Best explanation for Weimar Republic Inflation I ever read....

Unfortunately most of the variation ranges from irrelevant to illusionary. Take Keynesianism. Neo-Keynesianism simply looks for orthodox consistency with microeconomics. New Keynesianism, in contrast, takes the hype from rational expectations and drives a false debate with the New Classical silliness. The discipline has arguably been a plaything for technicians. Lovely mathematical models that work well when the economy is stable, but coĺlapse when there is a shock. They might as well as not bothered and stuck with VAR modelling!

The problem with the Austrians is that they have no credible labour or consumer theory. Arguably the school with the most to say is post Keynesianism. Stealing from the Marxists when appropriate, they are able to understand crisis and offer understanding of a diverse set of phenomena (e.g. price rigidity; stagflation etc).

It was essentially a moan at macroeconomics and it's role in creating misery. The false debate over the Phillips Curve gave us the folly of mometarism. The arrogance pre-financial crisis eliminated opportunity to protect the economy. And they've achieved next to nothing in rejecting austerity and the economic irrationality is has spawned. Makes me grumpy, so it does!

 

What is a labor theory? What is a consumer theory?

 

So what do you believe in...if anything?

As I said, I believe in a balanced budget, low taxes (especially for the lower classes), no corporate taxes, a neutered Fed that only monitors inflation and has no other powers (like manipulating equities, bailing out banks or buying corporations, etc.), no government bailouts or economic stimuli...just let the economy fix itself when things go bad.
Recessions are necessary evils...allow them to do their thing.

I don't believe in macroeconomic 'schools' or theories or models. I believe in common sense and what has worked historically.

 

Without a macroeconomic school to give a theoretical spine, you aren't going to derive convincing argument.

I'm in favour of market socialism, but it's not relevant here. Here we are referring to any notion of optimal macroeconomic policy. As mentioned, I'm sympathetic to the post Keynesian perspective. That informs us, for example, that interventionism has to be ratcheted up because of the instabilities generated through markets which tend towards market power.

 

I am not interested in presenting a 'convincing argument'...no offense. I am interested in real world applications.
I went to university and got my BS...it taught me NOTHING that had helped me in my investment career...nothing.

Macroeconomics is about common sense, understanding the human condition and keeping emotionally detached...not economic theories and models.

Sorry, but interventionism has never worked (like the Great Depression and the Great Recession - which, in both cases, just resulted in massive debt, ruined fundamentals and relative economic stagnation).

'Austerity' has (like the 1920/21 Depression - which resulted in a reasonably quick down time with no increase in national debt).

The key to 'fixing' a recession/depression is to help the poor where needed and let the economy fix itself.

 

That statement is completely divorced from any moral ambition. If the "fix" is that greater and greater amounts of wealth disparity (and it will) then your "fix" is a failure.

 

That's a normative statement.

 

The macroeconomy isn't going to be understood through common sense. We know that it often behaves in ways which we wouldn't expect (e.g. see the failure to apply microeconomic foundations). We also have to acknowledge that the "human condition'" demands more detailed analysis than simple notions of economic rationality. Behavioural Macro, for example, can help us understand phenomena ranging from involuntary unemployment to price bubbles. That's also one of the advantages of Keynesianism: it can be adapted to include more and more economic psychology.

Both economic history and empirical evidence rejects your stance. Take the Great Depression. Keynesianism was effectively forced on the US by world war. Prior to that, they were guilty of innate conservatism. Of course we can go further back. Just as with the Asian Tigers, Western capitalism developed because of industrial policy.

In the long run, we are all dead. Austerity is an ideological reaction which can't even achieve its supposed aim (e.g. Britain's austerity policy has ironically increased debt). Without interventionism you can expect problems such as hysteresis in unemployment (as, leaving it to the economy to fix itself takes so long, long term unemployment goes through the roof)

 

Economics is the study of how people act to achieve their ends with limited means.

Macro. Micro. They're all economics and have the same explanations.

 

LOL...the reason for the wealth disparity (at least since 2001) is primarily (IMO) because of the Federal Reserve skewing monies towards the rich and large corporations.
If you think they are helping the little guy/gal...think again.

 

No idea what you are talking about here. Which world war? Cannot be WW1. And surely you are not calling the New Deal 'austerity' - which came long before WW2?

