Capitalism has failed...confirmed

So then deflation is okay if it's connected to economic growth. So then it would be perfectly acceptable to have a static money supply, with prices falling due to economic growth.

 

Isn't that a good thing?

Actually, under a free market, slavery is prohibited because each human being owns himself.

Money is an efficient medium of exchange to facilitate acts of trade that arises normally as the most easily traded commodity in the community. Even very small economies give rise to money.

Are you really trying to suggest that all acts of coercion are the result of "capitalism" and if we just abolished whatever "capitalism" is (never has a self-described socialist sufficiently defined that term), human nature will simply change and no one will ever do anything you don't want them to do?

But if you, like kilgram, oppose retaliatory force even in cases of murder and rape, how can you effectually abolish "capitalism." You can't illegalize it, according that doctrine. You just have to persuade every to not engage in it...I guess...?

So the idea is that if we just persuade everyone to stop committing acts of violence, they'll stop committing them? Ingenious!

You're describing fiat currency, which I too oppose. You're describing commodity currency, which has actually market value to human beings.

As for "social nature," nobody opposes humans interacting socially or any such idea. That's a straw man. What we oppose is using violence to prohibit certain acts of voluntary trade between human beings.

 

In your magical Utopia this would work. But in the real world, a static money supply would create negative deflation causing less economic growth and mass suffering.

I'm sure you do not care about human's suffering though.

 

What's the difference between my magical Utopia and the real world?

 

We increase our money supply, lol

 

So in my Utopia a static money supply would work. And the difference between my Utopia and the real world is that it doesn't have a static money supply. So you're saying that a static money supply could work in a world with a static money supply??

 

I'm saying the only way a static money supply would work is if our ability to produce goods and services increased so fast that the decline in prices was followed by an increase in velocity. Velocity would have to increase because the greater the population the larger the amount of savings.

So your theory would have to have us in an industrial revolution every year, and since there is limits to how much we can produce at any given moment it just realistically would not work.

Which is why we constantly increase the money supply to make up for population increases and to push the velocity of money to keep up with production.

 

But if both deflation and increase in velocity are caused by economic growth, that normally would be the case.

 

You are assuming their would be an increase in velocity. Which is exactly what doesn't happen when we face deflation. The destructive deflation happens when people stop spending money and it drives prices down because there is less productivity. The good deflation happens when prices are driven down because there is MORE productivity.

So you are making tons of assumptions to try to fit your theory when in reality those assumptions do not exist.

 

Capitialism deplores static money supply ,its the constantly increasing pace of Money circulation that lead to the 2008 GFC.Capitialism is anything but a static system .good to see you say a utopia .

 

Given a static money supply, we would see the "good deflation." As for prices falling because people are saving more, they should reach equilibrium when they reach a price at which people are willing to buy again.

Oh, really? When has the deflationary spiral you fear ever actually happened?

 

Why would we see "good deflation". We would see a reduction in productivity, a reduction in wages, and a reduction in velocity. Those 3 things would destroy this economy. You aren't making sense.

The great depression.

Also started happening 3 years ago which is why the Fed/Govt pumped so much money in to the system.

 

how are they going to save anything when wages are being cut by between 25 to 50%,mass unemployment greeceand spain and the USA 20% plus.

BTW,the 8.3% figure put out as US unemployment is crap.oh 210 000 find parttime minimum wage jobs as over a million are taken off being counted ,gee 1 000 000 is abigger number then 200 000.

Obama thinks Americans are so stupid that they can't do subtractions for them selves.

so at least double nthe 'Official Unemployment rate in the US'lets be nice and callit 15% permanent Unemployment,and growing.

So with decreasing wages and growing Unemployment ,how exactly do they Save anything????????

And then the problem of the corresponding decline in tax reciepts ,well we will let u off on that one ,who says Communists are not merciful.

Its a dead Horse called market economy it makes no sense continuing in this way of market determining anything.

and particularly not government policy.

 

Think of it this way. Imagine you are an author before the printing press. It takes you 3 months to write each book. Since you can only produce 4 books a year the price for each book is going to be relatively high (assuming there is a demand for the book).

Now good deflation would be the invention of the printing press. Now you can write your book in 3 months and print out 1000 copies. Now the price of the book plummets and many more people can afford one of the 1000 copies. That is good price deflation based on more productivity.

What we face is the opposite. The printing press is already invented and you sell 1000 books a year. Now all of a sudden an economic shock happens and people stop spending money and you only sell 800 books. The decrease in demand causes you to decrease prices in order to try and sell more books.

This is BAD deflation since productivity is decreasing. So in order to sell 1000 books again at the same price, either people have to spend more money again or there has to be more money in the economy. Simple as that.

 

What happens to the loss on the unsold 200 books?

Do we get a discount ?

 

You posited that there are two kinds of deflation. Good deflation caused by the economy growing in relation to the money supply and bad deflation caused by lower velocity. Given a static money supply, the good kind would certainly occur so long as the economy grew at any kind of rate.

And as for the bad kind, it would reach an equilibrium when prices fell low enough that people started spending again, unless you posit that people will just spend less and less until we're all living as subsistence farmers. But even when people spend less, it doesn't mean they stop spending at all. Rather, they work harder, save more, and consume as they achieve the ability to do so.

Those were both caused by the government manipulation of the money supply, though. They are symptoms of your prescription. The Great Depression dragged out of seventeen years because of continued government interference, whereas previous downturns, such as the one in 1920, ended sooner with less interference.

