Economics

[Toro]

What do you do if I may ask? Subordinated debt? Distressed securities?

Btw, Treasuries have outperformed gold. The following chart takes spot gold price divided by the 30-year Treasury. US bonds price have appreciated more than gold price. We also get some interest to boot.

I run an investment department. Most would describe me as an allocator though that's not quite it. I used to be an equity PM. Professionally, in debt, I own senior loans, mezz and distressed. The insurance stocks are in my PA.

Gold has sucked this year and has been in a brutal bear market since it peaked in April 2011. Gold has been a personal trade too. When I ran my fund 10 years ago, I was told I was the largest shareholder of gold stocks in the SE. I was buying gold stocks when it was $320 and people were telling me I was an old man and - literally - laughing in my face. I had no idea gold was going to go up to $1921 though, and the stocks would go up 10x-20x. I thought it might go to $500-600 one day. But I'm under no illusions. Gold is a commodity/currency that is to be traded, not owned. It is down 37% from the top, and silver is down by almost 60%. It is my impression that most people who are in gold don't understand commodities and how to trade them.

Nice. I always thought mezzanine and distressed presented interesting opportunities.

You ran a hedge fund? You don't come across as a sociopath. Just kidding...

I'm glad I've had a chance to post more on here. It makes for interesting discussion. I had ankle surgery a week ago, so I'm out of commission for the next two weeks.

Btw, you raise a critical about gold. The vast majority of people don't understand how the trade works or why we trade commodities.

I hire hedge funds. I don't run one. I'm only a semi-sociopath.

 

[EdwardBaiamonte]

JM Keynes was a brilliant economist

and what exactly was his brilliant contribution? Odd you forgot to say?

 

[Kimura]

JM Keynes was a brilliant economist

and what exactly was his brilliant contribution? Odd you forgot to say?

Have you been laid? Ever? I'm just curious.

 

[EdwardBaiamonte]

JM Keynes was a brilliant economist

and what exactly was his brilliant contribution? Odd you forgot to say?

Have you been laid? Ever? I'm just curious.

and what exactly was his brilliant contribution? Odd you forgot to say?

 

[EdwardBaiamonte]

Have you been laid? Ever? I'm just curious.

and what exactly was his brilliant contribution? Odd you forgot to say?

You need to get laid, brah. You're a loser, you've NEVER done well with ***** Dude, if you need to get laid, you can always pay, son.

and what exactly was his brilliant contribution? Odd you forgot to say?

 

[Kimura]

and what exactly was his brilliant contribution? Odd you forgot to say?

You need to get laid, brah. You're a loser, you've NEVER done well with ***** Dude, if you need to get laid, you can always pay, son.

and what exactly was his brilliant contribution? Odd you forgot to say?

I was trying to bait you into one of your cut and paste jobs since you don't have an original thought in your head.

KM Keynes is the father of macroeconomics. I'd call that a brilliant contribution.

 

[Foxfyre]

Keynes is indeed credited as the 'father of macroeconomics' though the practical application is generally related to government manipulation of the economy. Is "greatness" assigned to those who greatly influence how we see and do things? If so, Marx, Lenin, Hitler, Chairman Mao all deserve the desigination of 'great men'.

If 'greatness' is assigned to those who have had the most positive influence on our economy/society/life together as a people, however, I might think that could be debatable when it comes to John Maynard Keynes. Brilliant and great are not necessarily synonymous.

 

[AmazonTania]

America is involved in several wars. It fits right in the inflation club.

Not really. We're talking hyperinflation. Inflation is a situation where prices increase faster than wages. Or a situation where both increase at the same time which tends to distort internal and external markets. A little inflation is part of a growing, healthy, robust economy. It will increase growth and consumption, prevents hoarding of cash, etc.

You've missed the point. I am referring to a different type of War and how it attributes to the type of inflation we are discussing. The type of inflation which involves competitive devaluation: A Currency War. And the object of a currency war is to lose. The loser gets to sell a ton of exports. The winner gets stuck with massive inflation, and in some cases, hyperinflation.

Argentina engaged in one with Brazil during the 1980's. Mexico engaged with with United States during the late 70's & 80's. Venezuela is starting to look like the first casualty from the Global Currency War. It's really possible for any country to experience a period of hyper inflation. All that requires is some form of conflict. And the US currency war with China, Korea, Japan, Venezuela and others. That's a rather large conflict. But it all stems on a race to the bottom, and I believe the United States is going to win.

Meh, he doesn't have any credentials in economics. He's a stockbroker. And a really shitty one at that.

That's your opinion. I don't necessarily see thousands of his clients closing their accounts in mass numbers. Still, if you are confident I think you should give him a call. He's always open to new ideas, as well as challenges.

The New Deal helped get the US out of the Depression. The was problem was that he drank some of the Kool Aid in the in beginning. He even ran on balancing the budget, etc.
Some of his economic advisers really didn't understand the gravity of the situation. They should have spent much more in the beginning. I'm talking orders of magnitude more. I've head the ahistorical and revisionist history. People don't seem to realize that FDR was also the leading anti-fascist on the world stage at time. If it wasn't for FDR, it would have ended badly for England. Badly.

Yeah, and all it took was Japanese Kamikaze pilots killing thousands of innocent Americans.

There's more interesting economists out there.

