tag:blogger.com,1999:blog-2761684730989137546.post6917430477936549845..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Lord Keynes — My Posts on the Origin of Moneymike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger58125tag:blogger.com,1999:blog-2761684730989137546.post-28200934887054756322012-11-02T10:34:00.352-04:002012-11-02T10:34:00.352-04:00It's a game of musical chairs with only (1) ch...<i>It's a game of musical chairs with only (1) chair for every (10) players.</i><br /><br />Right, govt step in with chairs for everybody but Fuld. Now they see that was a mistake that paralyzed the system and almost took the whole economy down.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76576975389716160952012-11-02T09:21:28.116-04:002012-11-02T09:21:28.116-04:00"Ask Chuck Prince. He admitted it was a game ...<i>"Ask Chuck Prince. He admitted it was a game of musical chairs but everyone felt they had to play to stay competitive"</i><br /><br />It's a game of musical chairs with only (1) chair for every (10) players.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-23739738878011289042012-11-02T09:18:54.236-04:002012-11-02T09:18:54.236-04:00"What does that mean? Are you saying when inc...<i>"What does that mean? Are you saying when income falls? How can debt service suddenly exceed incomes of borrowers? When do incomes of borrowers fall? Why?<br />"</i><br /><br />Here's how:<br /><br />https://www.evernote.com/shard/s82/sh/4305d816-3f46-4b6c-b429-3ee9ac7f51d2/725e44fda952b472bfba8b5238a01a60<br /><br />This is the simple case of private debt funding gross profit only. With no net governmemt spending where else could the funds come from?<br /><br />Liablities quickly out-run the growth of incomes.<br /><br />paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81086584342865852802012-11-02T08:36:37.057-04:002012-11-02T08:36:37.057-04:00Graph of the Day: Frequency of Banking Crises
htt...Graph of the Day: Frequency of Banking Crises<br /><br />http://nakedkeynesianism.blogspot.co.uk/2012/10/graph-of-day-frequency-of-banking-crises.htmlyhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-5170257051649373552012-11-02T03:37:13.821-04:002012-11-02T03:37:13.821-04:00"Sure, if I agree to use gold, and I tend to ...<i>"Sure, if I agree to use gold, and I tend to be a late receiver, then it is my choice to be subject to the Cantillon Effect. I cannot use it to argue against the private money."</i><br /><br />Sure, if I agree to use fiat money, and I tend to be a late receiver, then it is my choice to be subject to the Cantillon Effect.<br /><br />Your position is incoherent: it is all just dependent on the original moral objection to fiat money, etc.<br /><br />My point is proven.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-73100803223960363812012-11-02T00:51:03.196-04:002012-11-02T00:51:03.196-04:00Well, we can argue this until doomsday, but in my ...Well, we can argue this until doomsday, but in my view it is social and political as much as if not more than economic, that is, cultural and institutional. I don't see changing economic institutions as being either practical or effective. unless people decide to change them. Change is always taking place but it generally takes place slowly unless forced by crisis. Then the outcome is quite uncertain and depends on a lot of factors that are social and political. <br /><br />Generally the political dimension is most significant because it is where actual power lies. I mean "political" in a broad sense here, not just government and what we call "politics." <br /><br />Cultural changes determine long term trends socially. The social trends is toward recognition of greater universality and increasing social liberalism. In my view, economic institutions are out of step with this trend and will fall in line over time. but with increasing complexification, it is unlikely it will be toward greater economic liberalism since more cooperation and coordination are required to meet growing challenges. As complexification increases, society has to commit more resources to organization to meet emergent opportunities and challenges. So the bias is toward greater social democracy and perhaps some form of syndicalism in which control of the means of production is more equally shared. What we have now is a plutocratic oligarchy and I don't think that this is a sustainable arrangement. It's a step between landed aristocracy and titled landownership of late feudalism and the next stage of economic organization.<br /><br />Historically, economic institutions are determined by social and political ones rather than vice versa. I think that Marx got that backwards. But in eras where acquisitors rule, the economic influence is more to the fore than in other eras.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-45305179912642777352012-11-02T00:18:31.426-04:002012-11-02T00:18:31.426-04:00Tom Hickey:
