Mild deflation causes people to put off SOME spending, in the same way as mild inflation causes people to put off SOME saving.

If mild deflation causes a deflationary spiral, then mild inflation causes hyperinflation.  They are each others' dual.

I think so, been involved in a few of the Keynesian v Austrian discussions lately and the more I look at it the more it seems that's something like arguing the merits of Christianity v Islam and overlooking Creationism v Evolution.

Maybe I'm getting the wrong idea, my view of Austrian economics is precious metal based economies or is that like considering apples a component of physics? And you say QE was created in 2001, wasn't the boom in the 80's just the same thing with a different name?


Something interesting going on here:
https://bitcointalk.org/index.php?topic=934456
Sounds along the same lines as that creationism versus evolution point but still getting my head around it, something like value being purely related to the individual rather than global.

Accurate enough to project the effects of the various QE projects for starters. Looking at the boom-bust cycles over the years the planners either haven't got a clue or are pumping and dumping the global economy and loading up on assets at every stage.

Economics have grown from something more convenient than barter to something as important in our everyday lives as the food we eat and water we drink and the only other thing that's embedded its self so deep in society is religion. This Keynesian versus Austrian argument comes up all the time, are we arguing over the merits of Islam versus Christianity when what we should really be considering is Creationism versus Evolution?

That is close to what the point of this (perhaps ultimately pointless) topic was.

What was perhaps implied rather than explicitly stated is that the "constant message" that is being broadcast by the general media (IMO) is that the world's most serious problems don't need fixing because the economic experts (which the politicians love to quote) have this all "under control" (or even worse that there simply is no problem).

So "why are we even asking the economists?" is in fact *exactly* what I was meaning (and by "we" I am really meaning those that are giving us the messages not literally "we" as I am pretty sure that most of us know that given any set of X economists you'll get X different predictions).

And @twiifm I am not mad at you (you'd have to do a lot better than say that I am ignorant).

You seem to be awfully sure of how ignorant I am - but that is okay as I know that your type just care about "winning arguments" rather than actually "doing anything useful to help the world".

So enjoy "winning your argument" and convincing everyone that they should just shut up and let the politicians and economists save us (because we all know what a great job they are doing).

And which proves more accurate long term? As in better than 50%.

This is right, and they are (of course) correct in that.

Now, you can argue, they are visibly wrong in that, because there is a lot of economic modeling going on, and there is a lot of econometry, and although that doesn't always work out, it does give some right information.

The point is: this can work maybe in the short term.  Economic activity can probably be modeled in the short term, by some or other Kalman-type filter on past time series.  If you take as input sufficiently relevant time series of macro-economic parameters, you may be able to have some model that will extrapolate small perturbations in the near future.

However, such models will allways end up failing in the longer term, and the reason is exactly that given by the Austrians: "human action".

The problem with any economic model is that it is the result of many human decisions, and that those human decisions not only change according to the whims of people (that could potentially still be modeled), but also because these humans themselves LEARN and use the economic happenings and to modify their behavior to their perceived advantage.

For instance, the first time you print money, the economy will react in a specific way.  That will be to the advantage of some and to the disadvantage of others.  Next time, the economy will not react the same way anymore.  People will have learned from the first time.  People will anticipate you printing money, and will take *different actions*, and as such, the economic dynamics will have changed.

In other words, the economic dynamics is not time-invariant, because there is this learning function.  And the states also have learning functions.  if the first time they react to a crisis in a specific way, and that doesn't bring in the hoped-for results (on electoral or economic side), next time that state (which is part of the economic dynamics) will do something else.

So: same situation, different response.  By definition, that cannot be modeled.  Because a mathematical model gives you the same response to the same input.

Human action, which includes learning, makes that economy is *in principle* not following a mathematical model.  Because it is not time invariant.
And because people learn.

Thats absurd, as I just explained. You have to think. You can not just listen to a bunch of people who talk each other up.

I do think this is the problem - those who support the non-scientific "pseudo-science" of economics would rather see us all asphyxiate in pollution than admit there is anything wrong with their theories.
 

Well he is smart, but he is not smart enough to grok that a trade always have two sides, and if the deflationary trait of the money means less buying, then the inflationary money would mean less selling. Why sell now when you can get more money for the same thing next year?

Yep, this is what excites me too.
If someone somewhere invents this BitCurrency in a way that intrinsically tracks a reliable independent measure of demand, so it auto-deflates or inflates as required, we will have a stable currency that cannot be centrally manipulated.
If this happens I'd get as much base commodity (BTC) as I could

Thanks for that interesting commentary.

To me, a big part of the problem is the huge disparity between ordinary people's understanding of banking / money and the reality.

For example, take the concept of interest and "loans". I think most people generally understand the word "loan" to mean the transfer of some some asset from one entity to another on a temporary basis while ownership clearly resides with the lender.

Note 1 very important aspect of this understanding: during the period of the loan, the lender's assets are *depleted* by the amount lent. So, for example if I run a car hire business with 10 cars and I lend you a car for a week, I will only have 9 cars left. It arises from this that an interest payment is reasonable to compensate the lender for the use they could otherwise have made on their asset.

