting tooth and nail to get their respective parties to do something other than pander to giant multinational corporations. You can pat your little Austrian economists on the back all you want, but, for now the corporatists have seized control of our government.

I agree that government spending could probably be cut in half.... IF half of our politicians weren't engaged in a war on the working class, and IF there was more support for labor and living wages, and IF the Sherman Anti-trust Act was still being enforced, IF corporations were voluntarily honest about the content of their products, IF they voluntarily disposed of toxic wastes in an environmentally sound manner, IF corporations VOLUNTARILY behaved in economically equitable manner towards consumers and their employees, AND IF large scale political contributions were recognized for what they are BRIBERY. You seem to think the problems of pollution, greed, public health, food insecurity, wealth disparity, discrimination, fraud, work place safety, corporate dishonesty, and crony capitalism are self solving problems that are caused by the attempts to do something about them. Your libertarian solution to all of these problems is to DO ABSO-FUCKING-LUTELY NOTHING, as if not fighting back against these things will HobomagicallyHobo make them go away. Your solution to our problems is based on political contingents that do not exist, but, thank you for the advice.

BTW, your comparison to the nineteenth century spending is skewed. In the 19'th the economy benefited form massive mineral deposits and territorial expansion. The theft of mineral and land wealth from the native population inflated GDP in the 19'th. Additionally, most of the 19'th was pre-industral, so many of the issues like toxic waste management, regulation of manufactured foods, industrial zoning regulations, and the necessity for public education largely due to the explosion of technology had yet to emerge. The world post industrial revolution is a very different place than most of the 19'th century. The necessity for public institutions to handle these problems is different as well. However, I do agree that an economy too heavy on the public sector is a bad thing.

Despite how it may sound, I actually agree with your assessment of the effects the policies of the last thirty years have had on our economy. The amount and types of government expenditures we have been engaged in has had either ineffective or destructive effect on the average standard of living. I simply disagree that an economically just environment is the emergent property of billions of uncoordinated and disorganized people acting on free will and reciprocal self interest.

You can lead a theist to reason, but, you cannot make him think.
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01-12-2013, 05:39 AM
RE: Economic recovery: you're doing it wrong
When I said that government needs to spend more, I meant that in times of economic decline government should spend more as
compared to times where there is no recession. Also I hope I made it clear when I said "more money in the pocket of poor people"
that I do not mean that government should spend more on corporate wellfare. On the contrary, government should spend more
on people wellfare.

For those who believe that the stock market (say S&P500) is not a good indicator of the economy, give me one other objective indicator that is a better
indicator of the economy and show me how your indicator has successfully predicted all the bubbles in the past.
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01-12-2013, 06:43 AM
RE: Economic recovery: you're doing it wrong
Make interest illegal.

Many will scoff the idea but if it happened it would fundamentally change how money operates.

For no matter how much I use these symbols, to describe symptoms of my existence.
You are your own emphasis.
So I say nothing.

-Bemore.
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01-12-2013, 06:51 AM (This post was last modified: 01-12-2013 07:01 AM by NoSkyDaddy.)
RE: Economic recovery: you're doing it wrong
Ok squirrel, just a misunderstanding. I agree with that. As far as indicators, I think they're all off. The stock market is a speculative gambling house, measures of inflation have been tampered with and do not reflect the true rate. I guess what I'm looking for in an increase in middle class, union equivalent jobs, and a demonstrable increase in working class buying power. As far as recognizing over inflated investments frankksj's advice is pretty sound.

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01-12-2013, 07:28 AM
RE: Economic recovery: you're doing it wrong
(01-12-2013 06:43 AM)bemore Wrote:  Make interest illegal.

Many will scoff the idea but if it happened it would fundamentally change how money operates.
I think it would just disincentivize lending. Usury laws would be good though. The real problem is that the whole system rewards short term speculation. The value of a stock isn't based on the company's strength or the value of it's products and services. The object often seems to be to ride a boom to the top, the , bail before the bust. This doesn't create any productive value to the economy. It just transfers it from one group of people to another. Some people get rich, others loose out. A low tax on capital gains rewards this behavior.

You can lead a theist to reason, but, you cannot make him think.
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