Francois Hollande projected to win French Presidency.

[ChargerCarl]

Originally Posted by Malice

How long do you expect that to take? If I simplify it you will complain that it is too simple. The ideas of Keynes simply aren't true, they're just accepted as dogma due to defects in the psychology of the common man.

The idea that nominal aggregates have large effects on real output has been proven many times over.

[ChargerCarl]

Originally Posted by Malice

The same is true for natural disasters. You may have heard reports that the tsunami and earthquake in Japan may boost GDP, as if it we're a good thing. This is the broken window fallacy, told by free market french economist Frederic Bastiat over 160 years ago. Let's imagine that a window is broken. The repairman will be paid $30 to fix it, some money will also go to the owner of the gas station for the gas it took the repairman to drive there, the hardware store will get money for the window and other tools, the people that manufactured those tools will also benefit. But what this ignores is that had the window not been broken the owner would have been able to spend that money on something else, perhaps some shoes. In one scenario he would be more prosperous, he would have new shoes, but in the other he would simply be where he started, with a window, but $30 poorer. Those resources were wasted. This is also similar to the basis that the multiplier effect is based on.

The broken window fallacy only applies to a barter economy or one with a fixed money supply. If Ben Bernanke went around with a baseball bat breaking windows and leaving behind checks to pay for it then there is no resource drain on the owner of the window. He will not reduce spending on other services.

[crazzyass]

Originally Posted by Malice

OK, this is mainly about stimulus and aggregate demand, so I suppose those are easy enough to deal with:

I'll relate it to World War II since it's an often cited case of stimulus spending ending recession/depression.

This continues due to three main reasons.

1) Unemployment numbers

2) GDP

3) The idea that spending drives the economy.

1) With unemployment the case is pretty simple: We had people drafted into the army. Jesus shit, really. We also had people making things that for the war that didn't increase the standard of living of anyone. These were wealth destroying jobs.

Creating employment’s a straightforward craft
When the nation’s at war, and there’s a draft
If every worker was staffed in the army and fleet
We’d have full employment and nothing to eat

...

jobs are a means, not the ends in themselves
people work to live better, to put food on the shelves
real growth means production of what people demand
That’s entrepreneurship not your central plan


2) GDP is the value of final goods and services during a particular time interval, usually a year.This is a very poor reflection of real economic health because simple increases in production don't necessarily mean increased prosperity. For example, if the government orders 1 trillion of bombs, tanks, and airplanes to be produced and they are taken overseas and blown up, it benefits no one, but GDP is increased, and let's not forget that this action has diverted resources from more productive channels and stolen and destroyed wealth through taxation.

The same is true for natural disasters. You may have heard reports that the tsunami and earthquake in Japan may boost GDP, as if it we're a good thing. This is the broken window fallacy, told by free market french economist Frederic Bastiat over 160 years ago. Let's imagine that a window is broken. The repairman will be paid $30 to fix it, some money will also go to the owner of the gas station for the gas it took the repairman to drive there, the hardware store will get money for the window and other tools, the people that manufactured those tools will also benefit. But what this ignores is that had the window not been broken the owner would have been able to spend that money on something else, perhaps some shoes. In one scenario he would be more prosperous, he would have new shoes, but in the other he would simply be where he started, with a window, but $30 poorer. Those resources were wasted. This is also similar to the basis that the multiplier effect is based on.

Also, an expansion of the monetary base also increase GDP, nominal GDP.

Of, relating to, or being the amount or face value of a sum of money or a stock certificate, for example, and not the purchasing power or market value.

It's just inflation that's driving the ones. No real wealth has been created, on dilution.

There are also ways government skews GDP to make things appear better, like many other statistics:

http://en.wikipedia.org/wiki/GDP_deflator




“War prosperity is like the prosperity that an earthquake or a plague brings.”
—Ludwig von Mises

3) The tail wagging the dog. Let's start with the paradox of thrift. The basic idea goes like this: Let's say someone decides to spend less, particularly on eating out. The owner of the restaurant has less demand, so he has to fire someone, that person has less to spend, there's also less demand from manufacturers, and so it does into a depressionary spiral. With spending, it's the opposite cycle. Boosting aggregate demand brings it back.