Now lets look at banking. As we know, it doesn't remotely work like this. What happens instead is:

[1] - the bank creates new money levered off a capital reserve base

[2] - that new money is backed by THE BORROWER'S FUTURE ECONOMIC ACTIVITY

Note that second part. It's actually the borrower who underwrites the value of the new money by signing a pledge to work for the next 25 years of their life in order to service and repay the loan. If their ability to do that is compromised then the loan defaults and the money is extinguished.

If the vast majority of ordinary people understood this principle, the banking system would not look anything like it does today. If they understood that the bank is only a liquidity provider but it is the borrower who endows that liquidity with 'value' then they would never accept the conditions under which such liquidity is provided.

What banks do as akin to supplying the paper to the book publishing industry, yet they are remunerated as if they were the authors generating the content.

The problem is with the words "loan" and "borrowing". They are misnomers which dupe the world into accepting a highly asymmetric financial system. The proof that it's asymmetric lies in headlines such as these...http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland

I know, and I showed you where it failed.  A capped money supply doesn't instore any monopoly.  That is a mercantilistic vision.
The point being that there are two possible cases:

1) the fishermen family hoarded most if not all of the money.  This means that they do not spend it on things OTHERS produce (if they would money would get in other people's hands too).  If they do not spend it on things others produce, those others don't get their hands on the money, and they cannot buy fish with the money they don't have.  So the fishermen do not "get rich" on the back of others, who cannot buy their fish and from whom they do not buy anything (or the money gets distributed).  In that case, their money isn't worth anything or not much.
So in as much the fishermen family has most of the money, that money isn't WORTH much.  You can't buy much stuff with it.
And in as much as they buy stuff with it, the money gets redistributed.

2) in as much as the fishermen hold all of THEIR money, and that money doesn't circulate amongst others, and those others don't interact economically with the fishermen, another money may as well emerge, replacing the former money. Then, the fishermen are sitting on a stash of worthless assets.  Maybe shells will emerge as money.  Or coconuts.  Whatever the OTHERS exchange amongst themselves.

Money is only worth what other people want to do for it.  In a free society, there doesn't have to be one kind of money.  If many people don't find any usage for a certain money, they can just as well introduce another kind of money, pushing the former kind of money out of the money market.



By being more violent than others.  By winning battles, and killing their opponents.

The link between money and power is that those having violent power are interested in trading that power for goods and services, and those with money can buy violence with the corrupt violence monopolist.

The power that money can buy is the corruption of the state.

It is.  Many people think it is a state institution, but that is not true.  It is a private cartel with state privilege.  Granted, with some state control.


http://en.wikipedia.org/wiki/Federal_Reserve_System


Absolutely.  However, the FED buying these assets makes their price increase, because of higher demand.  If a private bank can obtain a higher price for a security because of this, it is getting the seigniorage from that demand which corresponds to the printed amount of money that bought it, and hence increased its demand.


Deficit spending must be financed by state bonds, which are then bought by the FED.

It is more or less the same, except that those profiting from the seigniorage are different, and usually influence faster the CPI than the holders of inflated securities.

If a business is in more demand than another, that means it creates more value (satisfaction) than any other.  That those that produce more satisfaction, are entitled to obtain more satisfaction, is not unfair in my book.

However, if you produce 5 times more satisfaction than your neighbour, then you're entitled to 5 times more enjoyment too, but this will not lead you to dominate everybody in the long run.  That can only happen through violence, in other words, state intervention.

I tried to show you in your example were your reasoning went wrong.  If a family is made of very skilled fishermen, then they DESERVE to get more, because they bring more.  But their skills will never totally outpace the skills of others, who are free to develop them too.  In as much as only this family would KNOW how to fish, and if fish is what keeps the others from starving, they would be dominant, and *rightly so*. 

However, if others develop fisher skills, or people also eat coconuts, there is absolutely no reason how the fishermen family can "build up an empire and dominate everything".  Yes, they can build up wealth - the wealth the CREATED and hence deserved.  Nothing stops others from creating wealth too.  The fishermen wealth is not at the expense of other people's own wealth creation.  It is only in the case where the fishermen are the *only* ones creating wealth, that they dominate everything else... and rightly so.


That had nothing to do with money, but rather with violence and violent power.

Actually, because during a feudal system, lords were paid in land, and land was finite, you see that the monopoly of power by the king was actually totally undone, and distributed amongst many lords.  But again, feudalism is not an economic system, but a system of violence and war.

This is as funny as wrong.

Free market had enough after the exponential trend was broken. Inflationary pressure was too high, not enough new sheep buying. So panic happened. The last big drop IMO is simply the result of the inflation. People called it months in advance.

No new money: price goes down fast

I fail to see manipulation. I do not fail to see supply/demand is not in equilibrium.

While bitcoin the technology could be difficult to understand to laymen, then bitcoin the currency isn't hard to understand to most.
The majority of coins are held by unknown people, who in all probability, are criminals or amoral people of different kind. Like hackers, con-artists, drug dealers, insider trading exchange owners etc.
Buffets opinion was about the currency, not the technology. And investing in the technology would mean to invest into companies that use the technology for more practical purposes then the current "bitcoin the currency".