patrick.net

Reality says

replacing old capital structure (which has run into a wall as proven by recession) with a New Capital Structure that liberate human labor and natural resources to more productive use.

sounds pretty Marxist to me! Sign me up!

Of course, the recession happened in the aftermath of the home ATM running out of cash, starting in 2006. I haunt DeLong's site regularly trying to make him understand that, LOL.

http://research.stlouisfed.org/fred2/graph/?g=i9G

is a graph I posted for him today -- blue is YOY job growth, red is YOY consumer debt take on . . . borrowing our way to prosperity!

We don't have a supply-side problem, we have the problem that J6P -- aka Mr & Mrs Consumer -- got tapped out 5+ years ago:

http://research.stlouisfed.org/fred2/series/CMDEBT

THAT'S who hit the fucking wall, not capitalism per se.

Push a trillion dollars into the middle class's hands again, like what the housing bubble was doing 2004-2005, and things would be great again.

Reality says

The "Demand" in economic discussion is a very specific term, not just want,
but a qualified demand meeting price points. There could not have been
quantifiable qualified demand before the price point for iPhone was set.

Sure there can. Jobs goes out and asks people if they'd be willing to buy an iPhone like device at $100. Or $200. Or $300. etc.

The true demand at any price point is never known exactly. It depends on the price of substitute items as well as many, many other factors. I'm not sure what your point is--nobody invests capital without having an idea of the demand for what they are going to make.

Bellingham Bill says

Reality says

replacing old capital structure (which has run into a wall as proven by recession) with a New Capital Structure that liberate human labor and natural resources to more productive use.

sounds pretty Marxist to me! Sign me up!

Not at all Marxist. Marxism advocates a centralized economic and social structure that would put an end to future on-going creative destruction for capital. That's why the soviet car factories were still building 1950's Lada's all the way to the 1980's. That's the very antithesis of what I'm advocating here. Keynesianism is essentially a mild version of Marxism that advocates government subsidy to keep the Lada factory in business after the consumers already expressed wishes for something new.

Bellingham Bill says

We don't have a supply-side problem, we have the problem that J6P -- aka Mr & Mrs Consumer -- got tapped out 5+ years ago:

That's just another way of saying the consumers are having a hang-over from past over-consumption and debt. The solution to that is not more alcohol and more debt, but more productive jobs to pay off the debt. That requires new capital formation displacing old jobs with new more productive jobs.

Bellingham Bill says

Push a trillion dollars into the middle class's hands again, like what the housing bubble was doing 2004-2005, and things would be great again.

hmm, this policy prescription sound awefully like telling the patient suffering from hang-over to just imbibe even more alcohol as a way of solving the morning-after headache. The consumer debt would have to be paid back, causing another debt service crunch down the road. That's what the 2004-05 housing bubble (to bail out the NASDAQ bubble crash debt service burden) proved in spades.

Reality says

Corporations hording massive cash for many years is prima facie proof that there
is a lack of productive capital investment opportunity to buy into.

You suck at using latin terms. Prima facie is evidence, not proof. Using prima facie here only means the corporate cash hoards are evidence of lack of productive capital investment opportunity that are worth testing.

The way you used it here, you meant res ipsa loquitur, "it speaks for itself."

tatupu70 says

Sure there can. Jobs goes out and asks people if they'd be willing to buy an iPhone like device at $100. Or $200. Or $300. etc.

No, he did no such thing. The specs for iPhone and all other i products were shrouded in secrecy before release.

The true demand at any price point is never known exactly. It depends on the price of substitute items as well as many, many other factors. I'm not sure what your point is--nobody invests capital without having an idea of the demand for what they are going to make.

An educated guess regarding future demand is not the same as qualified demand in the market place right now.

Reality says

An educated guess regarding future demand is not the same as qualified demand
in the market place right now.

So what? We're not talking about qualified demand in the market today. That can never be quantified so it's pretty much useless. We're talking about demand. Which can easily be estimated about potential future products.

Reality says

No, he did no such thing. The specs for iPhone and all other i products were
shrouded in secrecy before release

lol. I guarantee you that Apple did market research and focus groups. Regardless, the concept that demand can be estimated before a product is released is the point. Companies spend a LOT of money doing just that.

tatupu70 says

So what? We're not talking about qualified demand in the market today. That can never be quantified so it's pretty much useless. We're talking about demand. Which can easily be estimated about potential future products.

Estimation of future existence is not the same as existing now. It can be safely estimated that your dead body will be in a coffin somewhere within the next 100 years; that does not mean it is there now.