Well, as you know, endogenous money f...Tom Hickey:<br /><br /><i>Well, as you know, endogenous money folks don't look at it this way. Banks don't lend out savings.</i><br /><br />Yes, and that is precisely what Austrians hold to be a problem. If banks did lend only from savings, then credit would not generate a Minsky moment.<br /><br /><i>Ask Chuck Prince. He admitted it was a game of musical chairs but everyone felt they had to play to stay competitive — until the music stopped. Dick Fuld got caught without a chair.</i><br /><br />Bingo. Even those who understand financial instability, have to play the game if they want to stay competitive, and that balancing act IMO demoralizes otherwise good producers and investors, and, I think, makes people more cynical and more willing to go for the quick investment buck, rather than long term investments that provide production and employment opportunities for many years.<br /><br />Remember when people graduated school and then stayed at one employer their entire career? That is getting rarer and rarer, and I don't think it is ALL to do with innovation and globalization.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-38297750614411315832012-11-02T00:06:21.721-04:002012-11-02T00:06:21.721-04:00Ask Chuck Prince. He admitted it was a game of mus...Ask Chuck Prince. He admitted it was a game of musical chairs but everyone felt they had to play to stay competitive — until the music stopped. Dick Fuld got caught without a chair.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-87764565655113412682012-11-02T00:04:12.664-04:002012-11-02T00:04:12.664-04:00Not to Austrians it isn't. Austrians hold that...<i>Not to Austrians it isn't. Austrians hold that credit expansion is that quantity of credit that exceeds that which is voluntarily saved. This is quantitative, because we can see how much money people set aside for lending, and how much money is actually lent by credit expanding banks.</i><br /><br />Well, as you know, endogenous money folks don't look at it this way. Banks don't lend out savings.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26656617464452175692012-11-01T23:58:32.423-04:002012-11-01T23:58:32.423-04:00Tom Hickey:
"What does that mean? Are you sa...Tom Hickey:<br /><br /><i>"What does that mean? Are you saying when income falls? How can debt service suddenly exceed incomes of borrowers? When do incomes of borrowers fall? Why?"</i><br /><br /><i>Because lending institution start to get concerned about repayment and are unwilling to lend against collateral whose value they deem unreasonable based on ability to pay.</i><br /><br />Why would banks suddenly become "concerned" about ability to repay?<br /><br /><i> This was a no brainer in hot spots like CA, NV, and FL. I was amazed that banks went along with the momo market as long as they did. It was clear they were going to be burned, and they were once they chickened out, momo slowed, and flippers bolted.</i><br /><br />No doubt. Greenspan and Bernanke Puts.<br /><br /><i>"This doesn't explain why debt becomes burdensome."</i><br /><br /><i>People start missing payment schedules.</i><br /><br /><i>Then banks know something's up, and the game of musical chairs is over.</i><br /><br />Why do people start missing payments?<br /><br /><br />Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-12340070132419679602012-11-01T23:54:47.771-04:002012-11-01T23:54:47.771-04:00Tom Hickey:
"No, Minsky asserts that credit ...Tom Hickey:<br /><br /><i>"No, Minsky asserts that credit qua credit does it. Austrians hold that it is credit expansion that does it."</i><br /><br /><i>No the way I read Minsky. Financial instability results from the financial cycle, in which quantity increases and quality decreases. Credit "expansion" as as absolute number is meaningless.</i><br /><br />Not to Austrians it isn't. Austrians hold that credit expansion is that quantity of credit that exceeds that which is voluntarily saved. This is quantitative, because we can see how much money people set aside for lending, and how much money is actually lent by credit expanding banks.<br /><br /><i>Analysis is necessary and it's ratios that count more than amounts.</i><br /><br />Of course. Note that credit expansion can be considered as a ratio. Total credit as the numerator, and total money saved to be lent as the denominator.<br /><br />Note also that Austrians do not hold that money printed by the Fed, acquired by the banks, and then "saved" and lent is not considered as actual savings. There has to be an act of production, earning, and saving WITHIN the market process.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-90047847577685925622012-11-01T23:54:44.892-04:002012-11-01T23:54:44.892-04:00This doesn't explain why debt becomes burdenso...<i>This doesn't explain why debt becomes burdensome.</i><br /><br />People start missing payment schedules. Then banks know something's up, and the game of musical chairs is over.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-49921582869716849602012-11-01T23:52:29.486-04:002012-11-01T23:52:29.486-04:00What does that mean? Are you saying when income fa...<i>What does that mean? Are you saying when income falls? How can debt service suddenly exceed incomes of borrowers? When do incomes of borrowers fall? Why?</i><br /><br />Because lending institution start to get concerned about repayment and are unwilling to lend against collateral whose value they deem unreasonable based on ability to pay. This was a no brainer in hot spots like CA, NV, and FL. I was amazed that banks went along with the momo market as long as they did. It was clear they were going to be burned, and they were once they chickened out, momo slowed, and flippers bolted.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-18381000222787837462012-11-01T23:50:17.506-04:002012-11-01T23:50:17.506-04:00LK:
