# Basic Ecconomics(what is Ecconomics?)

Discussion in 'Business & Economics' started by RainbowSingularity, Aug 4, 2018.

1. ### SeattleValued Senior Member

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Can you lend me $100,000 for 10 years? I'll pay you back$10,000 every year for 10 years, no problem.

3. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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That countries which follow modern capitalist economic theory have flourished more than any of the societies which have thus far failed to embrace it. The average American (both by mean and median) has a higher income and standard of living than the mean and median standard enjoyed in any country which has tried a substantially different approach, and low-income Americans are still considered relatively wealthy by such standards.

Edit: Redundant post. Hit the wrong key on my laptop, then backspace, browser took me off page and I couldn't find the post I had been making. I love how practical most geniuses are

Last edited: Aug 7, 2018

5. ### iceauraValued Senior Member

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You don't know how compound interest means and works, or you're trolling.
Either would be typical of the academically educated in economics.

7. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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What went right is that the average and median American today enjoys a vastly higher income and standard of living than they would in any country on the planet which doesn't implement similar economic practises.

Great. What were/are the nominal per-capita GDP's of these historical/modern societies? Oh I'm not being fair because I'm not accounting for changes in technology? Well feel free to notify me when someone in the modern age completely ignores mainstream economic theory and still manages to do better than Mr. Greenspan and his lot. BTW your biology link doesn't prove anything, because capitalists also take resource limits into account when making long-term plans, whereas leaders in other systems have historically miscalculated when trying to do so.

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8. ### SeattleValued Senior Member

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3,508
It's an oxymoron to talk about the educated not understanding a subject. You are suggesting that the uneducated understand the subject?

I don't think you know what you are talking about.

Your response to everything, regardless of the subject, is the period of time in the U.S. after the Great Depression up until the Reagan Presidency. That's not an answer. That's just a time period.

9. ### iceauraValued Senior Member

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That's what went right due to various people - most of them educated primarily in the liberal arts, some in with engineering or military experience, very few of them formally educated in economics - in the past.
The major economists involved in things going right back then would be Adam Smith and (later) John Maynard Keynes.
But you were asked for what went right due to an economist.

10. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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No, what's actually destructive is allowing banks to make terrible decisions and then deciding to use taxpayer money to bail them out instead of starting fresh and channeling that money towards more productive causes, such as those banks which didn't screw things up. I've already argued that position on these forums before, Joepistole and I used to have a long-running disagreement about it.

Canada's banks remained highly profitable throughout the whole sub-prime mortgage crisis, and it wasn't government regulation which made them stick to conservative lending practises; in fact, the Conservative government under Stephen Harper wanted them to do more of what the US and UK banks were doing, nevertheless crediting themselves for Canadian stability in the aftermath.

Limit the ability of banks to do what they do and what reward:risk ratios they can demand of their clients, and the only people who'll be able to get anything financed will be people with rich parents or uncles.

11. ### iceauraValued Senior Member

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I'm not talking about not understanding a "subject". I'm talking about someone who is shocked that moneylenders will prey on people and act as parasites on economies if it profits them, personally, to do so. I'm talking about a body of influential policy advisors and powerful officials who expect the banking and financial industries to regulate themselves and be constrained by their rational evaluation of market forces to moderate their greed in the interests of the greater good.
My response to you was the Roosevelt administration and subsequent maintainers of its policies, which were revoked beginning in 1981.
You asked for an example of policymakers who did a better job.
No one is talking about ignoring mainstream economic theory - I recommended paying careful attention to it, in fact, above, in order to avoid repeating the errors of defunct and dismissed economic theory of the past.

12. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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And I've already described it. America's financial institutions follow modern capitalist economic theory. Therefore they're responsible both for the successes and the failures, along with the theory they choose to put into practise.

13. ### iceauraValued Senior Member

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Non-conservative mortgage lending practices were not the cause of the Crash of '08.
Canadian banks did take losses on their mortgage lending, and were bailed out to the tune of 100 billion + by a central bank fund previously designed for the purpose.
Canadian banks are heavily and stringently regulated by the Canadian Federal Government - not, as in the US, free to shop around for loosely regulating States.
That was not true between 1933 and 1983. My farming ancestors, for example, had no trouble borrowing money on their signatures under the New Deal regulations- and they were dead broke after the Depression.
No one in my ancestry had rich parents or uncles, and none of them had any trouble getting their various businesses, farms, houses, etc, financed by banks, during the fifty years of rising US prosperity under New Deal banking regulations.

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14. ### iceauraValued Senior Member

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27,559
Speaking of economists, now: their manner of "following" theory - the actual policies the influential and dominant economists recommended and helped establish - changed in 1981.
Before that change, they provided successes. After that change, they provided failures.

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15. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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The article notes that none of Canada's major lending institutions were ever in danger of bankruptcy during the crisis, nor were extra funds needed to be raised from government revenues as was done in the US. The money the Canadian government set aside came from the central bank and was used to provide a source of credit at a time when global credit markets were seizing up, and the interest rates were set at standard market prices rather than negative values after inflation as was done in the US. Plus most of the mortgages financed with this money were already insured, so the government was guaranteed to receive most of its money back no matter what, and only about half of the available funds from this program were ever actually tapped.

Making loans available to support credit liquidity when global credit markets are freezing, is not the same as handing over hundreds of billions in tax dollars to subsidize bankrupt CEO's taking luxury vacations, with no guarantees of timely payback or profit after inflation.

