Thursday, September 19, 2013

Why Nearly Everyone Born After 1970 Should NOT Be Satisfied With Their Education - Or Upbringing

Commentary by Roger Erickson

And mostly disgusted with both of them.

Why anyone born after 1970 should be pissed.

Ok, this author is angry, but that's not really the point, is it?

For survival, the ONLY POINT - ever! - is to decipher context, and then adapt to it.

Note that I specifically did NOT say "analyze context." When it comes to cultural evolution and adaptive rate, there is no TRY. There is only DO, or exit the stage extinct, or enslaved by those who will.

Saying that you've been had is just a euphemism for saying that you've been clueless up to now. Those people who've had  you for lunch are NOT going to respond, after the fact, to complaints. Only action.

So.  What, exactly are you - and your little Middle Class - gonna DO about it, now that you've noticed? 

Tick-tock. Tick-tock.


22 comments:

Bob Roddis said...

Anyone with an IQ above a turnip knows that this period began with Nixon moving to a pure funny money regime in 1971. And that regime ain't "capitalism".

It seems that things didn't turn out so well. Who knew?

Matt Franko said...

"Operator Error" Bob...

rsp,

Bob Roddis said...

"Operator Error" Bob...

WHICH IS WHAT ONE SHOULD EXPECT BECAUSE THE SWAT TEAM IS NOT RUN BY HAL THE COMPUTER OR GOD.

duh

Tom Hickey said...

"Correlation is not causation."

Tom Hickey said...

What been happening since 1970 is a cultural revolution along with globalization. While it's messy, it's a huge step forward for humanity. The world is becoming much more liberal as entire cultures move away from stultifying tradition in which there is a "right place for everyone and everything based on the societies of the past. Thank God that's going the way of the dodo as more and more people not only think for themselves but express themselves freely.Without this foundation, not much chance of adaptive rate increasing.

Matt Franko said...

I still say we give it a try with people in the operational positions who know what the heck is really going on Bob...

Lets give it a try with people who dont think "we're out of money" at the helm Bob... see what happens...

Perhaps if we can get people in there who understand how to operate a system under state currency and we STILL screw that up I may join your camp Bob, but to me it doesnt look like we've actually had both this system and qualified people to operate it in almost 2,000 years....

so I think it may be time to give it a try the right way again Bob and see how it goes this time...

rsp,

Roger Erickson said...

We've been on a pure fiat currency system since 1933, not just 1971, in case no one noticed.

The quasi-gold std re-introduced in the 1944 Breton Woods agreements was between governments only. No one even tried to take advantage of that inter-gov $US/gold convertibility until the French, and that's when Nixon finally ended the unused supposition.

1933. Remember that date.

So even the correlation with 1971 fails, utterly and completely.

Ripples in the quality of distributed decision-making both correlates and explains much better as major causality. And yes, evidence for that stretches through all human-derived concepts, back to the dawn of theorized time periods.

jrbarch said...

Whatever the adaptive rate of education has been over the last few millenia, the adaptive rate of ignorance has been faster? Mind is missing some vital piece ....?

Bob Roddis said...

1. The funny money 1971 "dollar" was worth 32% of the 1933 "dollar". The 2013 "dollar" was worth 6% of the 1933 "dollar". And with every funny money emission, someone was able to rob others of their purchasing power, which is the whole point of the emission process.

2. "Operator Error" Bob...

Well then. MMT is all just a theory. Full of giant size holes in its logic and factual basis.

Matt Franko said...

Bob,

The "T" in MMT you are correct stands for "theory"...

This is how science works vice ideology/dogmas... thru theory/hypothesis that can be tested...

The last 2,000 years was a test for your chaos inducing Austrian-type theories and many (including yourself btw) dont like what they can see thru the history...

It time to test a new Theory...

rsp,

Tom Hickey said...

Bob, we been there before. Yes money declined in purchasing power on an absolute basis but not on a relative basis. People are much better off today than in 1913 owing to many other factors, not the least of which is productivity resulting from innovation. Looking at the relative value of a currency relative to the amount of gold it will purchase is irrelevant to most people, who are concerned instead with living standard, which is a function of productivity and income, for instance.

Yes, anyone who hoarded money under the mattress lost purchasing power. How many people would have been that stupid.

This is after all a market economy and people are presumed to be intelligent enough to make reasonable investment decisions, which involves inflationary expectations.

Your argument is nonsensical.

Tom Hickey said...

Austrian economics is not a theory based on generating testable hypotheses, which is the basis of the scientific method. It is an ideology based on assertion of a priori principles as self-evident. These principles are not treated as assumptions that stand or fall based on empirical consequences, which is the basis of doing science.

Tom Hickey said...

No doubt that those with better credit get access to credit first and there are Cantillon effects of that. But that is true in any monetary system and in the "sounder" the system is the more credit is restricted to those that have the best credit. Prior to the advent of fiat, consumer credit other than with a significant downpayment and good credit history was not available to the middle class. This severely restricted economic growth. Without abundant consumer credit, there is low growth and high inequality distributionally. There is an economic price to pay for sound money over loose money, and there is a financial risk involved in loose money over sound money. There are always trade-offs in econ.

Tom Hickey said...

