Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Ripsnort on October 13, 2003, 12:05:36 PM
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Good article.
Spending our way to disaster [/size]
The consumer debt bubble in the United States could make the stock bubble seem like nothing.
October 3, 2003: 10:32 AM EDT
By Justin Lahart, CNN/Money Senior Writer
NEW YORK (CNN/Money) - The American consumer has become deeply addicted to spending, running up ever higher levels of debt in order to live in a fashion that is beyond his means. And the world has become equally addicted to the consumer continuing to burn through cash.
It's a dangerous situation -- potentially a bubble that dwarfs even the U.S. asset bubble that burst in 2000 -- and it will be a challenge for policy-makers to keep it from ending badly.
(http://money.cnn.com/2003/10/02/markets/consumerbubble/consbub1.gif)
The perseverance of consumer spending over the past several years is credited with keeping the economy afloat, but it didn't come without consequence. In order to keep on living in the manner they became accustomed to during the boom years, Americans went deeply into hock.
"If there's a bubble, it's in this four-letter word: Debt," said Merrill Lynch chief North American economist Dave Rosenberg. "The U.S. economy is just awash in it."
Indeed, consumer credit and mortgage debt are both a higher percentage of disposable income now than they've ever been before. Nor do these rises in debt levels appear justified by the rise in the value of people's homes -- household debt as a percentage of household assets (what you owe versus what you're worth) has also never been so high, according to the Federal Reserve.
How did this come to pass? We live in an economy that has become deeply dependent on the American consumer for growth. U.S. consumer spending accounts for around 70 percent of U.S. gross domestic product. So nobody wants to see the consumer falter, and they have been doing their darndest to make sure that doesn't happen.
(http://money.cnn.com/2003/10/02/markets/consumerbubble/consbub2.gif)
The Federal Reserve has cut rates like never before, allowing mortgage rates to come down this year to their lowest recorded levels. Car companies have offered zero percent financing for two years now, and they've recently begun offering it on 2004 vehicles.
But rather than using such rate reductions as an opportunity to save money, consumers have, as a whole, used them as an opportunity to spend more.
"We're a what's-my-monthly-payment nation," said Northern Trust chief U.S. economist Paul Kasriel. "The idea is to have my monthly payments as high as I can take. If you cut interest rates, I'll get a bigger car."
Financial companies have got into the act, too, offering people ever-more efficient ways of running up debt. Hardly does a week go by without a new credit card offer coming in the mail.
Or consider credit cards like Wells Fargo's NowLine Visa Platinum, which allows you easy access to a home equity line of credit. You can use it, says Wells in its online promotion, to help pay "for everyday expenses, like gas, groceries, clothes, etc."
Codependency, anyone?
Other countries share in the deep commitment to keep U.S. consumers laying out their cash. Big exporters -- Japan and China in particular -- have strived to keep their currencies low against the dollar, allowing Americans, in effect, to buy more of their stuff. U.S. consumer spending accounts for around 20 percent of world gross domestic product.
But here is another situation where the United States is spending more than it makes. The current account deficit -- the gap in the United States' trade in goods and services with the rest of the world -- has risen to about 5 percent of the total economy. That's as high as it's ever been. The chart of the current account gap as a percentage of GDP, incidentally, looks almost exactly like a chart of consumer credit as a percentage of income.
(http://money.cnn.com/2003/10/02/markets/consumerbubble/consbub3.gif)
So the world economy is leveraged to the U.S. consumer. And the U.S. consumer is leveraged to the hilt. There are now more registered cars on the road in the United States than there are licensed drivers. America's energy needs, per capita, are nearly twice that of Great Britain's. At some point the U.S. consumer's creditors -- which is to say the rest of the world -- may have second thoughts about how their money is being used. Kasriel compares it to a corporation that uses its stock and bond proceeds to throw big parties, rather than invest them in its future.
Clearly something has to give.
"Nobody can pinpoint when this process will come to an end," said Carlos Asilis, a portfolio manager with the hedge fund Vega Capital Management. "But it is very clear that it can't go on forever. Do you let this bubble grow, or do you do something about it?"
There are signs that U.S. policy-makers are at least partially trying to address the problem, pressing Japan, China and other Asian exporters to let their currencies strengthen against the dollar. This would, they believe, reduce consumer expenditures on imported goods and fuel export growth as well.
But it might not solve the problem of consumers who are continuing, in effect, to eat their seed corn. It would take a powerful disincentive, like a Fed rate hike, to get people to stop spending and start paying down debt and save more. But to do that would be to court the forces of recession.
"We have a Fed that wants a booming economy, but the only way the consumer can continue to fuel the economy is through continued debt accumulation," said Rosenberg. "I don't know if there's an easy way out."
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I'm not. I started pinching pennies in 1999 in anticipation of bad things.
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I recently mopped up and cleaned up my credit house...I had 2 old phone bills, an old pager bill and a Dr bill that somehow never made it to the insurance claims office. All clear now, car paid for and even a little bit in savings.
When I shared my story about cleaning up what I'd found in my report, my friends were telling me about their credit card debt....yeeks! $3000, one has almost $8k....good grief!
That's one thing I wish they taught in high school...managing money, credit and saving for he future. When those pre approved cards showed up, they were great for buying...but it took a long time to finally pay them off!
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Well, I guess if you mean me buying my new home I guess so Rip. But the way things are now I'll be paying less for for my new home then when I bough my first home when I was 23. But, since I had no real credit I'm paying a high rate. Now, since I've owned my home for 4 years. I can now get a much lower interest rate. So now I can get a larger home(2100 sqft), with a nice garage. For what I'm paying now for a 1000sqft home now.
But, since I bought my old home I've remodled it and will turn a 40K proffit on it. So I'll have a nice 6 month grace incase the watermelon hits the fan so to speak.
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nuch, I don't think houses are part of consumer debt. They'd be considered an investment since you rarely sell a house for less than what you paid.
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Doesn't it seem like these types of stories come out a couple of months before the big Christmas shopping sprees hit?
Only 72 days/2 credit card billing cycles to Christmas. :rolleyes:
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25 and no debt whatsoever here. But then everything I own is crap. Paid for crap, but still crap.
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no debt here, no credit either. 1 credit card (secured, so I can't go into debt on it but can use it when traveling).
I've always had this absurd notion that you should earn your money before you spend it.
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Originally posted by capt. apathy
I've always had this absurd notion that you should earn your money before you spend it.
Everyone please forward this to your local Democrat, its so simple even they may understand it. Maybe.
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Just wait until Bush signs the new bankruptcy law that the credit card companies wrote.
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Originally posted by Montezuma
Just wait until Bush signs the new bankruptcy law that the credit card companies wrote.
Oh, the one where you'd actually be RESPONSIBLE for your overspending actions? Yah, we'd hate to make people actually responsible for stupid decisions.
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It's supply and demand. Rates go down, people will borrow more. Rates go up, people will bust bellybutton to pay debt. If lots of people borrow more than they can pay, lenders will raise rates to cover increased risk, and the problem will solve itself.
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Originally posted by capt. apathy
I've always had this absurd notion that you should earn your money before you spend it.
How many times did you haul your laundry up to the laundromat before deciding "That's it. I'm buying my own washer and dryer!". ;)
You pay cash for your furniture, too?
Homeownership and buying big-ticket items on credit go hand in hand.
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Originally posted by ra
I'm not. I started pinching pennies in 1999 in anticipation of bad things.
I started borrowing in 1999 when I got LAID OFF due to a STOCK CRASH caused by CLINTON'S POLICIES. :D
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Everyone please forward this to your local Democrat, its so simple even they may understand it. Maybe.
you're kidding right? since we have had a republican ran gov't our deficit has been steadily growing.
this year we will spend $455 billion more than we take in.
From http://www.msnbc.com/news/940556.asp -------------
this years federal budget defficit is suposed to be the worst since 1992, when messured as a percentage of the nations gross domestic product. no improvement is expected until fiscal 2005, according to bush administration projections.
well he's got it back to where daddy left it. even there own projections say it won't get better until 2005 (I guess they are expecting us to vote him out in 2004 and get someone in there who can handle it)
and how did these tax cuts get us an extra 87 billion to spend in Iraq?
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Originally posted by DiabloTX
Everyone please forward this to your local Democrat, its so simple even they may understand it. Maybe.
You're right. The government should raise taxes so it won't have to borrow on credit.
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Originally posted by Ripsnort
Oh, the one where you'd actually be RESPONSIBLE for your overspending actions? Yah, we'd hate to make people actually responsible for stupid decisions.
If that's true, its gonna kill small business, agricultural economies, and new business start-ups.
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How many times did you haul your laundry up to the laundromat before deciding "That's it. I'm buying my own washer and dryer!".
You pay cash for your furniture, too?
many times.
and yes.
you just live with crappy furniture for a few years while you save.
my first living room set was 2 bean bag chairs. my kitchen table was a wire spool and 2 milk crates. it sucked but I made do for a couple months before I could buy a crappy table and chairs and a couch. I paid $50 for my first washer/dryer set. bought $20 in parts and they ran for 2 or 3 years while I saved money for the next set.
you make sacrifices, you don't always(or even often) get the new toys you want, but you get by and you don't build 20 or 30 k in card debt.
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Originally posted by capt. apathy
you're kidding right? since we have had a republican ran gov't our deficit has been steadily growing.
I stand corrected...:rolleyes:
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Originally posted by capt. apathy
many times.
and yes.
you just live with crappy furniture for a few years while you save. and I paid $50 for my first washer/dryer set. bought $20 in parts and they ran for 2 or 3 years while I saved money for the next set.
you make sacrifices, you don't always(or even often) get the new toys you want, but you get by and you don't build 20 or 30 k in card debt.
Must be nice to have the tools and talent to fix your own machines. Its not a skill everyone has.
Credit cards can get away with charging high interest because they're considered unsecured loans and bear a high risk to the lender. If the credit card risk was diminshed, would we start seeing lower APRs? If the APR went down, would we see more consumer spending? Or, if people couldn't get out of debt through bankruptcy, would consumer spending go down?
