http://www.scribd.com/doc/16629172/How-an-Economy-Grows-and-Why-It-Doesnt-Irwin-Schiff
Because I am benevolent I will attempt to provide one final reference. That comic will teach you just about everything discussed here.
I’ve already explained to you what I thought were the flaws in your theory. I referred an article to you by Frank Shostak. All I can suggest now is to go to Mises Daily, search for “deflation” and “structure of production”. Also here is the entire Frank Shostak archive pick and choose the articles that interest you. There is always Rothbard and Mises. Nobody can teach you ABCT in a format like this, you need to read about it if you are curious.
Do you see no other option?
Yeah apparently now deflation is what goes hand in hand in war. I see Keynesians have stolen and co-opted the anti-inflationist line, only with no logical basis to stand on.
I don’t see it. Do you? Unless we can convince the populace that they should spend more money and keep spending until there is deflation no more in the land.
If the public actually took the advice yes it would work.
Ok. If you don’t get my theater example in the thread and my exchanges with filc where I ask him to invest 100,000 pieces of gold and get back only 90,000 of gold in a deflationary environment. He said that a rational person would do it.
If you cannot see how 100,000 pieces of gold is greater (better than) 90,000 pieces of gold no matter what the inflation/deflation is in the land then I really don’t know what to say!
Mansoor
Ok. If you don’t get my theater example in the thread and my exchanges with filc where I ask him to invest 100,000 pieces of gold and get back only 90,000 of gold in a deflationary environment. He said that a rational person would do it.
If you cannot see how 100,000 pieces of gold is greater (better than) 90,000 pieces of gold no matter what the inflation/deflation is in the land then I really don’t know what to say!
Seems myopic. What about the day after you’ve gotten rid of deflation? You don’t think your spend spend spend policy will have consequences?
Then taxes can be raised as a way to slow the economy down. The government can then do the reverse. Hoard tax revenue until inflation goes away.
I reviewed the story in the link. I am un-impressed. It does not address over-saving (hoarding) and deflation.
Projects like the waterpark will not be done when deflation ensues based on the logic I discussed in the movie theater example and the 100,000 pieces of gold vs. 90,000 pieces of gold discussion
Mansoor
Great. First we inflate the currency, spend the money on public works projects that the demos chooses, rather than letting private individuals choose them, then, once we’ve gotten people spending lots of money they either don’t have or don’t want to hold onto because it will be worth less tomorrow, we tax whatever they have left and then let the government hoard the money until it decides it wants to spend it on god knows what. This is your plan?
Look, it is very simple. The planet is a closed economy. If too many citizens of the world save too much deflation will ensue. Deflation can sometimes spiral out of control (like in the GD). We must guard against this kind of disaster.
Mansoor
So. You have a better plan. I am all ears. Remember, I won’t accept deflation!
Mansoor
Look, it’s simple, there are all sorts of problems in the world, if we treat any one of them as the “end all be all there can be no problem worse than this one” we can get tunnel vision and forget that there are consequences for every action. Political actions, because they effect so many, can have enormous consequences, most of them unintended. Just because you can identify a major problem and say “well look, we got a Great Depression once because this happened” doesn’t mean that all of a sudden any means necessary to prevent such an outcome are justifiable and/or acceptable. I really think you need to slow down and think about what you’re saying here, Mansoor.
You are correct. There is only one data point. Therefore, I will wait until we reach 25% unemployment rate and -25% decline in economic activity then see what you think.
I will continue the discussion at tha time. But in the meantime do you think it is ok for the government to keep the unemployed alive and keep them from freezing to death? Do you think that would be ok?
Mansoor
Here’s my plan: I’m not going to totally disregard Keynes, but I’m also not going to treat his toolset as a surgical knife. Keynes’ toolset is more like a big god damn hammer. I would rather let the market use its much more precise knife to deal with problems that use Keynes big god damn hammer. Deflation is a problem, so is inflation. They both can have undesirable effects. I think where we need to start in this country is cutting taxes. I know of no better way to get people money than to give them money they already rightly earned. Then, instead of letting the government decide what kinds of projects to undertake, I’m going to let private individuals decide. They may not do what you think they should do, but at least we won’t be essentially taking moves out of a totalitarian playbook. There are worse things than deflation, one of them is totalitarianism. What I’m trying to say is that I think your priorities suck.
These are the kinds of loaded questions that make a conversation impossible. Because ofcourse I want to see the unemployed alive but I also don’t want to play Robin Hood.
Also, as far as unemployment goes, do you care about what people are being employed to do? I mean if the government gave us 10 billion dollars and we used it to pay people to go dig holes in the desert, would that really be the same as letting the market direct 10 billion dollars towards something that might be more productive?
Agreed. But if deflation continues to spiral and unemployment continues to increase. What will you do? Will you at least feed them and keep them from freezing to death.
While we rethink all this.
Mansoor
Let’s assume “rampant” productivity and “idiotic” non-consumption have indeed pushed humanity deep into dreaded DEFLATION (!!). In this new world (i.e. HELL, as defined by Mansoor Keynes), everyone gets richer by simply sitting on their hoarded savings, watching some phantom “economy” (mind you, NO ONE invests and NO ONE does business anymore, as sitting on your savings is just more logical) produce stuff no one needs (as prices fall). Are you suggesting there would be no point on this downward spiral into the black hole of misery that these “rich” hoarders would say: “Darn it, I’ve accumulated all this wealth, so I think I may buy myself a loaf of bread cause I’m fainting from hunger. I deserve it.” Who would he buy a loaf of bread from, assuming that our old baker from the OP also decided to close his shop and get himself richer by sitting on his savings just like everyone else?
Z.
Agreed. I am happy with that. Let’s just keep them alive until we see the next data point clearly. Then we can talk more. I will accept this plan.
Mansoor