Fucking shit. Thank you, Phraser!

@quantumushroom, this is why.

>> ^Bradaphraser:

I think the point dystopianfuturetoday is making is that when regulation is reduced, there is ALWAYS collusion. Adam Smith understood this. "Two men of the same trade cannot meet, even for merriment and diversion, without the conversation ending in a conspiracy against the public."

The general idea is that SOME regulation is necessary to ENSURE that supply and demand are driving prices, and not guilds and cartels.

I think the point dystopianfuturetoday is making is that when regulation is reduced, there is ALWAYS collusion. Adam Smith understood this. "Two men of the same trade cannot meet, even for merriment and diversion, without the conversation ending in a conspiracy against the public."



The general idea is that SOME regulation is necessary to ENSURE that supply and demand are driving prices, and not guilds and cartels.

@dystopianfuturetoday You wrote: "A free market is impossible, which is why one has never existed, and why you were unable to come up with any working examples."

This is the definition of "free market" I believe everyone is using around here, via wikipedia.

A free market is a market where prices are determined by supply and demand. Free markets contrast with controlled markets in which prices, supply or demand is directly controlled.

So why is this "impossible?"

@ghark, thanks for the links, I read all of them, very informative.

I'm sure you know that economics has more than one school of thought, which often times are very opposed to each other not only in theory, but also in their interpretations of important historical events like the Great Depression or even the Industrial Revolution. It seems straightforward that, given all historical evidence we have, there should be only one account of what went down in history, right? It's too bad that's not the case Historians are, themselves, often influenced by their own ideological bias. At least we both know it would be naïve to think all historians agree exactly on everything in history! Ask economists from different schools what happened during the Great Depression and they will invoke very opposite historic accounts.

A quick google search gave me an article stating almost the opposite of your 1st article (which is no surprise given its purpose to dismiss an alleged economic myth):
http://economics.about.com/cs/taxpolicy/a/taxing_growth.htm

That being said, I'd like to address your statement that "higher taxes is bad for our economy" being a rumor spread by the rich. I could just as well state the opposite is a rumor spread by those with a vested interest on taxing other people: the government and those who aren't being taxed. Wouldn't you agree that's more likely, given there are more people with that vested interest than rich people in the world? Also, wouldn't it be more likely that, maybe, a socialist ideology would be behind an effort to spread such a statement? I'm not questioning socialism, just saying, it's very likely a socialist would take a biased interpretation of economic growth and higher taxation and state that they're related in direct proportion (socialists usually want bigger governments that require higher taxes).

Economists say controversial things like "war is good/bad for the economy", "inflation is good/bad for the economy", "when you break a window, that helps/hinders the economy", so it's no wonder that something like "higher taxes is good/bad for the economy" falls into that category.

We cannot solve all economic fallacies here, I'm just trying to point out that we should be aware of the underlying economic schools of thought to better understand the ideological bias motivating their own sets of conclusions.

Chile's approach does not seem free market to me, even if it appears to be closer to that because of privatization. All education there seems to be state funded. When the state comes into a market providing easy money, costs go up, it's supply and demand. If every student has X amount of money provided by the state, private schools stop competing over price, so tuition costs go up (at least that's what I could gather, I'm sorry if I'm not exactly an expert on the Chile situation!)

About the uneven distribution, what I was stating is that not much moral judgement can be made on distribution itself, but on how this distribution is happening. If you have more money than me, I don't have enough information to judge whether that situation is unfair or whether you're undeserving of that money.

When I consider those who benefitted from TARP bailouts though, it pisses me off , because they got money from the taxpayer, money that they're not legitimately entitled to, they didn't have to work for, they didn't deserve. That particular kind of uneven distribution is scandalous IMHO, and it's the kind of injustice that more often results from misallocation of taxpayer money that is more likely to happen with higher taxation.

Oh and the best part about capitalism: Corporations don't work without money. Get a job...support your local boutiques, farmers' markets, and avoid chains who do business in a way you don't agree with. That's protest that hurts the corporations. You don't like that you went to school but you can't get a job? Learn a trade. Would've been a better choice for most of these people anyway. College isn't for everyone. And with every person that goes to college, the cost of schooling goes up. Supply and demand.

@marinara Food is one of the most purely competitive markets that exist. Wall street isn't profiting off of that increase. Price fluctuations in food almost perfectly reflect supply and demand. Kraft's profits, for instance, are around 7%. They pay a yield of 3 percent or so on the dividend, but the price per share is flat over the past decade.

