Just because an economic activity is designed to be stimulative doesn't mean it is Keynesian.
Bush's tax cuts were trickle-down economics; whether they were also Keynesian is debatable, but they were definitely an attempt to stimulate the economy from the top down: http://www.cbsnews.com/2100-250_162-636398.html
Economic Fallacies
@Secretwealth- Your proof that the Bush Tax Cuts benefited the wealthy and were meant as a "trickle down" cut is a study commissioned by Senate Democrats?
MOST tax cuts are just plain cash handouts. The Taxpayer Relief Act of 1997 was. The Bush Tax Cuts (both even called "Relief" acts) were that, and they both cut taxes on almost all brackets. Does that give more benefit to someone who pays taxes in every bracket? I suppose, but it was pretty much just an across the board cut of 3% with the top bracket getting a 4.6% cut. They raised the estate tax limits which benefitted the wealthy of all earning levels, but they also barred the high earners from the ESA (and the Roth IRA in 97). There was also an AMT effect that makes it much less than clear how much the rich benfited.
Arguing about the asymmetry of the benefit is sort of pointless. It doesn't change the fact the intent was to put more cash in the hands of all people to spend in the face of a recession. (Or merely to get politicians elected during a down economy, depending on your cynicism)
The Tax Reform Act of 1986 was appropriately named as well. Those tax cuts were implementing theories on tax revenue optimization based on pricing-type ideas by Laffer/Reagan. They actually were working on how to simplify the tax code and optimize the tax take by reducing rates to incentivize people to let cash hit the income box, getting rid of many "shelters" and making cap gains taxed as regular income. (Ironically Pres. Obama's bi-partisan debt panel recommended going back to something that looks more like that than what we have today.) Total tax take as a % of GDP actually increased after the Act's passage, it did not drop.
This is that derisively called "trickle down" stuff, and it is WAY different than the various "Taxpayer Relief acts".
MOST tax cuts are just plain cash handouts. The Taxpayer Relief Act of 1997 was. The Bush Tax Cuts (both even called "Relief" acts) were that, and they both cut taxes on almost all brackets. Does that give more benefit to someone who pays taxes in every bracket? I suppose, but it was pretty much just an across the board cut of 3% with the top bracket getting a 4.6% cut. They raised the estate tax limits which benefitted the wealthy of all earning levels, but they also barred the high earners from the ESA (and the Roth IRA in 97). There was also an AMT effect that makes it much less than clear how much the rich benfited.
Arguing about the asymmetry of the benefit is sort of pointless. It doesn't change the fact the intent was to put more cash in the hands of all people to spend in the face of a recession. (Or merely to get politicians elected during a down economy, depending on your cynicism)
The Tax Reform Act of 1986 was appropriately named as well. Those tax cuts were implementing theories on tax revenue optimization based on pricing-type ideas by Laffer/Reagan. They actually were working on how to simplify the tax code and optimize the tax take by reducing rates to incentivize people to let cash hit the income box, getting rid of many "shelters" and making cap gains taxed as regular income. (Ironically Pres. Obama's bi-partisan debt panel recommended going back to something that looks more like that than what we have today.) Total tax take as a % of GDP actually increased after the Act's passage, it did not drop.
This is that derisively called "trickle down" stuff, and it is WAY different than the various "Taxpayer Relief acts".
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"Your proof that the Bush Tax Cuts benefited the wealthy and were meant as a "trickle down" cut is a study commissioned by Senate Democrats?"
If the CBO isn't good enough for you, I don't think anyone is--unless parroting your own POV, of course.
"it doesn't change the fact the intent was to put more cash in the hands of all people to spend in the face of a recession."
This isn't the idea behind Keynesian stimulus, though.
If the CBO isn't good enough for you, I don't think anyone is--unless parroting your own POV, of course.
"it doesn't change the fact the intent was to put more cash in the hands of all people to spend in the face of a recession."
This isn't the idea behind Keynesian stimulus, though.
"it doesn't change the fact the intent was to put more cash in the hands of all people to spend in the face of a recession."
This isn't the idea behind Keynesian stimulus, though"
Even your homeboy Krugman calls tax cuts stimulus, he just argues it's not as good as government spending.
http://krugman.blogs.nytimes.com/2009/0 ... -tax-cuts/
The government intervening by putting money into the hands of people by tax cuts is defined pretty well by:
"Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems"
Even if tax cuts don't have a multiplier effect, you don't have to have a multiplier above 1.0 for it to qualify as Keynesian stimulus.
This isn't the idea behind Keynesian stimulus, though"
Even your homeboy Krugman calls tax cuts stimulus, he just argues it's not as good as government spending.
http://krugman.blogs.nytimes.com/2009/0 ... -tax-cuts/
The government intervening by putting money into the hands of people by tax cuts is defined pretty well by:
"Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems"
Even if tax cuts don't have a multiplier effect, you don't have to have a multiplier above 1.0 for it to qualify as Keynesian stimulus.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
@Secretwealth- So is your assertion that if something fails it can't be Keynesian? That might indeed be Krugman's opinion...
