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  1. #41
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by ygolo View Post
    The data does seem to show that inflationary monetary policy ended the slide in GDP, but unemployment is a different story.

    The U.S. went of the Gold Standard (according the first source I linked) fairly early as well.
    1933 - roughly the same time the recovery of GDP started. The countries that went off early recovered earlier and are remarkably better off (table 2 in the linked study above).

    Unemployment follows somewhat the same trend (some exceptions, like the UK - table 4), but lagged overall indicators, which I believe follows traditional economic thoughts on the difficulties of reducing unemployment. That is, the long time for unemployment recovery is inherent in its nature.

  2. #42

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    Quote Originally Posted by ptgatsby View Post
    1933 - roughly the same time the recovery of GDP started. The countries that went off early recovered earlier and are remarkably better off (table 2 in the linked study above).

    Unemployment follows somewhat the same trend (some exceptions, like the UK - table 4), but lagged overall indicators, which I believe follows traditional economic thoughts on the difficulties of reducing unemployment. That is, the long time for unemployment recovery is inherent in its nature.
    It's too bad they don't have the numbers all the way to the war. The U.S. drop in unemployment was very steep compared to previous years after it entered the war.

    From 1938-1940, unemployment only dropped from 19% to 14.6%. But from 1940-1942, unemployment dropped from 14.6% to 4.7% and eventually in 1944 to 1.2%. It came back up to 3.9% in 1946 after the war ended.

    Accept the past. Live for the present. Look forward to the future.
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    "[A] scientist looking at nonscientific problems is just as dumb as the next guy." Richard Feynman
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  3. #43
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by ygolo View Post
    It's too bad they don't have the numbers all the way to the war. The U.S. drop in unemployment was very steep compared to previous years after it entered the war.
    You can get near 0% unemployment if you just get people to break a lot of windows/make a lot of sawdust/some other analogy of your choosing funded through government money.

    Although it does highlight an extreme example of how an overstimulated economy acts - the counterpart to the great depression, where bonds were used as deflationary devices.

  4. #44

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    Quote Originally Posted by ptgatsby View Post
    You can get near 0% unemployment if you just get people to break a lot of windows/make a lot of sawdust/some other analogy of your choosing funded through government money.

    Although it does highlight an extreme example of how an overstimulated economy acts - the counterpart to the great depression, where bonds were used as deflationary devices.
    True. But if it is spent towards improving the overall means of production, infrastructure, or research, is it still not real employment with real productivity?

    There is also the option of creating R&D or production goals with prizes attached to stimulate private sector investment.

    Accept the past. Live for the present. Look forward to the future.
    Robot Fusion
    "As our island of knowledge grows, so does the shore of our ignorance." John Wheeler
    "[A] scientist looking at nonscientific problems is just as dumb as the next guy." Richard Feynman
    "[P]etabytes of [] data is not the same thing as understanding emergent mechanisms and structures." Jim Crutchfield

  5. #45
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by ygolo View Post
    True. But if it is spent towards improving the overall means of production, infrastructure, or research, is it still not real employment with real productivity?

    There is also the option of creating R&D or production goals with prizes attached to stimulate private sector investment.
    Sure. That's what a stimulus package is suppose to do... War is just an inefficient way of doing it, as it essentially is making sawdust to burn down houses.

  6. #46
    Senior Member Maabus1999's Avatar
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    "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong...somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises...I saw after eight years of this Administration we have just as much unemployment as when we started...And an enormous debt to boot!" - Henry Morgenthau, Jr.

    I will let you all find out who said this.

    I support spending. Smart spending. I do not see much in current government spending that is "smart" or building long term growth. This fascination with "short term" growth is something I disagree with. Take our lumps, learn from it, and concentrate on rebuilding in the long run.

