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Old 09-25-2009, 04:03 PM  
Taco John Taco John is offline
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Ron Paul takes on Fed Defenders at Bloomberg

Ron Paul is great! He handles these interviews so well, and no matter how hard they try to out flank him, he constantly gets his point across in a way that anyone can understand.

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Old 09-25-2009, 04:07 PM   #2
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I love how he just spanks them at the end. The guy was gracious and acknowledged it.
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Old 09-25-2009, 04:34 PM   #3
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Old 09-25-2009, 10:19 PM   #4
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The problem Ron Paul and the Austrian theory has, it can't explain 19th century recessions.

If the government causes all recessions since 1913 with monetary policy, how do 19th century recessions take place? If government spending is the root of all evil, and laissez-faire and the gold standard will solve everything, why were recessions both longer and deeper in the 19th century than in the 20th?

Second, Paul ignores some of the problems of gold. First of all, gold supply is totally unrealated to GDP. If economic growth outstrips the amount of new gold removed from mines, you end up with deflation. If the economy contracts, and the amount of gold remain's static, then you have inflation. What happens if we discover a new industrial use for gold? Now your money supply is totally and rapidly out of wack. Commodity prices aren't really stable. Gold has been relatively stable, simply because its pretty much a USELESS item whose only value is its shiny, and people like to look at it.

Any attempt to maintain a relationship between goods produced and gold supply, simply gives you another body regulating the money supply (the fed bank by another name).

The reality is, both Austrian and mainstream economics have internally conflicting premises.

The Austrians believe in the "irrational" consumer, who makes purchases based on all kind of non-beneficial psychological reasons. I actually agree with the Austrians on this point. However, if consumers regularly make irrational economic choices, why is it now impossible for government action to influence more "rational" behavior? Yet, among austrians, ANY government action is always malinvestment (as an article of faith). In short, they switch to a "rational consumer" presumption for purposes of analyzing government intervention in the market.

Conversely, mainstream economics, which believes in the "rational consumer", somehow switches to the psychologically driven irrational consumer theory when it comes to FIXING an economic downturn through government stimulus. Because if consumers are generally so rational that you can use mathmatics to accurately describe real world behavior based on the rational consumer presumption, then how could the government improve upon the choices made by the consumer?

Unlike the Austrians, I do think that the mainstream mathmatical models based on the rational consumer theory have value. Rational behavior does have a sort of darwinian selection working in its favor, thus, even though psychology can drives choices which fly in all kinds of random directions, rational consumer mathmatics are an almost gravatic influance toward which economic behaviors tend to be pulled by market forces.

The problem is, mainstream economics often don't accept the rational consumer model's limits and think they are accurate projections of real world behavior.

Think of it sort of like a pinball machine: at any given time that ball can be moving in all kinds of directions because there are bumpers, flippers, and targets. But, "rational consumer" influence is sort of like the tilt of the table. Over time, the ball tends to flow in the direction gravity pulls it. But, accurately modelling the tilt of the table won't tell you which way the ball is going at any specific point in time.
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Old 09-25-2009, 10:23 PM   #5
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Don't ask them about history, it's not very convenient for them to answer.

I think I've asked them to explain pre-Fed crashes probably ten times with no reply.
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Old 09-25-2009, 11:59 PM   #6
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Originally Posted by JohnnyV13 View Post
The problem Ron Paul and the Austrian theory has, it can't explain 19th century recessions.
Sure it can. You start your post with a premise that is absolutely wrong. In any market, prudence can be replaced by overhyped expectations, and greed sets in - causing overinvestment. And when a politically motivated central bank tied at the hip of both the congressional and executive branches over extends the credit available during a boom, the result is an exaggeration of the booms, and hence an exaggeration of the bust.

Quote:
Second, Paul ignores some of the problems of gold. First of all, gold supply is totally unrealated to GDP. If economic growth outstrips the amount of new gold removed from mines, you end up with deflation. If the economy contracts, and the amount of gold remain's static, then you have inflation. What happens if we discover a new industrial use for gold? Now your money supply is totally and rapidly out of wack. Commodity prices aren't really stable. Gold has been relatively stable, simply because its pretty much a USELESS item whose only value is its shiny, and people like to look at it.

