How many people agree with MR/MT theory described on the forum

[Kshartle]

How do you feel about this almost century of prosperity achieved with a government and central bank constantly meddling in the economy?

I assume that the answer is that it would have been even better had the government and central bank left things alone.

Yes no question. It's amaizing what somewhat sound money and the most economic freedom ever held by a people will get them to create.

We are left to imagine what the world will be like when humans are truly without rulers.

[MediumTex]

After 21 pages, as best I can tell the "Kshartle Krew" position is that current Fed policies will definitely lead to inflation

If they never stop. It will lead to a deflationary collapse once they do though.

It will not lead to a revived economy anymore than sending an electric current through a corpse can revive it. The muscle contraction might look like a sign of life but once you end the current it will fall bank on the table smoking and smelling worse than before.

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

[MediumTex]

How do you feel about this almost century of prosperity achieved with a government and central bank constantly meddling in the economy?

I assume that the answer is that it would have been even better had the government and central bank left things alone.

Yes no question.

How can you be so sure if it's only been tried once in the last 90 years?

I'm not saying I disagree with you, but it seems a lot more like a theoretical thing based upon how little it's actually been tried in practice.

[Kshartle]

So not only can people choose the assets within which they are going to save, but most of those assets have actually RISEN in value due to the fed bringing rates down (per Austrian's own admittance), and inflation has been lower than the fed target to boot.

Why should someone in their 70s or 80s have to buy 30 year bonds to get a smidgen of interest? Why do they have to risk their money in the stock market hoping to ride one it's crazy waves?

If you can't see how the FEDs policies hurt unsophisticated savers and people on fixed income.......

It is truly inhumane what they are doing. It denys people the ability to take their hard earned savings and loan it safely in short-term ultra-safe ways and get compensated fairly. The FED has cheapened credit to such a degree that people can't get by on what they were counting on.

[Kshartle]

How do you feel about this almost century of prosperity achieved with a government and central bank constantly meddling in the economy?

I assume that the answer is that it would have been even better had the government and central bank left things alone.

Yes no question.

How can you be so sure if it's only been tried once in the last 90 years?

I'm not saying I disagree with you, but it seems a lot more like a theoretical thing based upon how little it's actually been tried in practice.

Yes it's based on logical and basic economic principles. 

[Libertarian666]

Yes no question.

How can you be so sure if it's only been tried once in the last 90 years?

I'm not saying I disagree with you, but it seems a lot more like a theoretical thing based upon how little it's actually been tried in practice.

Yes it's based on logical and basic economic principles.

The fact that something has not been tried is not evidence that it won't work.
The fact that limited government has been tried and has failed in every case, on the other hand, is evidence that such an approach does not work.

[Kshartle]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

[Libertarian666]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

But there was full employment! And higher wages!!!
Of course you couldn't buy much with those wages, because just about all consumer goods were rationed. And by the time you could buy stuff, the prices were way up due to the money printing wonderful economic stimulus of the war.

But that's just a detail. War is great for the economy because people are doing the economic equivalent of digging holes and filling them in... only lots of people get killed in the process. What fun!

[moda0306]

Ohh sorry. I saw a quote from the Daly guy or whoever saying the government needs to help ease the deleveraging of the private sector by running deficits and Gumby saying we all agree on this. I wanted to explain how this is utterly false.

As far as how they work mechanically, you're right I'm not interested. They spend more money than they took in with taxes by printing or borrowing. All the transaction details aren't important in my opinion, just the effects.

Sorry.

Kshartle,

Is there a real-world example of a government and central bank simply allowing all loans to default in order to strengthen the economy?

Maybe if we could look at how this process actually unfolded it would be helpful.

I'm not aware of any situations like this, but maybe you are.

I believe the deflationary depression of 1920 was not resisted by the government or FED and so it ended quite quickly and paved the way for growth. Although in the later 20's monetary expansion distored the economy and led to the recession and government meddling turned it into a depression.

http://en.wikipedia.org/wiki/Depression ... E2%80%9321

Unemployment hit 11.7% in 1921 but was down to 2.4% by 1923 according to some study in this article. I have not verified any of that with other sources.

The depression of 1920 was brought on by the fed by raising rates to contain the inflation caused by the post-war economic adjustment... Balance sheets were healthy at that time. They then lowered rates after inflation was tamed and the economy bound ahead. Very different environment.