Having cash for a new bedroom set and living room set and dining room set is a luxury few have. I sure wouldn't want to be driving around town with $7,000 in cash in my car on my way to Rooms To Go.
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Must be nice to have the tools and talent to fix your own machines. Its not a skill everyone has.
tools yes, I had a decent set before I left home. I started giving my son tools instead of toys when he turned 11 or 12, so he can be more self suficient.
as far as tallent I had no idea how to fix the stuff. it's motivated learning. it's broke you can't afford to pay someone to fix it and you can't do with out it. if you can't figure it out go to the library and read, most repairs are very simple.
machanical parts - look for parts that are obviosly bent or broken, then replace them, if they bend or brake again look for the parts that could have done that too them and replace those.
electrical is even easier- look for melted parts or ones with smoke stains around them.
basicly if it's a choice of do it yourself or do without, and you have no money to spend going to the bar or doing anything entertaining, you spend your time trying to fix stuff. if you can't fix it you've lost nothing and usually learned something.
I never learned to work on cars until I married a woman who could break them faster than I could earn the money to pay someone else to fix it.
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You guys do realize that if you can borrow at a rate below the inflation rate, you are making money? The lender is paying you to borrow from them. It's foolish not to borrow in that situation, as long as you are confident you can repay.
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You guys do realize that if you can borrow at a rate below the inflation rate, you are making money? The lender is paying you to borrow from them. It's foolish not to borrow in that situation, as long as you are confident you can repay.
for every person with the self-control not to spend that money, there are 10 others who are bragging about a 10% return on the 10k they have invested while paying 18% interest on a 20k card debt.
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We live in an economy that has become deeply dependent on the American consumer for growth.
The guy is an idiot - like most keynesian economists. The "growth" usually means growth of production - which could only happen due to accumulation of the productive capital that allows to increase productivity per person and equip additional workers.
In order to accumulate the productive capital, the real resources must be saved and invested in profitable ventures rather than consumed.
If you spend 7 hours a day growing corn for consumption and 1 hour maintaining soil and tools, your economy does not grow. If you spend 6 hours a day growing corn and save one hour a day to improve the field/tools, in the beginning the consumption will drop by 1/7 but with years the productivity will increase and consumption will finally reach and exceed the starting one.
Alternatively one can stop waisting 1 hour a day on maintaining soil and tools and spend all 8 hours growing corn for consumption. The consumption would grow 1/7 immediately but then decline to nothing as soil gets exausted and tools wear off.
More contemporary example would be instead of buying a car and using it up you could buy the same car and invest it into a business, while driving an old one car for personal consumption. Actually you would just invest the car's worth of money into the company rather than delivering a car but it makes no difference resourcewise.
As a result a new business is working of which you are a part-owner, enjoying additional revenue stream, while the new company is cranking out the products, causing their prices to drop and our real wages (purchasing power) to raise.
Or at least we should invest into the business enough to replace the worn-out capital -cars, machinery, skills. One can achieve a great increase in consumption by not replacing the worn-out capital. That is called "capital decumulation". We can buy cars for personal use instead of for business, use lumber and metal for bigger houses instead of replacing machinery, train social-studies majors instead of engineers and workers. Then once the factory gets worn out and trained old workers retire, we end up with ... nothing. Textile industry... gone. Steel industry... almost gone. Consumer goods manufacturing... gone. We had great time living down the capital accumulated by our ancestors.
If the US economy is really growing - and that is a big "if", it may not have been for a while, whatever the government numbers say - it is certainly not because of consumption but because of savings (of real resources - so called "real funding", not paper money or computer account balances).
There are two kinds of savings that are currently fuelling the growth (or slow the decline) of the US economy - the savings of the foreigners subcidising us via negative trade balance and the "forced savings" that steal the value of people's savings in favor of the recepients of the newly-printed money and credit expansion.
Anyway, whatever real resources the foreigners invested into us in exchange for the dollars, IOUs and shares of capital, they will not be able to collect if we default - like we did to those suckers in 1971.
The elderly with depreciated savings and unfunded social security obligations can go play with themselves, since even voting 100% tax rates will not raise enough taxes to cover their living and medical expenses. And as they die out of hunger, their share of votes will drop rapidly and so their taxing power.
So for the rest of us the choice to make is based on what course the eventuall resolution will take.
If the Fed will have to inflate exlosively in a futile attempt to honor the nominal obligations (FDIC insured accounts - get your guaranteed $100,000 and buy a whole chicken, SSA payments, etc.) - it will pay off to be deeply in debt. You buy a house for a million and then pay off that million when you raise and sell ten chickens.
If the Fed freezes accounts, stops printing new money and changes currency so that 35 trillion outstanding dollars are invalidated, that will cause an explosive deflation, with prices/salaries dropping and that expensive house bought on credit being impossible to repay and having it reposessed.
One way to exploit either situation is getting a huge loan and investing it into something that cannot be reposessed - like having children or a few pounds of gold coins.
If inflation hits, you sell a kid or some of your hoard and repay easily. If deflation hits, you declare bancrupcy and live off your children/gold with just a bad credit rating.
For the older guys - do not spend money on medications/treatment that will prolong your life. Instead spend it on fun that would shorten it - alcohol, smoke, lose women, junk food, etc.
How is that for financial advice? ;)
miko
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Originally posted by capt. apathy
for every person with the self-control not to spend that money, there are 10 others who are bragging about a 10% return on the 10k they have invested while paying 18% interest on a 20k card debt.
LOL....so true.
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Originally posted by capt. apathy
for every person with the self-control not to spend that money, there are 10 others who are bragging about a 10% return on the 10k they have invested while paying 18% interest on a 20k card debt.
LOL so true.
Whenever somebody asks me what investments I have, I tell them about my student loan. :)
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Originally posted by miko2d
In order to accumulate the productive capital, the real resources must be saved and invested in profitable ventures rather than consumed.
If you're investing in a venture, isn't that consuming the resource? ;)
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Originally posted by FUNKED1
You guys do realize that if you can borrow at a rate below the inflation rate, you are making money? The lender is paying you to borrow from them. It's foolish not to borrow in that situation, as long as you are confident you can repay.
I was once talking with an old family friend who had made his fortune providing the cameras at horse tracks - not just for photofinishes but the tv sets inside, too. He told me an interesting story about how he got involved in the business.
His dad had told him, shortly after my friend had gotten out of the Navy, that he should go down to the bank and borrow money. My friend had asked "Why? I've got money. I don't need to borrow anything." His dad had told him that he should borrow the money, hold it for six months, then pay it back in full because it would build a credit history for him so that he could get a bigger loan to launch his business. It would cost him interest payments, but at that time the inflation rate was just about to exceed the interest rate on the loan. While it wouldn't amount to any real money, it did save him a few bucks when it came to pay it back, so I guess you could say he "earned" the delta between the interest and the inflation.
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It's Bush's fault
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gofaster: If you're investing in a venture, isn't that consuming the resource? ;)
Actually it does. But if the venture is profitable, the consumption of the resource will cause creation of a resource of greater value.
that he should go down to the bank and borrow money
With current low interest rates the after-tax inflation-adjusted real mortagage rate is actually negative.
miko
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Cool post, I know what you mean. I've unfortunetly been a addict of the "Live the Moment" generation. Hence just spent 5k on a motorbike and sidecar that I can't even ride on the road. :D
...-Gixer
~Hells Angels~
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My parents had credit problems, so when I was growing up, they told me to stay away from all things credit and never told me how it worked.
End result of this, I entered the world convinced that credit cards were evil and didn't have a shred of credit until I was 20, when I realized that you MUST have credit in todays society. You need it for cell phones, to buy cars, houses, everything. So I began trying to create credit, but since my parents didn't teach me anything about it, I made some mistakes and had some blemishes on my record before I figured out how it all works.
I now have good credit and everything except my house is paid off, but I will not make the same mistakes my parents did. By ending any conversation about credit before it started with an admonishment of 'Credit is evil", my parents did me a disservice. There are positive and negative aspects to it, and I hope I will be able to do a better job preparing my kids for the realities of finance. Saying 'credit is bad' is just bad advice.
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Oh, and in regards to making your money dance, when I say that I own a house, I should clarify: I own a four unit apartment building. The rents almost pay the whole mortgage (they would for sure if we didn't live in one of the four) and the building has gone from 389K to 674K value since I bought it.
Yay for me! Real estate is a cool business. Real estate that actively pays for its monthly expenses is even cooler.
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I always kept my credit house in order and had several credit cards "just in case". Then I learned my lesson after my ex-wife maxxed out 3 cards in 2 months just before our divorce. Guess who got stuck with the bill. Now I have 2 cards with a $1000 limit on both. My house, vehicles and land are all paid for and my total debt is about $300. Credit cards with high limits are for suckers.
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Sidecar?
How are you going to freaking lean into the curves hauling around a sidecar?
Hooligan
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Economists with keyboards and free time are dangerous.
There will always be those who over-extend - consumers and companies. Reasonable debt is not bad.
U.S. consumer spending does provide fuel for a significant amount of the global economic engine. Reducing consumer spending (be it via credit or not) will create larger problems.
All mature manufacturing industries move production down the pecking order to lesser developed countries. Economic theories remain static for the convenience of those stuck in the world of academia, not for those in the real world. Analyzing current debt ratios through century old glasses and filtering is fanciful only for those who enjoy stale debate.
The U.S. consumer and government debt ratio is neither unsustainable, nor out of line. Unless you are an economics professor or a gold seller.
Even consumer debt creates jobs and circulates currency.
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Originally posted by Chairboy
Oh, and in regards to making your money dance, when I say that I own a house, I should clarify: I own a four unit apartment building. The rents almost pay the whole mortgage (they would for sure if we didn't live in one of the four) and the building has gone from 389K to 674K value since I bought it.
Yay for me! Real estate is a cool business. Real estate that actively pays for its monthly expenses is even cooler.
