- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
The problem with this is that it isn't relevant. (probably because you forgot the conversation already) The issue was my assertion about GM production being included in the GDP. You jumped in, lied and said GM production isn't included in the GDP, then started some idiotic preaching about the GDI.
Oh proof? OF COURSE!!!!!!!!!!!!!!!!!!!!!
Looks like you still don't understand how GDP is calculated. If GM sells its production for less than its input factors (wage, parts, etc.), then according to the production approach, all the value of its production would have been more than cancelled by the intermediate inputs that have to be subtracted.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
2. Everyone was warning of a housing bubble.
Talk about lies. Everyone??? That must be why the housing price kept going up, right?
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Government regulations specifically requiring rating by these 3 agencies for many bond instruments.
Really? Link them.
Are you that clueless? Do I have to link "1+1=2" for you?
Oh, wait, I forgot, you don't even know what GDP is consisted of!
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
I'll bring it up again.
In late 1982 the most vocal and famous Austrian economist said the bond market was about to crash. His reasons were well established fundamentals of Austrian theory. They are the same fundamentals that continue to be parroted today.
Starting in early 1983 the bond market experienced a 30-year bull run.
Reality, are you simply too scared to discuss this?
Gotta love that silence!
I already addressed that issue many posts back. Looks like I have to address it again:
1. Rothbard was not the most famous Austrian in 1982 (or today) by any stretch of imagination. Your giving him the title only shows your complete ignorance about men like Mises and Hayek. The Nobel prize winning Hayek was still alive in 1982.
2. Rothbard was criticizing Reaganomics, something I doubt you are a fan of. He was saying Reagonomics government borrowing to spend and cut taxes would lead to bond market collapse . . . a position that many on the left actually are sympathetic to, even today!
3. As I already brought up in my previous reply on the subject, what prevented massive government from collapsing the bond market was China/India. The foreign export economies bought up massive amount of US government bonds starting in the 80's. We may well soon be finding out what happens when China, Japan and India reduce their appetite for US government bonds.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Those were government sanctioned rating agencies whose ratings exculpate the fund managers.
They were? How were they government sanctioned?
Government regulations specifically requiring rating by these 3 agencies for many bond instruments.iwog says
Krugman variously advocated housing bubble, then denied having advocated, then taking credit for having advocated. It's all over the map.
None of this matters. You said Austrians were the only ones who saw the bubble. This claim is a lie.
I said Austrians were the only school of economists that systematically warned about the housing bubble. Krugman was only one Keynesian, and his warning in mid 2005 was fairly late anyway compared to the Austrians, and most Keynesians didn't even get it then.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Remember your crash course on GDP? It's amazing after having posted dozens of charts involving GDP, you didn't know how GDP is counted. Goes to show that you never really had any education in economics.
All I remember is you pretending the GDP was the GDI. You looked really stupid.
That's more than stupid, also goes to show you don't understand basic concepts like GDP or GDI. The BLS calculates GDP two ways: expenditure method and income method. The minute difference between the two is called Statistical Discrepancy, i.e. noise in data gathering.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
I asked specifically which investments and you replied by restating your earlier post with all generalities. Care to try again? Give me one example of something Granny bought because rates were so low and she was chasing higher yields. And that focused money into the housing bubble.
Are you so retarded as not to know that's what people do when faced with inadequate cash flow from interest income? How hard is it for you to understand people buy triple-A rated bonds when savings interest is too low.
Again--you're wrong. If I gave you $1MM and asked you if you'd rather invest it in an investment that after 3 years will yield $1.02MM 100% of the time or an investment that will yield $0.00 80% of the time and $1.1MM 20% of the time, which would you choose?
Do you even understand what "yield" means? It means return on capital, not return OF capital. Since when was AAA rated bonds considered to have 80% chance of losing all capital? Those were government sanctioned rating agencies whose ratings exculpate the fund managers.
So again- is the problem the fraud, or the low rates?
Low interest rate was what pushed the savers into riskier investments than bank savings. That's the explicit purpose of low interest rate policies by the FED. Fraud was not necessary to cause losses on mortgage backed securities. In case you did not know, losses on MBS were not limited to sub-primes.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
More bullshit. See when I need something to support a point, I go to the internet and get it.
And often, you get the exact stuff to prove yourself wrong and/or utterly ignorant. Remember your crash course on GDP? It's amazing after having posted dozens of charts involving GDP, you didn't know how GDP is counted. Goes to show that you never really had any education in economics.
When you need to prove that Krugman "made all sorts of pronouncements", you just say it. You don't support it or prove it, you just pull it out of your ass and pretend you're having a discussion.
http://www.economicpolicyjournal.com/2012/05/krugmans-caught-in-lie-on-housing.html
Krugman variously advocated housing bubble, then denied having advocated, then taking credit for having advocated. It's all over the map.