[Kshartle]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

But there was full employment! And higher wages!!!
Of course you couldn't buy much with those wages, because just about all consumer goods were rationed. And by the time you could buy stuff, the prices were way up due to the money printing wonderful economic stimulus of the war.

But that's just a detail. War is great for the economy because people are doing the economic equivalent of digging holes and filling them in... only lots of people get killed in the process. What fun!

It's a wonderful stimulus for coffin makers and grave diggers. At least the holes being dug serve a purpose.

[moda0306]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

Words have meanings.  War doesn't necessarily mean "depression."  An economy at full capacity making war goods may not be ideal or even desireable, but it's surely not a depression.

[Kshartle]

Kshartle,

Is there a real-world example of a government and central bank simply allowing all loans to default in order to strengthen the economy?

Maybe if we could look at how this process actually unfolded it would be helpful.

I'm not aware of any situations like this, but maybe you are.

I believe the deflationary depression of 1920 was not resisted by the government or FED and so it ended quite quickly and paved the way for growth. Although in the later 20's monetary expansion distored the economy and led to the recession and government meddling turned it into a depression.

http://en.wikipedia.org/wiki/Depression ... E2%80%9321

Unemployment hit 11.7% in 1921 but was down to 2.4% by 1923 according to some study in this article. I have not verified any of that with other sources.

The depression of 1920 was brought on by the fed by raising rates to contain the inflation caused by the post-war economic adjustment... Balance sheets were healthy at that time. They then lowered rates after inflation was tamed and the economy bound ahead. Very different environment.

How does a post-war economic adjustment cause inflation?

Hmm.....higher rates leading to an inflationary bust after a bunch of inflation.....hmmmmm...where have I heard of this before?!?!?

[Libertarian666]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

Words have meanings.  War doesn't necessarily mean "depression."  An economy at full capacity making war goods may not be ideal or even desireable, but it's surely not a depression.

True, in common parlance "boom" means "great times!!!" and "depression" means "terrible times that need more money printing!!!".

But the first lesson of economics is that what is instantly visible to the naked eye may not be the whole story, and in fact we see that often the immediate visible effects are the opposite of the long-term effects. This is usually taught via the "parable of the broken window".

[Kshartle]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

Words have meanings.  War doesn't necessarily mean "depression."  An economy at full capacity making war goods may not be ideal or even desireable, but it's surely not a depression.

They are certainly depressing for the people losing loved ones or who are deprived of new products and living on rations or starving.

What could be more depressing than a war? Perhaps it's not the technical definition of a depression, but by that standard there could never be an inflationary depression.

We can substitute awful sucky time for depression if that fits better.

[moda0306]

So not only can people choose the assets within which they are going to save, but most of those assets have actually RISEN in value due to the fed bringing rates down (per Austrian's own admittance), and inflation has been lower than the fed target to boot.

Why should someone in their 70s or 80s have to buy 30 year bonds to get a smidgen of interest? Why do they have to risk their money in the stock market hoping to ride one it's crazy waves?

If you can't see how the FEDs policies hurt unsophisticated savers and people on fixed income.......

It is truly inhumane what they are doing. It denys people the ability to take their hard earned savings and loan it safely in short-term ultra-safe ways and get compensated fairly. The FED has cheapened credit to such a degree that people can't get by on what they were counting on.

What is "compensated fairly?"

Being able to earn a positive real yield without taking ANY risks is unnatural.  People can always diversify, draw down, and even annuitize some of their wealth.  I'm not saying it's "easy" for fixed income folks trying to invest today, but it certainly isn't easy for an unemployed citizen either, or a business owner, or someone trying to pay back college loan debt.

[moda0306]

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

Words have meanings.  War doesn't necessarily mean "depression."  An economy at full capacity making war goods may not be ideal or even desireable, but it's surely not a depression.

They are certainly depressing for the people losing loved ones or who are deprived of new products and living on rations or starving.

What could be more depressing than a war? Perhaps it's not the technical definition of a depression, but by that standard there could never be an inflationary depression.

We can substitute awful sucky time for depression if that fits better.

No, depression actually has economic meaning.  It surely is a "sucky time," but it's due to huge deleveraging, unemployment, and an economic Mexican Standoff caused by a monetized economy.

If you want to say "war sucks," then I'd agree, but economically, depression has a meaning, and it isn't because people are sad. 

For instance, The Holocaust wasn't a depression.  It was genocide.

[Gumby]

How do you interpret the post-WWII economic health of the U.S.?  Was that not a revived economy? 