The 1920/21 Depression was tackled with a balanced budget and government letting the economy fix itself.

Result? The unemployment rate, the DOW and the GDP were back to near pre-crash levels in 3 1/2 years and the national debt actually dropped.

http://www.polidiotic.com/by-the-numbers/us-national-debt-by-year/
https://en.wikipedia.org/wiki/Depression_of_1920–21
http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

Which proves once and for all that you do not need government intervention to 'solve' a recession/depression.


And government intervention?
10 years after the crash (just before the Great Depression began), the DOW was less then 1/2 of it's pre-crash level, the unemployment rate was still more then FIVE times higher then it's pre-crash level and the national debt had more then doubled.

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
http://www.u-s-history.com/pages/h1528.html
http://www.polidiotic.com/by-the-numbers/us-national-debt-by-year/


Which proves that 'austerity' works and government intervention does not.

 

I disagree. I think it almost always behaves in ways we could expect. The 1920/21 Depression, the Great Depression, the dot.com crash and the Great Recession...all came on as logical extensions to the events which preceded them.

They were easy to predict...it's just that once people get the 'fever' of profit...they find ways to justify it's ongoing existence - often silly and illogical ways. They lose their emotional detachment.

Macroeconomics is EASY to predict...you just have to use common sense, take a detached perspective and understand how humans work/feel.
That is not always easy to do...but it is more then possible.

 

I think the Austrians have the best explanation for the boom/busts cycle created by the state.

 

Agreed.

Unfortunately, most current economists have been taught by their profs that every economic problem can be solved by models/equations and theories. And when in doubt - throw money at the problem...LOTS OF IT. 'It's the humane thing to do'.
Which is nonsense.

Recessions are the result of excess. And they are the cure to bring market forces back to where they need to be. People have been taught to fear them like the plague. When, in reality, they are the solution to the problem...a necessary 'evil'.

It's like obesity (or almost any addiction). You don't solve the problem of eating too much by eating even more. You eat less, you diet.
It's uncomfortable. But it's necessary.
Same goes for recessions/depressions. Throwing more money at a problem that was usually created with too much money is nonsense.

 

Not true. We can all look back and crow, 'we knew', but the truth is it's simply macro school trying to proclaim superiority.

Given you don't refer to any macroeconomic theory, all you have is akin to weather forecasting by checking the colour of the clouds outside.

Behavioural Macro is certainly not easy. It leads to outcomes that seem counterproductive, but are generated by the complexity of our cognitive biases.

There's an irony that, without acknowledging the importance of macro school of thought, you still derive the same sense of arrogance. Macro isn't easy to predict. The important point, mind you, is that the real world difficulties doesn't justify limited government criteria. If anything, it encourages greater interventionism.

 

Well, I have no idea what your point is. You both praise and insult macroeconomic theory.

But yes, of course you can predict macroeconomic calamities. And you do not need to go to school to learn it. Just use common sense, keep your emotions in check and understand human drives/desires.

I was not around for the 1920/21 Depression or the Great Depression...but they should have been easy to spot (in hindsight). The former due to massive government expenditure (because of WW1) that was suddenly removed from the economy. How could a major retraction not take place?
The latter? The ridiculous investment rules and margin requirements of the time...mixed in with the fact the Fed drastically increased the money supply (by over 70% during the 1920's). Throw in the completely moronic Smoot-Hawley Tariff Act....and it is little wonder the Great Depression occurred.

Fast forward to times I was around for...the dot.com crash and the housing bust which led to the Great Recession.

The dot.com crash was staggeringly obvious. Start up companies were having money thrown at them without any basis for investment. Everyone HAD to invest in dot.com stocks...it was mania. And mania ALWAYS ends badly.
I, unfortunately, got caught up in it and had not learned my lessons...so I got burned along with many others.
But I learned.

And when the Housing boom started in the early 2000's...even I saw the nightmare that it was setting up...as did many others (Peter Schiff, Ron Paul and other Austrian Schoolers were screaming that this bubble would pop...few listened).

It was sheer madness to give mortgages to people who could not afford them and it was equally obvious that it would all end VERY badly. A child could have seen it coming.
But greed does funny things to people. It blinds many of them to the obvious.
All bubbles grow with new money entering the market. But eventually, that has to end. And when it does, the bubble pops.
And all the signs pointed to late summer 2007...when I completely liquidated my portfolio (though I do not expect you or others to believe me). The bubble had reached it's height and when banks were giving mortgages to homeless people...you knew it was time to get out.