Carl Menger, the founder of the Austrian School, made a great contribution to economics with marginal utility. Hayek at least joined the reality-based community on occasion. von Mises and Rothbard were wrong about many, many things. Honestly, I don't believe Murray Rothbard understood macro.

There's Abba Lerner, GF Knapp, Michał Kalecki, Hyman Minsky, etc.

Keynes was wrong about couple things and yet, here you are. A cheerleader for his school of thought. Dean Baker and I agree about many things regarding the roles up to the 2007 Financial Crisis. Unfortunately, that is all we agree on. I don't believe Krugman understood macro, but I like him. He is a funny guy.

If there was anything I have learned as long as I've been debating my different economic opinions, is that taste is subjective.

There's only one way to calculate GDP:
GDP = C + I + G + (X – M)

It's probably better to show you what I mean. Do you have a financial times subscription?

Data shift to lift US economy 3% - FT.com

People purchase bonds as a place to park their wealth. It's a secondary function. The primary function of bonds are too drain excess reserves. Period. Period. Period.

Again, under a fiat system, bonds are not necessary. As a matter of fact, if people are so concerned about something as trivial as debt, we should just get rid of bonds. You can just credit commercial bank accounts as a national government. Granted, you won't earn any interest keeping your money in reserve accounts.

Sovereign governments don't borrow the national money of account they freely issue. We have to look at this from the consolidated government model. National governments tax to create demand for the national unit of account and regulate aggregate demand. In this scenario, deficits are a prerequisite to create net financial assets.

If that is the case, there is virtually no need for banks. Period. Bond sales provide interest-earning alternatives to that of reserves. Whether they are sold by the Fed or the Treasury, the result doesn't change. If the banking system has excess reserves, the overnight interbank lending rate falls below the target rate, thus triggering bond sales.

Banks lend to credit-worthy borrowers, creating deposits while holding the debt obligations of the borrowers. If banks demand reserves, they go to the overnight interbank market or the central bank discount window to get these reserves. If the system as a whole is short, upward pressure on the overnight rate sends signals to the central bank that it needs to supply reserves. During the financial crisis, demand for excess reserves grew and the Fed was able to accommodate that demand. The entire process has been inflationary, and still will be inflationary whether we forgo the middle man and rid ourselves of bonds or not.

And deficits are not necessarily a prerequisite for the creation of savings. This assumes that the private sector can save just as much or just as quickly as the government can rack up debt, which is not the case. Increasing true in the case of Japan.

The Japanese government issues "public debt" so household savers can get a decent return without having to get into foreign-denominated currency. They can also maintain growth with spending which creates savings and keeps unemployment on the low side.

The Japanese central bank and treasury are fully aware of these facts. Their economists wrote brilliant papers about this.

Bookmark this post: There simply will not be a Japanese debt crash - not tomorrow, next year, five years or EVER. The reality of the situation is that the Japanese never have any problems issuing JGBs at low or miniscule yields. We bond traders understand which is why these arguments make me want to commit ritualistic Japanese suicide. Bushido style.

I don't think so. Then again, I've seen truly tremendous things of people doing very spectacular things while under the influence. So, maybe you are right in this regard. Otherwise, I doubt it. Government bonds are increasing, and a large portion of local portfolios are already invested in JGBs. These new funds would have to come from their new savings. The problem is that new savings are on a downward trend, accelerated by an ever increasing aging population. This, along with increasing rates the whole thing is in the process of unraveling. There aren't too many tricks the Bank of Japan can pull out of it's economic hat.

And since the notification on this particular post won't shut up, I don't think I'll lose track of this. Unless one of you would be so inclined to stop talking. But I suppose this will all start over again, but only for one of us to say the words, "I told you so."

First of all, the term printing money is a term from the days of the gold standard. Under a fiat system, government spending is money creation. It's a matter of crediting commercial bank accounts. It's ex-nihilo, the entire process of money creation, a balance sheet operation.

We no longer monetize the debt, that's another term from the gold standard. Under the gold standard, the US money supply was limited to the amount of gold it had on hand.The government used to get gold by issuing certificates which were IOUs by Uncle Sam. These certificates were passed from person to person the same we pass around cash. This is where the term comes from. We 86'd the gold standard in 1933, but we continue to incorrectly use the term.

People also erroneously assume the Federal Reserve purchases government debt and this creates money in the banking system which somehow works it way into the general economy. The FED is prohibited from purchasing debt by the Treasury by law. When the FED purchases debt, the purchase is made from the public. These consist of bills, notes, and bonds already owned so to speak. The whole belief that the FED is required to buy US debt is utterly and patently false. US auctions are constantly oversubscribed by many times the available US paper. The US dollars sitting in those bank accounts are what's used to purchase bonds are in fact the result of government spending itself. Dollars don't magically appear in reserve accounts.

Semantics are semantics.

1. Monetising the debt as been around for much longer than the 20th century. It's not new. In fact, it's been around since the founding era. And technically, we are still monetising debt. That's what the Fed does whenever it engages in open market operations. The financial technique as been with us. It has always been with us. And it will continue to be with us, until some crazy economist comes up with a newer and more fabulous way of distorting the marketplace.