Somehow I missed the CBO reference in your first link, my eye was drawn to the Sentate Democrat part, mea culpa.
Here's an article that seemed to try and present both sides better than CBS-
http://agonist.org/485/
But I can't find the actual CBO report, I'd like to see it. Got a link?
As I said previously however, asymmetry of benefits doesn't negate the Keynesian bona fides of a program. "Keynesian" isn't code for fair. Economic intervention and stimulus by the government of any kind always favors the wealthy and connected, and always will.
Who do you think benefited from Solyndra? The GM and Dodge bailouts? The average taxpayer?
Somehow I missed the CBO reference in your first link, my eye was drawn to the Sentate Democrat part, mea culpa.
Here's an article that seemed to try and present both sides better than CBS-
http://agonist.org/485/
But I can't find the actual CBO report, I'd like to see it. Got a link?
As I said previously however, asymmetry of benefits doesn't negate the Keynesian bona fides of a program. "Keynesian" isn't code for fair. Economic intervention and stimulus by the government of any kind always favors the wealthy and connected, and always will.
Who do you think benefited from Solyndra? The GM and Dodge bailouts? The average taxpayer?
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Riggerjack
- Posts: 3199
- Joined: Thu Jul 14, 2011 3:09 am
secretwealth, I'll look into Krugman's peace. and for the record, I rarely say
"Krugman is evil/stupid/a hack/his book sucked/he should die"
I usually stop at Krugman is evil. Smart, but demonstrating a moral flexibility I find unacceptable.
As to Keynes, I think he was brilliant, and socially inline with modern Americans. That being said, generally, when the term Keynesian is used, it is referring to stimulus in recession, or manipulating money supply to moderate the business cycle. Both have shown to be excellent teaching tools, or mental exercises, but disastrous policy tools. Real economies are simply too diverse and don't allow for accurate forecasts of what will happen when you push lever A 15% more or less.
Read the published works of the heads of the Fed banks. They never agree on anything, and they are the top end of the pros, with nothing else to distract them.
But hey, Krugman has a column in the NY times and always knows how to get it fixed in under 1100 words.
"Krugman is evil/stupid/a hack/his book sucked/he should die"
I usually stop at Krugman is evil. Smart, but demonstrating a moral flexibility I find unacceptable.
As to Keynes, I think he was brilliant, and socially inline with modern Americans. That being said, generally, when the term Keynesian is used, it is referring to stimulus in recession, or manipulating money supply to moderate the business cycle. Both have shown to be excellent teaching tools, or mental exercises, but disastrous policy tools. Real economies are simply too diverse and don't allow for accurate forecasts of what will happen when you push lever A 15% more or less.
Read the published works of the heads of the Fed banks. They never agree on anything, and they are the top end of the pros, with nothing else to distract them.
But hey, Krugman has a column in the NY times and always knows how to get it fixed in under 1100 words.
@Riggerjack:
Once again it shows that our differences in what would be sensible policy come to a very large degree from our very different models of how the economy actually works. If I held the same economic views you do, I would hold similar views towards the value of government stimulus. But I don't think that austerity works to recover from a recession. I'll talk about that and the Latvia-example you referred to in another post.
I guess in my description of the model something got lost in translation there. Let me try to go over some points in more detail:
We live in an economy in which the currency is fiat currency passed out by the government. Hence the government need not run a deficit to begin with. There is no need to "finance" government-issued currency. The reason the US has debt is that there's a law that requires that along with spending, government debt obligations have to be issued. It is not necessary from an economic point of view when you have fiat money. This makes any worry about government deficit pointless. You said that the fact that people talked about the platinum coin shows that the lunatics are running the asylum. Well, if the debt is not required and can easily be cancelled by minting a coin, then the lunacy would be to worry about debt. Again, this is a difference in the underlying model of how money comes into being and which role the government plays in that.
I guess that's one of the key differences between your view and mine. You believe that the fiscal crisis is of extreme imporance and relevance and I believe it's not really an issue. Please try to understand where I'm coming from here. If indeed the government can relieve its debt by minting a coin, then the entire debt issue would be a sick joke.
And that's one of the problems I see here. There's a strong focus on the fiscal crisis (which is artificial, I think), but little focus on the much more real crises of healthcare, health, unemployment, energy generation, sustainable food production, global warming, education, child care, etc.
So, if my model is the right one, the lunatics running the asylum would be cutting services for old and sick people to solve an imaginary problem. Again, one can see the strong differences in the underlying model and how it influences the view of different solutions.
I think there's another point on which we might disagree. I am very opposed to the cutting of social spending out of a sense of fairness. It would be fine to cut there if the bailout had been passing out 150.000$ to each of the 100 million taxpayers instead of rewarding banks for their contribution to the problem. But passing the bill for a crony bailout (which people across the country hate) over to sick and old people while maintaining over 80% of allegedly temporary tax cuts and calling it "shared sacrifice" really takes the cake, even when you believe in the Austrian model of the business cycle and the severity of the fiscal crisis. Why not get the money back from the financial sector if that's where the stimulus went? Why go for social programs instead?
