mustang19:The central bank claims to provide enough capital for both consumption and investment insofar that the economy requires a certain amount of both.
How could anyone with more than two neurons connected in their brain write this or think it makes any sense whatsoever? Whatever the CB is providing, it couldn't possibly be capital -- for one, because the CB can produce as much of it as it wants by pushing "0"s on a keyboard. One shouldn't be able to do that with capital.
Who cares what "the economy" requires? I require Ferrari 458 Italia, Porsche GT3 RS 4.0, and a 100 ft sailing boat with an all blonde crew. Can I create a CB to provide what I require?
The problem occurs during a recession when interest rates don't reach the point where entrepreneurs can utilize the available capital, perhaps becauses it's being hoarded.
The problem occurs during the boom before the recession. That's when the real capital gets destroyed. The recession is merely the messenger. Gagging him will not reverse the damage.
mustang19 Troll:I didn't come here expecting to be agreed with. And I didn't come here (mostly) to troll. I'm interested in seeing how people defend their positions.
Now you're contradicting yourself.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
How could anyone with more than two neurons connected in their brain write this or think it makes any sense whatsoever? Whatever the CB is providing, it couldn't possibly be capital.
It doesn't provide forklifts and cranes, but it can increase utilization of capital that already exists but isn't being put to use by hoarded cash.
Bernanke is working on that all blonde crew, though.
The problem occurs during the boom before the recession. That's when the real capital gets destroyed.
Real capital? If you can define what it is, we can measure it. Capital formation? Lower during recessions.
mustang19:It doesn't provide forklifts and cranes, but it can increase utilization of capital that already exists but isn't being put to use by hoarded cash.
The "hoarded" cash is being put to whose use, exactly? The owner who just expressed his preference to "hoard" it? Are you saying Bernank has a "better" use for someone's property than its very owner himself?
Real capital? If you can define what it is, we can measure it.
Capital = postponed consumption. You know, you catch three tuna fish a month and you decide to postpone consumption of (save) one per month so -- after two months -- you can survive without having to fish for a month and spend the month building a bigger + faster fishing boat so you can catch five tuna a month. Got it?
Capital formation? Lower during recessions.
No. What happens during recessions is that the information about the previous capital destruction (during the credit-induced boom) hits Bernank's measuring device. Basically, whatever he thought got "created" during the boom, in fact, did not get created. Quite the contrary, capital got destroyed. No further credit-expansion could possibly reverse or alleviate that fact. It could only make things worse down the road. After decades of such can kicking, I'm afraid that we've reached the end of the road.
Yep, like ending a recession.
When did this road start? How many decades ago did we have more capital than we have now?
mustang19:Yep, like ending a recession.
You mean, killing the messenger? Who should (subjectively) value that and why? Do I have a choice about giving my "hoarded" cash to Bernank if I thought his valuation was idiotic?
What's the net worth (assets - liabilities) of X, for X = from CB infested nations all the way down to their average citizen?
You see no problem with the following: (1) Money supply MUST grow. (2) Money can only be created into existence as DEBT. => (3) Debt must grow?
You mean, killing the messenger?
A savings glut isn't a messenger for anything other than the fact that a lot of people have chosen to hoard cash at the same time due to adverse economic expectations.
Here you go.
No problem at all. "Free banking" is no different.
Mustang, I too think am about to give up on you -- for now, at least. Hope our exchanges stirred something new for you. Sure didn't for me.
I may be a bit overtired (late night last night with the baby), but doesn't the appended link you provided
http://upload.wikimedia.org/wikipedia/commons/e/e0/Net-worth-of-the-United-States.jpg
answer this:
How many decades ago did we have more capital than we have now?
with: 4 years ago (the graph ends in 2008), then 15-23ish years ago, then 34-40ish years ago, then 41-50ish years ago?
Don't lose hope, Z. There are a lot more arguments out there, you'll find some.
Anarchocapitalist peace and flowerpower- Mustang
They're GDP shares. Have a good rest.
Ahhh.
I didn't come here expecting to be agreed with. And I didn't come here (mostly) to troll. I'm interested in seeing how people defend their positions.
That seems rather pointless given that this is not a forum for economics specialists.
Nevertheless, I had fun. If debating annoys people, though, I'll stop bringing these things up.
Believe it or not, the people on this forum are ten thousand times more mature and less neurotic than on the left liberal forums. I appreciate Jargon and Z taking my points seriously and having a constructive discussion.
Well, I hope Peter Schiff vs Paul Krugman is in the near future. Would be fun to watch.
