Nothing works forever though. The question is: would you prefer short term pain or short term gain?
you don’t need a balanced budget or a surplus to meet the demands of a payment schedule. I know that sounds kid of weird but government is somewhat different from a company or a business. Basically N-Dollars are Gained and lost immediately whenever a country buys a T-bill.
i’ll use a bad analogy,but its the only thing that I can think of(yes i know the procedures are more complicated)
Basically its like when you have two credit cards,and you use one of them to pay off your credit card debt.
It’s a ponzi scheme.
stop changing the subject…I am just trying to describe the process of borrowing and repayments. we can talk about ponzi schemes later.
It depends what you mean by “works”. I would argue that a true free market economy won’t engender crises like we’ve seen throughout history and certainly won’t lead to the collapse of the currency.
That’s not really the right question to ask. Economics does not just concern itself with the short term. The short term pain comes with long term prosperity. Short term gain comes at the expense of even greater long term pain. And the long term can only be put off so many times.
But what you’re describing is a ponzi scheme. I take your money and then pay someone else back with it. I can keep doing this as long as I can keep finding new people to borrow from.
He’s saying that you can’t borrow to pay off previous debt forever. In other words, you can’t pay off debt by going into more debt ad infinitum. Eventually it has to come to an end unless you print the money, which is a de facto default.
The question is: do you prefer a short-term sharp pain, or long-term perpetual pain? Here’s a better example: do you prefer a 9 month depression (1920-1921) followed by recovery, or 14 years of depression (1929-1943). Either way, the GDP figures don’t tell you anything about the real economic condition. the USSR had high GDP numbers, all while the people were starving in the streets, and China has high GDP numbers, all while they’re building empty super-malls and ghost cities.
Maybe so, but it would also be hyper competitive and difficult and wouldn’t promise special privileges to anyone. That’s not exactly appealing to a lot of people.
But we’re not just talking about economics here. Keynesian economics is a blueprint for public policy of a certain breed. It’s hard to tell people they’re going to lose their house because ultimately it’s going to lead to general economic prosperity. That person might choose the short term gain over the short term pain because it’s easier to get now rather than get later.
Here’s a Krugman joke: Krugman went to the supermarket with a credit card to get his family out of debt.
Me, I prefer long term gain. But I’m not in charge here.
I’m not sure why “hyper competit[ion]” would be a bad thing. The consumer generally benefits enormously when there is free market competition driving down prices. I’m not sure why it owuld be any more difficult than it is now. With all the regulations and taxes and licensing and fees that would no longer be in the way, it would seem to be far less difficult to me. And why should anyone get special privileges?
But it’s ok to tell others that they have to pay for this person’s house? Or to force lender’s to take losses? And then there’s the moral hazard it creates…
If that person has political power yes. But why should people have the right to go to government and demand special privileges?
We’re talking about solutions for the business cycle. Keynesians continuously delay the correction until (a) the economy is trapped in an extended depression with a malformed capital structure, or (b) there is hyper-inflation. Austrians want liquidation, that is, a sharp contraction which will free up the factors of production for more warranted economic employments. The pain is sharp, but quick. Keynesians focus on the affects, and Austrians focus on the cause.
I’m not talking about growth theory, because even Keyesnian’s agree with Austrians when it comes to growth (at least in theory they do)–see Solow’s growth model (growth is a function of savings and technological improvement).
Hyper competition is bad for anyone who has to compete. The consumer wins, sure. But the producer doesn’t.
I don’t know whether it’s ok or not. That’s not my call. Nor is it my concern.
I don’t know whether people should have the right to demand things but I know that they do have the ability to. That’s all I’m worried about. Should and should not are outside of the realm of my competence. I am not fit to judge right from wrong in this way.
Unfortunately, the political will is lacking on the austrian side.
By “political will” you mean violence, right?
No, I mean political will. The politicians aren’t willing to push for what Esuric is talking about.
It’s the only logical and rational way to deal with a deflationary contraction brought about by an inflationary induced boom. As progressives, we try to better the system. We’re not fatalists who throw our hands up and say fuck it.
Well, keep plugging away then.