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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Wed Jul 05, 2017 6:39 pm 
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nero wrote:
Keynesian economics is not planned economy. Planned economy in practice needs state owned production means, like in the late USSR. The Soviet system failed gloriously, the Gosplan did not have enough computing power to solve all the optimization problems. And the more importantly people did their own private micro-optimasation, the middle level management likewise. Usually in form of stealing.

But Keynesian economics is not about micro, but macro. And both monetary and financial tools are available. The Chicago school monetarist accept only the first.

So the monetarist method to help economy out of recession is to lower the interest rate. But when interest rate is reaching zero, just raise hands and accept that all is doomed. ;)

But the Keynesian approach is to put money in the system, borrowed, or preferably from previously accumulated the buffers (Joseph in Egypt). And keep people working, if the private economy is dead, by state financed programs doing something useful for the future, like infrastructure.


Yeah but as I said, this sort of intervention requires a godly prophet who can tell the future running the central bank.

It's just a variant on "It's okay, our supreme economists will manage it all". Uh huh. That works so well.

After the dot com crash Keynesian practices were followed. That led to the credit crunch, which required massive bailouts to keep the debt sodden system going. Interest rates have been at an emergency level for well over a decade now. And the system has been choking on them for quite a while - another crash is coming. Now interest rates are zero already, and the only way to force more stimulus into the dying patient is various quite authoritarian measures.

A reset crash would've been long over by now.

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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Thu Jul 06, 2017 1:35 pm 
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EUBanana wrote:
nero wrote:
Keynesian economics is not planned economy. Planned economy in practice needs state owned production means, like in the late USSR. The Soviet system failed gloriously, the Gosplan did not have enough computing power to solve all the optimization problems. And the more importantly people did their own private micro-optimasation, the middle level management likewise. Usually in form of stealing.

But Keynesian economics is not about micro, but macro. And both monetary and financial tools are available. The Chicago school monetarist accept only the first.

So the monetarist method to help economy out of recession is to lower the interest rate. But when interest rate is reaching zero, just raise hands and accept that all is doomed. ;)

But the Keynesian approach is to put money in the system, borrowed, or preferably from previously accumulated the buffers (Joseph in Egypt). And keep people working, if the private economy is dead, by state financed programs doing something useful for the future, like infrastructure.


Yeah but as I said, this sort of intervention requires a godly prophet who can tell the future running the central bank.

It's just a variant on "It's okay, our supreme economists will manage it all". Uh huh. That works so well.
...

:lol:

It not so difficult to see when there is a recession, businesses going out of business, total output decreasing, unemployment increasing. Shouldn't be so difficult to detect a recession. But if you mean how to predict a recession before the recession, that is more difficult. For example it was easy to predict that the US housing bubble would burst. But when was more difficult to predict.

But then Keynesian economics is reactive, not proactive. But in the perfect case filling the coffers during tho good times to have buffers for the next recession.
EUBanana wrote:
...
After the dot com crash Keynesian practices were followed. That led to the credit crunch, which required massive bailouts to keep the debt sodden system going. Interest rates have been at an emergency level for well over a decade now. And the system has been choking on them for quite a while - another crash is coming. Now interest rates are zero already, and the only way to force more stimulus into the dying patient is various quite authoritarian measures.

A reset crash would've been long over by now.

Well, this dot.com recession was not really a recession. In the US there was a slight downturn between March 2001 to November same year. The unemployment rose from 5% to 6.3%. Most of the world did see not recession. A stock market hiccup caused some trouble. No bid deal.

It is quite an overstretch that a stimulus in Keynesian sense was applied back then.

There was monetarist FED interest rate reaction alright.

Image

And there was Bush tax cuts for the rich. But it was by no mean a Keynesian stimulus. To increase the demand, the tax cuts should go to those who spend the money right away.

So there was no Keynesian policies applied 2001 that leaded to the collapse of 2008.

Anyway nice to discuss with you.

I left enough things open for you. Like the bailouts, austerity and stimulus in various countries. And if you are curious, I can tell you what events and policies left Finland with 20% unemployment rate 25 years ago.

Your turn.

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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Sat Jul 08, 2017 11:19 am 
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[quote="EUBanana"][/quote]

So you are not obviously going to answer to my previous post.

