Incomes have been either erased or diminished, and will not be recouped in entirety for several agrarian and industrial sectors around the world for at least 5 to 6 years.
Yep, there still is this absurd idea of an economic rebound once the pandemic is over. It will be only a statistical one, not a real economic upturn. On a global level the service sector is such a huge provider of employment that the impact that pandemic has had is quite dramatic to overall aggregate demand. Same thing goes for tourism etc. The impact will be measured in years.
In the midst of all of this, having exploited the nature of sheer capitalistic brilliance, the world's billionaires have generated over half a trillion additional dollars to their name.
Have they? Likely that is counted from their wealth and not from income and from the rebounce from the initial covid scare and stock market plunge until today seen from the graph below:
This rebound to similar highs as before is utterly confusing. Yet it happens because the monetary policy that causes asset inflation and the basically the idiotic index investing that is pushing stock prices to hilarious levels. You already have stocks with P/E ratios of 1000 meaning that in orders to get back your money in earnings, you would have to wait 1000 years. Yet if you take the largest five tech companies out of the indexes, the reality would be quite different.
But if nobody has bought a house in your neighborhood for a while, but then one is sold for twice the price as the last time, congratulations neighborhood home owner! Your house is suddenly worth twice of that in yesterday and you are so rich. And that's basically the asset bubble we have today...
I'll guess people will again then ask where did the trillions of dollars go when the market crashes.
I'm entirely in accord with the arguments you, and this forum, have previously put forth. A number of the distresses we've seen become pronounced are attributable to structural and maladaptive measures (such as the neoliberal market-oriented policies you've described) that were present prior to the pandemic.
I don't believe that the economic fallouts of the pandemic will be responsible for a greater number of deaths than the pandemic itself (I apologize it came across that way), but I believe they've exacerbated these distresses for many, and in the process, dispossessed developing classes of the most elementary economic freedoms.
For instance, in countries with high Gini coefficients and income asymmetries, families that weren't poor, but were incrementally advancing up the socioeconomic hierarchy, are likely to have suffered a setback that isn't easily recoverable from. Meaningful investments, such as Real Estate, have remained inaccessible to many of these families - a pattern that will almost certainly sustain itself for a considerable amount of time given their now absent, or diminished incomes.
There's a similar mechanism by which the neoliberal markets you've described have treated the business world. Small-scale entrepreneurs have borne the brunt of changes to consumerist mentalities in developing economies, whilst multinational conglomerates have been diversified enough industrially to reconstitute their business models. The conclusion of the matter has been an acceleration in the rate at which wealth gaps have been increasing, not an 'increase' per se (since I agree with you on the front that solutions to these predicaments must be devised independently of the pandemic).
Finally, the agrarian laborers, and several former white collar employees that have slipped down the socioeconomic ladder, are no longer economically liberal enough to be invulnerable to governmental stronghold and possibly tyranny. I may be mistaken in my judgment, but political motives are being indefensibly ascribed precedence over the truthful provision of state welfare around the world.
Aryamoy MitraOctober 28, 2020 at 16:31#4658890 likes
I remember reading a number of journalistic articles that cited astronomical increases to S&P 500 stocks, and consequently the net capital owned by the world's most active industrialists and businesspeople. I may be wrong, but I think this trend has been prominent for quite a while now.
'Yet it happens because the monetary policy that causes asset inflation and the basically the idiotic index investing that is pushing stock prices to hilarious levels. You already have stocks with P/E ratios of 1000 meaning that in orders to get back your money in earnings, you would have to wait 1000 years.'
Exactly. Such mismatches between equity and dividend value are precisely what in my estimation cause stock bubbles.
'But if nobody has bought a house in your neighborhood for a while, but then one is sold for twice the price as the last time, congratulations home owner! Your house has suddenly is twice worth than yesterday. And that's basically the asset bubble we have today... And I'll guess people will again then ask where did the trillions of dollars go when the market crashes.'
That's a really interesting analogy. It brings to light precisely how cyclical and sensitive today's economies really are with regards to demand and prices. Asset inflations result in commodities becoming unaffordable for those who don't possess them at the status quo, and subsequently detract demand from sellers - which ultimately results in stagnation. In order to combat this stagnation, central banks deploy expansionary monetary policies, which cause asset inflation and reinitiate the entire cycle all over again.
Exactly. Such mismatches between equity and dividend value are precisely what in my estimation cause stock bubbles.
It's more of a symptom than a cause, even if with index investing there is this mechanism to put more investment in the stock that have risen the most and are the largest. Yet I think the reason is and in history has been the financial sector, which has with excessive financing promoted speculation and in the end created the bubble. Once the sound business enterprises are invested, then there's left the unsound ones and then pure speculation about the future values, usually of real estate. Since the Tulip Mania or the South Sea Bubble of 1720, all bubbles have behind them a very lax financial sector lending people to speculate.
That's a really interesting analogy. It brings to light precisely how cyclical and sensitive today's economies really are with regards to demand and prices.
It's a simple fact when you think of it. And it explains simply why prices of real estate etc. can vary on a wide range yet real estate while rents do not go up and down in a similar way. Every rent is priced monthly while the vast majority of real estate are not bought and sold annually. This is multiplied in the stock market where it is genuinely a bunch of casino players are selling and buying a small proportion of the stock all the time. Hence we have gotten such absurdities as negative oil prices: a reaction when the casino players faced the actual possibility of ending up with the physical stuff they trade with.
Asset inflations result in commodities becoming unaffordable for those who don't possess them at the status quo, and subsequently detract demand from sellers
Not perhaps commodities. Prices hikes of commodities have happened and have resulted in poor countries in food riots, but far more typical issue would be real estate and the price of homes. This is where even ordinary people are touched by asset inflation. They have took a loan for a home in a economically booming area, once they have paid that loan they have made usually a quite a profit (if they move then somewhere cheaper).
Here California is the best example I can think of. The lack of affordable housing programs has lead to sky high prices in homes and Third World style inequality with the most richest people living there with people on tents, and especially during this pandemic an outflow of people from the state or into less expensive areas. The pandemic has not only shut many small business down, but also put people to work from home. If people can work from home sometimes even their employer urging them to do that, why pay a huge price for a crappy small place in Silicon Valley, if you could have that estate in Colorado?
I think this pandemic is an engine to a far longer economic downturn than we anticipate.
Yet I think the reason is and in history has been the financial sector, which has with excessive financing promoted speculation and in the end created the bubble.
This is fundamentally flawed because speculation goes both ways. Speculation doesn't cause bubbles across all financial instruments.
Asset inflation is caused by the pursuit of price stability and other monetary policies. Low interest rates means financial institutions hunt for yield at the same time central banks are dumping free money in the system with no end in sight. It's not as if they don't realise stocks are overvalued. They're just passing along the hot potato simply due to large demand in the financial markets because everybody is investing free money, the source of which is basically unlimited. And with MMT, which is the direction we're going in, tof will only get worse. In the end, the stock price isn't relevant but at what volumes it can be traded, its liquidity and volatility. Hence, asset inflation while the fundamentals crumble.
This is fundamentally flawed because speculation goes both ways. Speculation doesn't cause bubbles across all financial instruments.
? ? ?
How is it fundamentally flawed?
You think that speculative bubbles happen in times when interest rates are high and banks don't lend or what? Tell me an example of a speculative bubble happening in that kind of environment.
And tell me of a speculative bubble that didn't have speculation??
I think everyone should agree that loose lending practices encourage speculative bubbles, and that was certainly one of the causes behind the 2008 crash - but I think we've seen bubbles in all types of US markets even in eras with high interest rates (1980s). I'm inclined to see financial speculation as just a natural human activity, and unless the government takes serious, serious steps to squash it I think it's going to happen in a number of different financial environments. I could be wrong though. I just think the 1980s here were a time for rampant speculation despite high interest rates and not being in an era of "endless QE."I think you're certainly right in a general sense that high interest rates discourage speculation.
Lockdowns are spreading across Europe as the virus surges today. Infection in Czechoslovakia is very high at the moment, with similar levels to Wisconsin in the US, which is probably the hottest spot in the world at the moment. I heard on the news tonight that 1 in 4 are infected there.
The UK is going to try to weather the storm without a national lockdown, somehow I doubt it. I expect a sudden U turn in a week or two which is the modus operandi of our government these days.
I'm inclined to see financial speculation as just a natural human activity, and unless the government takes serious, serious steps to squash it I think it's going to happen in a number of different financial environments.
Gambling is a natural human activity also, but a speculative bubble is separate from your ordinary market actions or the "Animal Spirits" Keynes talked about. Hyman Minsky explains quite well how speculative bubbles are endogenous to financial markets. Even the Tulip Mania did involve the banking sector, so the access to debt is intrinsic to a speculative bubble to form.
Even the Tulip Mania did involve the banking sector, so the access to debt is intrinsic to a speculative bubble to form.
By "access to debt" do you mean, primarily, traders and investors using leverage? So borrowing funds to invest or speculate. Certainly that can magnify things. We can do that on a much greater scale now with the internet but I'd imagine that practice has been around for quite some time.
In the end, the stock price isn't relevant but at what volumes it can be traded, its liquidity and volatility.
Yes, and that liquidity isn't just institutional; everyone's fleeing the dollar, and with Robinhood and other retail "friendly" (i.e. exploitative) brokers becoming ubiquitous, the gap between real (economic) value and asset price is likely to widen. At some point though stocks will feel the pinch and inflation hedges like gold and bitcoin will be the major winners.
(This is actually worth a new thread).
MerkwurdichliebeOctober 29, 2020 at 00:26#4660300 likes
Reply to ssu
The real estate bubble in the UK is due to a systemic failure of government, Although it was the privelidged classes who benefited from it, I don't think it was this which provided the driving force behind it. It was ideological, the Tory government continually dismantling state institutions and support, and inviting in capitalist organisations to fill the gap. The Tory wet dream of free market capitalism. During the same period there were incentives brought in to increase home ownership allowing council tenants to buy the property they were living in. This fuelled the trend further. The council properties were not replaced with provision of new social housing. The property developers continually focussed on building the highest value properties in the most desirable locations with little affordable housing.
I could go on, but that is enough detail to spell out that the UK is in a dangerous place, trying to hold this bubble in place. If it blows all that wealth built up over 40 years will evaporate, with mass evictions, repossessions and millions of people with massive debts that they can't pay. No wonder the Tory's are running scarred and lurching to the right in a vein attempt to double down on their rip roaring capitalism. They have filled Downing Street with headless chickens running around the cabinet table, lashing out at Europe, immigrants and the poor. Roll on Brexit Britain.
The north is being used as a Petri dish.
The surge a month ago was fuelled by schools and universities going back, so now the increases will be reducing due to partial lockdowns. The trouble is that the infection rate is so high that test and trace has become ineffective as the numbers are unmanageable.
You think that speculative bubbles happen in times when interest rates are high and banks don't lend or what? Tell me an example of a speculative bubble happening in that kind of environment.
And tell me of a speculative bubble that didn't have speculation??
Because I think we need to distinguish between speculation and investing. If investors en masse invest because of cheap credit, this has nothing to do with speculation. I think the distinction between an economic bubble and a speculative bubble is useful; a speculative bubble can exist in a specific asset class but speculators as distinct from investors are a much smaller group that don't have the influence to cause economic bubbles.
Simply because prices don't reflect underlying value, this doesn't mean it is caused by speculation but there's a tendency to call it a speculative bubble regardless of cause. The stupidity of the name even resulted in idiotic measures like banning short selling. This resulted in an even bigger downward trend in the markets, because it wasn't speculators causing it but investors who now had to outright sell their positions to manage their risks.
Obviously, my comment about interest rates and monetary policy concerns the current asset inflation. The previous one was driven by inflated real estate prices, combined with bad loan origination and complex derivatives. No speculation involved, again. Just stupidity in the loan origination part with bad incentives all over the place and moronic optimism about always upward moving "markets".
Pursuit of price stability? I don't understand where this is coming from. Please explain.
Central Banks have a limited range of measures at their disposal because they're constrained by their purpose of maintaining price stability. Which is a quaint left over from the days when they thought price stability would avoid the boom and bust cycle and unreasonable fear of deflation. So they can basically only regulate the money supply and interest rate. And here we are.
There's of course a lot else going on. Like the fact people will save regardless of interest rates because they have saving goals. So all these theories can't deal with the complexity of human action and there's always unintended consequences and effects. It's time we stop basing policy on necessarily flawed theory.
. I think the distinction between an economic bubble and a speculative bubble is useful; a speculative bubble can exist in a specific asset class but speculators as distinct from investors are a much smaller group that don't have the influence to cause economic bubbles.
OK, I'll just answer one part here as otherwise the answer would be too long.
Yet economic bubbles are also speculative bubbles. Here's why.
Let's think about this with two examples, because the divide is simply about contagion and the effect of the bubble to the real economy. Bubbles can also move into other asset classes.
Bubble 1: Speculative bubble that doesn't affect the economy
Some hip new innovation that has genuine promise sends people investing in something be it cryptocurrencies, rare earth minerals or whatever is the new fad. That there is hype driving the bubble can be seen perhaps from uh, a philosophy forum we all know starting to talk about the new innovation and some there investing in it. These kinds of things won't have large economic consequences as a) few will invest more than a tiny amount of their wealth and b) there's not much impact on jobs, or consumer consumption in the real economy. The burst of the bubble won't have huge consequences. If some people lose money, they'll likely curse to death the whole stock market and finance sector as bunch of swindlers and con men. And continue with their lives with just hating capitalism. But the vast majority of people who didn't notice the fad will not be affected.
Bubble 2: Speculative bubble that does affect the economy
A real estate bubble. As houses cannot be built by robots in China, real estate bubbles have a huge impact on employment and in the domestic economy. Second, people don't choose to speculate: families need a roof over their head and people looking for a home have to participate in the market however crazy it is. And people who own real estate will notice the wealth effect of their homes increasing in value, hence it's not just the few who invest or those who willingly take risks. For the majority of people buying an own home is the largest investment they will ever do. Hence it's not only the rent seekers and speculators that are players in this bubble. That building houses is labor intensive means that the bubble truly lifts up the economy. And for the financial sector? Mortrages and financing construction is the most ordinary thing they do.
And when this kind of speculative bubble collapses, there went the wealth of many, which has causes on their consumption. At the worst case people find having more debt than then is the price of the property. Once you cannot service that debt, then you are in real trouble. Also, the slowing down of the construction business will have an effect on the economic cycle. And most importantly, when the financial sector is hit, it will close it's lending an sit on it's money like Scrooge McDuck and this will have an effect on other unrelated sectors of the economy. Hence a real estate market bursting will cause a severe recession.
Or a pandemic which shuts down the economy which already has speculative bubbles inside it...
A real estate bubble. As houses cannot be built by robots in China, real estate bubbles have a huge impact on employment and in the domestic economy. Second, people don't choose to speculate: families need a roof over their head and people looking for a home have to participate in the market however crazy it is. And people who own real estate will notice the wealth effect of their homes increasing in value, hence it's not just the few who invest or those who willingly take risks. For the majority of people buying an own home is the largest investment they will ever do. Hence it's not only the rent seekers and speculators that are players in this bubble. That building houses is labor intensive means that the bubble truly lifts up the economy. And for the financial sector? Mortrages and financing construction is the most ordinary thing they do.
What I'm trying to get at, is that this isn't a form of speculation. Maybe you just think that's a semantic discussion but there's a reason supervisors enacted stupid decisions like banning short selling - they confuse investing, buying to use and speculation. What you describe isn't a speculative bubble in my view of how the word "speculation" should be used. A speculator buys or sells assets or derivatives only because of a future expectation of value which could either be higher or lower than the current market price. A speculator is in that sense agnostic about the general direction of the market, although he is obviously concerned about his specific positions held at a certain time. An investor invests to obtain a return on its capital mostly by lending its money for a variable return in capital or stock markets. They can also He wants the industry or market he's invested in to grow and isn't agnostic. Then there are also buyers who buy to use, a specialty chemical company buys furfuryl alcohol to blend it for its own products - not to invest or to speculate.
Most people buy houses to use them, not to speculate or to invest. The real estate bubble was caused due to systemic risks. NINJA-loans, incentives for brokers to originate loans that were terrible, CDOs that were opaque and too much money in the system.
Some junior officer on a ship in the South China Sea hits the wrong button sending a torpedo in to somebody else's ship, leading to full scale escalating chaos in minutes.
Stock markets are excellent systems to bring lenders and borrowers together. Its insanity is caused by other things.
Market collapse of 1929 caused by hyper-speculation, leading to Great Depression, leading to re-emergence of Hitler, leading to WWII, leading to mass death camps, and nuclear weapons.
Market collapse of 2008 leading to untold suffering for millions, and a near miss global catastrophe.
Just arguing for tight control of a very dangerous mechanism.
Or, we can keep debating until the next crash where you lose your home and Net connection, and then I'll be able to go "Nana nana na na!" and you won't be able to counter. :-)
Never said you did. I hear you, a meeting place for mechanical transactions. In theory, neutral. Trouble is, in the real world, such places can routinely lead to chaos on a large scale.
What you describe isn't a speculative bubble in my view of how the word "speculation" should be used.
Sorry, but in economics this term is used.
It's erroneous to assume that speculative bubbles happen because of some market participants just somehow start acting irrationally and start speculating / gambling. Perhaps better would be to talk about debt bubbles, but that then takes focus away from the market behavior happening with a bubble in some new industry. Simply put it, the phenomenon is complex.
The real estate bubble was caused due to systemic risks. NINJA-loans, incentives for brokers to originate loans that were terrible, CDOs that were opaque and too much money in the system.
OK. NINJA-loans (no-income, no job / assets) is actually a perfect example of speculation, if you just think about it.
The speculator is just the lender. The banker assumes that the real estate prices will go up. If he is sure of that, NINJA-loans are totally logical. If the NINJA-loan taker cannot pay his monthly interest, no problem, the bank just takes the home and either the value has stayed the same or perhaps even risen. So "no" risks! And a huge amount of new potential customers. You see, the systematic risk you are talking about is actually the speculative bubble bursting. Then, what has not been seen in any statistics (which just have shown low risk and minimal amount of credit losses) suddenly change to something totally else. And similar thing with CDOs: just take your share and sell the risks to someone else, so no reason to think if the people can pay or cannot. After all, real estate prices go up! Have done that forever.
Why it looked like a non-risky thing. Assume extrapolating the percentage of mortgage delinquencies from loans from the stats from 1979 to Q4 of 2006. Think your extrapolation would predict correctly the future 2007-2008?
Then there's the way the banking sector operates. You see, If you sell cars, there's a multitude of things you can do with your product to make it different from other cars and hence make a niche of people to love your cars (and others hate them). With a bank loan there's nothing like that. You can basically choose a) what's the interest rate and b) to whom you give loans to. Nothing else, basically. And the more debt you issue, the more profit you make. And if you are a smaller bank or a failing bank, one option is to be more "aggressive", meaning you start giving debt to people that other banks don't give money, or face losing the game.
All this shows how intrinsic role the financial sector has in creating speculative bubbles. These bubbles can also happen when a heavily controlled financial sector is suddenly opened to free competition and banks start to in earnest compete about market shares.
That's simply not true. There's a distinction between speculation and investment in economic theory as well. Depends on what you read, really. But it's fine. I don't think we disagree in essence on what caused the bubble with respect to 2008 or the asset inflation we're looking at right now.
The speculator is just the lender. The banker assumes that the real estate prices will go up. If he is sure of that, NINJA-loans are totally logical. If the NINJA-loan taker cannot pay his monthly interest, no problem, the bank just takes the home and either the value has stayed the same or perhaps even risen. So "no" risks! And a huge amount of new potential customers. You see, the systematic risk you are talking about is actually the speculative bubble bursting. Then, what has not been seen in any statistics (which just have shown low risk and minimal amount of credit losses) suddenly change to something totally else. And similar thing with CDOs: just take your share and sell the risks to someone else, so no reason to think if the people can pay or cannot. After all, real estate prices go up! Have done that forever.
