robbeiflex
Well-known
Banks are supposed to create money, the process is inherent to their key function. In my view it is possible to run a bank responsibly, only recently it has not been very common. The problem starts when bankers use that money to enrich themselves, weakening their balance sheets. From there it is a slippery slide to the rest of us having to bail them out.
mike-s
Established
I don't know Roger we have to have some measure although I agree GDP is a limited concept. Since it is measured in money GDP has the limitation of not taking into account other actions that are not measured in this way. Ormerod points out that things like people washing their own clothes has a value but does not appear in GDP. As you say the things that are social requirements (costs) are bundled in with wealth producing transactions, which hopefully produce a profit. Basically all measures of this type simply exhibit the problem that orthodox economics has in defining the macro situation in large economies. Nevertheless, provided its limitations are understood (arguable) GDP can be used as a relative measure.
In the early 70s Tobin and Nordhaus came up with an alternative MEW (Measure of Economic Welfare) - a heavily modified measurement where things that were regarded as, for want of a better phrase, non-contributing, were excluded. An example of this was commuting costs which, while they had a monetary value, were non-productive periods of time required simply to get people to work. I think the important point was that MEW measure while different in value from GDP was found to rise and fall at about the same rate as GDP.
Another thing, harking back to the bailout business, is how much trouble we were in. The perspective being that the initial expenditure of the Marshall plan, which is accepted as being one of the best economic actions "both in memory and actuality" (Galbraith 1994) amounted to some $53billion equivalent value in 1994 according to Galbraith - say about $85b today. To bail out the Irish banks (a country of some 4.5 M people) required $67.5b. As economists frequently say - the mind boggles.
Jockos
Well-known
I disagree.
Roger Hicks
Veteran
That's all I'm saying. Limited not least because it is arbitrary. How does a teacher in a fee-paying school count against GDP and one in a state-funded school doesn't?
You're right: we need a yardstick. MEW is an improvement. But when even economists prefer to faff around with near-useless measures such as GDP, rather than trying to improve them, we're back to (a) how many angels can dance on the head of a pin and (b) are they doing a Highland Fling or the Twist? And possibly (c) are we dealing with the hard of thinking when it comes to the area of the head of the pin, to say nothing of angel-counting?
Your point about the scale of bailouts (or even the bail of scaleouts) is well taken. How are people allowed to dig themselves in this deep? And why are the rest of us required to dig them out?
Of late I've been thinking of an HOS index: Heads On Spikes. How many (bankers' and CEOs') Heads On Spikes should there be for that sort of bail-out? If we can't trace it to specific people -- well, maybe we're using the wrong measuring tools. Betcha a few heads on spikes (on Wall Street or Tower Bridge) would cure "irrational exuberance".
Cheers,
R.
Al Patterson
Ferroequinologist
The lack of basic economic knowledge on the site is astounding.
Through a process known as fractional reserve banking, banks do create money. $100 in deposits becomes $457 in loans, creating $357. See the chart in the link. This is a part of their core function.
http://en.wikipedia.org/wiki/Fractional_reserve_banking
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oftheherd
Veteran
Dialogue and then compromise is sorely lacking in the congress of today. That is the real problem.
Money is indeed the big problem imho. That is why I think the real solutions is campaign reform. Campaigns must be funded some way besides big business money. I am not sure of the best way, but it has to be. Then accountability to ensure votes cannot be bought.
All good points in a reasonable dialogue. Thank you sir!
Again, points to ponder. I don't think most in the USA understand the socialist system in most of Europe. I know I don't. I also can't speak for most people in the US. However, we always did have a culture of taking care of ourselves and making do. That seems to be changing to an entitlement culture. Somebody owes the entitlement believers whatever they want. The government is the likeliest entity to take on that burden. But it still has to be paid for. And since by that by taxes, that means I must support those that want what I have worked all my life to have. I don't fault anyone wanting more, but I sure fault those that just want it because they want it, without working for it. I also don't believe I should work as I have, just so someone else can have my goodies.
Maybe there are good points to the European system, but I think it would take a culture change in the US to accept it, and the entitlement ideal may overtake any attempt to understand any good points to the European socialist system.
As to cameras, film or digital; I see prices going up and down all the time. Different types seem to go up or down at different times. The internet has an effect on that among other things, as well as supply.
Roger Hicks
Veteran
Dear Al,
It is at least arguable that taking economics classes is an excellent way to reduce one's economic knowledge. Economics, as taught, is an extremely formal subject with an increasingly tenuous relationship with reality. You no doubt remember the physics questions at school which relied on inextensible string of negligible mass in a vacuum, and perfectly spherical bodies of uniform density. The assumptions made when it comes to such things are orders of magnitude more complex and realistic than most of the assumptions made in economics.
Cheers,
R.
Roger Hicks
Veteran
But is there a real "entitlement ideal"? I'd turn it around, with a "help ideal". Tom Stanworth summed it up perfectly: "I am more than happy to help those less fortunate than myself, but not those lazier than myself." It is very much in the interests of the greedy, arrogant and (often temporarily) more fortunate to paint the less fortunate as invariably lazy.
