It did lower unemployment when Roosevelt enslaved a quarter of the population though
False. Stagflation, also known as an inflationary depression, disproved this.\
This idea comes from the incorrect believe that depression was caused by falling prices, in reality the depression caused falling prices.
No
Recessions are the result of bad economic conditions, preventing a recession is not desirable if bad economic conditions already exist. The idea to prevent recessions that we endorse is prevent these conditions from ever forming. Recessions are an economic force and serve a purpose.
Nope. It causes people to use resources less effectively by distorting price signals.
Bank runs put crooks out of business. Thats why the government hates them, and why you should love them.
I just wanted to add on to this that there is a game at the Federal Reserve where you play as the chairman of the Federal Reserve. Bad things happen (in the news), and as chairman, you leverage economic policy so that these things don’t happen. And no, it works according to flawed macroeconomic theory to determine whether your policies work or not.
Firstly, who got the US into a depression? Secondly, war is only good for the government. its an excuse to debauch the currency further and remove civil rights domestically. Thirdly, all that labour could have been employed in creating real wealth, instead of munitions to kill people abroad. Sounds like a broken window??
From today’s article:
That’s the defunct Phillips Curve logic.
How can one consume or invest in the long run. Greater savings lead to greater capital expenditure which leads to lower prices.
A recession is a correction, as Rockwell phrased it: “like a hangover after a long night of drinking”. Only centrally-set intrest rates that are below the ‘natural’ rate can cause malinvestment. A recession is the market screaming out that we’ve made a few very big mistakes.
Inflating the currency causes recessions.
Governments turn recessions into depressions (see 4 and 5)
Several flaws here. GDP = AD = Y = C+I+G+X-M. Apparently all G spending is good for the economy. Also, we should be sending more goods overseas than we get in return. Apparently we are doomed to suffer from chronic lack of this “AD” and the only remedy for this is increasing G to make up the difference. The other choice is death.
Compared to that, inflation is a walk in the park.
The business cycle hasn’t died yet but the government is still trying to kill it. No success.
So my multiple choice answers are: 1. Myth, 2. Myth, 3. Myth, 4. Myth, 5. Myth, 6. Myth, 7. True (it is the correct formula)?, 8. Myth.
Maybe when I learn Python, seeing as I already know HTML & CSS, I could venture on attempting such. It would be a fun way to put “newbie” skills to the a test, methinks.
WWII got us out of the Depression in the sense that GNP grew. Living standards didn’t really increase until after the war ended though.
Only in the short term. The monetary supply shock created by lowering interest rates, throws us into a business cycle, so we might end up having a slightly stronger economy (on the surface) for two, three, or even ten years, but once monetary expansion slows, rates will rise and demand will fall, putting us in the same situation as before.
Nobody believes that, not even Keynesians. Increased taxes decrease consumption (duh), they’re often used in Keynesian fiscal policy to prevent an economy from “overheating” (growing too fastly).
Again, no respectable economist actually believes that. There’s a reason why even Keynesians support government surpluses and not deficits during good economic times.
As I’ve stated before, the inflation = good mentality rests on rigid wages, shown here:
As you see, in this model, since prices and wages are “sticky” or rigid, when aggregate demand falls, output falls. The fault in this is that it assumes prices are completely rigid, but these rigidities are not inherent in free markets. Rigid wages and prices are due to minimum wages, price caps, unions, and other forms of government control.
In a free market where employers can change wages depending on demand, you’d see something more like this:
As you see, the supply “curve” is vertical, this represents a flexible system. When demand falls or rises, wages fall or rise, preventing unemployment from happening and therefore allowing the economy to function at full employment and output.
True.
True.
External shocks can create a business cycle, but there really isn’t anything a government can do from preventing these external shocks from happening. Usually, the government “cure” is worse than the disease (i.e. gold release on Black Friday 1869 that caused bust in 1873).
3 and 4: my professor believes that reducing the budget deficit can help the economy, if there is a budget deficit, by either increasing taxes or reducing government spending. Sorry, should have put that in a better format. However, he says, there is a short-term recession, but in the long term, there is increased private consumption and investment. I guess I used the wrong wording.[:(]
Wow. My professor did say that wages are “sticky” and I contested that.