Again. If you look at it from my perspective, this is not a speculator because he's not agnostic about future values; he's invested in prices always going up. Combine that with shitty risk management and voila.
If you look at it from my perspective, this is not a speculator because he's not agnostic about future values; he's invested in prices always going up.
What does agnosticism have to do with this?
If someone thinks that prices are ALWAYS going up, meaning real prices (not that the currency is losing value), that simply is by any means quite a risky, speculative approach to investing.
Ok, now we really have to look at the definition to speculation to get this point:
assumption of unusual business risk in hopes of obtaining commensurate gain
In the world of finance, speculation, or speculative trading, refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value. With speculation, the risk of loss is more than offset by the possibility of a substantial gain or other recompense.
Speculation is an investment approach in which the investor aims to buy or sell stocks, currencies or other assets solely to make a quick profit. In such cases, the investor is known as a speculator.
Anyway, Then call it a debt bubble or simply an asset bubble. It's the same important phenomenon that earlier was even dismissed to ever happen in the modern financial markets (and still there are those who don't believe in bubbles anyway). I myself have seen enough crashes and market hype in my own lifetime to believe that this phenomenon does truly exist. And a crash can happen ...and then people start bitching about risk management being wrong.
You can be agnostic about opinions as well. So I don't commit to saying God exists or not but I can also be agnostic about markets going up or down. Maybe that's a very Dutch way of use the term agnostic for "unimportant" things but Merriam Webster recognises that type of use as well.
From your definitions, Market Business News is the definition of speculation I'd use if I'd have to chose; it's not investing based on yield but (short term) price differentials.
Anyway, Then call it a debt bubble or simply an asset bubble. It's the same important phenomenon that earlier was even dismissed to ever happen in the modern financial markets (and still there are those who don't believe in bubbles anyway). I myself have seen enough crashes and market hype in my own lifetime to believe that this phenomenon does truly exist. And a crash can happen ...and then people start bitching about risk management being wrong.
I think bubbles are real but if you see speculators as a sub-set (or even separate) from investors, calling them speculative bubbles becomes a bit weird.
And I get that you see the position "market prices will always go up" is speculation but where it differs from a speculative transacation is that such assumptions underpin long-term investment. The lender enters into a 30 year mortgage, for it's long term yield. Or they buy stock not with the plan of selling it in a week time because they think next week will be the most opportune time to sell but because regardless of market volatility if they sit on it long enough they will make a return on their investment.
and then people start bitching about risk management being wrong.
I think this was true of the last bubble. With wrong incentives and no skin in the game for a lot of people.
Now it's mostly driven by governmen/central bank policy. I think that's worse because there's no threat of bankruptcy dampening risk taking. The next bust is going to be horrible - much worse than 2008. Everybody in finance knows it and they will dump all their shit and buy commodities before average Joe realises what's going on.
What we need, in my view, is smaller financial institutions that aren't too big to fail and quicker and more robust bankruptcy and resolution mechanism when they do fail. These risks will always return and be underestimated because today's black swan wasn't the one of 10 years ago. We shouldn't aim at avoiding black swans but aim at dealing with them quickly and decisively, cut out the cancer and move on with as little disruption to society as possible.
calling them speculative bubbles becomes a bit weird.
Well sorry if economics is a bit weird, or if in economics and in economic literature they have been called "speculative bubbles" at least since the 1970's (like here and then later here or here...). Yet this shouldn't be your counterargument to what I'm saying...or the thing we debate about.
The simple fact is that (asset bubbles/debt bubbles/speculative bubbles) aren't in the kind of econ 1.0 terms that have been generally accepted with a theoretic model as the issue is still quite disputed (just as is with any question that is current in an academic field of study).
I think this was true of the last bubble. With wrong incentives and no skin in the game for a lot of people.
What make's it "the last" one? It didn't burst, I think we are living now in that bubble economy still... and the pandemic might be perhaps the final straw that truly will burst it.
What we need, in my view, is smaller financial institutions that aren't too big to fail and quicker and more robust bankruptcy and resolution mechanism when they do fail.
Or simply let's have that deflation and start of with totally new financial sector.
What make's it "the last" one? It didn't burst, I think we are living now in that bubble economy still... and the pandemic might be perhaps the final straw that truly will burst it.
I distinctly recall houseprices losing value significantly. Of course, they've rebounded since on the "solution" offered by central banks to bail-out the banks that would've otherwise gone bankrupt for fear of an imploding financial sector. This time every asset category is just overvalued; We had negative yield on 30-year bonds for a while because of the flight to safety in NL and DE. Stocks are overvalued and property is through the roof again.
Or simply let's have that deflation and start of with totally new financial sector.
Well, I already called the fear of deflation irrational but... that only concerns goods and services price deflation. There's no statistically significant link between such price deflation and diminished output. It's different for asset prices though, in particular property price deflation combined with high levels of private debt. Here the link is obvious and serious.
Of course, they've rebounded since on the "solution" offered by central banks to bail-out the banks that would've otherwise gone bankrupt for fear of an imploding financial sector. This time every asset category is just overvalued; We had negative yield on 30-year bonds for a while because of the flight to safety in NL and DE. Stocks are overvalued and property is through the roof again.
This is the way it has gone. Perhaps the only asset class that was let at least partially to come down was indeed the real estate sector, because the millions of homeowners were not simply connected as Wall Street is. Here "socialism for the rich" comes to play. But you are right that now the bubble is nearly in every (if not every) asset class.
And then we got a pandemic. This is the "may you live in interesting times"-addition to the equation.
Once a massive economic downturn is forced upon on the Global economy (and rightly so, because the lives of our fellow citizens are worth more than a dent in our economic prosperity), it does have consequences. Everybody understood that this was truly an exogenous shock and was implemented by the lock downs, yet that doesn't change the underlying facts that this, again, has been a huge economic shock to the economy.
And there's no V-shaped recovery ...if we don't count the V-shaped recovery for asset inflation.
A rebound will happen, but likely we are going to be still on a lower level especially with the advanced economies. And that's the point here:
Yet the effect on unemployment will have the severe effect on the global economy going forward. That huge change in unemployment will have real consequences. And it's still not over.
unenlightenedOctober 30, 2020 at 13:28#4665400 likes
On a global level the service sector is such a huge provider of employment that the impact that pandemic has had is quite dramatic to overall aggregate demand. Same thing goes for tourism etc.
Anyone would think that employment had value itself rather than being the cost of producing value. Employment is being produced, but no one is buying it or ever has - you cannot give the stuff away, you have to pay people to take it.
This time every asset category is just overvalued;
I'm having a big problem making sense of all this What is the value standard by which every asset category is measured? The best I can make of it is that it is the end of the game of Monopoly; wealth has become so concentrated that the social system of exchange cannot function.
People not playing football, not painting each other's nails, not spending at bars and restaurants and not flying hither and thither on holiday does not cause the collapse of the economy unless the economy is based on pure bullshit. I would have thought that a universal basic income was the obvious solution to such a crisis as we face, linked to food and housing costs.
I'm having a big problem making sense of all this What is the value standard by which every asset category is measured?
Done by comparison.
Most simple way is to look at real prices, meaning inflation adjusted prices. And let's say a modernized apartment in Manhattan in the 1990's is roughly as valuable as a modernized apartment in 2020. However, if you take into account how much the inflation rat has eaten off the value of the dollar and still the price is way higher in 2020 than in 1990, then it's likely you are looking at an asset bubble.
Here's housing prices:
Here's a study of the inflation adjusted price of gold:
Reply to unenlightened Capital flows far outstrip the money involved in goods and services. So yes, the economy is largely financial bullshit.
Let me try to illustrate (not 100% correctly but this should get the idea across). Let's say we're a country of 2, I'm a farmer, you make tools I can use. The government (central bank) made 10 coins and egalitarian as we are, you have 5 and I have 5. Since it's linked to the gold standard, the government can't make more coins without devaluing their worth.
I buy tools for 1 coin and produce food and at some point you'll buy one bushle of food for 1 coin from me. We can go back and forth like this unitl we're both dead. We'll have exchanged a lot coins and probably obtained some wealth in the meantime because the tools are pretty durable so there's a collection of them.
Now we introduce a bank. First of all when we put our coins in the bank, they will gain interest. That means the money supply needs to grow. Back in the day 10% interest wasn't uncommon so let's say we both only need 4 coins for our day to day transactions and can keep 1 coin in the bank until we die plus whatever interest we get on it (we'll give that 40 years). Compound interest means that after 40 years, we each have 41.14 coins in the bank. So both of us have 46.14 coins but since we're lazy, no productivity increase. If the money supply is 90 coins in total and the number of goods in the market remain the same, what will that do for prices? They ought to be rising, right?
Now, there's of course a good reason for this because the savings can be used for lending. And if the bank lends to @ssu, he'll do something really useful with it. So that's our third countryman. Welcome to the club, we're special because there's only three of us. Here's 5 coins to get you started because we're totally egalitarian here.
Based on the circulation of money, the bank feels comfortable to lend out the money we deposited. So let's say the bank treats our savings as term deposits of one year. But will only lend out one of the deposits so it can cover one deposit with the other if we'd withdraw early. So it will lend out 1 coin in the first year and 41.14 coins in year 40 but since it promised us both 10%, it needs to charge 25% for the yearly loans. But wait, it can lend out any profit it makes as well. So the money supply doesn't increase with 82 coins but with... (drumroll) 6,311 coins for a total of 6,319 coins of which you own 49 coins, I do too and the bank owns EUR 6,009 coins. Pretty fair huh? Especially since we're the only ones actually working in this picture!
But wait, ssu borrowed that money everytime and actually successfully invested it. So his rate of return was actually larger than the interest rate. A whopping 5% after his interest and downpayment but since he annually borrowed larger and larger sums of money (initial 1 coin + compound interest + whatever the bank lends him from it's own profits), he ends up with the other 300 coins. Prices should be rising for our tools and bushles right? Except they're not! Why God, why ain't I as rich as ssu? You fucker, you didn't work harder than I did. Give me your money. Tax him or something.
We see here the simplest divergence between goods and services price levels and that of a financial product, namely loans, which is a simple product to see how it yields profit. But a bank can of course
buy stock, buy bonds or trade derivatives instead of providing loans. Now that the bank has it's own source of money, you and I can go fuck off with our 10%, interest rates will go down as will lending rates as banks start competing to get ssu to enter into a loan with them. As lending rates drop other financial instruments become more interesting so at some point the lending rate bottoms out at the level where other financial instruments provide a higher yield. Even if ssu used his lending activities to raise productivity and add to the real economony, his wealth after 40 years is much smaller than that of the bank.
So how do we know asset prices are inflated? Because goods and service prices are not inflating, which they would if more money would be spend on goods and services simply because the money supply increases. Now, goods and services inflation can also be offset by increased productivity but this isn't happening and certainly not concurrent with increases in the money supply.
Second, sub-zero interest rates. If money were scarce, you'd have to pay a premium to be able to get a hold of it. But there's no premium, banks are basically giving it away since the central bank is giving it away too.
Third, yield or return on investment. Would you put your money into something that would take 1,000 years to pay that amount back? Doesn't really seem like a sensible investment to me.
unenlightenedOctober 30, 2020 at 16:13#4665820 likes
Why do you think an universal basic handout is the obvious solution?
Demonstrably, most people don't need to work most of the time, because we [s]can afford to[/s] have to pay people for playing football, and painting each other's nails, etc. But they still need to eat. Don't call it a handout as if you own the world. It's a hand round of the plentiful resources of the world.
At the moment people who spend their lives building houses have to pay rent to people who never built shit to live in one of the houses they helped to build. That's a hand out, and a greedy grasping hand it is too.
Would you put your money into something that would take 1,000 years to pay that amount back? Doesn't really seem like a sensible investment to me.
Of course the idea is that these companies are so awesome that they will grow. It's silly, yes.
But let's remember that 40% of the value of the SP500, five hundred handpicked companies, is from just six companies or so. Take them out, the net companies that have their best possible upturn during a pandemic, and the rest are in a bad shape. Hence if just six companies would take a 25% drop, the whole index would be -10% down even without every other stock not changing it's price.
Demonstrably, most people don't need to work most of the time, because we can afford to have to pay people for playing football, and painting each other's nails, etc. But they still need to eat.
Well, if an society can pay to professional athletes, artists and nail salon personnel, that just shows that the society is prosperous. The more poor the society, the more people working in jobs that are basic necessities.
But coming back to universal handouts: unemployment benefits do that thing too (feed people). Or more generally speaking, a welfare state system does it. Why the necessity to give Jeff Bezos or Bill Gates the handout?
Besides, haven't Americans already been give by Trump this during the pandemic? I remember a Finn who said his American wife got money all the way from Trumpland to spend here in Finland. What's the cure all in this?
Reply to Benkei
Thanks for that, I don't think you're far off at all. From where I'm sitting, watching the rain fall on streets with much reduced traffic, the economy seems to have tanked.
Stagflation, noun (economics), persistent high inflation combined with high unemployment and stagnant demand in a country's economy.
The corporations live to serve their masters, the shareholders. To maintain rosy appearances in the markets, they are cutting expenses to the bone, which immediately impacts their suppliers of services. The suppliers cut working hours or just lay off workers and go out of business. Shops are closing, stores have limited inventories with rising prices, and many people just stay home watching the rain fall. But thank God, the stocks are doing so well.
unenlightenedOctober 30, 2020 at 17:22#4666030 likes
But coming back to universal handouts: unemployment benefits do that thing too (feed people). Or more generally speaking, a welfare state system does it. Why the necessity to give Jeff Bezos or Bill Gates the handout?
Bill and Jeff have to eat too. So we give them the necessities as of right, and get them to pay some tax on their "earnings" like the rest of us. Is it a strange notion to you that the government serves everyone?
haven't Americans already been give by Trump this during the pandemic? I
Not sure what's been happening in Trumpton, but here in ready baked Brexitland, there have been arbitrary ad hoc unfair handouts to mainly businesses to continue the pretence that everyone is doing vital work. "Eat out to help out" was the slogan to justify government handouts to Macdonalds and Starbucks, and the policy of not providing meals for children, was named, but not by the government, "Eat nowt to help out."
Bill and Jeff have to eat too. So we give them the necessities as of right, and get them to pay some tax on their "earnings" like the rest of us. Is it a strange notion to you that the government serves everyone?
Is it strange to understand that there is a huge difference of taking care of those necessities or just giving a sum of money to a person and hoping that the person will use it wisely?
Of course the question of universal basic income is far more complex. My country btw. did have an experiment on universal basic income.
Tells something that they didn't continue it. So I'm not so sure it's this great solution.
Well given the overwhelmingly positive results there, it tells me that it would be a great idea, that it would not lead to lots of people just doing nothing or any nonsense like that, and apart from the continuing social pressure to find employment which is just a hangover from the outmoded attitude of a non automated industrial society, there really is no downside. But pressure from capitalists would make it hard to implement widely because it is only the fear and suffering of the poor that empowers employers. If unemployment was no great threat, work conditions would have to be made pleasant and workers treated with respect. That would be awful.
If unemployment was no great threat, work conditions would have to be made pleasant and workers treated with respect.
I'm not so sure about that. If unemployment isn't a great threat, you aren't facing living in the streets, then simply being unemployed is a valid option.
We do have here a welfare state that does take you from the cradle to the grave. You don't need to work, you do have perpetual unemployment (basically similar to UBI), the welfare state pays your rent up to 600 euros, meaning you can get a decent small flat in the suburbs. If the choice is to go and work at McDonalds, you really have to think of the equation, because you aren't going to be so much better of with the job at McDonalds. And before I continue, I have to say I totally choose the problems of a nanny state than have homeless and dirt poor people around. The dismal situation in the US is something similar to the Third World and that a welfare state where you don't need to work can leads to social exclusion becoming a problem. But that problem is quite minor compared to homelessness.
Here's the long term stats for my country on unemployment. Notice that on good times (2015) the unemployment was at the level that it is roughly now in the US. But do notice the pattern: after every severe economic recession where unemployment has exploded upwards, it has come down, but to a higher level even at good times.
Now compare this to US unemployment. What you can see is that similar uptick after a recession cannot be seen as the US unemployment has continued to go down under 5% after a recession, even if there can be differences in the ways the statistics are done:
Of the Nordic countries Norway can easily afford the system, but we cannot. The government is still in far better situation than some South European countries, but we can fall there too.
unenlightenedOctober 31, 2020 at 12:18#4668140 likes
What's so terrible about that? If playing football and painting nails are valid options then why not going for a walk in the park. - Oh wait, that is already a thing - called professional dog walker. And yet looking after one's own children is "simply being unemployed". Looking after someone else's children is a profession, though.
Norway can easily afford the system, but we cannot.
See I don't believe this. Lockdown demonstrates that we can live without most of the services and with 50% unemployment. If we can live without them, we can afford to live without them. When we don't have to, we probably prefer not to, so most folks will want to work to afford them; that's not a problem either. But don't pretend that the freedom not to be a wage slave is unaffordable.
See I don't believe this. Lockdown demonstrates that we can live without most of the services and with 50% unemployment. If we can live without them, we can afford to live without them.
Uhhh...you STILL do have all the expenses, don't forget them. All the unemployment benefits, all the bailouts and funding have to be covered. TRILLIONS of dollars pushed just into the US economy after Covid-19 hit. Yes, spending trillions with a t in one year does have an effect.
In fact, so why pay taxes at all? Why just take care of all government expenses by covering it all in new debt that the central bank then buys. At least, oh, until the pandemic goes away. If you think it will cause inflation, think again! Learn the marvels of modern monetary theory (MMT), which leave me a bit puzzled.
I think it would be important to debate MMT in this forum. I'm surprised as that there are many who supported Bernie here and not much is said about MMT.
unenlightenedNovember 01, 2020 at 14:16#4671830 likes
.you STILL do have all the expenses, don't forget them.
You still have all the expenses either way. People got to eat. Most people these days are totally unproductive. They cut hair and play football. So if all those people stop work, hair gets longer and grass gets longer. And that's it. All the rest is just accounting for the food that they are going to eat in either case; there is no real difference.
People got to eat. Most people these days are totally unproductive. They cut hair and play football. So if all those people stop work, hair gets longer and grass gets longer. And that's it. All the rest is just accounting for the food that they are going to eat in either case; there is no real difference.
I get your point. But society doesn't work that way, literally. That accounting you talk about is far more important than you think. Work is important for many people. Starting from things like self respect and mental health.
We do value work, be it a "productive" or "unproductive", which by your definition is quite a loose definition. And is it wrong to value work.
unenlightenedNovember 01, 2020 at 16:34#4672280 likes
Yes it is wrong. It is wrong because it is contradictory as I pointed out earlier. The whole thrust of the development of civilisation has been from the beginning to work less. Work has negative value in the economy and always has had because it tends to be tiring, boring and unpleasant if not dangerous. Because it has negative value, employers have to pay. So we get animals and machines to work instead whenever possible, so we don't have to. And society literally does work that way, and literally always has, and the notion that anyone - meaning anyone working class - should be grateful for work being provided, is a foul and immoral lie. Only the devil makes work for idle hands.
Reply to unenlightened
I sympathise with your ideas here, I have similar ideas. But we will need someone like Corbyn as Prime Minister to even start moving in the right direction. To think that right leaning conservative leaders might move in that direction is naive. You are aware I presume of the inequality in our society? In which a proportion of the population drains wealth away from the other less privelidged parts of the population. There are literally people who don't work, but live off the back of others working, often through what could be described as exploitation. There is a group who live off the wealth accrued from the increases in property values, again they don't work and that's not to mention the billionaires and criminals.
I think it's fine to get some of these people to pick vegetables, or work in the care sector for a good wage. But somehow I doubt that they would see it that way.
unenlightenedNovember 01, 2020 at 16:58#4672380 likes
I think it's fine to get some of these people to pick vegetables, or work in the care sector for a good wage. But somehow I doubt that they would see it that way.
