You need to look at Japan my man's, if reality =/= things that actually occurred then I don't know when they changed the definition D:!
Keynesian Economics
- Thread starter lifegoesonbrah
- Start date
Was going to like this, but they wouldn't let me give you another rep :/. Anyways, exactly. My father was also a Loan Officer (kind of necessary to become a Banker, unless you know a way to raise the tangible net worth requirements and the people from the proper network) and I know for a fact he used to 'nudge' appraisers to hit a target price, as well as do other illegal practices that were widely accepted in the industry.
I dont know what you mean to look to Japan for. Can't be how to get out of bad economic times.
Granted they've had bad luck with the disasters.
OGEvilgenius
Well-Known Member
Inflation punishes savers. I thought it was universally agreed with have a big consumption problem in the world?
You talk about Japan, but their standards of living actually increased steadily over that period. Japan is an interesting case study. But it's far from perfect as they use the ponzi scheme we use as well for their monetary system.
If someone needs a car, they will buy one. If they don't really need a car, they probably won't (whereas they might today). I don't see that changing.
OGEvilgenius
Well-Known Member
The problem with your belief is that turd companies don't last very long unless credit is extended to them needlessly. Most of these companies had nothing going for them but an idea (in particular during the dot com bubble, and many failed horribly). When credit is reasonably tight just an idea usually won't net you a loan, let alone a multimillion dollar loan (x a few thousand), causing a dramatic bubble that effects everyone's bottom line regardless of whether they were invested in it or not.
lifegoesonbrah
Well-Known Member
Paul Volker used deflationary policies which led to problems in the short run, but stability in the long run.
Back on topic:
Good Keynes quote that shows how his General Theory was distorted by the Neo-keynesians:
"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." Keynes
no, not really, its only bad for those people who act irresponsibly. If I have a $100,000 in cash saved up under my mattress, deflation is just the ticket for a responsible saver like me. On the flip side inflation is bad for those who act responsibly. Savers get shafted out of their money, it gets STOLEN from them through the overissuance of currency and loss of purchasing power. Capital cannot accumulate in a inflationary environment, the debt can only go so high before the interest due is more than the money supply and the system is crushed under the debt.
Inflation is great for people who hold massive amounts of debt (Banks and farmers) but in the end it only really works out well for the Bank, the farmer gets killed with ever higher operating costs and one year of bad growth wipes him out and he has to sell the place for 1/2 of what it is worth in order to get himself out of all that debt. Big bank now owns the farm and paid half price for it to boot, they wait a while and sell it at profit yet once again. rinse and repeat. One bank can make MILLIONS off of one $250,000 small farm if it loans to people who aren't going to be able to make the payments. It doesn't even matter if the farm was totally worthless, the bank is allowed to put almost any value it wishes and count it as an asset towards the books.
Inflation is damn near deadly to those on set incomes, such as pensioners, retirees, disabled people, homeless, jobless, also middle class, lower class, well pretty much everyone except banks and the wealthy.
We can't go around borrowing something that doesn't even exist, using it to provide products and services and expect to get away with it forever. Eventually the world wakes up and realizes that the almighty dollar isn't worth shit.
When that happens we start to see other countries making plans to rid themselves of reserves of US dollars and trading directly with partner countries in their own currencies.
http://www.bbc.co.uk/news/business-16330574
http://zeenews.india.com/business/news/economy/brics-to-sign-pacts-for-trade-in-local-currencies_44626.html
http://www.dailymail.co.uk/news/article-1332882/China-Russia-abandon-dollar-new-bilateral-trade-agreement.html
http://online.wsj.com/article/SB10001424052970204603004577269034194273786.html
http://money.cnn.com/2012/03/07/markets/bondcenter/dim-sum-bond-dubai/index.htm
http://seekingalpha.com/article/321806-india-iran-oil-deal-sets-stage-for-12-billion-move-to-gold
http://www.reuters.com/article/2010/06/29/us-dollar-reserves-un-idUSTRE65S40620100629?feedType=RSS&feedName=topNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+(News+%2F+US+%2F+Top+News)&utm_content=Google+Reader
http://theeconomiccollapseblog.com/archives/shocking-new-imf-report-the-u-s-dollar-needs-to-be-replaced-as-the-world-reserve-currency-and-that-sdrs-could-constitute-an-embryo-of-global-currency
http://www.opednews.com/articles/2/The-Beginning-of-the-End-f-by-michael-payne-120204-694.html
We can't keep our heads buried in the sand forever. The days of US Dollar Hegemony are numbered.
sync0s
Well-Known Member
A deflationary policy would make the president (ie RP) look worse than Obama did during this term. We just need to stabilize the currency and control inflation more. Step 1: Nationalize or abolish the Fed
Although I disagree with the statement deflation would make a president look bad, I think you've hit the nail on the head when you say stabilize. Mild inflation or deflation is fine.
Consistency and less variables make the decision making process easier.
sync0s
Well-Known Member
If you owe $250,000 on a house and currency deflates (for arguments sakes) 25%, your house asset value would only be $187,500, right? What do you think that would do to the economy?
Maybe some of you more economic minded people can correct me. I'm just the resident philosopher.
The world does not have to run on debt mame.
The existence of downward rigidities is not proven, the only time it works in theory is if very strict conditions are kept. Look at all the empirical evidence objectively mame, concern for 'fairness' or the presence of 'money illusion' do not in themselves justify positive inflation.
Johnny Retro
Well-Known Member
Would you buy something today if you thought it would cost less tomorrow?
It won't do anything as long as everyone keeps making the payments. But people consider the house an investment instead of a place to hang their hat, and when the house value falls they send the keys to the bank and stop making payments. The banks get infusions of free cash from the Fed to keep them solvent in the face of all the jingle mail and foreclosures and the American people pay for all of it through reduced purchasing power, reduced real wages, reduced freedoms, reduced opportunities. Its the same flim flam as last time and we just keep falling for it.If you owe $250,000 on a house and currency deflates (for arguments sakes) 25%, your house asset value would only be $187,500, right? What do you think that would do to the economy?
Maybe some of you more economic minded people can correct me. I'm just the resident philosopher.
Depends on whether it is something I need, or something I want. Needs override wants. And when we talk about deflation we aren't talking about high percentages here, were talking about .5% a year until equilibrium. So, would I forgo buying a new $30,000 car today when a year from now I can get it for $150 less? I suppose it depended on how much utility the vehicle would give me, if that utility exceeded the $150 savings, then yes I would buy the car now.
Johnny Retro
Well-Known Member
You cannot put a nominal value on the outcome. During the Great Depression they were seeing 10% a year. It is circumstantial
Deflation has a negative effect on debtors. Therefor why would they issue debt when they feel they can get a better price in 2 years? or 5 years? This causes an illiquid debt market. An illiquid debt market pushes rates up even higher. Then when deflation stops and you start to see an increase, these debtors are stuck paying high interest rates, and many will probably default. There-for creating a downward spiral..
https://www.rollitup.org/politics/514477-keynesian-economics-5.html#post7215460 Deflation is caused by a reduced money supply. There are several ways you can do that, the best is by paying off a loan, because 9 times that amount is destroyed in a opposite money multiplier effect. You can default on your payments or Banks can stop lending. Prices have nothing to do with causing deflation, they are the effects of deflation.
The Fed caused the depression by cutting the money supply, Bernanke says so and so did Milton Friedman. This explains Helicopter Ben's hazardous policies concerning unlimited money creation.
sync0s
Well-Known Member
That isn't valid considering that no matter how you view an investment of yours, you should never pay more than the actual value. Plus, when your value is lower than your principal you can't pull out a HELOC thus further placing a burden on the economy.
I agree with you on the fed, but eliminating the federal reserve and those policies does not have to mean deflation.
What isn't valid? People stopping payments on their home? People will continue to make mortgage payments on underwater property because they expect things to get better, not all , but many.
You couldn't just eliminate the Fed without having another system already in place. Eliminating the fed would eliminate the supply of money, which would cause major deflation.