    Infrastructure - Fine if it actually is worthwhile ( high incompetence marks here). Illegal immigrants make up a lot of the jobs here so this can be a problem (see Visa incentives for similar issues).
    Research - Fine but most funding should be in applicable research that can be turned into jobs (like finding room temperature super conductor materials or medical breakthroughs).
    Taxes - Less is better of course but at the same time we have to pay for what is necessary. Defining necessary is the problem and we will never have consensus. Redoing the tax code from scratch would be nice but could wipe out many jobs so resistance is high.
    Business - Need better interconnects between business and education. Not everyone needs to go to college but everyone needs to be trained to succeed (nothing wrong being a mechanic, electrician, etc...).
    Visa "incentives" - I don't mind foreigners working in this country as long as they spend their money in this country. Need to work on this for legal and illegal immigrants.
    Capital Gains - Reduce it on UMC and LUC (sub $500,000 income). Possibly raise it on anyone who has more then 75% of their income being capitol gains from 15% to 25% to be more fair with income taxes. Create more incentives for people to invest with lower incomes (instead of saving...if they can).
    Education - Increase the viability of community colleges for workforce skills. Change subsidies for 4 year colleges to support more professional degrees and less "fluff" degrees. We don't need tens of thousands degrees in psychology, philosophy, and business. Make all schools more career centric once again with more business interaction via government support. Also need to get rid of the antiquated laws that let people drop out of high school at a young age (not everyone is needed on a farm...). I almost think it should be illegal to not finish high school as you become a drain on society.
    Health Care - Increase government oversight (similar to banks) while GREATLY limiting malpractice suits. Cost controls on technology spending possibly necessary (shouldn't need government involvement but for some ungodly reason hospitals seems to be crazy with Cap Ex spending when compared to other industries, so I may support a smacking here). Possibly concentrate government spending on research that will greatly reduce health care costs, instead of increasing it (see Cap Ex spending). Everyone wins here if we can but government incompetence once again.
    Energy - Efficiency research with what we have now while maintaining our future leadership in new energy products. Let us take back our power in energy development from the Middle East like we had in earlier 1900s. Solar, Wind, Nuclear (fission AND fusion), other. I support mass research here as long as the majority of money is spent on projects that are worthwhile (i.e. reducing the cost per kw of solar panels) that can create a possible new export base. Boone Pickens is right in that we need to do something, and in my mind try it all and let capitalism pick the winner. Exception is oil can't be a winner (I'm fine letting companies drill but I think they should have zero influence in getting us off the black gold).
    Exports - We need them back in a desperate way. It doesn't need to compete with China or India (they can keep textiles and toys for example) but we need to find a new world niche (i.e. energy) that we aggressively pursue.
    Protectionism - Bad idea. Horrible idea. But make sure the other countries also play fair. However, for multinational or American based companies, make strong incentives for a majority of payrolls to be inside the United States. Problem here a consequence to promote this is protectionism in a way so it creates a conundrum that needs to be thought out.

    I could go on but these are just random ideas I've thrown out for my view on economic growth.

    Closing statement: The biggest problem is no one in the government (with power) has been "truly" pro middle class in the past two decades.

  7. #47
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    Quote Originally Posted by Maabus1999 View Post
    "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong...somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises...I saw after eight years of this Administration we have just as much unemployment as when we started...And an enormous debt to boot!" - Henry Morgenthau, Jr.

    I will let you all find out who said this.
    Funny, pretty sure I posted that twice :P . As far as Great Depression economics are concerned, regardless of how generations who didn't live through it look back and say "Ok, this little thing helped the economy in this little way", at the end of the day, what matters more than a particular area that the economy may or may not have recovered in is the simple principle behind why we have economies. At the end of the day, nobody in the depression gives a damn if the GDP is the only thing getting better if a great portion of people are still jobless and starving on the streets. I wish I had the time to look into the specifics of keynsian economics, but I know from the history books and the words of people such as Morgenthau (FDR's own treasury secretary) that the one aspect keynsian economics (government intervention in the economy and spending to increase demand/spending and fight deflation; not to mention the other policies with government creating nearly useless jobs, taking 100% of income over a certain amount, bullying companies like Ford into unionizing, and a mess of other REGRESSIVE policies) did not help PEOPLE at all. It's barely even possible to say that if helped the economy.

  8. #48

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    Quote Originally Posted by Lateralus View Post
    Ajblaise is correct in one sense. The current economic condition of the country is due to Keynesian economic philosophy, which has been the preeminent philosophy in the US since the Great Depression. Also, the Federal Reserve is a Keynesian-styled institution, with its interest rate manipulations. The bailouts represent Keynesian philosophy in practice.
    You're completely wrong. No one who knows anything about macroeconomics claims the Fed is Keynesian, or ever has been. This is taken from the INTJ forum (this link will take you thread in question INTJ Forum);
    where I was discussing grad school with someone who just got into Chicago. Too lazy to tailor my point to completely fit this thread.

    --------------------------------------------------------------------------
    Originally Posted by Rudy

    Schwarzie's Questions (Final part, for now).


    I believe the answer that his proponents would give is that, in times of abundance, more labor can always be allocated towards luxury goods and services; that is, more such jobs can be created without limit, given the abundance to support them. I can only say that I am not a particular devotee of Dr. Friedman; though I am a fan of the free market in general, I am not an advocate of its unrestrained dominance.