You see it’s all about spending, hear the register cha-ching
Circular flow, the dough is everything
So if that flow is getting low, doesn’t matter the reason
We need more government spending, now it’s stimulus season

So forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift

This is not how reality works. Remember the production possibilities frontier. You have a limited pool of (REAL!) savings and must make a trade off between consumption and investment. Investment requires underconsumption. If we all spent every penny on frivolous things and never saved, we would not be better off. Investment can lead to increased production and make us better off in the long run, by far. So consumption may momentarily drop, but will then rise to a level higher than previously. People don't save without reason, they save so they may consume (more) in the future; a change in time preference, a tradeoff between consuming now or later. An increase in real savings, the supply of money being affected by supply and demand, lowers interest rates, signals to entrepreneurs that people are more future oriented (time preference), and can make investment in the higher order stages of production more profitable with those low rates. Higher order stages are those farthest away from consumer goods, which are at the bottom. An example is mining, perhaps then the manufacturing equipment made from those mined materials.

Increased money supply causes a drop in interest rates without real savings, it causes a distortion in the market, mixed signals. Entrepreneurs take on unsustainable long term projects, unsustainable due to the lack of actual resources, and consumers are driven to consume more without there being an actual increase in resources. Think of your hayekian triangle. This leads to the bust.

And let us not forget, markets clear!

I want this shirt:

I sincerely appreciate the detailed post, I really do. Hence the thanks. I'll address it later tonight probably, as I'm dealing with finals and moving right now. I'll try to get to it soon.

[Pee Vee Proots, M.D.]

Originally Posted by Malice

OK, this is mainly about stimulus and aggregate demand, so I suppose those are easy enough to deal with:

I'll relate it to World War II since it's an often cited case of stimulus spending ending recession/depression.

This continues due to three main reasons.

1) Unemployment numbers

2) GDP

3) The idea that spending drives the economy.

1) With unemployment the case is pretty simple: We had people drafted into the army. Jesus shit, really. We also had people making things that for the war that didn't increase the standard of living of anyone. These were wealth destroying jobs.

Creating employment’s a straightforward craft
When the nation’s at war, and there’s a draft
If every worker was staffed in the army and fleet
We’d have full employment and nothing to eat

...

jobs are a means, not the ends in themselves
people work to live better, to put food on the shelves
real growth means production of what people demand
That’s entrepreneurship not your central plan


2) GDP is the value of final goods and services during a particular time interval, usually a year.This is a very poor reflection of real economic health because simple increases in production don't necessarily mean increased prosperity. For example, if the government orders 1 trillion of bombs, tanks, and airplanes to be produced and they are taken overseas and blown up, it benefits no one, but GDP is increased, and let's not forget that this action has diverted resources from more productive channels and stolen and destroyed wealth through taxation.

The same is true for natural disasters. You may have heard reports that the tsunami and earthquake in Japan may boost GDP, as if it we're a good thing. This is the broken window fallacy, told by free market french economist Frederic Bastiat over 160 years ago. Let's imagine that a window is broken. The repairman will be paid $30 to fix it, some money will also go to the owner of the gas station for the gas it took the repairman to drive there, the hardware store will get money for the window and other tools, the people that manufactured those tools will also benefit. But what this ignores is that had the window not been broken the owner would have been able to spend that money on something else, perhaps some shoes. In one scenario he would be more prosperous, he would have new shoes, but in the other he would simply be where he started, with a window, but $30 poorer. Those resources were wasted. This is also similar to the basis that the multiplier effect is based on.

Also, an expansion of the monetary base also increase GDP, nominal GDP.

Of, relating to, or being the amount or face value of a sum of money or a stock certificate, for example, and not the purchasing power or market value.

It's just inflation that's driving the ones. No real wealth has been created, on dilution.

There are also ways government skews GDP to make things appear better, like many other statistics:

http://en.wikipedia.org/wiki/GDP_deflator




“War prosperity is like the prosperity that an earthquake or a plague brings.”
—Ludwig von Mises

3) The tail wagging the dog. Let's start with the paradox of thrift. The basic idea goes like this: Let's say someone decides to spend less, particularly on eating out. The owner of the restaurant has less demand, so he has to fire someone, that person has less to spend, there's also less demand from manufacturers, and so it does into a depressionary spiral. With spending, it's the opposite cycle. Boosting aggregate demand brings it back.

You see it’s all about spending, hear the register cha-ching
Circular flow, the dough is everything
So if that flow is getting low, doesn’t matter the reason
We need more government spending, now it’s stimulus season

So forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift

This is not how reality works. Remember the production possibilities frontier. You have a limited pool of (REAL!) savings and must make a trade off between consumption and investment. Investment requires underconsumption. If we all spent every penny on frivolous things and never saved, we would not be better off. Investment can lead to increased production and make us better off in the long run, by far. So consumption may momentarily drop, but will then rise to a level higher than previously. People don't save without reason, they save so they may consume (more) in the future; a change in time preference, a tradeoff between consuming now or later. An increase in real savings, the supply of money being affected by supply and demand, lowers interest rates, signals to entrepreneurs that people are more future oriented (time preference), and can make investment in the higher order stages of production more profitable with those low rates. Higher order stages are those farthest away from consumer goods, which are at the bottom. An example is mining, perhaps then the manufacturing equipment made from those mined materials.