But here is some points to ponder for you. If you can stand the Scottish accent.



In general, I don't agree all that Blyth says, but a lot, or rather most of it.

Enjoy. And discuss.

Just for fun. ;)

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The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt

Mit der Dummheit kämpfen selbst Götter vergebens.


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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Wed Jul 12, 2017 3:47 am 
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nero wrote:
So there was no Keynesian policies applied 2001 that leaded to the collapse of 2008.

Anyway nice to discuss with you.

I left enough things open for you. Like the bailouts, austerity and stimulus in various countries. And if you are curious, I can tell you what events and policies left Finland with 20% unemployment rate 25 years ago.

Your turn.


Image

Not many surpluses there. Only debt debt and more debt.

You can see as far as the UK is concerned the slight 2001 slowdown was met with more spending. And that has been the situation ever since. Even reigning in the deficit of 150 billion a year (Bear in mind UK government spending is ~750 billion so clearly a deficit that large is completely unsustainable) has led to howls from the left about 'austerity'.

Clearly it's simply politically impossible to practice Keynesianism. There's probably another crash coming now, certainly we're due for one roughly, and where's the money saved up from our surpluses? Ho ho ho, there isn't any.

I'm not even talking about whether it works. It's a bit like global warming, it doesn't matter if it's happening or not because there's nothing we can do about it here in the West. In the same manner, there's no point really talking about Keynesianism because it simply cannot be implemented. Politicians are far too short term and far too prone to give the baying left wing what they want, ie ever more money.

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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Wed Jul 12, 2017 1:00 pm 
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EUBanana wrote:
nero wrote:
So there was no Keynesian policies applied 2001 that leaded to the collapse of 2008.

Anyway nice to discuss with you.

I left enough things open for you. Like the bailouts, austerity and stimulus in various countries. And if you are curious, I can tell you what events and policies left Finland with 20% unemployment rate 25 years ago.

Your turn.


Image

Not many surpluses there. Only debt debt and more debt.

You can see as far as the UK is concerned the slight 2001 slowdown was met with more spending. And that has been the situation ever since. Even reigning in the deficit of 150 billion a year (Bear in mind UK government spending is ~750 billion so clearly a deficit that large is completely unsustainable) has led to howls from the left about 'austerity'.

Clearly it's simply politically impossible to practice Keynesianism. There's probably another crash coming now, certainly we're due for one roughly, and where's the money saved up from our surpluses? Ho ho ho, there isn't any.

I'm not even talking about whether it works. It's a bit like global warming, it doesn't matter if it's happening or not because there's nothing we can do about it here in the West. In the same manner, there's no point really talking about Keynesianism because it simply cannot be implemented. Politicians are far too short term and far too prone to give the baying left wing what they want, ie ever more money.

:lol:

You could have selected a smaller image. Even I have do some horizontal scrolling with my 2560x1600 monitor have to do some horizontal scrolling. And Doggie with his VGA resolution monitor will be ape-shit with the image. :lol:

And it is true that Keynes didn't formulate explicitly policies for the economic up-turn. He concentrated more on the idea that during a recession the state should concentrate to avoid contraction of the economy by maintaining demand by government projects. You seem to agree with the idea, in theory. ;)

The problem with your, way big image, is that it give absolute numbers, not numbers as relative to the GDP. And this is very important and essential. With austerity the GDP can contract and so the the debt burden can be even bigger. I thing that you can understand even this. Perhaps.

Image

The growing economy reduced the debt proportion after the WWII. Even having budget deficit and and financi social programs like the NHS.

Image

But you are right that it is a very seldom when a government actually reduces the public debt in actual volume. During the up-turn the growth reduces the debt ratio. As seen in the graph above after the WWII.

And the Blairite, zanu-labour years don't look so bad in comparison. :roll:

I admit that I am kind of Ordo-Keynisian, who will spoil the party of the up-turn. No tax cuts during an upturn, no unnecessary programs even the coffers are full. But then I am not a politician, but more mathematically inclined. If you borrow, you pay it back. Too much reading about Joseph in Egypt and advising the Pharaoh. :lol:

But in a democracy it is politically next to impossible to reduce the debt in absolute numbers.