Not one thing in life beats dirt as an investment:)
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Originally posted by miko2d
For the older guys - do not spend money on medications/treatment that will prolong your life. Instead spend it on fun that would shorten it - alcohol, smoke, lose women, junk food, etc.
How is that for financial advice? ;)
miko
Substitute good food for "junk food" and throw in a life ins policy for the kids.
I say buy all our raw material from everyone else while we can. When the earth starts running dry, we will be the only ones left with any resources.;)
BTW, anyone got a few bucks I can borrow?
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fullback: U.S. consumer spending does provide fuel for a significant amount of the global economic engine. Reducing consumer spending (be it via credit or not) will create larger problems.
You got it totally confused but at least you are in a good company. Consumer spending on consumption goods diverts resources from consumer spending on investment into productive capital - physical and intellectual.
Everything produeced is consumed and capital goods are just stages in producing consumer goods, so 100% of economy will always be consumer spending.
Reducing consumer spending (be it via credit or not) will create larger problems.
Yes, really big problems - like wifes staying at home and rising more children that are better cared for, shorter work hours to enjoy leisure time and most importantly high growth rates bringing even more wealth with less effort... Scary.
Economic theories remain static for the convenience of those stuck in the world of academia, not for those in the real world. Analyzing current debt ratios through century old glasses and filtering is fanciful only for those who enjoy stale debate.
Nexh thing you will say that mathematics that was applicable 100 years ago is now obsolete bacause 2x2 is not always 4. You cannot spend more physical resources that you produce, no matter how many coloured pieces of paper you print. You cannot invest into improved production what you consume. It was true in ancient Greece, it was true for Robinson Crusoe and it will be true forever while resource and time are scarce.
The U.S. consumer and government debt ratio is neither unsustainable, nor out of line.
What do you mean "sustainable"? If you mean that we can keep defaulting on it like we did in 1930s and 1970s, maybe it is - if there are suckers that would keep lending us the real goods. Check with me in 20014 when SSA runs dry and see if the debt is sustainable.
Even consumer debt creates jobs and circulates currency.
How does circulating currency benefits anyone? shuffle money bamong your pockets and see if your welfare increases. And why are jobs producing consumer goods any better than jobs producing capital goods and increasing future production?
miko
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"Reducing consumer spending (be it via credit or not) will create larger problems.
Yes, really big problems - like wifes staying at home and rising more children that are better cared for, shorter work hours to enjoy leisure time and most importantly high growth rates bringing even more wealth with less effort... Scary. "
How can they save any money if they don't have a job , because their company went out of business because no one spent any money. If you want to save money, you need to earn it first. If there is no consumer spending, houses will not be built, washing machines, dryers, refrigerators etc., will not be bought. To say that consumer spending has nothing to do with a healthy economy is way off.
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miko2d:
I made a mistake. I should not have posted to this thread in the first place. It is not a venue with participants schooled in, or functioning daily in, the world of macro-economics.
I mean no disrespect, but I will not respond to your parsing because we are at such completely different levels of understanding.
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It's a side car for dirt ovals, speedway. My mate does the leaning I just drive it.
...-Gixer
Originally posted by Hooligan
Sidecar?
How are you going to freaking lean into the curves hauling around a sidecar?
Hooligan
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after a couple of divorces you get used to being in debt... Hving expensive hobbies and not caring about the future helps too.
Told my son that when I die he should strip the body while it's still warm and empty out the house and garage and then when the creditors sell the property take wahtever is left if anything. He thinks that is a very cool idea. He would rather see me have fun with my money.
lazs
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I think its amusing that we're having a discusion about the evils of credit card debt when every single one of us used a credit card to register for this sim.
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Originally posted by lazs2
Told my son that when I die he should strip the body while it's still warm and empty out the house and garage and then when the creditors sell the property take wahtever is left if anything.
And then you'll wake up from your blood-sugar black-out, cold and naked on the floor of your garage, wondering "WTF happened to my El Camino and gun collection?" :p
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Sixpence: How can they save any money if they don't have a job, because their company went out of business...
People always have a job - even a lone person on an uninhabitad island can work to provide for himself without money, businesses, etc. In the modern economy people just use division of labor to increase mutual productivity rather than live in autarchy.
A person who has all he needs stops working, thus releasing his workplace. A person who has unsatisfied needs can always work to satisfy needs of others in exchange for their goods/services. The reason people lose work is not because there can ever be supply exceeding demand but that misallocation of capital resources occured that caused oversupply in some areas and shortage in others.
The most common factor causing misallocation of capital towards projects that will fail is artificial lowering of the interest rates below the free-market rate. That screws up the temporal structure of the capital big way, since long-term projects ate much more sensitive to the interest rates.
To say that consumer spending has nothing to do with a healthy economy is way off.
In fact I said the opposite - consumer spending is always 100% of the economy. What consumers should be - and would be - buying and what workers would be producing without the state intervention is capital goods instead of consumer goods.
That's it. Why the heck are you so fixated on the damn dryers refrigerators? What's wrong with buying/producing machinery, infrastructure and education?
fullback: I mean no disrespect, but I will not respond to your parsing because we are at such completely different levels of understanding.
No problem. You do not have to make a convincing case for your prefered theory, just give people a chance to get interested in it, in case they want to study it in detail. I wish you mentioned which school of macroeconimics you relied on.
As I've mentioned, the Austrian school does not recognise macroeconomic aggregates except in historical studies.
gofaster: I think its amusing that we're having a discusion about the evils of credit card debt when every single one of us used a credit card to register for this sim.
It's not about what form of money one uses but about incurring debt. In my 14 years in US I have never ever had to pay credit card interest.
Debt is good when is an investment in productivity increase - education, transportation, even house if it helps one work more efficiently. Debt for consumption is a different matter.
miko
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go faster... in my family... if you even develop a limp you cause people to salivate. Low blood sugar would be a death sentence.
lazs
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Originally posted by gofaster
You pay cash for your furniture, too?
Homeownership and buying big-ticket items on credit go hand in hand.
Absolutely do I pay cash for big ticket household items. Rip the band-aid off quickly and get it done. Maybe a 90 days same as cash but that’s it. I learned my lesson quickly.
No unsecured debt and the car/boat will get paid off the beginning of the year.
Yes, everyone leverage as much as possible… I’ll be looking for another rental property in about a year or so. I’m closing another at the moment. Why? Because he has too much in unsecured debt and is looking to get a quick dollar off his house and does NOT want to file bankruptcy.
Put the card down man, put it down. Look at the balance and then walk around the house to see what you got for that money. Um, nada.
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Originally posted by Zippatuh
Put the card down man, put it down. Look at the balance and then walk around the house to see what you got for that money. Um, nada.
I rarely have cash. My wallet is full of credit cards, one for gas, one for the grocery store, one for getting cash out of the bank, etc. etc.
The key is...the balances are paid for at the end of each month, prior to the billing cycle (and in some cases, the interest cycle)
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Originally posted by Ripsnort
I rarely have cash. My wallet is full of credit cards, one for gas, one for the grocery store, one for getting cash out of the bank, etc. etc.
The key is...the balances are paid for at the end of each month, prior to the billing cycle (and in some cases, the interest cycle)
Same here. I don't like to carry around a lot of cash, mostly out of concerns for security. If my wallet is ever lost or stolen (which has happened before) I can cancel my cards and simply be out around $40 in cash. I pay my cards off (via online so as to avoid the 'lost in the mail' excuse rom the CC companies) each month. I use the "same as cash" credit offers to buy big-ticket stuff like furniture and appliances so that I can build up the cash amounts in my bank account and get the interest from the money while paying zero interest on the loan. I have three credit cards - Visa, Discover, Mastercard - but only use Discover so I can track the CC bill easier (the others are there in case the vendor doesn't take Discover). For gas I use the little key fob "SpeedPass" thingy from Chevron so that I don't have to expose my wallet at the gas pumps at night.
Paying cash for big-ticket stuff is simply missing the opportunity to generate interest on money you already have. If I can get 0% interest for 12 months on financing, I take it and make sure its paid off by the 10th month.
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Thumbs up Gofaster. Credit card perks are certainly nice, aren't they? We do online banking too.
Make sure you never carry your SS number around in your wallet however. Identify theft is a really bad thing for your credit.
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You guys are so smart, thanks for the tips!
Now how do I keep my garage floor warm in the winter?
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Originally posted by FUNKED1
You guys are so smart, thanks for the tips!
Now how do I keep my garage floor warm in the winter?
No problem. I'm islamic.
You need to put in pipes prior to pouring concrete. Incidently, these are popular in scandinavian countries.
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LMAO THAT WAS FRIKKIN FAST!!!
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Originally posted by FUNKED1
LMAO THAT WAS FRIKKIN FAST!!!
I'm a reply script for Ripsnort while he's working on another workstation. He's told you he's good at writing macro scripts...idjit.
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Don't forget to hook a source of warm to hot water to the pipes or they won't work.
I had to throw that in, used to write manuals for the government. :D
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Originally posted by miko2d
Sixpence: How can they save any money if they don't have a job, because their company went out of business...
1.) People always have a job - even a lone person on an uninhabitad island can work to provide for himself without money, businesses, etc. In the modern economy people just use division of labor to increase mutual productivity rather than live in autarchy.
A person who has all he needs stops working, thus releasing his workplace. A person who has unsatisfied needs can always work to satisfy needs of others in exchange for their goods/services. The reason people lose work is not because there can ever be supply exceeding demand but that misallocation of capital resources occured that caused oversupply in some areas and shortage in others.
The most common factor causing misallocation of capital towards projects that will fail is artificial lowering of the interest rates below the free-market rate. That screws up the temporal structure of the capital big way, since long-term projects ate much more sensitive to the interest rates.
To say that consumer spending has nothing to do with a healthy economy is way off.
2.)In fact I said the opposite - consumer spending is always 100% of the economy. What consumers should be - and would be - buying and what workers would be producing without the state intervention is capital goods instead of consumer goods.
