Total Posts:34|Showing Posts:1-30|Last Page
Jump to topic:

Bailout...

comoncents
Posts: 5,647
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 7:27:49 PM
Posted: 6 years ago
Who is for it?
Who is against it?

What if it were a Chrysler situation where they pay it back, and you get to save a ton of jobs?

Let me know...
mongoose
Posts: 3,500
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 7:29:05 PM
Posted: 6 years ago
Against.
It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
Ragnar_Rahl
Posts: 19,297
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 8:00:25 PM
Posted: 6 years ago
What if it saves jobs, and they pay it back?
If they pay it back and it's a profitable allocation of capital, you don't need tax money to make it happen and it's no longer a bailout.

The government has no place in makework.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Ragnar_Rahl
Posts: 19,297
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 8:09:29 PM
Posted: 6 years ago
CCCCCCCCCCCCCCCCCCCC-OOOOOOOOOOOOOOOOOOOOOOOOMMMMMMMMMMMMMMMMBBBBBBBBBBBBOOOOOOOOOOOOOOOOOOOOO BBRRRRRRRRRRRREEEEEEEEEEEAAAAAAAAAAAAAKKKKKKKKKEEEEEEEEEEEEERRRRRRRRRRR!

But as said against.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
djsherin
Posts: 343
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 8:23:11 PM
Posted: 6 years ago
At 10/18/2010 7:31:00 PM, comoncents wrote:
At 10/18/2010 7:29:05 PM, mongoose wrote:
Against.

Why?
What if it saves jobs, and they pay it back?

Making cars illegal would have saved a lot of horse and buggy jobs.

The government only gets its money through taxation. Giving a bailout to x takes capital away from private investors who would have given their money to y. Knowing the private sector wouldn't have loaned to x, but to y, investors believe y to be more profitable. Why should we then take the money by force from the private sector and give it to x? If the money goes to y, will jobs not be created?
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 10:55:57 PM
Posted: 6 years ago
i'm torn. the more i look into it the more it doesn't look totally retarded... but there are two main reasons (at least in my head) why the politicians took this upon themselves:

1. the failure of many financial institutions would send ripples through the entire economy and cause the recession to spiral into a depression (the reason they gave)

or

2. their buddies that run said financial institutions begged them to save their jobs and fortunes.

honestly, they both seem plausible to me. for 1, just look at the history of bank runs and the financial disasters that caused. for 2 just look at the history of... corporations in general lol. not to say that i am anti-business, but that most businesses would rather work hard at getting privileges from the government than at providing a superior service. but. ANYWAYS. its interesting you would bring this up comon, because its been on my mind recently. in the first case it might be justifiable, but in the second, its clearly not.

since you're all so obviously against it, help me out here- why is option one so exceedingly unlikely?
evidently i only come to ddo to avoid doing homework...
J.Kenyon
Posts: 4,194
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:08:08 PM
Posted: 6 years ago
At 10/18/2010 10:55:57 PM, belle wrote:
1. the failure of many financial institutions would send ripples through the entire economy and cause the recession to spiral into a depression (the reason they gave)

or

2. their buddies that run said financial institutions begged them to save their jobs and fortunes.

honestly, they both seem plausible to me. for 1, just look at the history of bank runs and the financial disasters that caused. for 2 just look at the history of... corporations in general lol. not to say that i am anti-business, but that most businesses would rather work hard at getting privileges from the government than at providing a superior service. but. ANYWAYS. its interesting you would bring this up comon, because its been on my mind recently. in the first case it might be justifiable, but in the second, its clearly not.

since you're all so obviously against it, help me out here- why is option one so exceedingly unlikely?

Whether or not politicians voted for good reasons has no necessary bearing on whether or not there are good reasons for passing the bill. Most here (myself included) have some moral or economic objection to it. I don't really feel like debating its merits right now, just throwing my two cents out there.
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:15:29 PM
Posted: 6 years ago
At 10/18/2010 11:08:08 PM, J.Kenyon wrote:
At 10/18/2010 10:55:57 PM, belle wrote:
1. the failure of many financial institutions would send ripples through the entire economy and cause the recession to spiral into a depression (the reason they gave)

or

2. their buddies that run said financial institutions begged them to save their jobs and fortunes.

honestly, they both seem plausible to me. for 1, just look at the history of bank runs and the financial disasters that caused. for 2 just look at the history of... corporations in general lol. not to say that i am anti-business, but that most businesses would rather work hard at getting privileges from the government than at providing a superior service. but. ANYWAYS. its interesting you would bring this up comon, because its been on my mind recently. in the first case it might be justifiable, but in the second, its clearly not.

since you're all so obviously against it, help me out here- why is option one so exceedingly unlikely?