Eventus Stultorum Magister.

http://research.stlouisfed.org/fred2/graph/?g=ibt

Vaticanus says

The Keynesian way to create demand is to break windows to sell more windows,
destroy cars to sell more cars ( see cash for clunkers),

Vaticanus says

The Austrian way to create demand is to allow people to use their land, their
labor, their resources to produce things the they can trade for other things

Other than this critique of Keynesianism being untrue, please review the link I previously posted and tell me what the graph means.

http://research.stlouisfed.org/fred2/graph/?g=ibt

If what you say about Austrians are true, and this is the best method for economic growth, then why does the red line cross the green line? Why does the slope of the blue line and and slope of the green line appear to be correlated?

Personally I prefer the growth in blue over the growth in red. But what do I know?

David1 said;" Personally I prefer the growth in blue over the growth in red. But what do I know?"

Your numbers are an illusion. You must subtract the growing national and household debt from these numbers to have any connection to reality. We are headed for a debt crisis both domestic and international.

Vaticanus says

Your numbers are an illusion. You must subtract the growing national and
household debt from these numbers to have any connection to reality. We are
headed for a debt crisis both domestic and international.

Ah. Here it is, good 'ole #1 in the Austrian playbook...
http://patrick.net/?p=1224393&c=959218#comment-959218

"The government numbers are lies"

by the way, I responded to a similar "added debt" argument from mell a few days ago, here -

http://patrick.net/?p=1224393&c=959295#comment-959295

Never got a response to that.

Reality says

political/monetary fiat, thereby preventing new capital formation from emerging
and displacing the old capital structure

Crowding out, I believe they say.

david1 says

Vaticanus says

Your numbers are an illusion. You must subtract the growing national and

household debt from these numbers to have any connection to reality. We are

headed for a debt crisis both domestic and international.

Ah. Here it is, good 'ole #1 in the Austrian playbook...

http://patrick.net/?p=1224393&c=959218#comment-959218

"The government numbers are lies"

by the way, I responded to a similar "added debt" argument from mell a few days ago, here -

http://patrick.net/?p=1224393&c=959295#comment-959295

Never got a response to that.

Absent creation of money out of thin air, there is no way that borrowed money can be paid back without an increase in productivity.

Domestic productivity in USA is not increasing faster than borrowing.

Vaticanus says

Absent creation of money out of thin air

When did we lose the ability to do this? We are not Greece.

david1 says

Vaticanus says

Absent creation of money out of thin air

When did we lose the ability to do this? We are not Greece.

Not yet, but the party is almost over.

Vaticanus says

Domestic productivity in USA is not increasing faster than borrowing.

And oh by the way, this isn't true, if we define domestic productivity as GDP.

GDP is growing at 2.5%. Federal debt is projected by the CBO to grow at 2.2% for the next ten years.

Why would the volcano blow in the future if Debt/GDP remains the same or slightly lower than the current 77%?

Why wouldn't Japan, whose debt to GDP ratio is about 200%, have high borrowing costs? The 30 year JGB is 1.62%.

Reality says

Estimation of future existence is not the same as existing now. It can be
safely estimated that your dead body will be in a coffin somewhere within the
next 100 years; that does not mean it is there now.

Horrible analogy aside, the demand is there now--it is the product that doesn't exist yet.

mell says

The S & P is higher than it should be, is that your argument?

No that is evidence. The argument is the creation of debt is a positive feedback loop. Given that 1.) SP 500 P/E ratios are lower than historical norms, 2.) Corporate earnings are at record highs.

More debt = more demand for goods and services = more earnings.

The rich did not get rich due to cronyism - they are rich due to the market - and they remain rich (and get richer) due to tax policy. The tax policy is where the cronyism lies.

david1 says

No that is evidence.

Of crony capitalism, you are mistaking corporate wealth for societal wealth. Plus, it's nonsense to measure wealth solely by the stock market.

david1 says

More debt = more demand for goods and services = more earnings.

No. Not at the amount of debt injected.

david1 says

The rich did not get rich due to cronyism - they are rich due to the market - and they remain rich (and get richer) due to tax policy.

No, they did get rich by being fist in line to receive the freshly printed money. What tax policy are you talking about. The one that is crushing the middle class? Obamacare?

mell says

Plus, it's nonsense to measure wealth solely by the stock market.

I am just using Denninger's example.

mell says

What tax policy are you talking about. The one that is crushing the middle
class? Obamacare?

LOL. The trend of towards greater income inequality began long before the Heritage Foundation had its first wet dream about obamacare.

david1 says

Vaticanus says

Domestic productivity in USA is not increasing faster than borrowing.

