Economics & Morality

Some partial backups of posts from the past (Feb, 2004)

Economics & Morality

Postby Cory Duchesne » Mon Dec 21, 2009 3:13 pm

In case you haven't seen it:

Economics & Morality

I'm looking to have a discussion with anyone who has some good answers to my questions (please don't refer me to wiki). Whenever I think about economics, I always find myself frustrated with the terminology and generalizations, and more interested in actual real life, cause and effect chain reactions and details which cause an economy to gradually change.

At the 1:49min mark, Kevin talks about how the more money the government prints, the less people trust it, and thus it's value decreases.

I can't help but think that that "trust" is a misleading term, I just don't find it coherent.

For instance, how would "the people" have any clue about the money supply increasing? Is it really about trust, or is it about scarcity of resources combined with too many people competing to make use of those resources?

It seems like a big aspect of hyperinflation is the desire to establish a large quantity of businesses and assets, but this desire is irrational in the same way it's irrational to try investing a large amount of work into producing a large quantity of crop when the soil is only good enough to produce a small quantity of crop.

For instance, the government might lend money to produce 30 large scale farms, but the soil in the nation can only support 5 farms. Likewise, the government lends money to support 20 aspiring oil companies, but there is really only enough oil within the nation to support 2 oil companies.

This is what I think the problem is in Zimbabwe. Perhaps the government started off with inflated expectations and hopes. It wanted to see a large quantity of businesses emerge, so they lent too much money to too many people, hoping that the money would be spent wisely to increase businesses and net revenue. But since resources were so scarce, and since each person who wanted to start or grow their own business had so much money loaned to them, a bidding war for (scarce) commodities ensued. After the commodities were all bought up for expensive amounts, the basic products that ended up on the market were unusually expensive.

So what's wrong with having your basic goods such as corn and bananas expensive?

It's problematic when your consumers aren't getting paid enough to buy anything but those basic goods. They can't afford to buy any extras like furniture, cars, etc.

My theory is that hyperinflation is set into motion because the inflated ambition/demand of government to produce a large quantity of businesses does not correlate with available commodities need to realistically support all those businesses, and thus, after a bidding war ensues, the products not only end up becoming more expensive, but half of the businesses go under, because their weren't enough commodities to go around. Too many businesses, not enough commodities. And so people lose their jobs, and thus demand for higher end goods goes way down, and all you're left with is the over priced basics.

At one point in the video, Kevin mentions how the rich people with all the money buy up the houses, furniture and possessions of the poor.

I have no doubt this is true, but as I already alluded too, aren't the rich people (the people the government will lend money to) buying up ALL commodities, with the hope to profit?

Too many people who borrow money are spending it on things that they hope to resell, but they CAN'T resell. There's no demand for the things they have too much of (luxury, houses, furniture, jewelry), and there's too much of a demand for the things they have no supply of (agriculture, coal, oil).

I assume the poor are eager to sell their houses and possessions because their employers aren't paying them money due to overestimating what the revenues would be of basic things like farms. Lower/middle class workers, because they are getting fired, can no longer afford to meet monthly costs so they try to transition down into a lower standard of living they can afford to maintain.

However, once they get down there, they notice that what was $10 last month, is now $50.

I assume Zimbabwe must have a dying agriculture, and part of their problem might be that they are importing most of their food, and they are being charged outrageous amount of money by other nations.

I would not be surprised at all if Zimbabwe's hyperinflation is partly caused by other Nations charging ridiculous amount of money for basic things. And the reason other nations are charging so much money, is because Zimbabwian dollars is all Zimbabwe has to give, and who the fuck wants to live in Zimbabwe? They have no commodities, no infrastructure, no quality of life. Nobody wants to visit Zimbabwe. So Nations are charging outrageous amounts of Zimbabwean money, because...........they don't trust it. A-ha...

I hope someone out there enjoyed my rant. To the reader: I'd like to hear your thoughts on this. I do realize what I have written probably has some significant flaws, I'm mainly just letting my intuition guide me in an effort to spark some kind of worthwhile discussion.
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Re: Economics & Morality

Postby Nick Treklis » Mon Dec 21, 2009 6:21 pm

I basically agree with what you're saying here. To put it as simply as possible, I'd say that hyper-inflation occurs when there is a disproportionate amount of currency relative to an economies ability to produce goods and services.

Still, people do need to have confidence in the currency they use because even if the monetary policy in place is fundamentally sound, people can get scared into behaving irrationally, thus crippling the ability to facilitate the economy through the currency if people don't trust it.
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Re: Economics & Morality

Postby Cory Duchesne » Tue Dec 22, 2009 2:39 am

Nick Treklis wrote:I basically agree with what you're saying here. To put it as simply as possible, I'd say that hyper-inflation occurs when there is a disproportionate amount of currency relative to an economies ability to produce goods and services.


yeah, that sounds right.

Still, people do need to have confidence in the currency they use because even if the monetary policy in place is fundamentally sound, people can get scared into behaving irrationally, thus crippling the ability to facilitate the economy through the currency if people don't trust it.


But in that case, I'm not sure if it's the currency that people fail to trust.... I think they don't trust that they'll have a job next month, or if they rely on commission, they don't trust that they're going to be able to sell cars, houses, cell phone plans, etc. So they don't spend.