Just wrong... Gold is not the only precious metal available. And the point about discovering a new industrial use for gold only underscores how valuable it is. A new industrial use increases the value of the gold. Gold isn't valuable just because it's shiny. It's valuable because there are industrial uses for it, especially in the electronics age, and will only increase in value as technology finds more uses for it because of its anti-oxidative qualities and use as an electrical conductor.

Gold will be around long after the dollar, and certainly long after the Fed.. It's the most successful standard of money in the history of earth.
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Old 09-26-2009, 12:53 AM   #7
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Originally Posted by Taco John View Post
Sure it can. You start your post with a premise that is absolutely wrong. In any market, prudence can be replaced by overhyped expectations, and greed sets in - causing overinvestment. And when a politically motivated central bank tied at the hip of both the congressional and executive branches over extends the credit available during a boom, the result is an exaggeration of the booms, and hence an exaggeration of the bust.




Just wrong... Gold is not the only precious metal available. And the point about discovering a new industrial use for gold only underscores how valuable it is. A new industrial use increases the value of the gold. Gold isn't valuable just because it's shiny. It's valuable because there are industrial uses for it, especially in the electronics age, and will only increase in value as technology finds more uses for it because of its anti-oxidative qualities and use as an electrical conductor.

Gold will be around long after the dollar, and certainly long after the Fed.. It's the most successful standard of money in the history of earth.
The fact that gold would become rapidly more valuable if you find a new industrial use means you'd have a catastrophic shrinkage of the money supply.

Why? Because, suddenly, industry would consume much more gold, leaving less to back currency. You'd have rapid deflation driven simply by discovering a new use for gold. And, you'd have no way to manage the problem if Ron Paul has his way.

Have you ever read about how WW2 prison camps used cigarettes for currency? They had frequent monetary crises because after every Red Cross visit you'd have a massive expansion of the money supply, and rapid dwindling because people consumed the cigarettes.

And, I notice you didn't even address the point that the supply of gold is totally unrelated to a society's productivity.

You really need to study Roman history. The primary reason behind Rome's economic collapse was simple lack of enough physical currency to run the empire. And, Rome's currency problem lasted over 100 years.

Rome bought way too many foreign goods, which meant gold flowed out of Rome. The currency situation got so bad, that Rome couldn't pay its soldiers in coin, instead they starting providing land in return for military service.

Now the problem was, that if you were going to gain value from a land grant, you needed to farm it, which prevented Roman legions from the frequent training needed to perform the complex tactics required by the Marian legion. Hence, Roman military effectiveness collapsed, and by the end of the empire, Rome had to use tactics similar to the Germanic tribes.

One of the advantages of "fiat money" is its only value is in buying something produced by the issuing economy. You will never run into a roman style currency issue, because, ultimately SOMEONE HAS TO SPEND THAT CURRENCY in the issuing country. Gold doesn't have a similary "homing" effect. Once exported, it might never come back and you could have a catastrophic collapse in the money supply no matter how many goods your economy produces.
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Old 09-26-2009, 12:57 AM   #8
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Originally Posted by JohnnyV13 View Post
The fact that gold would become rapidly more valuable if you find a new industrial use means you'd have a catastrophic shrinkage of the money supply.

Why? Because, suddenly, industry would consume much more gold, leaving less to back currency. You'd have rapid deflation driven simply by discovering a new use for gold. And, you'd have no way to manage the problem if Ron Paul has his way.

Have you ever read about how WW2 prison camps used cigarettes for currency? They had frequent monetary crises because after every Red Cross visit you'd have a massive expansion of the money supply, and rapid dwindling because people consumed the cigarettes.

And, I notice you didn't even address the point that the supply of gold is totally unrelated to a society's productivity.

You really need to study Roman history. The primary reason behind Rome's economic collapse was simple lack of enough physical currency to run the empire.

