>> ^Psychologic:
I've never seen Paul or Schiff talk about the inherent deflationary nature of information technologies in the context of Austrian Economics, despite their constant talk of inflation. The price of a given amount of processing power or data storage drops by a fairly consistent percent per year (on average)... the same is true for dna sequencing, solar power, or many other high-tech devices.
Maybe they don't think it's a big deal, but I've never even seen them mention it. Austrian Economics were formulated well before the information age, so I'm curious how these new trends fit into it.


Metal melt values are always a good indicator about inflation over the long history of time. Let us look at penny melt values. This would be a relation of the fiat value of a penny vs the market value of the copper.

http://mises.org/images4/3069figure1.jpg

The worst part of this is that the penny has been changed every so often with less and less copper (other coins as well). Soon, pennies will be filled with steal as that is one of the cheapest metals you can have. After that, it is the end of the line for a penny. What graphs and graphs like this show ( you can look it up for gold, silver, and nearly any other rareish earth metal) and the trend is the same, metal is more highly prized over time than US dollars. This eats away until the system snaps (like back in the currency crunch of 33 when the government outlawed gold...forced you to sell gold so the treasury could have something real to give dollars value after the failed works projects of the 30s.). Fiat currencies and currency under control of central bankers tends to eventually undermine itself. The world is complex and full of players and vested interests and various other things that make prediction along a specific time frame hard. You could have massive investment of a foreign saver nation rescue a monetary system from collapse (IE China to the USA). But when the music stops for debt, the game is up, you have to face the monster your created. And like most things, the longer you wait to fix it, the worse it will be at that time if finally needs mending.

You are also talking about two different ideas. Because tech gets cheaper doesn't mean there isn't inflation. Technology is fairly different from things like, say food, or metal. New processes make something more efficient to produce over its life cycle. Chips become cheaper because of size. The smaller it gets, the cheaper it can be produced and as consequence, more of them can be sold per unit of silicon wafer. If you ever wandered why smaller is better it is because silicon wafers have to be manufactured circular, it is part of the physic's of aligning the silicon molecules properly. However, chips are usually rectangular. This means that you have to throw away all the edge pieces that don't line up to make squares out of the main circle. This doesn't just scale linearly; the smaller you make a chip, the more of the silicon you use.

The same is kind of true of other techs. Hard drives use a similar shrinking so that less can do more. But a building isn't going to use much less material than it did 20 years ago. Also, inflation is really hard to place effectively when you have the government interfering with prices. When you distort prices by government hand out, it is hard to know what the value of something is. Lets take houses for starters. When the government was handing out nearly free money for housing stuff, the market inflated. House prices when up by 50% a year in some areas. This bubble finally burst along with some other bad lone stuff. The prices of homes have fallen dramatically in most areas, but this isn't "deflation", this is a market readjustment.

In other words, the ideas of metals and stuff still apply to tech. Tech is neat in the way that new advancements mean you can do more with less. (same for DNA stuff, as tech gets more advanced, the less you have to play people and computer time to do the same amount of work).

As for their predictions, Shiffs has been saying for years watch out for the bubble burst. He also predicted that the stock and gold values would merge before we saw the end of the stock tumble, which it pretty much did.

>> ^bobknight33:
Let the free market decide the price of health care and let the individuals / Government punish /fine / jail/ those insurers who willfully F@#k over people.


Didn't your 'free market' recently, sans lube, fuck the asshole out of the world economy? Sink the US further in debt? Tank the mortgage market? Force the taxpayer bailout of dozens of companies? Oh the free market works wonderfully when times are good but when corporate greed finally butchers the cow rather than milking it and revenue dries up, guess who comes cap in hand for free money? The 'not so free anymore' market. Surprise sur-fucking-prise.

The free market is incapable of providing quality, affordable health care. It's been proven over and over again. And if there is a push for more oversight to punish the exploiters, the same people shouting down a public option will be shouting that government oversight = socialist interference with the free market.