With Apple on the other hand, you have a much stronger case they are gouging customers, seeing as they have a profit margin over 25%. It's exactly that profitability that has made them the most valuable company in the world by market capitalisation. Their price per share, for comparison, has increased 5000%. They also use suppliers with highly questionable labor practices.

That's the kind of hypocrisy that undermines the effective communication of a message via protest. That's why it would be better to protest something like the Republican stonewalling of Elizabeth Warren's appointment.

>> ^NetRunner:
Well, prices are set by market forces. You know, supply and demand. It's not necessarily the case that the Fed expanding the monetary base will lead to inflation.

Again, look at the last few years. Bernanke expanded the monetary base radically, but inflation has stayed low, and is on a declining trend.

And price changes from an increased "supply" of currency is called inflation.

Bernanke expanded the monetary base of the US dollar (ie world reserve currency) and people all over the world are in the streets rioting over the increased cost of living. PPI in the US has gone up 7.2% the last 12 months. And if you're referring to QE, most of that money is either parked at a bank or was used to buy toxic debt (to counter deflation). But when those TRILLIONS do reach the marketplace, inflation will be realized. That's why precious metal prices have blown up. The US dollar has lost 98% of it's purchasing power against gold the last 40 years.
>> ^NetRunner:
Oy. Okay, so here's how a bank works. People like you and me have some money. The bank offers to "hold" that money for us in an account, and at least used to pay us some small amount of interest on that money as incentive for us to keep our money with them.

But the bank doesn't just take our money and stick it in some vault for safekeeping, they lend that money out to other people, at a higher rate of interest than they offered us.

Problem is, we're allowed to withdraw our money from the bank whenever we want, so the bank has to keep some cash on hand (aka in reserve). However it will only keep a fraction of the total deposits in reserve, because otherwise it wouldn't be able to loan out money. That's what fractional reserve banking means.

That's what one would presume fractional reserve banking means, but it's not.




>> ^NetRunner:
I agree. Provided by "our system" you mean laissez-faire capitalism.

The banks take our savings and gamble them on risky, potentially profitable investments. That's sorta key to the functioning of capitalism though. Without that, the whole system crashes almost instantly.
LOL. The state stepping in to reward and cover up fraud is not laissez-faire capitalism. I don't get it. You defend the system, then you try to shift blame on free market capitalism?

>> ^NetRunner:
Artificially. You keep using that word. I don't think it means what you think it means.

Prices are set by market forces, and according to free market advocates this is perfect/moral/only way they can or could ever be set, or else we'll go to hell be socialists.

There are plenty of unnatural "market forces" in our current system. Even inflation itself. Hence, prices are artificially set.


>> ^NetRunner:
Different economic models hypothesize different answers. I tend to think the Keynesian story is right -- it's aggregate supply and aggregate demand. When you have a shift in either one that would lead to a higher equilibrium price, then you see "aggregate price" (aka the CPI) rise.
Which is to say, you can get both inflation and deflation without the Fed doing anything. To stabilize inflation, you actually need the Fed constantly adjusting the monetary base so neither inflation or deflation get out of kilter. Look at pre-1913 interest rates if you don't believe me.

John Maynard Keynes on inflation: "By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."

What you're talking about makes no sense. Prices in a market with sound money still go up and down. That's the way a market works. Calling it inflation and deflation doesn't make it so.

>> ^NetRunner:
I agree, if by "the ones that...extract value from that actually worked and earned their wealth" you mean any and all business owners, investors, and so on who have done nothing but collect interest on wealth they already own.

Maybe before you start going after people who are collecting interest on the wealth they presumably earned honestly, you will stop defending those who collect interest on money they created from nothing. Deal?

>> ^marbles:

So... where does this increase in price level (i.e. inflation) come from...? Oh yeah, from expanding (or inflating) the fiat monetary base!

Well, prices are set by market forces. You know, supply and demand. It's not necessarily the case that the Fed expanding the monetary base will lead to inflation.

Again, look at the last few years. Bernanke expanded the monetary base radically, but inflation has stayed low, and is on a declining trend.

>> ^marbles:
>> ^NetRunner:
Also, "Without a system built on fractional reserve" means a world without banks.

LOL Says who? It may be a world without corrupt banks. If you or I can't loan money we don't have, why should a bank be able to?

Oy. Okay, so here's how a bank works. People like you and me have some money. The bank offers to "hold" that money for us in an account, and at least used to pay us some small amount of interest on that money as incentive for us to keep our money with them.

But the bank doesn't just take our money and stick it in some vault for safekeeping, they lend that money out to other people, at a higher rate of interest than they offered us.

Problem is, we're allowed to withdraw our money from the bank whenever we want, so the bank has to keep some cash on hand (aka in reserve). However it will only keep a fraction of the total deposits in reserve, because otherwise it wouldn't be able to loan out money. That's what fractional reserve banking means.

>> ^marbles:
Meanwhile, our system uses the power of the state to reward fraud and gambling of the largest banks and biggest corporations while extracting wealth from the poor and middle-class.


I agree. Provided by "our system" you mean laissez-faire capitalism.

The banks take our savings and gamble them on risky, potentially profitable investments. That's sorta key to the functioning of capitalism though. Without that, the whole system crashes almost instantly.

@RedSky

It's not that speculative activity has "nothing" to do with supply and demand. Of course it does. I'm saying that once you get past that initial set of contracts between the initial speculator and the farmer/mill/bread company/whatever, you get further and further away from supply and demand as a factor. You get people who are betting on price swings for profit rather than someone actually providing a service. The video did a pretty good job of illustrating the see-saw effect this has on markets, which makes prices unstable.

This see-saw effect causes severe and sudden price spikes and dips as people pile on short sales or speculative buying. The point is, if the price for a good increases 71% in a short period of time without extreme supply issues, it's likely a speculative effect. Yes, the video could have done a better job of explaining why biofuels, certain supply shortages, etc, don't account for nearly all of the price increase, but I've heard that broken down elsewhere. I'll try to find a source.

Furthermore, large US investment banks have convinced sovereign wealth funds (think Saudi royal money type funds) to invest in US commodities markets in recent years.

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/11/AR2008081102462.html
http://www.reuters.com/article/2009/02/24/us-commodities-sovereignwealth-idUSTRE51N28Z20090224

This is what these huge piles of money do to protect themselves. More recently, investors bought huge piles of Swiss Francs because it was the world's most stable currency. However, since such huge investment in the currency suddenly increased the value of the Franc, it caused Swiss exports to become more expensive. This started to destabilize their economy, as producers were having trouble keeping contracts with their buyers. So, the Swiss central bank started manipulating their currency value by offering to buy unlimited amounts of any foreign currency. They succeeded in dropping the Franc's value by around 10%. None of this activity had anything to do with supply or demand of Swiss goods...or goods anywhere for that matter. It was simply massive amounts of investment from a crowd mentality.

Same thing goes for the price of gold. It's just a giant hedge against inflation and/or price spikes in other markets...so you get these accumulations of money in "safe" areas, and that's how you get massive overvaluation of various goods and commodities (bubbles).

It's all due to the level of complexity. "Speculative activity" is a stabilizer when the number of speculators is low, but it has a destabilizing effect as the number of speculators increases.

@mgittle

I agree that particularly the sheer volume of speculative versus physical transactions is an issue.

You say though that speculative activity has nothing to do with supply and demand though, which I disagree with as ultimately that's what it's looking to predict. After all speculation based on rumor and not fundamentals is essentially a ponzi scheme, ultimately the price will fall back down to true levels when enough further buyers cannot be found, or for that matter when counter parties can't be found. Food may to some extent be an exception here in that people can't choose not to buy it though, so there is less pressure on it to fall if it rises too far.

Ultimately I agree that whether it causes more instability is debatable, but you could just as easily argue that more transactions means a deeper, more liquid market and that the price instability is more as a result of the market pricing in food price changes more readily. My issue with the video was more than it only listed the other factors, saying nothing of their significance relative to the argument it was making, which seems disingenuous.\

On topic, there needs to be a better ability to measure and monitor OTC derivative contracts, but I think generally people who sorely blame speculators don't understand how markets work.

Everything ultimately has a fundamental value, if speculators are taking excessive amounts of positions expecting the price to go up, ultimately it will rise far beyond levels determined by supply and demand for the physical good and these speculators will stand to lose in their derivative position.

What is their incentive to inflate prices if they know that this will happen? Why not simply attempt to predict the market price accurately, whether it is trending up or down? Now obviously bubbles happen and what the video says about property investors heading into food commodities may well be true, but that is precisely why shorters have a role in the market to push the price down if it gets over-inflated.

You know when the video talks about hedge funds betting in price falls? What they conveniently omit to mention is taking these contracts puts downward pressure on prices.

Furthermore, whether high or low food prices hurt people in developing economies depends on who you're talking about. People living in country areas who rely on farming for their livelihood tend to gain from higher prices, urban dwellers tend to lose from it.

Demand and supply is also quite obviously driving increases in prices regardless of what you believe about speculation.

1) As developing countries have become wealthier they've shifted from a grain/rice diet to a more meat reliant diet, which is far more agriculturally intensive.

2) It's pretty self evident that weather instability has increased worldwide which destabilises prices.

3) Increased use in bio-fuels both in the US and Europe has taken up supply and pushed up prices.

4) All of these factors have in several cases resulted in countries establishing temporary trade barriers which in itself push up prices.

Point is, it's easy (and not entirely rational) to blame speculators but analysing all the factors at play (which this video brushes off) paints a far more complex picture.

Economics is "the study of the use of scarce resources which have alternative uses."

Every dollar urinated away on fanciful bull$h1t (per the info in marinara's post, the Golfer Administration ramrodded this through with zero oversight) like this is a dollar that could've landed in someone's paycheck (where it would be taxed) and circulated to buy goods people actually want and use (and taxed again).

That's also another dollar that will never be invested freely by peeps who are a lot more cautious with their dollars than thugverment. And these 'lone' dollars we're discussing are far from alone. Each one also costs many more dollars because government bureaucracies filled with government workers have to move them around.

No one is 'against' solar. they want "viable" (meaning cost-effective) solar systems. And people wanted to fly before the Wright Brothers built a plane in their garage using zero tax dollars.

If I believed that the recovery act went to paying wages, I would support it. But I really doubt it. My own personal idea is for the government to subsidize the minimum wage. It would add $5 in salary to each employee making less than $10. Do the math. for 1 million people, it would cost 10 Billion per year.

It seems like such an easy solution, doesn't it? Just pay people a living wage! Except living wages don't come from government, they come from businesses who have to deal with market demand. The American workforce is roughly 100 million. So with your 10 billion in what is essentially workfare (favoring one burger flipper over another) you've given a whopping 1 percent of low-wage earners a larger paycheck...for doing nothing!

Not only will this money be taxed at a higher rate, prices will rise, just like they do every time some vote-buying slug in office suggests raising the minimum wage. And employers will hire less people at $10 than $5. Supply and demand. Only in liberaland does a forklift driver earn the same as a neurosurgeon, because anything less wouldn't be "fair". It's also why double digit inflation is the norm across Europe.

>> ^NetRunner:

Well, I for one and glad you've gone from not understanding the point of the video, to thinking the point the video makes is so obvious that it's stupid to make a fuss about it.
I blame lots of people for lots of things, but "being stupid" isn't one of them. It's the smart people who know better, but are doing shit like this I'm mad about.
They're working very hard to make sure the stupid stay stupid, and sometimes it's so obvious it just makes me sick.

Maybe you don't get the point of this video. Or any cable news video for that matter. Cable news is television. Not journalism. Television is driven by stupid people. If that needs clarification just check the amount of highly rated "reality TV" shows. Cable news is a ratings driven industry. It is solely, completely, 100% reliant upon ratings, period. Everything that is broadcast is based upon ratings, which directly impacts upon revenue. Is this shocking news for anyone?

So what's the problem? The vast majority of people watching are idiots. The news isn't making people stupid, they are giving a product to their audience (a.k.a. stupid people). Apparently people love reality shows. They love drama and bullshit and worthless crap and could hardly comprehend a complex job bill, assuming they could even read one. So the "news" has become a reflection of it's viewers, a bunch of fucking zombie-eyed, vote-texting, self-involved twittering imbeciles with an attention span of 10 seconds or less.

Can't blame the "smart" people in the "news" for doing exactly what they are supposed to do, keep the drooling masses from changing the channel. That's show business for ya.

Maybe all the "smart" viewers should write a letter of complaint and then just stop watching. Maybe then it would change. Until then, it's just supply and demand.

Ratings 1

Ratings 2

Three words that can destroy this entire argument:

"Supply and Demand."

>> ^Fusionaut:

How to end the drug war and take power away from organized crime: decriminalize drugs.


No. Decriminalization of drugs will have very little affect on organized crime.

Decriminalization is simply moving the common citizen's punishment from being caught using illegal drugs from criminal to civil - it does nothing about the supply chain for these drugs. In many cases, criminal punishment will still exist for anyone falling under the growing/producing, selling, or transporting category.

But decriminalization isn't completely ineffectual; it will dramatically raise the quality of life of users and provide an official avenue for addicts to get help before hitting rock bottom (although it may just open up the avenue for people/organizations to step into rather than actively providing.)

To disrupt the organized crimes' profit from illegal drugs, you have to provide other sources of these drugs. Pure and simply, this is supply and demand. There will always be some demand.