    -------------------------------------------------------------------

    Interesting, I assumed you were a hard core monetarist, because Chicago was your first choice. Why exactly was it your first choice anyways?

    I also went through the econ grad school dilemma, years ago.

    I don't see how anyone can argue monetarist policy considering the the last decade. Lowering the interest rate to deal with recessions isn't exactly ideal since the increased money supply helped spur the credit/real estate debacle.

    Most libertarians eschew monetarist solutions, because of the notion of less government interference. You're going to interfere either way, whether through fiscal stimulus or increased money supply, it's just which poison (I also agree you shouldn't interfere unless you have too, but when monetarists interfere, the general public doesn't notice).

    I consider myself libertarian but for some reason most libertarians I meet, are far more right wing in terms of individual civil liberty; while also tending to be monetarist, in terms of macroeconomic policy.

    In times of prosperity, there is no need to fix anything so monetarists always sound smart, but when things go wrong, their solutions are the exact same solutions prescribed by the neo-classical economists before Keynes. Keynes burst onto the scene because he predicted the great depression while neo-classicals didn't see it coming; (and their successors, the monetarists) because they don't factor in bubbles, and irrational behavior because their models make the assumption of a rational individual.

    They assume all markets are always self correcting (Keynesians just assume most are), and if a society like the US has increasing trade deficits and massive debt, the solution according to Monetarists is too... lower the interest rate, increase the money supply and all will be well. That's fine when you have real growth (and even Keynesians want to expand M1, M2 and even M3, under those circumstances); but that's not even close to what we have now.

    The monetarists at the Fed today have prescribed lowering interest rates and taxes to solve all our problems. Then they all of sudden became Keynesians when they bailed out our financial sector through direct fiscal stimulus; but only because they were using monetarist tools and were blindsided by a liquidity trap - that their expansionist monetarist policies were supposed to prevent in the first place. When they realized large banks would no longer lend to each other, it violated all their theories and resorted to direct fiscal stimulus to stop the liquidity trap their models said, couldn't happen.

    Sorry for the rant, I rarely meet anyone who actually reads economics and just read the blogs section for the first time yesterday. Normally I can't speak intelligently about econ without having to explain basic concepts to someone who simply doesn't get it; without sounding pedantic.

    I also mistakenly assumed you were a hard core monetarist, because most of the monetarists in my program were INTJs or ENTJs. The interesting thing, to me, is that I think XNTJs are the mostly likely type to assume someone is an idiot before knowing them; yet assume individuals are rational in their bloated econometric models.

    It has always been a bizarre paradox for me..
    Last edited by meanlittlechimp; 09-09-2009 at 07:58 PM.

  9. #49
    mountain surfing nomadic's Avatar
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    not to be disrespectful, but this is very non principled research.

    if u are a graduate student, and this is your thesis, this thread had better be cited on your publication.

    quote politics and idea stealing is such a horrible aspect of academia and research.

  10. #50
    Senior Member reason's Avatar
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    In a nutshell: the Great Depression was a "perfect storm" of political errors.

    1. Inflation during the "roaring twenties" set the economy upon an unsustainable growth path.
    2. When inflation ended widespread malinvestment was discovered.
    3. A Financial panic produced a "rush to liquidity."
    4. The Federal Reserve should have increased the money supply, but it did not, and a steep deflation started to clear the market.
    5. A "delfationary spiral" set in, and was exacerbated by calamitous legislation from both the Hoover and Roosevelt administrations.
    6. The end of World War II saw a return to normalcy -- prices and money supply had (finally) adjusted, and much of the deleterious legislation of the thirties came to an end.
    The root of the problem was the Federal Reserve: it set the economy on a collision course in the twenties with inflation, and when the economy crashed it made matters even worse by throwing away all the fire extinguishers. Although the Hoover and Roosevelt administrations -- in their seemingly infinite conceit -- poured gasoline onto the inferno, they were more like malicious bystanders than incompetent drivers.

    While the Austrian school is right about the cause of the recession, the Chicago school is right about what turned the recession into a depression. Meanwhile, the Keynesians aren't right about anything (though they get close in a couple of places).

    The underlying structural problem in the economy is the absence of a free market in banking and money, because that is the only way we'll get good monetary policy. For more, check out two economists: Lawrence H. white and George Selgin. Although both are associated with the Austrian school, they are somewhat detached from that community and look more favourablly upon the Chicago school.

    And, ygolo, I'll post a more indepth analysis about free banking soon. Once you understand free banking, you'll understand the effects of central banking much better.
    A criticism that can be brought against everything ought not to be brought against anything.

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