We just have to convince them of our generosity in offering them work. I find a leather bullwhip is persuasive.
The whole thrust of the development of civilisation has been from the beginning to work less. Work has negative value in the economy and always has had because it tends to be tiring, boring and unpleasant if not dangerous.
I don't think so. Besides, getting rid of meaningless work is a totally different question that getting rid of work altogether.
Meaningful work brings meaning to life. What's so wrong with improving things that are important to oneself through work?
Reply to ssu I have to side with unenlightened on this one. I think the goal is full production, not full employment. Meaningful hobbies give meaning to.
unenlightenedNovember 03, 2020 at 18:07#4680870 likes
Besides, I've done a lot of voluntary work, that I've not gotten paid. I think it has been meaningful and I've liked it. I don't know what your problem is with work.
I respect myself because I contribute to society; I get a job because I am hungry. I value people playing football because I like to watch it. I value paid work for me because it pays. You yourself talk about obligatory work, because you reject living without paid employment as a valid option. You conflate what is meaningful with what is profitable and it is offensive.
And contribution we usually think as work. Rarely we see ourselves contributing if we just get an unemployment check. That sense of contribution is important and that is my point as it seems you haven't understood my point.
You're the one putting words in my mouth. Naturally if someone really doesn't want to work, that is his or her decision. Yet the vast majority would like to work. And it is very important for many for their self respect as it still is a stigma to be unemployed.
The unfortunate fact is that a society can tolerate high unemployment because of this personal stigma, even if the unemployment is because of an economic depression. There are enough of annoying people that will say "anyone can get a job if they really want to work". Unemployment is seen as a personal failure. If you the welfare state does give protection and you don't find yourself in the street or living in your car as in the US one can find oneself, that doesn't help the motivational side.
And how this is societal attitude one can easily see how then the society totally accepts one idle class of people: the retired. Once you have worked and then retire is seen as good. Yet is the issue about changing people's views on unemployment? Well, then kicks the economy itself into the equation: those nail polishers or football players you judge to be unimportant still get their money because of a totally willing and voluntary transaction of money: somebody is genuinely willing to pay for their services and it's not similar a tax.
unenlightenedNovember 04, 2020 at 12:44#4684140 likes
The unfortunate fact is that a society can tolerate high unemployment because of this personal stigma, even if the unemployment is because of an economic depression. There are enough of annoying people that will say "anyone can get a job if they really want to work". Unemployment is seen as a personal failure. If you the welfare state does give protection and you don't find yourself in the street or living in your car as in the US one can find oneself, that doesn't help the motivational side.
Can you just unmuddle this for me? I say that society doesn't need people to work very much because automation. So most employment is people scratching each other's backs and picking each other's nits. And if people do a bit less or a lot less of that, it needn't matter very much to anyone, as long as everyone still gets food and shelter.
You are saying:
1. society can well tolerate high unemployment - agreed.
2..there is a social stigma to unemployment - yes, but there needn't be.
3. welfare doesn't motivate employment - yes but that doesn't matter because 1.
A person who does something useful or worthwhile or creates something of the like should be rewarded. Most work or have compulsory education because they need to do so in order to live.
Nothing is given for free. If you eat something it's because someone either raised crops or cattle, and had to deal with the hardships/setbacks associated with it. You can't have someone sitting around doing nothing and getting stuff while someone deals with the stresses and hardships associated with producing said stuff and gets the exact same. It doesn't make any sense. You have to be rewarded for your effort or to many people that effort would be in vain, at least it wouldn't be something anyone would want to do. With joy and not out of spite, and if so, without those two, you never know what you're going to get...
UBI sounds like a great idea, in theory, if the world were as it was, groups of peoples with numbers under a few hundred thousand who can explore, cultivate, and lounge around as they please. Unfortunately, we live in a world of 8 billion. Not to be unexpected, the pleasures of fraternizing were too great to be resisted. However, that was back when your community or people would inflict harsh punishment on you for neglecting your offspring. Now, you just offer up for adoption or the State to handle your progeny if you're "unable" or unwilling usually (and that's 90% of most cases). That's what they wanted so that's how it is. So. You work. Simple, really.
You can have an economy with UBI where everyone works if they please (which most won't). Meanwhile, your next door neighbors may actually instill or rather correlate their currency to work and effort. Over time, which one do you think will hold more value? See the Zimbabwean dollar.
unenlightenedNovember 04, 2020 at 13:26#4684220 likes
Can you just unmuddle this for me? I say that society doesn't need people to work very much because automation. So most employment is people scratching each other's backs and picking each other's nits. And if people do a bit less or a lot less of that, it needn't matter very much to anyone, as long as everyone still gets food and shelter.
I understand your point. My point is that "scratching each other's backs" is important as then the transfer of wealth, the payment, is voluntary. No nail polisher of football player will just come to your house and demand you pay part of their income. Yes, we don't have anymore 12 hour workdays six days a week. Heck, I can write to you in PF and do my work and still my boss is happy. A fitting mix of work & leisure is what we need.
You are saying:
1. society can well tolerate high unemployment - agreed.
2..there is a social stigma to unemployment - yes, but there needn't be.
3. welfare doesn't motivate employment - yes but that doesn't matter because 1.
So what is your argument against a basic income?
Well, I do live in a welfare state where there is a) free education even to the university level, b) assistance to housing, c) perpetual unemployment benefits and d) universal free health care. When you have those, you already have been taken care of what universal basic income is for, especially with the unemployment benefit. Then for those who do have income and pay taxes, it is questionable if this is basic income is necessary as it's basically a payback of the taxes.
unenlightenedNovember 04, 2020 at 19:05#4685180 likes
Well, I do live in a welfare state where there is a) free education even to the university level, b) assistance to housing, c) perpetual unemployment benefits and d) universal free health care. When you have those, you already have been taken care of what universal basic income is for, especially with the unemployment benefit. Then for those who do have income and pay taxes, it is questionable if this is basic income is necessary as it's basically a payback of the taxes.
Right. The difference is one of principle and psychology, rather than of mere economics, but I think it has important implications, and it is those implications that you resist. But you have dropped the 'we can't afford it' line at least, since it obviously costs almost nothing to give with one hand and take back with the other.
Reply to unenlightened
Well, here we have been having deficits for a long time and it hasn't gone into investments, but upholding the welfare state. If taxes don't cover the costs, then the government takes on debt.
The true question, which I already mentioned, is if we really can go along the lines of Modern Monetary Theory and assume that it doesn't matter how much debt the government has, that it won't have an effect on creditworthiness or the value of the currency. It's a quite current issue you especially now.
TheMadFoolNovember 06, 2020 at 13:17#4691130 likes
The GLOBAL ECONOMY is completely, entirely, centerd on and around money. Even to someone who's utterly economically illiterate as I am can see this truth stand out like a sore thumb in the way economies are run both within and between countries. If money is flowing into the bank accounts, all is good is the mantra I suspect.
Unfortunately, the way economies are run, perhaps its something inherent in its very nature, has, :smile: "costs" that can't be translated by economists or anyone else apparently into money. Stuff like pollution, environmental degradation, deforestation, global warming, etc. haven't been transliterated into dollars and dollars seem to be the only language people, especially the ones who call the shots, understand. It's as if mother earth, Gaia, hasn't been able to keep up with the way human language has evolved from Hindi, Chinese, English, German, Japanese, etc. into the now global language that's money. In the past, Gaia, could speak to us in moving verse and thought-provoking prose, of course at the cost of losing precious trees to make the paper on which they're written. Now, this simply fails as the language has changed into what to Gaia is unspeakable nevertheless "understandable"
I've been led to believe this lamentable state of affairs is changing but not in the way some of us would've liked.
What's happening is people (economists?? I'm not sure) have begun the process of translation between Gaia and us but the chosen language is, for better or for worse, money - dollar costs of environmental degradation, dollar costs of deforestation, dollar costs of biodiversity loss, etc.
Wouldn't it have been better if we'd done it the other way - learned to speak mother earth, Gaia's language, perhaps requiring a getting in touch with our softer, mellow side that has a primeval connection to the Earth?
Something must be done about the so-called global economy.
You think that speculative bubbles happen in times when interest rates are high and banks don't lend or what? Tell me an example of a speculative bubble happening in that kind of environment.
That is an interesting thought. I absolutely love it. I tried to warn people of the housing bubble several years ago and no one would listen. Somehow the whole nation has lost its judgment. No one seems grounded in reality.
Wouldn't it have been better if we'd done it the other way - learned to speak mother earth, Gaia's language, perhaps requiring a getting in touch with our softer, mellow side that has a primeval connection to the Earth?
Something must be done about the so-called global economy.
For starters, not everything important has to do with the economy. The economy is first and foremost a tool, if it works well, then the prosperity should be used to preserve nature and make the environment a better place to live for every living creature.
The simple fact is that economy is important just up to a point, it isn't itself a reason.
Then you are one of the people that understand reality and don't go with the hype as the majority will do.
Heavens no. I don't go along with the hype because I am too skeptical. But I only know enough to know how much I do not know.
This may have nothing to do with what you all are talking about, but there was a time when the there was a formula for determining the prices of things. One third the price of something was the cost of making it. One third of the price was invested in the company. The last third was profit. I was absolutely horrified when large manufactures of cars went bankrupt!
Something has gone very wrong with our capitalism. Successful business should not need to depend on banks for loans, because they should have their own reserve for growth, and bad times.
Far too many industries/businesses are dependent on government contracts! How many bombs does the world need and should we be arming the world because that is good for our economy?
Should we count the whole world as our supply of resources, or should we be aware of our own resources and the nations we depend on for mineral resources? When it comes to mineral resources and the cost of defending our economic interest, I think we are way out of touch with reality.
Can we ignore global warming or should we figure the cost of ignoring it as part of our reality?
For starters, not everything important has to do with the economy. The economy is first and foremost a tool, if it works well, then the prosperity should be used to preserve nature and make the environment a better place to live for every living creature.
The simple fact is that economy is important just up to a point, it isn't itself a reason.
What you have said is kind of like figuring the value of a homemaker. Traditionally a man supports the woman, and we know his value by what he earns. The wife does not earn money, so her value is zero, right?
The earth is our mother. We have exploited her and diminished what she has to give. The value of what we take from her is what the men earn. She can be ignored as the homemaker is ignored. :wink:
:lol: I can imagine some men totally regretting the forum is open to women who do not know what they are talking about. While they take their fantasies of economics very seriously. I come to the discussion with point of view of a woman who came of age before women were liberated, and also from a geological perspective. I lost any trust in economist when I realized they are not grounding their thoughts on economics with geological reality.
What you have said is kind of like figuring the value of a homemaker. Traditionally a man supports the woman, and we know his value by what he earns. The wife does not earn money, so her value is zero, right?
That's the classic example how economics get's things wrong: if the mother stays at home, looks after the children and takes care of the house, that isn't seen in the GDP. A bigger problem is in Third World countries where a lot of people are subsistence farmers. Farmers that live off their land and have minimal amount of transactions again aren't counted in the economics statistics, which is the reason why some countries seem even poorer than they are.
I lost any trust in economist when I realized they are not grounding their thoughts on economics with geological reality.
Some do that, but many just choose the fancy mathematical models that nobody else understands to make their findings "academic" or "professional" and are happy focusing on the mathematic models and equations. As long as everybody else is saying the same things, it doesn't matter if the World then develops totally differently as one has described. Just call it a black swan event.
A person who does something useful or worthwhile or creates something of the like should be rewarded.
— Outlander
Why?I just created that worthwhile post; reward me.
Nothing is given for free.
— Outlander
Everything is given for free. We come into this world with nothing and helpless to even feed ourselves.
For thousands of years the woman's and the poet's reward was intrinsic . During the great Depression the arts were funded but we seem very reluctant to do that today. Mothers dependent on welfare are surely not rewarded for being mothers.
Especially in our materialistic capitalism, we do not have a system for rewarding everyone who makes a contribution. Many of our essential workers are living below the poverty level without the protections of wealth. Just how well should they be rewarded?
We might want to provide well for everyone, but being dependent on public assistance is not equal to having dignity and liberty and where is the money to provide for everyone going to come from?
Reply to ssu I please there seems to be more agreement here than I expected. Okay, what can we do to get the whole world operating on a better understanding of reality? We desperately need a better grasp of reality. Third world countries are not going have our standard of living, making shoes and clothing for wages that keep these jobs in third world countries. That is not good for them nor all the people in the developed countries needing jobs.
Even if somehow the economy of every country could afford a high standard of living, our planet is finite and the faster we consume its resources the closer we come to economic collapse.
What is a realistic plan that is sustainable? I want to give the world birth control because war is a product of over population and I hate war.
Third world countries are not going have our standard of living, making shoes and clothing for wages that keep these jobs in third world countries. That is not good for them nor all the people in the developed countries needing jobs.
Economic history tells how to do it.
Actually many countries have become more prosperous thanks to globalization and thanks to the West's indifference on manufacturing going to cheaper countries. Yet that strategy of using cheap labor to lure low skill manufacturing to a country goes only so far. The next step, a huge one, would be to use that income to increase the education and the skill level of the future labor force that would then interest medium to high skill manufacturing to the country. To have those educated professionals, engineers, scientists etc. in your workforce. And in order to preserve them, as they simply don't migrate to the West, the income has to be near to the Western standards. This in turn then creates the class that every country wants to have: the educated middle class, which in turn will demand things like taking care of the environment. And above all, they are consumers, which themselves create the demand for a service economy. Not that poorer people wouldn't think that the environment is important, but if you face literally hunger, the environment isn't you biggest worries.
So what could be done?
Starting from the problems of the present globalization would be a good choice. Now it's the emphasis on globalization is on owners of companies getting as much as they can. This isn't the way things went in the West: the labor movements demanded and got labor laws, work safety standards and above all, negotiated collectively pay increases, which then made working class families more prosperous and created the consumer society. If you prevent the labor force in a Third World country to get also these important rights and higher salaries, then the country will stay poor as there isn't much of aggregate demand. No "take off" of the economy will happen.
Secondly, Improving the institutions in other countries is important, but this is something they themselves have to do. Foreigners can help just so much, but they cannot run the system. Also the focus on economic and monetary policy should be the ordinary people, not the richest people. The elite in a country should understand it's role and invest in the country, not move the money to Swiss bank accounts or luxury real estate in the US (in fear of losing the money if it stays in the country).
And thirdly, having the vast majority of people able to get a decent long term mortgage for a decent home will create prosperity in the long run. For example in Egypt, the vast majority of people rent their homes, meaning that all their life they haven't saved, but are as poor as when they entered the workforce. We take it granted that the financial sector (usually) works OK for us, but that isn't so in many countries.
I am not sure how your idea of an economy works. Think of this as a computer game. describe your area, does it have a sea port? Is it inland? What are the natural resources. You know, what can be use to start your economy? What is your water supply? Can you feed your community? How? Do you have a source of energy? After telling me how these people meet their immediate needs and develop a product they can sell, what is the transportation system and who is the buyer of the product?
If someone thinks that prices are ALWAYS going up, meaning real prices (not that the currency is losing value), that simply is by any means quite a risky, speculative approach to investing.
This is just partially correct. You need to also include the fact that speculators ignore the (necessary) market fundamentals responsible for the increase in an asset's value. What supports a continued increase in value besides crossing fingers? One could expect, understandably, the value of an asset to keep going up during the times of sustained profitability, demand, production, and other sound economic conditions. This is not speculative bubble -- this is called sound investing.
If someone thinks that prices are ALWAYS going up, meaning real prices (not that the currency is losing value), that simply is by any means quite a risky, speculative approach to investing.
It's not just risky, it's counter intuitive. Increased efficiency and specialisation in production should lead to lower prices. Rising prices are purely a result in increases in the money supply or debt leveraging. If those funds are directed at the "wrong" sector or causes a general glut it's going to collapse.
It's not just risky, it's counter intuitive. Increased efficiency and specialisation in production should lead to lower prices. Rising prices are purely a result in increases in the money supply or debt leveraging. If those funds are directed at the "wrong" sector or causes a general glut it's going to collapse.
What happens when a vital resource for a product becomes hard to get and the demand is greater than the supply?
Unfortunately, the way economies are run, perhaps its something inherent in its very nature, has, :smile: "costs" that can't be translated by economists or anyone else apparently into money. Stuff like pollution, environmental degradation, deforestation, global warming, etc. haven't been transliterated into dollars and dollars seem to be the only language people, especially the ones who call the shots, understand. It's as if mother earth, Gaia, hasn't been able to keep up with the way human language has evolved from Hindi, Chinese, English, German, Japanese, etc. into the now global language that's money. In the past, Gaia, could speak to us in moving verse and thought-provoking prose, of course at the cost of losing precious trees to make the paper on which they're written. Now, this simply fails as the language has changed into what to Gaia is unspeakable nevertheless "understandable"
That is not exactly true. We can talk about the cost of pollution, environmental degradation, deforestation, global warming. Here is a google page that does that.
It is up to us to change the conversation and Biden's administration is more likely to make new conversation possible then the Trump administration dependent on denial of the cost.
We the people have a lot of work to do in the US because it is evident the population is very ignorant of things we need to know, to have good moral judgment. We need to become aware of the most important pieces of information and then be sure the media is addressing them and our schools are preparing the young for a different reality than the one we have lived up to now.
TheMadFoolNovember 08, 2020 at 14:28#4697960 likes
That is not exactly true. We can talk about the cost of pollution, environmental degradation, deforestation, global warming. Here is a google page that does that.
Yes, the "cost" which is a monetary term to my knowledge. I feel like a nonphysicalist with an environmental agenda, equally apalled by the materialistic reductionism as I am about the, coincidentally, "green" reductionism. Isn't it odd that the greenback is at odds with the greenbelt? I guess, we're a bit confused about the whole issue - both are green after all.
Well, I do live in a welfare state where there is a) free education even to the university level, b) assistance to housing, c) perpetual unemployment benefits and d) universal free health care. When you have those, you already have been taken care of what universal basic income is for, especially with the unemployment benefit. Then for those who do have income and pay taxes, it is questionable if this is basic income is necessary as it's basically a payback of the taxes.
And we all live happily ever after, NOT.
We no longer live in labor intense economy. Factories that once employed 300 people are run by a handful of people with high tech skills. Not only is does this mean not enough factory work, but everyone who got only a C average in school, has very little of chance of getting a job that pays a decent wage because the supply of these people is far greater than the demand for them. AND, who is paying taxes? Not the unemployed people, and not those working for low wages.
Since early times governments have been supported by the source of income. At first the source of income was the land. Then as economies developed the source of income was the human time and energy invested in the production of products. Increasingly the source of income is the technology that has replaced the need for human labor and I think we need to rethink our tax system.
At the very least, we need to respect how much time and energy a person gives to earn the wage. Someone working more than 40 hours a week should not be taxed at the same scale of someone who can earn that much money in a fraction of that time. To make our tax system just, it should compensate people for their time and energy. Working 60 hours to week consumes a lot from a human being, and this people should not be taxed the same as someone doesn't work for a living but lives well off of investments. We have a long ways to go before we express human value.
One could expect, understandably, the value of an asset to keep going up during the times of sustained profitability, demand, production, and other sound economic conditions. This is not speculative bubble -- this is called sound investing.
True, but notice there are indicators as Price to earnings ration, the P/E. Usually with "normal" stocks this is something like 30, meaning that the company will pay in dividends it's stock price in 30 years. If a company grows and creates profits, that ratio could stay the same. If it anticipated to grow a lot, maybe the P/E would be 50 to 75. Now you have stocks in the P/E 100 - 1000. Now of course, the standard rhetoric is that these companies have a bright future, but now they aren't yet profitable, but will soon be. Amazon has an P/E of 98 now, is it this "small company destined to have far brighter future"? The company is over a quarter century old and is the leader in it's field, but I guess it will have to grow multiple times.
How many multiple times bigger you think Amazon's revenues will grow?