Increased money supply causes a drop in interest rates without real savings, it causes a distortion in the market, mixed signals. Entrepreneurs take on unsustainable long term projects, unsustainable due to the lack of actual resources, and consumers are driven to consume more without there being an actual increase in resources. Think of your hayekian triangle. This leads to the bust.

And let us not forget, markets clear!

I want this shirt:

Yet another amazing post lost to the #40 void. Seriously the last post from the previous page should show on the next. I would never have seen this work of art had it not been quoted on page 2.

[Malice]

Originally Posted by ChargerCarl

The broken window fallacy only applies to a barter economy or one with a fixed money supply. If Ben Bernanke went around with a baseball bat breaking windows and leaving behind checks to pay for it then there is no resource drain on the owner of the window. He will not reduce spending on other services.

Charger, come on. Resources are scarce (keep in mind the limits of time). Inflation robs wealth from others and doesn't raise prices equally, those that spend it first get the main benefits (there's a name for this effect, but I can't remember), although I suppose you could argue about inflation expectations. It's as if I drank half your cup of juice, added some water, and told you you were whole.

[Malice]

Originally Posted by ChargerCarl

The idea that nominal aggregates have large effects on real output has been proven many times over.

Of course, goods are produced to meet the demands of people. Output that no one really desires, that doesn't increase standards of living, is waste. It's the profit and loss system that channels efforts into the most efficient means.

(1) Supply creates its own demand; hence, aggregate overproduction or a "general glut" is impossible.

(3) In the case of partial overproduction, which necessarily implies a balancing underproduction elsewhere, equilibrium is restored by competition, that is, by the price mechanism and the mobility of capital.

(4) Because aggregate demand and supply are necessarily equal, and because of the equilibrating mechanism, output can be increased indefinitely and the accumulation of capital proceed without limit.

The tail does not wag the dog. The basic truth of Say's Law holds: http://mises.org/daily/5715

Quote: Risking the accusation of beating a dead horse, I should like to address myself to one more effort by Keynes to disprove Say's law, or what he calls "a corollary of the same doctrine" (p. 19). "It has been supposed," he writes, "that any individual act of abstaining from consumption necessarily leads to, and amounts to the same thing as, causing the labor and commodities thus released from supplying consumption to be invested in the production of capital wealth" (p. 19). And he quotes the following passage from Alfred Marshall's Pure Theory of Domestic Values (p. 34) in illustration:

"The whole of a man's income is expended in the purchase of services and of commodities. It is indeed commonly said that a man spends some portion of his income and saves another. But it is a familiar economic axiom that a man purchases labor and commodities with that portion of his income which he saves just as much as he does with that he is said to spend. He is said to spend when he seeks to obtain present enjoyment from the services and commodities which he purchases. He is said to save when he causes the labor and the commodities which he purchases to be devoted to the production of wealth from which he expects to derive the means of enjoyment in the future."

This doctrine, of course, goes much further back than Marshall. Keynes could have quoted his bête noir, Ricardo, to the same effect. "Mr. Malthus," wrote Ricardo, "never appears to remember that to save is to spend, as surely as what he exclusively calls spending." [18] Ricardo went much further than this, and in answering Malthus answered one of Keynes's chief contentions in advance: "I deny that the wants of consumers generally are diminished by parsimony — they are transferred with the power to consume to another set of consumers." [19]

And on still another occasion Ricardo wrote directly to Malthus:

"We agree too that effectual demand consists of two elements, the power and the will to purchase; but I think the will is very seldom wanting where the power exists, for the desire of accumulation [i.e., saving] will occasion demand just as effectually as a desire to consume; it will only change the objects on which the demand will exercise itself.[20]"

For the present, however, it may be sufficient merely to note Keynes's contention on this point rather than to try to analyze it in full. There will be plenty of opportunity for that later. As we shall see, Keynes himself alternates constantly between two mutually contradictory contentions: (1) that saving and investment are "necessarily equal," and "merely different aspects of the same thing" (p. 74), and (2) that saving and investment are "two essentially different activities" without even a "nexus" (p. 21), so that saving not only can exceed investment but chronically tends to do so. The second is the view which he chooses to support at this point. We shall have occasion to analyze both views later. For the present it is sufficient merely to note the presence of this deep-seated contradiction in Keynes's thought.[21]

And as I stated before, the aggregation of Keyne's led to flaws in his thinking. You need to disaggregate components to get a clear view: http://mises.org/daily/4552

There is a tradeoff between consumption and investment, not an aggregation of them.