Banks were still relatively loosely regulated even in those times. As I say, capitalism has a built-in regulatory mechanism whereby companies and institutions with unsound practises end up going bankrupt, and those with sound management succeed on their own. Government intervention to bail out US banks instead of leaving them to deal with their own mess and allowing a new class of wealthy elite to replace them, resulted in the US government supporting bad actors who will be free to engage in similar blunders in the future. Instead there should have been a consistent policy- the banks are free to lend and deal with voluntary clients as they please, and they're entirely 100% responsible for absorbing the damage when things go wrong, leaving room for better performers to take over the economy and put more people to work.

16. ### iceauraValued Senior Member

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dup.

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17. ### iceauraValued Senior Member

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Likewise the South Dakota State Bank, which was better regulated than most.
But the Canadians took losses on their mortgage lending - they could not escape all of the US implosion.
Which shows, btw, that it wasn't the mortgage lending that did in the entire US banking and financial industry.
It didn't work. It never has worked, in the US or anywhere else. There are many reasons it will never work, but the main one is that bankers are human beings - not saintly and rationally self-sacrificing guardians of the greater good.

The problems arise when the unsound practices inevitable in poorly regulated banks take down the entire economy, millions of people lose their jobs and homes, and great misery overtakes a formerly prosperous nation. That's bad, see? We learned that finally, once and for all we thought, in 1929. That's why a sensible government regulates its banking industry.
Republican government sucks ass, agreed. But that's what the American people voted for - or the electoral college, anyway.
That was the US policy in the derivatives market after 1999. Not a very good one, as it turned out - as if anyone with a lick of sense thought it was.

Even well run banks aren't physically capable of "absorbing" damage on the scale they are capable of creating if unregulated, and banks brought under by "unsound practices" are less capable than the well run. That's partly what the regulation is for - to make sure that banks are capable of absorbing whatever damage they have caused when things go wrong. Without the regulation, they won't be.

18. ### CptBorkRobbing the Shalebridge CradleValued Senior Member

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Bankers don't need to be guardians of the greater good, that's a problem for the people as a whole to sort out through their collective spending and earning choices. People stop working in a given job when the pay doesn't justify their working and living conditions, when it creates more burdens than it solves. Employers have an interest in attracting quality workers to their businesses and therefore an interest in providing attractive working conditions and salaries. Manufacturers have an interest in making better products at more affordable prices to outdo their competitors.

In a free market with heavy competition, businesses and corporations which fail to abide by sound practices end up developing a bad reputation and mismanaging their assets, leading to their collapse and replacement with superior competitors. The problems with capitalism often stem from the market not being free and competitive due to selective government intervention, and governments not intervening under more appropriate circumstances when vulnerable people are being abused and exploited.

Why even worry about economic policies, tax brackets and profit margins, when it's legal to buy stuff that was made or handled in a foreign country by people working at gunpoint, children locked up in factories prone to infernos, folks who are arrested and beaten when they attempt to unionize, and all that other pleasantness?

No, that's why a sensible banking industry regulates itself. Didn't John D. Rockefeller make a comment about knowing to get out of the market back in '29 when even his shoeshine boy was playing stocks? As you yourself note, not all US banks failed during the 2008 crisis, and they'd be running things now if their competitors hadn't been rescued. Evolution works by allowing things to fail and be replaced with better stuff.

Obama was involved in the bailouts policy too, he's the one who enacted it. You can say he was pressured or whatever and I'm sure he was, but the President's job is to lead, he can't say he had no part in the bailouts.

If a bank is well-run, then by definition it won't cause financial damage it can't afford to absorb.

19. ### iceauraValued Senior Member

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It's the responsibility of citizens to prevent disproportionate wealth accumulation and resulting bad consequences in the society they control.
And by preventing bankers from wrecking their economy.
That's what Greenspan said he expected - may have been an excuse for abetting exactly what happened.
None ever has, or ever will (as noted above). Being shocked when they don't is kind of silly.
And therein lies the oddity of the common effect of getting an academic education in economics - so many of those folks expect bankers to regulate themselves.
There is also the more common problem: markets not being "free" because the government failed to set up and defend them, or because they were a natural monopoly and could not be set up or defended as free markets.
A free market is usually a difficult thing to maintain and defend - sophistication in governance is necessary.
Republican governance sucks ass - agreed.
That said, none of the surviving banks (if any) would be ""running things" as some kind of replacements for the ruined banks - there would have been little to run, for a long time.
You can say he took an oath of office to faithfully execute the legislation passed by Congress and previous administrations. He wasn't pressured, he was subject to mandate.
That's good then, because they couldn't absorb as much damage as they could do, if unregulated. No bank can.

20. ### JeevesValued Senior Member

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2,190
This piece of crockery again? It wasn't even true in Dickens' time.
Enough to keep people fed, clothed, sheltered and working; enough left over to support a stable government and standing army and build some quite impressive roads, fortifications and temples. With no periodic monetary crises. No homeless. No breadlines. No police busting the heads of striking miners. No children in sweatshops, though they would be expected to help out in cottage industry and family farms. No dole. No crippling debt. Nobody becoming a billionnaire on adolescent angst or pathological gambling.
So, predators flourish when it kills prey? Not news. What sometimes - like every twenty years - seems to strike capitalist countries, as if it were news, is that a large portion of their own population pays a heavy price for the enrichment of a small portion of their own population. Then the apex predators say: "Yes, but you're still better off than the peoples we're actively bombing, so shut up."

Last edited: Aug 7, 2018