You see, there is an alternative reason for Amazon to have such a high P/E and that is index investing. In index investing, you just invest in the biggest companies because you want to mimic the index. And Amazon is on of the biggest companies in SP500 (or other indexes). Why? Because the index has gone up! Someone might notice the reason for a bubble when many follow this investment strategy.
It's not just risky, it's counter intuitive. Increased efficiency and specialisation in production should lead to lower prices. Rising prices are purely a result in increases in the money supply or debt leveraging.
True.
The real problem in the "Market economy" of the present is that the natural market mechanism that would lead to asset prices to fall isn't tolerated. That isn't free market economics. Yet you have great examples from tiny countries like Iceland that the most healthiest thing to do is let the bubble burst, put the people who have done outright crimes to face legal actions and have that quick deflation, and then the economy is back to being healthy. It really is about political power.
Yes, the "cost" which is a monetary term to my knowledge. I feel like a nonphysicalist with an environmental agenda, equally apalled by the materialistic reductionism as I am about the, coincidentally, "green" reductionism. Isn't it odd that the greenback is at odds with the greenbelt? I guess, we're a bit confused about the whole issue - both are green after all.
I think a better understanding of our economy might include a study of Christianity. Especially Protestantism, that is tied to Calvinism, a very materialistic/supernatural understanding of life justifying the exploitation of humans and earth. By materialistic I mean a total rejection of animism- [quote="the attribution of a soul to plants, inanimate objects, and natural phenomena. 2. the belief in a supernatural power that organizes and animates the material universe. "a village steeped in ancient animism and rituals""][/quote] The supernatural power is the God of Abraham, His son the Holy Ghost, all completely separate from nature. The religion prevented us from understanding Gia until just recently and there is still very strong resistance to accepting the science of Gia that was known to aborigine's for centuries. Especially in the US we are in the throws of culture war, and this is a serious, social, economic and political problem that could destroy our democracy.
TheMadFoolNovember 08, 2020 at 15:52#4698120 likes
I think a better understanding of our economy might include a study of Christianity. Especially Protestantism, that is tied to Calvinism, a very materialistic/supernatural understanding of life justifying the exploitation of humans and earth
I'm too ignorant to comment but if I had to say something about Christianity vis-a-vis the earth's present state it would be that Christian values are just too anthropocentric to permit an all-inclusive perspective, something necessary if we're to ever to get the global environmental movement off the ground. Just saying...I could be completely wrong of course.
Well "anthropocentric" is a very fancy word and I had to look it up. I totally like that word and would not throw stones at people because that is true of them. We might be a whole lot more rational if we favored evolution over creationism because that would give us a much more realistic understanding of our value, what can be expected of us and what our limitations are. All social animals perceive their group to be the most important.
I mention Christianity because many people understand life through this mythology rather than a study of nature. Primitive people had a closer connection with nature and understood their survival depended on knowledge of the environment rather than on a God's will. Democracy is rule by reason, and that also depends on knowledge of the environment. Hunter gathers learned where to look for food. We learned to look for finite resources and those resources are being exhausted. If we do not take a serious look at what mineral resources have to do with building and maintaining an economy, we are not going to make much progress in a discussion about economics.
I think that for starters, we concentrate on how things change while something that has stayed the same for decades we simply take for granted.
For sure our brains are designed to run on automatic without too much thinking. But as our reality changes we need to understand that change and how to adjust to it.
I love how you all force me to think! :heart: Imagine being a primitive person whose survival depends on knowing the environment. You will not be planning a new computer program and giving any thought to technological development, but you may discover a better way to make a spear because your survival pushes you to do what you do better. I have I succeeded in conveying a totally different mode of thinking and different direction of human evolution? Modern man probably would not survive in the past and someone from the past would have a terrible time trying to survive in our time. To begin with What is blazes is economics? What is it and where does it come from?
A person who does something useful or worthwhile or creates something of the like should be rewarded.
— Outlander
Why?I just created that worthwhile post; reward me.
Nothing is given for free.
— Outlander
Everything is given for free. We come into this world with nothing and helpless to even feed ourselves.
Interesting discussion you two are having. I will argue we do not get things for nothing when we are no longer dependent children. Even what nature gives us, requires us to make an effort to get it. I think everyone should have a garden because gardens teach us a lot about life. A productive garden requires a lot of work, preparing the soil, planting at the right time, watering just enough and not too much, defending the garden from disease, pest, and animals that will gladly eat it and if you don't get it right, you starve. Hunters and gathers lived off the land, but they had to learn where to look for food, and when the food would be there, and how to survive the elements. In some places life was more like a Garden of Eden, but much of our planet is not so friendly, and life was not so easy.
Wouldn't it have been better if we'd done it the other way - learned to speak mother earth, Gaia's language, perhaps requiring a getting in touch with our softer, mellow side that has a primeval connection to the Earth?
Something must be done about the so-called global economy.
Your thought needs our attention. Primitive people learned they must invest in the land to get food. When I speak of being materialistic, my intention is to raise awareness of our disconnection with life. How we develop our awareness will make us ,more or less anthropocentric. We might want to be focused on Gia?
Religion attempts to focus us on God but that focus doesn't work well if it ignores Gai.
unenlightenedNovember 09, 2020 at 20:02#4701930 likes
I will argue we do not get things for nothing when we are no longer dependent children. Even what nature gives us, requires us to make an effort to get it. I think everyone should have a garden because gardens teach us a lot about life. A productive garden requires a lot of work, preparing the soil, planting at the right time, watering just enough and not too much, defending the garden from disease, pest, and animals that will gladly eat it and if you don't get it right, you starve.
Indeed. I have worked most of a lifetime to afford a garden of my own. Up to now I have worked as a gardener for others, and borrowed or rented various patches from time to time. But in a couple of weeks God willing, we are moving to a new house with a small garden of our own. But bitter experience has taught me that a productive garden takes many many years of labour. We inherit the labour of the ancestors in creating a good soil structure, de-stoning, draining, clearing, terracing, developing the strains of seed we rely on, and building up the complex of knowledge from generations of experience so that we make fewer mistakes and can be more productive than our predecessors. All of this we get for free.
And we are also dependent on our neighbours to keep their patch in good condition and not spread weed seeds or dilute our seed stock with cross-pollination from inferior varieties.
... we do not get things for nothing when we are no longer dependent children.
You are completely wrong. Never mind the food itself, can you even make a spade? No, most everyone who posts here is totally dependent on a vast network of social connections without which they could not survive, let alone post.
Head for the wilderness and divest yourself of everything made by another hand, and see how far your own work will take you.
You will not be planning a new computer program and giving any thought to technological development, but you may discover a better way to make a spear because your survival pushes you to do what you do better.
Making a spear better is likely a far more difficult thing than planning a new computer program, when you think of it. I'd say we are always making similar simple advances, but just adding up on the aggregate collective understanding. "If I have seen further it is by standing on the shoulders of Giants" as Newton once said.
The homeless will be {happy? amazed?} to know they get so much free.
The homeless have been robbed of their home which is the same Earth that the rich think they have exclusive right to. Some people think there is some justice or morality in a few people owning many homes and a great number paying to borrow their homes and many more not having homes at all. I think is ridiculous and unneccesary. Everyone should have a garden, and everyone should have a home.
The homeless have been robbed of their home which is the same Earth that the rich think they have exclusive right to. Some people think there is some justice or morality in a few people owning many homes and a great number paying to borrow their homes and many more not having homes at all. I think is ridiculous and unneccesary. Everyone should have a garden, and everyone should have a home.
This thread is about the economy and I suppose we could talk about housing the homeless. We have come to that time of year when people freeze to death if they are not sheltered. First we need to decide where they are going to sleep? Then where will they pee and shit? How do they get food? How do they manage their trash? How do they avoid having their few possessions stolen? Our budget is zero. Now create those shelters.
What in the Heavens is whatever you said and do you stand by the concept it is not a byproduct of God? A useful one perhaps but yes.
Yeah, once again I left out an important word. I have corrected the post. Amazing what a difference one word can make. Especially when the word is "not". This time the missing word is "glad".
I became politically active to house the homeless following the 1970 recession. We could not assimilate the young into the work force fast enough and I housed many of them. I sold plasma to supplement my small pay check and was feeding these young people, buying them medicine, buying them clothes so they could apply for jobs, and then things got worse. When an economy crashes the cost of housing stays low but as soon as the economy improves, the cost of housing rises and even more people become homeless.
During the 1970 recession I researched poverty at the U of O document department. I wanted to understand how can wealth just suddenly disappear and such hardships follow?! I learned some interesting things, such as how laws to protect the middle class standard of living, result in increased homelessness. What large populations and diminished resources has to do with the increased cost of housing because the cost of land and everything that makes a house, goes up, making it impossible to build truly low income housing.
I fought very hard to call public attention to the increasing homelessness, and now my retired sister combs the streets of our state capital, rescuing the homeless people she can rescue. Her Facebook page has pictures of the horrors she deals with, and the people who want their story to told. My grown granddaughter manages a camp ground for homeless people and her life is on the line, because of the virus and because, when necessary, she must take knives away from men who are not in their right mind. In my community there is much more for struggling people than in our state capital and this is because of what I was able to achieve long ago. I did not achieve it alone but I got the ball rolling because I wanted to get homeless people out of my home. We could not have achieved anything but our city counsel had hippies running our city and so a lot of good things were done. :flower:
It is hard to imagine anyone being homeless and staying in their right mind for long. Their survival almost depends on going feral, like a feral cat that can no longer be domesticated. I am not as involved as I once was because I just physically can't do much, but I turn on my computer every morning to make this world a better place. After what I have seen and experienced, I really want people to face reality. Never in the history of humanity did the easy life come free, unless the people live in one of the few places that are like a Garden of Eden, such as the tropical islands and Mediterranean areas with large rivers.
You can easily create a budget by taking from other people. Or taxation.
Please explain that. Who decides how much a tax payer will pay, and who pays taxes? What is the process of getting more money from tax payers? What are the consequences of raising taxes or creating new taxes? What is being taxed, property, things we own or buy, incomes?
When a representative has a history of raising taxes, what happens when the next election period comes? When a representative or president says we must conserve and stop consuming oil or stop cutting down the forest, what happens at the next election? Why? It is the economy and I hope people keep posting.
Reply to Athena The point was just shorthand that the example you provided is fictitious. The budget is never zero. There's always a budget of labour available for starters - there's a bunch of homeless lying around doing nothing after all. And yes, if enough people are homeless they should just take homes from others. Seems fair enough if a society fails to care for all its members.
Reply to Athena
Very nice to hear that people actually do voluntary work.
Perhaps I seem to be a "socialist" when I do say that these things ought to be taken care by the government and not to be left only to voluntary organizations as they can do only so much. Above all, it policies have to be smart and understand that homelesness is a complex issue, yet it can be minimized and dealt with. Many need far more help than just a roof over their head. Even if there is mental disorders and addiction problems, many don't have these issues. In my country in the 1950's there were about 70 000 homeless people, in 1987 the number had decreased to 18 000 and now in 2020 it's estimated that there are 4 000. Four thousand in over five million people isn't much (0,008%), which all are sheltered. In the US the number is something like (0,175%), which is twenty times the amount than here. For comparison, LA County has roughly twice the population of my country, Finland, yet has about 60 000 homeless.
I think this isn't a problem of money in the US, but the lack of sound social policies, social work and organization. The biggest obstacle is the view that the Welfare State is socialism and that you cannot force people into treatment etc. Reducing the homeless by 50% is totally possible for starters.
?Athena The point was just shorthand that the example you provided is fictitious. The budget is never zero. There's always a budget of labour available for starters - there's a bunch of homeless lying around doing nothing after all. And yes, if enough people are homeless they should just take homes from others. Seems fair enough if a society fails to care for all its members.
Okay you have 50 labors. Now how do you turn this labor into shelter for everyone?
Perhaps I seem to be a "socialist" when I do say that these things ought to be taken care by the government and not to be left only to voluntary organizations as they can do only so much. Above all, it policies have to be smart and understand that homelesness is a complex issue, yet it can be minimized and dealt with. Many need far more help than just a roof over their head. Even if there is mental disorders and addiction problems, many don't have these issues. In my country in the 1950's there were about 70 000 homeless people, in 1987 the number had decreased to 18 000 and now in 2020 it's estimated that there are 4 000. Four thousand in over five million people isn't much (0,008%), which all are sheltered. In the US the number is something like (0,175%), which is twenty times the amount than here. For comparison, LA County has roughly twice the population of my country, Finland, yet has about 60 000 homeless.
I think this isn't a problem of money in the US, but the lack of sound social policies, social work and organization. The biggest obstacle is the view that the Welfare State is socialism and that you cannot force people into treatment etc. Reducing the homeless by 50% is totally possible for starters.
Your opening statement is excellent and I look forward to reading the rest of your post.
The truth of what you said makes me so mad! :rage: The US has just recently come to the end of its wilderness, and its mentality has not caught up with its changed reality. For awhile we did have facilities for the mentally ill. Some were very nice and others were hell holes because they were overwhelmed by a larger population of mentally ill people than expected. The solution was to close them down and deny the problem. Today where I live, we have an space that provides many services and the mentally ill hang around this area with no place to go. My sister has been rescuing people off the streets at our state capital and her life has been hell because we do not have the organization to help the seriously mentally ill. Our hospitals are dumping people with serious health problems on the streets knowing they have no place to go. A third world country could not do worse than we are doing.
We are just beginning to think in terms of government having a responsibility to care for people needing help, instead of driving them out of town or incarcerating them for crimes. But I am not sure this discussion belongs in a thread about economics? This discussion belongs in a thread questioning if the US is civilized. We are so clueless about the end of a labor intense economy that could more easily assimilate marginal people, and why our high tech society has pushed millions of people out of main stream society and into uncontrolled mental illness and drug addiction. Now that economic change could be an economic issue? But as long as people insist everything is free I don't think we can make much progress in a discussion of economic reality.
Your post is so good, I am excited about what you may say next.
But I am not sure this discussion belongs in a thread about economics?
Actually, it is.
The 19th Century name for economics was "political economics", which honestly describes just how linked economics is to politics. The idea of "economics" being just this private sector machine spewing out production and GDP is totally wrong. Social problems, povetry, corruption or the way government treats the private sector effect very much how the actual economy works. Unfortunately these factors aren't at all easy to mathematically model, hence they are usually left out from mainstream economic models. Yet looking at which countries economically prosper and which don't, these things do matter.
The simple link is of course is that a well functioning economy creates prosperity for the people and taxes for the government, which then can ease the social problems. Yet there is also a link the other way around: if social problems are left unchecked and become large, this increases the lack of social cohesion, increases crime and heightens political tensions, which then create an atmosphere that decreases economic investment and business activity. You never have at the same time a booming economy and large scale rioting on the streets at the same time.
Even if homelessness effects a very small portion of the population, it is something that everybody can see. (It should be mentioned that young adults living with their parents, for example, aren't the ones when we talk about the homeless, even if they literally don't have an own home). We are now seeing an exodus from California now as the high cost of living and the possibility of working from home gets many to move away from the traditional centers like Los Angeles or San Francisco. Yet many of those moving away do also mention the homeless problem and the tent cities on the street as a reason. Homelessness isn't just a personal problem for those who are effected by it, it does effect the whole society. It easily reminds us how much social cohesion there is in our society. If there isn't any, people are genuinely scared of each other. So I think this is a topic that can and should be discussed on a thread about the economy.
Homelessness in Finland in the late 1960's early 1970's depicted by a cartoonist. As parks had a Puistotäti "Park Aunt", a Kindergarten teacher, taking care of children outside in parks, the parks also had an Puistosetä "Park Uncle", the homeless alcoholic sipping his bottle in the park. Back then the traditional hobo here was a WW2 veteran that hadn't gotten accustomed back to civilian life, which tells this is an universal problem as many homeless in the US are veterans from the various wars.
Yet there is also a link the other way around: if social problems are left unchecked and become large, this increases the lack of social cohesion, increases crime and heightens political tensions, which then create an atmosphere that decreases economic investment and business activity.
Awe you speak of the American dream where the only thing government provides is a police force to protect private property. You know, bash people's heads in when they dare defy the authority of autocratic industry and property owners. Anything to do with taking care of the poor, who are exploited by industry and property owners, is a matter of charity and that is not the correct function of government. I mean like get real. If you take care of these people they stop working for poverty wages and that would be terrible for the economy! We are not like Europe you know, where the government might be expected to take care of the people.
In the US the idea of a good education system is neighborhood controlled schools that are as good as want the people in that neighborhood can afford. So in one school district the advantaged students have a superior education, and the kids in the slums who live with crime and violence daily, actually risk their lives going to school that have very little to offer the children and the teachers can actually experience battle fatigue because the uncivilized behavior of students. We have videos of these schools where teachers have no control over students and surely you would not spend your hard earned money on those children, would you? Awe yes, the United States, the richest nation in the world. What would happen to our wealth if threw it away on that scum? Look people get what the deserve and it would be stealing form those who work hard for their money to tax them and give the money to the undeserving.
Like OMG, we don't want to be socialist! Everyone knowns how bad that is. Government is correctly restricted to using tax dollars to support a military force that in turn protects our economic interests over seas, because that is the source of our wealth. Local government provides the services the people can afford, and we just stay out of those bad neighborhoods where those disgusting people live. Like Trump said, we don't want those people in our neighborhoods ruining our property value. Really? arguing in favor of socialist notions and that it is the governments responsibility to spread out the prosperity? What kind of person are you? You do not sound like a Trump supporter! :brow: Someone in this forum must provide the correct understanding of what makes the US great because we must protect our wealth and stand firmly against socialism!
We are now seeing an exodus from California now as the high cost of living and the possibility of working from home gets many to move away from the traditional centers like Los Angeles or San Francisco. Yet many of those moving away do also mention the homeless problem and the tent cities on the street as a reason. Homelessness isn't just a personal problem for those who are effected by it, it does effect the whole society. It easily reminds us how much social cohesion there is in our society. If there isn't any, people are genuinely scared of each other. So I think this is a topic that can and should be discussed on a thread about the economy.
Do you think? but that isn't what is causing the rioting in our cities is it? Those rioters are anarchist that should be controlled with the National Guard if local police forces can not maintain law and order. You are a foreigner so you can be forgiven for not knowing what our great leader Trump says about law and order. I pray to the heavens you know I am being sarcastic and I am experiencing a great emotion relieve as I attack what we have been living and what is tearing the US apart. Europe experienced peasant revolts long ago, and because they were crushed by those in power, we might think they lost their fight, but you are telling us the did not win the fight. They won the fight. It just took a long time to realize their win.
Our unions made some progress and then past President Reagan destroyed the unions. Our past education explained the connection between unions and democracy, but that was before the 1958 National Defense Education that put an end to education for citizenship in a democracy and gave us instead education for a technological society with unknow values. We are no longer the democracy we once were, and as more and more of our wealth goes to the 1% things are not getting better so we worship Trump who promisers to make things better. We will see how well Biden does. I hope he and Harris can unite our nation, but no one understands what the change in education has to do with the mess we are in, so I am afraid we will continue to be divided and fighting against each other.
Awe you speak of the American dream where the only thing government provides is a police force to protect private property.
The fundamental idea behind is that well known mantra of "limited government" and giving freedom for everyone to pursuit their happiness. And that is a struggle for many, which is a problem.
In the US the idea of a good education system is neighborhood controlled schools that are as good as want the people in that neighborhood can afford.
As neighborhoods aren't similar, in fact even US states differ from each other just like member states of the European Union (even if English is spoken everywhere), one cannot think that neighborhoods, communities and cities can all provide equal opportunity. Hence here is where things start going wrong. Worse schools make it harder to get to the best secondary schools or to apply to tertiary education.
Awe yes, the United States, the richest nation in the world. What would happen to our wealth if threw it away on that scum? Look people get what the deserve and it would be stealing form those who work hard for their money to tax them and give the money to the undeserving.