2. 'Printing money' is term usually synonymous with the term 'newly minted money,' which was used directly used for Government Finances. 'Money creation' involves the purchase of financial assets. What exactly is the difference? None as far as I can tell. Both of these techniques involves the physical creation of a medium of exchange. Neither of these things necessarily adds to the aggregate money supply. Honestly, there really isn't much of a difference, if any at all. It's just all a matter of technicalities so people can be so hard up on the term. I dislike being professional when I'm outside work.

And most people should already know that the FED doesn't actually have to print money to purchase government debt. These days, it just types the money into existence. The Federal Reserve Act prohibited the Fed from buying debt directly from the Government. It just goes into the secondary market to purchase these treasuries, eliminated the supply of treasuries in the marketplace. These treasuries no longer exist, but they exist on the Fed's balance sheet and one day (most days actually), the Treasury has to pay the Fed back.

And while all of this doesn't happen by 'magic' this really doesn't make things any better.

Yeah, QE, it was supposed to generate the "wealth effect". I'm going to use some British slang: bollocks! It was a useless policy in my option.

It wasn't useless. Look at all those returns. It's like Christmas, except it's not only in December or July.

The real economy is more important than Wall Street. I'm 36, I started on Wall Street when I was 22. Now that I'm no longer a delusional idiot, watching reruns of Wall Street and Boiler Room, I've finally realized we don't need Wall Street to have a prosperous and productive economy.

Seriously, it's needs more regulation and it should be taxed to discourage any rent-seeking behavior. As it stands today, they can destabilize whole the financial system, especially with high frequency trading, derivatives, credit default swaps, etc.

I won't pretend to know all that much about derivatives, but I see no problem with rent seeking. If government is willing to give away free money, I will take it. Sure, I'm not going to waste all of my own time and effort trying to win free money. Not when I can pay someone to do all of that for me.

Yeah, it has value though seigniorage, regulation, legal tender laws, taxes and production.

It is a store of value and it is standard of deferred payment. Not exactly something I would call the US dollar, but people are willing to do outlandish things in order to obtain it. So I guess it's okay.

Sure, if you feel so inclined to.

I dunno. How about Niall Ferguson. Very good specialty in economic history, especially in regards to hyperinflation.

Carmen Reinhart is also another one of my favorites.

 

[CrusaderFrank]

The US can never end up like Greece. We have haven't ceded any monetary sovereignty. We have structural problems - a byproduct of stagnant wages for the last twenty years. The government also hasn't spent nearly enough to stimulate aggregate demand. They've been focused on Wall Street, encouraging more of the same delusional an destructive behavior.

We still don't have a full employment policy, Medicare for all, an infrastructure program, a doubling of social security payments for our seniors and disabled. These are the things needed to create any type of real wealth and capital to help the middle class and all Americans.

We're such an infinitely wealthy country. It boggles my mind.

Are you insane?

 

[AmazonTania]

Trade deficit does devalue a nation's currency. You have also overlooked a few things, but to see this we must start with some basic ideas.

If a country whats what you produce, then it needs your currency. Exporting creates an international demand for your currency as well as the demand for the goods and services of the foreign businesses. If you are purchasing your foreign car from a local dealer, this means your car has already been exported. This contributes to the nation's current account deficit, as the product was exported to your country for final sale.

<snip>.....

Again, you're looking at this from a fixed exchange perspective in my opinion. We live in a world of floating exchange rates which is far superior. Any type of imbalances, which you articulated, are resolved through the overall price of the currency fluctuating. We use domestic policy strategies, such as fiscal policy and the FED, to target the domestic policy agenda knowing that any exchange rate issues with any and all currency imbalances as a manifestation of trade surpluses, trade deficits, etc. ad infinitum.

Any country which runs a trade surplus is running a risk inherent in accruing fiat foreign currency. When a country runs a trade surplus, real goods and services are leaving the country in return for a questionable ability to import in the future, and through an agreement to export down the road at prices which is acceptable to countries in the foreign sector holding its currency. If the US, for example, was to suddenly slap a tax on exports, the foreign sector's purchasing power would ultimately become reduced.

Under the Gold Standard, the rate of exchange remains fixed, so long as you are also trading with currencies under the same currency system. I'm not using a fixed rate of exchange. Quite the opposite, as I have already explained: If you need what another country produces, you need it's currency. That is the basis of trade. Selling dollars and buying Euro's increases the demand for Euro's and lowers the demand for Dollars. The Euro rises against the Dollar (EUR/USD) and the Euro becomes more valuable. This is inherently 'free flowing.' Nothing about my initial point changes.

Trade requires a balance, but a surplus isn't unobtainable if no one demands your goods or services. In America's case, there are no goods or services to export. If no one demands these goods or services, then no one demands US dollars. These US Dollars are generally being held up by foreign reserves which can then be sold at any time. If countries decide to start selling dollars against another currency, this can further drive up the cost of imports for Americans.

At tariff on foreign goods would reduce purchasing power for foreigners, but not that much. The United States would be doing this at it's own peril of increasing the cost of living for all it's citizens. As maybe of the reasons why the economy is not as bad as it seems is because cheap goods and services keeps the economy from imploding. However, recently the Americans have spent a larger portion of their income on foreign services.

One of the drawbacks of being the world largest debtor, there are only so many cards you can yield. Even if you do yield the reserve currency.