Whether or not politicians voted for good reasons has no necessary bearing on whether or not there are good reasons for passing the bill. Most here (myself included) have some moral or economic objection to it. I don't really feel like debating its merits right now, just throwing my two cents out there.

well yes i realize there are moral and/or economic objections; i am wondering what those are. perhaps my presentation was confusing, but i assume some will be against it because they think option two is true (precluding option one), others because they think option one contains some flaw in analysis quite apart from option two being true or not, and still others because all tax is theft and thus it doesn't matter how devastating the results are, the government shouldn't have anything to do with business. i am not looking for a debate really, just other people's knowledge...
evidently i only come to ddo to avoid doing homework...
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:25:50 PM
Posted: 6 years ago
At 10/18/2010 11:15:29 PM, belle wrote:
At 10/18/2010 11:08:08 PM, J.Kenyon wrote:
At 10/18/2010 10:55:57 PM, belle wrote:
1. the failure of many financial institutions would send ripples through the entire economy and cause the recession to spiral into a depression (the reason they gave)

or

2. their buddies that run said financial institutions begged them to save their jobs and fortunes.

honestly, they both seem plausible to me. for 1, just look at the history of bank runs and the financial disasters that caused. for 2 just look at the history of... corporations in general lol. not to say that i am anti-business, but that most businesses would rather work hard at getting privileges from the government than at providing a superior service. but. ANYWAYS. its interesting you would bring this up comon, because its been on my mind recently. in the first case it might be justifiable, but in the second, its clearly not.

since you're all so obviously against it, help me out here- why is option one so exceedingly unlikely?

Whether or not politicians voted for good reasons has no necessary bearing on whether or not there are good reasons for passing the bill. Most here (myself included) have some moral or economic objection to it. I don't really feel like debating its merits right now, just throwing my two cents out there.

well yes i realize there are moral and/or economic objections; i am wondering what those are. perhaps my presentation was confusing, but i assume some will be against it because they think option two is true (precluding option one), others because they think option one contains some flaw in analysis quite apart from option two being true or not, and still others because all tax is theft and thus it doesn't matter how devastating the results are, the government shouldn't have anything to do with business. i am not looking for a debate really, just other people's knowledge...

Recessions are caused by the artificial expansion of the money supply. This artificial expansion results in investment for projects that wouldn't have otherwise been invested in (see: housing, dot-com). But, since this investment is based on fake money from the central bank, rather than real savings, it isn't sustainable. Eventually, it becomes apparent that there isn't enough actual demand to buy up the results of the malinvestment, and the bubble collapses (For example, it turns out that housing prices aren't going to go up forever). This collapse is natural, inevitable, and necessary. The crash needs to happen to liquidate the bad investments and reallocate capital into productive areas. However, if there's a bailout or further money printing ("Quantitative Easing"), then this liquidation process is halted. This prevents the economy from entering an actual recovery, which is why it's currently stagnating. And, eventually, the bubble will continue its collapse, and it'll be far worse than if we had just let it happen the first time around. At least, that's the short version. A better and more detailed analysis of how the business cycle works is here: http://mises.org...
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
bluesteel
Posts: 12,301
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:35:53 PM
Posted: 6 years ago
At 10/18/2010 11:25:50 PM, LaissezFaire wrote:
Recessions are caused by the artificial expansion of the money supply. This artificial expansion results in investment for projects that wouldn't have otherwise been invested in (see: housing, dot-com). But, since this investment is based on fake money from the central bank, rather than real savings, it isn't sustainable. Eventually, it becomes apparent that there isn't enough actual demand to buy up the results of the malinvestment, and the bubble collapses (For example, it turns out that housing prices aren't going to go up forever). This collapse is natural, inevitable, and necessary. The crash needs to happen to liquidate the bad investments and reallocate capital into productive areas. However, if there's a bailout or further money printing ("Quantitative Easing"), then this liquidation process is halted. This prevents the economy from entering an actual recovery, which is why it's currently stagnating. And, eventually, the bubble will continue its collapse, and it'll be far worse than if we had just let it happen the first time around. At least, that's the short version. A better and more detailed analysis of how the business cycle works is here: http://mises.org...