You wouldn't have so many problems or crime, for starters. Not that problems would go away altogether. Still our societies (yours and mine) try to function as meritocracies, which do inherently create inequality. The issue is to have a system with social mobility and not have the classes turn into a caste system.
Do you think? but that isn't what is causing the rioting in our cities is it?
No.
Of course there's a long thread about racism and I won't go into that. perhaps the basic problem in the US is that many confuse Bernie Sanders, who basically in Europe would be your average social democrat, with Hugo Chavez and his kind, which are a totally different socialists.
They won the fight. It just took a long time to realize their win.
Exactly.
It should be understood that the conservative right accepted and took the idea of a welfare state as it's own in the Nordic countries. This is something that Americans would find really hard to understand from people who call themselves right-wingers. A similar thing happened with capitalism: the modern social democrat does not cry for a Marxist revolution, but just wants to curb the excesses of capitalism, yet understands that there is a time and place for free market capitalism. Especially when elections are around, the ordinary leftist and the right-winger won't admit that they have accepted issues from the other side, naturally, but their silence does tell a lot.
Our unions made some progress and then past President Reagan destroyed the unions.
I myself find it odd that labor unions had been infiltrated by organized crime at the first place. But I think this is a major reason why real income and wages haven't gone up in the US and inequality has become even greater.
Awe you speak of the American dream where the only thing government provides is a police force to protect private property.
— Athena
The fundamental idea behind is that well known mantra of "limited government" and giving freedom for everyone to pursuit their happiness. And that is a struggle for many, which is a problem.
In the US the idea of a good education system is neighborhood controlled schools that are as good as want the people in that neighborhood can afford.
— Athena
As neighborhoods aren't similar, in fact even US states differ from each other just like member states of the European Union (even if English is spoken everywhere), one cannot think that neighborhoods, communities and cities can all provide equal opportunity. Hence here is where things start going wrong. Worse schools make it harder to get to the best secondary schools or to apply to tertiary education.
Awe yes, the United States, the richest nation in the world. What would happen to our wealth if threw it away on that scum? Look people get what the deserve and it would be stealing form those who work hard for their money to tax them and give the money to the undeserving.
— Athena
You wouldn't have so many problems or crime, for starters. Not that problems would go away altogether. Still our societies (yours and mine) try to function as meritocracies, which do inherently create inequality. The issue is to have a system with social mobility and not have the classes turn into a caste system.
Do you think? but that isn't what is causing the rioting in our cities is it?
— Athena
No.
Of course there's a long thread about racism and I won't go into that. perhaps the basic problem in the US is that many confuse Bernie Sanders, who basically in Europe would be your average social democrat, with Hugo Chavez and his kind, which are a totally different socialists.
They won the fight. It just took a long time to realize their win.
— Athena
Exactly.
It should be understood that the conservative right accepted and took the idea of a welfare state as it's own in the Nordic countries. This is something that Americans would find really hard to understand from people who call themselves right-wingers. A similar thing happened with capitalism: the modern social democrat does not cry for a Marxist revolution, but just wants to curb the excesses of capitalism, yet understands that there is a time and place for free market capitalism. Especially when elections are around, the ordinary leftist and the right-winger won't admit that they have accepted issues from the other side, naturally, but their silence does tell a lot.
Our unions made some progress and then past President Reagan destroyed the unions.
— Athena
I myself find it odd that labor unions had been infiltrated by organized crime at the first place. But I think this is a major reason why real income and wages haven't gone up in the US and inequality has become even greater.
Let me begin with "I love you". It is so wonderful to find someone who really knows the value of education and that it isn't only about military and industrial interest. It is our culture and everyone being prepared to give their best to the country.
James Williams in 1899 "If we reflect upon the various ideals of education that are prevalent in the different countries, we see that what they all aim at is to organize capacities for conduct. " At this time for the Germans that meant preparing the young to advance technology for military and industrial purpose. England strongly rejected this education because it wanted to protect it classes, and education for technology tends to make everyone equal, because the child from the poorest home, educated for technology, does not remain in the low class. The focus of English education was to be an English man and woman.
The US with its democratic values, stumbled onto the benefits of education for technology when it mobilized for the first world war. Technologically Germany was the most advanced, and the US had to scramble to catch up. This is not just about having the best war ships and best cannons. It is about having thousands of people who can type, or repair trucks, or build bridges. We did not have that when we faced WWI but rapidly put education for technology into our schools when we knew we were going to entered the war.
Up to this time, US education was limited to literature, reading, writing, and speaking! I collect old books and they are quaint. The goal of education, as you understand it, being to prepare good citizens, so we have social order and a well running democracy. This including promoting associations and unions uniting people to do for themselves what Europeans relied on their governments to do for them. The addition of education for technology was a huge economic benefit that was not expected. Up to this time parents rather keep their children home to help on the farm. When parents learned their children would learn a job skill in school, they were more willing to send their children to school, because that meant their children a had chance of having better lives with more money and the benefit of what money can buy.
We can see how this develops. People have more money to spend, so more businesses become profitable. The whole economy grows and the standard of living is improved. There is no need to say this to you, but more people in the US need to understand the relationship between the education, the military and the economy. This trinity becomes stronger and larger.
But for all the good of this trinity something went very wrong in Germany and the US. If human beings are to be more than well trained, reactionary animals, that obey their masters, or get pushed to the margins of society, then they must learn how to be civilized humans. Leaving moral training to the church does not work in a democracy with liberty. In a democracy with liberty the people must have training for good moral judgment and cultural values. Citizens must be adults, not God's and the king's children.
Germany has progressed as a civilization better the US since WWII. The US missed the lesson's Germany learned and the US took their culture for granted. Now it is no longer a well cultured nation, but I have hope we will return to better education for reasoning and a better economy of independent thinkers who are empowered to make their best contribution to society. Education preparing our young to be products for industry, is good for slaves, and gives us a third world economy of workers dependent on the owners. :rage:
I myself find it odd that labor unions had been infiltrated by organized crime at the first place. But I think this is a major reason why real income and wages haven't gone up in the US and inequality has become even greater.
That is a fascinating statement! I must look into that. Do you have any more to say about it?
At this time for the Germans that meant preparing the young to advance technology for military and industrial purpose. England strongly rejected this education because it wanted to protect it classes, and education for technology tends to make everyone equal, because the child from the poorest home, educated for technology, does not remain in the low class. The focus of English education was to be an English man and woman.
The US with its democratic values, stumbled onto the benefits of education for technology when it mobilized for the first world war. Technologically Germany was the most advanced, and the US had to scramble to catch up.
This is a very good take on the situation in the 19th Century. Yes, back then it was Americans that went to Germany to educate themselves. And before WW2, a huge portion of science was in German language and many academics of those time were fluent in German. After WW2, English dominates as a true lingua universalis. And this is one of the cornerstones
If human beings are to be more than well trained, reactionary animals, that obey their masters, or get pushed to the margins of society, then they must learn how to be civilized humans. Leaving moral training to the church does not work in a democracy with liberty. In a democracy with liberty the people must have training for good moral judgment and cultural values. Citizens must be adults, not God's and the king's children.
Yes. Let's look at this from the viewpoint of the ruling elite. This is the double edge sword for those in power: educated people create a better economy, while an uneducated people likely obey more traditional rulers. Hence many dictators and totalitarian system try the illogical goal of having more doctors, engineers and scientists to advance the technology of the country, yet assume that these highly trained clever professionals won't stray into the realm of thinking about politics or basically using their head. Let's remember that Hitler had been in power only 6 years before he started WW2, hence all the German engineers and scientists had studied and learnt their profession basically before Nazi totalitarianism took hold.
In our current time Saudi Arabia is the best example of this: it desperately tries to use it's wealth into buying the best armament and technology and tries to create technology hubs, yet you don't make a Silicon Valley out of nothing in a society that is in the end quite backward. And those high-tech weapons need an army of very qualified engineers to be kept in service. You end up just with a huge segment of the population being foreign workers.
Germany has progressed as a civilization better the US since WWII. The US missed the lesson's Germany learned and the US took their culture for granted.
Some define this to be the benefit of the loser of a war. Not only Japan and West Germany were forced into soul searching when militarism had catastrophically failed (East Germany simply assumed it had nothing to do with fascism, hence for example the East German army was made in line with the old Wehrmacht as totalitarianism continued there). In fact after Carthage surrendered to the Romans and stopped competing with Rome for the dominance of the Mediterranean, it had a renaissance and prospered so much that the Romans finally decided to attack and obliterate the whole city.
Not only has the loser of a war think things over, it really has to build all of it's infrastructure and manufacturing plants up from scratch, which modernizes the society in a rapid pace and give an edge to the manufacturing. While nobody had bombed the US during WW2, it simply dominated other countries in the 1950's. But then it didn't have to rapidly modernize. Hence when the World caught up, many parts of it's industry was old and couldn't compete. Add that these areas were left alone and Americans created "the Rust Belt".
True, but notice there are indicators as Price to earnings ration, the P/E.
This is not the only measure. There are ways to look at a new company, for example. Seasonal or cyclical changes can askew the earnings. But, for investors not looking at stock price, but say real estate properties, the criteria are different.
Comments (113)
Yep, there still is this absurd idea of an economic rebound once the pandemic is over. It will be only a statistical one, not a real economic upturn. On a global level the service sector is such a huge provider of employment that the impact that pandemic has had is quite dramatic to overall aggregate demand. Same thing goes for tourism etc. The impact will be measured in years.
Quoting Aryamoy Mitra
Have they? Likely that is counted from their wealth and not from income and from the rebounce from the initial covid scare and stock market plunge until today seen from the graph below:
This rebound to similar highs as before is utterly confusing. Yet it happens because the monetary policy that causes asset inflation and the basically the idiotic index investing that is pushing stock prices to hilarious levels. You already have stocks with P/E ratios of 1000 meaning that in orders to get back your money in earnings, you would have to wait 1000 years. Yet if you take the largest five tech companies out of the indexes, the reality would be quite different.
But if nobody has bought a house in your neighborhood for a while, but then one is sold for twice the price as the last time, congratulations neighborhood home owner! Your house is suddenly worth twice of that in yesterday and you are so rich. And that's basically the asset bubble we have today...
I'll guess people will again then ask where did the trillions of dollars go when the market crashes.
Quoting Aryamoy Mitra
Unfortunately there are too many that feel this way.
I'm entirely in accord with the arguments you, and this forum, have previously put forth. A number of the distresses we've seen become pronounced are attributable to structural and maladaptive measures (such as the neoliberal market-oriented policies you've described) that were present prior to the pandemic.
I don't believe that the economic fallouts of the pandemic will be responsible for a greater number of deaths than the pandemic itself (I apologize it came across that way), but I believe they've exacerbated these distresses for many, and in the process, dispossessed developing classes of the most elementary economic freedoms.
For instance, in countries with high Gini coefficients and income asymmetries, families that weren't poor, but were incrementally advancing up the socioeconomic hierarchy, are likely to have suffered a setback that isn't easily recoverable from. Meaningful investments, such as Real Estate, have remained inaccessible to many of these families - a pattern that will almost certainly sustain itself for a considerable amount of time given their now absent, or diminished incomes.
There's a similar mechanism by which the neoliberal markets you've described have treated the business world. Small-scale entrepreneurs have borne the brunt of changes to consumerist mentalities in developing economies, whilst multinational conglomerates have been diversified enough industrially to reconstitute their business models. The conclusion of the matter has been an acceleration in the rate at which wealth gaps have been increasing, not an 'increase' per se (since I agree with you on the front that solutions to these predicaments must be devised independently of the pandemic).
Finally, the agrarian laborers, and several former white collar employees that have slipped down the socioeconomic ladder, are no longer economically liberal enough to be invulnerable to governmental stronghold and possibly tyranny. I may be mistaken in my judgment, but political motives are being indefensibly ascribed precedence over the truthful provision of state welfare around the world.
I remember reading a number of journalistic articles that cited astronomical increases to S&P 500 stocks, and consequently the net capital owned by the world's most active industrialists and businesspeople. I may be wrong, but I think this trend has been prominent for quite a while now.
'Yet it happens because the monetary policy that causes asset inflation and the basically the idiotic index investing that is pushing stock prices to hilarious levels. You already have stocks with P/E ratios of 1000 meaning that in orders to get back your money in earnings, you would have to wait 1000 years.'
Exactly. Such mismatches between equity and dividend value are precisely what in my estimation cause stock bubbles.
'But if nobody has bought a house in your neighborhood for a while, but then one is sold for twice the price as the last time, congratulations home owner! Your house has suddenly is twice worth than yesterday. And that's basically the asset bubble we have today... And I'll guess people will again then ask where did the trillions of dollars go when the market crashes.'
That's a really interesting analogy. It brings to light precisely how cyclical and sensitive today's economies really are with regards to demand and prices. Asset inflations result in commodities becoming unaffordable for those who don't possess them at the status quo, and subsequently detract demand from sellers - which ultimately results in stagnation. In order to combat this stagnation, central banks deploy expansionary monetary policies, which cause asset inflation and reinitiate the entire cycle all over again.
It's more of a symptom than a cause, even if with index investing there is this mechanism to put more investment in the stock that have risen the most and are the largest. Yet I think the reason is and in history has been the financial sector, which has with excessive financing promoted speculation and in the end created the bubble. Once the sound business enterprises are invested, then there's left the unsound ones and then pure speculation about the future values, usually of real estate. Since the Tulip Mania or the South Sea Bubble of 1720, all bubbles have behind them a very lax financial sector lending people to speculate.
Quoting Aryamoy Mitra
It's a simple fact when you think of it. And it explains simply why prices of real estate etc. can vary on a wide range yet real estate while rents do not go up and down in a similar way. Every rent is priced monthly while the vast majority of real estate are not bought and sold annually. This is multiplied in the stock market where it is genuinely a bunch of casino players are selling and buying a small proportion of the stock all the time. Hence we have gotten such absurdities as negative oil prices: a reaction when the casino players faced the actual possibility of ending up with the physical stuff they trade with.
Quoting Aryamoy Mitra
Not perhaps commodities. Prices hikes of commodities have happened and have resulted in poor countries in food riots, but far more typical issue would be real estate and the price of homes. This is where even ordinary people are touched by asset inflation. They have took a loan for a home in a economically booming area, once they have paid that loan they have made usually a quite a profit (if they move then somewhere cheaper).
Here California is the best example I can think of. The lack of affordable housing programs has lead to sky high prices in homes and Third World style inequality with the most richest people living there with people on tents, and especially during this pandemic an outflow of people from the state or into less expensive areas. The pandemic has not only shut many small business down, but also put people to work from home. If people can work from home sometimes even their employer urging them to do that, why pay a huge price for a crappy small place in Silicon Valley, if you could have that estate in Colorado?
I think this pandemic is an engine to a far longer economic downturn than we anticipate.
This is fundamentally flawed because speculation goes both ways. Speculation doesn't cause bubbles across all financial instruments.
Asset inflation is caused by the pursuit of price stability and other monetary policies. Low interest rates means financial institutions hunt for yield at the same time central banks are dumping free money in the system with no end in sight. It's not as if they don't realise stocks are overvalued. They're just passing along the hot potato simply due to large demand in the financial markets because everybody is investing free money, the source of which is basically unlimited. And with MMT, which is the direction we're going in, tof will only get worse. In the end, the stock price isn't relevant but at what volumes it can be traded, its liquidity and volatility. Hence, asset inflation while the fundamentals crumble.
? ? ?
How is it fundamentally flawed?
You think that speculative bubbles happen in times when interest rates are high and banks don't lend or what? Tell me an example of a speculative bubble happening in that kind of environment.
And tell me of a speculative bubble that didn't have speculation??
Quoting Benkei
Pursuit of price stability? I don't understand where this is coming from. Please explain.
I think everyone should agree that loose lending practices encourage speculative bubbles, and that was certainly one of the causes behind the 2008 crash - but I think we've seen bubbles in all types of US markets even in eras with high interest rates (1980s). I'm inclined to see financial speculation as just a natural human activity, and unless the government takes serious, serious steps to squash it I think it's going to happen in a number of different financial environments. I could be wrong though. I just think the 1980s here were a time for rampant speculation despite high interest rates and not being in an era of "endless QE."I think you're certainly right in a general sense that high interest rates discourage speculation.
The UK is going to try to weather the storm without a national lockdown, somehow I doubt it. I expect a sudden U turn in a week or two which is the modus operandi of our government these days.
Gambling is a natural human activity also, but a speculative bubble is separate from your ordinary market actions or the "Animal Spirits" Keynes talked about. Hyman Minsky explains quite well how speculative bubbles are endogenous to financial markets. Even the Tulip Mania did involve the banking sector, so the access to debt is intrinsic to a speculative bubble to form.
Thoughts on this?
By "access to debt" do you mean, primarily, traders and investors using leverage? So borrowing funds to invest or speculate. Certainly that can magnify things. We can do that on a much greater scale now with the internet but I'd imagine that practice has been around for quite some time.
Yes, and that liquidity isn't just institutional; everyone's fleeing the dollar, and with Robinhood and other retail "friendly" (i.e. exploitative) brokers becoming ubiquitous, the gap between real (economic) value and asset price is likely to widen. At some point though stocks will feel the pinch and inflation hedges like gold and bitcoin will be the major winners.
(This is actually worth a new thread).
Don't forget that masked bandits are the biggest winners...they are completely unrecognizable.
Yes. Without the access to debt, there are only very few that can invest. Debt leverage is quite essential.
Thanks Baden!
The real estate bubble in the UK is due to a systemic failure of government, Although it was the privelidged classes who benefited from it, I don't think it was this which provided the driving force behind it. It was ideological, the Tory government continually dismantling state institutions and support, and inviting in capitalist organisations to fill the gap. The Tory wet dream of free market capitalism. During the same period there were incentives brought in to increase home ownership allowing council tenants to buy the property they were living in. This fuelled the trend further. The council properties were not replaced with provision of new social housing. The property developers continually focussed on building the highest value properties in the most desirable locations with little affordable housing.
I could go on, but that is enough detail to spell out that the UK is in a dangerous place, trying to hold this bubble in place. If it blows all that wealth built up over 40 years will evaporate, with mass evictions, repossessions and millions of people with massive debts that they can't pay. No wonder the Tory's are running scarred and lurching to the right in a vein attempt to double down on their rip roaring capitalism. They have filled Downing Street with headless chickens running around the cabinet table, lashing out at Europe, immigrants and the poor. Roll on Brexit Britain.
The surge a month ago was fuelled by schools and universities going back, so now the increases will be reducing due to partial lockdowns. The trouble is that the infection rate is so high that test and trace has become ineffective as the numbers are unmanageable.
Because I think we need to distinguish between speculation and investing. If investors en masse invest because of cheap credit, this has nothing to do with speculation. I think the distinction between an economic bubble and a speculative bubble is useful; a speculative bubble can exist in a specific asset class but speculators as distinct from investors are a much smaller group that don't have the influence to cause economic bubbles.
Simply because prices don't reflect underlying value, this doesn't mean it is caused by speculation but there's a tendency to call it a speculative bubble regardless of cause. The stupidity of the name even resulted in idiotic measures like banning short selling. This resulted in an even bigger downward trend in the markets, because it wasn't speculators causing it but investors who now had to outright sell their positions to manage their risks.
Obviously, my comment about interest rates and monetary policy concerns the current asset inflation. The previous one was driven by inflated real estate prices, combined with bad loan origination and complex derivatives. No speculation involved, again. Just stupidity in the loan origination part with bad incentives all over the place and moronic optimism about always upward moving "markets".
Quoting ssu
Central Banks have a limited range of measures at their disposal because they're constrained by their purpose of maintaining price stability. Which is a quaint left over from the days when they thought price stability would avoid the boom and bust cycle and unreasonable fear of deflation. So they can basically only regulate the money supply and interest rate. And here we are.