That's it. Why the heck are you so fixated on the damn dryers refrigerators? What's wrong with buying/producing machinery, infrastructure and education?
miko
1.) This is the 21st century Miko. You live in the city, do you have land to grow your own food? Years ago people had land to farm, build, mill, etc. You are thinking that the barter system from centuries ago will work today. It won't. Good luck to you finding a back yard in manhattan. You seem to lean alot toward socialism, and while socialism is a good idea in concept, it has it's drawbacks. Somewhere in between socialism and capitalism is a good system.
2.) Anything bought by consumers would be consumer goods. What the state has to do with that, I have no idea. Infrastructure and education is purchased by consumers in a way- our taxes. So we do buy our infrastructure. But where the state(the people we elect) oversee the projects, you call it "state intervention".
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Sixpence: 1.) This is the 21st century Miko. You live in the city, do you have land to grow your own food? Years ago people had land to farm, build, mill, etc. You are thinking that the barter system from centuries ago will work today.
I said nothing of that kind. Where do you get all that nuisance? I tried to give you a chewed down version of Say's Law but it probably went over your head.
The demand and supply are always the same. People join workforce (by providing supply) because they have unsatisfied needs (which lead to demand). They supply economic goods and in the modern system of the division of labor they exchange them - in barter, via money, etc. It's goods for goods and money is just a medium of exchange which is not being consumed or used up. This is a basic principle and 21 century does not have anything to do with it.
If peopel who need to consume and are willing to produce are prevented from working, it's due to state intervention into the economy. Neither unemployment not business cycles are natural to the free market capitalist economy - they are results of government intervention and/or lack of capitalism.
It won't. Good luck to you finding a back yard in manhattan. You seem to lean alot toward socialism,
You are joking, right?
Somewhere in between socialism and capitalism is a good system.
There is no "in betwen". There is free market capitalism and there is socialist breakdown of the division of labor and destruction of civilisation. There is no static state - a society either progresses towards free market or deteriorates towards socialism. Socialist economy is not a "bad system". It is a logical impossibility. Without private property and market-generated prices there is no basis for economic calculation. Now possible way to plan anything, to decide where to direct resources, etc.
What the state has to do with that, I have no idea.
No surprise.
But where the state(the people we elect) oversee the projects, you call it "state intervention".
The state diverts resources into projects that would not be undertaken under free market. The state restricts individual's participation in the ecomony causing unemployment. The state causes massive misallocation of capital by distortimg the signals generated by the price system. The misallocated resources are wasted when projects inevitably fall, causing more unemployment and disruption.
Would you care to tell us in which way does the temporal capital structure affected when the interest rates are artificially lowered?
miko
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P.S. It's curious how ignorant people call themsleves "progressives" and others "conservatives" and being obsolete for adhering to the 19th century free-market economic doctrines (elaborated and developed in 20th century) while they are nothing but proponents of the 16th century mercantilist policies. All that while throwing "21st century" around. Some progressives...
Truly, ignorance is a bliss.
miko
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Someday, not sure when, I'll really do more than skim one of Miko's wordy replies. Its my new years resolution :p
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lol, if he had it his way, there would be no laws, a dictator, and total anarchy.
" People always have a job - even a lone person on an uninhabitad island can work to provide for himself without money, businesses, etc"
Not on manhattan island
"It won't. Good luck to you finding a back yard in manhattan. You seem to lean alot toward socialism,
You are joking, right? "
You stated on an earlier post that the state should provide assistance to families. On one hand you are for state intervention, on the other you are not.
Who pays for the infrastructure?
BTW, pardon my ingnorance, but you explain things in difficult to understand terms, so the only way to get you to say it in laymen's terms is to argue the point.
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Originally posted by miko2d
P.S. It's curious how ignorant people call themsleves "progressives" and others "conservatives" and being obsolete for adhering to the 19th century free-market economic doctrines (elaborated and developed in 20th century) while they are nothing but proponents of the 16th century mercantilist policies. All that while throwing "21st century" around. Some progressives...
Truly, ignorance is a bliss.
miko
Common sense prevails in the marketplace Miko....this economic bubble gum you chew in public, has little or no relevance to making a buck.
It's investments, followed by production ending with consumption which drives the economy....the love affair you seem to have with the economic vernacular might serve you well, however, I along with most everyone else I know is too busy making the money while you seem satisfied talking about it.
I'll guess you're age at around 28 and still in school?
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Originally posted by LePaul
Someday, not sure when, I'll really do more than skim one of Miko's wordy replies. Its my new years resolution :p
Same! LOL! What does he think we are, Rowgue Scholars? :p Ever heard of the saying "too smart for your own good" Miko? :eek: You have nothing intellectually to prove to anyone but yourself how damn intelligent you are...the rest of us just want short, sharp answers. :p
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Originally posted by Ripsnort
....What does he think we are, Rowgue Scholars? ....
Somehow I doubt Miko will ever confuse us with Roads Scholars.... ;)
We're still struggling through stage of learning how to use scissors for cut-n-paste.... :D
I think there's a requirement for original thinking to qualify for the former.......
Regards,
Badger
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Sixpence: lol, if he had it his way, there would be no laws, a dictator, and total anarchy.
You are totally inventing ridiculous meaning and attributing it to my posts. You cannot understand what I am talkng about and you start piling all kinds of wild accuations which not only have no relation to what I said, but actually contradict to each other.
How can there be a dictator and no laws and total anarchy? How could I be for anarchy and socialism and dictator and a proponent of 19 century free-markets at the same time?
Not on manhattan island
Oh, yea? Next thing you will climb on top of a mount Everest and complain that you cannot find work there at the salary you deem acceptable.
You stated on an earlier post that the state should provide assistance to families. On one hand you are for state intervention, on the other you are not.
Nops. Unless you dug up my post from (quite) a few years back, you must be confusing me with someone.
I recently said that if the state mandates the families to support the children (of which I do not approve), then it must pick up the tab for the support. Is it the one you are referring to?
I guess if I said that it was evil of the nazis to shoot jews in gettoes and then charge the cost of bullets to their families, you would present it as I said it was OK for nazis to shoot jews?
Rude: It's investments, followed by production ending with consumption which drives the economy.
Wrong. It's investments properly directed in viable ventures followed by production ending with consumption which drives the economy. And the error that the Austrian school of economics avoid that every other one makes is treating the economy as some kind of homogenous aggregate. This obviously leads to a fallacy that any investment leads to growth of production and it is necessarily goods.
Austrian economists starting with Bohm-Bawerk recognised the complex physical and temporal structure of capital and the disruptive effects that manipulated interest rates cause. When the resources are misallocated, the jobs are created temporatily and production seems to increase, but the projects will not be able to complete or will not be profitable and will fold, with unemployment rising again and resources wasted.
Rude: Common sense prevails in the marketplace Miko....this economic bubble gum you chew in public, has little or no relevance to making a buck
Statement as empty of content as the best of Matrtlet's posts. Do you share Keinsian common sense that hiring people to dig up holes and fil them back in makes all of us prosper? Or that printing more paper money will magically increase the supply of investable resources? Or that preventing pople from accepting a job below certain limit would make them rich?
I'll guess you're age at around 28 and still in school?
I am close to 40, have been working for 13 years in financial industry in NYC - equities treding, quantitative analysis, etc., M.S. in Electical engneering and M.S. in Computer Science. Top 1% on income, expecting a second child.
Don't laught on what you do not uinderstand - it only shows you own immaturity.
Would you care to explain with your "common sense" how lower interest rates affect the flow of investments into capital, specifically the temporal re-allocation?
How come all the american firms that were working and employing lost of people on top of the last boom suddenly went out of business and laid people off while the consumers are still buying a lot of products from abroad? How come all those people and resources were misdirected from producing goods that people would actually buy into stuff that is now lays unused as dead weight? What made all the entrepreneurs to misdirect money into the wrong investments instead of production with guaranteed market? I have an explanation for that. Do you?
Ripsnort: ...how damn intelligent you are...the rest of us just want short, sharp answers.
:) There is a very short answer. Any government intervention in free-market economy is bad and would necessarily lead to the results less desirable than the original state of affairs even from the vantage of the proponents of the intervention.
If you take my word for it, you do not need to read anything else.
When it comes to proofs, that's another matter entirely - about 3 thousand pages of selected reading would probably cover it.
BTW. There is a practical reason for my posting this stuff here - besides getting a few people interested enough to undertake serious studies. I could obviously find agreable audience on libertarian/free-market forums but I would rather try my skills on regular people to work out a presentable version of those views.
My children will soon grow enough to be exposed to the views of such "common sense" ignorant socialists. I am preparing my defences.
miko
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"Not on manhattan island
Oh, yea? Next thing you will climb on top of a mount Everest and complain that you cannot find work there at the salary you deem acceptable. "
Nice dodge
"Here is an apt analogy. You are not free if you wear a long leash that is not pulled tight at the moment. You are not free if you willingly go on the slack leash where the master would want you to go. You are not free if you approve of the leash. You are not free if you learned the limits of your leash. You are only free if you wear no leash. " - Miko
no laws- no leash, right? welcome to anarchy
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Sixpence: no laws- no leash, right? welcome to anarchy
Wrong!
There is diference betwen the government of Law and the government of people. Why don't you read the Founding Fathers on that subject.
If you call the state of people being secure in their person and property, protected by government from invasion, violence and fraud and not subject to the whims of "majority" in matters that do not concern violation of other people's persons and property as "anarchy", that it may well be anarchy. But it would be the strangest definition of anarchy I ever heard.
miko
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Originally posted by Sixpence
"Here is an apt analogy. You are not free if you wear a long leash that is not pulled tight at the moment. You are not free if you willingly go on the slack leash where the master would want you to go. You are not free if you approve of the leash. You are not free if you learned the limits of your leash. You are only free if you wear no leash. " - Miko
no laws- no leash, right? welcome to anarchy
I agree. Laws = leashes. No laws = no leashes = anarchy.
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You guys need to relax a little..
lazs
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Originally posted by miko2d
Sixpence: no laws- no leash, right? welcome to anarchy
Wrong!