Which is why Paul Volcker raised interest rates to end stagflation, when Greenspan or Bernanke would have lowered rates. Charles Morris (Two Trillion Dollar Meltdown) attributes most of the economic success of the past few decades to Volcker's austerity program.

On the other hand, a failure of U.S. financial institutions might have resulted in London becoming the new financial center of the world, which would hurt the U.S. in a variety of ways (David Smick - The World is Curved).
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
FREEDO
Posts: 21,057
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:39:20 PM
Posted: 6 years ago
Legalizing pot and being against bailouts are two things that the great majority of people here can all agree on.
GRAND POOBAH OF DDO

fnord
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:48:10 PM
Posted: 6 years ago
At 10/18/2010 11:25:50 PM, LaissezFaire wrote:
right, thats the standard version i've heard. but how does that explain the many (in fact more frequent) business cycles that took place before the fed was instituted and that were actually marked by drastic deflation?

i agree that malinvestment likely has something (a lot?) to do with it, but expansion of the money supply isn't a necessary factor. bubbles get started (seemingly) all on their own. thats why i don't find the traditional explanation entirely satisfying.

you also have to take into account the fact that massive gov't spending (in the form of WW2) actually did pull us out of a huge depression... so it can't be that spending in a recession is always bad or prevents recovery.
evidently i only come to ddo to avoid doing homework...
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/18/2010 11:48:49 PM
Posted: 6 years ago
sorry, messed that one up...

At 10/18/2010 11:48:10 PM, belle wrote:
right, thats the standard version i've heard. but how does that explain the many (in fact more frequent) business cycles that took place before the fed was instituted and that were actually marked by drastic deflation?

i agree that malinvestment likely has something (a lot?) to do with it, but expansion of the money supply isn't a necessary factor. bubbles get started (seemingly) all on their own. thats why i don't find the traditional explanation entirely satisfying.

you also have to take into account the fact that massive gov't spending (in the form of WW2) actually did pull us out of a huge depression... so it can't be that spending in a recession is always bad or prevents recovery.
evidently i only come to ddo to avoid doing homework...
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:02:18 AM
Posted: 6 years ago
At 10/18/2010 11:48:10 PM, belle wrote:

right, thats the standard version i've heard. but how does that explain the many (in fact more frequent) business cycles that took place before the fed was instituted and that were actually marked by drastic deflation?
The expansion of the money supply doesn't necessarily include the Fed; the Fed is just responsible for the recent ones. The 1st/2nd Banks of the United States, fractional reserve banking, etc have been responsible as well. As for the business cycle being more frequent/worse before the Fed, that isn't actually true, today's economists just measure them wrong. Take the deflationary "Long Depression" of 1873-1879. It was supposedly one of the worse recessions in the 19th century, but the 1870s saw an average annual real GDP growth of 6.8%. Today's recessions are measured wrong by economists as well, because of the way CPI is calculated. In the past few decades, they changed the way CPI is calculated several times, always to make inflation seem lower than it really is. For example, if we used the CPI calculations of the 1970s today, the average yearly price increase in 2000-2010 would be almost as high as the price inflation of the 70s.

i agree that malinvestment likely has something (a lot?) to do with it, but expansion of the money supply isn't a necessary factor. bubbles get started (seemingly) all on their own. thats why i don't find the traditional explanation entirely satisfying.
That has never happened, ever. Name any recession in U.S. history where a bubble got started all on its own.

you also have to take into account the fact that massive gov't spending (in the form of WW2) actually did pull us out of a huge depression... so it can't be that spending in a recession is always bad or prevents recovery.
No, WWII did not get us out of the Great Depression.

Thomas Woods wrote:
Is there any truth to the notion that World War II stimulated the American economy? Unemployment did fall substantially during the war, it is true, but presumably we can figure out without too much mental effort what happens to unemployment when 29% of the labor force is at one time or another drafted into the armed forces.