I ain't done witchu yet foo. I am a college student in the middle of exams, but I'll reply to your response eventually.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
If debating annoys people, though, I'll stop bringing these things up.
Debating doesn't annoy most people, as long as it's a genuine exchange (mutual intellectual honesty). You keep pretending that this isn't the issue by mis-characterizing why people get cross with you on these forums (i.e.: that debating annoys people rather than their annoyance being a function of how you interact with them in a debate).
News flash: he's still trolling.
Paul and his supporters continue to wrongly predict runaway inflation, an episode that hasn't occurred.
Is there a wiki section or article here that I can read to help me refute this claim if I ever encounter it again?
Might be useful to read Henry Hazzlitt's wonderful The Failure of the New Economics alongside the General Theory In fact, I would recommend this to anyone interested in economics. It's a chapter by chapter criticism.
Hey Mustang! Betcha missed me, I'm finally done with exams.
mustang19: They do. But they're similar. Round and round we go.
They do. But they're similar. Round and round we go.
Wait but?...
The micro and macro definitions of savings and investment do not differ, only the scales at which they are examined.
You chose to tie yourself off there, not me. I'll take it as a concession. We're only going round and round because I'm dumb enough to chase you around expecting that you'll give an straight answer. I guess that's my own fault.
But I'm not going to defend the parts of Keynes' theory that don't make sense. Only the ones that do.
I will note to the jury that this is an implicit recognition of the internal inconsistency of Keyne's theory as admitted by Mustang.
My bad. You're right there. I probably got it from some half-remembered krugmanite post.
Thank you. Of all the economists to listen to though, why Krugman? He's the man who openly called for Greenspan to inflate a housing bubble and then says on the news that it is some right-wing myth that the Fed created the housing bubble. Clearly he was lying in one of the two cases or he has no understanding of his own thoughts.
...
So did you read that big ol' chunk of text in there? Was my or Hayek's explanation of Austrian Business Cycle Theory helpful?
They're cyclical insofar as restructuring is depressed during recessions.
This is an oversimplification. There is no set cycle to M&A. There are however business cycles, wherein a handful of profitable companies can find themselves unharmed after the bloodbath swimming in 5 penny dollars. I will grant you that it is likely that M&A will occur when such opportunities are present. But again, so what?
In section 2 we examine the basis for the common notion that an aggregate recession increases overall factor reallocation in the economy. This conclusion is inferred from the rise of liquidations during recessions – as documented, for example, in the gross job flow series of Davis and Haltiwanger (1992). However, this inference is only warranted if the increase in liquidations during the recession is followed by an abnormally high level of creation during the cyclical recovery phase. But, in an economy that undergoes continuous restructuring, this is not the only form a recovery can take place. If, for example, the recovery materializes instead through an abnormally low destruction rate, the recession will not result in increased restructuring. To examine this question empirically, we explore the cumulative business cycle response of US manufacturing job flows. Although limited in several respects, the evidence is consistent with the notion that, contrary to the prevailing views, recessions result in a reduction in cumulative reallocation.
So in sum: If we can 'get through' the recession without prices falling, we won't have to restructure. Oh, and our evidence kind of supports our argument.
Bear in mind that their are other fields based on complicated interactions, such as climate science and evolutionary biology. That doesn't mean we should share time between evolution and creationism in schools just because the empirical evidence can't conclusively demonstrate how apes evolved into man. The quality of evidence in many natural sciences is almost as bad/good as in economics in terms of making predictions or even constructing theories that aren't overturned every five years.
I think that you're missing the principle or consciously avoiding it.This is not the Austrian gripe with modelling or empirically inducted theory. Yes climate science and evolutionary biology are complicated, but that does not bar them from the methodology of natural sciences. Why? Because they are not defined by actors or actions in the human sense. Climates themselves may constantly be in flux, but the contributing factors to that flux may be understood as characteristically fixed. Carbon is carbon, helium helium, gravity gravity, etc.
The difference in economics is that none of the variables are constant in a market. Humans value things subjectively and this leads to an array as large as the human population of unique spending and savings patterns. No experiment can be made because there are no constants. One may assume that Carbon will have six protons in a week, but one may not assume that the price of chinese pork will be what it is today in a week. If I make a prediction saying that X Government Program will have N result, even if such result qualitatively becomes true there is no way to establish the causality because there were simultaneously a plethora of other factors. All conditions in constant flux. Equilibrium, or final prices, is never reached but only approached. It is approached as best the market actors can possibly do so until conditions change again (which is constantly), in which case they re-orient towards final prices. I recommend you read either Hoppe or Mises on the subject, as both have written a defense of the praxeological method and will likely explain this with greater clarity than I can.