We're still act as if we're on a gold standard. This drives the me insane on a daily basis.

Then you economic bulls really need to get a grip. You blokes are too hard press. This is just typical how international trade is conducted. It requires some sort of balance. You pay for imports, with exports. Trade deficits aren't necessarily bad, and trade surpluses aren't always good all the time. They're both self correcting and mutually beneficial. But your premise seems to be that trade surpluses are never good, and trade deficits are better than everyone gives them credit for. It doesn't always work that way.

 

[AmazonTania]

Anybody here an economist? I've read a lot of opinions here and just wondering, that's all. I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades. Peter Ferrara could give a pretty good anti argument, but what nations can he give a working example of that were successful under his brand of economics.

People speak of Keynesian or Austrian economic theories as though they were FORMULAS for how economies ought to be run in every circumstance.

Keynesianism is a proposed RESPONSE to a specific economic circumstance (deflationary depression), and NOT a formula for how an economy ought to run all the time.

JM Keynes was a brilliant economist. He stumbled upon some concepts that weren't really part of the consensus at the time. Besides Sir Issac Newton ad Alan Turing, he's top 5 on my list of genius Brits.

99% of people that deride Keynes have never read the General Theory. It's a gaggle of idiots and ideologues who have an agenda.

Unfortunately, he died before he could complete his Magnum Opus. I'm positive he would have arrived at similar conclusions that Hyman Minsky arrived at.

Keynes unlocked the door for us. Modern Monetary Theory (MMT) has showed me the way so to speak.

'Brilliance' is always subjective. The term virtually has no meaning unless it is coming from an objective point of view.

Keynes is indeed credited as the 'father of macroeconomics' though the practical application is generally related to government manipulation of the economy. Is "greatness" assigned to those who greatly influence how we see and do things? If so, Marx, Lenin, Hitler, Chairman Mao all deserve the desigination of 'great men'.

If 'greatness' is assigned to those who have had the most positive influence on our economy/society/life together as a people, however, I might think that could be debatable when it comes to John Maynard Keynes. Brilliant and great are not necessarily synonymous.

Of all the economic schools or thought examined after the Great Depression, the three main ones were Keynes, Austrian, and Marx. All very different, but the one thing they have in common was that they've all been correct about a particular event to a certain degree.

Keynesianism was definitely the most popular, as the concepts and policies are generally easier to enact and pursue. Especially when it comes to Governments who want more power. Unlike the other two theories, Keynesianism is the only economic model center stage in this global economy. There are no Austrians, Monetarist or Marxist theories to point to when things go wrong. The Marxist will tell you, 'Marxism has never been implemented in society, ever...' And Austrians, well, they never get their way. If when they turn out to have been right all along.

[ame=http://youtu.be/GTQnarzmTOc]Fight of the Century: Keynes vs. Hayek Round Two - YouTube[/ame]

 

[oldfart]

Keynes is indeed credited as the 'father of macroeconomics' though the practical application is generally related to government manipulation of the economy. Is "greatness" assigned to those who greatly influence how we see and do things? If so, Marx, Lenin, Hitler, Chairman Mao all deserve the desigination of 'great men'.

If 'greatness' is assigned to those who have had the most positive influence on our economy/society/life together as a people, however, I might think that could be debatable when it comes to John Maynard Keynes. Brilliant and great are not necessarily synonymous.

But in Keynes case they were. Too bad you never read any of his work. Or for that matter, any macroeconomics.

 

[Foxfyre]

Keynes is indeed credited as the 'father of macroeconomics' though the practical application is generally related to government manipulation of the economy. Is "greatness" assigned to those who greatly influence how we see and do things? If so, Marx, Lenin, Hitler, Chairman Mao all deserve the desigination of 'great men'.

If 'greatness' is assigned to those who have had the most positive influence on our economy/society/life together as a people, however, I might think that could be debatable when it comes to John Maynard Keynes. Brilliant and great are not necessarily synonymous.

But in Keynes case they were. Too bad you never read any of his work. Or for that matter, any macroeconomics.

Too bad that you don't have a clue about who or what I have read.

 

[prepster]

There is no empirical evidence that Keynesian economics has been truly successful anywhere it has been tried.

In our own history, the first effort at using Keynesian economics was FDR's "New Deal" that most credible historians now credit with actually prolonging the Great Depression. And its legacy is not pretty either:

By the 1970s, Keynesian policies had produced double digit unemployment, double digit inflation, and double digit interest rates, all at the same time, along with four successive worsening recessions from 1969 to 1982. Keynesian monetary policy involves running up the money supply to increase demand, with artificially lowered interest rates promoting more spending. That is where the inflation came from.

While Reagan's return to supply sided economics boosted job creation, halted and reversed runaway inflation, and ushered in a sustained period of economic growth. The U.S. economic growth between 2002 and 2007 exceeded the entire economy of China.

We call this period, 1982-2007, the twenty-five year boom &#8211; the greatest period of wealth creation in the history of the planet. In 1980, the net worth &#8211; assets minus liabilities &#8211; of all U.S.households and business&#8230;was $25 trillion in today&#8217;s dollars. By 2007, &#8230;net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.&#8221;

Obamanomics: The Final Nail In the Discredited Keynesian Coffin - Forbes

Those who see government as the lawful master of the people and the role of the people is to serve government will generally embrace the bastardized version of Keynesian economics that says we can spend ourselves into prosperity. (Keynes himself would never have advocated Keynesian economics as the U.S. has embraced it.)

