Are recessions/depressions natural in a economy ? If the Uni

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mikecartwright
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07 May 2012, 5:47 pm

Are recessions/depressions natural in a economy ? If the United States of America had always had tax cuts and lower taxes and or even no income tax or a flat tax would we still have recessions/depressions in our economy ? Taxes were low during the 1920's but there was still a recession therefor my question is are they natural in a economy ?



http://en.wikipedia.org/wiki/Depression ... E2%80%9321



1000Knives
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07 May 2012, 6:18 pm

Well, whether or not something is "natural" or not is almost irrelevant. It's not natural for us to live in houses with air conditioning and television, but we do it anyway, as it's pleasurable and convenient. So, I guess economic recessions and depressions are "natural" but they're certainly not pleasant, so logically, we want to have them not happen.

But, for the other things, lots of things can screw up an economy. A war can. Natural disaster can. A drought can. And as far as high taxes, all countries have had high taxes, just maybe not numerically. It used to be called serfdom. America is now just headed on the path of serfdom on a national scale.

Nothing new under the sun...



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07 May 2012, 7:48 pm

There is a business cycle. At some point people let wishful thinking and over-optimism guide their investments. The lure of Free Money and Something for Nothing is very powerful.

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07 May 2012, 8:35 pm

There are also climatic elements and their effect on agriculture, which is relatively random and unpredictable, but can have very far-reaching consequences, especially where the economy is agrarian, but even elsewhere (through food prices, in particular).



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07 May 2012, 11:40 pm

Seems like during every recession/depression wealth and business is consolidated. If the world were to eventually adopt a world market, how would they get out of that recession/depression? Would the world ever boil down to one market, assuming we are still stuck on this planet?


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ruveyn
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08 May 2012, 3:35 am

snapcap wrote:
Seems like during every recession/depression wealth and business is consolidated. If the world were to eventually adopt a world market, how would they get out of that recession/depression? Would the world ever boil down to one market, assuming we are still stuck on this planet?


Even if there were a world Uni-Market there would still be a business cycle. It is related to human psychology.

Perhaps a market run by dolphins or elephants would not be so burdened.

ruveyn



WilliamWDelaney
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08 May 2012, 6:42 am

mikecartwright wrote:
Are recessions/depressions natural in a economy ? If the United States of America had always had tax cuts and lower taxes and or even no income tax or a flat tax would we still have recessions/depressions in our economy ? Taxes were low during the 1920's but there was still a recession therefor my question is are they natural in a economy ?



http://en.wikipedia.org/wiki/Depression ... E2%80%9321
The truth of the matter is that the market is a social institution. It rises and falls based largely on people's mood.

What this means is that, if a France were to elect a socialist government during a debt problem, your stocks would very suddenly take a dive. The reason behind this is that a lot of American investors have some pretty dumb ideas about European socialism. They would be pulling their money out of certain stocks that might be uncertain during economic hard times, and they would be reticent to make new investments until they were sure what was going to be the outcome.

However, this would be a great time to buy. The French working class have fled to the far-right National Front, and they aren't coming back. French Socialism doesn't revolve around economic ideology anymore, but their ideas tend to be centered around minorities, academics, women and youth. When the media realized this and started reporting it, American investors would most likely go back to business as usual. Americans are going to get a quick education pretty soon in what the difference is between modern European socialism and what Americans think when they hear the "S" word.

Now, what determines people's readiness to buy, at the individual level, is people's belief that they ought to buy. Production is not a problem in our economy, and it never will be again, thank God. Well, back when people believed that real estate would always be growing, people wanted to buy houses. Why? Because they believed that a house would be their retirement. They believed they would eventually be able to flip their home for a profit and take a long vacation. People really don't like to work. They hate to work, and they really like to be able to do something that can earn them an easy profit without having to work for it. People love a free lunch, even though the food makes them so thirsty they have to pay the exorbitant price for a drink. The food is loaded with salt. The free lunch doesn't exist.

Right now, we are in a situation that people don't want to spend money. That's just a matter of fact. People have a belief right now that austerity is the answer. They believe that they ought to keep their money in the bank and sit on it until the economy has "recovered." There isn't a damn thing wrong with the economy, though, except that people are paranoid to spend money, even though perhaps they should.