"No, not just as with any new private se...LK:<br /><br /><i>"No, not just as with any new private sector fiduciary media, because the Cantillon Effect is not mandatory in a free market money system."</i><br /><br /><i>LOL!!</i><br /><br /><i>How is not mandatory?</i><br /><br />LOL!!!!!!!!!!<br /><br />Because you are not FORCED to accept the commodity that is being increased with you as a late receiver!<br /><br /><i>Millions will not give their consent to the new fiduciary media created by other private agents, and fiduciary media will redirect wealth from those who receive it last, to those who receive it first.</i><br /><br />You are assuming everyone is already accepting it. Sure, if I agree to use gold, and I tend to be a late receiver, then it is my choice to be subject to the Cantillon Effect. I cannot use it to argue against the private money.<br /><br />But I know that in a private money system, I am free to compete to PRODUCE THAT MONEY MYSELF.<br /><br />I can't do that with fiat money. Only the state created banking cartel is allowed to do that. Thus, I am subjected the Cantillon Effect against my will, and it becomes important.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-2759279741034633872012-11-01T23:47:16.847-04:002012-11-01T23:47:16.847-04:00No, Minsky asserts that credit qua credit does it....<i>No, Minsky asserts that credit qua credit does it. Austrians hold that it is credit expansion that does it.</i><br /><br />No the way I read Minsky. Financial instability results from the financial cycle, in which quantity increases and quality decreases. Credit "expansion" as as absolute number is meaningless. Analysis is necessary and it's ratios that count more than amounts. <br /><br /><i>Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt by the non-government sector. He identified three types of borrowers that contribute to the accumulation of insolvent debt: hedge borrowers, speculative borrowers, and Ponzi borrowers.<br />The "hedge borrower" can make debt payments (covering interest and principal) from current cash flows from investments. For the "speculative borrower", the cash flow from investments can service the debt, i.e., cover the interest due, but the borrower must regularly roll over, or re-borrow, the principal. The "Ponzi borrower" (named for Charles Ponzi, see also Ponzi scheme) borrows based on the belief that the appreciation of the value of the asset will be sufficient to refinance the debt but could not make sufficient payments on interest or principal with the cash flow from investments; only the appreciating asset value can keep the Ponzi borrower afloat.<br />If the use of Ponzi finance is general enough in the financial system, then the inevitable disillusionment of the Ponzi borrower can cause the system to seize up: when the bubble pops, i.e., when the asset prices stop increasing, the speculative borrower can no longer refinance (roll over) the principal even if able to cover interest payments. As with a line of dominoes, collapse of the speculative borrowers can then bring down even hedge borrowers, who are unable to find loans despite the apparent soundness of the underlying investments.[5]<br /></i> (<a href="https://en.wikipedia.org/wiki/Hyman_Minsky#Understanding_Minsky.27s_financial_instability_hypothesis" rel="nofollow">source</a>)Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41578325087742645382012-11-01T23:44:55.425-04:002012-11-01T23:44:55.425-04:00Tom Hickey:
Yes, and Minsky/MMT says the same thi...Tom Hickey:<br /><br /><i>Yes, and Minsky/MMT says the same thing, but significantly differently. </i><br /><br /><i>And we know when they will burst, too. That occurs when debt service outruns income to service it.</i><br /><br />What does that mean? Are you saying when income falls? How can debt service suddenly exceed incomes of borrowers? When do incomes of borrowers fall? Why?<br /><br /><i>Banks stop tighten standards, momentum slows, and savvy traders that aren't out yet run for the door at once. But no one can say during the run-up when that will occur with any degree of precision.</i><br /><br />This doesn't explain why debt becomes burdensome.<br /><br /><i>Then there were those that applied similar reasoning to govt debt and lost their shirts shorting tsys. "But hyperinflation is just around the corner."</i><br /><br />I am invested in a portfolio that retains principle, but gains if REAL inflation picks up. I've done fairly well, but nothing spectacular.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-90283441010133688392012-11-01T23:42:56.711-04:002012-11-01T23:42:56.711-04:00"No, not just as with any new private sector ...<i>"No, not just as with any new private sector fiduciary media, because the Cantillon Effect is not mandatory in a free market money system."</i><br /><br />LOL!!<br /><br />How is not mandatory? Millions will not give their consent to the new fiduciary media created by other private agents, and fiduciary media will redirect wealth from those who receive it last, to those who receive it first. <br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-13206776276381013792012-11-01T23:40:08.092-04:002012-11-01T23:40:08.092-04:00My, that's truly brilliant, Major_Freedom.