That everyone engages in economic calculation is empirically true

Nonsense. "Economic calculation" the basis of the rationality assumption that Keynes destroyed.

The basis of PR, advertising and marketing is based on non-rationality of preference and choice.

And if economic calculation were the case there could not be gas stations within sight of each other with different prices. That's what branding is all about. Most humans are creatures of habit, subject to persuasion and the preferences of others, not reason that calculates economic value.

"Economic calculation" is actually meant wrt to the allocators of capital not goods market. The idea is that the real interest rate wrt expected return on investment are dominate, and there is general truth to this. However, as Keynes observed, in a monetary economy money and goods are not substitutes for each other, so that uncertainty affects liquidity preference, and there is no way to calculate what is inherently uncertain. Similarly, the momentum of booms results in people's animal spirits overshadowing their reason, resulting in bubbles dye to price-chasing.

Tom Hickey said...

Let's put it differently. No one stashes money under the mattress for long periods other than crazy people.

Tom Hickey said...

Nonsense. Booms and busts are a feature of capitalism in all its phases, regardless of the monetary regime.

Tom Hickey said...

Actually, Christine Desan says there were no booms and busts before paper money in the 1600s.


Before 1600 is before the Industrial Age and the advent of industrial and financial capital. Prior to the rise of industrial and finance capitalism, credit only financed trade and governments. Joint stock companies were trading companies in the 16th and 17th centuries. The Bank of England was not established until 1696.

There were booms and busts in the 19th century on the gold standard due to land speculation in the US. so it's not just industrial capital.

Wherever there is a monetary economy and credit extension, there are periods of over-extension of credit wrt to actual value of collateral due to over-exuberance (the opposite of rational economic calculation) and an ensuing correction in asset prices that becomes contagious, goes viral, and affects incomes and effective demand.

As I pointed out before, banknotes were introduced in China in the 7th century and China did not experience either inflation or boom-bust cycles until the 16th century. The inflation was due to war funding without sufficient taxation to counter.

At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The cowry has served as money throughout history even to the middle of this century. 

China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be thought of as the original development of metal currency. In addition, tools made of metal, like knives and spades, were also used in China as money.  From these models, we developed today's round coins that we use daily. The Chinese coins were usually made out of base metals which had holes in them so that you could put the coins together to make a chain.

In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the beginning of a kind of paper money.

From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was used as money. Through this period the amount of currency skyrocketed causing severe inflation.


History of money

Tom Hickey said...

BTW, the reason there wasn't inflation is that prior to government borrowing to finance war, young men were pressed into service and the populace forced to support the war logistically through levies of real goods. These were not monetary economies to speak of, and the rulers didn't have to bother to conform to the niceties of taxing and borrowing. This was continued into the feudal system and only came to an end with the rise of the merchants and guilds that got a foothold in power in the late Renaissance. Modern banking did not make an appearance until the 17th and 18th centuries with the advent of wider credit extension. This became a funding source for not only trade but capital expansion.

The Rombach Report said...
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The Rombach Report said...
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The Rombach Report said...

Tom & Bob - I think all three of us have to agree that bubbles happen under both hard and fiat money regimes, human nature being what it is. However, my perception is that on the margin fiat money is more likely than hard money to fuel bubbles because your everyday citizen will be more motivated to game the system (think sub-prime house flipping) if prices are fluctuating wildly due to inflation or deflation.

Tacking on a different angle, the growing awareness of the growing disparity in wealth was highlighted recently with protest demonstrations by MacDonald's employees demanding a $15/hr minimum wage. My take on it is that they may be aiming too low and I think I can make a case for why the minimum wage should be $20/hr.

In 1964 the minimum wage was 5 silver quarters per hour. Now, the silver content of those 5 quarters is worth more like $20.

Tom Hickey said...

Ed, the boom-bust cycle is usually but not necessarily related to ease of credit. Austrians and PKE economists that follow Minsky agree on this. Minsky was influenced in this by his teacher, Joseph Schumpeter, who was Viennese, so there is a connection with the Austrian School. However, the interpretations are somewhat different although they agree that credit is the fundamental issue. Austrians see it related to the interest rate whereas Minsky hypothesized a financial cycle independent of the interest rate. Austrians hold that when credit is too cheap, malinvestment results that must eventually be purged, which sounds intuitive. But Minsky said that in reality it is more complicated than that, based on different stages of a financial cycle.

But capitalism is also affected by shorter business cycles in addition to the longer financial cycle. ABT hold that the business cycle is the result of malinvestment resulting from credit being priced to low. PKE adopts the view of Keynes. See John T. Harvey, US Business Cycles from 1971-2010: A Post Keynesian Explanation, for instance.

Curiously and in spite of its name, very few business cycle theories actually treat it as a cycle. Mainstream economics, for example, models all macroeconomic fluctuations as a function of exogenous forces. In their view, the economy remains at full employment indefinitely unless impacted by some external event. Post Keynesian economists disagree strongly with this characterization, arguing instead that business-cycle fluctuations are endogenously generated. The goal of this paper is to compare the explanatory power of four business cycle models–three mainstream and one Post Keynesian–for the US economy since 1971. While the test employed is a simple one, the results are very clear: no model’s performance comes even close to that of the one based on Keynes’ seventy-year old analysis.