Is that what you mean by behaving irrationally? (consumers holding onto their money)?

I suppose what must also happen sometimes is firms anticipate that the overhead costs to run the firm will rise, and so the firm raises the price of products prior to getting hit with increased overhead costs. So you can say that the firms don't trust the currency, but another way to put it is that they don't trust that overhead costs will stay even. They fear and anticipate that the things they need to run the business will be more expensive.

Again, would this be an example of what you mean by behaving irrationally? (firms increasing prices because they anticipate overhead costs will overwhelm them in coming months?)

When I think of the element of "trust" in regards to having faith in a currency, the most powerful example of trust (or lack of trust) effecting a nation is when other wealthy Nations try to sell stuff to a Zimbabwe-like nation. When selling (lets say grain) they ask Zimbabwe to give them quite a bit more money than they would ask from other healthier countries. They don't trust this nations currency only because they don't trust that the nation itself is a place they would want to live. So basically Nation-X asking an exorbitant amount of money from Nation-Y for simple things is an example of Nation-X not trusting the worth of Nation-Y. So there is the outsider nation trusting or not trusting the insider's currency - and in this respect, trust in currency can make a big impact on the way market prices look.

Also I think it's this lack of faith that Nation-X has in Nation-Y plus Nation Y's dependency on Nation-X that shakes the faith of firms within Nation-X.

I'm trying to think of an instance where lack trust by consumers effects the market, but for some reason this isn't as easy to visualize. I suppose, when they lack faith in their currency, consumers may resort to more old fashioned trade? I'm not sure if resorting to trade would inflate the currency much. Although, firms whose debt was compounding each month, might have to raise prices if nobody is giving them any money for goods.

Overall, I would say the consumers who lack means of production are the ones whose trust or lack of trust is the least relevant.
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Re: Economics & Morality

Postby Ryan Rudolph » Tue Dec 22, 2009 8:21 am

Cory,

Your points are sound regarding the futility of trying to prop up an economy with loans that doesn't have the infrastructure and resources support a large influx of investment. The end result is added debt with no real gains because the environment will not support the growth.

However, when trying to understand money supply and how it drives inflation, one must also consider currency worth, which is largely driven by activity on the stock market, and specifically by large investors.

What is counter intuitive about stock investing is that when you buy a share in a company, and you set up the account in US dollars or Canadian dollars, the currency you trade in, and even the currency you save your money in matters.

It matters because if the currency your trading in is decreasing in value, while the company share is increasing, you could end up with no net gain, or even a loss due. Because of this, any stock investor who has any significant amount of investment is very careful what currency he invests in or even what currency he saves his money in.

For the small time investor with thousands of dollars, it doesn't affect things very much, but when the top billionaires suddenly change the currency that they save in and invest in, it has drastic effects on the global economy.

Essentially when a billionaire drops their currency of choice, and switches, they are basically saying that they no longer have any faith in that nation, and they want to give their business to another nation by investing and saving in their currency.

That is why what guys like Warren Buffet and Bill Gates say matters, if they suddenly came forward and announced that they were switching their trading currency and saving currency to Chinese yen over the US dollar, the ramifications on wall street would be devastating.

So what a nation's government does matters, because large mistakes by government make investors nervous who are holding a lot of funds or stocks in that currency.

So basically currency is not only defined purely as being exchanged for goods and services, but a currency is a entity traded in and of itself, just like gold, nickel, or goodyear tires. And what makes the relationship more complicated is that resources and companies are never traded or invested in and of themselves, you always have to choose what currency you want to hold these positions in, which should be a measure of how wise you believe the nation is behaving as a whole, which should include government, corporations and individuals.

So what happens when there is a huge supply of gold, with very few buyers, the price goes down. Similarity, there are currency traders, and billionaires that affect the flow of currency within the market. If everyone is dumping their accounts in US dollars, and switching to Chinese Yen, the currency must go down.

So when a country inflates their money supply, they are creating more debt for their population as higher taxes, which means GDP will do down, which means investment will decrease, which means unemployment will increase, which means corporations will need to cut and slash to stay afloat, which means investors will lose confidence and pull their money out of that nation's currency, and into another currency.

I see the whole process as a sort of cycle, where the problem spirals into a sort of domino effect.

Not to mention, that when the money supply is inflated, they are essentially adding to the digital total of funds available to trade stocks in and or save money in.

That is why the Federal Reserve buys back US funds and dollars all the time, they are trying to control the value of US dollars by limiting the amount of digital currency available for currency traders.

Much of the activity is shady at the Fed, I suspect they are hiding a huge iceberg that we are only seeing the tip of. That is why the Fed doesn't want to be audited by the congress because they would discover that the FED has probably engaged in buying back currency from banks, that they originally sold to banks as government backed securities, and then they bury the information of how much currency they are constantly buying back. This creates the illusion that things are much better in the US than they actually are.
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Re: Economics & Morality

Postby Nick Treklis » Tue Dec 22, 2009 9:05 am

Cory,

Consumer spending in the USA makes up a very large percentage of economic activity. So if consumers lose trust in their currency causing them to behave irrationally by erratically saving, spending, or investing their money, it does have the potential to make large portions of the economy unstable. It's a lot more complex than this, but when money starts ending up in places that the economy isn't used to having it in, and disappearing from places it's used to having it, I imagine it could throw things off quite a bit. And depending on how you look at it, it doesn't necessarily have to be a bad thing either unless you are heavily invested in the status quo.
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Re: Economics & Morality

Postby Cory Duchesne » Thu Dec 24, 2009 5:50 am

Ryan Rudolph wrote:Cory,
Your points are sound regarding the futility of trying to prop up an economy with loans that doesn't have the infrastructure and resources support a large influx of investment. The end result is added debt with no real gains because the environment will not support the growth.


I guess the question is whether or not this actually happened in Zimbabwe, or if it is just my theory.

However, when trying to understand money supply and how it drives inflation, one must also consider currency worth, which is largely driven by activity on the stock market, and specifically by large investors. What is counter intuitive about stock investing is that when you buy a share in a company, and you set up the account in US dollars or Canadian dollars, the currency you trade in, and even the currency you save your money in matters. It matters because if the currency your trading in is decreasing in value, while the company share is increasing, you could end up with no net gain, or even a loss due. Because of this, any stock investor who has any significant amount of investment is very careful what currency he invests in or even what currency he saves his money in.


I imagine it's complicated, but I'm guessing it has a lot to do with analyzing a nation and determining the health of it's firms. If a nations firms have good long term prospects, delivering a quality of life, then I suppose the currency will be judged as useful, hence valuable.

So what a nation's government does matters, because large mistakes by government make investors nervous who are holding a lot of funds or stocks in that currency.


I'm guessing long drawn out wars that cost millions per day must eventually scare the shit out of investors. You gotta wonder what America would look like if all the money spent on war had been invested in innovation and better education.

So basically currency is not only defined purely as being exchanged for goods and services, but a currency is an entity traded in and of itself, just like gold, nickel, or goodyear tires.


This doesn't really boggle my mind the way it used to. If another nation has a great quality of life and an assortment of useful things to buy which are produced efficiently, then that nations currency is a valuable thing to have, and should be treated like a resource or a tool. The currency of another Nation should cost you your money. I think that makes perfect sense.

And what makes the relationship more complicated is that resources and companies are never traded or invested in and of themselves, you always have to choose what currency you want to hold these positions in, which should be a measure of how wise you believe the nation is behaving as a whole, which should include government, corporations and individuals.


That makes sense to me. You can't make an investment or a purchase of goods without using money. And it makes sense that some money(nation) is going to be more powerful than other money(nations), simply on account of the health and efficiency of firms within a Nation.

So what happens when there is a huge supply of gold, with very few buyers, the price goes down. Similarity, there are currency traders, and billionaires that affect the flow of currency within the market. If everyone is dumping their accounts in US dollars, and switching to Chinese Yen, the currency must go down.


I like how you emphasize the billionaires.... you seem to imply that the decisions of the people with the most money create a trickle down effect, where switching to a new currency causes everyone below you to switch to that currency as well. But why would a Bill Gates want to switch currencies? Isn't it because of the economic activity of everyone below him? It seems like it's the activity of the guys in the middle or even lower who give the guys up top the rationale to make a move. Someone like Gates would keep his eye on what the smaller guys are doing, and if it they forsee a powerful enough trend, then they will follow that trend as well, and after they make the switch, then yes, all hell breaks loose.

So when a country inflates their money supply, they are creating more debt for their population as higher taxes


Is this always true though? Aren't there almost just as many instances where inflating the money supply is good and necessary? For instance, an analysis might indicate that there is a lot of room in a sector of an industry for more businesses, or lots of room for existing businesses to grow. So you print more money, you lend it to the entrepreneurs or you lend it to existing firms so that they can grow their business. A result of this printing and lending is that profits increase, and the loans are paid back. The Nation as a whole becomes wealthier and strong, and this is party because they increased the money supply. Increasing the money supply can expand the playing field and allow for more growth.

So when a country inflates their money supply, they are creating more debt for their population as higher taxes


Why would inflating the money supply cause more taxes? When banks create money, it doesn't lead to increase taxes. Also, increasing the money supply might actually lead to only a temporary debt which eventually turns into greater profit.

when the money supply is inflated, they are essentially adding to the digital total of funds available to trade stocks in and or save money in. That is why the Federal Reserve buys back US funds and dollars all the time,


What kind of currency does the Reserve use to buy the US funds? And what would the consequences be of repeatedly using another Nations currency to buy and hide US money?

they are trying to control the value of US dollars by limiting the amount of digital currency available for currency traders. Much of the activity is shady at the Fed, I suspect they are hiding a huge iceberg that we are only seeing the tip of. That is why the Fed doesn't want to be audited by the congress because they would discover that the FED has probably engaged in buying back currency from banks, that they originally sold to banks as government backed securities, and then they bury the information of how much currency they are constantly buying back. This creates the illusion that things are much better in the US than they actually are.


Let me get this straight: are you saying the Fed buys and hides US money, trying to pretend the money no longer exists?
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Re: Economics & Morality

Postby Ryan Rudolph » Thu Dec 24, 2009 12:33 pm

Cory,

Is this always true though? Aren't there almost just as many instances where inflating the money supply is good and necessary? For instance, an analysis might indicate that there is a lot of room in a sector of an industry for more businesses, or lots of room for existing businesses to grow. So you print more money, you lend it to the entrepreneurs or you lend it to existing firms so that they can grow their business. A result of this printing and lending is that profits increase, and the loans are paid back. The Nation as a whole becomes wealthier and strong, and this is party because they increased the money supply. Increasing the money supply can expand the playing field and allow for more growth.


Yes, Inflating the money supply can be done wisely by banks if it meets demand for economic activity, but as I will go into further later on – the FED can pump too much credit into banks, which causes individuals and corporations to do stupid things.

Why would inflating the money supply cause more taxes? When banks create money, it doesn't lead to increase taxes. Also, increasing the money supply might actually lead to only a temporary debt which eventually turns into greater profit.


The Fed operates like a individual business that is backed by the government, so if the FED takes an loss, the tax payer gets the bill. I will attempt to go into more detail below.

Let me get this straight: are you saying the Fed buys and hides US money, trying to pretend the money no longer exists?


Sort of. The fed controls how much currency US banks have access to use as a means to control interest rates. Originally, interest rates were supposed to be governed by the amount of savers and borrowers in relation to each other. For instance: if there were a high supply of savers, with few borrowers, interest rates would be low to indicate that the money supply was high. This is a great position for any nation to be in.

However, later in this century, as demand for credit in the US economy skyrocketed, and there was no longer enough credit available from savers to meet the high demand of borrowers so the FED stepped in and created an artificial mechanism to guarantee there was always enough credit available.

They accomplished this by either pumping credit into banks or buying back currency, and interest rates fluctuated accordingly. What Ron Paul argues is that one consequence of this artificial system is that sometimes the Fed pumps too much credit into banks, as it doesn't realistically represent demand, and it causes individuals to do stupid things. Low interest rates encourages borrowing which can lead to periods of boom/bust cycles. The US is currently experiencing a bust cycle from having too much credit pumped into banks all at once, (from a boom cycle).

Ron wants to go back to a gold standard, which is a horrible idea, as backing your currency with a rare metal is just not practical in economies as large as these. In small simple economies with a low rate of growth, a gold standard might work, but any technological complex civilization couldn't sustain itself with a gold standard. Plus Ron is naive in his thinking when he believes a gold standard would stop over spending, the FED and the government would find a way around it somehow - probably by a continual dilution how much each dollar is backed by in gold.

What you also need to understand about the FED is that if it sort of like the mother hive of all smaller banks, but it is also behaves like a private institution, meaning it has its own balance sheet, makes its own business deals, and attempts turns a profit independently of the tax money congress gives it to operate.

However, the government backs the FED even if it takes loses, which are passed on to the tax payer. The FED tries its best to use actual currency from its own reserves to lent smaller banks, but inflating from nothing happens as a last resort. The FED also has total secrecy over what it does, and I believe it fudges its balance sheets to make it seem like it has more assets and capital than it actually has. Morever, I believe that during this crisis, they resorted to some dishonest practices as well.

From the beginning, I suspect The fed lent smaller banks too much credit, so the banks got greedy and lost most of the money due to poor investment choices, taking large risks, poor mortgage practices and so on, ending up with net loses and debt. Then the FED informs these banks to take all these bad investments, bad debt and bundle them together to create a high risk securities that the FED buys back as investments, but there is nothing there but debt and loss, which is dressed up as a potential investment. Then the FED holds these for a period of time, and eventually burys them somewhere in the books, and reports that they were ACTUALLY able to turn a profit off of the smaller banks securities. I believe something like this is happening at the FED, and that is why they are avoiding an audit by the congress.
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Re: Economics & Morality

Postby Cory Duchesne » Mon Dec 28, 2009 9:24 am

Ryan Rudolph wrote:
Let me get this straight: are you saying the Fed buys and hides US money, trying to pretend the money no longer exists?


Sort of. The fed controls how much currency US banks have access to use as a means to control interest rates. Originally, interest rates were supposed to be governed by the amount of savers and borrowers in relation to each other.


Do you mean to imply that it's the FED's job to know the health of all banks below the FED?

For example, here's a list of American Banks. Does the Fed need to analyze the health of all these franchises in order to determine what interest rates should be? If so, then I can understand why the FED should function as a business, however, a little more transparency and regulation would be nice.

For instance: if there were a high supply of savers, with few borrowers, interest rates would be low to indicate that the money supply was high. This is a great position for any nation to be in.

However, later in this century, as demand for credit in the US economy skyrocketed, and there was no longer enough credit available from savers to meet the high demand of borrowers so the FED stepped in and created an artificial mechanism to guarantee there was always enough credit available.


Do you think this is always a bad idea? I'm leaning toward the notion that in some cases, this strategy can and should work.

They accomplished this by either pumping credit into banks or buying back currency, and interest rates fluctuated accordingly. What Ron Paul argues is that one consequence of this artificial system is that sometimes the Fed pumps too much credit into banks, as it doesn't realistically represent demand, and it causes individuals to do stupid things. Low interest rates encourages borrowing which can lead to periods of boom/bust cycles. The US is currently experiencing a bust cycle from having too much credit pumped into banks all at once, (from a boom cycle).


I want to address the part I bolded. Is it really true to say that the excessive credit did not realistically represent the demand? Or is it more accurate to say that the demand was present, but it wasn't a very wise demand.

A wise demand would be a demand for credit that would be invested into improving the efficiency of a business. The business learns to profit more efficiently, so the loan gets paid back, and less people get paid more money. I'm referring to the trend where industries require less manual workers due to more automation.

A foolish demand would be a demand for credit that would be used to buy a luxurious home, and after the purchase, the buyer loses their job, and thus can't afford monthly payments to the bank.

It's interesting to note how the wise demand is connected to the foolish demand. The success of the person making the wise demand for credit leads to the job loss of the person who makes the foolish demand for credit.

What I'm referring to is the increased automation in society. More work is being accomplished with less people.

However, I don't know if the trend toward automation is partly responsible for the latest bust in the American economy. What do you think?

Ron wants to go back to a gold standard, which is a horrible idea, as backing your currency with a rare metal is just not practical in economies as large as these.


It might work if you could figure out a way to establish a tendency toward deflation. As economies evolve in sophistication, it seems rational that currency would deflate more and more. After all, if the goal it to produce products more efficiently, then you would think that the end result would be cheaper and cheaper goods.

In small simple economies with a low rate of growth, a gold standard might work, but any technological complex civilization couldn't sustain itself with a gold standard. Plus Ron is naive in his thinking when he believes a gold standard would stop over spending, the FED and the government would find a way around it somehow - probably by a continual dilution how much each dollar is backed by in gold.

What you also need to understand about the FED is that if it sort of like the mother hive of all smaller banks, but it is also behaves like a private institution, meaning it has its own balance sheet, makes its own business deals, and attempts turns a profit independently of the tax money congress gives it to operate.


If it's the FED's responsibility to have a good handle on the health of all other Banks, then I suppose it's only fair that the people who run the FED should get paid. However, there should not be any secrecy, obviously.

However, the government backs the FED even if it takes loses, which are passed on to the tax payer. The FED tries its best to use actual currency from its own reserves to lend to smaller banks, but inflating from nothing happens as a last resort. The FED also has total secrecy over what it does, and I believe it fudges its balance sheets to make it seem like it has more assets and capital than it actually has.

Morever, I believe that during this crisis, they resorted to some dishonest practices as well.

From the beginning, I suspect The fed lent smaller banks too much credit, so the banks got greedy and lost most of the money due to poor investment choices, taking large risks, poor mortgage practices and so on, ending up with net loses and debt. Then the FED informs these banks to take all these bad investments, bad debt and bundle them together to create a high risk securities that the FED buys back as investments, but there is nothing there but debt and loss, which is dressed up as a potential investment. Then the FED holds these for a period of time, and eventually burys them somewhere in the books, and reports that they were ACTUALLY able to turn a profit off of the smaller banks securities. I believe something like this is happening at the FED, and that is why they are avoiding an audit by the congress.


One thing that still is not clear for me: you talked earlier about how the the FED buys back currency from smaller banks. This confuses the hell out of me. What do they buy the currency with?

Also, you use the term securities - but I'm not clear on the definition or meaning of this concept, perhaps you could clarify.
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Re: Economics & Morality

Postby Ryan Rudolph » Mon Dec 28, 2009 12:08 pm

Cory,

Do you mean to imply that it's the FED's job to know the health of all banks below the FED?


Yes, one of the fed's primary functions is to control interest rates as a means to stimulate growth. Banks make money by lending, and if they do not have access to sufficient credit at critical times when there are lots of potential borrowers then the system will not work. So the FED works with the government to manage credit levels available to smaller banks. They also are involved in the printing of actual currency.

The original purpose of the FED was merely to be a lender of last resort in case there was ever a run on all the banks at once, so if everyone demanded their money, then the FED could ensure enough currency was available. However, as the economy grew more complicated, so did the FED's roles. And this function was no longer necessary or relevant.

Does the Fed need to analyze the health of all these franchises in order to determine what interest rates should be? If so, then I can understand why the FED should function as a business, however, a little more transparency and regulation would be nice.


Yes, they monitor the behavior of US banks, and their analysis extends out into the actual economy as well. Not only to they examine the health of overall banks, but they also study the nation's economic growth projections by calculating statistical averages of how much credit they believe companies will need. A much harder job than your local weather man eh? and we know how often they goof up.

Do you think this is always a bad idea? I'm leaning toward the notion that in some cases, this strategy can and should work.


The system can work, but the major problem here is human nature. There is a lot of corruption across the board - within the FED, within corporations, wall street, smaller banks and so on. For instance: FED employees doing back deals with corporations and smaller banks. An audit of their activity is essential. These guys have a lot of power, and their activities need to have oversight for the system to work correctly.

Is it really true to say that the excessive credit did not realistically represent the demand? Or is it more accurate to say that the demand was present, but it wasn't a very wise demand.


I know what you saying, and yes, there was demand for that much credit, but the credit was given to people who shouldn't have had it, or was given to people who had decent credit scores, but were not intelligent enough to turn it into honest gains for the economy itself. If the credit is wasted, then the end result is a society filled with debt, or slaves.

One thing to consider is that people with a decent credit score are not always the people you want to give credit to, they are usually work drones who when given a bit of leisure, waste credit on something pleasurable in order to forget the time they worked to develop decent credit. Credit is used to pacify the ego's wounds many times.

It's interesting to note how the wise demand is connected to the foolish demand. The success of the person making the wise demand for credit leads to the job loss of the person who makes the foolish demand for credit.


One of the major reasons for this is that the middle class is shrinking in the US, partly due to manufacturing and call centers being outsourced to places like Mexico, China and India. And Illegal aliens from Mexico are driving down the minimum wage because they are willing to work for less. The end result is that jobs have been squeezed out of much of the United States at many different income levels. In my opinion, the shrinking of the middle-class is one factor that caused the banks to take more risk to make money, and give loans to people who they shouldn't have resulting in huge loses. And the middle class that is actually left has been taking larger risks and less conservative choices as well with their credit due to dissatisfaction with modern life caused by feeling like a slave, feeling like no one cares about them in their company and so on. As we both know, trying to survive in the middle-class society can cause self-destructive behavior in individuals who are not mentally prepared/conditioned for what work requires. Basically, Being in a position that causes physical and mental pain can cause self-destructive behavior during leisure.

However, I don't know if the trend toward automation is partly responsible for the latest bust in the American economy. What do you think?


Only one factor I think, other factors include corporate outsourcing, illegal aliens, human discontent, greed, self-destructive behavior, inflation from pumping too much credit into the society, the desire to gamble and so on.

I don't believe we have begun to see the significant effects caused by automation, I suspect that there will be a growing demand for highly educated scientists and technicians and a decreasing demand for labourers. In the future economy, the uneducated and unintelligent will be forced to live off the government, but I'm also concerned that the system will not support them due to less people in the work force. I'm also concerned that as health care becomes more complicated, the costs will be more expensive, and governments will have a difficult time covering everyone, and insurance companies will not be able to turn a profit as easy from health insurance.

We maybe heading into an increasing elitist society that pushes strong policies of population control.

It might work if you could figure out a way to establish a tendency toward deflation. As economies evolve in sophistication, it seems rational that currency would deflate more and more. After all, if the goal it to produce products more efficiently, then you would think that the end result would be cheaper and cheaper goods.


Yeah Ron doesn't mention anything about deflation, and I don't know if he has thought about it at all. He believes it would work presently, and I strongly disagree. In your theory of deflation, one would think that the society would also need to be small in population because as ones population increases with economic growth then the price of everything increases due to the demand of everything increasing simply from their being more consumers. A rapid population decrease should cause deflation in a highly evolved technological society. I have always wondered what the ideal population needs to be in order to effectively bring prices down to what they should be.

Comparing the real estate prices between Dartmouth and Halifax is a decent example of inflation caused by the consumer demand, as it relates to higher population. A half duplex In Dartmouth can be bought for roughly $140,000, but the same duplex built in Halifax might cost $195,000. To my mind, this indicates that geography in real estate is related to demand and price, which is ultimately determined by the population density in that area. The same duplex might cost you $500,000 in downtown Toronto. To me, this trend is unacceptable. Ideally, one would think that we should have cities smaller than Dartmouth to bring house prices below $100,000. Maybe $60,000. I agree with one of your old ideas too when you say that real estate should be passed on to the next generations to prevent mortgages altogether. A paid home should never be given back to a bank to resell. In an elitist society, this idea could emerge quite easily.

One thing that still is not clear for me: you talked earlier about how the the FED buys back currency from smaller banks. This confuses the hell out of me. What do they buy the currency with?


The FED has the power to control the currency of smaller banks in many ways – they can either deny the banks new credit when they apply, they can simply restrict a smaller banks present credit without warning during emergencies, so the term 'buy' is not relevant here, or they can encourage banks to bundle many of their loans up into a security. A security is an investment package inventing by banks so they could potentially make money off their loans by selling them to investors. It works like this – Suppose I own a bank, and I have 10 lousy high risk mortages, I bundle them together, and sell them to an investor explaining that this is a high risk investment, but will we pay you 18% annual interest on the package, and we will manage it for you. However, if any of the ten people default on their mortages, then your piece of the pie evaporates into nothing. This is what happened in South Korea, they envied the growth in the US, and bought a crap load of these high risk mortage securities, which turned into dust overnight, and the South Korean economy went bust with the US.

So the FED as a last resort can explain to the banks that they will buy back the failed securities and try to save face on as many of the mortgages as possible of setting up lower payment with mortgage holders and so on. However, a huge amount of their efforts fail. And they do not properly disclose this information to the public. It seems like a way to bury debt and loses to me.

Overall, its a complicated messy situation with no easy answers. A lower population with more rational people would be a decent start though.
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Re: Economics & Morality

Postby Cory Duchesne » Sat Jan 02, 2010 3:19 pm

Ryan, thanks for your time. Much appreciated. Maybe pick this up again later after I do some research.
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Re: Economics & Morality

Postby Ryan Rudolph » Wed Jan 06, 2010 9:02 am

ok Cory.

Perhaps someone can help me with this -

A question I have been pondering for some time that relates to economics is -

I've been considering the relationship between creative talent and motivation, and it seems to me that some of the greatest inventions have emerged from the human mind with very unwhole motivations. For instance: Much of our modern technology has been invented by the great militarys of the world, who were driven by the masculine tendency to conquer, destroy and out-compete with other nations and races.

However, the progress made from these creative, yet feeble brained men has paved the way for companies with a much more whole vision such as google, who invent new products, but charge no money for them. Their motivations are non-typical of capitalist values, which states that a company should only do something if it can profit personally in a monetary sense from the activity. And the goal is to perpetuate personal profit, usually at the expense of others.

Moreover, the products google creates almost always apply to the IT sector, but I wonder what other industries could be transformed in this way? is it possible for other companies who have made billions already with one service, to invent and market free services on the side that are not in the IT sector?

If we had this sort of transformation in the energy sector then we should experience a extended period of deflation that should reduce the costs of many other goods and services, as the variable 'price' of most goods and services are closely determined by the price of energy.

It seems to me that cheap clean plentiful energy will solve many of our current problems, and provide the groundwork to solve many of our future problems.

Basically google represents a sort of enlighened business model that is breaking away from the capitalist system, yet using it to fund its projects at the same time. It is a bizarre, yet mind blowing phenomenon. The more I think about it, the more I realize that the ramifications of these sorts of transformations can be nothing other than progressive.
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Re: Economics & Morality

Postby Jason » Wed Jan 06, 2010 1:47 pm

Ryan Rudolph wrote:I've been considering the relationship between creative talent and motivation, and it seems to me that some of the greatest inventions have emerged from the human mind with very unwhole motivations. For instance: Much of our modern technology has been invented by the great militarys of the world, who were driven by the masculine tendency to conquer, destroy and out-compete with other nations and races.


Ryan, who do you think generally creates these military technologies? From the little I've seen, it's not bloodthirsty soldiers and warmongers, but people much more like your typical nerd/geek/engineer/scientist. I have serious doubts that most of these people are actually focused on and/or motivated by conquering, destroying and out-competing other nations and races when they develop said technology. But, it wouldn't surprise me if there's some denial of the consequences of their technology going on in these people's minds during its development.

Check out some of DARPA's prize-driven research efforts. There are university students working on these tasks. At first glance it appears to be just about developing an autonomous vehicle, which may not seem intrinsically connected to killing and war, but there's a decent chance it will eventually be used in one way or another to help wage war.

However, the progress made from these creative, yet feeble brained men has paved the way for companies with a much more whole vision such as google, who invent new products, but charge no money for them. Their motivations are non-typical of capitalist values, which states that a company should only do something if it can profit personally in a monetary sense from the activity. And the goal is to perpetuate personal profit, usually at the expense of others.


Google is a corporation that makes money indirectly from their products - from advertising. I'm pretty sure one of their main goals is to make profits.
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Re: Economics & Morality

Postby Carl G » Wed Jan 06, 2010 2:51 pm

And if you think Google is a new business model, not charging for their product, one need only look at media predecessors, like radio, and television before cable.
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Re: Economics & Morality

Postby Anders Schlander » Wed Jan 06, 2010 9:12 pm

google is almost definitely inside the top-50 of top-earning companies, some of which are wealthier than whole countries. For example Wal-mart. But people will always suit their own values/goals - so it's obvious that no matter what kind of enterprise you run, they will be attempting to promote their values and profit by meeting their goals.

A company that aims to produce urban-farming for example, needs a profit to build more - but is quite useful. Google might be useful too. If a company that's actually useful profits in order to invest into their purpose, which means investing to become even more useful - well then that's a useful company.

Urban-farming, planting on rooftops, housing installations that are eco-friendly, etc. is an example of a pretty decent endeavour. If they profit in the goal of expanding their goal instead of suiting their own greed, they will become even better. It's like a teacher teaching students to become masters, the masters will teach even more students, etc.
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Re: Economics & Morality

Postby Nick Treklis » Fri Jan 08, 2010 11:46 am

Ryan Rudolph wrote:Much of our modern technology has been invented by the great militarys of the world


This is no accident. It's simply because this industry is the biggest recipient of government tax dollars (at least until they bailed the banks out) so as a side effect with all that money and capital, they are going to produce the latest and greatest technological achievements. Really though, the only reason this industry receives as much money as it does is because the military-industrial complex serves to protect corporate interests over seas.

Just imagine how many more technical advancements there would be if the intent was in fact to actually advance humanity by investing in genetics, health care, sustainable energy, biology, robotics, and nano-technology. I mean, look at what the government was capable of doing with the Manhattan Project; developing the atomic bomb in less than four years when technology wasn't even close to where it's at today, same goes for the Apollo Space Program. These examples show how vastly inferior capitalism is compared to intelligently planned socioeconomic programs.