Economic historian Robert Higgs, in a couple of articles that appeared in professional journals in the 1990s, made the most effective assault on the hoary old myth of wartime prosperity. By the time Oxford University Press published his Depression, War, and the Cold War in 2006, Higgs' thesis was even beginning to find its way into textbooks. Higgs urges us to consider the sudden and severe resource constraints that afflicted the American economy during those years. With 29 percent of the labor force shifted into the armed forces at some point during the war, their places were taken by elderly men and by women and teenagers with relatively little work experience. We are supposed to believe that an economy suffering from these disabilities somehow managed to achieve average real GDP growth rates of 13% per year, an achievement never matched in American history before or since? And we're also supposed to believe that when the original labor force was restored at the end of the war, the American economy's real output would fall by 22% over the next two years?

It does not speak well for mainstream economics that so many of its students believed such obvious nonsense for so long. These conclusions come directly from what the statistics tell us, a critic may object. Well, might there be something a little fishy about those statistics, given that they lead us to such absurd conclusions?

The problem is that the national income statistics gathered during the war are meaningless. For reasons we'll see in chapter 6, Gross Domestic Product is an aggregate of dubious value even under ideal circumstances. But during the war the national income statistics were more misleading than usual. Only the free interaction of buyers and sellers, of demand and supply, can give rise to meaningful prices on the free market. If the government were to claim, unilaterally and in isolation from market exchange, "From now on, the price of eggs will be $10 apiece, and we'll be ordering one million of them," how would our understanding of real conditions in the economy be enhanced by multiplying the arbitrary price of $10 by one million eggs, arriving at $10 million, and adding that to our national income?

But that's in effect what happened during the war. With at least two-fifths of our national output now part of the war machine, with large portions of the remainder under various kinds of controls and with spillover effects throughout the economy, the price system became more and more arbitrary. Prices arose not out of the free interaction of buyers and sellers. They were arbitrarily imposed by government and did not reflect consumer choice. Adding up a bunch of arbitrary numbers yields nothing but a great big arbitrary number. But it's those numbers, the GDP figures during the war, on which the tall tale of wartime prosperity is based.

In the midst of all this, consumers also had to suffer rationing, declining product quality, the complete inability to purchase things like new homes, cars, and appliances, and an increase in the work week. How significant is a "boom" in which the consumer welfare is subject to constraints like this? But there's your big prosperity.

Oh, and we were warned that with the war over, the boys coming home and military spending slashed, the country would plunge into the doldrums again. Exactly the opposite happened, of course: 1946 was a year of fantastic prosperity, in which the private sector experienced the single greatest growth spurt in American history. This is a big mystery to a certain school of economists, but common sense to everyone else: when your economy shifts back to producing things consumers need and the labor force is increased and improved, the economy improves.

The national income accounting statistics showed a great decline in American prosperity in 1946. The health of the private economy, which is where the wealth is generated, was very poor during the war and excellent afterward. This is really just common sense (but if it weren't for the denial of common sense, most of our public intellectuals would have nothing to do).

If spending on munitions really makes a country wealth, the United States and :Japan should do the following:
Each should seek to build the most spectacular naval fleet in history, an enormous armada of gigantic, powerful, technologically advanced ships. The two fleets should then meet in the Pacific. Naturally, since they would want to avoid the loss of life that accompanies war, all naval personnel would be evacuated from the ships. At that point the U.S. And Japan would sink each other's fleets. Then they would celebrate how much richer they had made themselves by devoting labor, steel, and countless other inputs to the production of things that would wind up at the bottom of the ocean.

We have welled on the "war brings prosperity" argument because it is based on the same central fallacy as the "consumer spending drives the economy" silliness, which we'll encounter in chapter 6, and because it is believed by the great majority of the geniuses who presume to offer us advice now.

Both of those fallacies assume that the mere act of spending, regardless of what the money is spent on, gives rise to prosperity. It's good for the economy, the tell us, if people empty their pockets during a recession, even though that's the opposite of what a sensible person would do. We're also told that if government spends feverishly on things consumers don't buy and can't use (like fighter planes and tanks, for instance), and then taxes the private economy or borrows in order to pay for it, it thereby makes everyone richer. That is the philosophy behind fiscal "stimulus" programs as well.
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:04:50 AM
Posted: 6 years ago
^ Sorry for the huge quote, I just think it's a really good explanation of why WWII didn't get us out of the Great Depression.
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
bluesteel
Posts: 12,301
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:15:29 AM
Posted: 6 years ago
At 10/19/2010 12:04:50 AM, LaissezFaire wrote:
^ Sorry for the huge quote, I just think it's a really good explanation of why WWII didn't get us out of the Great Depression.