Freedom loving people who see the role of government as serving the people, will reject Keynesian economics every time.

The interesting aspect about FDR's policies during the Great Depression is that they often strayed away from traditional Keynesian stabilization policies. Roosevelt actively raised taxes throughout the Great Depression, exactly the opposite of what Keynes suggests in a recession/depression. FDR also received significant opposition from his Republican counterparts in maintaining constant increases in federal spending, namely direct federal spending, throughout the Great Depression.

At the same time, FDR imposed significant regulatory barriers upon businesses, thereby not allowing stabilization policies to fully blossom. Keynes never really discussed the impact of regulations upon economic prosperity, as his main focuses were stabilization policies. With that being said, it was not Keynesian economic policies that failed during the Great Depression. It was the deviation from such policies that prolonged the Great Depression until the beginning of WWII, when, guess what, Keynes' recommendations were followed more strictly, and by the end of the war to the early 1970s, they worked wonders.

In addition, Keynes was well-aware of the problems politics and policy-makers could create with his policies. Before even discussing matters of stabilization policy, in the interwar period, Keynes discussed extensively the horrible affects of arbitrary interventionist policies, specifically those related to war reparations. The man keenly understood that politicians and other public policy officials can and do make mistakes, sometimes deliberately, and the fact that he was privy to such knowledge all the while being able to conceptualize revolutionary economic principles speaks to his greatness as an intellectual.

 

[oldfart]

JM Keynes was a brilliant economist. He stumbled upon some concepts that weren't really part of the consensus at the time. Besides Sir Issac Newton ad Alan Turing, he's top 5 on my list of genius Brits.

99% of people that deride Keynes have never read the General Theory. It's a gaggle of idiots and ideologues who have an agenda.

Unfortunately, he died before he could complete his Magnum Opus. I'm positive he would have arrived at similar conclusions that Hyman Minsky arrived at.

Keynes unlocked the door for us. Modern Monetary Theory (MMT) has showed me the way so to speak.

'Brilliance' is always subjective. The term virtually has no meaning unless it is coming from an objective point of view.

I know of no meaning of academic brilliance that would meet your definition of objective; so the choices are to forgo the term entirely or admit it is subjective. I choose the latter, and I assume you choose the former. For the sake of consistency then, I assume we will not hear you wax eloquent on any thinker's "brilliance".

Of all the economic schools or thought examined after the Great Depression, the three main ones were Keynes, Austrian, and Marx. All very different, but the one thing they have in common was that they've all been correct about a particular event to a certain degree.

I have always been a bit put off by this kind of classification. Endulge me for a bit. The discipline began as "political economy", an approach which focused on government role in the economy and the general welfare of society. Even Adam Smith writing in the negative took for granted that his subject was about public policy. In the Malthus--Ricardo debates of 1820, the subject matter came to focus at times on the motives and logic of economic actors without direct reference to government. If Adam Smith is the beginning of classical macroeconomics, then these debates are the start of classical microeconomics. As this happened, economics as a field of thought began to diverge from political economy.

While the two are obviously related, there is still a difference. Economics has by fits and starts gravitated toward what Milton Friedman called "positive economics" (as opposed to "normative economics") with an emphasis on developing models for prediction and testing hypotheses. Political economy has tended to paint with a broader brush, be less interested in data and data problems, more interested in "historical analysis", and be more frankly political and ideological in approach.

Keynes was first and foremost a good economist. His "Treatise on Money" is the high point of classical monetary theory. His role as a senior civil servant in the Treasury led to "The Economic Consequences of the Peace", his most widely read book, and places him firmly in the role of a political economist. But he is wearing two hats, and he does not confuse his role as professional economist and his role of advocate for economic policy.

Marx is a sociologist. As an economist, he is a good sociologist. "Das Capital" ranks as one of the least readable tomes ever written, and the labor theory of value may be biggest intellectual bust of the eighteenth and nineteenth centuries. While Marx might be touted as the forerunner of Fabian (labor union) socialism, the welfare state, and Leninist, Stalinist, Maoist, and later Soviet "Communism", none of these systems actually contain much that Marx actually wrote about economics, and what they did try to adhere to was catastrophic. I'm not sure Marx even qualifies under the heading of "political economy", much less economics.

The "Austrian School" usually identified with von Mises and Hayek, on the other hand, is a cogent presentation of a school of political economy. It also has a severe streak of rejectionism of quantitative methods, so it becomes hard to judge it as economics. It seems impervious failed predictions.

So IMHO Hayek is a pure political economist, Marx is neither an economist nor a political economist, and Keynes is predominantly an economist. We are not comparing apples to oranges, we are looking at fruit salad.

Keynesianism was definitely the most popular, as the concepts and policies are generally easier to enact and pursue. Especially when it comes to Governments who want more power. Unlike the other two theories, Keynesianism is the only economic model center stage in this global economy. There are no Austrians, Monetarist or Marxist theories to point to when things go wrong. The Marxist will tell you, 'Marxism has never been implemented in society, ever...' And Austrians, well, they never get their way. If when they turn out to have been right all along.