There is diference betwen the government of Law and the government of people. Why don't you read the Founding Fathers on that subject.
If you call the state of people being secure in their person and property, protected by government from invasion, violence and fraud and not subject to the whims of "majority" in matters that do not concern violation of other people's persons and property as "anarchy", that it may well be anarchy. But it would be the strangest definition of anarchy I ever heard.
miko
If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me.
I always thought the government of the people was the basis for the government of the law. After all, its the people that elect the government officials that pass the laws. If you don't like the law, you can file a claim in court and have equal representation to demonstrate how you are aggrieved by it.
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"If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me."
According to Miko, the American democracy is a bunch of thugs forcing their will upon us.
The country being run by the few....dictator?
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gofaster: I agree. Laws = leashes. No laws = no leashes = anarchy.
Then you are dumb too. How about this.
Laws = fences. Fences are usually stationary, fixed objects. They are intended to prevent you from violating somebody else's domain and to prevent them from violating yours. You know where they are. You know what to expect. You know which domain is yours and you know where you cannot cross, except maybe by invitation from the other side. There are no surprises and you can plan your life, not being subject to arbitrary decisions of others. Whatever is in your domain - obtained by laboor or exchange - is secure. You are not forced to run into fences.
Leash is a tether that attaches you to a master that moves around at will and controls you totally. Leash is a movable object, intended to direct you all the time and induce you to go wherever the master goes, jerk you away from things that interest you even if you are withing the usually accepted range. Master of course is not restrained by any means and can act arbitrarily. Leash could be used to keep you close while you are being whipped or to hang you. Leash is oppression.
miko
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Originally posted by miko2d
gofaster: I agree. Laws = leashes. No laws = no leashes = anarchy. Leash is a tether that attaches you to a master that moves around at will and controls you totally. Leash is a movable object, intended to direct you all the time and induce you to go wherever the master goes, jerk you away from things that interest you even if you are withing the usually accepted range. Master of course is not restrained by any means and can act arbitrarily. Leash could be used to keep you close while you are being whipped or to hang you. Leash is oppression.
miko
So laws equal oppression. So anarchy it is.
Anarchy: 1 a : absence of government b : a state of lawlessness or political disorder due to the absence of governmental authority c : a utopian society of individuals who enjoy complete freedom without government
utopian:1 : of, relating to, or having the characteristics of a utopia; especially : having impossibly ideal conditions especially of social organization
2 : proposing or advocating impractically ideal social and political schemes
3 : impossibly ideal : VISIONARY
4 : believing in, advocating, or having the characteristics of utopian socialism
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Sixpence: "If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me."
Oh, I am not arguing that our governmenmt is not democratic. Sure it is. I am saying that it is oppressive. What does democracy and freedom from oppression have to do with each other?
According to Miko, the American democracy is a bunch of thugs forcing their will upon us.
Upon each other.
If someone gets enough of like-minded people together, theyc an vote on what you can wear, eat or drink, what kinds of sex youc an have and with whom, what you can say and what you can read. How many children you can have and how you shoudl raise them. Who you can trade with. Basically, anything they want to vote on.
They can certainly decide how much property you should own and how much income you should keep and penalise you for certain lifestyle choices by confiscaing more or less of it.
They can change rules every day.
You can register you futile protest or you can join in voting on what you neighbours should be forced to do.
Quite opposite to what the Founding Fathers intended.
miko
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Originally posted by miko2d
gofaster: I agree. Laws = leashes. No laws = no leashes = anarchy.
... How about this.
Laws = fences. Fences are usually stationary, fixed objects. They are intended to prevent you from violating somebody else's domain and to prevent them from violating yours. You know where they are. You know what to expect. You know which domain is yours and you know where you cannot cross, except maybe by invitation from the other side. There are no surprises and you can plan your life, not being subject to arbitrary decisions of others. Whatever is in your domain - obtained by laboor or exchange - is secure. You are not forced to run into fences.
Leash is a tether that attaches you to a master that moves around at will and controls you totally. Leash is a movable object, intended to direct you all the time and induce you to go wherever the master goes, jerk you away from things that interest you even if you are withing the usually accepted range. Master of course is not restrained by any means and can act arbitrarily. Leash could be used to keep you close while you are being whipped or to hang you. Leash is oppression.
miko
Actually, you are restricted by fences just as much as you are restricted by leashes. The difference is that the leash, as you interpret it, is more fluid. And so are the laws. To be more accurate, Federal laws are fences, local laws are leashes. And they all restrict your freedom.
The only true freedom would be anarchy - freedom from responsibility, freedom from consequences, freedom from direction.
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Originally posted by miko2d
Sixpence: "If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me."
Oh, I am not arguing that our governmenmt is not democratic. Sure it is. I am saying that it is oppressive. What does democracy and freedom from oppression have to do with each other?
According to Miko, the American democracy is a bunch of thugs forcing their will upon us.
Upon each other.
If someone gets enough of like-minded people together, theyc an vote on what you can wear, eat or drink, what kinds of sex youc an have and with whom, what you can say and what you can read. How many children you can have and how you shoudl raise them. Who you can trade with. Basically, anything they want to vote on.
They can certainly decide how much property you should own and how much income you should keep and penalise you for certain lifestyle choices by confiscaing more or less of it.
They can change rules every day.
You can register you futile protest or you can join in voting on what you neighbours should be forced to do.
Quite opposite to what teh Founding Fathers intended.
miko
So the majority deciding what we should do is not what what our Founding Fathers intended? I disagree. I think that was their exact intention. Being told what to do by the chosen few( kings and dictators) was oppressive. If we are going to be told what to do, it should be decided by the majority.
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gofaster: To be more accurate, Federal laws are fences, local laws are leashes. And they all restrict your freedom.
Oh, my... You take an analogy all the way to absurd. Iyt's an analoge, for chist's sake, not an exact formula.
The only true freedom would be anarchy - freedom from responsibility, freedom from consequences,..
BS. If the strong state had only laws protecting people's person and property from assault and fraud, how would that be anarchy? Each person would be completely responcible for the consequences of his/her own actions, not being able to saddle others with responcibilities against their will.
...freedom from direction.
I see. You need direction? So you are slave by nature. Fine. I respect that choice of yours. I have other values.
miko
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Originally posted by Sixpence
So laws equal oppression. So anarchy it is.
Anarchy: 1 a : absence of government b : a state of lawlessness or political disorder due to the absence of governmental authority c : a utopian society of individuals who enjoy complete freedom without government
utopian:1 : of, relating to, or having the characteristics of a utopia; especially : having impossibly ideal conditions especially of social organization
2 : proposing or advocating impractically ideal social and political schemes
3 : impossibly ideal : VISIONARY
4 : believing in, advocating, or having the characteristics of utopian socialism
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Sixpence: So the majority deciding what we should do is not what what our Founding Fathers intended?
Of course not. They strictly limited the issues on which the majority could vote - at least on federal level.
A majority was not allowed to vote on which religion to establish, what is permissible to say or print, what kind of money to use instead of gold or silver coin - only on few specific issues.
Everything else they believed to be a private business or the state/municipality business.
I can form a cooperative with you, buy a property in common - say a farm or a business company. In this way democratic voting (according to persons or according to shares owned) would be the most fair way to manage our shared property. We could elect directors, decide how to direct resources, etc.
But it would not entitle you to vote what I can smoke, eat and drink, whom I should marry and how I shoudl raise my children.
miko
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Originally posted by miko2d
If someone gets enough of like-minded people together, theyc an vote on what you can wear, eat or drink, what kinds of sex youc an have and with whom, what you can say and what you can read. How many children you can have and how you shoudl raise them. Who you can trade with. Basically, anything they want to vote on.
They can certainly decide how much property you should own and how much income you should keep and penalise you for certain lifestyle choices by confiscaing more or less of it.
They can change rules every day.
You can register you futile protest or you can join in voting on what you neighbours should be forced to do.
Quite opposite to what the Founding Fathers intended.
miko
Not really. You may want to re-read The Federalist papers at Yale Law School's website http://www.yale.edu/lawweb/avalon/federal/fed.htm
No. 2 states "Nothing is more certain than the indispensable necessity of government, and it is equally undeniable, that whenever and however it is instituted, the people must cede to it some of their natural rights in order to vest it with requisite powers."
The specifics are contained in the US Constitution as far was what powers the federal government shall have, including issues of taxation and property.
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gofaster: Not really. You may want to re-read The Federalist papers at Yale Law School's website
I have a copy. I believe it agrees with what I said. What particular statement do you have in mind?
miko
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Originally posted by Badger
Somehow I doubt Miko will ever confuse us with Roads Scholars.... ;)
No no, I had it right...."Rowgue" scholars. ;) ;)
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Originally posted by miko2d
I can form a cooperative with you, buy a property in common - say a farm or a business company. In this way democratic voting (according to persons or according to shares owned) would be the most fair way to manage our shared property. We could elect directors, decide how to direct resources, etc.
But it would not entitle you to vote what I can smoke, eat and drink, whom I should marry and how I shoudl raise my children.
miko
I agree, to a point. But at some point there needs to be laws that regulate us. It might be in the best interest of the majority to tell you where you can smoke. If the majority of us do not want smoke where we dine in public, this is not telling you that you can't smoke. So in that case you are reaching to say it is oppressive.
On a larger scale, we vote on how to pay for those who have health problems from smoking all their life and cannot afford to pay for those health expenses. The majority will decide, and to some it will be oppressive, to others it will be the democratic thing to do.
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Originally posted by Sixpence
"If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me."
According to Miko, the American democracy is a bunch of thugs forcing their will upon us.
The country being run by the few....dictator?
You make a quite an effort to not understand what is said here.
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Originally posted by mietla
You make a quite an effort to not understand what is said here.
Half of that quote is not mine
"If I understand that right, what you would propose would be a government run by the few, writing laws for the many, but the many not having any say in the laws? That doesn't sound very democratic to me."
The last half is, and it was taken from something he said in another post.