I'm not sure we can resolve our differences regarding our model of economics, but if not, we can still debate about this.
Once again it shows that our differences in what would be sensible policy come to a very large degree from our very different models of how the economy actually works. If I held the same economic views you do, I would hold similar views towards the value of government stimulus. But I don't think that austerity works to recover from a recession. I'll talk about that and the Latvia-example you referred to in another post.
I guess in my description of the model something got lost in translation there. Let me try to go over some points in more detail:
We live in an economy in which the currency is fiat currency passed out by the government. Hence the government need not run a deficit to begin with. There is no need to "finance" government-issued currency. The reason the US has debt is that there's a law that requires that along with spending, government debt obligations have to be issued. It is not necessary from an economic point of view when you have fiat money. This makes any worry about government deficit pointless. You said that the fact that people talked about the platinum coin shows that the lunatics are running the asylum. Well, if the debt is not required and can easily be cancelled by minting a coin, then the lunacy would be to worry about debt. Again, this is a difference in the underlying model of how money comes into being and which role the government plays in that.
I guess that's one of the key differences between your view and mine. You believe that the fiscal crisis is of extreme imporance and relevance and I believe it's not really an issue. Please try to understand where I'm coming from here. If indeed the government can relieve its debt by minting a coin, then the entire debt issue would be a sick joke.
And that's one of the problems I see here. There's a strong focus on the fiscal crisis (which is artificial, I think), but little focus on the much more real crises of healthcare, health, unemployment, energy generation, sustainable food production, global warming, education, child care, etc.
So, if my model is the right one, the lunatics running the asylum would be cutting services for old and sick people to solve an imaginary problem. Again, one can see the strong differences in the underlying model and how it influences the view of different solutions.
I think there's another point on which we might disagree. I am very opposed to the cutting of social spending out of a sense of fairness. It would be fine to cut there if the bailout had been passing out 150.000$ to each of the 100 million taxpayers instead of rewarding banks for their contribution to the problem. But passing the bill for a crony bailout (which people across the country hate) over to sick and old people while maintaining over 80% of allegedly temporary tax cuts and calling it "shared sacrifice" really takes the cake, even when you believe in the Austrian model of the business cycle and the severity of the fiscal crisis. Why not get the money back from the financial sector if that's where the stimulus went? Why go for social programs instead?
I'm not sure we can resolve our differences regarding our model of economics, but if not, we can still debate about this.
I really don't think austerity measures are a good idea.
Austerity measures have proven devastating in so many experiments done to real economies: Greece, Spain, Italy, Ireland, etc. show how poorly this approach actually works. The narrative of "we were fiscally irresponsible and now we need to save and pay the price" doesn't really apply to Spain or Ireland.
http://www.project-syndicate.org/commen ... erity-cure
Also, you have at least two Nobel-Prize-Winning economists as well as the IMF going on record saying that austerity doesn't work and only makes things work. You have Europe with many examples of how poorly it works.
http://www.bloomberg.com/news/2013-01-0 ... erity.html
http://www.thedailybeast.com/articles/2 ... wrong.html
http://www.bloomberg.com/news/2012-01-1 ... glitz.html
Also, please note the following article with some research on the actual effects of austerity measures on GDP growth and debt-to-GDP ratios (figures 4 and 5):
http://www.voxeu.org/article/panic-driv ... plications
If you stick to Austrian economics, of course you hate Krugman to the point of stopping Wikipedia editing of the Austrian Economics page before having Krugman's criticism entered.
http://www.salon.com/2013/02/19/how_pau ... economics/
Even Latvia, often cited as a miracle of stoic baltic citizens picking up the plow and getting to work instead of getting hysterical like Greeks, simply reacted with an exodus of workers and an unemployment rate of over 14% (so much for getting to work).
http://www.globalresearch.ca/austerity- ... odel/31675
The thing is, in a recession with a massive loss of money in the biggest crash since 1929, inflation is the last thing to worry about. A 15 trillion dollar stimulus didn't wreck the dollar. No hyperinflation to see. Not even a rise in interest rates on US debt. All of this makes perfect sense, but it doesn't if you follow the predictions of the Austrian model. Now if economics wants to be a science, it needs to take into account costly experiments like this. Wrecking entire economies is quite expensive compared to a particle accelerator. It would help to take the results into account.