Same goes with the fed bosses denying a bubble. Where's your evidence? Where are your quotes?
You're a dismal failure at supporting even the tiniest assertions.
These are big words for someone who knows next to nothing about economics and relies on string-search and incomplete reading of wikipedia entries to engage in personal attacks.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Huh? Please be more specific. What was Granny buying that allowed the money to be available for the "shadow banking system" to use? And why did the "shadow banking industry" ignore the risk?
Granny had to look for new investment vehicles when bank interest payment no longer paid for her expenses. The shadow banking industry papered over the risk by getting the AAA ratings from the government sanctioned rating agencies. Those government sanctioned ratings carry exculpating power for fund managers, should there be law suits.
Again I ask--was the cause improper understanding of risk or low interest rates?
Artificially low interest rates was the reason why the savers were pushed to the slice-and-dice shops.
That's not really true. Liar loans were well known at the time.
"No income verification" loans performed reasonably well while the housing boom continued. So the "empiricist" data was that they were just fine. After the collapse came, lack of down payment and lack of owner equity still correlated better with foreclosures than whether there was income verifications.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
That is one of the most ridiculous statements I have seen in a while... Your contention is that savers require a certain yield on their savings and will invest in whatever gives them that return--regardless of risk?? And regardless of current borrowing costs?
That's not what I said at all. A traditional way of extremely conservative saving was laddering CD's. Someone with $1mil in savings could get $60k a year in a 6% CD interest rate environment, to pay for his/her daily expenses in retirement. However, when that rate was cut to 3% or below, the retiree had to scramble to find something else that yielded enough return to pay for his/her bills. That's the genesis of the money pool that became available for the shadow banking system for lending to mortgage originators. If not for the low bank interest rate mandated by the FED, that money would be out there seeking returns while exposed to risks of one kind or another.
The only reason that these loans were made was because the risk was not known to investors. Because of the fraud in the system. And therefore, that is the cause. Not low interest rates.
Fraud and miscalculations became obvious only in hindsight. At the time, most people were looking at the "empiricist" data that real estate prices never declined nation-wide, so it was alleged. So risk was allegedly mitigated by spreading out the lending pool far and wide.
BTW, later on, when the defaults came, the data best correlated to default was lack of down payment, not whether the borrower had proved his/her income.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
That's two years after the guy advocated a housing bubble!
Who cares. The point is you lied and I proved it.
No I didn't. While Krugman made all sorts of pronoucements (so his followers can always find something to quote later), the Keynesians were not at all systematically warning about the housing bubble. The FED bosses kept insisting on there wasn't a housing bubble as late as 2006-07!
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
That's why it's so ominous to see signs that America's housing market, like the stock market at the end of the last decade, is approaching the final, feverish stages of a speculative bubble.
~ Paul Krugman, May 27th, 2005
http://www.nytimes.com/2005/05/27/opinion/27krugman.html?_r=0
That's two years after the guy advocated a housing bubble!
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Exactly!! It was the low interest rates of adjustable loans. It had nothing to do with the fact that lenders had no standards and would lend almost any amount to people without money or jobs.
Lending money wasn't exactly magic. There was this much money waiting to be lent because the savers couldn't get satisfactory interest rate at bank saving accounts. So the mortgage brokers and underwriters had to keep lowering lending standards competitively until the money quota was lent out.
Regulations couldn't possibly have prevented that.
Of course it could, and eventually it did. By raising interest rate, savers would stop putting the money into sub-prime lending pools looking for higher yield.
Neither could regulations have done anything about AAA rated mortgage bond fraud.
Again it could. By simply removing the oligopoly status of the 3 rating agencies, other rating agencies would be able to compete, and the ratings from the 3 wouldn't have the accounting privilege that enabled their rating to be passed around like carved in stone (when it was really trash).
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
The housing bubble and crash has adversely affected the minority families far greater, in percentage terms
Perhaps, but what does that have to do with this (your original) statement:
Yes. It's indicative that they joined the party late. If the government had shutdown the racket in 2005-06, it would have helped the late-comers, but would have been political suicide for keeping the late-comers out when all one could see was the early birds getting all the riches in the real estate boom!
Policing mortgage origination at that time would have resulted in preventing minorities from joining the real estate boom
Which is complete bullshit. The effects of the crash are completely different than the reasons for the bubble.
Do you not know that the marginal neighborhoods in the innercities went up the most at the final leg of the housing bubble? What do you think was the demographic of those neighborhoods?
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Austrian economists were more or less the only ones loudly warning against the housing bubble
I'm sure that's the way you remember it.
All right, I should have said, the Austrian economists were the only school of economists that were systematically out there loudly warning against the housing bubble.