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Originally posted by miko2d
gofaster: Not really. You may want to re-read The Federalist papers at Yale Law School's website
I have a copy. I believe it agrees with what I said. What particular statement do you have in mind?
miko
Miko2d: If someone gets enough of like-minded people together, they can vote on what you can wear, eat or drink, what kinds of sex you can have and with whom, what you can say and what you can read. How many children you can have and how you shoudl raise them. Who you can trade with. Basically, anything they want to vote on."
This is not entirely correct. The U.S. Constitution reserves specific powers to the federal government, including trade between states and foreign nations. Section 8, Clause 3.
"Clause 3: To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"
What you can say and what you can worship is contained in the First Amendment.
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances."
If someone is walking around telling you how many children you can have, he's probably a priest, and those aren't elected officials under the US Constitution. :p
Miko2D: "They can certainly decide how much property you should own and how much income you should keep and penalise you for certain lifestyle choices by confiscaing more or less of it."
This is correct. Its contained in Section 7, Clause 1:
"Clause 1: All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."
and Section 8, Clause 1:
"Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; "
Incidentally, it was affirmed (in 1913) in Amendment XVI regarding income taxes:
"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."
After all, somebody has to pay the bills to keep and maintain a military and the government. It might as well be the people benefitting from the government's provisions.
Miko2d: "They can change rules every day."
Of course they can. That's why we elected them to run things.
miko2D: "You can register you futile protest or you can join in voting on what you neighbours should be forced to do.
Exactly. Protests are protected under the US Constitution. Whether or not they're futile depends on the merit of the issue.
So how is this opposite from what the Founding Fathers intended?
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I understand alot of what he says. There are some laws that I do see as oppressive. There are some parts of the patriot act I do not agree with. I believe a man's home should not be violated as some laws allow. He makes a good point on some issues, on some I disagree. I disagree on his assessment of the American democracy.
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Originally posted by gofaster
After all, somebody has to pay the bills to keep and maintain a military and the government.
Yes, but if the government paid only legitimate bills like defense (including control of immigration), our taxes would be 15% of what they are now.
85% of what they collect now is used to redistribute the wealth and social engineer.
It might as well be the people benefitting from the government's provisions.
Would be nice, but as it is now, some people pay taxes, and others (who do not pay) benefit.
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Originally posted by mietla
Would be nice, but as it is now, some people pay taxes, and others (who do not pay) benefit.
Maybe we should start taxing the churches, the poor, and the downtrodden. Those Catholics, Jesuits, and Baptists have had it good for too long! :p
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You find it funny?
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Originally posted by mietla
Yes, but if the government paid only legitimate bills like defense (including control of immigration), our taxes would be 15% of what they are now.
85% of what they collect now is used to redistribute the wealth and social engineer.
It would be alot easier to understand if you stated exactly where that 85% is spent, who reaped the benefits, etc.
Isn't it funny how a company keeps tab on what is spent, but we don't. It would be nice if there was an exact breakdown of every tax dollar and where it was spent. If there is a link where they show exactly where the money was spent and who recieved it, plz post. Something more than a graph is what I am looking for.
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This is 2001, but I bet the structure is roughly the same except that we are probably spending 2.3 - 2.5 trillion now.
Just to give you an idea.
2.0 trillion = 2,000,000,000,000/year
5,479,452,054/day
228,310,502/hour
3,805,175/minute
The now famous and wasteful Clinton investigation cost us less than 15 minutes of federal spending.
(http://www.raf303.org/mietla/budget2001.jpg)
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You're a little too smart for me Miko....just telling me that capital invested in VIABLE ventures reaps success is far beyond me. We invest in only viable venture or we do not invest, as does everyone else I know.
I can see you are much like most anyone with strong opinions...good at telling others what to do while you yourself sit back and watch.
Our company is valued at over 180 mil...not bad for two brothers and a sister....and imagine this, we accomplish this year end and year out all without your great wisdoms.
You come off as slightly full of yourself....no degrees in humility I suppose.
Knock yourself out...I'll just watch.
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That's what I mean, there is no breakdown of exactly where it went.
What is "other mandatory?
What is "net interest"
What is the difference between "medicare" and "medicaid?"
What is "other means-tested entitlements?"
What is "non defense descretionary"?
I mean, can it be broken down further?
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Originally posted by Rude
We invest in only viable venture or we do not invest, as does everyone else I know.
...
Our company is valued at over 180 mil...not bad for two brothers and a sister....and imagine this, we accomplish this year end and year out all without your great wisdoms.
Would you be as successful is the government told you to stop producing whatever your product is, and forced you to build an Amtrak extension instead?
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Originally posted by mietla
Would you be as successful is the government told you to stop producing whatever your product is, and forced you to build an Amtrak extension instead?
*Scratches head*
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Originally posted by Sixpence
That's what I mean, there is no breakdown of exactly where it went.
What is "other mandatory?
What is "net interest"
What is the difference between "medicare" and "medicaid?"
What is "other means-tested entitlements?"
What is "non defense descretionary"?
I mean, can it be broken down further?
All of it but the defense is a wealth transfer from some people to others.
Do some your own searching/reading will ya....
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Originally posted by Sixpence
*Scratches head*
you don't even have to duck when the point goes your way, do you?
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Originally posted by mietla
All of it but the defense is a wealth transfer from some people to others.
Do some your own searching/reading will ya....
That is it, I can't find out where the money actually went. That's why i asked.
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Originally posted by mietla
you don't even have to duck when the point goes your way, do you?
Nope, you lost me, i'm just a simple mind, sorry.
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Originally posted by Ripsnort
I rarely have cash. My wallet is full of credit cards, one for gas, one for the grocery store, one for getting cash out of the bank, etc. etc.
The key is...the balances are paid for at the end of each month, prior to the billing cycle (and in some cases, the interest cycle)
Don’t get me wrong, I use ‘em and rarely carry cash… but it’s a debit card and comes right out of the checking.
Everything else is Amex.
If they don’t take that then I have a backup MC that gets paid immediately.
I do often kick myself for not taking advantage of the “point” thing. I doubt that I ever will. I’m kind of lazy about stuff like that.
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Originally posted by mietla
Would you be as successful is the government told you to stop producing whatever your product is, and forced you to build an Amtrak extension instead?
Not sure I understand the question....the private sector is just that...private. The government does not dictate to us what we do with our money.
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Originally posted by Rude
The government does not dictate to us what we do with our money.
You mean the 50% of the money they DON'T confiscate before we even see it...
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Originally posted by funkedup
You mean the 50% of the money they DON'T confiscate before we even see it...
Of course:)
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Originally posted by Sixpence
Nope, you lost me, i'm just a simple mind, sorry.
My point was that Rude is successful because he decides (whether he uses Miko's "smarts" or not) how to invest his money and what product to deliver.
Had a government force him to stop of what he is successfully doing and told him to invest in an inherently unprofitable public transportaion, he would lose his business.
Only the government can decide to produce things that no one needs/wants and subsidize them forever for a "greater good".
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Originally posted by Rude
Not sure I understand the question....the private sector is just that...private. The government does not dictate to us what we do with our money.
Exactly. This is why capitalism is successful and can be perpetuated while socialism has to fail.
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Originally posted by Rude
You're a little too smart for me Miko....just telling me that capital invested in VIABLE ventures reaps success is far beyond me. We invest in only viable venture or we do not invest, as does everyone else I know.
Which is all good and dandy for the economy. I think what miko was orginally saying, was that it's good for the economy when people do as you do, invest in viable ventures. As opposed to spending their resources on foreign made consumer goods.
It would hardly be good for the US economy if you liquidated your 180 million dollar business and bought 180 million dollars worth of rubber dog crap flown out of Hong Kong, right? Or more accurately, at one point you and you sisters decided to invest resources into a commerical property management company. Propably a better idea to do that in hindsight than to say, send those resources on foreign consumer goods for personal consumption.
And I believe this is why he thinks that US economy is going to go in the sinker. Because people are spending thier resources on foreign goods instead of investing it in viable ventures in the US. And think what the US would become if Americans took those 500 billion dollars a year that are spent in the trade deficate and invested into in private education systems, US companies etc. The potential is staggaring.
I don't think the gist of what you are saying is conflicting with what miko is say, if I understand correctly.
miko said, "How come all the american firms that were working and employing lost of people on top of the last boom suddenly went out of business and laid people off while the consumers are still buying a lot of products from abroad? How come all those people and resources were misdirected from producing goods that people would actually buy into stuff that is now lays unused as dead weight? What made all the entrepreneurs to misdirect money into the wrong investments instead of production with guaranteed market? I have an explanation for that. Do you?"
I would like to hear it.
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Originally posted by mietla
Would you be as successful is the government told you to stop producing whatever your product is, and forced you to build an Amtrak extension instead?
You mean, if Sixpence were in the tobacco business and it was suddenly prohibited, but the gov't then offered (since the gov't can't force someone to perform a business service) him a contract to build a rail line into the northern states so it could transport federal goods and passengers?
Yeah, somehow I think Sixpence would make a profit off of that contract. :p
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Originally posted by mietla
(http://www.raf303.org/mietla/budget2001.jpg)
Ok, so if we only keep defense, we'd only pay 16% of what we pay now in taxes, right?
So where does the money for the FAA, FCC, FEMA, IRS, FTC, FBI, NTC, NSA, DEA, HUD, INS, EPA, and FHA (just to name a few) come from?
And do you really think Social Security, Medicare, and Medicaid are superfluous? You do realize that when you retire you only get 60% of your salary, right? And that's assuming your company manages to survive after you leave.
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Originally posted by GScholz
You are assuming too much. First, if Rude can find a successful business venue on his own, then he could do it as a government employee as well. You're assuming all socialists are inept at good business.
it is not an assumption, it is an experience.
Secondly, socialism is not communism. A socialist society can still have a free marked and private property. Look at most of Europe for an example of that.
different stages of the same, terminal disease. Give it 50 more years and will see who'll still works.