Again, please note the following article with some research on the actual effects of austerity measures on GDP growth and debt-to-GDP ratios (figures 4 and 5):
http://www.voxeu.org/article/panic-driv ... plications
Austerity measures have proven devastating in so many experiments done to real economies: Greece, Spain, Italy, Ireland, etc. show how poorly this approach actually works. The narrative of "we were fiscally irresponsible and now we need to save and pay the price" doesn't really apply to Spain or Ireland.
http://www.project-syndicate.org/commen ... erity-cure
Also, you have at least two Nobel-Prize-Winning economists as well as the IMF going on record saying that austerity doesn't work and only makes things work. You have Europe with many examples of how poorly it works.
http://www.bloomberg.com/news/2013-01-0 ... erity.html
http://www.thedailybeast.com/articles/2 ... wrong.html
http://www.bloomberg.com/news/2012-01-1 ... glitz.html
Also, please note the following article with some research on the actual effects of austerity measures on GDP growth and debt-to-GDP ratios (figures 4 and 5):
http://www.voxeu.org/article/panic-driv ... plications
If you stick to Austrian economics, of course you hate Krugman to the point of stopping Wikipedia editing of the Austrian Economics page before having Krugman's criticism entered.
http://www.salon.com/2013/02/19/how_pau ... economics/
Even Latvia, often cited as a miracle of stoic baltic citizens picking up the plow and getting to work instead of getting hysterical like Greeks, simply reacted with an exodus of workers and an unemployment rate of over 14% (so much for getting to work).
http://www.globalresearch.ca/austerity- ... odel/31675
The thing is, in a recession with a massive loss of money in the biggest crash since 1929, inflation is the last thing to worry about. A 15 trillion dollar stimulus didn't wreck the dollar. No hyperinflation to see. Not even a rise in interest rates on US debt. All of this makes perfect sense, but it doesn't if you follow the predictions of the Austrian model. Now if economics wants to be a science, it needs to take into account costly experiments like this. Wrecking entire economies is quite expensive compared to a particle accelerator. It would help to take the results into account.
Again, please note the following article with some research on the actual effects of austerity measures on GDP growth and debt-to-GDP ratios (figures 4 and 5):
http://www.voxeu.org/article/panic-driv ... plications
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RealPerson
- Posts: 875
- Joined: Thu Nov 22, 2012 4:33 pm
Wide income differences provide incentives for people to work hard, start businesses and take risks. As a result, you get a growing economy. Once in a while, you even hit a jackpot like Microsoft or Apple. But you also get large income differences.
Taxing the rich to pay for various equalizers reduces the incentive to work crazy hours and take risks in starting up your own business. The largest experiment to date with equalizing was the old Soviet Union. The factory worker made about the same as the doctor. Collective property rights also means nobody had any incentive to take risks or work harder. We all know the outcome of that experiment. Less economic growth but more income equality.
There is no magic to this. Human nature is the same all over the planet. We get in trouble when we think incentives do not change human behavior. Having less economic activity in return for more income equality may well be a worthwhile trade-off. It's just that we have to be comfortable recognizing that it is a trade-off.
Taxing the rich to pay for various equalizers reduces the incentive to work crazy hours and take risks in starting up your own business. The largest experiment to date with equalizing was the old Soviet Union. The factory worker made about the same as the doctor. Collective property rights also means nobody had any incentive to take risks or work harder. We all know the outcome of that experiment. Less economic growth but more income equality.
There is no magic to this. Human nature is the same all over the planet. We get in trouble when we think incentives do not change human behavior. Having less economic activity in return for more income equality may well be a worthwhile trade-off. It's just that we have to be comfortable recognizing that it is a trade-off.
You technically have the ability to debase the money such that there is no debt/defecit when you have a fiat money.
However, I find the assertion we can and should do so to the point there is no debts shockingly dangerous, and frankly puzzling.
It is hard to predict when debasement of a currency will finally create panics and the start hyperinflation, but they will start at some point if done without limits. The United States is funding it's debt in part on the bond market with large foreign inflows. We can argue we don't need to do this, but we have been doing it for a long time. If we were to choose to inflate away the value of Tresuries there would certainly be a political price to be paid, potentially even war.
A pretty quick read on the history of fiat/elastic money is "Paper Money Collapse".
http://www.amazon.com/Paper-Money-Colla ... 1118095758
A colleague of mine, who came to the US to get an MBA at Berkeley and stayed to work, lived through the collapse of the Peruvian economy. If you were to suggest to him that money has infinite elasticity he would pretty energetically disagree.
@RealPerson- Great post, well said.
However, I find the assertion we can and should do so to the point there is no debts shockingly dangerous, and frankly puzzling.
It is hard to predict when debasement of a currency will finally create panics and the start hyperinflation, but they will start at some point if done without limits. The United States is funding it's debt in part on the bond market with large foreign inflows. We can argue we don't need to do this, but we have been doing it for a long time. If we were to choose to inflate away the value of Tresuries there would certainly be a political price to be paid, potentially even war.
A pretty quick read on the history of fiat/elastic money is "Paper Money Collapse".
http://www.amazon.com/Paper-Money-Colla ... 1118095758
A colleague of mine, who came to the US to get an MBA at Berkeley and stayed to work, lived through the collapse of the Peruvian economy. If you were to suggest to him that money has infinite elasticity he would pretty energetically disagree.
@RealPerson- Great post, well said.