LF - that's hogwash. I don't think many economists would argue that the war years were years of prosperity, but they would all agree that WWII ended the Great Depression.

The massive government spending fixed the main problem of the Great Depression: the collapse in consumer confidence led to a collapse in demand, leading to unused capital stock and a collapse in capital investment, crashing the productivity of the economy. The economy was essentially in a downward spiral that only massive infusions of cash could solve.

This paper discusses the problem with the Misesian re-alignment theory, as far as the Great Depression is concerned:
http://www.j-bradford-delong.net...
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:26:47 AM
Posted: 6 years ago
At 10/19/2010 12:15:29 AM, bluesteel wrote:
At 10/19/2010 12:04:50 AM, LaissezFaire wrote:
^ Sorry for the huge quote, I just think it's a really good explanation of why WWII didn't get us out of the Great Depression.

LF - that's hogwash. I don't think many economists would argue that the war years were years of prosperity, but they would all agree that WWII ended the Great Depression.
Almost all economists failed to predict the current recession. Coincidentally, the ones that did were also the one's who would not agree that WWII ended the Great Depression.

The massive government spending fixed the main problem of the Great Depression: the collapse in consumer confidence led to a collapse in demand, leading to unused capital stock and a collapse in capital investment, crashing the productivity of the economy. The economy was essentially in a downward spiral that only massive infusions of cash could solve.
No. The Great Depression was entirely caused by government intervention. Take the difference between the crashes of 1920 and 1929, for instance. Both were fairly severe crashes. What was the difference? The government's response. In the crash of 1920, the Fed raised interest rates, and slashed spending and taxes. What happened? Well, there's a reason you've never heard of the Depression of 1920--it ended in 12 months. What did the government do in response to the crash of 1929? First, the Fed slashed interest rates, the federal government engaged in deficit spending, and, most importantly, Hoover used various wage controls to keep wages artificially high. During the 1920 depression, wages were allowed to fall, and unemployment quickly subsided. But when wages were artificially high, unemployment skyrocketed.

This paper discusses the problem with the Misesian re-alignment theory, as far as the Great Depression is concerned:
http://www.j-bradford-delong.net...
He's claiming that the laisses-faire policies after the 1929 crash led to the Great Depression? Hoover was nearly as interventionist as FDR.
http://mises.org...
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
djsherin
Posts: 343
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:33:35 AM
Posted: 6 years ago
At 10/18/2010 11:48:10 PM, belle wrote:
At 10/18/2010 11:25:50 PM, LaissezFaire wrote:
right, thats the standard version i've heard. but how does that explain the many (in fact more frequent) business cycles that took place before the fed was instituted and that were actually marked by drastic deflation?

i agree that malinvestment likely has something (a lot?) to do with it, but expansion of the money supply isn't a necessary factor. bubbles get started (seemingly) all on their own. thats why i don't find the traditional explanation entirely satisfying.

you also have to take into account the fact that massive gov't spending (in the form of WW2) actually did pull us out of a huge depression... so it can't be that spending in a recession is always bad or prevents recovery.

The malinvestment as described by the ABCT doesn't require a central bank. As I understand it, it deals with a divergence of the market rate of interest (the interest rate(s) actually observed) and the natural rate of interest (time preference); namely, a boom and bust will result when the market rate of interest is somehow pushed below society's time preference. The central bank is probably the easiest way to do this and it is by far the most common in today's world (along with fractional reserve banking). The fed and the banking system increase the supply of money which lowers interest rates without a matching drop in time preference.

I won't go into the whole theory, I'm just pointing out that you don't need a central bank for interest rates to be pushed down. Any expansion of the money supply through the loan market will push interest rates down. This is an artificial (unsustainable, because it's not backed by real savings) lengthening of the structure of production.

An interesting aside is that even without fractional reserve banking, its possible for a bank to artificially lengthen the structure of production by what I believe is called maturity mismatch. This happens when, say, someone buys a CD that matures in 1 year, but the bank uses that money to make a loan that matures in 5 years, for instance. Ceteris paribus, this would lengthen the structure of production. It wouldn't be in the bank's interest to do this but it's still technically possible.