Thus, it must be concluded that, in this model, the consumption of the unemployed is not included in the consumption expenditure of the employed.

But the model at the same time implies that the consumption of the unemployed cannot be outside of the expenditure of the employed if the model is expected to produce a nonzero equilibrium output. This leaves the only remaining option — the consumption of the unemployed must be zero.

Thus, according to this model, in any continuous economy free of external intervention, if the initial reduction in the propensity to consume below the level that ensures full employment persists for long enough, the economy returns to equilibrium at a lower, newly established level of full employment, N1. This is shown in figure 4.

But, unlike the restoration of equilibrium where the unemployed find the yet undiscovered opportunities for employment, the true logic of the Keynesian model implies that the equilibrium is restored by the cessation of the physical existence of the unemployed (i.e., death). Any other outcome contains unresolved internal contradictions.

Contrary to the commonly used interpretation of the "Keynesian cross," continued fluctuations in output and employment cannot be produced by this model if its strict logic is coupled with the logic of human existence. In this case, the Keynesian model implies that prolonged business cycles could not persist in the absence of an intervention external to the market processes. However, for Keynes, government intervention was the cure, not the cause, of the business cycle. It then turns out that the Keynesians are Austrians during recessions "without even knowing it."

The Keynesian model is simply flawed. Motivated human action and realities of existence need to taken into account.

[ChargerCarl]

Oh.my.christ.no.

say's law falls apart the second you introduce money into an economy. consumption and production are only constantly in equilibrium in a barter economy because the act of consumption is the same as the act of production. A buyer must also be a seller. However when you introduce a medium of exchange you eliminate that constraint. Purchasing and selling goods are distinct acts, so general gluts become possible.

[Malice]

No, not in the long run without government intervention, which is why I left out #2 of Ricardo's statement, and which Hazlitt addressed

(2) Since goods exchange against goods, money is but a "veil" and plays no independent role.

that only version 2 is false as stated, and that even this is capable of being stated in a form that is correct.

Now Ricardo clearly stated the doctrine in versions 1, 3, and 4; and though he implied it also in version 2, his statement even of this can be interpreted in a sense that would be correct:

M. Say has … most satisfactorily shown that there is no amount of capital which may not be employed in a country, because a demand is only limited by production. No man produces but with a view to consume or sell, and he never sells but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to be supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually produce a commodity for which there is no demand.
There cannot, then, be accumulated in a country any amount of capital which cannot be employed productively until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases. While the profits of stock are high, men will have a motive to accumulate. Whilst a man has any wished-for gratification unsupplied, he will have a demand for more commodities; and it will be an effectual demand while he has any new value to offer in exchange for them.…
Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market as not to repay the capital expended on it; but this cannot be the case with respect to all commodities.[10]

The italics above are my own, intended to bring out the fact that Ricardo by no means denied the possibility of gluts, but merely of their indefinite prolongation.[11] In his Notes on Malthus, in fact, Ricardo wrote: "Mistakes may be made, and commodities not suited to the demand may be produced — of these there may be a glut; they may not sell at their usual price; but then this is owing to the mistake, and not to the want of demand for productions." [12]

[ChargerCarl]

That didn't address my critique at all. It merely stated again what I just said was false.

Also, I don't think you understand what the term "general glut" means.

[ChargerCarl]

Then again, I don't think you're actually capable of discussing economics without resorting to blindly copying and pasting articles from mises, a think tank nobody in the world cares about.

[Malice]

What are you talking about? A general glut is a misallocation of resources, caused by government if on a large scale (the cluster of errors), and is dealt with by economic adjustment, which doesn't require government intervention.

[Malice]

Ah, I see. "In the long run we are all dead."

[slicknickns]

i hope that he ruins that country, fuck the french, fuck their politics (national front and other righties are OK)

their culture is shitty, the ITALIANS are better, their arrogant and their food sucks

[water bottle]

Originally Posted by slicknickns

their arrogant and their food sucks

1. Only in Paris.

2. That's just not true. The French do some amazing things with food. The hoighty toighty Parisian haute cuisine is overrated though.

People are too prejudiced to the French. It seems to all be based in the three days many have spent in Paris. Some of the nicest people I've met have been French.