Let's say you throw the people a tax-cut. Is that going to make people spend money? It might for the short-term, assuming that people believe that a tax-cut is always going to make the economy run like it's powered by dynamite. It's a bull crap superstitious belief, but people in general don't have much intelligence. Their mindset is, "the government isn't going to start taking a lot of my money and drain my retirement, so I'm sure that I'll still have enough to live on if...I go ahead and get that knee replacement surgery!"

Therefore, what actually WOULD cause people to start spending money again in this economy? Well, what the government could do in theory would be to establish a fixed tax rate that can only be changed when changing it can be justified. By that, I mean that establishing new entitlement programs would not be a justification.

A justification for raising taxes would be paying down debt, for example. If the government were to start cutting entitlement programs and at the same time implemented a temporary tax hike, with a definite expiry date, the market actually would run as if it were powered by dynamite. Clinton actually did this. This is how we had that big budget surplus during his presidency. He had made a fiscally responsible decision to use taxation to finance paying down America's deficit, and it was a success because it was being done for fiscally conservative reasons.

What would cause people to start spending money again would be to make a long-term plan for how we're going to deal with entitlements, and we ought to make a binding contract, on both sides of the aisle, that we're going to stick to it. It can't be a situation where the Republicans say, "my party won the election, so we're going to beat up your party, gut entitlements and have a tax-cut party," and it can't be a situation where the Democrats say, "my party won the election, so we're going to beat up your party, have a tree-hugging party, and make all the rich people pay for the booze." Instead, both parties would have to individually make a binding agreement with themselves to enforce a strict policy on entitlements, and there would need to be a sense that they would stick to it, no matter who was in charge.

And the reason that would cause people to want to spend money is that it would give the big investors a sense that they can predict the future. People would actually believe that, 20 years from now, their retirement would be intact. They would know that, if they were to start up a business, the government wouldn't suddenly decide they were going to create a socialist state and tax away their life savings. People would be able to spend money on things they needed with a sense of confidence and security.

That's all we need to do in order to fix things. That actually is the answer.



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08 May 2012, 7:58 am

As long as people would rather spend than save (along with the self denial that comes with saving) there will be a tendency to debt. With growing debt is the urge to double-down to liquidate the debt. And there is The Birth of the Bubble. As long as people nourish the illusion of Something for Nothing there will be booms, busts and bubbles.

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08 May 2012, 8:20 am

They have happened since the dawn of man. They do happen in cycles, all we try to do is control how long we stay in a certain phase.


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08 May 2012, 8:59 am

WilliamWDelaney wrote:
The truth of the matter is that the market is a social institution. It rises and falls based largely on people's mood.

What this means is that, if a France were to elect a socialist government during a debt problem, your stocks would very suddenly take a dive. The reason behind this is that a lot of American investors have some pretty dumb ideas about European socialism. They would be pulling their money out of certain stocks that might be uncertain during economic hard times, and they would be reticent to make new investments until they were sure what was going to be the outcome.

However, this would be a great time to buy. The French working class have fled to the far-right National Front, and they aren't coming back. French Socialism doesn't revolve around economic ideology anymore, but their ideas tend to be centered around minorities, academics, women and youth. When the media realized this and started reporting it, American investors would most likely go back to business as usual. Americans are going to get a quick education pretty soon in what the difference is between modern European socialism and what Americans think when they hear the "S" word.


Ha!

HaHaHaHaHa!

Sorry Bill but you are a little out of date.

1. In France it is Front National not National Front. The National Front was a UK organisation of skinheads now largely defunct.

2. European socialism is all about economic socialism. totally, 100%.

Why do you think the first thing Francois Hollande said was 'we are going to renegotiate the fiscal pact' and the first thing Angela Merkel said was' the fiscal pact is non negotiable'?

If Hollande had stood on a platform of hippy love why wasn't he celebrating his victory with group hugs for all instead of picking a fight with Germany before he is even officially sworn into office?

Why has he made election promises to not sign the already agreed fiscal treaty, to raise taxes on the rich to 75% and start a national house building scheme churning 500,000 houses per year?



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08 May 2012, 9:50 am

There have been many economic slumps and economic gains through history. Equally, there are many theories as to why. I would guess there are different causes for the ups and downs, but one idea often mentioned is demographics. For example, we often hear about the baby boom generation. As each generation goes through life, they develop different priorities. When younger and have kids, spending on items for what children need goes up. And when older and retired, spending for vacation homes rise for example.