And oh by the way, this isn't true, if we define domestic productivity as GDP.

GDP is growing at 2.5%. Federal debt is projected by the CBO to grow at 2.2% for the next ten years.

Why would the volcano blow in the future if Debt/GDP remains the same or slightly lower than the current 77%?

Why wouldn't Japan, whose debt to GDP ratio is about 200%, have high borrowing costs? The 30 year JGB is 1.62%.

You may define productivity however you wish but "we" don't equate GDP to productivity.

No matter, that is semantics. What about inflation? What about domestic debt? Surely you must not forget those drains on productivity?

Creating money out of thin air will induce mistrust, and eventually collapse if it is abused. when you see the way the USA bullies, sets up puppet regimes, you can clearly see the abuse. those chickens are coming home to roost in the form of terrorism. Our competitors will acquire the resources such as oil supply and raw materials to destroy the petrodollar and replace it with an international currency (controlled by the banksters no doubt). Then USA = Greece. Lately we are starting to see those resources being acquired by our competitors internationally. Both militarily and economically we are in grave danger of being overthrown. The economic war between the US and her thinning list of allies and the East/BRIC nations will likely prove to be the end of Keynsian theory.

david1 says

I am just using Denninger's example.

That's a fair point, though it was only a small part of his overall considerations.

david1 says

LOL. The trend of towards greater income inequality began long before the Heritage Foundation had its first wet dream about obamacare.

Again, be my guest and fight to change the taxes as you would like to see them, I am not wildly opposed. What I think is ludicrous though is the fixation on taxes while billions have been put directly into the pockets of the ones who should be in jail and their wealth clawed-back by this corrupt administration (and the one before). Instead you punish everybody by raising taxes, even if it may be necessary. Just stop the looting and start the prosecuting first, then you'd have more credibility and support from society to raise the taxes. I just don't get why people complain about this and go to great lengths to blame every Republican from the past while they blow the clown in chief who has been one of the biggest crony capitalists in action since he took office. The time is here and now to act.

Vaticanus says

You may define productivity however you wish but "we" don't equate GDP to
productivity.

Domestic aggregate productivity is not GDP? What about: Vaticanus says

The Austrian way to create demand is to allow people to use their land, their
labor, their resources to produce things they can trade for other things like
potatoes, shoes, houses, shingles, clothes, etc....

Vaticanus says

when you see the way the USA bullies, sets up puppet regimes, you can clearly
see the abuse.

This is an interesting argument. So we bully the world so they will buy our debt?

david1 says

Vaticanus says

You may define productivity however you wish but "we" don't equate GDP to

productivity.

Domestic aggregate productivity is not GDP? What about: Vaticanus says

The Austrian way to create demand is to allow people to use their land, their

labor, their resources to produce things they can trade for other things like

potatoes, shoes, houses, shingles, clothes, etc....

Vaticanus says

when you see the way the USA bullies, sets up puppet regimes, you can clearly

see the abuse.

This is an interesting argument. So we bully the world so they will buy our debt?

Now you just being stupid. One more = ignore.

Vaticanus says

Now you just being stupid. One more = ignore.

Darn. And I really thought you were going to teach me something too.

I'm a real asshole for using your quotes to ask you to explain your contradictions.

mell says

Also this remains to be proven

Not really. See 1940s and 1950s. Didn't seem to affect productivity then...

mell says

because the small bump in pay after tax wasn't worth the extra effort and giving
up privileges of their current position.

I think you're confusing the cause--it was the small bump in pay. Not the after taxes.

tatupu70 says

Not really. See 1940s and 1950s. Didn't seem to affect productivity then...

Not much dumb money was caught by those confiscatory rates. Warren Buffet should in theory be facing a 35% tax rate, but is actually paying something like 18% or less. What makes you think a 75% tax rate bracket will catch him? Talks about confiscatory rate brackets are just empty talks.

"labor is productive capital"

indeed.

Capital wealth is the ability to create "actual" wealth (or more capital)

"Actual" wealth is that which directly satisfies human needs and wants, which is why I call it "direct" wealth and capital "indirect" wealth.

Fixed capital serves as a multiplier on labor's ability to create wealth -- a tractor, roads, a computer, etc etc etc.

(knowing how to use a tractor or computer productively is a soft form of capital)

Money is a claim check on existing wealth for sale. Too much money in consumers' hands , compared to the productive capacity of the economy, will cause price inflation as scarcity rears its ugly head and goods and services get sold more on the bid than the ask (as sellers have the fun of picking among competing bidders).