If bank runs cause recessions, can government stop recessions by helping the banks? Is there any way to prevent bank runs in the free market? What are the factors causing a bank run?
No, they’re just rewarding bad behaviour, and creating an incentive to continue its existence. BTW, you really should not be debating your professor, at least not until you graduate. If you want debate, do so out of an academic context, preferrably with someone who isn’t marking you.
Because banks don’t have enough money to cover the debts they owe. When people think their money is safe there are no bank runs, thus to prevent bank runs make their money actually safe by practicing sound banking, ie not fractional reserve
Bank runs are the market’s way of putting crooks out of business.
Government is"helping" the banks, because they are having strong lobbies. They do so on the expense of anybody else. There is some due dilligence on customers of banks to choose a bank that is secure. Helping banks that overplayed their hand (and offered more benefits to customers then they reasonably could afford) encourages other banks to do the same. It also lowers the risk perception of customers and hence encourages them to deal with that kind of bank.
After setting rates to 18% in the first few quarters, then fixing them at 0,25% for the following ones and finally putting a 7% rate in, my economy was still stable and working with low inflation and marginal unemployment.
By inflating the currency, the Federal Reserve and financial industry steal from everyone and give the profits to a handful of people. Federal Reserve Notes are literally slave work permission points.
The Federal Reserve may cause recessions by jacking up interest rates and shriking the money supply. People need Federal Reserve Notes in order to work, so the Federal Reserve has the power to force people out of their jobs.
To end the recession, new money is printed and given to a handful of people. They may hire the workers displaced by the recession.
The bad guys like a certain level of unemployment and underemployment. This guarantees that workers have no bargaining power.
Higher taxes increase consumption by the bad guys and decreases the resources available to productive workers.
The government may partially counteract the Federal Reserve’s monetary policies. If there’s deficit spending while the Federal Reserve is shrinking the money supply, that helps keep the money supply stable.
Politicians and bankers are colluding. The spoils of inflation are split between government insiders and financial industry insiders.
Inflating the currency lowers unemployment, because the people who print the new money may hire displaced workers at a discount.
Under a gold standard, banks fraudulently expand the money supply by issuing too many loans. When the inevitable correction occurs, there isn’t enough gold so that all depositors can be paid. Then, government intervenes to bail out bankers and cheat depositors.
That equation is nonsense. For example, you’re not including the effect of money supply inflation.
The business cycle is caused by government intervention in the market. Business cycles are symptoms of a non-free market. Insiders intentionally cause business cycles to loot and pillage everyone else.
Business cycles make it hard for individuals and small businesses to make rational economic decisions. State intervention in the market causes malinvestment.
Government fiscal policy tries to alleviate the damage caused by other bad fiscal policies. Having a central bank and fiat debt-based money is a bad idea. Other policies cannot correct for this huge mistake. You can’t cut off someone’s arm, give them a band-aid, and point out how you’re helping them.
Boom/bust cycles are intentionally caused to ruin small businesses and reduce the bargaining power of worrkers.
Government restricts people’s opportunities to start their own businesses. Left with no other choice, people work for the government or in State-sponsored monopolistic/oligopolistic industries.
The State seizes 50% of the economy directly via taxes and inflation. If you include all the hidden taxes and cost of regulation compliance, the State directly or indirectly affects 95%-99% or more of the market.
The free market cannot compensate for the massive distortions caused by government.
It is hard for people to defend themselves from the massive criminal consipracy called “government”.
Now we need to make our own where price stability and true full employment are the goals, with way more economic disturbances like bank runs, collusion, scandal, war etc.
That’s more or less true, in the sense that if you lower government spending it won’t crowd out investment as much, and that if you balance the budget people won’t have to worry about paying for the huge debt later on.
Wages are sticky, but barely at all in a free market. It would only take a few short months for the market to clear if we had a free market. Instead, union wage controls are a major source of price stickiness, which essentially “proves” the Keynesians right. The solution is to allow employers to fire union employees on the spot and let them union bust when they want to.
Fractional reserve banking stretches banks too thinly and causes bank runs. Although bank runs are “bad,” they are “good” in the sense that they eliminate banks that have bad banking practices. If a bank goes under during a bank run, it’s a sign to other banks that they better practice full reserve banking or something very close to it or risk going under.