What is relatively new to history is the idea that government can smooth out the down cycles in the economy. That is a main idea behind Keynesian theory. Politicians like Keynesian ideas as it allows them to tell voters they are able to improve their lives. It is a vote getter. The gist being that money can be removed from a productive part of the economy and placed into another sector creating jobs. The idea often do not pan out. Government is poor at picking winners and losers. And as evident today, with enormous amounts of stimulus spending economic growth has been anemic. The economy seems to be stalling once again in America and Europe too. In America we have the additional problem of a high number of regulation, delaying projects for years if not decades. As the President mentioned, shovel ready projects where not so shovel ready.

Economic Thomas Sowell wrote some nice article in the recent past on the topic of job creation during down times.

"Brass Oldies"

http://jewishworldreview.com/cols/sowell102610.php3

&

"Brass Oldies: Part II"

http://jewishworldreview.com/cols/sowell102710.php3

snippet:

Quote:
....One of these brass oldies is the idea that the government can and must reduce unemployment by "creating jobs." Some people point to the history of the Great Depression of the 1930s, when unemployment peaked at 25 percent, as proof that the government cannot simply stand by and do nothing when so many millions of people are out of work.
If we are going to look back at history, we need to make sure the history we look at is accurate. First of all, unemployment never hit 25 percent until after-- repeat, AFTER-- the federal government intervened in the economy.
What was unemployment like when the federal government first intervened in the economy after the stock market crash of 1929? It was 6.3 percent when that first intervention took place in June 1930-- down from a peak of 9 percent in December 1929, two months after the stock market crash.
Unemployment never hit double digits in any of the 12 months following the stock market crash of 1929. But it hit double digits within 6 months after government intervention-- and unemployment stayed in double digits for the entire remainder of the decade, as the government went in for one intervention after another....


&

"Brass Oldies: Part III"

http://jewishworldreview.com/cols/sowell102810.php3



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08 May 2012, 10:02 am

DC wrote:
WilliamWDelaney wrote:
The truth of the matter is that the market is a social institution. It rises and falls based largely on people's mood.

What this means is that, if a France were to elect a socialist government during a debt problem, your stocks would very suddenly take a dive. The reason behind this is that a lot of American investors have some pretty dumb ideas about European socialism. They would be pulling their money out of certain stocks that might be uncertain during economic hard times, and they would be reticent to make new investments until they were sure what was going to be the outcome.

However, this would be a great time to buy. The French working class have fled to the far-right National Front, and they aren't coming back. French Socialism doesn't revolve around economic ideology anymore, but their ideas tend to be centered around minorities, academics, women and youth. When the media realized this and started reporting it, American investors would most likely go back to business as usual. Americans are going to get a quick education pretty soon in what the difference is between modern European socialism and what Americans think when they hear the "S" word.


Ha!

HaHaHaHaHa!
Ridicule will neither raise my estimation of you nor alleviate your own ignorance.

Quote:
Sorry Bill but you are a little out of date.
I assure you that my statements correspond precisely with the stated platform of the French Socialist Party in this year's election.

Quote:
1. In France it is Front National not National Front.
I am not French, though, and I prefer to use proper grammar where I can. Also, italics are your friend: it's "Front National.

Quote:
The National Front was a UK organisation of skinheads now largely defunct.
I was clearly speaking of the French National Front, not the organization in the UK.

Quote:
2. European socialism is all about economic socialism. totally, 100%.
Nonsense. "Socialist" is a meaningless name for various and diverse political affiliations. It doesn't just differ between America and Europe, but it differs between one European country and another and even from one election cycle to another.

Quote:
Why do you think the first thing Francois Hollande said was 'we are going to renegotiate the fiscal pact' and the first thing Angela Merkel said was' the fiscal pact is non negotiable'?
Because "Plan B" is actually a perfectly viable alternative to the "austerity" plan. That is, they are changing the hand that they are using to hang themselves, but little else has changed.

Quote:
If Hollande had stood on a platform of hippy love why wasn't he celebrating his victory with group hugs for all instead of picking a fight with Germany before he is even officially sworn into office?
His political adversaries had the idea that he was "picking a fight," not Hollande, not the German government.

Quote:
Why has he made election promises to not sign the already agreed fiscal treaty, to raise taxes on the rich to 75% and start a national house building scheme churning 500,000 houses per year?
The tax sounds like a good idea that we ought to begin emulating immediately. Austerity was a pile of ignorant horse crap.



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08 May 2012, 10:52 am

DC wrote:
Ha!

HaHaHaHaHa!

Sorry Bill but you are a little out of date.

