BF2S Forums and why not pass a "jobs bill"?

Flaming_Maniac wrote:

JohnG@lt wrote:

Flaming_Maniac wrote:

Saying he "prolonged" it is a really simple way of looking at an issue that is not black and white at all.

He started going in the right direction with Keynes. Then once things started to turn around, he screwed it up by trying to go classical again. The point was Docta made an incredibly ignorant comment, as if he is trying to pin the Great Depression on non-welfare forms of stimulation. Of course he won't stick around to defend it, but there you go.

Keynes is never the answer. How do you propose a group of lawyers can effectively run an economy whilst always maintaining an eye on their next re-election campaign? Government dictatorship over the economy leads to inefficiency, increased labor costs and non-competitiveness. The premise behind Keynesian thought is that money is static and all transactions are zero sum. Because this premise is entirely false, it should be discarded just like all of the theory that preceded Smith has been. Neo-Mercantilism preaches tariffs, isolationism and the protection of ones own work force. This leads to stagnation of both thought and wealth. Free trade is the only path to real wealth accumulation.

Bringing this back just because it really is a fantastic and intelligently made video regardless of the format:
http://www.youtube.com/watch?v=d0nERTFo-Sk

Keynes is perfectly valid, assuming your country has the stones to pay the debt back after the recession is over. Which doesn't happen. That doesn't invalidate the theory, you can't judge it by results when nobody wants to follow the theory to completion.

Deficit spending was never even mentioned in The General Theory. Politicians just took a few lines out of context and used it as political cover to spend like retards.

Here's the primary difference between the way Keynesian theory is used and the way that Hayek stated governments should conduct themselves instead.

Using simple numbers:
The City of Keynes and the City of Hayek are neighboring cities split down the middle by a river. Each wishes to build a bridge crossing the river but they can not agree on how to finance it so each builds their own. For simplicities sake, they both use the same engineer and the same workers, making the costs identical at $10M. To simplify it even further, let's assume that each can budget $1M annually towards the bridge building endeavor.

In order to pay for its bridge, Keynes floats a tax free municipal bond at 5% over 30 years to cover the cost of construction. At the end of the 30 years, the bond, which compounded annually, is now worth $43,219,423.75, more than 4x the initial cost of the bridge.

The City of Hayek, by contrast, chooses to put away it's $1M annual alloted budget at 5% interest (because, of course, it's buying the bond floated by Keynes). After 10 years, the city has accumulated bonds worth $13,206,787.16, during this time, due to inflation (2%), the cost of the bridge has increased to $12,189,944.20. So, the city has a cushion of $1,016,842.96 to pay for cost overruns or whatever else it wishes to do with the money.

By saving up and investing its capital, the City of Hayek saved itself $30,012,636.59 (43-13-1) on the cost of the bridge.



The way the City of Keynes ran itself in this scenario is the same way our Federal and local governments have been financing projects for the past hundred years. They routinely pay four times as much per project than they need to because it's all about instant gratification and buying votes. They aren't spending their own money and when that bond comes due they'll just issue another one, or they'll be out of office and it will be someone elses problem. We as a nation are fiscally insolvent because of Keynesian theory.

Edit - Also, for simplicities sake, I assumed that when the bonds Hayek was holding were sold, they were sold at par.

Last edited by JohnG@lt (2010-07-22 10:28:15)

Phrozenbot wrote:

Doctor Strangelove wrote:

I'd just like to point out that lowing's proposal was Hoover's "solution" to his recession.

The Hoover that supposedly did nothing, or the actual Hoover that used government intervention to aid the economy?

The only way the government could really aid an economic recovery is through tax cuts.

we already did this

http://forums.bf2s.com/viewtopic.php?pi … 3#p3040393

not on a full keyboard now, I'll read/respond later.

Actually, no, I'll respond now, because what you said was an incredibly bad example. You must have made it up yes? It completely ignores the entire point Keynesian economics, mitigating the effects of the business cycle. It's not about how to finance fixed expenditures, you just proved why it's better to avoid loans. Congratulations.

edit2: jesus, and in this article they say politicians during the time of the Great Depression weren't willing to spend the money Keynes was talking about to get the country out of the depression - well no shit, that was the entire problem, government didn't understand the purpose of deficit spending like we do today.

Flaming_Maniac wrote:

we already did this

http://forums.bf2s.com/viewtopic.php?pi … 3#p3040393

not on a full keyboard now, I'll read/respond later.

Actually, no, I'll respond now, because what you said was an incredibly bad example. You must have made it up yes? It completely ignores the entire point Keynesian economics, mitigating the effects of the business cycle. It's not about how to finance fixed expenditures, you just proved why it's better to avoid loans. Congratulations.

edit2: jesus, and in this article they say politicians during the time of the Great Depression weren't willing to spend the money Keynes was talking about to get the country out of the depression - well no shit, that was the entire problem, government didn't understand the purpose of deficit spending like we do today.

Because his entire premise was flawed. Any increase in G necessarily decreases both I and C. The government can not create a job without pulling one out of the private sector. The government can not create money without causing inflation or taxing it out of the private sector. To fuel enough government spending to stave off a recession, you'd have to go to a completely command economy where the state owns most property and controls commerce. People point to WWII as the savior that pulled us out of the Depression. While this was true, it was accomplished via a state run command economy ramped up for wartime production. We're talking massive government imposed shortages, government directed production and everything else. There was no economic freedom during the war, and civil liberties were necessarily curtailed as well. If this is the kind of world you wish to live in, move to Cuba or Venezuela.

Flaming_Maniac wrote:

JohnG@lt wrote:

Flaming_Maniac wrote:

we already did this

http://forums.bf2s.com/viewtopic.php?pi … 3#p3040393

not on a full keyboard now, I'll read/respond later.

Actually, no, I'll respond now, because what you said was an incredibly bad example. You must have made it up yes? It completely ignores the entire point Keynesian economics, mitigating the effects of the business cycle. It's not about how to finance fixed expenditures, you just proved why it's better to avoid loans. Congratulations.

edit2: jesus, and in this article they say politicians during the time of the Great Depression weren't willing to spend the money Keynes was talking about to get the country out of the depression - well no shit, that was the entire problem, government didn't understand the purpose of deficit spending like we do today.

Because his entire premise was flawed. Any increase in G necessarily decreases both I and C. The government can not create a job without pulling one out of the private sector. The government can not create money without causing inflation or taxing it out of the private sector. To fuel enough government spending to stave off a recession, you'd have to go to a completely command economy where the state owns most property and controls commerce. People point to WWII as the savior that pulled us out of the Depression. While this was true, it was accomplished via a state run command economy ramped up for wartime production. We're talking massive government imposed shortages, government directed production and everything else. There was no economic freedom during the war, and civil liberties were necessarily curtailed as well. If this is the kind of world you wish to live in, move to Cuba or Venezuela.

...unless you are talking about deficit spending. lol at least make an attempt at a point legitimately based on the theory.

Realizing of course that inflation was not an issue during the Great Depression. Now if you want to talk stagflation that's a horse of a different color, but you certainly did not bring that up.

As stated previously, deficit spending is probably the worst thing a government can do. Not only is it moronic and short-sighted to pay vastly greater sums in order to push a project today, it is also generational theft.

FM, just concede the argument. Keynes has been pretty thoroughly thrashed over the past forty years.

Flaming_Maniac wrote:

JohnG@lt wrote:

Flaming_Maniac wrote:

...unless you are talking about deficit spending. lol at least make an attempt at a point legitimately based on the theory.

Realizing of course that inflation was not an issue during the Great Depression. Now if you want to talk stagflation that's a horse of a different color, but you certainly did not bring that up.

As stated previously, deficit spending is probably the worst thing a government can do. Not only is it moronic and short-sighted to pay vastly greater sums in order to push a project today, it is also generational theft.

FM, just concede the argument. Keynes has been pretty thoroughly thrashed over the past forty years.

That was the worst comeback you could have come up with, and you're telling me to concede lol.

The purpose of Keynes is to level out the business cycle because stability is good for an economy.

You aren't paying "vastly greater sums" when spending money you don't have because the value of money in your hand is dramatically great than that that you will have. There is a reason businesses large influxes of cash now at a price instead of accruing the same money over a period of time, because that money isn't worth as much to them anymore. The government needs money now to spend its way out of a recession, it's not about what they do with the money it's about when they spend the money.

Now if you want to talk about stagflation like I already tried to give you or if you want to talk about the practical issue of repaying the debts during a high point of the business cycle like I already told you I agreed with then we could have an entirely different discussion here. Instead you keep rehashing the same incredibly pedestrian point with the economical understanding of Keynes that the small child of a wealthy Republican family would have.

No, Keynesian economics leads to more booms and busts and they tend to be larger and more frequent. Allan Greenspan keeping interests rates so low for so long in order to fuel the huge boom cycle and 'keep the good times going' is right out of the Keynes playbook.

Hayek on the other hand would level out the peaks and valleys as much as possible.


As for my parents, my mom is a postal worker, my dad is a bum and my stepfather is the head of the maintenance department at a small college. They vote Democrat FM, before you go into a tantrum about peoples age and taking that superior attitude that you gravitate towards, how about not taking everything you learn in college as gospel? Read a bit. Keynes is neo-mercantilist drivel. Read Wealth of Nations, read Mill's Principles of Political Economy, read Ricardo and his Principles of Political Economy and Taxation, read Milton Friedman and Hayek. Then come back to me and attempt to school me.

Flaming_Maniac wrote:

JohnG@lt wrote:

Flaming_Maniac wrote:

That was the worst comeback you could have come up with, and you're telling me to concede lol.

The purpose of Keynes is to level out the business cycle because stability is good for an economy.

You aren't paying "vastly greater sums" when spending money you don't have because the value of money in your hand is dramatically great than that that you will have. There is a reason businesses large influxes of cash now at a price instead of accruing the same money over a period of time, because that money isn't worth as much to them anymore. The government needs money now to spend its way out of a recession, it's not about what they do with the money it's about when they spend the money.

Now if you want to talk about stagflation like I already tried to give you or if you want to talk about the practical issue of repaying the debts during a high point of the business cycle like I already told you I agreed with then we could have an entirely different discussion here. Instead you keep rehashing the same incredibly pedestrian point with the economical understanding of Keynes that the small child of a wealthy Republican family would have.

No, Keynesian economics leads to more booms and busts and they tend to be larger and more frequent. Allan Greenspan keeping interests rates so low for so long in order to fuel the huge boom cycle and 'keep the good times going' is right out of the Keynes playbook.

Hayek on the other hand would level out the peaks and valleys as much as possible.


As for my parents, my mom is a postal worker, my dad is a bum and my stepfather is the head of the maintenance department at a small college. They vote Democrat FM, before you go into a tantrum about peoples age and taking that superior attitude that you gravitate towards, how about not taking everything you learn in college as gospel? Read a bit. Keynes is neo-mercantilist drivel. Read Wealth of Nations, read Mill's Principles of Political Economy, read Ricardo and his Principles of Political Economy and Taxation, read Milton Friedman and Hayek. Then come back to me and attempt to school me.

You really didn't see how that was a metaphor and not a shot at your actual personal upbringing?

http://en.wikipedia.org/wiki/Keynesian_economics wrote:

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle

Maintaining low interest rates during times of prosperity is exactly the opposite of what Keynes said should be done, minimizing the business cycle means contractionary policy during good times and expansionary policy during bad.

Hayek blames the business cycle on fractional reserve banking. He doesn't talk about how to mitigate it. If you're going to say fuck the fractional reserve system altogether, we're done with this conversation.

I really don't think you've read half the books you say you have. The explanations of the views of the various authors is never accurate.

Right, because you simply read the wikipedia summation and that is always accurate

Fractional reserve banking is fine, but does lead to massive spikes in inflation during booms. The simple way to reduce it's impact is to increase the necessary reserve on every dollar lent. The reserve effectively caps the top end amount of money that can ever be in the system (though it is exponential so meeting that cap would take massive effort ).

I really don't understand why you're so keen on deficit spending and stimulus. One is a hand grenade passed from generation to generation and the other is simply ineffective.