Image

But it is possible. ;)

But my biggest problem with the idea that the growth will handle the deficit is that I have doubts about continuing growth in a closed system. But then the human inventiveness is not yet capacity limitet and there is new generation of AI coming.

We are living in interesting times. ;)

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Mit der Dummheit kämpfen selbst Götter vergebens.


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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Thu Jul 13, 2017 7:19 am 
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Quote:
I admit that I am kind of Ordo-Keynisian, who will spoil the party of the up-turn.


This is pretty much the root of it. No politician is going to do that. If Keynesianism becomes politically acceptable it won't be true Keynesianism, it'd just be an excuse to ignore deficits, which will eventually mean the currency gets trashed (or if that's not possible there's a massive financial crunch, a la Greece).

It's far too easily for it to be corrupted into thinking that deficits are a good thing, in and of themselves, no matter what the economic conditions are.

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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Sat Jul 15, 2017 6:21 pm 
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EUBanana wrote:
Quote:
I admit that I am kind of Ordo-Keynisian, who will spoil the party of the up-turn.


This is pretty much the root of it. No politician is going to do that. If Keynesianism becomes politically acceptable it won't be true Keynesianism, it'd just be an excuse to ignore deficits, which will eventually mean the currency gets trashed (or if that's not possible there's a massive financial crunch, a la Greece).

It's far too easily for it to be corrupted into thinking that deficits are a good thing, in and of themselves, no matter what the economic conditions are.

Well, the idea that there should be neutral fiscal policy over a business cycle, up-turn and down-turn; or what order it goes. This means no accumulation of public debt because of counter cyclical policies.

But there is so much temptation to start policies that are not sustainable during the up-turn economy. With the exception of NHS in UK, which saves a lot of money in comparison with the system applied in the US.

But what sucks in my opinion with the debt aficionados is that their view is that the growth will reduce the proportional debt when the economy is growing. I have some doubts about continuous growth in a closed system like the Earth is. The debt can not be paid by growth for ever.

My conclusion is that counter cyclical, Keynesian, policies should be applied always. And the idea of austerity, with the idea is when private side goes down, the public side should contract likewise is just stupid.

So I conclude that the idea having always the state budget on balance, no surplus, or deficit, a harmful thing. Public timescale should go over the business cycles.

But I bet that in ten years the world is quite different from that it is now. Is it for worse or better? :roll:

I don't know.

Eventually we are all dead. So...

Thanks. ;)

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Mit der Dummheit kämpfen selbst Götter vergebens.


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 Post subject: Re: The Chicago Vs. Austrian School plus
PostPosted: Sat Jul 15, 2017 7:36 pm 
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nero wrote:
Well, the idea that there should be neutral fiscal policy over a business cycle, up-turn and down-turn; or what order it goes. This means no accumulation of public debt because of counter cyclical policies.

But there is so much temptation to start policies that are not sustainable during the up-turn economy.


Right.

Quote:
With the exception of NHS in UK, which saves a lot of money in comparison with the system applied in the US.


The US has too many lawyers. Seems to me that healthcare in the US is absolutely riddled with them. Huge amounts of money are diverted to the legal industry in a way which does not happen elsewhere.

Quote:
But what sucks in my opinion with the debt aficionados is that their view is that the growth will reduce the proportional debt when the economy is growing. I have some doubts about continuous growth in a closed system like the Earth is. The debt can not be paid by growth for ever.


I don't know about that. Plenty of goods do not require resources from the Earth. The Mona Lisa, a copy of Steel Division Normandy, a night with a woman of ill repute. More and more, the economy is based on these things, and less and less on huge physical devices using up a lot of matter.

And the earth is a huge ball of resources. We've barely even begun to access them. And when it becomes economically viable to do so (possibly right now but it would be daring) there's the solar system to exploit as well.

Quote:
My conclusion is that counter cyclical, Keynesian, policies should be applied always. And the idea of austerity, with the idea is when private side goes down, the public side should contract likewise is just stupid.


I used to think Keynes was a monkey.

Then I actually read some of his stuff and realised that any politician who claims to be a Keynesian almost always isn't. I don't know why so many politicians think absolutely nothing of national bankruptcy, but a lot of them really don't.

I'm sure I've dusted this off before here. ;)


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