SPAM free on '03 [Economy Thread]

[MarkTiarra]

Seeing as I keep posting pics of my favorite BF girls I figured I should cut my dickhead ratio down by 15.4% and post something that's been on my mind for awhile. All geniuses welcome to debate on this one please:

The Economy - we talk about good economy, bad economy. The markets are good, then they are bad, then they are good again... yadda yadda. But what REALLY drives the economy?

You cal listen to a hundred "experts" say a hundred different things about stocks and taxes and global crises and technoligies, etc... but in the end doesn't it all boil down to HUMAN PSYCHOLOGY?

I mean for the most part there is a finite amount of money in circulation. When it's being passed back and forth more, the economy is considered good. When it's being socked away for a rainy day all around, the economy is considered bad.

To me it's all an abstract and the only thing that truly effect the economy is the perception of the population about it. When people are afraid of the future they don't spend. When they feel secure about things they spend. Obviously you can do things to influence this such as take less away in taxes and do things that help corps hire more people, but in the end it's simple human psychology.

What do you guys think?

[NetRodent]

If you've been drinking, stop.

If you're sober, start drinking.

[Doctor Dre]

This is a part of the reality . Like when they do show to restart the economy . But there is facts that slow down the economy that aren't ONLY what people think .

Exemple : the big blackout . The governement stoped for a week here and tons of food were lost ... And other bad things like that . AnywayS :P

[MarkTiarra]

Originally posted by NetRodent
If you've been drinking, stop.

If you're sober, start drinking.

I've been staring at tits all day.

[High Quality]

Actually mark, you're way off.

Its a proven fact that government's play the largest part in economies both locally and internationally. Tariffs affect imports in a significant way. Degrees of taxation are directly proportional to investment in local economies. So its not "people are afraid to spend"... not in america. Perhaps that was the japanese problem of the early 1990s, but not in America.

As for your misconception about "limited amount of money flowing"... you are completely wrong. New wealth is created every day, AND governments increase the money supply by vast amounts on a daily basis. This is called inflation, and governments use this to their advantage in many, many ways. A lot of business and foreign investment is entirely based upon a country's inflation rate.

Economy in the grand scheme isn't as complicated as most modern "Keynesian" economists think it is, or want it to be. Alan Greenspan is a true moron who is considered a demi god by congress. Monetary and Fiscal policy, haha.

Anyway, hope that clears some stuff up for you.

[MarkTiarra]

I appreciate the cursory lesson. Maybe you can answer a question I've had for a long time then:

If the goverment prints more money than usual and puts it in circulation, why does this decrease the value of the dollar? To me it would seem to come down to human psychology again because the answer I always hear is that prices go up. Well prices go up because people get greedy and if there is more out there they know they can ask for more and of course prices rising is a domino effect thing.

I can see your point on taxes/tarrifs having a great impact on the economy and that not being based on psychology in any way (unless one considers the psychology of the people running the goverment who make the decisions, but I digress).

So anyway, interesting points. That's what I was looking for, some intelligent discourse.

Originally posted by High Quality
Actually mark, you're way off.

Its a proven fact that government's play the largest part in economies both locally and internationally. Tariffs affect imports in a significant way. Degrees of taxation are directly proportional to investment in local economies. So its not "people are afraid to spend"... not in america. Perhaps that was the japanese problem of the early 1990s, but not in America.

As for your misconception about "limited amount of money flowing"... you are completely wrong. New wealth is created every day, AND governments increase the money supply by vast amounts on a daily basis. This is called inflation, and governments use this to their advantage in many, many ways. A lot of business and foreign investment is entirely based upon a country's inflation rate.

Economy in the grand scheme isn't as complicated as most modern "Keynesian" economists think it is, or want it to be. Alan Greenspan is a true moron who is considered a demi god by congress. Monetary and Fiscal policy, haha.

Anyway, hope that clears some stuff up for you.

[High Quality]

Originally posted by MarkTiarra
I appreciate the cursory lesson. Maybe you can answer a question I've had for a long time then:

If the goverment prints more money than usual and puts it in circulation, why does this decrease the value of the dollar? To me it would seem to come down to human psychology again because the answer I always hear is that prices go up. Well prices go up because people get greedy and if there is more out there they know they can ask for more and of course prices rising is a domino effect thing.

I can see your point on taxes/tarrifs having a great impact on the economy and that not being based on psychology in any way (unless one considers the psychology of the people running the goverment who make the decisions, but I digress).

So anyway, interesting points. That's what I was looking for, some intelligent discourse.

In terms of inflation this its actually a game of catch up. The government benefits most because it can print money and buy whatever it wants with that money, the added "cash" in the economy isn't felt in its entirety for months. Thus, if there are say $100,000,000 in cash circulation (hypothetical), and the government prints another $1million, prices will eventually reflect the extra $1million in circulation (consumer price index or CPI), however this equilibrium wont occur for months. Thus, since the government HAS the extra $1million and then spends it, its basically saying "fuck you" to everyone who has a $1 bill in their pocket because its lessening the value of it, in this instance, by 1%.

If you then take a look at debts or investment, if someone loans you $15,000 for a car loan in 2003, and inflation is 1%, then every year that you pay back your loan, you're paying it back with money that is worth less than when it was given to you. So inflation helps people with debt, but hurts investors or people who loan money.

Hope that helps.

[BigFish]

Mark is not way off. Psychology and expectation is a big part of economics, but not all. Governments don't "increase the money supply by vast amounts daily". I dunno where you got that. They increase the money supply as part of monetary policy to counter short term "crowding-out" effects of fiscal policy and to meet money demand. Inflation is thus the long term effect of short term monetary policy. In short: gov spending (fiscal policy)>increase in money supply and interest rates>business spending less because of that (crowding out effect)>monetary policy to increase money supply to meet money demand>interest rates drop.

[Hardcore J]

[BlueDesignStudios]

I think both High Quality & Mark raise some interesting points.

I'm with High Quality on his view of 'what if the government printed off more money' - I believe that to be the correct economics explanation, however I can also see things from an intuitive perspective that Mark has explained - it kind of goes inline with my thoughts of 'I wouldn't actually be hurting anyone if I forged $10Million in $100's would I?'
Realistically $10M extra in an economy wouldn't make much different, but in the scenario that High Quality presented he does show how things would change with an extra 1% of money.
Of course, there are pleanty of other effects this would have on the economy, secondary effects as I believe they are called. For example, it would effect exchange rates, interest rates, unemployment - perhaps not so noticably in practise, but in theory, at least.

As far as your first post Mark, I used to think of the problem through your eyes. Then I discovered economics
While economics isn't real world stuff (anything in University isn't for that matter), it does show you how you can break down & analyse how the world works using supply & demand & other models. I actually enjoy this stuff now

Finally, you do raise valid points about HUMAN PSYCHOLOGY - you are correct on this, markets do work for a large part on this.
If you look at stock market crashes, why do they happen? Perception, and human psychology has a lot to do with it.
Same goes for the current housing boom the world is experiencing. Are houses worth as much as some people are paying thesedays? I doubt it - house prices can't rise forever, they're related to wages, and when interest rates go up, as they ultimately will, I think a lot of people will ask themself why did they buy that house!

Whew.. just my .. but good to actually have an intelligent post on GFY .. thanks Mark

[High Quality]

Originally posted by BlueDesignStudios
I think both High Quality & Mark raise some interesting points.

I'm with High Quality on his view of 'what if the government printed off more money' - I believe that to be the correct economics explanation, however I can also see things from an intuitive perspective that Mark has explained - it kind of goes inline with my thoughts of 'I wouldn't actually be hurting anyone if I forged $10Million in $100's would I?'
Realistically $10M extra in an economy wouldn't make much different, but in the scenario that High Quality presented he does show how things would change with an extra 1% of money.
Of course, there are pleanty of other effects this would have on the economy, secondary effects as I believe they are called. For example, it would effect exchange rates, interest rates, unemployment - perhaps not so noticably in practise, but in theory, at least.

As far as your first post Mark, I used to think of the problem through your eyes. Then I discovered economics
While economics isn't real world stuff (anything in University isn't for that matter), it does show you how you can break down & analyse how the world works using supply & demand & other models. I actually enjoy this stuff now

Finally, you do raise valid points about HUMAN PSYCHOLOGY - you are correct on this, markets do work for a large part on this.
If you look at stock market crashes, why do they happen? Perception, and human psychology has a lot to do with it.
Same goes for the current housing boom the world is experiencing. Are houses worth as much as some people are paying thesedays? I doubt it - house prices can't rise forever, they're related to wages, and when interest rates go up, as they ultimately will, I think a lot of people will ask themself why did they buy that house!

Whew.. just my .. but good to actually have an intelligent post on GFY .. thanks Mark

I could say a lot about your statements. But I'll start with your conception of housing prices.

Housing prices are determined 3 ways. Cost to build analysis, Income analysis (investment properties) and a third way that I dont quite remember....

But basically they usually all arrive to within 5% of each other. Supply and demand has a huge thing to do with cost to build, as does the present interest rates (determined by inflation figures, mostly).

If you want my 2 cents on it, housing prices WILL rise forever. Why? Population booms. As more mexicans cross the border, more babies are born, etc the demand will continue to rise. Add to that increasing government regulations across the nation on buildings means fewer builders / more costs which means fewer construction sites... etc.

As for stock market crashes... the 1929 crash was proven also to be due to government intervention. In his book "America's Great Depression" Murray Rothbard (famous encomoist) shows how the government, through monetary policy increased the money supply artifically (inflation), and thus created the "roaring twenties". The end result of course was over valued stocks to the point of internal collapse of 1929.

Hope that helps, once again

[MarkTiarra]

Originally posted by High Quality


As for stock market crashes... the 1929 crash was proven also to be due to government intervention. In his book "America's Great Depression" Murray Rothbard (famous encomoist) shows how the government, through monetary policy increased the money supply artifically (inflation), and thus created the "roaring twenties". The end result of course was over valued stocks to the point of internal collapse of 1929.

Hope that helps, once again

I'm going to have to checkthat out because I'm still wondering what % human psychology played in that. In other words, yes the government did something that was a cause, but was the direct effect a logical one or was it based on the human reaction to the originating cause? Same point I was driving at the value of the dollar decreasing in part because some greedy people jack their prices when they realize there is more money out there to be spent.

An interesting thought experiment here: If by some miracle all humans decided to never raise a price again, and the world goverments all gave their population a cash reward of $1 million [insert money type], what would happen?

In theory everyone would be rich. If no prices for anything go up how can this not be the result?