As for bubbles in general occurring without increases in the money supply, I'm not familiar with any examples. I think it's possible for this to occur, but not nearly as likely as when the money supply is artificially increased. Are you aware of any episodes in history in which this happened?
bluesteel
Posts: 12,301
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:37:45 AM
Posted: 6 years ago
At 10/19/2010 12:26:47 AM, LaissezFaire wrote:
At 10/19/2010 12:15:29 AM, bluesteel wrote:
At 10/19/2010 12:04:50 AM, LaissezFaire wrote:
^ Sorry for the huge quote, I just think it's a really good explanation of why WWII didn't get us out of the Great Depression.

LF - that's hogwash. I don't think many economists would argue that the war years were years of prosperity, but they would all agree that WWII ended the Great Depression.
Almost all economists failed to predict the current recession. Coincidentally, the ones that did were also the one's who would not agree that WWII ended the Great Depression.

Ok, that's a really unfair ad hominem. My "history of economics" professor said WWII ended the Great Depression. She hasn't weighed in on current monetary policies or bailouts. I think close to 95% of economists would say that WWII ended the Great Depression. Maybe 60%, if that, would say that the bailout was good. These two aren't related.

The massive government spending fixed the main problem of the Great Depression: the collapse in consumer confidence led to a collapse in demand, leading to unused capital stock and a collapse in capital investment, crashing the productivity of the economy. The economy was essentially in a downward spiral that only massive infusions of cash could solve.
No. The Great Depression was entirely caused by government intervention. Take the difference between the crashes of 1920 and 1929, for instance. Both were fairly severe crashes. What was the difference? The government's response. In the crash of 1920, the Fed raised interest rates, and slashed spending and taxes. What happened? Well, there's a reason you've never heard of the Depression of 1920--it ended in 12 months. What did the government do in response to the crash of 1929? First, the Fed slashed interest rates, the federal government engaged in deficit spending, and, most importantly, Hoover used various wage controls to keep wages artificially high. During the 1920 depression, wages were allowed to fall, and unemployment quickly subsided. But when wages were artificially high, unemployment skyrocketed.

Fair enough - this seems like something I'd really like to look into further. But the government being partly responsible for the Great Depression doesn't prove that WWII wasn't responsible for ending it.

This paper discusses the problem with the Misesian re-alignment theory, as far as the Great Depression is concerned:
http://www.j-bradford-delong.net...
He's claiming that the laisses-faire policies after the 1929 crash led to the Great Depression? Hoover was nearly as interventionist as FDR.
http://mises.org...
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:39:52 AM
Posted: 6 years ago
At 10/19/2010 12:02:18 AM, LaissezFaire wrote:
The expansion of the money supply doesn't necessarily include the Fed; the Fed is just responsible for the recent ones. The 1st/2nd Banks of the United States, fractional reserve banking, etc have been responsible as well. As for the business cycle being more frequent/worse before the Fed, that isn't actually true, today's economists just measure them wrong. Take the deflationary "Long Depression" of 1873-1879. It was supposedly one of the worse recessions in the 19th century, but the 1870s saw an average annual real GDP growth of 6.8%. Today's recessions are measured wrong by economists as well, because of the way CPI is calculated. In the past few decades, they changed the way CPI is calculated several times, always to make inflation seem lower than it really is. For example, if we used the CPI calculations of the 1970s today, the average yearly price increase in 2000-2010 would be almost as high as the price inflation of the 70s.

meh.
http://en.wikipedia.org...

there are 19 recessions/depressions listed in the 80 years leading up to the founding of the fed

theres 19 that occurred after the fed was instituted in a somewhat longer period of time.

even if the severities are calculated slightly differently, at most you could say that fed was ineffective at preventing depressions/recessions; the data certainly doens't imply that it causes them.

That has never happened, ever. Name any recession in U.S. history where a bubble got started all on its own.

http://en.wikipedia.org...

take your pick. my personal favorite is the tulip bubble, but of course thats not part of US history. i don't see why that makes it irrelevant anyhow...

you also have to take into account the fact that massive gov't spending (in the form of WW2) actually did pull us out of a huge depression... so it can't be that spending in a recession is always bad or prevents recovery.
No, WWII did not get us out of the Great Depression.


Thomas Woods wrote:
alot

more meh. other than the egregious strawmanning of keynes actual position, this guy's analysis seems superficial. he completely ignores the role of mass psychology in the perpetuation of recessions. if if recoveries are retarded because people are afraid to take losses on their investments, how is everyone holding on to their money going to help things? its a feedback loop that keeps getting worse, and will keep getting worse until some low point is reached... who knows how much will be lost in the spiral?

he also seems to misunderstand the point about the war; its not the war itself that made us prosper, but rather the fact that once it ended people were willing to spend money again because they expected to get a good return on their investments. no one is suggesting that wasting tons of money on a whim is good for the economy. what they are saying is that at certain critical junctures, when consumer confidence is at an extreme low point, spending by the government can help break the cycle of investors fleeing from the market. having something to spend it on like war is ok, but investing in something constructive is obviously preferable... war is just easier to get started in times of crisis... i have no doubt people would engage in it regardless of economic status. but thats beside the point.

point: the classical austrian explanation doesn't take into account people's actual behavior or the data we have on how people make decisions. its true as far as it goes, but it appears that in fact, thats not very far.
evidently i only come to ddo to avoid doing homework...
bluesteel
Posts: 12,301
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:40:02 AM
Posted: 6 years ago
At 10/19/2010 12:33:35 AM, djsherin wrote:

As for bubbles in general occurring without increases in the money supply, I'm not familiar with any examples. I think it's possible for this to occur, but not nearly as likely as when the money supply is artificially increased. Are you aware of any episodes in history in which this happened?

Dutch tulips
http://en.wikipedia.org...
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
bluesteel
Posts: 12,301
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:41:57 AM
Posted: 6 years ago
At 10/19/2010 12:39:52 AM, belle wrote:
my personal favorite is the tulip bubble

jinx, belle owes me a soda
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:47:31 AM
Posted: 6 years ago
At 10/19/2010 12:37:45 AM, bluesteel wrote:
At 10/19/2010 12:26:47 AM, LaissezFaire wrote:
At 10/19/2010 12:15:29 AM, bluesteel wrote:
At 10/19/2010 12:04:50 AM, LaissezFaire wrote:
^ Sorry for the huge quote, I just think it's a really good explanation of why WWII didn't get us out of the Great Depression.

LF - that's hogwash. I don't think many economists would argue that the war years were years of prosperity, but they would all agree that WWII ended the Great Depression.
Almost all economists failed to predict the current recession. Coincidentally, the ones that did were also the one's who would not agree that WWII ended the Great Depression.

Ok, that's a really unfair ad hominem. My "history of economics" professor said WWII ended the Great Depression. She hasn't weighed in on current monetary policies or bailouts. I think close to 95% of economists would say that WWII ended the Great Depression. Maybe 60%, if that, would say that the bailout was good. These two aren't related.
It is hardly an ad hominem. Maybe in the case of people who specialize in "history of economics," but that isn't the case for most economists. The Keynesians have always been wrong about everything, there's no reason to believe anything they say. They are the people that said that the massive reduction in government spending after WWII would lead to the return of the Great Depression (of course, modern Keynsians wouldn't say this, but only because they're looking at it after the fact), the very same people that said that stagflation is impossible, and the very same people to fail to predict every single boom and bust cycle since Keynes' General Theory was published. The people who did predict all of these recessions, who accurately predicted what the result of the Fed's and Congress' interventions, are the people who I'll trust as far as economic history goes. (The Austrian school of economics)

The massive government spending fixed the main problem of the Great Depression: the collapse in consumer confidence led to a collapse in demand, leading to unused capital stock and a collapse in capital investment, crashing the productivity of the economy. The economy was essentially in a downward spiral that only massive infusions of cash could solve.
No. The Great Depression was entirely caused by government intervention. Take the difference between the crashes of 1920 and 1929, for instance. Both were fairly severe crashes. What was the difference? The government's response. In the crash of 1920, the Fed raised interest rates, and slashed spending and taxes. What happened? Well, there's a reason you've never heard of the Depression of 1920--it ended in 12 months. What did the government do in response to the crash of 1929? First, the Fed slashed interest rates, the federal government engaged in deficit spending, and, most importantly, Hoover used various wage controls to keep wages artificially high. During the 1920 depression, wages were allowed to fall, and unemployment quickly subsided. But when wages were artificially high, unemployment skyrocketed.