There's of course a lot else going on. Like the fact people will save regardless of interest rates because they have saving goals. So all these theories can't deal with the complexity of human action and there's always unintended consequences and effects. It's time we stop basing policy on necessarily flawed theory.
OK, I'll just answer one part here as otherwise the answer would be too long.
Yet economic bubbles are also speculative bubbles. Here's why.
Let's think about this with two examples, because the divide is simply about contagion and the effect of the bubble to the real economy. Bubbles can also move into other asset classes.
Bubble 1: Speculative bubble that doesn't affect the economy
Some hip new innovation that has genuine promise sends people investing in something be it cryptocurrencies, rare earth minerals or whatever is the new fad. That there is hype driving the bubble can be seen perhaps from uh, a philosophy forum we all know starting to talk about the new innovation and some there investing in it. These kinds of things won't have large economic consequences as a) few will invest more than a tiny amount of their wealth and b) there's not much impact on jobs, or consumer consumption in the real economy. The burst of the bubble won't have huge consequences. If some people lose money, they'll likely curse to death the whole stock market and finance sector as bunch of swindlers and con men. And continue with their lives with just hating capitalism. But the vast majority of people who didn't notice the fad will not be affected.
Bubble 2: Speculative bubble that does affect the economy
A real estate bubble. As houses cannot be built by robots in China, real estate bubbles have a huge impact on employment and in the domestic economy. Second, people don't choose to speculate: families need a roof over their head and people looking for a home have to participate in the market however crazy it is. And people who own real estate will notice the wealth effect of their homes increasing in value, hence it's not just the few who invest or those who willingly take risks. For the majority of people buying an own home is the largest investment they will ever do. Hence it's not only the rent seekers and speculators that are players in this bubble. That building houses is labor intensive means that the bubble truly lifts up the economy. And for the financial sector? Mortrages and financing construction is the most ordinary thing they do.
And when this kind of speculative bubble collapses, there went the wealth of many, which has causes on their consumption. At the worst case people find having more debt than then is the price of the property. Once you cannot service that debt, then you are in real trouble. Also, the slowing down of the construction business will have an effect on the economic cycle. And most importantly, when the financial sector is hit, it will close it's lending an sit on it's money like Scrooge McDuck and this will have an effect on other unrelated sectors of the economy. Hence a real estate market bursting will cause a severe recession.
Or a pandemic which shuts down the economy which already has speculative bubbles inside it...
Quoting Benkei
This I find still find confusing.
Quoting Benkei
Yet they look at inflation as it is now measured. That price stability is about consumer prices, prices of tomatoes, not the price of a Netflix share!
Central banks fight inflation, but they don't fight asset inflation.
(or with zero real interest rates as today, they would hope to see mild inflation)
What I'm trying to get at, is that this isn't a form of speculation. Maybe you just think that's a semantic discussion but there's a reason supervisors enacted stupid decisions like banning short selling - they confuse investing, buying to use and speculation. What you describe isn't a speculative bubble in my view of how the word "speculation" should be used. A speculator buys or sells assets or derivatives only because of a future expectation of value which could either be higher or lower than the current market price. A speculator is in that sense agnostic about the general direction of the market, although he is obviously concerned about his specific positions held at a certain time. An investor invests to obtain a return on its capital mostly by lending its money for a variable return in capital or stock markets. They can also He wants the industry or market he's invested in to grow and isn't agnostic. Then there are also buyers who buy to use, a specialty chemical company buys furfuryl alcohol to blend it for its own products - not to invest or to speculate.
Most people buy houses to use them, not to speculate or to invest. The real estate bubble was caused due to systemic risks. NINJA-loans, incentives for brokers to originate loans that were terrible, CDOs that were opaque and too much money in the system.
Stock market = Insanity
Market collapse of 1929 caused by hyper-speculation, leading to Great Depression, leading to re-emergence of Hitler, leading to WWII, leading to mass death camps, and nuclear weapons.
Market collapse of 2008 leading to untold suffering for millions, and a near miss global catastrophe.
Just arguing for tight control of a very dangerous mechanism.
Or, we can keep debating until the next crash where you lose your home and Net connection, and then I'll be able to go "Nana nana na na!" and you won't be able to counter. :-)
Never said you did. I hear you, a meeting place for mechanical transactions. In theory, neutral. Trouble is, in the real world, such places can routinely lead to chaos on a large scale.
Sorry, but in economics this term is used.
It's erroneous to assume that speculative bubbles happen because of some market participants just somehow start acting irrationally and start speculating / gambling. Perhaps better would be to talk about debt bubbles, but that then takes focus away from the market behavior happening with a bubble in some new industry. Simply put it, the phenomenon is complex.
Quoting Benkei
OK. NINJA-loans (no-income, no job / assets) is actually a perfect example of speculation, if you just think about it.
The speculator is just the lender. The banker assumes that the real estate prices will go up. If he is sure of that, NINJA-loans are totally logical. If the NINJA-loan taker cannot pay his monthly interest, no problem, the bank just takes the home and either the value has stayed the same or perhaps even risen. So "no" risks! And a huge amount of new potential customers. You see, the systematic risk you are talking about is actually the speculative bubble bursting. Then, what has not been seen in any statistics (which just have shown low risk and minimal amount of credit losses) suddenly change to something totally else. And similar thing with CDOs: just take your share and sell the risks to someone else, so no reason to think if the people can pay or cannot. After all, real estate prices go up! Have done that forever.
Why it looked like a non-risky thing. Assume extrapolating the percentage of mortgage delinquencies from loans from the stats from 1979 to Q4 of 2006. Think your extrapolation would predict correctly the future 2007-2008?
Then there's the way the banking sector operates. You see, If you sell cars, there's a multitude of things you can do with your product to make it different from other cars and hence make a niche of people to love your cars (and others hate them). With a bank loan there's nothing like that. You can basically choose a) what's the interest rate and b) to whom you give loans to. Nothing else, basically. And the more debt you issue, the more profit you make. And if you are a smaller bank or a failing bank, one option is to be more "aggressive", meaning you start giving debt to people that other banks don't give money, or face losing the game.
All this shows how intrinsic role the financial sector has in creating speculative bubbles. These bubbles can also happen when a heavily controlled financial sector is suddenly opened to free competition and banks start to in earnest compete about market shares.
That's simply not true. There's a distinction between speculation and investment in economic theory as well. Depends on what you read, really. But it's fine. I don't think we disagree in essence on what caused the bubble with respect to 2008 or the asset inflation we're looking at right now.
Quoting ssu
Again. If you look at it from my perspective, this is not a speculator because he's not agnostic about future values; he's invested in prices always going up. Combine that with shitty risk management and voila.
What does agnosticism have to do with this?
If someone thinks that prices are ALWAYS going up, meaning real prices (not that the currency is losing value), that simply is by any means quite a risky, speculative approach to investing.
Ok, now we really have to look at the definition to speculation to get this point:
Merriam-Webster
Investopedia
Market Business News
Anyway, Then call it a debt bubble or simply an asset bubble. It's the same important phenomenon that earlier was even dismissed to ever happen in the modern financial markets (and still there are those who don't believe in bubbles anyway). I myself have seen enough crashes and market hype in my own lifetime to believe that this phenomenon does truly exist. And a crash can happen ...and then people start bitching about risk management being wrong.
You can be agnostic about opinions as well. So I don't commit to saying God exists or not but I can also be agnostic about markets going up or down. Maybe that's a very Dutch way of use the term agnostic for "unimportant" things but Merriam Webster recognises that type of use as well.
From your definitions, Market Business News is the definition of speculation I'd use if I'd have to chose; it's not investing based on yield but (short term) price differentials.
Quoting ssu
I think bubbles are real but if you see speculators as a sub-set (or even separate) from investors, calling them speculative bubbles becomes a bit weird.
And I get that you see the position "market prices will always go up" is speculation but where it differs from a speculative transacation is that such assumptions underpin long-term investment. The lender enters into a 30 year mortgage, for it's long term yield. Or they buy stock not with the plan of selling it in a week time because they think next week will be the most opportune time to sell but because regardless of market volatility if they sit on it long enough they will make a return on their investment.
Quoting ssu
I think this was true of the last bubble. With wrong incentives and no skin in the game for a lot of people.
Now it's mostly driven by governmen/central bank policy. I think that's worse because there's no threat of bankruptcy dampening risk taking. The next bust is going to be horrible - much worse than 2008. Everybody in finance knows it and they will dump all their shit and buy commodities before average Joe realises what's going on.
What we need, in my view, is smaller financial institutions that aren't too big to fail and quicker and more robust bankruptcy and resolution mechanism when they do fail. These risks will always return and be underestimated because today's black swan wasn't the one of 10 years ago. We shouldn't aim at avoiding black swans but aim at dealing with them quickly and decisively, cut out the cancer and move on with as little disruption to society as possible.
Well sorry if economics is a bit weird, or if in economics and in economic literature they have been called "speculative bubbles" at least since the 1970's (like here and then later here or here...). Yet this shouldn't be your counterargument to what I'm saying...or the thing we debate about.
The simple fact is that (asset bubbles/debt bubbles/speculative bubbles) aren't in the kind of econ 1.0 terms that have been generally accepted with a theoretic model as the issue is still quite disputed (just as is with any question that is current in an academic field of study).
Quoting Benkei
What make's it "the last" one? It didn't burst, I think we are living now in that bubble economy still... and the pandemic might be perhaps the final straw that truly will burst it.
Or then we can start to believe in MMT.
(Which I find quite puzzling.)
Quoting Benkei
Or simply let's have that deflation and start of with totally new financial sector.
I distinctly recall houseprices losing value significantly. Of course, they've rebounded since on the "solution" offered by central banks to bail-out the banks that would've otherwise gone bankrupt for fear of an imploding financial sector. This time every asset category is just overvalued; We had negative yield on 30-year bonds for a while because of the flight to safety in NL and DE. Stocks are overvalued and property is through the roof again.
Quoting ssu
Well, I already called the fear of deflation irrational but... that only concerns goods and services price deflation. There's no statistically significant link between such price deflation and diminished output. It's different for asset prices though, in particular property price deflation combined with high levels of private debt. Here the link is obvious and serious.
How would you solve that?
This is the way it has gone. Perhaps the only asset class that was let at least partially to come down was indeed the real estate sector, because the millions of homeowners were not simply connected as Wall Street is. Here "socialism for the rich" comes to play. But you are right that now the bubble is nearly in every (if not every) asset class.
And then we got a pandemic. This is the "may you live in interesting times"-addition to the equation.
Once a massive economic downturn is forced upon on the Global economy (and rightly so, because the lives of our fellow citizens are worth more than a dent in our economic prosperity), it does have consequences. Everybody understood that this was truly an exogenous shock and was implemented by the lock downs, yet that doesn't change the underlying facts that this, again, has been a huge economic shock to the economy.
And there's no V-shaped recovery ...if we don't count the V-shaped recovery for asset inflation.
A rebound will happen, but likely we are going to be still on a lower level especially with the advanced economies. And that's the point here:
Yet the effect on unemployment will have the severe effect on the global economy going forward. That huge change in unemployment will have real consequences. And it's still not over.
Quoting ssu
Anyone would think that employment had value itself rather than being the cost of producing value. Employment is being produced, but no one is buying it or ever has - you cannot give the stuff away, you have to pay people to take it.
Quoting Benkei
I'm having a big problem making sense of all this What is the value standard by which every asset category is measured? The best I can make of it is that it is the end of the game of Monopoly; wealth has become so concentrated that the social system of exchange cannot function.
People not playing football, not painting each other's nails, not spending at bars and restaurants and not flying hither and thither on holiday does not cause the collapse of the economy unless the economy is based on pure bullshit. I would have thought that a universal basic income was the obvious solution to such a crisis as we face, linked to food and housing costs.
Done by comparison.
Most simple way is to look at real prices, meaning inflation adjusted prices. And let's say a modernized apartment in Manhattan in the 1990's is roughly as valuable as a modernized apartment in 2020. However, if you take into account how much the inflation rat has eaten off the value of the dollar and still the price is way higher in 2020 than in 1990, then it's likely you are looking at an asset bubble.
Here's housing prices:
Here's a study of the inflation adjusted price of gold:
Quoting unenlightened
Why do you think an universal basic handout is the obvious solution?
Let me try to illustrate (not 100% correctly but this should get the idea across). Let's say we're a country of 2, I'm a farmer, you make tools I can use. The government (central bank) made 10 coins and egalitarian as we are, you have 5 and I have 5. Since it's linked to the gold standard, the government can't make more coins without devaluing their worth.
I buy tools for 1 coin and produce food and at some point you'll buy one bushle of food for 1 coin from me. We can go back and forth like this unitl we're both dead. We'll have exchanged a lot coins and probably obtained some wealth in the meantime because the tools are pretty durable so there's a collection of them.
Now we introduce a bank. First of all when we put our coins in the bank, they will gain interest. That means the money supply needs to grow. Back in the day 10% interest wasn't uncommon so let's say we both only need 4 coins for our day to day transactions and can keep 1 coin in the bank until we die plus whatever interest we get on it (we'll give that 40 years). Compound interest means that after 40 years, we each have 41.14 coins in the bank. So both of us have 46.14 coins but since we're lazy, no productivity increase. If the money supply is 90 coins in total and the number of goods in the market remain the same, what will that do for prices? They ought to be rising, right?
Now, there's of course a good reason for this because the savings can be used for lending. And if the bank lends to @ssu, he'll do something really useful with it. So that's our third countryman. Welcome to the club, we're special because there's only three of us. Here's 5 coins to get you started because we're totally egalitarian here.
Based on the circulation of money, the bank feels comfortable to lend out the money we deposited. So let's say the bank treats our savings as term deposits of one year. But will only lend out one of the deposits so it can cover one deposit with the other if we'd withdraw early. So it will lend out 1 coin in the first year and 41.14 coins in year 40 but since it promised us both 10%, it needs to charge 25% for the yearly loans. But wait, it can lend out any profit it makes as well. So the money supply doesn't increase with 82 coins but with... (drumroll) 6,311 coins for a total of 6,319 coins of which you own 49 coins, I do too and the bank owns EUR 6,009 coins. Pretty fair huh? Especially since we're the only ones actually working in this picture!
But wait, ssu borrowed that money everytime and actually successfully invested it. So his rate of return was actually larger than the interest rate. A whopping 5% after his interest and downpayment but since he annually borrowed larger and larger sums of money (initial 1 coin + compound interest + whatever the bank lends him from it's own profits), he ends up with the other 300 coins. Prices should be rising for our tools and bushles right? Except they're not! Why God, why ain't I as rich as ssu? You fucker, you didn't work harder than I did. Give me your money. Tax him or something.
We see here the simplest divergence between goods and services price levels and that of a financial product, namely loans, which is a simple product to see how it yields profit. But a bank can of course
buy stock, buy bonds or trade derivatives instead of providing loans. Now that the bank has it's own source of money, you and I can go fuck off with our 10%, interest rates will go down as will lending rates as banks start competing to get ssu to enter into a loan with them. As lending rates drop other financial instruments become more interesting so at some point the lending rate bottoms out at the level where other financial instruments provide a higher yield. Even if ssu used his lending activities to raise productivity and add to the real economony, his wealth after 40 years is much smaller than that of the bank.
So how do we know asset prices are inflated? Because goods and service prices are not inflating, which they would if more money would be spend on goods and services simply because the money supply increases. Now, goods and services inflation can also be offset by increased productivity but this isn't happening and certainly not concurrent with increases in the money supply.
Second, sub-zero interest rates. If money were scarce, you'd have to pay a premium to be able to get a hold of it. But there's no premium, banks are basically giving it away since the central bank is giving it away too.
Third, yield or return on investment. Would you put your money into something that would take 1,000 years to pay that amount back? Doesn't really seem like a sensible investment to me.
Demonstrably, most people don't need to work most of the time, because we [s]can afford to[/s] have to pay people for playing football, and painting each other's nails, etc. But they still need to eat. Don't call it a handout as if you own the world. It's a hand round of the plentiful resources of the world.
At the moment people who spend their lives building houses have to pay rent to people who never built shit to live in one of the houses they helped to build. That's a hand out, and a greedy grasping hand it is too.
Yes, that's the way to get rich: invest with debt in something that pays more than what you have to repay. And for a bank to be a bank.
Quoting Benkei
Of course the idea is that these companies are so awesome that they will grow. It's silly, yes.
But let's remember that 40% of the value of the SP500, five hundred handpicked companies, is from just six companies or so. Take them out, the net companies that have their best possible upturn during a pandemic, and the rest are in a bad shape. Hence if just six companies would take a 25% drop, the whole index would be -10% down even without every other stock not changing it's price.
Quoting unenlightened
Well, if an society can pay to professional athletes, artists and nail salon personnel, that just shows that the society is prosperous. The more poor the society, the more people working in jobs that are basic necessities.
But coming back to universal handouts: unemployment benefits do that thing too (feed people). Or more generally speaking, a welfare state system does it. Why the necessity to give Jeff Bezos or Bill Gates the handout?
Besides, haven't Americans already been give by Trump this during the pandemic? I remember a Finn who said his American wife got money all the way from Trumpland to spend here in Finland. What's the cure all in this?
Thanks for that, I don't think you're far off at all. From where I'm sitting, watching the rain fall on streets with much reduced traffic, the economy seems to have tanked.
Stagflation, noun (economics), persistent high inflation combined with high unemployment and stagnant demand in a country's economy.
The corporations live to serve their masters, the shareholders. To maintain rosy appearances in the markets, they are cutting expenses to the bone, which immediately impacts their suppliers of services. The suppliers cut working hours or just lay off workers and go out of business. Shops are closing, stores have limited inventories with rising prices, and many people just stay home watching the rain fall. But thank God, the stocks are doing so well.
Bill and Jeff have to eat too. So we give them the necessities as of right, and get them to pay some tax on their "earnings" like the rest of us. Is it a strange notion to you that the government serves everyone?
Quoting ssu
Not sure what's been happening in Trumpton, but here in ready baked Brexitland, there have been arbitrary ad hoc unfair handouts to mainly businesses to continue the pretence that everyone is doing vital work. "Eat out to help out" was the slogan to justify government handouts to Macdonalds and Starbucks, and the policy of not providing meals for children, was named, but not by the government, "Eat nowt to help out."
Is it strange to understand that there is a huge difference of taking care of those necessities or just giving a sum of money to a person and hoping that the person will use it wisely?
Of course the question of universal basic income is far more complex. My country btw. did have an experiment on universal basic income.
Tells something that they didn't continue it. So I'm not so sure it's this great solution.
Well given the overwhelmingly positive results there, it tells me that it would be a great idea, that it would not lead to lots of people just doing nothing or any nonsense like that, and apart from the continuing social pressure to find employment which is just a hangover from the outmoded attitude of a non automated industrial society, there really is no downside. But pressure from capitalists would make it hard to implement widely because it is only the fear and suffering of the poor that empowers employers. If unemployment was no great threat, work conditions would have to be made pleasant and workers treated with respect. That would be awful.
I'm not so sure about that. If unemployment isn't a great threat, you aren't facing living in the streets, then simply being unemployed is a valid option.
We do have here a welfare state that does take you from the cradle to the grave. You don't need to work, you do have perpetual unemployment (basically similar to UBI), the welfare state pays your rent up to 600 euros, meaning you can get a decent small flat in the suburbs. If the choice is to go and work at McDonalds, you really have to think of the equation, because you aren't going to be so much better of with the job at McDonalds. And before I continue, I have to say I totally choose the problems of a nanny state than have homeless and dirt poor people around. The dismal situation in the US is something similar to the Third World and that a welfare state where you don't need to work can leads to social exclusion becoming a problem. But that problem is quite minor compared to homelessness.
Here's the long term stats for my country on unemployment. Notice that on good times (2015) the unemployment was at the level that it is roughly now in the US. But do notice the pattern: after every severe economic recession where unemployment has exploded upwards, it has come down, but to a higher level even at good times.