Of course, some people off the street and didn't even know how GDP is calculated may have been warning against bubble too, but that's not exactly a school of economic thought, not that I'm against "gut feelings." Austrians are actually one of the few economists who acknowledge that successful traders and businessmen are better future predictors than academic economists.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Homeowners vote Republican, so Rove saw a need to create more homeowners.
It was a bipartisan effort. Don't tell me Democrats were against homeownership. Democrats sat at the head of FNM and FRE; banksters that donate primarily to Democrats were all too happy to blow the bubble.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Policing mortgage origination at that time would have resulted in preventing minorities from joining the real estate boom.
Bullshit. The market moved up massively (and crashed massively) in lily-white sundown communities.
The housing bubble and crash has adversely affected the minority families far greater, in percentage terms. They were simply late to the game, probably due to the relatively low income and low wealth station that they had been to begin with. The cycles created by the money mob literally does transfer wealth from the middle class and lower middle class to the wealthy elite.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Exactly. We all know it had nothing to do with lack of regulation, greed, and AAA ratings on total crap. It was all the fed's fault.
You have this funny misconception that regulations always work to mitigate human mistakes. The reality was that the top monetary regulator, Greenspan, was actually encouraging people to take on adjustable rate loans instead of fixed loans in 2005-06, at Congressional hearings, no less. Even FNM and FRE expanded sub-prime lending in 2007! due to Congressional prodding! The bond rating fiasco was once again the result government create oligopoly giving the 3 government-sanctioned rating agencies a market position to sell the ratings as a marketing tool instead of having to earn their reputations from consumers.
The various regulations simply worked in concert to exacerbate the cycle, instead of restraining it. As for greed, that's just being human; don't tell me your being landlord having nothing to do with greed.
- On 12 May 2013
in
krugman-in-wonderland - Chutzpah Economics,
Reality said:
bullshit, plus governments perform the critical task of redistributing wealth from those who have it to those who do not.
Austrians willfully misunderstand this basic feature of reality, that without redistribution the rich would end up owning everything, since interest never sleeps, and money is power.
In case it's not obvious, the rich leverage far more than the poor! Interest is what the rich pay in order to generate higher return on borrowed money.
The primary volume of government redistribution is from the middle class to the ultra rich. The ultra rich are the ones with politicians in their pockets.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
This was because the Bush Administration had decided to no longer police loan mortgage origination, and the Fed was either clueless about it or complicit in the Market-knows-best deregulation.
Policing mortgage origination at that time would have resulted in preventing minorities from joining the real estate boom. The administration encouraged minority to buy homes in 2005 just like the previous administration encouraged minorities to buy stocks in 1998. Politicians are usually behind the curve.
That ideological Austrian clowns don't understand this basic feature of reality is another strike against them, like they need any more.
Austrian economists were more or less the only ones loudly warning against the housing bubble, in a sea of clown "empiricists" who claimed nation-wide price drop could never happen because it never happened before (in the data they were showing, which happened to be post-WWII only)! Now the clowns who believe SP500 companies generate 73% of GDP blame the Austrians. Go figure. You wonder why the politicians are conditioned to be behind curve.
- On 12 May 2013
in
The spectacular failure of Austrian economics,
Reality said:
Krugman was absolutely correct. How can you blame interest rates as being a more important factor in the housing bubble and crash than free money given to people without credit and jobs???
Low interest rates started the bull market in real estate. Billions of fraudulent dollars dumped into the market finished it.
The "free money" was not really free, but fractional-reserve leveraged from worldwide savings chasing yield when the FED denied proper market return in bank saving accounts for those savings. The yield chasing was what led to sub-prime lending, which had higher yield.
- On 12 May 2013
in
Austrian test,
Reality said:
Do you realize what you just wrote is put down with far more certainty than any study (usually with statistical inference) warrant?
Do you realize that Austrian methodology, Praxeology, does not recognize empiricism as a valid means of discovering truth?
Not in the general sense at all. Praxeology restricts itself to only where outcome is determined by purposeful human action. It does not at all apply to where results are not influenced by human deliberation.
A classic example of Praxeology is: if you use trading data from 100 days of stock price data to come up with a 99-order polynomial to perfect fit the data, Praxeology would tell you the prediction it makes for the 101th day is likely to be wrong! despite your data collection. Why? because the trading on the 101th day is to be determined by purposeful action of human beings on that day, not blackbox pre-determined outcome of the previous trading sessions.
Another classic example: Never having had a nation wide real estate price decline in any previous years in the data collected would tell an empericist, a Keynesian central planner with econometrician leaning, and a trader relying on Black-Scholtz box to bet that it would never happen. Whereas Praxeology would tell you that none of that data matters because when everyone leans the same way, the bubble will be formed and it will collapse! Because real estate price is not a natural science phenomenon but result of purposeful human decision making when bidding on prices!