Oh, that's a misunderstanding. I don't advocate debasing the currency. Let me be clear here, I believe fiat currencies run the risk of inflation, no doubt about it. I fully agree with you that "they will start at some point if done without limits" But still, a fiat currency doesn't need to be "financed by debt". I don't say that inflation is a way out of debt. It isn't. I say that there's no need for government debt to issue fiat money. The coin is simply a way to reduce the unneccessary debt through a simple financial transaction which doesn't affect the real economy.
When inflation looms and there's more demand than productivity, tax increases need to be made to suck money out of the economy. This is not the case when you have massive unemployment, private debt and a business sector that is reluctant to invest and are in the largest recession since 1929.
Also, the fact if the matter is that the theory is at the very basic level descriptive instead of prescriptive. The government has to create money by keystroke FIRST, because it's the only one legally allowed to start the process, otherwise there is no money you could pay your taxes with to begin with.
Okay, I searched a little and found a very nice discussion of the risk of hyperinflation as seen in the MMT/chartalist model by Prof. Randall Wray:
The actual discussion of it is a three-part blogpost series, but I will start with the part where he criticizes Paul Krugman of being wrong, which was the reason for the series. The enemy of my enemy is my friend, right?
http://www.economonitor.com/lrwray/2011 ... ey-theory/
http://www.economonitor.com/lrwray/2011 ... rs-part-1/
http://www.economonitor.com/lrwray/2011 ... rs-part-2/
http://www.economonitor.com/lrwray/2011 ... -part-3-2/
Have fun!
A TLDR might be this article:
http://www.nextnewdeal.net/deficits-do- ... -you-think
When inflation looms and there's more demand than productivity, tax increases need to be made to suck money out of the economy. This is not the case when you have massive unemployment, private debt and a business sector that is reluctant to invest and are in the largest recession since 1929.
Also, the fact if the matter is that the theory is at the very basic level descriptive instead of prescriptive. The government has to create money by keystroke FIRST, because it's the only one legally allowed to start the process, otherwise there is no money you could pay your taxes with to begin with.
Okay, I searched a little and found a very nice discussion of the risk of hyperinflation as seen in the MMT/chartalist model by Prof. Randall Wray:
The actual discussion of it is a three-part blogpost series, but I will start with the part where he criticizes Paul Krugman of being wrong, which was the reason for the series. The enemy of my enemy is my friend, right?
http://www.economonitor.com/lrwray/2011 ... ey-theory/
http://www.economonitor.com/lrwray/2011 ... rs-part-1/
http://www.economonitor.com/lrwray/2011 ... rs-part-2/
http://www.economonitor.com/lrwray/2011 ... -part-3-2/
Have fun!
A TLDR might be this article:
http://www.nextnewdeal.net/deficits-do- ... -you-think
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Riggerjack
- Posts: 3199
- Joined: Thu Jul 14, 2011 3:09 am
Felix: Finding someone like you was the reason I started this thread. I was looking for someone who disagreed with me, and would define their beliefs. I won't in any way be upset, if this goes on for 2 years, and neither of us convinces the other.
I'm reading economonitor linked above, and I'm trying to hold my objections until the end...
I'm reading economonitor linked above, and I'm trying to hold my objections until the end...
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"Wide income differences provide incentives for people to work hard, start businesses and take risks. As a result, you get a growing economy. Once in a while, you even hit a jackpot like Microsoft or Apple. But you also get large income differences."
Then why haven't we got any great entrepreneurs/technological breakthroughs from the Seychelles, Namibia, Botswana, or Honduras? And why HAVE we had many great entrpepreneurs and technological breakthroughs from Norway (Opera), Finland (Nokia, Angry Birds, Linux), and Sweden (Minecraft, Skanska, Volvo)?
Also, why did the U.S. have so many tremendous technological breakthroughs (the Internet, the space shuttle, the mainframe) when its income disparity was much smaller than today?
BTW, absolutely stupendous post, Felix.
Then why haven't we got any great entrepreneurs/technological breakthroughs from the Seychelles, Namibia, Botswana, or Honduras? And why HAVE we had many great entrpepreneurs and technological breakthroughs from Norway (Opera), Finland (Nokia, Angry Birds, Linux), and Sweden (Minecraft, Skanska, Volvo)?
Also, why did the U.S. have so many tremendous technological breakthroughs (the Internet, the space shuttle, the mainframe) when its income disparity was much smaller than today?
BTW, absolutely stupendous post, Felix.
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Riggerjack
- Posts: 3199
- Joined: Thu Jul 14, 2011 3:09 am
Secretwealth: I took a quick look at wikipedia for your examples.
Seychelles, population 84000, even if conditions for greatness were the same, I don't expect the San Tan Valley, AZ to generate too many tech corporations.
Namibia: Approximately half the population live below the international poverty line, and the nation has suffered heavily from the effects of HIV/AIDS, with 15% of the adult population infected with HIV in 2007.
Botswana: According to the International Monetary Fund, economic growth averaged over 9% per year from 1966 to 1999. Botswana has a high level of economic freedom compared to other African countries.[17] The government has maintained a sound fiscal policy, despite consecutive budget deficits in 2002 and 2003, and a negligible level of foreign debt. It earned the highest sovereign credit rating in Africa and has stockpiled foreign exchange reserves (over $7 billion in 2005/2006) amounting to almost two and a half years of current imports. Not sure where you were going, but things seem to be looking up here.
Honduras: is a country in eternal revolution. there have been hundreds of revolts, rebellions, uprisings, and "constitutional Crises" plus hurricanes and a current civil war. you're right, somehow they aren't the next Silicone Valley.
Yeah, lack of software innovation, that's the problem they should work on. But I expect you only threw those out as a quick strawman, trying to equate income equality to technological innovation.
Seriously, there are factors that together create wealth and innovation, places where things get better.
Rule of law. Because competing warlords make for an unstable business environment.
Enforceable property rights. Because if you can't prove you own it easily, you have limited motivation to improve it.
Freedom of contract. The ability to do business with whoever you choose. should be self explanatory. Although it may fall best under political freedom to do business below, I felt it deserved its own paragraph, mainly due the the horrid economic conditions of the places you use for examples.
Political Freedom to do business. This is the killer. It's hard to get past the double sided blade of regulation and corruption. If you have to bribe your councilman to be able to do business, or get shut down before you compete too hard with the mayor's brother, your ability to gather enough capital to reach "escape velocity" is greatly hindered. "Escape velocity" meaning the amount of money necessary to escape the local limiting factors.
"Also, why did the U.S. have so many tremendous technological breakthroughs (the Internet, the space shuttle, the mainframe) when its income disparity was much smaller than today?"
Because income disparity is a much smaller factor than those listed above.
I know you are highly educated (it never fails to come up) and you like to dismiss others' statements as strawmen, non sequiturs, and the like. It would be nice, if you felt the need to hold your own statements up to the same standards.
Seychelles, population 84000, even if conditions for greatness were the same, I don't expect the San Tan Valley, AZ to generate too many tech corporations.
Namibia: Approximately half the population live below the international poverty line, and the nation has suffered heavily from the effects of HIV/AIDS, with 15% of the adult population infected with HIV in 2007.
Botswana: According to the International Monetary Fund, economic growth averaged over 9% per year from 1966 to 1999. Botswana has a high level of economic freedom compared to other African countries.[17] The government has maintained a sound fiscal policy, despite consecutive budget deficits in 2002 and 2003, and a negligible level of foreign debt. It earned the highest sovereign credit rating in Africa and has stockpiled foreign exchange reserves (over $7 billion in 2005/2006) amounting to almost two and a half years of current imports. Not sure where you were going, but things seem to be looking up here.
Honduras: is a country in eternal revolution. there have been hundreds of revolts, rebellions, uprisings, and "constitutional Crises" plus hurricanes and a current civil war. you're right, somehow they aren't the next Silicone Valley.
Yeah, lack of software innovation, that's the problem they should work on. But I expect you only threw those out as a quick strawman, trying to equate income equality to technological innovation.
Seriously, there are factors that together create wealth and innovation, places where things get better.
Rule of law. Because competing warlords make for an unstable business environment.
Enforceable property rights. Because if you can't prove you own it easily, you have limited motivation to improve it.
Freedom of contract. The ability to do business with whoever you choose. should be self explanatory. Although it may fall best under political freedom to do business below, I felt it deserved its own paragraph, mainly due the the horrid economic conditions of the places you use for examples.
Political Freedom to do business. This is the killer. It's hard to get past the double sided blade of regulation and corruption. If you have to bribe your councilman to be able to do business, or get shut down before you compete too hard with the mayor's brother, your ability to gather enough capital to reach "escape velocity" is greatly hindered. "Escape velocity" meaning the amount of money necessary to escape the local limiting factors.
"Also, why did the U.S. have so many tremendous technological breakthroughs (the Internet, the space shuttle, the mainframe) when its income disparity was much smaller than today?"
Because income disparity is a much smaller factor than those listed above.
I know you are highly educated (it never fails to come up) and you like to dismiss others' statements as strawmen, non sequiturs, and the like. It would be nice, if you felt the need to hold your own statements up to the same standards.
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Riggerjack
- Posts: 3199
- Joined: Thu Jul 14, 2011 3:09 am
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LuckyMoneyCat
- Posts: 19
- Joined: Fri Jan 20, 2012 7:36 pm
@Felix- Finally took the time to read those links, thanks for posting those. I'll admit to a lot of teeth grinding with Wray's posts, these guys are even more wacky and dangerous than Krugman.
"The final option is to convert them to cash. That would be a poor choice for banks, since the Fed pays 25 basis points on reserves and cash earns nothing (and has nonzero storage costs). However, Krugman says they will do this in order to lend cash to individuals. Really? Has he ever borrowed from a bank? If you have ever borrowed—say, for a house or a new car—did the loan officer give you a wheelbarrow filled with cash?"