As for Pennypacker, seriously pal, every piece of "evidence" you provide is either corporate sponsered or right-wing capitalist propaganda. There is not a single piece of objective non-partisan, non conflict of interest information in there... And you use that claptrap to argue with World Health Organisation and OCED stats? Or ignoring the point made by Mr. Weiner, voters would have a choice. If voters flock to the public option, it's a blatant fact that private health cover has failed...

Fair and balanced? Lol, does it even hurt anymore when the right wing nuts shove their megaphone up your butt so the appropriate sounds come out of your mouth?

I disagree with you Bobknight,

By your own words, you said the money supply within the US has gone up 271%. That would mean the economy is coming back from the recession. Unless of course, your FOR recessions in my country?

Unlike the last idiot we had in the White House, this guy understands things. Following the status quo only servers to polarize the left and ring wings more. Results in the extremists from either side coming out of the wood work, feeling its 'ok' to launch attacks (including threats of violence) with impunity. Is THAT, what you want for my country?

So far, Bobknight, you sound like an enemy of the USA, not a citizen or friend of it.

And truthfully, Mr. Obama does not want to take over health care. There are, quite alot of problems with the health care system in the USA. There is no silver bullet solution like the GOP is brainwashing you with. Nor, is this guy trying to take over in some sort of hidden agenda or 'grab for power'. Funny that the last guy tried to do that, but not a single Republican said a word.

Somethings that should be done regarding the health care system in the USA:
A) Get our 40-50 million citizens who dont have coverage, some sort of coverage. The long term benefit will save us, and the short term gain is those who skip seeing a doctor over serious issues, can get help.

B) Setting up the legal system, so that health care companies can not act in together, or conspire against Americans on the rate of health care. As it stands now, there are no anti-trust laws in effect for the health care industry. Wouldnt you want such laws in effect for our health? Drinking water? Food system & supply?

C) Set up a system that gives a base level of care coverage across the board. Makes companies accountable to the level of care they give. That gives a bonus to companies that get things done right the first time, and starts penalizing the longer and deeper screw ups take place. As it stands now, if a hospital screws up, or you catch an illiness inside, chances are you will be back to the hospital for further treatment. Does that sound like a wise policy to have?

D) Set up a system for preventive medicine. Give Americans a tax saving or incentive to eat right, exercise, and live better. That is like free money to go work at the gym, and be healthy in the process. Your against looking and feeling good?

E) Behave in a civil manner. Yes, even idiots that have no clue how to behave in society, can get a fair say at town hall meetings. When people come together, discuss the issue(s) at hand as reasonable, mature, and forward thinkers, great things take place. Founding fathers did it, why cant we? They didnt have 1 billionith the tools we have at our disposal. Or are you as Rep. Barney Frank put it "just a dinning room table'?

Yes, there are alot of issues, and the president has his work cut out for him. Rather then waste your time, with your fearful and childish rant. Why not be productive and learn what is the issue, and how it can help the USA on this issue.

Tags for this video have been changed from 'free money poker texas holde pitbullpoker casino no deposit deposit earn' to 'banned, redacted' - edited by thegrimsleeper

The wage conversation is a bit of a tangent, but from my point of view the right answer is to expand unemployment benefits and welfare, rather than reduce the minimum wage. I might be convinced that yes, people in certain situations should be able to work for less, but I'd rather the market just adjust to knowing that projects that rely on cheaper labor can't be done here.

As for your assertion that the entire housing asset bubble was caused by Fannie and Freddie and the 1977 Community Reinvestment Act...I'm disappointed. I'd thought you were more well-read than to believe that story.

Here's the most basic, simplistic response -- if it was all Fannie and Freddie's fault (two formerly privately-owned and operated companies, BTW), why are other banks in trouble? Why is AIG in trouble?

I agree that the problem here was moral hazard, but I disagree that it was government that created that situation. It seems that the market's own mechanisms for accurately gauging risk failed utterly.

>> ^gtjwkq:
Money spent by govt is, in principle, rarely spent as wisely as money spent by people, because people work to earn and therefore value their money, they usually have to be productive to earn it (which isn't easy), while govt is just politicians and bureaucrats deciding over money they easily appropriate from productive people. I don't know how I can put this in simpler terms.

I hear this a lot from Austro-libertarians. If this were true, banks should never work right, either. The people making the investment choices, and choices about loans are not the people who own the banks. The most risk they have to bear is getting fired, and often they get lavish severance packages even when they are fired, and are almost immediately rehired by another bank.

I agree that having some skin in the game helps motivate people to be more wise with their money, but I don't think there are any people in government who're casually disinterested in how taxpayer money is spent -- on the contrary, I think they're highly interested in either spending it on altruistic things (like unemployment, healthcare, green technology incentives) or spending it on selfish things (tax cuts/subsidies for industries that donated to you, aid in skewing regulation to benefit donors). I like to vote for the former, and call for the latter to be jailed (though it seems they're all guilty of both in varying ratios).

I also think government spending is best directed at things that are unlikely to turn a direct profit, but are useful for humanitarian purposes, or a general positive impact on the economy (e.g. infrastructure).

I would like to see less military spending, but I think that will be politically difficult when there are two wars going on, and a recession. I like the way Obama/Gates have shuffled the military budget in terms of reallocating money between different military projects, but I'm annoyed that the budget did still get an increase for next year.

As for the bank bailouts, I feel like they were a necessary evil. I would rather they'd asked more in the way of concessions from the bank in return, but I do think letting them fail would have just made things worse.

When I give you money, the money is now yours, what you do with it is your own business. But when I'm the govt, and I give you money, I'm giving you money that IS NOT MINE and that I SHOULDN'T BE GIVING TO YOU (at least that's what I'm arguing, a keynesian might think differently). So there lies the root of the problem: govt is to blame for handing out free money, not what people did with it, because it's expected that people will be careless about money that is freely handed to them, as opposed to money that is earned.
People with guns don't inevitably commit murder. About the bus driver, it's expected that he'll drive poorly and crash when drunk (maybe not though if he's lucky), even though I said he was force-fed the alcohol, which is not accurate since I'm not sure investment banks were legally obligated to accept govt money, but it's easy to imagine how a bank might be strongly influenced to accept money if it has no strings attached and it's also offered to its competitors.

This, I think is a crucial part of our disagreement. Say you're a well-known investor who's made ridiculous profits through shrewdly investing in successful business. I walk up to you, give you a million dollars, no strings attached. Are you going to necessarily be reckless and wasteful with that money, simply because it was a gift? What if the money had come from some investment that simply performed better than your expectations? Does that make you unwise?

Would it make any difference how I got the money I gave you? Even if I conned it out of a bunch of nice old ladies, wouldn't you still invest it correctly? That's why I think the Austrian theory doesn't make sense, especially on this topic.

It would make sense if the government, before the economy went haywire, said "do whatever ya like, we'll absorb all your losses" -- but it didn't do that, implicitly or explicitly.

All that said, I disagree with your characterization of there being a qualitative difference between money given to companies being theirs, but that money given to government to pay taxes still somehow remains yours. It's this whole idea that government is operating as a giant racketeering organization (which seems utterly incorrect). It's like the managing corporation of a condominium. By living here, you agree to a contract with the government, and you have to abide by the obligations in the contract, like obeying the laws, and paying taxes.

Regardless of how you think government got the money to give away, I don't see why money government gives to banks somehow will automatically be frittered away, especially if they say "this is yours, no strings attached".

Even though I think Ben Bernanke is an idiot, he's smart enough to be the current chairman of the Fed and even he thinks the Fed helped cause the Great Depression. The conclusions one can take about what happened in the 20's and 30's are not as clear cut as you'd think. What is important to understand are the motivations behind those that acted and those who interpret what happened.

I think you should perhaps read that speech of his more carefully -- I find what Bernanke says about the Great Depression persuasive. He's mostly talking about how much he loves Milton Friedman, but the key paragraph is:

Friedman's emphasis on avoiding monetary disruptions arose, like many of his other ideas, from his study of U.S. monetary history. He had observed that, in many episodes, the actions of the monetary authorities, despite possibly good intentions, actively destabilized the economy. The leading case, of course, was the Great Depression, or as Friedman and Schwartz called it, the Great Contraction, in which the Fed's tightening in the late 1920s and (most importantly) its failure to prevent the bank failures of the early 1930s were a major cause of the massive decline in money, prices, and output. It is likely that Friedman's study of the Depression led him to look for means, such as his proposal for constant money growth, to ensure that the monetary machine did not get out of order. I hope, though of course I cannot be certain, that two decades of relative monetary stability have not led contemporary central bankers to forget the basic Hippocratic principle.

He doesn't go into why the Fed thought what it was doing was the right idea here, but it should sound refreshingly Austrian -- they were worried about deviating from the gold standard too much, and weren't concerned about bank failures because they figured, as you do now, that banks failing is a blessing in disguise: ownership just moves from incompetent managers to competent ones, no muss, no fuss (liquidationism, it's called these days).

What Bernanke believes is that the Fed should have known better and reacted by massively expanding the money supply to stave off deflation, and rescuing the failing banks. What it actually did was contract the monetary supply and let them fail, and that was pouring gasoline on the fire (or as one economist said of Austrian advice at the time, it was "to cry, 'Fire! Fire!' in Noah's flood.")

I don't contest that the Fed has a lot of power, and that if wielded incorrectly it can cause a lot of damage. But I think the period of time between the Great Depression and now is a testament to the stability a central bank can create. There were recessions, but no Depressions, or Panics. There's already a debate about whether Greenspan could have prevented this one, but so far that debate is leaning towards the relaxation of banking regulation being at fault, rather than a FRB monetary policy error.

I don't really think debate on the history of the Great Depression is over; Keynesians and Monetarists are still fighting about aspects of it. But Austrian economics fell out of the mainstream in the aftermath of the Great Depression, largely because their policy prescriptions were carried out, to disastrous results. Present-day Austrians don't even deny that a contractionary monetary policy in the late 20's was a bad idea, they just deny it was their idea, even though it's what people like Hayek and Schumpeter were calling for at the time, and what they're calling for now.

That's why I can be perhaps a bit over the top when trying to quash Austrians as quacks; in my opinion their policies caused both Depressions.

I wouldn't say low salaries are completely unavoidable, there are jobs that can only offer such salaries but the long-term tendency in a free market is for better salaries to be available to those more competent and specialized, with a general increase in quality of life and purchasing power attenuating most concerns on the lower end.

Minimum wages today are calculated with goals like "sustaining a family of four" or something, but teenagers or people who live with their parents sometimes are just working for extra bucks, or they might be looking for entry level employment for the experience, to acquire a skill, etc. So the govt steps in and says NO, and that represses an entire market for lesser jobs in every sector of the economy, taking away freedom of choice both from the unemployed and the employers. In the end, it won't matter when unemployment reaches high percentages and desperation sets in.

Why did Fannie Mae and Freddy Mac (FM2) offer free credit and backed up loans made in the real estate market? Because politicians decided it should be easier for people to have houses, yay! A noble goal any politician would promise for votes.

Now here's a thing about the nature of people: They're greedy, but they're also fearful. It's a very important balance because they want stuff, but they also fear losing what they have. But FM2 stepped in and took away the fear: ZERO risk, we are federal institutions and we totally back up all your loans! So people were free to be greedy without the fear. That's the housing bubble in an austrian nutshell for you.

Money spent by govt is, in principle, rarely spent as wisely as money spent by people, because people work to earn and therefore value their money, they usually have to be productive to earn it (which isn't easy), while govt is just politicians and bureaucrats deciding over money they easily appropriate from productive people. I don't know how I can put this in simpler terms.

The govt isn't just police officers and VA hospitals. How about our multi-trillion dollar warfare machine, how can any liberal think that's indispensable? What about institutions like Homeland Security, Departments of Education, Agriculture, DEA, FDA, and countless other needless resource wasting bureaucracies at the Federal level? I'm all for cutting them out first.

You say you're not pleased with the bailouts, yet you don't consider govt at fault for handing money to investment banks. Could you elaborate on this apparent contradiction?

When I give you money, the money is now yours, what you do with it is your own business. But when I'm the govt, and I give you money, I'm giving you money that IS NOT MINE and that I SHOULDN'T BE GIVING TO YOU (at least that's what I'm arguing, a keynesian might think differently). So there lies the root of the problem: govt is to blame for handing out free money, not what people did with it, because it's expected that people will be careless about money that is freely handed to them, as opposed to money that is earned.

People with guns don't inevitably commit murder. About the bus driver, it's expected that he'll drive poorly and crash when drunk (maybe not though if he's lucky), even though I said he was force-fed the alcohol, which is not accurate since I'm not sure investment banks were legally obligated to accept govt money, but it's easy to imagine how a bank might be strongly influenced to accept money if it has no strings attached and it's also offered to its competitors.

The rest of us go bankrupt or get jail time if we lose or steal money, a politician, with luck, doesn't get reelected. That's what I meant with "exempt from accountability".

Even though I think Ben Bernanke is an idiot, he's smart enough to be the current chairman of the Fed and even he thinks the Fed helped cause the Great Depression. The conclusions one can take about what happened in the 20's and 30's are not as clear cut as you'd think. What is important to understand are the motivations behind those that acted and those who interpret what happened.

The privileges granted from the govt to the Fed make it a very very powerful institution, and the govt LIKES the Fed. Just keep that in mind.

>> ^rottenseed:it looks like a way for banks in third world countries to get fat without having to fund their own loans or take any risks.

I've been neck deep in this debate, and the way I look at it is this:

Kiva does subsidize Micro Finance Institutions (MFI), which are basically banks.
Kiva does require that MFIs they fund offer significantly better rates that locally available.
Many of the places where MFIs operate have a loan-shark credit system where > 100% interest per month is common.
The MFIs do run the risk of losing money on inflation, since the loans must be paid back in US dollars, and the only legal reason not to repay kiva is that the recipient did not repay the loan from the MFI.
Kiva Audits the books of MFIs it uses to make sure they are legit.

The rates, when all fees are considered, look absurd to someone accustomed to a world where a major loan is rarely less than $100k at a time. But consider if you want a home loan you will likely pay more than $1000 in fees, if you only want to borrow $1500 you can see how this can be a problem.

Since the MFIs have legal reporting requirements which cost money to meet, the fees must be paid, the 50% rates you hear are fully inclusive of the fees. The accumulable interest is rarely over 20% APR, and then only in places where monthly loan-shark interest is in the 200% range. Remember most of the places where MFIs operate have high inflation, charging 15% APR with 15% annual inflation, is, in effect interest free money.

The MFIs provide an important service, we help them capitalize and grow, so they can do more of it. They are legal entities with staff and documentation costs, these costs are legitimate, and we do help them get paid.

Subsidizing MFIs may be the most efficient way to alleviate world wide poverty. I know it seems impure, but pure solutions rarely work. Please don't let the perfect be the enemy of the good.

>> ^imstellar28:
^are you arguing that cell phones are necessary? If so, you epitomize everything thats wrong with this country.


You've missing the point.

1)
In today's society, to be a functioning member of society you need a phone. If you don't think you do, try getting a job without a phone. Especially a job that might have variable hours. This is a huge stumbling block for people that have fallen on hard times. In fact, some unexpected and temporary homeless are able to use the shelter's phone, but that isn't nearly the same as having your own phone. That seems like a fairly straight-forward point, right?

2)
In an effort to raise these people out of poverty, they are given phones.

3)
With today's technology, getting a cell phone is exceeding more convenient and much cheaper. Emphasis on the much cheaper.



Free money to CEOs? Aren't they providing a service? Is there no support entailed? Do you have the same response to chapter 7 housing subsidies? Are landlords getting free money?

NetRunner: "Progressives don't like it when big business get our tax dollars. Usually we argue for things like small business subsidies, regular welfare (ya know, for poor people), anti-trust legislation and enforcement, etc. We also don't like corporate tax loopholes, capital gains tax cuts, or attempts to eliminate or reduce estate taxes, or the porcine industry-specific tax cut."

How's fighting the good fight working out for you? Obviously not well so far. Don't worry, keep at it, and maybe in another two hundred years this big government thing will finally work itself out and become that nonincentivized national utopia you and the neocons always wanted.


NetRunner: The free market provides me with tax preparation services, though most of them tell me "you don't own enough for us to do much for you"

Ah... It's a personal vendetta. Now I'm seeing it. Mad at the world because it hasn't made good on the things you felt entitled to? Mommy told you you were special and you believed her, didn't you? I can see why you are how you are now. LOL!

You're right, though, I don't fully understand my credit card agreement. And, when I feel it's unfair I disagree to it, and typically they want to rectify the issues to ensure I remain their customer. I also pay them off. I also understand credit isn't a right. Maybe to those who think the world owes them something may also think the credit card companies owe them free money.

Credit card companies can appear to be unscrupulous at times, but people still see enough of a demand to use them so they can afford to be that way. If the demand for credit was much lower, then they would probably make their agreements more customer friendly. But, because people want it, they can be a bit more unruly with the terms of conditions.

But, you have a choice whether or not to sign that contract. You don't have a choice in signing a contract with the government. Consider this. If you wanted to borrow money (credit) you don't have to do so at the bank, you could do it from your friend, and you can work out any agreement you choose. However, if you decide to get married, you are forced to sign a contract with the government as they see it should be written.

Try negotiating your contract with the government and let's see how that works out for you. At least with the credit card companies everything is negotiable.

i honestly can't tell whether that was sarcastic. either way, fucking awesome comment.

>> ^imstellar28:
You "tell em" jon, just like you did when you supported giving them money in the first place.
Why shouldn't they get bonuses? They just increased their revenue from something negative to 100+ billion, and they didn't even do any real work; they just convinced some scared people to give them free money.
If you had increased your company's revenue by hundreds of billions of dollars, you probably would have received a multi-million dollar bonus as well.

You "tell em" jon, just like you did when you supported giving them money in the first place.

Why shouldn't they get bonuses? They just increased their revenue from something negative to 100+ billion, and they didn't even do any real work; they just convinced some scared people to give them free money.

If you had increased your company's revenue by hundreds of billions of dollars, you probably would have received a multi-million dollar bonus as well.

What I don't understand is how giving money to mismanaged businesses (a.k.a., "the bailout") helps to rectify the failing economy, as opposed to simply rewarding bad business practices?! What about those companies that didn't fail.. whose stocks didn't plummet because they saw that the CDO finance schemes were simply unsustainable? It seems to me that such responsible businesses are now placed at a grave disadvantage, due to the fact that $billions are being doled out to companies requesting a "bailout." Wouldn't such actions merely incentivize poor management and irresponsibility? How are the well-run businesses supposed to compete with "free money?!" What a crock!

theres nothing shameful in a person who is given free money spending it on themselves or their friends. if you give me a billion dollars tomorrow, what position are you in to complain if i go out and buy all my friends a lamborghini?

whats shameful is giving other people money that isn't yours.

and you were expecting what to happen after giving free money to strangers?

Here's a simpler cycle, when the American consumer has a larger wallet (or at least a perceived one). They spend and stimulate the economy.

When Banks horde capital to stave off fallout and Automakers with failed business models get free money they sit on it.

Solution: Give me back even 10% of the 50% the government takes from me and I'll find a place in the economy to put it in.

Regan already proved this when faced with a financial fallout, had the audacity to CUT TAXES and use the TAXPAYER to stimulate the economy. Imagine that cutting taxes working instead of increasing them.