As an Austrian, you shouldn't care that any study didn't show those things with certainly.
That just goes to show that you don't understand what Austrian economics or Praxeology is. Praxeology does not at all apply to outcomes that are not influenced by conscience and deliberate human decision making.
You are once again failing Logic 101: A may lead to B, does not mean A necessarily leads to B.
I haven't had anybody say to me "I have a personal relationship with Christ, which is why I am a Zen Buddhist."
No, what you said is the equivalent of accusing everyone who said "I have a personal relationship with Christ" as a fake Christian.
This is an expression of empirical knowledge, something von Mises doesn't believe is valuable to determining truths generally and in economics in particular.
Then you don't know Ludwig von Mises either! If you have read his "Human Action," you'd know that he is very much a secular humanist well grounded in scientific knowledge and reality and scientific method for natural sciences. It is the real life observations that convinced him the futility of trying to model purposeful human action as pre-determined mathematical models. The human mind changes, and for profit motives the human is prone to front-run any recognized mathematical model. That observation is actually far better grounded in reality than any faith in the power of any simple mathematical models to predict human behavior.
- On 12 May 2013
in
Austrian test,
Reality said:
Oh reality, I said "I corrected your text in bold". I think it was painfully obvious to any reader that I changed your quote.
That's not nearly enough. You put your own utter ignorance about economics in the quotation body with attribution to me! with bolding for emphasis! Someone else can easily quote that again without quoting your text below. Don't ever do that again.
Economic value being subjective is one of the first things you will learn in Economics 101.
Rothbard might say so, but that don't make it so.
You just keep banging the "I'm stupid" button. Go read an Economics 101 text book. Rothbard was born way too late to take credit for discovering the subjectivity of value.
The Subjective Theory of value is ONE of the theories on how to determine prices.
That's utterly lunacy. Economic value subjectivity came long before price discovery, long before commodity currency existed.
One problem with it is: The Prices effect the decisions, but the decisions effect the price. Where then did the first price come from?
What the heck are you talking about? Price is simply the relative valuation of a good to what is considered currency. "First price"? in what? in Whampoms or in a newly sanctioned government fiat?
Please do take Economics 101 before wasting everyone's time on debating things that you know nothing about!
Ah, more BS.
Every libertarian says this when challenged. The other variant of this is "Read Hazlitt's 'Economics in One Lesson'".
If you keep reading people telling you to read Economics 101, perhaps you are indeed just utterly ignorant. Economics 101 is not advocacy of libertarianism by any stretch of imagination. In fact, it's a textbook getting the student on track to be brainwashed by mainstream Keynesianism in Economics 102 (MacroEcon). However, it does introduce some basic economic concepts, for which you are obviously lacking.
Are you really that brainwashed by statism?
Another Laissez-Faire true believer(tm) "Code Phrase". This is an attempt to reframe the Argument from the specific to the general (practically metaphysical) when things aren't going so well when discussing the specifics.
The subject under discussion is praxeology, it is a scientific methodology or not (as claimed in the video). Statism doesn't play into it.
The sentence was specifically addressing your contention that the pencil example illustrating division of labor in the market place was somehow propaganda! The validity of the pencil example does not rely on Austrian economics or praxeology. The pencil example simply illustrated what Adam Smith called the "invisible hand"! Apparently, you consider that propaganda. That proves you are a hopeless statist who believes nothing can happen without central planning. In other words, you are about 240 years out of date in economic thinking, and still believe in "the divine right of the King/government/central-planner."
- On 11 May 2013
in
Austrian test,
Reality said:
Comparing the "Truths" of an assertion to Physics is a Red Flag that "Bullshit may be Coming". See the Sokal Hoax, or any statement by Deepak Chopra.
You are once again failing Logic 101: A may lead to B, does not mean A necessarily leads to B.
- On 11 May 2013
in
Austrian test,
Reality said:
Yes, Austrians are even less science and reality-based than most other schools of economic thought. They are also much more brazen in their predictions.
That's not true at all. Austrians focus on the economic decision making process and logic. Whereas Keynesians and Econometricians tend to focus on the noise of data gathering, torturing the data to present a certain politically expedient target number. Just look at the convenient methodological revisions that has always taken place when the tweaking is favorable for the policy makers.
By the way, at the link above you'll see that most of the conversation from "CNC" above comes verbatim from arguments made by Austrians.
Much of it were bits and pieces taken out of original context.
This is why, again, people call Libertarian thinking, of which Austrianism is a major faction of, Marxism of the Right. The Dogma trumps empirical experience.
This is once again complete nonsense. Marxism is very much into "Scientific Socialism" extremely obsessed with validating in the field by the numbers! . . . which as in any social science is very dependent on which partisans are collecting and cooking the numbers!