He says a "new car", but plenty of people get used car loans and fund in cash, I have done this. When I sold my house recently the buyer's loan did not fund in cash, but I received a payment, some of which did ultimately become cash both personally, and in the form of consumption that was not all done by "keystrokes". Real dollars are a part of the economy, it's not just all electronic debits.
"Wray: Quite a mess here. Government finances its spending by keystrokes, that generate demand deposits in the private sector, with banks holding reserves. MMTers agree this COULD lead to inflation—for example, if the spending pushes the economy beyond full employment. Inflation can result even before full employment—for example if bottlenecks in important resources develop. All government spending is financed by what he calls money issue—always—so it is wrong to state this would necessarily lead to inflation. "
Man, he sure likes repeating, ad nauseum, "The government spends by keystrokes". I used to commute past Solyndra's newly renovated, beautiful, vacant building. It sure looked like more than a keystroke to me.
There have just been too many periods of significant inflation without full employment to take this part of the theory seriously. The 1970's US Stagflation was my first thought and repeatedly mentioned in his comments section.
"The floating rate provides policy space that can be used by prudent governments to pursue domestic policy goals with a greater degree of freedom. History is of course filled with imprudent governments there, too. There is no substitute for good governance. Still, it is curious that except for the losers of WWI (plus Poland and Russia, which were on the winning side but lost the war—so to speak–anyway), there are no cases of nominally democratic Western capitalist countries that have experienced hyperinflation in the past century. And if we limit our data set to those with floating currencies, there aren’t any with exchange rate crises, either."
Um, really? How about this?
http://www.businessinsider.com/soros-ma ... ort-2013-2
In his articles he attempts to bolt on all sorts of conditions that seem to be necessary (war, poor gov't etc etc) but that's just backward looking, and I personally don't think particularly useful for what is happening today, a globalized information economy with incredible prevailing debt levels and lots of fiat money- which is something new. When it breaks, and it will, it will be in a new way.
A friend of mine is a formally trained economist, and retired CEO of a British public employees retirement pension fund. He has been reminding me, and many interested people on another forum, since 2009 that we are in a new situation, and everything that is happening is an experiment.
It really doesn't matter how many smart people/Nobel laureates are working on these theories, LTCM anyone? And these were Nobel laureates playing with their own money.
I did like this link, which Wray posted because Krugman said he'd read it in response to MMT'ers arguing he didn't understand their position.
http://pragcap.com/understanding-modern-monetary-system
Within this article is a FAR better discussion of their position on money, and much more rational AFAIAC.
"Thus, government cannot just spend and spend or the extra dollars in the system will chase too few goods, drive up prices and reduce living standards. It’s important to understand that government cannot just spend recklessly. This is important so I’ll say it again. This does not give the government the ability to spend and spend. If they spend in excess of productive capacity and tax too little they can create mal-investment and inflation resulting in lower living standards."
OK, good. So, at least MMT'ers agree that government spending has limits and can and does create price distortion which can lead to inflation and problems. Certainly my core problem with so much of the stimulus spending we've had.
Within their definition of money we find:
"Production is vital in giving any currency its value. The goods and services that are produced by the citizens and the value that other citizens are willing to pay for these goods and services is what ultimately makes any fiat currency viable. Therefore, government has an incentive to promote productive output and maintain sound stewardship of its currency. Otherwise, they risk devaluing the currency and possibly threaten the stability of their currency system. Paying its citizens to sit at home doing nothing, buy cars they don’t need or purchase homes they can’t afford are unproductive forms of spending that are likely to turn a nation of producers AND consumers into a nation of consumers. If government is corrupt in its spending and becomes an institution that is mismanaged and detracts from the private sector’s potential prosperity then it is only right that the citizens revolt, denounce the nation’s currency and demand change."
OK, now, these sound like guys that I can agree with.
I could not write any better on why EXACTLY I think this Trillion dollar coin talk (and/or increased stimulus) is absolute freaking insanity, and has the real power to cause something extraordinary to happen, Black Swan type stuff.
We as a nation are simply consuming more than we produce, and our production is likely at a level that is artificially high to begin with thanks to the oil economy. Our standard of living is going to have to fall to balance this out, especially if we are at, or have passed peak oil.
There is no trickery, or coin minting, that is going to change this. It's going to be austerity.
"The final option is to convert them to cash. That would be a poor choice for banks, since the Fed pays 25 basis points on reserves and cash earns nothing (and has nonzero storage costs). However, Krugman says they will do this in order to lend cash to individuals. Really? Has he ever borrowed from a bank? If you have ever borrowed—say, for a house or a new car—did the loan officer give you a wheelbarrow filled with cash?"
He says a "new car", but plenty of people get used car loans and fund in cash, I have done this. When I sold my house recently the buyer's loan did not fund in cash, but I received a payment, some of which did ultimately become cash both personally, and in the form of consumption that was not all done by "keystrokes". Real dollars are a part of the economy, it's not just all electronic debits.