Rome bought way too many foreign goods, which meant gold flowed out of Rome. The currency situation got so bad, that Rome couldn't pay its soldiers in coin, instead they starting providing land in return for military service.

Now the problem was, that if you were going to gain value from a land grant, you needed to farm it, which prevented Roman legions from the frequent training needed to perform the complex tactics required by the Marian legion. Hence, Roman military effectiveness collapsed, and by the end of the empire, Rome had to use tactics similar to the Germanic tribes.

One of the advantages of "fiat money" is its only value is in buying something produced by the issuing economy. You will never run into a roman style currency issue, because, ultimately SOMEONE HAS TO SPEND THAT CURRENCY in the issuing country. Gold doesn't have a similary "homing" effect. Once exported, it might never come back and you could have a catastrophic collapse in the money supply no matter how many goods your economy produces.

And likewise, have you read what happens when you inflate the paper supply?
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Old 09-26-2009, 01:05 AM   #9
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Sure it can. You start your post with a premise that is absolutely wrong. In any market, prudence can be replaced by overhyped expectations, and greed sets in - causing overinvestment. And when a politically motivated central bank tied at the hip of both the congressional and executive branches over extends the credit available during a boom, the result is an exaggeration of the booms, and hence an exaggeration of the bust.

Then why were 19th century recessions deeper (more loss as a percentage of GDP) and longer than 20th century recessions? Shouldn't the 20th century recessions have been worse due to the influence of the fed?

I once posted GDP data going back to the frigg'n revolution on CP, and the 19th century recessions were clearly worse. BEP's only response was to claim "GDP isn't a valid statistic". Certainly it has its limits (because it can't tell you about dsitribution of wealth). Yet, that data clearly indicates some problems with Austrian theory.
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Old 09-26-2009, 01:13 AM   #10
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And likewise, have you read what happens when you inflate the paper supply?
Yeah. Funny how the German economy recovered (ahead of the rest of hte world) once Hitler issued credit and used it to produce munitions.

Meanwhile, the Weimar REpublic attempted laissez-faire Austria economic theory. And guess what, that government collapsed due to its terrible economy.
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Old 09-26-2009, 02:37 AM   #11
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Yeah. Funny how the German economy recovered (ahead of the rest of hte world) once Hitler issued credit and used it to produce munitions.

Your argument in favor of Keynesian economics is that it quickly raises armies for the purposes of conquering neighbors?

Is this the kind of society that you want to live in? We the people are just lug nut proles in the socialized war machine? Because that's what Keynesian economics gives you. That is the fruit of the Keynesian spirit no matter what direction you examine it from. The fruit of it is the same: death, destruction, corruption and WAR. The system has no soul. It's not tied to anything except for faith in government. And the money flows in one direction: to whoever gets to play Ceasar for this eight year cycle. Except that he's not really playing Ceasar. He's a front guy for the small factions of world players who get to take advantage of the fact that we the people are not willing to tie the money down to anything.

You will certainly best me in your knowledge of the economics of the Wiemar Republic. I don't know enough about their government structure during that time to be able to comment on it. But I would wager that a fair examination of their collapse might reveal government (either subtly or not-so-subtly) trying to manipulate the market towards their own intents, and ended up creating something entirely different and unexpected (volatile even).

Keynesian economics is empire building economics. Austrian economics is republic building economics. We are at the cross roads in history where we get to make the choice about how power is distributed in this world: a socialized empire, or a distributed republic. And these G20 summits aren't about making Iowa's economy any better. They're certainly not about making America's economy any better. We're moving in a clear direction on this question.

This split is the pit in the gut of many Americans right now. They can sense the hell that is being created for us each day as we dig ourselves deeper and deeper into debt, and government consolidates more and more and ever more power, with the clear purposes of moving that power to the central stage through mechanisms such as economic treaties that masquerade as "free trade," but filled with quote-unquote "fair trade" restrictions - which amount to levers for government to pull in order to suck money out of the system and manipulate the flow. Hopefully whoever is on each switch is honest, because they're not accountable to we the people. They're accountable to whatever Czar their purview falls beneath. And whoever that Czar answers to. And that one. And that one. On up to wherever the top is.

