tag:blogger.com,1999:blog-7820485130017459619.post1425239062313506224..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: The Multilplier Effect of Borrowing and Economic StructureUnknownnoreply@blogger.comBlogger6125tag:blogger.com,1999:blog-7820485130017459619.post-55835326780167131302012-10-15T17:48:10.713-07:002012-10-15T17:48:10.713-07:00Cynicus -
Posting this here because this seems a ...<br />Cynicus -<br /><br />Posting this here because this seems a UK-centric blog, and I have always found your articles thought provoking, though it must be <br /><br />apparent that I don't always seem to agree with you.<br /><br /><br />Trying to cut your argument to the bone , I guess you are basically agreeing with Treasury Secretary Andrew Mellon, who advised Pres. <br /><br />Hoover ( during the Great Depression) :<br /><br />"..[..] liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. <br /><br />High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and <br /><br />enterprising people will pick up from less competent people."<br /><br />..the argument being that it will hurt like hell, but in the long term this seems the only way , as he says, to purge the [ <br /><br />malinvestment] out of the system, and get us back to some kind of 'good' investing in (unspecifiable) economically wholesome ventures <br /><br />that will , i guess, put us on the ( much spoken of but rarely achieved) 'firm foundation', and all will eventually be well.<br /><br />One immediate objection to this is of course the well known paradox of thrift, by which a universal desire to CUT & SAVE leads, <br /><br />because your expenditure is my income, only to a deeper black hole. If everybody stashes their money away at 1/2 % , and cuts their <br /><br />expenditure to the bone, we all end up out of work, with no money to stash and no further realistic possibility of *any* expenditure.<br />Thus, we defeat our own purpose, and by rather too naively following the equally rather too obvious analogy of household finances ( <br /><br />much beloved of the current crop of economically illiterate Tories in power ) we end up not frugally becoming richer ( as we might <br /><br />expect) but frugally becoming *poorer*.<br /><br />Imagine our surprise.<br /><br />So, we can fairly confidently predict that following Mellon's ( & your) advice, we will first collectively begin to circle & then <br /><br />rapidly fall into the great black economic plug hole, with no real idea of when or even if we will reach rock bottom before the <br /><br />blackshirts get enough support to take over.<br /><br />Not an enticing prospect.<br /><br />The upside had better be good, is all I can say.<br /><br />And what - might we imagine - would *be* the upside ? Well, at rock bottom, I guess all economically unneccessary companies / <br /><br />businesses / ventures / markets / undertakings of any sort will have been nicely 'liquidated', and what is left will ( by hypothesis) <br /><br />be only those sturdy & self confident outfits that can compete with the outside world at it's own poverty wage game.<br /><br />And since Govt expenditure will have been slashed to the bone ( see above ) there will be very little by way of any 'safety net' for <br /><br />those unfortunate enough to be trying to buy a £200,000 house on a £50 a week wage packet, so down come the old house prices, & we <br /><br />are reduced - by & large - to a nation of a fortunate few slave labour paupers and a lot of emaciated corpses. <br /><br />In a word, upside not so good either.<br /><br />Yours is the kind of wonderful harmonious 'invisible hand' theory an Austrian might like to dream himself to sleep with, but which, <br /><br />in reality, no-one but a sadist would really inflict on anyone, let alone, for eg, his own grandmother or children. ( Unless he were, <br /><br />say , Angela Merkel & the victim was a lot Greek grandmothers & children. )<br /><br />Lest you say , "all very compelling, but what is the alternative?" - I should say "I don't pretend to know but please - for God's <br /><br />sake - don't do anything Mellon or Mr Economicus has suggested!" would be a reasonable starting place. :-)<br /><br /><br /><br />chaingangcharliehttps://www.blogger.com/profile/04803774361542678154noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-59209131224656962242012-10-15T03:07:51.809-07:002012-10-15T03:07:51.809-07:00C.E. An interesting comment, and something I have ...C.E. An interesting comment, and something I have given thought to. For me, I see the consequence of the current policy creating even greater potential for the dangers that you consider; just further down the road. That is a bigger worry. To make my point, just think of what would have taken place if the problems I identify were addressed in 2008. Would this cause the same concern that you express? Yes, some civil disorder, but compared with what will take place now, when there is a loss of faith in democracy? It is a short answer that covers a lot of ground, and perhaps deserves more detail. However, I hope you will accept it as an answer. Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-87394146371386388952012-10-15T02:00:55.376-07:002012-10-15T02:00:55.376-07:00I think it is better that we slowly get poorer and...I think it is better that we slowly get poorer and poorer and not go for "pain now", that is civil unrest, wars, deathAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-46724299505693936282012-10-13T23:59:08.508-07:002012-10-13T23:59:08.508-07:00C.E: Yes, you are right. And that is exactly how e...C.E: Yes, you are right. And that is exactly how en economy structures around government debt consumption. You support my point very well. Thank you. Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-60698243965185764302012-10-13T23:42:23.542-07:002012-10-13T23:42:23.542-07:00"The Keynesians argue that the answer is more..."The Keynesians argue that the answer is more fiscal stimulus, and that this will regenerate demand, and all boats will rise with the fiscal stimuli. If only everyone borrowed and spent, all would be well. However, there is a fundamental problem with this idea. The more countries borrow, the more they restructure their economies around the borrowing. If, as they Keynesians had their way, all the countries of Europe were to raise their borrow and spend, this would (assuming that creditors would go along with it; a big assumption) lift Europe out of its current funk. The problem is that the restructuring of all economies to servicing debt based consumption would simply be greater"<br /><br />Your error is in the last sentence. Government stimulus does not merely involve consumption spending, it also induces significant private sector investment. And also involves public sector investment (public infrastructure etc).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-37998861731716147922012-10-13T17:50:02.838-07:002012-10-13T17:50:02.838-07:00Cynicus,
If I understand you correctly, the upsho...Cynicus,<br /><br />If I understand you correctly, the upshot of your article here would be that we should take - wait for it - *GREECE* ( of all the God forsaken places on earth) as our role model ( cut debt! cut govt spending! raise taxes ! balance the Sacred Money Books ! it's tough but it's the only way, chaps..) .<br /><br />Seems strange to me to be taking the line 'we [collectively] can't *afford* X or we can't *afford* Y. <br /><br />How can a man with a perfect £5 note printing machine in his basement be regarded as unable to 'afford' more or less anything at all, that has a price tag in pounds sterling ?<br /><br />The UK is that man ( we create our own currency). The users of the Euro ( for eg) are not that man ( they cannot ). It's a huge difference, though usually glossed over as if the difference is just some kind of meaningless technical detail. All the scary talk of Britain being 'bankrupt' is , as anyone who is interested can discover, nonsense. It is *impossible* for Britain to become 'bankrupt' unless the Govt decides ( for some unimaginable reason) that it wants to be, so long as it's debts are denominated in GBP. <br /><br />Now let's see what the much vaunted 'good' / 'praiseworthy' private enterprise financial system has given us over the last few decades : A vast global housing bubble as a means of peddling as much debt to as many people over as short a time as monetarily possible.<br /><br /><br />Why, thank you so much, Invisible Hand.<br /><br />Private Enterprise in it's infinite invisible wisdom decided it would be a great idea to fill the high streets of the UK with row after repetitive row of Estate Agents, Banks, Building Societies, Nail Parlours, 93 Exotic Kinds of Coffee At Ridiculous Prices Emporia, PC + Playstation Game Shops, over priced 'Designer' (!) Clothes Shops , 'Past Times' oulets, Cathedrals of Home-Improvement ( all with an eye on those ever rising house prices!) , Travel Agents offering 6 holidays a year in ever more ludicrous locations ( on credit mind!) , restaurants offering local dishes real & imaginary from ditto, and car dealers pointing out that if the family car was over 2 years old it was ... well... a bit of a joke really tosh, here have a loan... get up to speed .. <br /><br />You see, *that* , my friends, is the kind of worthwhile, eye-on-the -ball *private* business decision making that we need to get back to - or we're all screwed. Because The Market, as everybody knows, Knows Best.<br /><br /> These are all economically sound & generally praiseworthy *private* business ideas and the fact that we all went dancing along with them to hell in a handcart is... well... a bit puzzling but doubtless the Invisible Thing knew exactly what it was doing, and if we all just slowly spin around into a nice cosy deflationary black hole for the next 10 years or so, then possibly the survivors ( if there are any) will be only too keen to Private Enterprise their merry way back along the upside of the next Marvelous Private Enterprise Bubble / Con Trick and all will be - Privately - Bloody Marvellous Again. <br /><br /><br /><br /><br /><br /><br /><br />chaingangcharliehttps://www.blogger.com/profile/04803774361542678154noreply@blogger.com