"Wray: Quite a mess here. Government finances its spending by keystrokes, that generate demand deposits in the private sector, with banks holding reserves. MMTers agree this COULD lead to inflation—for example, if the spending pushes the economy beyond full employment. Inflation can result even before full employment—for example if bottlenecks in important resources develop. All government spending is financed by what he calls money issue—always—so it is wrong to state this would necessarily lead to inflation. "
Man, he sure likes repeating, ad nauseum, "The government spends by keystrokes". I used to commute past Solyndra's newly renovated, beautiful, vacant building. It sure looked like more than a keystroke to me.
There have just been too many periods of significant inflation without full employment to take this part of the theory seriously. The 1970's US Stagflation was my first thought and repeatedly mentioned in his comments section.
"The floating rate provides policy space that can be used by prudent governments to pursue domestic policy goals with a greater degree of freedom. History is of course filled with imprudent governments there, too. There is no substitute for good governance. Still, it is curious that except for the losers of WWI (plus Poland and Russia, which were on the winning side but lost the war—so to speak–anyway), there are no cases of nominally democratic Western capitalist countries that have experienced hyperinflation in the past century. And if we limit our data set to those with floating currencies, there aren’t any with exchange rate crises, either."
Um, really? How about this?
http://www.businessinsider.com/soros-ma ... ort-2013-2
In his articles he attempts to bolt on all sorts of conditions that seem to be necessary (war, poor gov't etc etc) but that's just backward looking, and I personally don't think particularly useful for what is happening today, a globalized information economy with incredible prevailing debt levels and lots of fiat money- which is something new. When it breaks, and it will, it will be in a new way.
A friend of mine is a formally trained economist, and retired CEO of a British public employees retirement pension fund. He has been reminding me, and many interested people on another forum, since 2009 that we are in a new situation, and everything that is happening is an experiment.
It really doesn't matter how many smart people/Nobel laureates are working on these theories, LTCM anyone? And these were Nobel laureates playing with their own money.
I did like this link, which Wray posted because Krugman said he'd read it in response to MMT'ers arguing he didn't understand their position.
http://pragcap.com/understanding-modern-monetary-system
Within this article is a FAR better discussion of their position on money, and much more rational AFAIAC.
"Thus, government cannot just spend and spend or the extra dollars in the system will chase too few goods, drive up prices and reduce living standards. It’s important to understand that government cannot just spend recklessly. This is important so I’ll say it again. This does not give the government the ability to spend and spend. If they spend in excess of productive capacity and tax too little they can create mal-investment and inflation resulting in lower living standards."
OK, good. So, at least MMT'ers agree that government spending has limits and can and does create price distortion which can lead to inflation and problems. Certainly my core problem with so much of the stimulus spending we've had.
Within their definition of money we find:
"Production is vital in giving any currency its value. The goods and services that are produced by the citizens and the value that other citizens are willing to pay for these goods and services is what ultimately makes any fiat currency viable. Therefore, government has an incentive to promote productive output and maintain sound stewardship of its currency. Otherwise, they risk devaluing the currency and possibly threaten the stability of their currency system. Paying its citizens to sit at home doing nothing, buy cars they don’t need or purchase homes they can’t afford are unproductive forms of spending that are likely to turn a nation of producers AND consumers into a nation of consumers. If government is corrupt in its spending and becomes an institution that is mismanaged and detracts from the private sector’s potential prosperity then it is only right that the citizens revolt, denounce the nation’s currency and demand change."
OK, now, these sound like guys that I can agree with.
I could not write any better on why EXACTLY I think this Trillion dollar coin talk (and/or increased stimulus) is absolute freaking insanity, and has the real power to cause something extraordinary to happen, Black Swan type stuff.
We as a nation are simply consuming more than we produce, and our production is likely at a level that is artificially high to begin with thanks to the oil economy. Our standard of living is going to have to fall to balance this out, especially if we are at, or have passed peak oil.
There is no trickery, or coin minting, that is going to change this. It's going to be austerity.
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Riggerjack
- Posts: 3199
- Joined: Thu Jul 14, 2011 3:09 am
Seneca, we were definitely reading the same stuff, thinking similar thoughts. What I couldn't get out of the MMT stuff I was reading was any Stimulus justification.
OK, it's another monetary theory. I can't say better or worse than others, but other than Wray's belief that keystrokes are somehow the same, and yet completely different than cash, I wasn't getting much out of it.
I freely admit to being less flexible in my thought processes as I get older, so I was going over it a few times. I even posted here a few times since starting, but the posts disappeared.
As near as I can tell MMT is just another monetary theory, and Wray used it in conjunction with Keynes to justify his preference for stimulus spending.
OK, it's another monetary theory. I can't say better or worse than others, but other than Wray's belief that keystrokes are somehow the same, and yet completely different than cash, I wasn't getting much out of it.
I freely admit to being less flexible in my thought processes as I get older, so I was going over it a few times. I even posted here a few times since starting, but the posts disappeared.
As near as I can tell MMT is just another monetary theory, and Wray used it in conjunction with Keynes to justify his preference for stimulus spending.