The story of the past 50 years has been labor productivity rising immensely, and also income and wealth inequality rising with it.

Lots of skim and skimmers in this system, keeping the working class down.

http://research.stlouisfed.org/fred2/graph/?g=icj

blue is per-worker real GDP, red is income inequaility since 1970

Vaticanus says

What about inflation? What about domestic debt? Surely you must not forget those drains on productivity?

(price) inflation means nothing if a) you're a wage earner b) don't have savings and c) wages rise with prices.

~1/3 of the country doesn't even have discretionary income

http://www.marketingcharts.com/direct/64-of-americans-have-discretionary-income-2340/

~1/6th are on food stamps

http://www.kcet.org/living/food/food-rant/fifteen-percent-of-americans-use-food-stamps.html

hmm, price inflation actually stimulates production, as buyers try to maximize their spending power by pulling forward purchases and consumption.

Slack demand kills productivity. We've got a lot of slack now, LOL

Debt is also neither here nor there wrt productivity.

Debt take-on, however, creates spending power, which is demand, which produces trade, which supports new production.

If what you believe is Austrianism, then Austrianism is a joke philosophy really. Worthless at best.

http://research.stlouisfed.org/fred2/series/TCU

Buffett gets like 40,000 paychecks from ADP every two weeks, of course

you should see all the BNSF checks he gets!

Rothbard totally lied about Georgism, which puts the entire school on my shitlist, LOL

http://fraggle.wordpress.com/rothbard-v-georgism/

http://market-ticker.org/akcs-www?post=220451

This simply cannot be refuted by the Keynesian voodoo machine - no matter how many insults you hurl at him. The US is falling behind countries who have adopted sound money policies, keep peddling that nonsense and shoving freshly printed money into the bankstas pockets ;)

mell says

The US is falling behind countries who have adopted sound money policies

Which countries are those btw?

Question

There are a 7 billion people on this planet. Each one makes how many transactions per day? I'm guessing 50? That is 35 billion transactions per day.

How should we govern those transactions?

mell says

http://market-ticker.org/akcs-www?post=220451

This simply cannot be refuted by the Keynesian voodoo machine - no matter how many insults you hurl at him. The US is falling behind countries who have adopted sound money policies, keep peddling that nonsense and shoving freshly printed money into the bankstas pockets ;)

I already refuted this. Debt take on has been a positive feedback loop. Consumption (corporate earnings) are higher than they would be under more sound money policies. Look at the chart I posted with Red, blue, and green lines. The red lines is what the economy would look like with debt taken out. It is workforce * productivity. Much flatter slope than the slopes of GDP and money supply.

Ergo, you get more bang for your buck with debt (leverage) helping you out in a growing economy. Since we have the power to increase money supply in times of credit crunch, normal problems of liquidity do not apply to us as they do in Greece.

We have debt/GDP of under 80%, and the projection is for this to fall slightly over the next ten years. Japan has Debt/GDP of over 200% and the interest on their 30 year bond is under 2%. The rumors of our demise due to debt load are greatly exaggerated.

http://research.stlouisfed.org/fred2/graph/?g=ibt

Now, refute that, with logic or math, without resorting to "government numbers are lies" please.

david1 says

Look at the chart I posted with Red, blue, and green lines. The red lines is what the economy would look like with debt taken out. It is workforce * productivity. Much flatter slope than the slopes of GDP and money supply.

haha, what a joke. I'd like to know what methodology was used to calculate the hypothetical if that bridge to nowhere had not been enabled by debt . . . the same natural resources and labor could have been put to much more productive use, leading to more jobs and higher standards of living instead of the waste. The chart probably assumes that the resources and labor would just sit idle without the debt creation. . . in other words utterly wrong-headed assumptions.

tatupu70 says

mell says

The US is falling behind countries who have adopted sound money policies

Which countries are those btw?

Singapore
Poland
Switzerland
Germany (high debt-to-gdp but at least they are trying to contain it)
South Korea
Estonia
...

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

With the example of few outliers (exceptions always prove the rule) the countries with low debt to gdp are doing much better. Wait, where's Zimbabwe at? 202? Yes we can!

david1 says

We have debt/GDP of under 80%, and the projection is for this to fall slightly over the next ten years. Japan has Debt/GDP of over 200% and the interest on their 30 year bond is under 2%. The rumors of our demise due to debt load are greatly exaggerated.

I never said that doomsday is imminent, but if you are trying to tell me that Japan with its rising poverty has been doing fine since embarking on the Keynesian voodoo train-of-shit, then I have another debt-enabled bridge to sell you.