And speaking of economic morality, think about the fact that when the United State's Government bailed out the banks with trillions of tax payer dollars, they could have paid off every single mortgage in the entire country. Talk about a stimulus! So basically the banks not only got the money for all those mortgages that went into default, they still own all the houses too! At the highest level, the level that matters most, this is a government by and for the bankers, the people are lucky to be an after-thought.
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Re: Economics & Morality

Postby Ryan Rudolph » Sun Jan 10, 2010 9:44 am

Nick,

Just imagine how many more technical advancements there would be if the intent was in fact to actually advance humanity by investing in genetics, health care, sustainable energy, biology, robotics, and nano-technology. I mean, look at what the government was capable of doing with the Manhattan Project; developing the atomic bomb in less than four years when technology wasn't even close to where it's at today, same goes for the Apollo Space Program. These examples show how vastly inferior capitalism is compared to intelligently planned socioeconomic programs.


yes, this is the sort of behavior we would expect from an enlighened society with enlighened leaders, but it seems humanity cannot get over itself, cannot get over his own individual clinging to survival. It seems humanities self-centered obsession with surviving ironically hinders our ability to collectively survive...and the end result is that people generally do not know what is of value to put money into on a large scale.

It is almost futile to persuade colonies of ants to think like eagles, but that is the position the intellectuals and transhumanists are in.
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Re: Economics & Morality

Postby IJesusChrist » Sun Jan 10, 2010 11:14 am

The only way economics can be used with success is with the absense of morality.

Sorry, I didn't read any of your post because economics can burn.
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Re: Economics & Morality

Postby paco » Wed Jan 26, 2011 10:08 am

Nick Treklis wrote:Cory,

Consumer spending in the USA makes up a very large percentage of economic activity. So if consumers lose trust in their currency causing them to behave irrationally by erratically saving, spending, or investing their money, it does have the potential to make large portions of the economy unstable. It's a lot more complex than this, but when money starts ending up in places that the economy isn't used to having it in, and disappearing from places it's used to having it, I imagine it could throw things off quite a bit. And depending on how you look at it, it doesn't necessarily have to be a bad thing either unless you are heavily invested in the status quo.

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Re: Economics & Morality

Postby paco » Wed Mar 09, 2011 3:05 pm

more economics means more money.
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Re: Economics & Morality

Postby josephcush39 » Tue Aug 16, 2011 7:41 pm

The term “morality” can be used either

1. descriptively to refer to some codes of conduct put forward by a society or,
1. some other group, such as a religion, or
2. accepted by an individual for her own behavior or
2. normatively to refer to a code of conduct that, given specified conditions, would be put forward by all rational persons.

What “morality” is taken to refer to plays a crucial, although often unacknowledged, role in formulating ethical theories. To take “morality” to refer to an actually existing code of conduct put forward by a society results in a denial that there is a universal morality, one that applies to all human beings. This descriptive use of “morality”is the one used by anthropologists when they report on the morality of the societies that they study. Recently, some comparative and evolutionary psychologists (Haidt, Hauser, De Waal) have taken morality, or a close anticipation of it, to be present among groups of non-human animals, primarily other primates but not limited to them. “Morality” has also been taken to refer to any code of conduct that a person or group takes as most important.
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Re: Economics & Morality

Postby GGman » Tue Nov 01, 2011 7:17 pm

A major issue is that processes that are (one time) profitable businesses and the accompanying skills of human beings are not needed on a consistent basis. That is while the 'economy grows' mathematically, the actual people, institutions, processes, products, waste, etc is just being moved around and reconfigured. We have a lot of make-work industries in capitalist society that are certainly not maximizing peoples potential as citizens because it's 'not profitable'.

The next is that many stages of a capitalist economies growth are limited by the model itself - it doesn't fit reality. If we consider that there are lots of valuable long term things that can be worked on but won't make someone a living we are losing out on things that have long term value that will never be produced under a capitalist model.
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Re: Economics & Morality

Postby mental vagrant » Tue Nov 01, 2011 8:45 pm

Show me capitalism.
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Re: Economics & Morality

Postby lexybam » Fri Dec 09, 2011 12:01 am

In economics, money in the economy is regulated in order to curb some anomalies. Excess money causes inflation that is why there is always a budget. If you want to know if there is so much money in the circulation, you can easily know this by the level at which the price of services are increasing. If something like inflation is seen occurring, that means something is wrong with the economy and the policy.
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Re: Economics & Morality

Postby Leyla Shen » Sun Dec 11, 2011 4:43 pm

The morality/immorality of bourgeois private property (modern capitalism) = means of production owned by the "privileged" class (middle-class = owners of the means of production; inheritance replaces privilege) who make profit through the exploitation of the working class and property-less peasants. The formula commodity (C)-money (M)-commodity becomes M-C-M. Thus, the coming into being of the stock market, and the transformation from feudal relations to (and further elucidation of) socio-economic classes through a (marginally) broader distribution of inheritable wealth (and therefore privilege) than in feudalism.

It was the bourgeoisie with the greater serf muscle, the members of pre-revolutionary France's Third Estate, who overthrew the system of monarchical sovereignty ("God save the King/Queen!") and privilege; the doctors, lawyers--in short, the intelligentsia--that heralded in the sharper development of capitalist exploitation we know and love today.

The value of money--which is to say, the exchange value of commodities--is directly determined by the capitalist's ability to exploit for PROFIT labour markets (which is to say, real flesh and blood people) and natural resources.
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Re: Economics & Morality

Postby ForbidenRea » Mon May 28, 2012 7:05 pm

Wiki
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