I must have lost the plot somewhere. You seem knowledgeable about economics, so maybe you can help me. What is the argument in favor of Keyensian economics, because I'm having a real hard time findng the charm of it.
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Old 09-26-2009, 03:25 AM   #12
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Sure it can. You start your post with a premise that is absolutely wrong. In any market, prudence can be replaced by overhyped expectations, and greed sets in - causing overinvestment. And when a politically motivated central bank tied at the hip of both the congressional and executive branches over extends the credit available during a boom, the result is an exaggeration of the booms, and hence an exaggeration of the bust.

Thank you for your concise refutation of Ron Paul's assertion that this economic collapse could not have occurred without the fed.

Since "prudence can be replaced by overhyped expectations" there is nothing in Austrian economic theory which suggests that bankers could not have become as entranced by the misapplied academic formulas behind credit default swaps (correlation formula) as they did under current financial rules.

In fact, banks world-wide applied these formulas, not just financial institutions in countries whose central banks were pumping easy credit into the real estate market.
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Old 09-26-2009, 03:37 AM   #13
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Originally Posted by JohnnyV13 View Post
Thank you for your concise refutation of Ron Paul's assertion that this economic collapse could not have occurred without the fed.


Link? I've listened to well over 200 hours of Ron Paul lectures speeches, and misc, and read nearly as much, and I haven't run across "could not have occured without the fed."

"Perpetuated by the fed..."

"Excaserbated by the fed..."

"Caused by the fed..."

"Would not have been so bad without the problems caused by fed..."


I've heard these. I don't believe I've run into "could not have occured without the fed." I could be wrong though. Maybe you've seen something that I haven't.


Quote:
Since "prudence can be replaced by overhyped expectations" there is nothing in Austrian economic theory which suggests that bankers could not have become as entranced by the misapplied academic formulas behind credit default swaps (correlation formula) as they did under current financial rules.
Nothing except for easy credit, I guess. Where do you suppose easy credit is created?
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Old 09-26-2009, 04:36 AM   #14
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I must have lost the plot somewhere. You seem knowledgeable about economics, so maybe you can help me. What is the argument in favor of Keyensian economics, because I'm having a real hard time findng the charm of it.
Sigh, I wrote a long post about Keynsian theory, the underpinnings of war, and how Keynsianism is abused by self interested politicians, but my damn computer crashed and I lost it all. I don't have the energy to rewrite it now. But, I'll get around to it sometime.

But, I will leave you with one interesting tid bit, actually both Keynsians and Austrians share a common problem when it comes to understanding human economic behavior, THEY'RE ECONOMISTS.

Sounds silly right? BUt, economists tend to presume that maximizing economic efficiency is the primary goal behind human economic behavior. This presumption is flawed.

In fact, the central driving force behind economic choices is actually biological in nature. Human being engage in economic activity with the fundamental purpose of maximizing how many genes they get into the next generation. People might not be cognitively aware of this purpose, but its the underlying psychology.

Conseqeuntly, if an economic activity increases the number of genes you successfully get into the next generation, then darwinian selection favors that behavior, EVEN IF IT CAUSES ECONOMIC ruin!

That's why you see persistent self destructive economic behavior on a regular basis. Think about how Joe Six pack with a crummy job can get laid like crazy if he goes on a drunken credit spree, even if it eventually leads to financial ruin. He might get more, and hotter, woman than if he acts prudently his entire life within a low level salary.

Its exactly like the male black widow spider who has sex with the female spider, even though she eats him afterward (to provide sustinance to her young). Darwinian selection FAVORS this behavior, even tho it leads to his death. because it maximizes how many of his genes get into the next generation (a biological concept known as inclusive fitness).
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Old 09-26-2009, 06:50 AM   #15
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Ron Paul is great! He handles these interviews so well, and no matter how hard they try to out flank him, he constantly gets his point across in a way that anyone can understand.
That was good. I'm starting to pay attention to this guy. I admit it, I didn't during the campaign and I bought into some other opinions that he was a loose cannon.
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