 

Lol, it most certainly wouldn't occur. Now you are just being stubborn.

That can take decades, if ever. In a static money supply, saving money destroys the economy. There is absolutely nothing good about this kind of deflation. Our entire economy is built to prevent this destructive inflation, lol. I'll listen to our ivy league economists instead of to political forum armchair economists.

No it didn't. There is no evidence whatsoever that the Govt manipulated the 1920s recession or the Great Depression. Unless you have an agenda against the Govt and make it up.

The recession of 1920–21 was characterized by extreme deflation — the largest one-year percentage decline in around 140 years of data.[2] The Department of Commerce estimates 18% deflation,

Source: http://en.wikipedia.org/wiki/Depression_of_1920–21

 

There are several problems with the "paradox of thrift." First of all, in downturns, prices and wages don't all just fall for everyone, everywhere. There are still areas of economic growth. In downturns, resources are reallocated to these more productivity areas, while needless or overbuilt sectors of the economy die on the vine and debt is liquidated. Furthermore, consumers spending less may cause producers to dip into their own savings and spend it to keep their businesses going. Thirdly, savings are not normally kept under mattresses; they're kept in banks and invested. Thus, more savings lowers interest rates and the cost of capital.

 

You just said it does occur: that economic growth causes deflation. Even in severe downturns, the economic still grows at some rate. It would be very, very unusual for it to shrink for a long period of time.

I never said it was good. I said it would tends towards an equilibrium as prices fell in accordance with consumer demand and markets clear. Savings lowers interest rates and the cost of capital and, thus, encourages production.

The New Deal wasn't a manipulation? Hoover's tax hikes weren't a manipulation? Farm price supports weren't a manipulation?

Right, and then the market reached equilibrium, cleared, and it ended naturally, without Keynesian "stimulus."

 

I have never said any of this. And it is not at all unusual for it to shrink for a long period of time if you keep the money supply stagnant. Just like it's not unusual for the economy to grow for a long period of time with steady inflation.

No it wouldn't. You are just making baseless assumptions that have are backed by zero facts whatsoever. I don't get why you guys don't try to listen to real economists instead of just throwing out the most mindless garbage around. What a waste of life not actually trying to learn.

They were reactionary policies to the depression and mass unemployment, not the cause of it.

No it didn't. The Govt set up all kinds of programs to halt unemployment, including mass tariffs on agricultural goods, unemployment centers to help the unemployed, etc.

 

Geoism and capitalism aren't mutually exclusive.

Yeah, the air and water are so much cleaner in Communist China

 

The bottom line is you don't have a problem with that kind of deflation, only the kind caused by lower velocity.

Now you're sounded agitated. It's not a baseless assumption to say that savings lowers interest rates and capital costs; it's logical. You haven't said anything to refute this and the more general argument that the market is self-correcting here, except argument by expert ("real economists").

No, the cause of it was the Federal Reserve, as this article explicates:

"The spectacular crash of 1929 followed five years of reckless credit expansion by the Federal Reserve System under the Coolidge administration. In 1924, after a sharp decline in business, the Reserve banks suddenly created some $500 million in new credit, which led to a bank credit expansion of over $4 billion in less than one year....The Federal Reserve System launched a further burst of inflation in 1927, the result being that total currency outside banks plus demand and time deposits in the United States increased from $44.51 billion at the end of June 1924, to $55.17 billion in 1929."

This economist warned about this in 1924, five years before the crash:

"Since November 21, 1923, the Federal Reserve Banks have increased their holdings of Government securities from $73,000,000 to $477,000,000, while the rediscounts and commercial paper holdings of the Federal Reserve Banks have declined with the falling off of commercial demand for money....The situation is abnormal and dangerous....even if we have not blown up a price bubble, we have been blowing up a credit bubble, especially in the form of long-time debts."

You're suggesting that a higher tax burden through tariffs would help ease recessions? That doesn't sound very Keynesian. Or do you just favor big government of whatever sort? At any rate, the overall tax burden at the time was reduced.

More importantly, the federal government slashed spending by half over two years. Moreover, the Fed raised the discount rate and there was price deflation over this period. This is opposite of the Keynesian prescription--well, except for lower taxes, but we all support that.

 

Strange twist of words there. I guess that's how disinformation specialists keep the waters muddy.

 

Gee the old crap of the 80's even playing field and Capitialism without economic competition and 'Win ,Win"

please the cliche'is thick on the ground.All acts of coersion are capitialist based as we live in a 100% capitialist society are you saying money has nothing to do with violent coersion ,please open your eyes.

Excuse me for bursting your bubble but only about 10% of all money circulating is enguaged with trade and production the other 90% is something called credit or ficticious capitial or speculative capitial .

Money Markets rule all others BTW!

Ask Greece for instance.

Free Market ,think before you use such silly concepts as in a truely free market Lehman Bros would have gone insolvent ?????

$7 000 000 000 000 of unfree market government intervention remember 2008-9 it wasn't long ago really it wasn't .

Free market please get with reality.

Please show or demonstrate the 'Free Market"
the only free market is in the dreams of Capitilists that they get the Labour of workers for free like in Hitlers concentration camps.

Capitialists deplore a even playing field and strive for ANY advantage over their rivals or haven't you heard of Monopoly?

Industrial espionage,dirty tricks or Rupert Murdoch?

go and tell your plan of 'Even Playing Field and free Market to rupert and Co they would laugh you down as not understanding the Nature of capitial.