Given my framework above, I agree with you. From an economic viewpoint it has been Keynesian theory vs a witches' brew of self-serving claptrap from bankers caught with their assets exposed, simplistic monetarist theories (inflation scares), and political opportunism. We have not had an intellectual debate since the 30's where one side (anti-Keynesians, A & A's "expansionary austerity", and R & R's "debt/growth inflection point") has so dramatically collapsed. One side has triumphed but cannot seem to change public policy one iota and the other seems to not be able to make a consistent coherent statement of policy.

The Austrians have in one sense done pretty well. Because they don't like data, they make no predictions that can discredit them. By being purists, they insure that no policy actually implemented can be viewed as a fair trial of their prescriptions. If we won't outlaw unions, abolish the minimum wage, end unemployment compensation and welfare (all necessary to "free up" labor markets so wages may fall sufficiently to achieve full employment), return to the gold standard, abolish central banks, and immediately balance the federal budget, they claim we simply fail because we did not go far enough. Being ideologically pure means never having to say you are sorry (or that you were mistaken!), a position that avoids all responsibility.

 

[AmazonTania]

JM Keynes was a brilliant economist. He stumbled upon some concepts that weren't really part of the consensus at the time. Besides Sir Issac Newton ad Alan Turing, he's top 5 on my list of genius Brits.

99% of people that deride Keynes have never read the General Theory. It's a gaggle of idiots and ideologues who have an agenda.

Unfortunately, he died before he could complete his Magnum Opus. I'm positive he would have arrived at similar conclusions that Hyman Minsky arrived at.

Keynes unlocked the door for us. Modern Monetary Theory (MMT) has showed me the way so to speak.

'Brilliance' is always subjective. The term virtually has no meaning unless it is coming from an objective point of view.

I know of no meaning of academic brilliance that would meet your definition of objective; so the choices are to forgo the term entirely or admit it is subjective. I choose the latter, and I assume you choose the former. For the sake of consistency then, I assume we will not hear you wax eloquent on any thinker's "brilliance".

I am very difficult to impress so I will hardly use the term brilliant. Especially when it comes to anything regarding economics. I either will agree or I will disagree.

I have always been a bit put off by this kind of classification. Endulge me for a bit. The discipline began as "political economy", an approach which focused on government role in the economy and the general welfare of society. Even Adam Smith writing in the negative took for granted that his subject was about public policy. In the Malthus--Ricardo debates of 1820, the subject matter came to focus at times on the motives and logic of economic actors without direct reference to government. If Adam Smith is the beginning of classical macroeconomics, then these debates are the start of classical microeconomics. As this happened, economics as a field of thought began to diverge from political economy.

While the two are obviously related, there is still a difference. Economics has by fits and starts gravitated toward what Milton Friedman called "positive economics" (as opposed to "normative economics") with an emphasis on developing models for prediction and testing hypotheses. Political economy has tended to paint with a broader brush, be less interested in data and data problems, more interested in "historical analysis", and be more frankly political and ideological in approach.

Keynes was first and foremost a good economist. His "Treatise on Money" is the high point of classical monetary theory. His role as a senior civil servant in the Treasury led to "The Economic Consequences of the Peace", his most widely read book, and places him firmly in the role of a political economist. But he is wearing two hats, and he does not confuse his role as professional economist and his role of advocate for economic policy.

Marx is a sociologist. As an economist, he is a good sociologist. "Das Capital" ranks as one of the least readable tomes ever written, and the labor theory of value may be biggest intellectual bust of the eighteenth and nineteenth centuries. While Marx might be touted as the forerunner of Fabian (labor union) socialism, the welfare state, and Leninist, Stalinist, Maoist, and later Soviet "Communism", none of these systems actually contain much that Marx actually wrote about economics, and what they did try to adhere to was catastrophic. I'm not sure Marx even qualifies under the heading of "political economy", much less economics.

The "Austrian School" usually identified with von Mises and Hayek, on the other hand, is a cogent presentation of a school of political economy. It also has a severe streak of rejectionism of quantitative methods, so it becomes hard to judge it as economics. It seems impervious failed predictions.

So IMHO Hayek is a pure political economist, Marx is neither an economist nor a political economist, and Keynes is predominantly an economist. We are not comparing apples to oranges, we are looking at fruit salad.

Well, they are just your opinions. Otherwise, I'd have to spend the entire night pointing out intellectual dishonesty. For whatever reason you believe someone explaining the negative implications of Government intervention in the marketplace and replying false mechanisms regarding prices and profits makes Hayek 'Political.' Although, he has never really advocated in favor of a particular policy, politician or program. Keynes has also advocated for a particular government action in response to a sharp economic downturn. Does this not make him 'political?' Nope, in your honest opinion, Keynes is the only good prominent economist.

Also, you have mentioned Adam Smith earlier. He was one of the principles in an astounding period of human learning called the Scottish Enlightenment during the 18th century. He was a moral philosopher, and for him moral philosophy encompass all of the information which had to do with human behavior. He was deeply concerned about the poor in society and was constantly figuring out how to raise the estates of the least among us. In the Wealth of Nations, he records centuries of data which shows empirically, the way to help the least among us is by allowing commerce. Free Trade, Free Migration, Limited Government. But nope, John M. Keynes is the first and foremost good economist.