Thirdly, you are assuming the USA is not a socialist society. That was mostly true back in the days of the founding fathers. Today the USA is a growing socialist society. I expect the USA will turn even more socialist in the future to combat growing social problems.
Unfortunately, you are right.
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Originally posted by Thrawn
Which is all good and dandy for the economy. I think what miko was orginally saying, was that it's good for the economy when people do as you do, invest in viable ventures. As opposed to spending their resources on foreign made consumer goods.
It would hardly be good for the US economy if you liquidated your 180 million dollar business and bought 180 million dollars worth of rubber dog crap flown out of Hong Kong, right? Or more accurately, at one point you and you sisters decided to invest resources into a commerical property management company. Propably a better idea to do that in hindsight than to say, send those resources on foreign consumer goods for personal consumption.
And I believe this is why he thinks that US economy is going to go in the sinker. Because people are spending thier resources on foreign goods instead of investing it in viable ventures in the US. And think what the US would become if Americans took those 500 billion dollars a year that are spent in the trade deficate and invested into in private education systems, US companies etc. The potential is staggaring.
I don't think the gist of what you are saying is conflicting with what miko is say, if I understand correctly.
miko said, "How come all the american firms that were working and employing lost of people on top of the last boom suddenly went out of business and laid people off while the consumers are still buying a lot of products from abroad? How come all those people and resources were misdirected from producing goods that people would actually buy into stuff that is now lays unused as dead weight? What made all the entrepreneurs to misdirect money into the wrong investments instead of production with guaranteed market? I have an explanation for that. Do you?"
I would like to hear it.
First of all, the owners of this company are two brothers and a sister...I'm the lucky guy responsible to them for the success or failure of it. Trust me...if I owned it all, I'de be dippin minnows in the Ozarks:)
The answer to the above is simple. The American firms which rode the boom, never turned a profit(the vast majority didn't)...the growth of many of these firms was artificial.
What caused this to happen? Very simple....greed. Those at the top of the food chain saw it, knew it and used it.
As to Americans purchasing foreign goods, we have and will continue to follow that path as long as those goods are of good quality and competitively priced.....labor abroad has killed our competitive edge and I'm not sure how we will correct this. Probably by some new innovation or method or industry.
The boom of the nineties was the result of out of control growth of the hi-tech sector and the resulting increase in productivity resulting from that growth. Cell phones, laptops, etc have allowed more and more work to be accomplished than ever before in our history. I often acdcomplish more on the drive to lunch than I do behind my desk due to a cell phone.
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You're assuming all socialists are inept at good business. Look at China for an example of the opposite.
You give me a labor force paid like China's and I'll own the world....big difference between good business and free labor.
China can simply produce similar goods cheaper than their competitors....if the same were true for Europe, then the water pistol in my local retailer would say, Made in France.
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Sixpence: I agree, to a point. But at some point there needs to be laws that regulate us.
Absolutely. And those laws should protect us from each other - like violence, theft, fraud, invasion of property.
It might be in the best interest of the majority to tell you where you can smoke. If the majority of us do not want smoke where we dine in public, this is not telling you that you can't smoke.
Wrong. You can tell me not to smoke in you property - without any vote. You and me can vote on whether someone could smoke on the property we commonly own - public property, like the street. But you should not be entitled to vote on whether I or my guests can smoke withing my own property (provided, of course I do not blow smoke into other person's property - that would be invasion). Nobody should be entitled to berge into my private property and enjoy smoke-free environment.
How come you precious democracy does not prevent smoking on the public proberty so I get sick woaking the streets - which I am entitled to and cannot avoid - but forbids smoking in private bars where I have choice not to enter? With all those smokers forced outside a get much more exposure to smoke now than before NYC outlawed it!
As well as I have a "pleasure" to see all those people enjoying themselves and getting sick so that I will have to pay for their treatment.
On a larger scale, we vote on how to pay for those who have health problems from smoking all their life and cannot afford to pay for those health expenses.
So I cannot vote to make them stop smoking and live healthy lifestyle but when they end up hurt I am obligated to pick up the tab.
The majority will decide, and to some it will be oppressive, to others it will be the democratic thing to do.
It's not oppressive or democratic - it's oppressive and democratic .
gofaster: If someone is walking around telling you how many children you can have, he's probably a priest, and those aren't elected officials under the US Constitution.
Liar. You know damn well that over 30,000 people were coercively sterilised in the US in the first half of the 20th century because officials deemed them as not worthy of procreation. If Hitler had not given eugenics a bad name, there is a chance that some stupid people on this board would be getting a state-administered snip.
There were laws to that effect voted for by majority and they can be voted in again once the people forget who Hitler was.
So how is this opposite from what the Founding Fathers intended?
"'A simple democracy,' wrote Benjamin Rush to John Adams in 1789, 'or an unbalanced republic, is one of the greatest of evils.' These two founding fathers of the United States, like nearly all of their fellow patriots, held a distinct disdain for, and distrust of, pure democracy. They correctly feared that a majority-mob would as surely trample the rights of a political minority as a tyrannical king."
Rude: You're a little too smart for me Miko....just telling me that capital invested in VIABLE ventures reaps success is far beyond me. We invest in only viable venture or we do not invest, as does everyone else I know.
Not smart, just educated in some matters to which I am trying top attract your interest. It requires some explanation and I will try to give a brief overview.
You are very wrong in your statement and it's a common mistake. Please read the folowing carefully, it's real science.
Thrawn: miko said, "How come all the american firms... I would like to hear it.
Here it comes:
Some ventures always fall because all investment is in future production, thus speculative. But in general, some entrepreneurs make better decisions, some worse and economy works. The way they decide which ventures to invest in is market signals - prices, etc., including the most important - interest rate. Free market interest rate is formed by a very complex interplay of real factors. Mostly it indicates availability of real resources for creating the projects. Enterprises are not built of paper money but of real goods - labor, materials, etc. that must be available to be purchased for that money.
If a venture is expected to bring 5% profit, you would not borrow capital at 6% to invest into it but you would borrow and invest if the interest rate dropped to 4%.
If the interest rate drops, a lot of projects that were unprofitable will become profitable and will be initiated. A very important point is that the longer-term projects are more sensitive to interest-rate fluctuiations, just like long-term bonds. The drop in iterest rates will cause increase of investment in long-term projects like mining, heavy industry, etc. much more than into short-term ventures.
So what happens when the real resources availability does not change but the interest rates are manipulated down by government credit expansion? All entrepreneurs are fooled into opening projects, especially long-term ones and there will not be enough resources to finish them or manipylate them profitably. As they near completion, they will compete for scarce resources, so they will borrow money to pay for them - raising interest rates, raising prices or both! No matter what happens, some of the projects will necessarily not reach profitability, go bust and the resources already invested in them will be wasted.
The artificially-induced boom and raise in production and employment will be followed by the inevitable bust and drop in production and employment while the capital misallocations are corrected and failed businesses are liquidated. We end up worse than if we had natural rate of growth.
Here is an example: from the 90s Firms fooled by low interest invest in software business, because it seems that population is consuming less and saving/investing more - say in education. They intend to build offices and hire programmers at $50K a pop. They do build offices, overpaying for the limber and steel, which can fortunately be imported, but when it comes to hiring programmers, they find out that people were not investing in programming education! So they borrow more money and drive the programmers salaries into $200! They get a lot of crappy jhalf-baked programmers and they cannot possibly be profitable with such high expenses. You see - teh dollars printed by Fed and multiplied by fractional reserve bank system were not backed by real investable stuff! So the businesses fold, not only the start-ups but the old good ones, like Sun and Lucent who lost good programers to the newcomers and had to pay triple for the remaining ones.
They have to scramble for indian programmers and imports and once they set up outsorcing, it will be difficult to get those jobs back. They already went to all the expence to set up the subcidiaries, so thr US programmer's salary will have to drop a lot lower than it would have been without artificial boom to make them forego that investment and bring the jobs back in.
So you end up with lots of resources inverted into offices wasted, lots of "dark" fiber cable wasted, lots of productive connections scrambled, lots of people with expensive houses bought at the peak salaries and no jobs to pay the mortgage, etc. Same happens in other industries.
That is why I do not rejoice when I hear that Fed caused a drop in rates and production increased. I know that some of that production is bound to fail. Not every growth is good - only the sustainable growth where resources are not misallocated from the start.
Business cycle is not a feature of capitalism, but of government credit expansions. There were no general boom/bust cycles before government legalised fractional reserve monetary system and enabled credit expansion to occur in the early 1800s.
miko
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Rude : The boom of the nineties was the result of out of control growth...
I hope I dispelled that misconception succesfully. There were no cell-phones to account for the boom/bust of 1819 or the Great Depression and for all the boom/bust cycles in between and since.
There was always monetary/credit expansion followed by boom then by bust just as I've descrived.
It was not greed or technology or Enron, etc. The people who malinvested money had to get them from somewhere - and those were not money you've earned and saved so the bank could loan them. They were money that bank created just for the occasion. Credit not backed by savings, induced investment without resources to complete the projects what made them invest.
miko
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Thank you for your responses, Rude and miko. I appreciate them very much.
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This stuff is all so hard for me to understand... I just don't care tho... so long as things keep going well enough for the UPS truck to drop stuff off on my porch.
Get a woody when I see one of them trucks.
lazs
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Rude: You give me a labor force paid like China's and I'll own the world....big difference between good business and free labor.
The chinese communists had the same labor force paid even less under total control and the best central planning possible conducted by the most brilliant people and they ruined their country utterly.
The good labor force can create miracles - but only as long as someone is not empowered to use it to accomplish his goals. Only in the context of free market spontaneous social cooperation through the division of labor and exchange will the production sustainably grow towards satisfaction of the most urgent needs of the consumers.
It is a common mistake for a wanna-be tyrants to believe that they can succeed where communists or nazis or fascists failed because he is smarter or more valorous or is guided by God.
The reason socialism is impossible to create is that in the absence of freely traded private property there can not be market prices and without them there is absilotely no basis for economic calculation. There is no way to even determine whether the capital is being accumulated or deculylated, let alone the most urgent needs and areas where investment would not be wasted.