Over the years I have known quite a few decent, hard-working people who earn or earned very little money. I have also known quite a few rich, arrogant twerps who imagine or have imagined that their good fortune is the sole result of their own intelligence, hard work, wit and charm, when in fact it's the sole result of having been born in the right place at the right time to parents who spent a fortune on sending them to the right schools where they met the right people. Oh: plus luck. And, of course, I've known quite a few who have worked up from "humble beginnings" through intelligence, hard work and (again) luck. But the last class ain't as common as the rich would have you believe, and those who are in it are distressingly seldom honest (or intelligent) enough admit the importance of luck.
Read "Chavs, The Demonization of the Working Class" by Owen Jones. It's a bit culturally specific ("chav" is an English slang word) but it should still make sense in the USA.
Cheers,
R.
Al Patterson
Ferroequinologist
Yeah, "all other things being equal" was the economics term I hated the most. I was taking econ 101 during the "stagflation" period in the '70s, and Keynesian economists couldn't explain why inflation and unemployment moved in the same direction, as the text said something different.
But then again when I took economics Keynes was the only game in town. I didn't learn about the Austrian School until I found some books by Hayek in the local library. I wonder what economics would be like if a broader approach were taken in choosing which economists to teach, and which to ignore...
pdh
Established
I'm quite bemused once again by this characterisation of Europe as "socialist" by so many (American) posters.
As a European, I can't think of a single country which could be adequately described as Socialist. A few offer a degree of social welfare to their inhabitants, but that's about it.
As a European, I can't think of a single country which could be adequately described as Socialist. A few offer a degree of social welfare to their inhabitants, but that's about it.
Al Patterson
Ferroequinologist
I do think that at least here in the US banks are allowed to be way more leveraged than might be prudent. The Fed always plays with buying and selling bonds and changing the Fed funds rate. Why don't they change the reserve requirements? They have the power to do so, but seem reluctant to use it.
mike-s
Established
Roger Hicks
Veteran
Dear Al,
This takes us back to Christ not being a Christian, Marx not being a Marxist, and Keynes not being a Keynesian. I'd lay odds that Keynes could have come up with a half-decent explanation but by the 1970s he'd been dead for over a quarter of a century and his work had been endlessly rehashed by countless second-, third- and fourth-rate professors, to say nothing of second-, third- and fourth-rate politicians.
There's also the fact that these same second-, third- and fourth-rate professors always want to put everyone in pigeonholes -- pigeonholes are their stock in trade -- so they'd categorize John Kenneth Galbraith (one of my greatest intellectual heroes) as "a Keynesian" -- which is a bit like saying, "Well, Francis and Benedict XVI both are/were both popes".
John Kenneth's greatest insight was that classical economics are overturned in a time of material plenty -- close akin to Marx's "superabundance" -- as expressed in The Affluent Society (1958), but for me his greatest book is The New Industrial State (1967) which shows how the affluent society is governed (or at least, how it was governed then). It is hardly surprising that in a "101" class (commonly taught by the intellectually challenged) the most important economics texts of the previous two decades were ignored.
My current favourite books on 21st century economics, as mentioned elsewhere, are the Nassim Nicholas Taleb trilogy (Fooled by Randomness, The Black Swan, Antifragile) and Jaron Lanier's Who Own the Future?. But all too many people (I'm not accusing you of this) assume that the little they know of "Economics" is all there is to know. And most of them know a hell of a lot less than you do, which is one reason I'm not accusing you. Another is that I have considerable respect for your intelligence and open-mindedness. There are others.
Cheers,
R.
Roger Hicks
Veteran
Distressingly many Americans believe that any country which does not allow its poorer citizens to die in the gutter, whether of curable illness or starvation, is socialist. I checked this with my (US citizen) wife, who has lived for extended periods in Britain and France, and visited many other European countries, and she did not demur.
Cheers,
R.
Al Patterson
Ferroequinologist
I'm still learning. As stated on another thread, I loved "The Black Swan", and am looking to read the other Taleb books when I can. Never read Galbraith, as he wasn't on the approved reading list of my Keynsian professors. I might need to add his books to my ever growing reading list. Amazing how work gets in the way of one's reading ...
Down to one or two books a week from four or five when I was between jobs.
Roger Hicks
Veteran
"Fooled by Randomness" (2nd ed) is wonderful, and you REALLY need to read The Affluent Society and The New Industrial State just for the content, never mind for pleasure. Put it this way: I own maybe half a dozen of John Kenneth's books, and quite often, they make me laugh out loud. Not bad for books on economics!
Cheers,
R.
Jockos
Well-known
And how is that system working out for you?
I'm aware that fractional reserve banking is a part of banks core function, I disagree that it should be.
Here's a link for you as well:
http://www.youtube.com/watch?v=jCQqAJCrxOc
Al Patterson
Ferroequinologist
I don't do you tube, too slow. I read as video is too slow a medium for knowledge transfer.
Roger Hicks
Veteran
Exactly! Anything where I can't control the rate of knowledge transfer is likely to be a waste of time (in the strictest sense), as I can't skim over the bits I already know (or don't care about) and I can't easily re-read the bits that don't make immediate sense. For the latter, too, I have to decide where the fault lies: with me for not understanding it, or the author/producer for not understanding it.
That's before you start on the ghastly accents that most video presenters have: saccharine, patronizing and guaranteed not to instill confidence..
Cheers,
R.
Jockos
Well-known
You old timers are missing the point; nowadays we read while playing youtube in the background - double information intake, maximum time efficiency!