Now compare this to US unemployment. What you can see is that similar uptick after a recession cannot be seen as the US unemployment has continued to go down under 5% after a recession, even if there can be differences in the ways the statistics are done:
Of the Nordic countries Norway can easily afford the system, but we cannot. The government is still in far better situation than some South European countries, but we can fall there too.
What's so terrible about that? If playing football and painting nails are valid options then why not going for a walk in the park. - Oh wait, that is already a thing - called professional dog walker. And yet looking after one's own children is "simply being unemployed". Looking after someone else's children is a profession, though.
Quoting ssu
See I don't believe this. Lockdown demonstrates that we can live without most of the services and with 50% unemployment. If we can live without them, we can afford to live without them. When we don't have to, we probably prefer not to, so most folks will want to work to afford them; that's not a problem either. But don't pretend that the freedom not to be a wage slave is unaffordable.
Uhhh...you STILL do have all the expenses, don't forget them. All the unemployment benefits, all the bailouts and funding have to be covered. TRILLIONS of dollars pushed just into the US economy after Covid-19 hit. Yes, spending trillions with a t in one year does have an effect.
In fact, so why pay taxes at all? Why just take care of all government expenses by covering it all in new debt that the central bank then buys. At least, oh, until the pandemic goes away. If you think it will cause inflation, think again! Learn the marvels of modern monetary theory (MMT), which leave me a bit puzzled.
I think it would be important to debate MMT in this forum. I'm surprised as that there are many who supported Bernie here and not much is said about MMT.
You still have all the expenses either way. People got to eat. Most people these days are totally unproductive. They cut hair and play football. So if all those people stop work, hair gets longer and grass gets longer. And that's it. All the rest is just accounting for the food that they are going to eat in either case; there is no real difference.
I get your point. But society doesn't work that way, literally. That accounting you talk about is far more important than you think. Work is important for many people. Starting from things like self respect and mental health.
We do value work, be it a "productive" or "unproductive", which by your definition is quite a loose definition. And is it wrong to value work.
Yes it is wrong. It is wrong because it is contradictory as I pointed out earlier. The whole thrust of the development of civilisation has been from the beginning to work less. Work has negative value in the economy and always has had because it tends to be tiring, boring and unpleasant if not dangerous. Because it has negative value, employers have to pay. So we get animals and machines to work instead whenever possible, so we don't have to. And society literally does work that way, and literally always has, and the notion that anyone - meaning anyone working class - should be grateful for work being provided, is a foul and immoral lie. Only the devil makes work for idle hands.
I sympathise with your ideas here, I have similar ideas. But we will need someone like Corbyn as Prime Minister to even start moving in the right direction. To think that right leaning conservative leaders might move in that direction is naive. You are aware I presume of the inequality in our society? In which a proportion of the population drains wealth away from the other less privelidged parts of the population. There are literally people who don't work, but live off the back of others working, often through what could be described as exploitation. There is a group who live off the wealth accrued from the increases in property values, again they don't work and that's not to mention the billionaires and criminals.
I think it's fine to get some of these people to pick vegetables, or work in the care sector for a good wage. But somehow I doubt that they would see it that way.
We just have to convince them of our generosity in offering them work. I find a leather bullwhip is persuasive.
I don't think so. Besides, getting rid of meaningless work is a totally different question that getting rid of work altogether.
Meaningful work brings meaning to life. What's so wrong with improving things that are important to oneself through work?
Playing football is meaningful work?
Dancing is meaningful work?
Play is meaningful work?
Then there is no need for employment at all, we can all choose our meaningful work for ourselves. I choose philosophy.
But no the lie you want to convince us of is that working for the man is meaningful work. More work needed, sir.
Is making art meaningful work?
I think so.
Besides, I've done a lot of voluntary work, that I've not gotten paid. I think it has been meaningful and I've liked it. I don't know what your problem is with work.
Quoting Benkei
Who has talked about full employment or obligatory work?
Quoting ssu
You see you talk with forked tongue.
I respect myself because I contribute to society; I get a job because I am hungry. I value people playing football because I like to watch it. I value paid work for me because it pays. You yourself talk about obligatory work, because you reject living without paid employment as a valid option. You conflate what is meaningful with what is profitable and it is offensive.
And contribution we usually think as work. Rarely we see ourselves contributing if we just get an unemployment check. That sense of contribution is important and that is my point as it seems you haven't understood my point.
Quoting unenlightened
You're the one putting words in my mouth. Naturally if someone really doesn't want to work, that is his or her decision. Yet the vast majority would like to work. And it is very important for many for their self respect as it still is a stigma to be unemployed.
The unfortunate fact is that a society can tolerate high unemployment because of this personal stigma, even if the unemployment is because of an economic depression. There are enough of annoying people that will say "anyone can get a job if they really want to work". Unemployment is seen as a personal failure. If you the welfare state does give protection and you don't find yourself in the street or living in your car as in the US one can find oneself, that doesn't help the motivational side.
And how this is societal attitude one can easily see how then the society totally accepts one idle class of people: the retired. Once you have worked and then retire is seen as good. Yet is the issue about changing people's views on unemployment? Well, then kicks the economy itself into the equation: those nail polishers or football players you judge to be unimportant still get their money because of a totally willing and voluntary transaction of money: somebody is genuinely willing to pay for their services and it's not similar a tax.
So a footballer who gets paid thinks football is work, and a footballer who doesn't thinks of it as leisure?
And a charity shop volunteer isn't contributing, but commercial shop worker is contributing?
Quoting ssu
Can you just unmuddle this for me? I say that society doesn't need people to work very much because automation. So most employment is people scratching each other's backs and picking each other's nits. And if people do a bit less or a lot less of that, it needn't matter very much to anyone, as long as everyone still gets food and shelter.
You are saying:
1. society can well tolerate high unemployment - agreed.
2..there is a social stigma to unemployment - yes, but there needn't be.
3. welfare doesn't motivate employment - yes but that doesn't matter because 1.
So what is your argument against a basic income?
A person who does something useful or worthwhile or creates something of the like should be rewarded. Most work or have compulsory education because they need to do so in order to live.
Nothing is given for free. If you eat something it's because someone either raised crops or cattle, and had to deal with the hardships/setbacks associated with it. You can't have someone sitting around doing nothing and getting stuff while someone deals with the stresses and hardships associated with producing said stuff and gets the exact same. It doesn't make any sense. You have to be rewarded for your effort or to many people that effort would be in vain, at least it wouldn't be something anyone would want to do. With joy and not out of spite, and if so, without those two, you never know what you're going to get...
UBI sounds like a great idea, in theory, if the world were as it was, groups of peoples with numbers under a few hundred thousand who can explore, cultivate, and lounge around as they please. Unfortunately, we live in a world of 8 billion. Not to be unexpected, the pleasures of fraternizing were too great to be resisted. However, that was back when your community or people would inflict harsh punishment on you for neglecting your offspring. Now, you just offer up for adoption or the State to handle your progeny if you're "unable" or unwilling usually (and that's 90% of most cases). That's what they wanted so that's how it is. So. You work. Simple, really.
You can have an economy with UBI where everyone works if they please (which most won't). Meanwhile, your next door neighbors may actually instill or rather correlate their currency to work and effort. Over time, which one do you think will hold more value? See the Zimbabwean dollar.
Why?I just created that worthwhile post; reward me.
Quoting Outlander
Everything is given for free. We come into this world with nothing and helpless to even feed ourselves.
It's called voluntary work, if you have not noticed.
Quoting unenlightened
I understand your point. My point is that "scratching each other's backs" is important as then the transfer of wealth, the payment, is voluntary. No nail polisher of football player will just come to your house and demand you pay part of their income. Yes, we don't have anymore 12 hour workdays six days a week. Heck, I can write to you in PF and do my work and still my boss is happy. A fitting mix of work & leisure is what we need.
Quoting unenlightened
Well, I do live in a welfare state where there is a) free education even to the university level, b) assistance to housing, c) perpetual unemployment benefits and d) universal free health care. When you have those, you already have been taken care of what universal basic income is for, especially with the unemployment benefit. Then for those who do have income and pay taxes, it is questionable if this is basic income is necessary as it's basically a payback of the taxes.
Right. The difference is one of principle and psychology, rather than of mere economics, but I think it has important implications, and it is those implications that you resist. But you have dropped the 'we can't afford it' line at least, since it obviously costs almost nothing to give with one hand and take back with the other.
Well, here we have been having deficits for a long time and it hasn't gone into investments, but upholding the welfare state. If taxes don't cover the costs, then the government takes on debt.
The true question, which I already mentioned, is if we really can go along the lines of Modern Monetary Theory and assume that it doesn't matter how much debt the government has, that it won't have an effect on creditworthiness or the value of the currency. It's a quite current issue you especially now.
Unfortunately, the way economies are run, perhaps its something inherent in its very nature, has, :smile: "costs" that can't be translated by economists or anyone else apparently into money. Stuff like pollution, environmental degradation, deforestation, global warming, etc. haven't been transliterated into dollars and dollars seem to be the only language people, especially the ones who call the shots, understand. It's as if mother earth, Gaia, hasn't been able to keep up with the way human language has evolved from Hindi, Chinese, English, German, Japanese, etc. into the now global language that's money. In the past, Gaia, could speak to us in moving verse and thought-provoking prose, of course at the cost of losing precious trees to make the paper on which they're written. Now, this simply fails as the language has changed into what to Gaia is unspeakable nevertheless "understandable"
I've been led to believe this lamentable state of affairs is changing but not in the way some of us would've liked.
What's happening is people (economists?? I'm not sure) have begun the process of translation between Gaia and us but the chosen language is, for better or for worse, money - dollar costs of environmental degradation, dollar costs of deforestation, dollar costs of biodiversity loss, etc.
Wouldn't it have been better if we'd done it the other way - learned to speak mother earth, Gaia's language, perhaps requiring a getting in touch with our softer, mellow side that has a primeval connection to the Earth?
Something must be done about the so-called global economy.
That is an interesting thought. I absolutely love it. I tried to warn people of the housing bubble several years ago and no one would listen. Somehow the whole nation has lost its judgment. No one seems grounded in reality.
Then you are one of the people that understand reality and don't go with the hype as the majority will do.
For starters, not everything important has to do with the economy. The economy is first and foremost a tool, if it works well, then the prosperity should be used to preserve nature and make the environment a better place to live for every living creature.
The simple fact is that economy is important just up to a point, it isn't itself a reason.
Heavens no. I don't go along with the hype because I am too skeptical. But I only know enough to know how much I do not know.
This may have nothing to do with what you all are talking about, but there was a time when the there was a formula for determining the prices of things. One third the price of something was the cost of making it. One third of the price was invested in the company. The last third was profit. I was absolutely horrified when large manufactures of cars went bankrupt!
Something has gone very wrong with our capitalism. Successful business should not need to depend on banks for loans, because they should have their own reserve for growth, and bad times.
Far too many industries/businesses are dependent on government contracts! How many bombs does the world need and should we be arming the world because that is good for our economy?
Should we count the whole world as our supply of resources, or should we be aware of our own resources and the nations we depend on for mineral resources? When it comes to mineral resources and the cost of defending our economic interest, I think we are way out of touch with reality.
Can we ignore global warming or should we figure the cost of ignoring it as part of our reality?
What you have said is kind of like figuring the value of a homemaker. Traditionally a man supports the woman, and we know his value by what he earns. The wife does not earn money, so her value is zero, right?
The earth is our mother. We have exploited her and diminished what she has to give. The value of what we take from her is what the men earn. She can be ignored as the homemaker is ignored. :wink:
:lol: I can imagine some men totally regretting the forum is open to women who do not know what they are talking about. While they take their fantasies of economics very seriously. I come to the discussion with point of view of a woman who came of age before women were liberated, and also from a geological perspective. I lost any trust in economist when I realized they are not grounding their thoughts on economics with geological reality.
That's the classic example how economics get's things wrong: if the mother stays at home, looks after the children and takes care of the house, that isn't seen in the GDP. A bigger problem is in Third World countries where a lot of people are subsistence farmers. Farmers that live off their land and have minimal amount of transactions again aren't counted in the economics statistics, which is the reason why some countries seem even poorer than they are.
Quoting Athena
Some do that, but many just choose the fancy mathematical models that nobody else understands to make their findings "academic" or "professional" and are happy focusing on the mathematic models and equations. As long as everybody else is saying the same things, it doesn't matter if the World then develops totally differently as one has described. Just call it a black swan event.
For thousands of years the woman's and the poet's reward was intrinsic . During the great Depression the arts were funded but we seem very reluctant to do that today. Mothers dependent on welfare are surely not rewarded for being mothers.
Especially in our materialistic capitalism, we do not have a system for rewarding everyone who makes a contribution. Many of our essential workers are living below the poverty level without the protections of wealth. Just how well should they be rewarded?
We might want to provide well for everyone, but being dependent on public assistance is not equal to having dignity and liberty and where is the money to provide for everyone going to come from?
Even if somehow the economy of every country could afford a high standard of living, our planet is finite and the faster we consume its resources the closer we come to economic collapse.
What is a realistic plan that is sustainable? I want to give the world birth control because war is a product of over population and I hate war.
Economic history tells how to do it.
Actually many countries have become more prosperous thanks to globalization and thanks to the West's indifference on manufacturing going to cheaper countries. Yet that strategy of using cheap labor to lure low skill manufacturing to a country goes only so far. The next step, a huge one, would be to use that income to increase the education and the skill level of the future labor force that would then interest medium to high skill manufacturing to the country. To have those educated professionals, engineers, scientists etc. in your workforce. And in order to preserve them, as they simply don't migrate to the West, the income has to be near to the Western standards. This in turn then creates the class that every country wants to have: the educated middle class, which in turn will demand things like taking care of the environment. And above all, they are consumers, which themselves create the demand for a service economy. Not that poorer people wouldn't think that the environment is important, but if you face literally hunger, the environment isn't you biggest worries.
So what could be done?
Starting from the problems of the present globalization would be a good choice. Now it's the emphasis on globalization is on owners of companies getting as much as they can. This isn't the way things went in the West: the labor movements demanded and got labor laws, work safety standards and above all, negotiated collectively pay increases, which then made working class families more prosperous and created the consumer society. If you prevent the labor force in a Third World country to get also these important rights and higher salaries, then the country will stay poor as there isn't much of aggregate demand. No "take off" of the economy will happen.
Secondly, Improving the institutions in other countries is important, but this is something they themselves have to do. Foreigners can help just so much, but they cannot run the system. Also the focus on economic and monetary policy should be the ordinary people, not the richest people. The elite in a country should understand it's role and invest in the country, not move the money to Swiss bank accounts or luxury real estate in the US (in fear of losing the money if it stays in the country).
And thirdly, having the vast majority of people able to get a decent long term mortgage for a decent home will create prosperity in the long run. For example in Egypt, the vast majority of people rent their homes, meaning that all their life they haven't saved, but are as poor as when they entered the workforce. We take it granted that the financial sector (usually) works OK for us, but that isn't so in many countries.
I am not sure how your idea of an economy works. Think of this as a computer game. describe your area, does it have a sea port? Is it inland? What are the natural resources. You know, what can be use to start your economy? What is your water supply? Can you feed your community? How? Do you have a source of energy? After telling me how these people meet their immediate needs and develop a product they can sell, what is the transportation system and who is the buyer of the product?
This is just partially correct. You need to also include the fact that speculators ignore the (necessary) market fundamentals responsible for the increase in an asset's value. What supports a continued increase in value besides crossing fingers? One could expect, understandably, the value of an asset to keep going up during the times of sustained profitability, demand, production, and other sound economic conditions. This is not speculative bubble -- this is called sound investing.
It's not just risky, it's counter intuitive. Increased efficiency and specialisation in production should lead to lower prices. Rising prices are purely a result in increases in the money supply or debt leveraging. If those funds are directed at the "wrong" sector or causes a general glut it's going to collapse.
What happens when a vital resource for a product becomes hard to get and the demand is greater than the supply?
That is not exactly true. We can talk about the cost of pollution, environmental degradation, deforestation, global warming. Here is a google page that does that.
https://www.google.com/search?q=economic+cost+of+global+warming&rlz=1C1CHBF_enUS926US926&oq=economic+cost+of+glob&aqs=chrome.0.0i457j69i57j0j0i22i30l5.11171j0j15&sourceid=chrome&ie=UTF-8
It is up to us to change the conversation and Biden's administration is more likely to make new conversation possible then the Trump administration dependent on denial of the cost.
We the people have a lot of work to do in the US because it is evident the population is very ignorant of things we need to know, to have good moral judgment. We need to become aware of the most important pieces of information and then be sure the media is addressing them and our schools are preparing the young for a different reality than the one we have lived up to now.
Yes, the "cost" which is a monetary term to my knowledge. I feel like a nonphysicalist with an environmental agenda, equally apalled by the materialistic reductionism as I am about the, coincidentally, "green" reductionism. Isn't it odd that the greenback is at odds with the greenbelt? I guess, we're a bit confused about the whole issue - both are green after all.
And we all live happily ever after, NOT.
We no longer live in labor intense economy. Factories that once employed 300 people are run by a handful of people with high tech skills. Not only is does this mean not enough factory work, but everyone who got only a C average in school, has very little of chance of getting a job that pays a decent wage because the supply of these people is far greater than the demand for them. AND, who is paying taxes? Not the unemployed people, and not those working for low wages.
Since early times governments have been supported by the source of income. At first the source of income was the land. Then as economies developed the source of income was the human time and energy invested in the production of products. Increasingly the source of income is the technology that has replaced the need for human labor and I think we need to rethink our tax system.
At the very least, we need to respect how much time and energy a person gives to earn the wage. Someone working more than 40 hours a week should not be taxed at the same scale of someone who can earn that much money in a fraction of that time. To make our tax system just, it should compensate people for their time and energy. Working 60 hours to week consumes a lot from a human being, and this people should not be taxed the same as someone doesn't work for a living but lives well off of investments. We have a long ways to go before we express human value.
True, but notice there are indicators as Price to earnings ration, the P/E. Usually with "normal" stocks this is something like 30, meaning that the company will pay in dividends it's stock price in 30 years. If a company grows and creates profits, that ratio could stay the same. If it anticipated to grow a lot, maybe the P/E would be 50 to 75. Now you have stocks in the P/E 100 - 1000. Now of course, the standard rhetoric is that these companies have a bright future, but now they aren't yet profitable, but will soon be. Amazon has an P/E of 98 now, is it this "small company destined to have far brighter future"? The company is over a quarter century old and is the leader in it's field, but I guess it will have to grow multiple times.
How many multiple times bigger you think Amazon's revenues will grow?
You see, there is an alternative reason for Amazon to have such a high P/E and that is index investing. In index investing, you just invest in the biggest companies because you want to mimic the index. And Amazon is on of the biggest companies in SP500 (or other indexes). Why? Because the index has gone up! Someone might notice the reason for a bubble when many follow this investment strategy.
True.
The real problem in the "Market economy" of the present is that the natural market mechanism that would lead to asset prices to fall isn't tolerated. That isn't free market economics. Yet you have great examples from tiny countries like Iceland that the most healthiest thing to do is let the bubble burst, put the people who have done outright crimes to face legal actions and have that quick deflation, and then the economy is back to being healthy. It really is about political power.
I think a better understanding of our economy might include a study of Christianity. Especially Protestantism, that is tied to Calvinism, a very materialistic/supernatural understanding of life justifying the exploitation of humans and earth. By materialistic I mean a total rejection of animism- [quote="the attribution of a soul to plants, inanimate objects, and natural phenomena. 2. the belief in a supernatural power that organizes and animates the material universe. "a village steeped in ancient animism and rituals""][/quote] The supernatural power is the God of Abraham, His son the Holy Ghost, all completely separate from nature. The religion prevented us from understanding Gia until just recently and there is still very strong resistance to accepting the science of Gia that was known to aborigine's for centuries. Especially in the US we are in the throws of culture war, and this is a serious, social, economic and political problem that could destroy our democracy.