The free market is the most planned and orderly economy possible - with every person being the best judge of local conditions and impersonal profit/loss mechanism constantly adjusting the ownership of productive resources in favor or those entrepreneurs who have been correct in predicting the consumer needs and best (most efficient, cheap) ways to satisfy them.
The "planned" socialist economy is completely unplanned and unplannable, total chaos and anarchy driven by arbitrary decisions of a few not based on any reality.
miko
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Originally posted by lazs2
This stuff is all so hard for me to understand... I just don't care tho... so long as things keep going well enough for the UPS truck to drop stuff off on my porch.
Get a woody when I see one of them trucks.
lazs
Yeah, me too. It means the seller on eBay actually followed through on his commitment.
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Originally posted by miko2d
There is no way to even determine whether the capital is being accumulated or deculylated, let alone the most urgent needs and areas where investment would not be wasted.
I thought one of the doctrines of the Austrian school was that trend prediction was impracticle, because the involvement of human beings made the system chaotic. If you can't use the economic calculations for trend prediction what value can they have, except for a historical/archival context?
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Originally posted by lazs2
This stuff is all so hard for me to understand... I just don't care tho... so long as things keep going well enough for the UPS truck to drop stuff off on my porch.
Get a woody when I see one of them trucks.
lazs
LOL, sig material.
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Thrawn: I thought one of the doctrines of the Austrian school was that trend prediction was impracticle, because the involvement of human beings made the system chaotic. If you can't use the economic calculations for trend prediction what value can they have, except for a historical/archival context?
By the tone of that statement is sounds that you perceive it as conflicting with something said earlied in this thread.
Trends certainly exist - at least for a while. Trend detection is certainly possible. What is not possible is by looking at the trend only to make prediction when and why it would change.
So yes - austrian school does not recognise the use of trends and any eggregates (so called "macroeconomics") for prediction. Only for historical purposes.
According to Austrian school, human action is not chaotic but supremely rational. It is directed by reason. That means that in identical conditions a person may choose to act differently. So you cannot make repeatable experiments, you cannot isolate some factor and fix the rest. There are no quantitative constants in human action like speed of light or charge of an electron.
Just because certain condition solicited certain responce in the past or elsewhere, there is no basis to believe that similar conditions will cause a responce of the same magnitude or even substantially similar.
That does not mean that there is no way to make definite statements about human (and hence market) behavior. Just that no quantitative statements are possible.
There are several apriori axioms in the foundation of the Austrian theory of human action (prexeology) of which economics (part dealing with exchange) is a subset.
Here are examples of those axioms:
- A human will value greater amount of a resource more than lesser amount.
- A human will value subcequent unit of a resource obtained less than previous unit of the same resource.
- A human will prefer to receive satisfaction sooner rather than later, everything else being equal.
There are few others like that which allow to develop a whole theory.
The subject of that theory is human mind and we cannot possibly observe and experiment on it like the natural scienced do. The simplest thing and the most basic concept - like "choice" we cannot possibly observe in nature. How do we know that people are making choices rather than follow predetermined paths like automatons or rolling balls? Not by observing humans.
We know because we directly know our own mind and we know that we make choices and we assume that all human minds work in similar way. So this theory is not based on reality in any way like physical theories are. It cannot be proved or disproved by observation of reality. What it can do is explain reality and reality may illustrate theory.
Why do we believe that the theory correctly describes reality? Simple. The reality of human action is determined by the nature of human mind and the theory is also based on the nature of the human mind, so they correspond to each other.
The thory does not deal with the ends - that is left to phsychology, religion, etc. It assumes that humans have ends as given and only deals with the means.
It tells shat should or should not be done to achieve certain ends, not what ends ought to be sought.
The predictions that the theory can make about the reality are very limited. They are much more to tell you what cannot be done rather than tell you in details how to do something.
The theory can predict that the trend is unsustainable but not when it will end. The theory can predict that by fixing price of a resource below market price you get shortage of that resource, etc.
That is a very rough overview. If you need a better resource, I could gladly provide a reference.
miko
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I think I understand what you are saying. To clarify, Austrian school claims that predictions about economic trends can be made, but that the prediction can not be fixed in time. Where as other schools claim that predictions about economic trends can be made and fixed in time.
If this is the case, it would be interesting to know how the other schools can fix their predictions in time and what there record for accurate predictions is.
"That is a very rough overview. If you need a better resource, I could gladly provide a reference. "
I've add the link you provide to "http://www.mises.org/austrian.asp" in my favorites list, but I regret I havn't had time to read it yet.
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Thrawn: I think I understand what you are saying. To clarify, Austrian school claims that predictions about economic trends can be made,
More accurately, you can use regression analysis math to detect thrends in any process that may have trends and the procedure is not specific to economics. The only prediction one may make about a trend is that if it was going in some direction, there is some chance that it will keep doing so for a while.
Austrian school does not contend the view that in economics one can find thrends in various measurements for brief or even prolonged periods of time.
The trends exist because human preferences usually do not change quickly over time.
So for a while a trend that you've detected may persist and you may use it to predict/guess short term future. Like dollar may be going up or stock market may be goind gown or steel price may be rising, etc.
But just observing the trend does not tell you anything when and how human preferences may change so it is just a guess whether the trend can persist, for how long and how it will change.
Only theory and familiarity with specific details of economic life can provide some direction here.
A steel use may increase becasue population is buying cars or because the lumber price increased and steel is replacing it. So the steel price trend will react differently in each case to teh same events. First may be inerrupted if oil price goes up. Second may be inerrupted is lumber price goes down. Which may happen if people's preference for preserving forests changes to preference for cheap lumber.
I've add the link you provide to "http://www.mises.org/austrian.asp" in my favorites list, but I regret I havn't had time to read it yet.
I suggest "Econimics for real people" by Gene Callahan and "Economics in One Lesson" by Hazlitt as must-read books for any citizen.
miko
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More accurately, you can use regression analysis math to detect thrends in any process that may have trends and the procedure is not specific to economics. The only prediction one may make about a trend is that if it was going in some direction, there is some chance that it will keep doing so for a while.
My apologies for not stating earilier my understanding that there is no such thing as usable real time information. It is my understanding that any datum point must deal with latency periods of transmission of the datum point, reception of the datum point, and correlation of the datum point into useful information.
So by nessecity, any piece of information has a latency period, if I understand correctly.
If this is so, than one would assume that any school of economic therory cannot make any real time statements, but must make statements about trends that took place in the past.
Although I still have difficulty in understanding the utility of the Austrian school of economic theory. If it can't be used with any degree of accuracy in predicting economic change fixed in time, what's the point.
An example, "The soviet union will fall because of these and these factors.". Fine, but before it falls there may be alot of time to aquire wealth.
Another, "The US economy will fall, eventually, if these factors do not change.". Without fixing the prediction time, where in do I get the benefit. Should I spend resources hedging against the fall, even though it might not happen within my life time?
I find it doublely frustrating because the Austrian school seems to make so much sense to me. It seems practicle, intuitively sound to me, and can seem to withstand all the refutations brought against it.
But perhaps it is better than other schools because at least it recognises it own limitations?
"I suggest "Econimics for real people" by Gene Callahan and "Economics in One Lesson" by Hazlitt as must-read books for any citizen."
I'll put it one my Christman list, thank you.
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Thrawn: Although I still have difficulty in understanding the utility of the Austrian school of economic theory. If it can't be used with any degree of accuracy in predicting economic change fixed in time, what's the point.
An example, "The soviet union will fall because of these and these factors.". Fine, but before it falls there may be alot of time to aquire wealth.
True - you cannot use Austrian economic theory to make accurate predictions even about a free market. What's more, austrian economic theory states that it is not a deficiency of any theory but a property of the reality and that no theory whatsoever could make more accurate predictions. Kind of the quantum principle in physics.
Human preferences change and if we could predict how, it would mean that humans do not have free will but are just automathons.
Another, "The US economy will fall, eventually, if these factors do not change.". Without fixing the prediction time, where in do I get the benefit. Should I spend resources hedging against the fall, even though it might not happen within my life time?
The theory helps you interpret the facts, which will help you to select which facts to concentrate on. You can be quite accurate in some cases.
We do know that in 2013 the Social Security will run deficits. We do not know what will happen exactly - tax raise, inflation increase, default on obligations or a combination of those but we can be sure it will be a serious change to the existing trends.
I find it doublely frustrating because the Austrian school seems to make so much sense to me. It seems practicle, intuitively sound to me, and can seem to withstand all the refutations brought against it.
That's a price we humans have to pay for having free will. Austrian theory can explain how market may react to any event. Even more specifically it can state how market may not react. It is quite usefull sometimes. Like if your politician is trying to make affordable housing more accesible to the poor by fixing rents, you can confidently predict that everything else being equal you will have less affordable housing for the poor and what is there, will be underutilised.
Also, it is hard to predict things even with good understanding of the markets because so many things depend on arbitrary intervention. No knowlege of the market will help you predict what the federal reserve or congress or chinese government will do next year with regard to exchange rates, interest, tariffs, etc.
You can suggest to them the best way to act in order to achieve some goal. You can tell them what is likely to happen or will not happen in responce to some act. But you sure cannot predict what they will do.
You could have confidently predict that Soviet Union will decline in wealth. But you could never have predicted that it woulr invade Afghanistan or appoint Gorbachev. At some point it's up to a choice of one or a few individuals. And no theory can predict what that individual will think.
But perhaps it is better than other schools because at least it recognises it own limitations?
Or that is recognises the limitation of human reason.
You see - however intricate a market economy is, however complex and sophisticated, it is not a product of a human reason or design but a spontaneous process, much like social institutions, human languages, biological evolution and some other phenomena.
People (positivists, historicists) had hard time recognising that such complex phenomema could arose without being designed by intent and once you mistakenly believe that it was human reason that designed some institution, it's only natural to assume that reason can improve on it.
miko
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Thank you for answering my questions. I look forward to becoming better informed.