Flaming_Maniac wrote:

JohnG@lt wrote:

Flaming_Maniac wrote:

JohnG@lt wrote:

No, Keynesian economics leads to more booms and busts and they tend to be larger and more frequent. Allan Greenspan keeping interests rates so low for so long in order to fuel the huge boom cycle and 'keep the good times going' is right out of the Keynes playbook.

Hayek on the other hand would level out the peaks and valleys as much as possible.


As for my parents, my mom is a postal worker, my dad is a bum and my stepfather is the head of the maintenance department at a small college. They vote Democrat FM, before you go into a tantrum about peoples age and taking that superior attitude that you gravitate towards, how about not taking everything you learn in college as gospel? Read a bit. Keynes is neo-mercantilist drivel. Read Wealth of Nations, read Mill's Principles of Political Economy, read Ricardo and his Principles of Political Economy and Taxation, read Milton Friedman and Hayek. Then come back to me and attempt to school me.

You really didn't see how that was a metaphor and not a shot at your actual personal upbringing?


Maintaining low interest rates during times of prosperity is exactly the opposite of what Keynes said should be done, minimizing the business cycle means contractionary policy during good times and expansionary policy during bad.

Hayek blames the business cycle on fractional reserve banking. He doesn't talk about how to mitigate it. If you're going to say fuck the fractional reserve system altogether, we're done with this conversation.

I really don't think you've read half the books you say you have. The explanations of the views of the various authors is never accurate.

Right, because you simply read the wikipedia summation and that is always accurate

Fractional reserve banking is fine, but does lead to massive spikes in inflation during booms. The simple way to reduce it's impact is to increase the necessary reserve on every dollar lent. The reserve effectively caps the top end amount of money that can ever be in the system (though it is exponential so meeting that cap would take massive effort ).

I really don't understand why you're so keen on deficit spending and stimulus. One is a hand grenade passed from generation to generation and the other is simply ineffective.

I'm not keen on it but I understand what it is and will call it as such.

It is an effective if not sure-fire way to get yourself out of a recession if you are willing to dump as much money as needs to be dumped. The problem is the careful and long-term management that is required even after you inject the demand, and the political implications of limiting the natural economic growth that would later ensue.

Out of curiosity, how often do you read Krugman?

Flaming_Maniac wrote:

I dunno if that is a joke or not, but I don't read any editorials but the ones posted here.

Look him up, he's the economics writer for the New York Times. He won a Nobel Prize in econ as well.

Among other positions, he glorifies the Chinese command economy and wishes it could be implemented here.
http://en.wikipedia.org/wiki/Paul_Krugman

Last edited by JohnG@lt (2010-07-25 20:32:42)

Flaming_Maniac wrote:

I know who he is. That is why I didn't know if it was a joke or what.

I think I am more conservative than you are.

That's cool. I'm not conservative at all I am a classically defined uber-liberal.

Last edited by JohnG@lt (2010-07-25 20:36:06)

JohnG@lt wrote:

.... He won a Nobel Prize in econ as well....

After Obama winning the Nobel Peace Prize (nominated BEFORE he was sworn as President), I have very little faith giving credence to someone just because  they are a Nobel Prize Laureate.  If anything it gives me more suspicion about him since he could have won the Prize by towing Liberial-line.

NOTE: I cannot say defacto in this case without further research, but you see my suspicion.

Last edited by Harmor (2010-07-25 20:42:25)

Harmor wrote:

JohnG@lt wrote:

.... He won a Nobel Prize in econ as well....

After Obama winning the Nobel Peace Prize (nominated BEFORE he was sworn as President), I have very little faith giving credence to someone just because  they are a Nobel Prize Laureate.  If anything it gives me more suspicion about him since he could have won the Prize by towing Liberial-line.

NOTE: I cannot say defacto in this case without further research, but you see my suspicion.

Well, yeah, that was kind of the point. He won the Nobel Prize, got a job at the Times and proceeded to go off his rocker. He went from highly respected economist to crackpot in the space of a decade. I have a decent amount of exposure to people working on Wall Street and he is probably the most reviled person among them. He's somewhat of a hero to lefties and others who want the scope of government increased dramatically.