I'm not suggesting that the U.S. should find a war to get involved in today for that reason (though Obama is doing his best), but WWII did seem to create the framework for a lot of post-war strength in the U.S. manufacturing sector and wider economy that was self-sustaining.

US govt spending was 42% of GDP in '44 and fell to 7.5% by '48.

The war was a depression. The depression ended when the government stopped consuming all the resources. This is what paved the way for prosperity.

Wars don't bring prosperity. They bring depression. The end of the war is a boom. If the war had gone on another 10 years the boom would have been put off another 10 years.

But there was full employment! And higher wages!!!
Of course you couldn't buy much with those wages, because just about all consumer goods were rationed. And by the time you could buy stuff, the prices were way up due to the money printing wonderful economic stimulus of the war.

...and thanks to the rapid expansion of private credit, incomes grew rapidly — roughly doubling in real terms between the late 1940s and early 1970s. In other words, our standard of living improved dramatically despite all the inflation. Hard to beat that.

It's easier to see the truth when you put it context of real income and private credit.

[Mdraf]

People, I can't keep up with the speed of this thread.  Plus I'm not a happy camper because I had to euthanize my dog of 16 years this weekend. I apologize to anyone I may have offended in prior off-the-cuff posts

[MediumTex]

People, I can't keep up with the speed of this thread.  Plus I'm not a happy camper because I had to euthanize my dog of 16 years this weekend. I apologize to anyone I may have offended in prior off-the-cuff posts

I'm sorry to hear that news.

We are just starting out with two puppies right now and it's hard to imagine them ever growing old.

[moda0306]

Ohh sorry. I saw a quote from the Daly guy or whoever saying the government needs to help ease the deleveraging of the private sector by running deficits and Gumby saying we all agree on this. I wanted to explain how this is utterly false.

As far as how they work mechanically, you're right I'm not interested. They spend more money than they took in with taxes by printing or borrowing. All the transaction details aren't important in my opinion, just the effects.

Sorry.

Kshartle,

Is there a real-world example of a government and central bank simply allowing all loans to default in order to strengthen the economy?

Maybe if we could look at how this process actually unfolded it would be helpful.

I'm not aware of any situations like this, but maybe you are.

I believe the deflationary depression of 1920 was not resisted by the government or FED and so it ended quite quickly and paved the way for growth. Although in the later 20's monetary expansion distored the economy and led to the recession and government meddling turned it into a depression.

http://en.wikipedia.org/wiki/Depression ... E2%80%9321

Unemployment hit 11.7% in 1921 but was down to 2.4% by 1923 according to some study in this article. I have not verified any of that with other sources.

Inflation was bad during and even after the war (an entire economy moving from war goods to private goods takes time, so our productive capacity wasn't fully correct), but our balance sheets were just fine... ie, we had plenty of paper to access said productive capacity.  This caused inflation, which the fed squelched by raising rates and causing a bad recession (not a balance-sheet recession like we have now), and these are like 1981 where we can recover quite quickly.  Lowering rates was all the economy needed for it to recover.

The post-WWI recession and recovery is often mis-characterized and ordered by Austrians and conservatives.  I'll dig up some points and holler back.

[Kshartle]

I will slow down myself to a more reasonable pace.

Sorry to hear about your dog. I've had mine since he was 6 months and now is ten. Don't know what I'm going to do in 5-6 years.

[moda0306]

People, I can't keep up with the speed of this thread.  Plus I'm not a happy camper because I had to euthanize my dog of 16 years this weekend. I apologize to anyone I may have offended in prior off-the-cuff posts

Sorry for your loss.  A good dog (hell, even a bad one) is an unbelievably loyal companion and losing them can be one of the hardest things to go through.

I'm sure we'll circle back around to this discussion until the end of time... until then, take it easy.

[Gumby]

Very sorry for your loss, Mdraf. Take all the time you need.

[Pointedstick]

I'm so sorry to hear about your dog. Mine is 7 and it's hard for me to imagine losing her. They can be such amazing companions.

Incidentally enough, this place seems much more like a dog person forum than a cat person forum. I wonder why that is?

[moda0306]

In honor of Mdraf's dog, I say we put this conversation on hold until he can go back through and gather his thoughts/responses.  I'd much rather debate an Austrian at their witty best than a man who's just lost a companion of 16 years.

I know I could use a break from MR v. Austrians for a bit.