I'm too ignorant to comment but if I had to say something about Christianity vis-a-vis the earth's present state it would be that Christian values are just too anthropocentric to permit an all-inclusive perspective, something necessary if we're to ever to get the global environmental movement off the ground. Just saying...I could be completely wrong of course.
I think that for starters, we concentrate on how things change while something that has stayed the same for decades we simply take for granted.
Well "anthropocentric" is a very fancy word and I had to look it up. I totally like that word and would not throw stones at people because that is true of them. We might be a whole lot more rational if we favored evolution over creationism because that would give us a much more realistic understanding of our value, what can be expected of us and what our limitations are. All social animals perceive their group to be the most important.
I mention Christianity because many people understand life through this mythology rather than a study of nature. Primitive people had a closer connection with nature and understood their survival depended on knowledge of the environment rather than on a God's will. Democracy is rule by reason, and that also depends on knowledge of the environment. Hunter gathers learned where to look for food. We learned to look for finite resources and those resources are being exhausted. If we do not take a serious look at what mineral resources have to do with building and maintaining an economy, we are not going to make much progress in a discussion about economics.
For sure our brains are designed to run on automatic without too much thinking. But as our reality changes we need to understand that change and how to adjust to it.
I love how you all force me to think! :heart: Imagine being a primitive person whose survival depends on knowing the environment. You will not be planning a new computer program and giving any thought to technological development, but you may discover a better way to make a spear because your survival pushes you to do what you do better. I have I succeeded in conveying a totally different mode of thinking and different direction of human evolution? Modern man probably would not survive in the past and someone from the past would have a terrible time trying to survive in our time. To begin with What is blazes is economics? What is it and where does it come from?
Interesting discussion you two are having. I will argue we do not get things for nothing when we are no longer dependent children. Even what nature gives us, requires us to make an effort to get it. I think everyone should have a garden because gardens teach us a lot about life. A productive garden requires a lot of work, preparing the soil, planting at the right time, watering just enough and not too much, defending the garden from disease, pest, and animals that will gladly eat it and if you don't get it right, you starve. Hunters and gathers lived off the land, but they had to learn where to look for food, and when the food would be there, and how to survive the elements. In some places life was more like a Garden of Eden, but much of our planet is not so friendly, and life was not so easy.
Your thought needs our attention. Primitive people learned they must invest in the land to get food. When I speak of being materialistic, my intention is to raise awareness of our disconnection with life. How we develop our awareness will make us ,more or less anthropocentric. We might want to be focused on Gia?
Religion attempts to focus us on God but that focus doesn't work well if it ignores Gai.
Indeed. I have worked most of a lifetime to afford a garden of my own. Up to now I have worked as a gardener for others, and borrowed or rented various patches from time to time. But in a couple of weeks God willing, we are moving to a new house with a small garden of our own. But bitter experience has taught me that a productive garden takes many many years of labour. We inherit the labour of the ancestors in creating a good soil structure, de-stoning, draining, clearing, terracing, developing the strains of seed we rely on, and building up the complex of knowledge from generations of experience so that we make fewer mistakes and can be more productive than our predecessors. All of this we get for free.
And we are also dependent on our neighbours to keep their patch in good condition and not spread weed seeds or dilute our seed stock with cross-pollination from inferior varieties.
Quoting Athena
You are completely wrong. Never mind the food itself, can you even make a spade? No, most everyone who posts here is totally dependent on a vast network of social connections without which they could not survive, let alone post.
Head for the wilderness and divest yourself of everything made by another hand, and see how far your own work will take you.
That's a nice compliment to the forum, Athena.
Quoting Athena
Making a spear better is likely a far more difficult thing than planning a new computer program, when you think of it. I'd say we are always making similar simple advances, but just adding up on the aggregate collective understanding. "If I have seen further it is by standing on the shoulders of Giants" as Newton once said.
The homeless will be glad to know they get so much free.
What in the Heavens is whatever you said and do you stand by the concept it is not a byproduct of God? A useful one perhaps but yes.
The homeless have been robbed of their home which is the same Earth that the rich think they have exclusive right to. Some people think there is some justice or morality in a few people owning many homes and a great number paying to borrow their homes and many more not having homes at all. I think is ridiculous and unneccesary. Everyone should have a garden, and everyone should have a home.
This thread is about the economy and I suppose we could talk about housing the homeless. We have come to that time of year when people freeze to death if they are not sheltered. First we need to decide where they are going to sleep? Then where will they pee and shit? How do they get food? How do they manage their trash? How do they avoid having their few possessions stolen? Our budget is zero. Now create those shelters.
Yeah, once again I left out an important word. I have corrected the post. Amazing what a difference one word can make. Especially when the word is "not". This time the missing word is "glad".
I became politically active to house the homeless following the 1970 recession. We could not assimilate the young into the work force fast enough and I housed many of them. I sold plasma to supplement my small pay check and was feeding these young people, buying them medicine, buying them clothes so they could apply for jobs, and then things got worse. When an economy crashes the cost of housing stays low but as soon as the economy improves, the cost of housing rises and even more people become homeless.
During the 1970 recession I researched poverty at the U of O document department. I wanted to understand how can wealth just suddenly disappear and such hardships follow?! I learned some interesting things, such as how laws to protect the middle class standard of living, result in increased homelessness. What large populations and diminished resources has to do with the increased cost of housing because the cost of land and everything that makes a house, goes up, making it impossible to build truly low income housing.
I fought very hard to call public attention to the increasing homelessness, and now my retired sister combs the streets of our state capital, rescuing the homeless people she can rescue. Her Facebook page has pictures of the horrors she deals with, and the people who want their story to told. My grown granddaughter manages a camp ground for homeless people and her life is on the line, because of the virus and because, when necessary, she must take knives away from men who are not in their right mind. In my community there is much more for struggling people than in our state capital and this is because of what I was able to achieve long ago. I did not achieve it alone but I got the ball rolling because I wanted to get homeless people out of my home. We could not have achieved anything but our city counsel had hippies running our city and so a lot of good things were done. :flower:
It is hard to imagine anyone being homeless and staying in their right mind for long. Their survival almost depends on going feral, like a feral cat that can no longer be domesticated. I am not as involved as I once was because I just physically can't do much, but I turn on my computer every morning to make this world a better place. After what I have seen and experienced, I really want people to face reality. Never in the history of humanity did the easy life come free, unless the people live in one of the few places that are like a Garden of Eden, such as the tropical islands and Mediterranean areas with large rivers.
Please explain that. Who decides how much a tax payer will pay, and who pays taxes? What is the process of getting more money from tax payers? What are the consequences of raising taxes or creating new taxes? What is being taxed, property, things we own or buy, incomes?
When a representative has a history of raising taxes, what happens when the next election period comes? When a representative or president says we must conserve and stop consuming oil or stop cutting down the forest, what happens at the next election? Why? It is the economy and I hope people keep posting.
Very nice to hear that people actually do voluntary work.
Perhaps I seem to be a "socialist" when I do say that these things ought to be taken care by the government and not to be left only to voluntary organizations as they can do only so much. Above all, it policies have to be smart and understand that homelesness is a complex issue, yet it can be minimized and dealt with. Many need far more help than just a roof over their head. Even if there is mental disorders and addiction problems, many don't have these issues. In my country in the 1950's there were about 70 000 homeless people, in 1987 the number had decreased to 18 000 and now in 2020 it's estimated that there are 4 000. Four thousand in over five million people isn't much (0,008%), which all are sheltered. In the US the number is something like (0,175%), which is twenty times the amount than here. For comparison, LA County has roughly twice the population of my country, Finland, yet has about 60 000 homeless.
I think this isn't a problem of money in the US, but the lack of sound social policies, social work and organization. The biggest obstacle is the view that the Welfare State is socialism and that you cannot force people into treatment etc. Reducing the homeless by 50% is totally possible for starters.
Okay you have 50 labors. Now how do you turn this labor into shelter for everyone?
Your opening statement is excellent and I look forward to reading the rest of your post.
The truth of what you said makes me so mad! :rage: The US has just recently come to the end of its wilderness, and its mentality has not caught up with its changed reality. For awhile we did have facilities for the mentally ill. Some were very nice and others were hell holes because they were overwhelmed by a larger population of mentally ill people than expected. The solution was to close them down and deny the problem. Today where I live, we have an space that provides many services and the mentally ill hang around this area with no place to go. My sister has been rescuing people off the streets at our state capital and her life has been hell because we do not have the organization to help the seriously mentally ill. Our hospitals are dumping people with serious health problems on the streets knowing they have no place to go. A third world country could not do worse than we are doing.
We are just beginning to think in terms of government having a responsibility to care for people needing help, instead of driving them out of town or incarcerating them for crimes. But I am not sure this discussion belongs in a thread about economics? This discussion belongs in a thread questioning if the US is civilized. We are so clueless about the end of a labor intense economy that could more easily assimilate marginal people, and why our high tech society has pushed millions of people out of main stream society and into uncontrolled mental illness and drug addiction. Now that economic change could be an economic issue? But as long as people insist everything is free I don't think we can make much progress in a discussion of economic reality.
Your post is so good, I am excited about what you may say next.
Actually, it is.
The 19th Century name for economics was "political economics", which honestly describes just how linked economics is to politics. The idea of "economics" being just this private sector machine spewing out production and GDP is totally wrong. Social problems, povetry, corruption or the way government treats the private sector effect very much how the actual economy works. Unfortunately these factors aren't at all easy to mathematically model, hence they are usually left out from mainstream economic models. Yet looking at which countries economically prosper and which don't, these things do matter.
The simple link is of course is that a well functioning economy creates prosperity for the people and taxes for the government, which then can ease the social problems. Yet there is also a link the other way around: if social problems are left unchecked and become large, this increases the lack of social cohesion, increases crime and heightens political tensions, which then create an atmosphere that decreases economic investment and business activity. You never have at the same time a booming economy and large scale rioting on the streets at the same time.
Even if homelessness effects a very small portion of the population, it is something that everybody can see. (It should be mentioned that young adults living with their parents, for example, aren't the ones when we talk about the homeless, even if they literally don't have an own home). We are now seeing an exodus from California now as the high cost of living and the possibility of working from home gets many to move away from the traditional centers like Los Angeles or San Francisco. Yet many of those moving away do also mention the homeless problem and the tent cities on the street as a reason. Homelessness isn't just a personal problem for those who are effected by it, it does effect the whole society. It easily reminds us how much social cohesion there is in our society. If there isn't any, people are genuinely scared of each other. So I think this is a topic that can and should be discussed on a thread about the economy.
Homelessness in Finland in the late 1960's early 1970's depicted by a cartoonist. As parks had a Puistotäti "Park Aunt", a Kindergarten teacher, taking care of children outside in parks, the parks also had an Puistosetä "Park Uncle", the homeless alcoholic sipping his bottle in the park. Back then the traditional hobo here was a WW2 veteran that hadn't gotten accustomed back to civilian life, which tells this is an universal problem as many homeless in the US are veterans from the various wars.
Awe you speak of the American dream where the only thing government provides is a police force to protect private property. You know, bash people's heads in when they dare defy the authority of autocratic industry and property owners. Anything to do with taking care of the poor, who are exploited by industry and property owners, is a matter of charity and that is not the correct function of government. I mean like get real. If you take care of these people they stop working for poverty wages and that would be terrible for the economy! We are not like Europe you know, where the government might be expected to take care of the people.
In the US the idea of a good education system is neighborhood controlled schools that are as good as want the people in that neighborhood can afford. So in one school district the advantaged students have a superior education, and the kids in the slums who live with crime and violence daily, actually risk their lives going to school that have very little to offer the children and the teachers can actually experience battle fatigue because the uncivilized behavior of students. We have videos of these schools where teachers have no control over students and surely you would not spend your hard earned money on those children, would you? Awe yes, the United States, the richest nation in the world. What would happen to our wealth if threw it away on that scum? Look people get what the deserve and it would be stealing form those who work hard for their money to tax them and give the money to the undeserving.
Like OMG, we don't want to be socialist! Everyone knowns how bad that is. Government is correctly restricted to using tax dollars to support a military force that in turn protects our economic interests over seas, because that is the source of our wealth. Local government provides the services the people can afford, and we just stay out of those bad neighborhoods where those disgusting people live. Like Trump said, we don't want those people in our neighborhoods ruining our property value. Really? arguing in favor of socialist notions and that it is the governments responsibility to spread out the prosperity? What kind of person are you? You do not sound like a Trump supporter! :brow: Someone in this forum must provide the correct understanding of what makes the US great because we must protect our wealth and stand firmly against socialism!
Do you think? but that isn't what is causing the rioting in our cities is it? Those rioters are anarchist that should be controlled with the National Guard if local police forces can not maintain law and order. You are a foreigner so you can be forgiven for not knowing what our great leader Trump says about law and order. I pray to the heavens you know I am being sarcastic and I am experiencing a great emotion relieve as I attack what we have been living and what is tearing the US apart. Europe experienced peasant revolts long ago, and because they were crushed by those in power, we might think they lost their fight, but you are telling us the did not win the fight. They won the fight. It just took a long time to realize their win.
Our unions made some progress and then past President Reagan destroyed the unions. Our past education explained the connection between unions and democracy, but that was before the 1958 National Defense Education that put an end to education for citizenship in a democracy and gave us instead education for a technological society with unknow values. We are no longer the democracy we once were, and as more and more of our wealth goes to the 1% things are not getting better so we worship Trump who promisers to make things better. We will see how well Biden does. I hope he and Harris can unite our nation, but no one understands what the change in education has to do with the mess we are in, so I am afraid we will continue to be divided and fighting against each other.
The fundamental idea behind is that well known mantra of "limited government" and giving freedom for everyone to pursuit their happiness. And that is a struggle for many, which is a problem.
Quoting Athena
As neighborhoods aren't similar, in fact even US states differ from each other just like member states of the European Union (even if English is spoken everywhere), one cannot think that neighborhoods, communities and cities can all provide equal opportunity. Hence here is where things start going wrong. Worse schools make it harder to get to the best secondary schools or to apply to tertiary education.
Quoting Athena
You wouldn't have so many problems or crime, for starters. Not that problems would go away altogether. Still our societies (yours and mine) try to function as meritocracies, which do inherently create inequality. The issue is to have a system with social mobility and not have the classes turn into a caste system.
Quoting Athena
No.
Of course there's a long thread about racism and I won't go into that. perhaps the basic problem in the US is that many confuse Bernie Sanders, who basically in Europe would be your average social democrat, with Hugo Chavez and his kind, which are a totally different socialists.
Quoting Athena
Exactly.
It should be understood that the conservative right accepted and took the idea of a welfare state as it's own in the Nordic countries. This is something that Americans would find really hard to understand from people who call themselves right-wingers. A similar thing happened with capitalism: the modern social democrat does not cry for a Marxist revolution, but just wants to curb the excesses of capitalism, yet understands that there is a time and place for free market capitalism. Especially when elections are around, the ordinary leftist and the right-winger won't admit that they have accepted issues from the other side, naturally, but their silence does tell a lot.
Quoting Athena
I myself find it odd that labor unions had been infiltrated by organized crime at the first place. But I think this is a major reason why real income and wages haven't gone up in the US and inequality has become even greater.
Let me begin with "I love you". It is so wonderful to find someone who really knows the value of education and that it isn't only about military and industrial interest. It is our culture and everyone being prepared to give their best to the country.
James Williams in 1899 "If we reflect upon the various ideals of education that are prevalent in the different countries, we see that what they all aim at is to organize capacities for conduct. " At this time for the Germans that meant preparing the young to advance technology for military and industrial purpose. England strongly rejected this education because it wanted to protect it classes, and education for technology tends to make everyone equal, because the child from the poorest home, educated for technology, does not remain in the low class. The focus of English education was to be an English man and woman.
The US with its democratic values, stumbled onto the benefits of education for technology when it mobilized for the first world war. Technologically Germany was the most advanced, and the US had to scramble to catch up. This is not just about having the best war ships and best cannons. It is about having thousands of people who can type, or repair trucks, or build bridges. We did not have that when we faced WWI but rapidly put education for technology into our schools when we knew we were going to entered the war.
Up to this time, US education was limited to literature, reading, writing, and speaking! I collect old books and they are quaint. The goal of education, as you understand it, being to prepare good citizens, so we have social order and a well running democracy. This including promoting associations and unions uniting people to do for themselves what Europeans relied on their governments to do for them. The addition of education for technology was a huge economic benefit that was not expected. Up to this time parents rather keep their children home to help on the farm. When parents learned their children would learn a job skill in school, they were more willing to send their children to school, because that meant their children a had chance of having better lives with more money and the benefit of what money can buy.
We can see how this develops. People have more money to spend, so more businesses become profitable. The whole economy grows and the standard of living is improved. There is no need to say this to you, but more people in the US need to understand the relationship between the education, the military and the economy. This trinity becomes stronger and larger.
But for all the good of this trinity something went very wrong in Germany and the US. If human beings are to be more than well trained, reactionary animals, that obey their masters, or get pushed to the margins of society, then they must learn how to be civilized humans. Leaving moral training to the church does not work in a democracy with liberty. In a democracy with liberty the people must have training for good moral judgment and cultural values. Citizens must be adults, not God's and the king's children.
Germany has progressed as a civilization better the US since WWII. The US missed the lesson's Germany learned and the US took their culture for granted. Now it is no longer a well cultured nation, but I have hope we will return to better education for reasoning and a better economy of independent thinkers who are empowered to make their best contribution to society. Education preparing our young to be products for industry, is good for slaves, and gives us a third world economy of workers dependent on the owners. :rage:
That is a fascinating statement! I must look into that. Do you have any more to say about it?
This is a very good take on the situation in the 19th Century. Yes, back then it was Americans that went to Germany to educate themselves. And before WW2, a huge portion of science was in German language and many academics of those time were fluent in German. After WW2, English dominates as a true lingua universalis. And this is one of the cornerstones
Quoting Athena
Yes. Let's look at this from the viewpoint of the ruling elite. This is the double edge sword for those in power: educated people create a better economy, while an uneducated people likely obey more traditional rulers. Hence many dictators and totalitarian system try the illogical goal of having more doctors, engineers and scientists to advance the technology of the country, yet assume that these highly trained clever professionals won't stray into the realm of thinking about politics or basically using their head. Let's remember that Hitler had been in power only 6 years before he started WW2, hence all the German engineers and scientists had studied and learnt their profession basically before Nazi totalitarianism took hold.
In our current time Saudi Arabia is the best example of this: it desperately tries to use it's wealth into buying the best armament and technology and tries to create technology hubs, yet you don't make a Silicon Valley out of nothing in a society that is in the end quite backward. And those high-tech weapons need an army of very qualified engineers to be kept in service. You end up just with a huge segment of the population being foreign workers.
Quoting Athena
Some define this to be the benefit of the loser of a war. Not only Japan and West Germany were forced into soul searching when militarism had catastrophically failed (East Germany simply assumed it had nothing to do with fascism, hence for example the East German army was made in line with the old Wehrmacht as totalitarianism continued there). In fact after Carthage surrendered to the Romans and stopped competing with Rome for the dominance of the Mediterranean, it had a renaissance and prospered so much that the Romans finally decided to attack and obliterate the whole city.
Not only has the loser of a war think things over, it really has to build all of it's infrastructure and manufacturing plants up from scratch, which modernizes the society in a rapid pace and give an edge to the manufacturing. While nobody had bombed the US during WW2, it simply dominated other countries in the 1950's. But then it didn't have to rapidly modernize. Hence when the World caught up, many parts of it's industry was old and couldn't compete. Add that these areas were left alone and Americans created "the Rust Belt".
From this:
To this:
This is not the only measure. There are ways to look at a new company, for example. Seasonal or cyclical changes can askew the earnings. But, for investors not looking at stock price, but say real estate properties, the criteria are different.
Real estate price are the classic way to speculate: if economic activity is going to increase somewhere, it will likely be seen in real estate prices.
Nice graph!
But okay. We're not in disagreement here.