This is generally why I do not take these sort of things seriously. One side, be it Marxist or Keynesian, waste their time arguing why their figures are so great, while the other side waste their time arguing why he is not. It's essentially pointless. Neither said successfully makes a good case about why their economist is 'brilliant.' It's very stupid and probably worse than listening to snot-nosed teenagers argue over which musical artist is better.

Given my framework above, I agree with you. From an economic viewpoint it has been Keynesian theory vs a witches' brew of self-serving claptrap from bankers caught with their assets exposed, simplistic monetarist theories (inflation scares), and political opportunism. We have not had an intellectual debate since the 30's where one side (anti-Keynesians, A & A's "expansionary austerity", and R & R's "debt/growth inflection point") has so dramatically collapsed. One side has triumphed but cannot seem to change public policy one iota and the other seems to not be able to make a consistent coherent statement of policy.

The Austrians have in one sense done pretty well. Because they don't like data, they make no predictions that can discredit them.

If by 'they don't like data,' you are saying that we effectively scratch the surface to look at the effects beyond the data, then you are right. If we take all data at face value, then all is truly right with the economy. Unfortunately, life isn't so simple.

By being purists, they insure that no policy actually implemented can be viewed as a fair trial of their prescriptions. If we won't outlaw unions, abolish the minimum wage, end unemployment compensation and welfare (all necessary to "free up" labor markets so wages may fall sufficiently to achieve full employment), return to the gold standard, abolish central banks, and immediately balance the federal budget, they claim we simply fail because we did not go far enough. Being ideologically pure means never having to say you are sorry (or that you were mistaken!), a position that avoids all responsibility.

Once you've given into a moral hazard, it is very difficult to stop. Austrians realise this, which is why we generally draw the line at the first attempt at a government handout. And if we fail, it's not because we haven't gone far enough. Nothing we have advocated as really been implemented. Although, I have noticed a trend when something does go wrong it is usually the fault of a free market or too lax regulation.

 

[Kimura]

You've missed the point. I am referring to a different type of War and how it attributes to the type of inflation we are discussing. The type of inflation which involves competitive devaluation: A Currency War. And the object of a currency war is to lose. The loser gets to sell a ton of exports. The winner gets stuck with massive inflation, and in some cases, hyperinflation.

Argentina engaged in one with Brazil during the 1980's. Mexico engaged with with United States during the late 70's & 80's. Venezuela is starting to look like the first casualty from the Global Currency War. It's really possible for any country to experience a period of hyper inflation. All that requires is some form of conflict. And the US currency war with China, Korea, Japan, Venezuela and others. That's a rather large conflict. But it all stems on a race to the bottom, and I believe the United States is going to win.

Currency wars are a myth and make zero sense. It&#8217;s largely theoretical nonsense. In order for any intentional devaluation to work, the country in question would have to increase its inflation target, since importing real goods and services would become increasing more expensive. The equity markets tell us a different story as well.

Keynes was wrong about couple things and yet, here you are. A cheerleader for his school of thought. Dean Baker and I agree about many things regarding the roles up to the 2007 Financial Crisis. Unfortunately, that is all we agree on. I don't believe Krugman understood macro, but I like him. He is a funny guy.

I'm not a Keynesian, but he opened to the door for many concepts about investment, employment, and savings which have helped move us closer to a better understanding.

It's probably better to show you what I mean. Do you have a financial times subscription?

Data shift to lift US economy 3% - FT.com

Yes, I do.

If that is the case, there is virtually no need for banks. Period. Bond sales provide interest-earning alternatives to that of reserves. Whether they are sold by the Fed or the Treasury, the result doesn't change. If the banking system has excess reserves, the overnight interbank lending rate falls below the target rate, thus triggering bond sales.

Banks lend to credit-worthy borrowers, creating deposits while holding the debt obligations of the borrowers. If banks demand reserves, they go to the overnight interbank market or the central bank discount window to get these reserves. If the system as a whole is short, upward pressure on the overnight rate sends signals to the central bank that it needs to supply reserves. During the financial crisis, demand for excess reserves grew and the Fed was able to accommodate that demand. The entire process has been inflationary, and still will be inflationary whether we forgo the middle man and rid ourselves of bonds or not.

Incorrect, cart before horse.

In the beginning.....

Just kidding.

First of all, the FED &#8211; or any other central bank &#8211; cannot control the supply of money. Monetary targeting went of the window in the 1980s, it has zero credibility as a policy instrument. Monetary policy is achieved by the FED through setting the the short-term interest rate through controlling liquidity in overnight cash markets.

All of the commercial banks have a reserve account over at the Federal Reserve. These reserves are utilized on a daily basis to guarantee that all payments and checks will clear on a daily basis.

For example, in the United States and Japan, these reserves have received a zero return. Most banks will attempt to lend out excess reserves to other banks which may require them due to a lack of reserves. As I&#8217;m sure you&#8217;re aware, we call this the interbank market, which will drive interest rates lower, since any type of return is preferable to zero. In the event the FED let this continue unabated, it wouldn&#8217;t be able to control monetary policy.

The FED controls the target interest rate by managing the liquidity in reserves. If the FED thinks that the banks believe their reserves to be excessive on any given day, it will drain those reserves out of the banking system by offering government bonds. The function of a government bond, operationally, is to provide the FED with ability relieve any pressure on the target interest rate. Obviously, the function of bonds is to provide the FED with a reserve drain mechanism; it&#8217;s not to lend the government money.

By the way, bank reserves aren't inflationary whatsoever, but that's a different animal.

And deficits are not necessarily a prerequisite for the creation of savings. This assumes that the private sector can save just as much or just as quickly as the government can rack up debt, which is not the case. Increasing true in the case of Japan.

The government, through deficits, is the only agent which can provide the non-government sector with net financial assets. The non-government sector cannot accrue financial assets without total deficits of an equal amount by the government.

Let&#8217;s say, for example, the foreign sector balance is zero (foreign trade). A government deficit must equal, down to the last penny, an increase in the net financial assets of the domestic private sector. Also, if the government were to spend a zero balance, a foreign sector deficit (current account surplus) is equal to a surplus in the domestic private sector. As a matter of basic accounting, all sectors cannot simultaneously run a surplus. There can&#8217;t be an influx of currency into all sectors, at least one must contain a negative balance. If the foreign sector is &#8220;balanced&#8221;, it will become impossible for the domestic private sector to net save (accrue financial assets) unless the government sector runs a deficit. If we don&#8217;t have a government deficit, we won&#8217;t have net private saving. Period.

1. Monetising the debt as been around for much longer than the 20th century. It's not new. In fact, it's been around since the founding era. And technically, we are still monetising debt. That's what the Fed does whenever it engages in open market operations. The financial technique as been with us. It has always been with us. And it will continue to be with us, until some crazy economist comes up with a newer and more fabulous way of distorting the marketplace.

2. 'Printing money' is term usually synonymous with the term 'newly minted money,' which was used directly used for Government Finances. 'Money creation' involves the purchase of financial assets. What exactly is the difference? None as far as I can tell. Both of these techniques involves the physical creation of a medium of exchange. Neither of these things necessarily adds to the aggregate money supply. Honestly, there really isn't much of a difference, if any at all. It's just all a matter of technicalities so people can be so hard up on the term. I dislike being professional when I'm outside work.

And most people should already know that the FED doesn't actually have to print money to purchase government debt. These days, it just types the money into existence. The Federal Reserve Act prohibited the Fed from buying debt directly from the Government. It just goes into the secondary market to purchase these treasuries, eliminated the supply of treasuries in the marketplace. These treasuries no longer exist, but they exist on the Fed's balance sheet and one day (most days actually), the Treasury has to pay the Fed back.

When we were on the gold standard, the US Treasury would print up certificates to buy gold from the gold mines. These mining companies would deliver the gold to the government and Uncle Sam would cut a check to the miners. The brand new money would end up at the FED as deposits and have the effect of increasing the money supply. This bullshit description continues to this day even though the federal government cannot monetize through FED purchases.

The US isn&#8217;t dependent on debt being sold to fund its spending. The US government isn&#8217;t constrained in its ability to spend. It&#8217;s been this way since Nixon closed the gold window. This officially removed any constraints. For some reason, our genius leaders in DC decided to keep the retarded operating structure of the gold standard, such as issuing bonds, even though they are no longer operationally needed.

There is no such thing as debt monetization under our fiat system. We have to view this from the consolidated government model: the relationship between the Treasury and FED. You're right, it's a matter of crediting commercial bank accounts via keystrokes. The Treasury spends base money into existence while the FED loans base money into existence.

On a side note, I read the Ascent of Money by Niall Ferguson. I thought it was a good read.

 

[EdwardBaiamonte]

Keynes was first and foremost a good economist. .

yes indeed a great economist!! He has his shot with FDR and here's the quote:

"But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads. The object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."

Its sounds a lot like BO's stimulus doesn't it? Let's hope Keynesian economics doesn't end in another world war!


Keynes: The 15 hour work week

"For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us! " jm Keynes

 

[jasonnfree]

Keynes was first and foremost a good economist. .

yes indeed a great economist!! He has his shot with FDR and here's the quote:

"But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads. The object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."

Its sounds a lot like BO's stimulus doesn't it? Let's hope Keynesian economics doesn't end in another world war!


Keynes: The 15 hour work week

"For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us! " jm Keynes

Ed, I've seen productivity increase so much in my lifetime, I think we should be working shorter work weeks. Where is the rewards for america being the most productive country in the world if people are working much longer hours and don't have the long vacations and national health care that some european countries have? Maybe not 15 hour work weeks, maybe 35 hours? Spend more time with family, maybe time to read a book. Not just work work work.

 

[AmazonTania]

Keynes was first and foremost a good economist. .

yes indeed a great economist!! He has his shot with FDR and here's the quote:

"But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads. The object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."

Its sounds a lot like BO's stimulus doesn't it? Let's hope Keynesian economics doesn't end in another world war!


Keynes: The 15 hour work week

"For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us! " jm Keynes

Ed, I've seen productivity increase so much in my lifetime, I think we should be working shorter work weeks. Where is the rewards for america being the most productive country in the world if people are working much longer hours and don't have the long vacations and national health care that some european countries have? Maybe not 15 hour work weeks, maybe 35 hours? Spend more time with family, maybe time to read a book. Not just work work work.

The average employee works 34.5 hours a week. Is that good enough for you?