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Economics Without Greed

Discussion in 'Economics, Business, and Taxes' started by georgephillip, Nov 12, 2015.

  1. Lukey

    Lukey Senator

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    I agree that debt based growth is sub optimal. At least when we're pursuing sound money policies the temptation to write excessive amounts of debt is kept under control. And it is more likely to be used for production and infrastructure investments rather than speculation.
     
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  2. georgephillip

    georgephillip Governor

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    Do you believe it's accurate to say the financial recycling of interest receipts into new lending is the driving force of the business cycle? In the sense that the exponential growth of debt makes business conditions more risky since there are not enough assets to meet creditor demands and keep business moving at the same time?
     
  3. Lukey

    Lukey Senator

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    Nope! As I said, when sound money policies are pursued, debt is more likely to be predominantly used to fund additional production that is sustainable. It is only when excessive easing is employed by the central bank that we tend to see the "exponential" growth of credit that drives speculative investments that ultimately can't be sustained and the result is the recessionary phase of the business cycle.
     
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  4. georgephillip

    georgephillip Governor

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    By sound money policies, do you mean QE?
     
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  5. Lukey

    Lukey Senator

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  6. georgephillip

    georgephillip Governor

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    Thanks, I think, for the blast from the past:
    http://www.zerohedge.com/news/2016-02-22/peter-schiff-warns-feds-nightmare-scenario-becoming-reality

    "In the past I argued that even a tiny, symbolic, quarter point increase would be sufficient to prick the enormous bubble that eight years of stimulus had inflated. Early results show that I was likely right on that point. The truth is that the economy may be entering a period of 'stagflation' in which very low (or even negative) growth is accompanied by rising prices. This creates terrible conditions for consumers whereby prices rise but incomes don’t. This leads to diminished living standards."

    Stagflation???
    [​IMG]
    :eek:
     
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  7. Woolleybugger

    Woolleybugger Mayor

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    There are plenty of assets available to fund investment but they are locked in and not liquid. One way to do this is a death tax that truly does force the inheritors to liquidate all inherited assets. Another way is to tax the incomes and gains over a certain level at very high rates approaching 100%. This is how we did it for decades and it worked both as a way of preventing some of the inheritances to last forever and as a means of forcing companies to reinvest rather than take gains as income.
     
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  8. georgephillip

    georgephillip Governor

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    Do you believe there is a more fundamental problem stemming from the "magic of compound interest?"
    "The problem lies in the way that savings and credit are lent out to become other peoples’ debts without actually helping them earn the money to pay them off.

    "To the financial sector this poses a banking problem: how to prevent losses to creditors when loan defaults occur. Such defaults prevent banks from paying their depositors and bondholders until they can foreclose on the collateral pledged by debtors and sell it off.

    "But for the economy at large, the problem is bank credit and other loans loading the economy down with more and more debt, 'crowding out' spending on current output.

    "Something has to give – meaning that either creditors or debtors must lose.

    "Politicians thus face a choice of whether to save banks and bondholders or the economy.

    "Do they simply reward their major campaign contributors by giving banks enough central bank or taxpayer money to compensate losses on bad loans?

    "Or do they restructure debts downward, imposing losses on large bank depositors, bondholders and other creditors by writing down bad debts so as to keep debt-strapped families solvent and in possession of their homes?"
    http://store.counterpunch.org/wp-content/uploads/2015/08/Killing-The-Host_PDF_V7.pdf (p.36)
     
  9. Woolleybugger

    Woolleybugger Mayor

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    It is a problem but only if the loan is used for asset speculation or silly consumerism. If it is used to invest in something that can tangibly improve the economy then it is a good investment. All money is debt btw, always has been, always will be. If you like this subject, check out Steve Keen on youtube, he covers your point in depth.
     
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  10. georgephillip

    georgephillip Governor

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    Thanks for introducing me to Keen:
    "Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation.[3][4]

    "The hypothesis predicts that an overly large private debt to GDP ratio can cause deflation and depression.

    "Here, the falling of the price level(???) results in a continually rising real quantity of outstanding debt.

    "Moreover, the continued deleveraging of outstanding debts increases the rate of deflation.

    "Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral.

    "The outcome is a depression.

    "Steve Keen argues that the current global economic crisis is the result of too much private debt."
    https://en.wikipedia.org/wiki/Steve_Keen#Financial_instability_and_debt_deflation

    What "falling price level" is this analysis referring to?
     
  11. Woolleybugger

    Woolleybugger Mayor

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    I can't answer that off the top of my head, you have to watch him do presentations instead of just interviews. He is a big supporter of MMT and has very interesting things to say on a wide range of economics. He and Krugman had a big spat a couple years ago...check him giving a lecture, its all on youtube.
     
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  12. georgephillip

    georgephillip Governor

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    "The Keen-Krugman debate
    STEVE KEEN 26 February 2014
    The debate between these two economists on the role of banking and specifically the creation of credit is of fundamental importance in understanding the shortcomings of orthodox economic thinking - and why it was so ill-equipped to handle, let alone predict, the crash of 2008.
    https://www.opendemocracy.net/ourkingdom/steve-keen/keen-krugman-debate
     
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  13. Poseidon Atlantis

    Poseidon Atlantis Mayor

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    image.
     
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  14. The Sage of Main Street

    The Sage of Main Street Governor

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    Dumb Jock Bullies Are Compatible With the Establishment

    "From each according to his ability, to each according to his greed." To each according to his natural ability has never been suggested by the ruling ideologies. But it works in sports, which are rationally structured because they are a "bread and circuses" tool of the regime.
     
  15. Lukey

    Lukey Senator

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    Yeah, that's the guy the lefties claim "saved capitalism." Sounds like one of them "we have to destroy the village in order to save it" saviors to me...
     
  16. georgephillip

    georgephillip Governor

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    "Forbes contributor Adam Sarhan wrote the followingearlier this year (2016):

    “Over the past 7 years, we have seen unprecedented action from global central banks all aimed at keeping stock prices up. It’s normal to see global central banks adjust monetary policy, up or down, based on economic conditions. But it is not normal to see global central banks print gobs of money every day to stimulate markets and it is definitely not normal to see them buy stocks outright. I’m not a lawyer but it raises the question: Is it even legal? I’m sure the BOJ is not alone in this questionable activity. The U.S. Fed refuses to be audited. One is compelled to ask: Why?”
    http://wallstreetonparade.com/2016/...n-apple-google-facebook-and-microsoft-stocks/
     
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