And this isn't even to speak of macroeconomic aggregates and yardsticks which themselves are flawed, as has been discussed.
The problem is that whenever I point out a prolonged deflationary slump, you can always explain how it's due to 19th century economies or 1920s America being too statist, not because liquidationism doesn't work.
Am I wrong or aren't I? I could say the same thing about Keynesians. The difference is that liquidationism produced the shortest recoveries and Keynesianism/Monetarism produced the longest recoveries.
Net capital formation? We can look at when, during the Great Depression, NCF resumed- it was under FDR's inflationary policies.
Lol, really? You're giving me a stock chart which is supposed to show capital accumulation under FDR's INFLATIONARY POLICIES.Yep I'm sure those nice red bars had nothin to do with him revaluing gold from 20$/oz to 35$/oz.
As Bob Higgs shows here: http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf
Net Investment for the Depression period was -3.1 Billion.
http://econproph.com/2009/10/26/fdic-managing-the-crisis-the-fdic-and-rtc-experience/
That won't cut it Mustang. You can't make that claim and leave out the year 1920, in which 12 of the 18 months of the Depression resided.
State campaigns of credit expansion create the illusion of real savings. The supply of capital goods is not at all more increased than before the campaign of credit expansion. Consider: if the campaign of credit expansion were not undertaken, the entrepeneur would not make those investments. See here after the rate cut in 2001, where clearly investments were undertaken:
Actually, if entrepreneurs invest this credit in capital goods, the supply of capital goods will probably increase.
Man you really troll me good. What did I do to earn a debate partner such as yourself? This comment informs me that you STILL don't understand opportunity cost, ABCT, or both. That "Capital Formation" is consumption, because it is ultimately doomed to be unprofitable and liquidated, and people go completely broke and unemployed. Had it not been invested, net capital accumulation would be higher at the time of the crash (in a parrallel universe). I regret having typed this post having read that comment.
Scroll down.
Parts of it, but not IS/LM.
Thank you. Of all the economists to listen to though, why Krugman? He's the man who openly called for Greenspan to inflate a housing bubble and then says on the news that it is some right-wing myth that the Fed created the housing bubble. Clearly he was lying in one of the two cases or he has no understanding of his own thoughts. ... So did you read that big ol' chunk of text in there? Was my or Hayek's explanation of Austrian Business Cycle Theory helpful?
It was. I think I have a better grasp of it, and I still find it consistent. It uses different terminology, like considering some recessions to be a desirable change in time preferences. It just doesn't disprove other explanations.
The longest recovery occured after 1933. That is true.
The longest expansions occured afterwards. We can look at the data if you like.
Alcohol consumption is still procyclical, though.
I appreciate the rest of your response. Unless you're interested in specifying how IS/LM is internally inconsistent, though, there's not much more I can say.
Anyway, we both have our opinions and I think we've learned about as much from each other as we are going to at this point. It's been a pleasant chat. Have an awesome summer, bro. If that's it, Obammunist fetuseater signing out.
mustang19: Scroll down.
I did. Capital Formation measured in $'s. Also I wonder how they recorded capital formation. I can't help but have a niggling fear that FDR didn't want his numbers to look bad.
Secondly it doesn't address whether whatever capital was formed was actually useful, if it was formed to satisfy the urgently felt needs.
? But IS/LM is based off of the previous assumptions in his GT.
I'm not aware of anyone explaining recessions as a desirable change in time preference. I am aware of Austrians explaining recessions as the inevitable bookend to a boom period spurred by artificial credit, and so a transition to more stable business conditions, if that is what you meant.
I was also not aware that it was the task of a business cycle theory to disprove other theories, rather the task of the theorist. There are various Austrian works which confront Keynesian economics if you are interested.
Y'mean 1929?
Neither my statement nor your data proves anything. Though it looks as though your own data hurts your case as the later recessions (read: more influenced by keynesian/monetarist thinking) are generally lengthier.
Correlation=/=Causation. Again.
Ok except that you admit that the prior foundations to IS/LM are inconsistent. And sure, prices are sticky if there is union legislation (read: price floors). So sticky that they can't unstick actually, unless illegally.
I enjoyed it. Can't tell if you're being super passive aggressive.
If you can explain them in your own words over less than a few pages, sure.
The cycles and expansions are lengthier, not the recessions.
That is not the kind of price stickiness employed in IS/LM. Temporary price stickiness is employed.