Fair enough - this seems like something I'd really like to look into further. But the government being partly responsible for the Great Depression doesn't prove that WWII wasn't responsible for ending it.
Not partially responsible--entirely responsible. And it does prove that. If government intervention, in the form of wage controls, is what caused the high rates of unemployment, and that unemployment suddenly disappeared after WWII, after the government's role in the economy was drastically reduced, then it's fair to conclude that it was the removal of government controls, not WWII spending, that caused the end of the depression. In addition, according to Keynesian economics, if the government spending of WWII were indeed responsible for the end of the recession, then the economy would have improved during WWII, not just after, once the spending was reduced.

This paper discusses the problem with the Misesian re-alignment theory, as far as the Great Depression is concerned:
http://www.j-bradford-delong.net...
He's claiming that the laisses-faire policies after the 1929 crash led to the Great Depression? Hoover was nearly as interventionist as FDR.
http://mises.org...
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:54:06 AM
Posted: 6 years ago
At 10/19/2010 12:33:35 AM, djsherin wrote:
The malinvestment as described by the ABCT doesn't require a central bank. As I understand it, it deals with a divergence of the market rate of interest (the interest rate(s) actually observed) and the natural rate of interest (time preference); namely, a boom and bust will result when the market rate of interest is somehow pushed below society's time preference. The central bank is probably the easiest way to do this and it is by far the most common in today's world (along with fractional reserve banking). The fed and the banking system increase the supply of money which lowers interest rates without a matching drop in time preference.

I won't go into the whole theory, I'm just pointing out that you don't need a central bank for interest rates to be pushed down. Any expansion of the money supply through the loan market will push interest rates down. This is an artificial (unsustainable, because it's not backed by real savings) lengthening of the structure of production.

ok. that sounds plausible. my main beef with LF was the apparent assumption that it is government action that causes business cycles, and that without interference in the market they would not occur. this doesn't seem to be the case at all.

An interesting aside is that even without fractional reserve banking, its possible for a bank to artificially lengthen the structure of production by what I believe is called maturity mismatch. This happens when, say, someone buys a CD that matures in 1 year, but the bank uses that money to make a loan that matures in 5 years, for instance. Ceteris paribus, this would lengthen the structure of production. It wouldn't be in the bank's interest to do this but it's still technically possible.

i've read this sort of thing was going on quite a bit prior to the recent recession, which makes really no sense at all to me, and i think is probably why so many people support stricter regulations for the financial sector. i actually think if you're going to have the kind of deposit insurance we currently have, such regulations are necessary to negate the moral hazard that accrues. what i am really lost about it whether or not the economy would be a bloody mess without it. it seems like management of the economy sacrifices a small amount of efficiency for much greater gains in security... but theres so much conflicting information out there, its absurdly difficult to tell how accurate that assessment is.

As for bubbles in general occurring without increases in the money supply, I'm not familiar with any examples. I think it's possible for this to occur, but not nearly as likely as when the money supply is artificially increased. Are you aware of any episodes in history in which this happened?

as i understand it, a bubble occurs any time higher than expected profits are achieved in any one area... people jump on the bandwagon like lemmings and ride it to the end. i've heard it asserted many times that they are caused by increases in the money supply, and i can follow the logic of why such increases would cause a bubble, but it seems like people just..... assert that they are always caused by such. and other people assert the opposite. and neither offer any evidence. so i am confused :P
evidently i only come to ddo to avoid doing homework...
LaissezFaire
Posts: 2,050
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:54:27 AM
Posted: 6 years ago
@Tulip bubble
Austrian economics explains this too.
http://mises.org...

@Other stuff
Going to bed, I'll respond tomorrow if no one else here does.
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
djsherin
Posts: 343
Add as Friend
Challenge to a Debate
Send a Message
10/19/2010 12:59:30 AM
Posted: 6 years ago
At 10/19/2010 12:40:02 AM, bluesteel wrote:
At 10/19/2010 12:33:35 AM, djsherin wrote:

As for bubbles in general occurring without increases in the money supply, I'm not familiar with any examples. I think it's possible for this to occur, but not nearly as likely as when the money supply is artificially increased. Are you aware of any episodes in history in which this happened?

Dutch tulips
http://en.wikipedia.org...

There were massive increases of the money supply during Tulipmania due in part to "free coinage". Huge quantities of precious metals flowed into that region because the Bank of Amsterdam was at the center of trade (the Dutch being extremely prosperous at this time) and was also a safe haven for deposits as it operated with 100% reserves. Tulipmania was certainly a bubble, but not one where there was no increase in the money supply.