I ...<i>My, that's truly brilliant, Major_Freedom.</i><br /><br />I am not Major_Freedom.<br /><br /><i>So you post under multiple handles so you can change your views whenever it suits!! I always wondered why you use so many internet handles: Major_Freedom, Pete, David, Christof, Pete PetePete, George, etc, etc.</i><br /><br />Of course my views have changed. I am learning over time. Those whose views don't change are not learning.<br /><br />I don't use those handled.<br /><br /><i>How convenient!</i><br /><br />How false!<br /><br /><i>This underscores for us all how you are utterly intellectually bankrupt.</i><br /><br />That doesn't follow. You just want to use that phrase because it gives you a psychological fix. But it doesn't last long, which is why you have said it more than once on this same blog post.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-28125560180071638722012-11-01T23:37:09.140-04:002012-11-01T23:37:09.140-04:00LK:
" It starts and stays with the fact that...LK:<br /><br /><i>" It starts and stays with the fact that the Cantillon Effect inherent in fiat money redirects wealth from those who receive it last, to those who receive it first. "</i><br /><br /><i>Just as with any new private sector fiduciary media.</i><br /><br />No, not just as with any new private sector fiduciary media, because the Cantillon Effect is not mandatory in a free market money system.<br /><br /><i>That is not an argument for abolishing fiduciary media.</i><br /><br />It is sufficient. There are other reasons.<br /><br /><i>And it is nothing but an externality.</i><br /><br />Only if others are obligated to deal in them. If they are not, then the costs do not get "externalized".<br /><br /><i>Practically all market activities generate externalities, whether beneficial or harmful.</i><br /><br />Private property rights is a way to eliminate negative externalities.<br /><br />The state is the biggest negative externality generating institution in human history.Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-60474560116734489522012-11-01T23:36:11.435-04:002012-11-01T23:36:11.435-04:00"Over at Robert Murphy's blog, you said &...<i>"Over at Robert Murphy's blog, you said "no," you would not ban it.<br /><br />I don't visit that blog."</i><br /><br />My, that's truly brilliant, Major_Freedom.<br /><br />So you post under multiple handles so you can change your views whenever it suits!! I always wondered why you use so many internet handles: Major_Freedom, Pete, David, Christof, Pete PetePete, George, etc, etc.<br /><br />How convenient!<br /><br />This underscores for us all how you are utterly intellectually bankrupt.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-53901119742572834902012-11-01T23:35:10.354-04:002012-11-01T23:35:10.354-04:00Austrian models don't have to predict WHEN bub...<i>Austrian models don't have to predict WHEN bubbles bust, to know that credit expansion generates them and makes corrections inevitable.</i><br /><br />Yes, and Minsky/MMT says the same thing, but significantly differently. <br /><br />And we know when they will burst, too. That occurs when debt service outruns income to service it. Banks stop tighten standards, momentum slows, and savvy traders that aren't out yet run for the door at once. But no one can say during the run-up when that will occur with any degree of precision.<br /><br />Then there were those that applied similar reasoning to govt debt and lost their shirts shorting tsys. "But hyperinflation is just around the corner."<br /><br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-65560679931694004122012-11-01T23:32:51.983-04:002012-11-01T23:32:51.983-04:00LK:
"Where Keynesians go wrong is asserting ...LK:<br /><br /><i>"Where Keynesians go wrong is asserting that it doesn't generate malinvestment and the boom bust cycle."</i><br /><br /><i>The very essence of Minsky's financial instability hypothesis is precisely the use of credit for destabilizing speculative purposes generating a boom/bust cycle.</i><br /><br />No, Minsky asserts that credit qua credit does it. Austrians hold that it is credit expansion that does it.<br /><br /><i>You have no idea what your taking about, as always.</i><br /><br />You don't know what YOU'RE talking about. And what do you mean "as always"? I just started showing you your errors.<br /><br /><i>"Not all new capital is beneficial."</i><br /><br /><i>So some new capital from new credit may be "beneficial"?</i><br /><br />Of course, because credit REDIRECTS capital. Some of it MAY end up being sustainable, but it is overwhelmed by capital that is not, which is precisely why the boom bust cycle takes place with credit expansion.<br /><br /><i>That simply proves my point.</i><br /><br />No, it doesn't, because your point is about credit expansion in general, not isolated instances where credit happened to have led to an individual investment that is later sustainable because of chance.<br /><br />Credit expansion cannot be used to target only sustainable investments.<br /><br />It would be like claiming because spraying a water hose at crowds MAY end up helping one or two people because they want a shower, or a drink, that it means spraying a water hose at crowds creates net benefits to the people who get wet.<br /><br />Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76087823497684533662012-11-01T23:30:24.269-04:002012-11-01T23:30:24.269-04:00" It starts and stays with the fact that the ...<i>" It starts and stays with the fact that the Cantillon Effect inherent in fiat money redirects wealth from those who receive it last, to those who receive it first. "</i><br /><br />Just as with any new private sector fiduciary media.<br /><br />That is not an argument for abolishing fiduciary media.<br /><br />And it is nothing but an externality.<br /><br />Practically all market activities generate externalities, whether beneficial or harmful.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-6105797915037110292012-11-01T23:26:48.009-04:002012-11-01T23:26:48.009-04:00LK:
Keynesian policy = macroeconomic management o...LK:<br /><br /><i>Keynesian policy = macroeconomic management of the economy via deficit spending to maintain full employment.</i><br /><br />Keynesian policy INCLUDES credit expansion, inflation, which took place in 19th century Australia.<br /><br />Keynesianism isn't only budget deficits.<br /><br /><i>you wish to abolish a free and voluntary market institution like FR banking?</i><br /><br />You evaded the argument. You want the state to regulate, i.e. violate consensual agreements, but you say it is wrong to want to reduce credit expansion by some law enforcement, state or private?<br /><br /><i>You can't even keep your answers straight.</i><br /><br /><i>Over at Robert Murphy's blog, you said "no," you would not ban it.</i><br /><br />I don't visit that blog.<br /><br />I didn't say I would ban it. If OTHERS want to engage in credit expansion of Wal-Mart money, let them. As long as I and all other individuals are not legally obligated to deal with those notes to pay taxes, then I have no basis to ban it.<br /><br /><i>(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t fiduciary media creation occur?;</i><br /><br />I am not saying it necessarily would not occur, just like I can't say torture will necessarily not occur.<br /><br />What will definitely occur is that it will be reduced compared to now. It will be self-regulated, instead of state regulated.<br /><br /><i>(2) with fiduciary media creation, under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;</i><br /><br />Not if anarcho-capitalist laws ban it.<br /><br /><i>(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;</i><br /><br />Straw man.<br /><br /><i>(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.</i><br /><br />False. You cannot claim credit expansion will necessarily exist in anarchy. Anonymoushttps://www.blogger.com/profile/15591978354639760240noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-24953688539374846882012-11-01T23:26:23.715-04:002012-11-01T23:26:23.715-04:00"There might be uses for new credit that have...<i>"There might be uses for new credit that have beneficial effects (new capital goods investments) or that cause deleterious economic effects (destabilizing asset bubbles).<br /><br />Not all new capital is beneficial. "</i><br /><br />So some new capital from new credit may be "beneficial"?<br /><br />That simply proves my point.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.com