[White Jesus]

Originally Posted by water bottle

1. Only in Paris.

2. That's just not true. The French do some amazing things with food. The hoighty toighty Parisian haute cuisine is overrated though.

People are too prejudiced to the French. It seems to all be based in the three days many have spent in Paris. Some of the nicest people I've met have been French.

Seconded the French can be pretty awesome plus their women are sexy as.
Americans just hate the French because the French hate Americans

[The Pat-Man]

lol @ all the middle eastern flags waving at his celebration ceremony, here it comes france, y'all though it couldn't get worse but you're in for a treat.

[Tachosomoza]

What's wrong with that?

[Malice]

They're the niggers of Europe.

Be honest Tacho, where would you prefer to live, in a city that's predominantly white and Asian or one that's mostly Hispanic and Black? I recall reading that the amount of Hispanic and Black residents is actually the strongest predictor of crime levels for a neighborhood.

[Tachosomoza]

I'd prefer to live in an area with a lot of families where members come from different races myself. I want my next door neighbor to be a black guy with an asian wife, and I want my other next door neighbor to be an American white guy with a Brazilian wife. Across the street would be a Latino and Native American same sex couple. That's Tacho's world.

[crazzyass]

Originally Posted by Tachosomoza

I'd prefer to live in an area with a lot of families where members come from different races myself. I want my next door neighbor to be a black guy with an asian wife, and I want my other next door neighbor to be an American white guy with a Brazilian wife. Across the street would be a Latino and Native Anerican same sex couple. That's tscho's world.

As someone who spends most of his time in environments like that, I can verify it's the best. I've noticed that areas with too high a concentration of ANY race kinda sucks, frankly. I grew up in the whitest city in the world and it was god-awful. American suburbia is shit.

[Malice]

“The existence of unused capacity is…by no means a proof that there exists an excess of capital and that consumption is insufficient: on the contrary, it is a symptom that we are unable to use the fixed plant to the full extent because the current demand for consumers’ goods is too urgent to permit us to invest current productive services in the long processes for which (in consequence of “misdirections of capital”) the necessary durable equipment is available…The only way permanently to “mobilize” all available resources is, therefore, not to use artificial stimulants —whether during a crisis or thereafter — but to leave it to time to effect a permanent cure by the slow process of adapting the structure of production to the means available for capital purposes”

(Prices and Production, p 273.)

Beautiful passage.

[Malice]

http://www.telegraph.co.uk/finance/g...to-France.html

Interesting article. What do you know, the rich can leave and anti-business legislation does matter to people.

[Issue313]

Originally Posted by Malice

http://www.telegraph.co.uk/finance/g...to-France.html

Interesting article. What do you know, the rich can leave and anti-business legislation does matter to people.

[crazzyass]

Originally Posted by Malice

http://www.telegraph.co.uk/finance/g...to-France.html

Interesting article. What do you know, the rich can leave and anti-business legislation does matter to people.

And the United States has a tax level SO close to the French's.

We're definitely not at a 70 year low or anything.

[Malice]

Originally Posted by crazzyass

And the United States has a tax level SO close to the French's.

We're definitely not at a 70 year low or anything.

Are you taking into account all taxes? What about being to write off losses? Are limited liability corporations counted as corporations? Many might be small businesses.

http://www.businessweek.com/articles...oyee-companies

Pfft, market socialism, what a joke.

[crazzyass]

Originally Posted by Malice

Are you taking into account all taxes? What about being to write off losses? Are limited liability corporations counted as corporations? Many might be small businesses.

http://www.businessweek.com/articles...oyee-companies

Pfft, market socialism, what a joke.

No, I do think small businesses should have their taxes significantly reduced if current loopholes aren't affording them the same benefits that corporations receive.

Most top corps pay zero taxes, or receive subsidies, while small businesses pay everything. That should be reversed.

[Malice]

Everyone should pay zero. The debt? That should be defaulted on.

[crazzyass]

Originally Posted by Malice

Everyone should pay zero. The debt? That should be defaulted on.

Now I know you're trolling. You're smarter than that.

[Malice]

But, I'm an anarchist. I thought I made this clear.

[crazzyass]

Originally Posted by Malice

But, I'm an anarchist. I thought I made this clear.

Ohh that's right. You welcome the meltdown of society into chaos already. I forgot.

[Malice]

Anarchy =/= chaos.

[crazzyass]

Originally Posted by Malice

Anarchy =/= chaos.

I was being facetious. I agree with you. Anarchy = Tyranny, though, and all joking aside.