1. In France it is Front National not National Front. The National Front was a UK organisation of skinheads now largely defunct.

2. European socialism is all about economic socialism. totally, 100%.

Why do you think the first thing Francois Hollande said was 'we are going to renegotiate the fiscal pact' and the first thing Angela Merkel said was' the fiscal pact is non negotiable'?

If Hollande had stood on a platform of hippy love why wasn't he celebrating his victory with group hugs for all instead of picking a fight with Germany before he is even officially sworn into office?

Why has he made election promises to not sign the already agreed fiscal treaty, to raise taxes on the rich to 75% and start a national house building scheme churning 500,000 houses per year?


That is a pretty limp attempt at criticism, I must say. It seems to me that it is you who is out of date--we are talking about François Hollande--not François Mitterand (and your assessment would be wrong, even of him). No one who actually reads french news could describe Hollande as a left-wing socialist.

And it is a poor student of french politics who describes the Parti Socialiste as anything other than centre-left. The socialists only displaced the communists as the largest party of the left in the late 70's (culminating with the communists' virtual elimination as a political force under Mitterand). Mitterand, and the major socialist figures of the time, such as Jospin, Cresson and Fabius took France solidly away from economic socialism in 1984 when she remained in the EMS (paving the way for Chirac's premiership, two years later--a bit of an own goal, that).

In the next decade, Jospin's premiership continued a national policy of privatisation (hardly a hallmark of economic socialism) and he was 'rewarded' by being eliminated in the first round of the 2002 presidential election because the left wing parties fielded their own candidates rather than support him, leading to the Le Pen's second place finish.

In the past decade, the internal debate within the PS have clearly demonstrated that centrists policies are prevailing. The ejection of Laurent Fabius (over the European Constitution), the moderates supremacy at Le Mans, the nomination of Ségolène Royal, and the large following for DSK all point to a preference for moderacy over the more traditionally socialist economic positions of people like Fabius.

Certainly the PS sees a strong role for government in the national economy. The promulgate strong regulatory protection for workers (35 hour work week, pension eligibility at age 60, etc.) but they do not propound a policy of direct participation in the economy. They are very much a party of the "third way" in the capital-L Liberal tradition.

As for Hollande and Merkel--it will make for interesting watching. Each is posturing, of course. The Germans agenda may well be to remove the PIGS from the Euro--but it certainly is not their agenda to lose France or the Beneleux. Some reconciliation of positions is bound to occur.


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DC
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08 May 2012, 11:12 am

WilliamWDelaney wrote:
Ridicule will neither raise my estimation of you nor alleviate your own ignorance.



My apologies, I often come across more obnoxious than I intend it wasn't meant to be a personal insult.

Quote:
Quote:
Sorry Bill but you are a little out of date.
I assure you that my statements correspond precisely with the stated platform of the French Socialist Party in this year's election.



Oh.

France just had a presidential election. president only. nobody else.
The words of the presidential candidate, a single person should therefore be taken into account as the French Socialist Party wasn't standing for election, Francois Hollande was.

Where does Hollande stand on multicult issues in France?

"In the period of crisis we are going through, limiting economic immigration is necessary and essential"

"I also want to fight illegal immigration on the economic front. It is not right that a certain number of employers, in a cynical way, are hiring illegal migrants"

Hollande repeated a pledge to ask parliament to cap the number of migrants allowed into France every year.

Hollande admitted on Friday that he would "maintain the law on the burqa and would apply it in the best of ways."

Basically, to get elected Hollande had to strip out all luvvie multiculturalism dogma from his campaign, any socialist, anywhere in Europe trying to get elected by ignoring economic issues and focusing on 'equality and diversity' will be slaughtered. European voters have rejected multiculturalism to such a large degree that coalition governments in some european countries are having to get into bed with far-right parties or even proper fascist ones.

Your original argument that socialist parties in Europe are focussed on equality issues and not economic ones smacks of Tony Blair 1997 socialism, I hate to be your 'man in the field' but Europe has changed and the report you are reading back in the studio is no longer applicable.

Quote:
Quote:
Why has he made election promises to not sign the already agreed fiscal treaty, to raise taxes on the rich to 75% and start a national house building scheme churning 500,000 houses per year?
The tax sounds like a good idea that we ought to begin emulating immediately. Austerity was a pile of ignorant horse crap.


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08 May 2012, 11:33 am

Because communists invented taxes, which never existed before. :roll: