6 ms·

Actually, it's not clear if boom and busts are "a thing" in free markets. We've had far worse booms and busts, and at a higher pace, ever since the Federal Res

Actually, it's not clear if boom and busts are "a thing" in free markets. We've had far worse booms and busts, and at a higher pace, ever since the Federal Reserve was created and has artificially modified the interest rate. The Fed lowers the interest rate because they have an incentive for the economy to perform well, because they want to look good (Alan Greenspan admitted he kept interest rates lower longer than he thought necessary because he wanted to retire on a high economy). This makes money cheap, so to speak, which creates incentive for everyone to borrow. Individually, this makes sense, but together, this ends in 2009-style. On top of that, many monopolies are created via regulations and laws. The fact that you're not even able to discuss these concepts or to realize that economists are incentivized to believe exactly the opposite of what I've said, because they financially benefit as central planners, mean that you are anti-intellectual, not the OP.

Nomentatus 9y ago
My understanding of economic history, including the 1870s (but many other busts, too), is quite different. Can you cite a source? I happen to be reading "A History of The World Economy", by James Foreman-Pack. It contradicts you at every turn (Chapter 6 esp) and notes there was a time when the U.S. was the odd man out, lacking a national bank and suffered more severe downturns than other nations, amongst other things.
- WalterBright 9y ago
  "And the Reserve System, established in response to monetary instability, had the power to exercise deliberate control over the stock of money and so could take advantage of this possibility to promote monetary stability. That conjecture is not in accord with what actually happened. As is clear to the naked eye in Chart 1, the stock of money shows larger fluctuations after 1914 than before 1914 and this is true even if the large wartime increases in the stock of money are excluded. The blind, undesigned, and quasi-automatic working of the gold Standard turned out to produce a greater measure of predictability and regularity--per-haps because its discipline was impersonal and inescapable--than did deliberate and conscious control exercised within institutional arrangements intended to promote monetary stability." Friedman's "Monetary History of the United States" pg 9-10
  - TheOtherHobbes 9y ago
    The idea that "the stock of money" is a real, objective thing is rank insanity. The idea that this "stock of money" should magically be constant makes even less sense. There is no stock of money. There are only political decisions, assorted client and patron relationships, and national and international conflicts among interest groups that define social goals and resource distribution. Money is political power counted on imaginary tally sticks. Volume fluctuations are irrelevant. What matters is what people do, for whom, to what end, using what resources. In an alleged democracy what should matter is economic enfranchisement - which in practice means creating fluid and porous social castes and interest groups, and inventing interesting goals with intelligence, realism, and effectiveness. Booms and busts are caused by aimless short-term accumulation, which is a form of unintelligent goal setting. Whether tally sticks are referenced to lumps of shiny metal or numbers derived by fiat is wholly irrelevant if the only goal is to acquire as many sticks as possible, and nothing else matters.
    - deleted 9y ago
      [deleted]
    - fallingfrog 9y ago
      Just curious: is this coming from stuff you've read or original thought? Because what you just said feels much closer to the truth than anything I heard in my macroeconomics 101 class. But I'm not an economist, so.
    - Nomentatus 9y ago
      First sentence: True - and neglected in our time, but not, I think by the originator of the concept. He did set a lot of store by "animal spirits," and these very strongly affect "the money supply" in the following ways: The usual multiplier of funds in a bank assumes that the depositors will regard their banked money as still theirs and available. But note that this is actually the OPPOSITE of the thinking of my grandparents, who lived through the great depression. To them, the largest single reason to put money in a bank was precisely to forget about it; and to piously treat it as now beyond their reach and ability to spend because it was now part of a sacred reserve. A very deflationary logic since it brings down the effective banking multiplier of the money supply (reflected by spending) sharply. And this is indeed what happens after a recession, and a kind of thinking that's still with us, post 2008. Of course, changes in sexual selection are also a large part of this. Young women and men shifted from being very interested in free spenders of the opposite sex (as a proof of money) before 2008 to being much less interested in being married to a free spender, thanks. Where I live, I was woken by revelers in the early morning leaving the fanciest downtown bars blocks away until 2008 at least a couple of times a week, for years. In all the years since that crisis, those extreme revelers have only very rarely been heard from by me. Despite my being a much less sound sleeper, now. Here too, sexual selection shifts post-crisis to a logic that's closer to bank-it-and-don't-think-about-it. (Debt accumulation, say on credit cards, may contradict me by now, however.)

Nomentatus 9y ago

My understanding of economic history, including the 1870s (but many other busts, too), is quite different. Can you cite a source? I happen to be reading "A History of The World Economy", by James Foreman-Pack. It contradicts you at every turn (Chapter 6 esp) and notes there was a time when the U.S. was the odd man out, lacking a national bank and suffered more severe downturns than other nations, amongst other things.

WalterBright 9y ago
"And the Reserve System, established in response to monetary instability, had the power to exercise deliberate control over the stock of money and so could take advantage of this possibility to promote monetary stability. That conjecture is not in accord with what actually happened. As is clear to the naked eye in Chart 1, the stock of money shows larger fluctuations after 1914 than before 1914 and this is true even if the large wartime increases in the stock of money are excluded. The blind, undesigned, and quasi-automatic working of the gold Standard turned out to produce a greater measure of predictability and regularity--per-haps because its discipline was impersonal and inescapable--than did deliberate and conscious control exercised within institutional arrangements intended to promote monetary stability." Friedman's "Monetary History of the United States" pg 9-10
- TheOtherHobbes 9y ago
  The idea that "the stock of money" is a real, objective thing is rank insanity. The idea that this "stock of money" should magically be constant makes even less sense. There is no stock of money. There are only political decisions, assorted client and patron relationships, and national and international conflicts among interest groups that define social goals and resource distribution. Money is political power counted on imaginary tally sticks. Volume fluctuations are irrelevant. What matters is what people do, for whom, to what end, using what resources. In an alleged democracy what should matter is economic enfranchisement - which in practice means creating fluid and porous social castes and interest groups, and inventing interesting goals with intelligence, realism, and effectiveness. Booms and busts are caused by aimless short-term accumulation, which is a form of unintelligent goal setting. Whether tally sticks are referenced to lumps of shiny metal or numbers derived by fiat is wholly irrelevant if the only goal is to acquire as many sticks as possible, and nothing else matters.
  - deleted 9y ago
    [deleted]
  - fallingfrog 9y ago
    Just curious: is this coming from stuff you've read or original thought? Because what you just said feels much closer to the truth than anything I heard in my macroeconomics 101 class. But I'm not an economist, so.
  - Nomentatus 9y ago
    First sentence: True - and neglected in our time, but not, I think by the originator of the concept. He did set a lot of store by "animal spirits," and these very strongly affect "the money supply" in the following ways: The usual multiplier of funds in a bank assumes that the depositors will regard their banked money as still theirs and available. But note that this is actually the OPPOSITE of the thinking of my grandparents, who lived through the great depression. To them, the largest single reason to put money in a bank was precisely to forget about it; and to piously treat it as now beyond their reach and ability to spend because it was now part of a sacred reserve. A very deflationary logic since it brings down the effective banking multiplier of the money supply (reflected by spending) sharply. And this is indeed what happens after a recession, and a kind of thinking that's still with us, post 2008. Of course, changes in sexual selection are also a large part of this. Young women and men shifted from being very interested in free spenders of the opposite sex (as a proof of money) before 2008 to being much less interested in being married to a free spender, thanks. Where I live, I was woken by revelers in the early morning leaving the fanciest downtown bars blocks away until 2008 at least a couple of times a week, for years. In all the years since that crisis, those extreme revelers have only very rarely been heard from by me. Despite my being a much less sound sleeper, now. Here too, sexual selection shifts post-crisis to a logic that's closer to bank-it-and-don't-think-about-it. (Debt accumulation, say on credit cards, may contradict me by now, however.)