With all due respect, if you are saying that it is impossible to see when bubbles are about to pop or even when one is forming (as one is now - a debt bubble)...then you simply do not understand the fundamentals of macroeconomic bubbles/busts.


BTW - you missed my stats (at the top of this page) on the Great Depression and the 1920/21 Depression which proved that 'austerity' works.

 

I do not say it is unnecessary. I do say they've let us down. Your stance is not logical. The idea that you can understand macroeconomics without any macroeconomic theory is not credible.

No, you normally get people saying- after the event- 'told you so'. The real prediction is in looking for individual struggling firm and then making money accordingly. That was recently displayed with the hedge funds benefiting from Carillion's plight.

You're not actually referring to macroeconomics. You're referring to how someone does not need economics in order to be part of the financial market racket. The idea of a layperson, devoid of any economic knowledge, understanding macroeconomic shifts is ludicrous.

Even here you're in trouble. The impact of Smoot-Hawley is still under debate. It was only 'assumed' to be the problem (and people naturally took that on-board and assumed truth). Keynes summed it up well: "Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist"

You certainly can refer to rent seeking and corruption as a major determinant of major recessions. But, as usual, that knowledge is from economists 'looking back at what happened". There isn't any notion of the layperson, without any understanding of macro theory, constantly guessing correctly because of their common sense. The analysis involved to understand when this occurs (as rent seeking and corruption is always part of capitalism) is much more involved.

No, I don't believe you. You make investment decisions based purely on guess work. When it works you claim knowledge. When it doesn't you quietly forget it. That's the nature of the betting man.

There are certainly financial leeches in the system that can use their understanding of bubbles to make ridiculous economic gains. These people aren't following common sense. They are akin to horse betters than know which animals have been dosed up.

And those that genuinely have knowledge? They'd at least be applying behavioural macro and integrating it with general macroeconomic theory.

 

Of course it's credible. It has been proven time and time and time again.

Sorry man...I do not do large, multi-quote, posts/replies. They just end up a LONG mess. And life is too short for that.

Look, you believe whatever you wish. And I will know what I know.

You have made your points and I have made mine.

You do not seem to have an open mind on this, you are saying - without posting ANY DATA/FACTS to back it up, that one cannot predict major, macroeconomic events in advance...so I do not see the point of further discussion on it with you.

Good day.

 

No problem. You couldn't add anything anyway

 

LOL...you have no idea what I could or could not add. Anything is possible.

Wow...even I would never presuppose to know the entirety of what someone could conceivably state in the future.

Enjoy your ouija board.

A little advice, I would try and open your mind up more on these matters. AND, try and post at least some data/facts to back up your points.

We are done here...for now.

Good day.

 

Not really. The idea of macroeconomic insight, without reference to macroeconomics, just isn't cunning. As I said, you've confused an understanding of macroeconomics with financial market 'betting'.

Strange comment, given you've provided none. Your argument is essentially "I don't need to know any economics as I moved some money about". Of course real use of data would refer to empirical analysis which, by definition, is based on hypothesis crafted from a macroeconomic school of thought.

 

Who is saying they understand economics without any economic theory?

 

They've been taught by their profs that every economic problem can be solved by government violence.

 

There is the unfortunate reality, given evidence via social experiments. People are more productive when there is a penalty for not doing so vs allowing people to pursue their own voluntary desires. All other things being the same, when two very large groups compete against each other, one working on voluntary cooperation and the other working under threat of some kind of penalty, the group working under threat of penalty will outperform the group that works voluntarily. Now, this assumes that in both groups that individuals are still allowed to pursue their own desires as in a capitalist society vs a malevolent autocracy.

Having said that, this applies most in large socially diverse countries like the US where people have competing interests and varied cultures and religions. In smaller nations where interests and races are more homogenous peoples interests tend to line up naturally.

If the US were to be individualist as you see it, it would quickly break up into multiple smaller nations where the peoples social, cultural and religious belief tend to align. This would be a HUGE benefit to rival powers of the world like Russia and China, which is why I suspect they feed individualist sentiment via social media in this country because they know a divided America is a weak America.

 

Hm, so you're saying that people don't pursue their own interests when people threaten them. And this is economics?