Can a Keynesian "demand crisis" happen?

[Richy_T]

Until people feel safe after they have accumulated enough saving, things will not improve, and the stimulus from either FED or Government will just give them enough money to save until they feel safe.

Stimulus does not come from the Fed of government, it comes from the savings of individuals. The prudent are robbed to feed the careless.

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[johnyj]

Until people feel safe after they have accumulated enough saving, things will not improve, and the stimulus from either FED or Government will just give them enough money to save until they feel safe.

Stimulus does not come from the Fed of government, it comes from the savings of individuals. The prudent are robbed to feed the careless.

No, stimulus came out of thin air. If you save in non-currency form, you will not be affected by FED/government

[Richy_T]

Until people feel safe after they have accumulated enough saving, things will not improve, and the stimulus from either FED or Government will just give them enough money to save until they feel safe.

Stimulus does not come from the Fed of government, it comes from the savings of individuals. The prudent are robbed to feed the careless.

No, stimulus came out of thin air. If you save in non-currency form, you will not be affected by FED/government

Savings typically imply currency however.

With that said, the rest of your statement is sound. I am diversifying into durable goods as much as possible. There are limitations to that though.

[hugolp]

Until people feel safe after they have accumulated enough saving, things will not improve, and the stimulus from either FED or Government will just give them enough money to save until they feel safe.

Stimulus does not come from the Fed of government, it comes from the savings of individuals. The prudent are robbed to feed the careless.

No, stimulus came out of thin air. If you save in non-currency form, you will not be affected by FED/government

So the misallocation of resources and its consequences does not affect you just because you dont use dollars?

[painlord2k]

So the misallocation of resources and its consequences does not affect you just because you dont use dollars?
[/quote]

The misallocation of resources will not go on forever.
What matter is if he avoid the effects until the misallocation end.

As someone said: I don't need to run faster of the lion. I need to run faster than YOU!!!

[hugolp]

So the misallocation of resources and its consequences does not affect you just because you dont use dollars?

The misallocation of resources will not go on forever.
What matter is if he avoid the effects until the misallocation end.

As someone said: I don't need to run faster of the lion. I need to run faster than YOU!!!
[/quote]

Yes, but the lack of jobs affects everybody. The lack of optimal production and development affects everybody. He will not get the technological developments that would have been posible without government regulations. He will not get the cheaper prices that would have been posible without government regulations. He will not get a less desperate and more mentally sane society that would have been posible... etc... How the government discoordinates the market and throws away resources affects everybody.

You can make the best of it since thats what you get, thats fine, but saying that it does not affect you is false.

[RodeoX]

1.  Can a shortage of a good occur because a large group of people irrationally decide to stop trading away that good?
2.  Can that good be money?

I would say yes to both, but not in a sustainable way if that good has compelling utility and no real direct competition.

[johnyj]

Yes, but the lack of jobs affects everybody. The lack of optimal production and development affects everybody. He will not get the technological developments that would have been posible without government regulations. He will not get the cheaper prices that would have been posible without government regulations. He will not get a less desperate and more mentally sane society that would have been posible... etc... How the government discoordinates the market and throws away resources affects everybody.

You can make the best of it since thats what you get, thats fine, but saying that it does not affect you is false.

Job is another topic. Imagine in a society where only robot works, what will people do to make a living? Computer, automation and globalization have concentrated production to a few companies, and these companies have started to use robots to replace workers. Sooner or later majority of people will have nothing to do, no matter how much money FED print

I don't think that economy will reach a balance by itself, it always performed best when the power of market participants are evenly distributed, but eventually it will become more and more centralized, small players squeezed out, several large guys make their club. Fight this centralization tendency is the most difficult task, require some kind of self-regulating mechanism to discourage the centralization effort and reward the distributed effort

And maybe the centralization itself is caused by human nature. Human can only handle five different things at the same time, so eventually they will only remember a few biggest companies and ignore the rest. And maybe they will only remember five things to consume  They must have more time to consume, I think continuously reduce working time is necessary, 6 hour working days or 4 days working week should solve the jobless problem

[johnyj]

So the misallocation of resources and its consequences does not affect you just because you dont use dollars?

For example, for those people who bought a house, the house price should fall sharply due to over supply, but now FED is supporing mortgage market with monthly buy, so actually many people have benefited from this resource misallocation

[mobodick]

1.  Can a shortage of a good occur because a large group of people irrationally decide to stop trading away that good?
2.  Can that good be money?

If not, to either of those questions, why not?

1.  No, not in a free market.  Technically, a shortage is simply a matter of the price not being able to rise to match increased demand.  Disparity between supply and demand occurs when prices are fixed either too high and overvalued, leading to a surplus, or too low and undervalued, leading to a shortage.  When the price of a good is allowed to rise or fall freely, there are no shortages or surpluses, and suppliers will not "decide to stop trading away that good".  For example, in the US after Hurricane Sandy there were reports of gasoline shortages and long lines waiting for hours forming at gas stations.  This happened because it was illegal to raise gas prices to account for the increased demand.

2.  Yes, money is a good/service with supply and demand.

That is not true in a market where there is more demand than supplies.
If a seller can get a better price elsewhere he can create a real local shortage in a population that cannot pay for the good.

[justusranvier]

so actually many people have benefited from this resource misallocation

Of course some people benefit from it - otherwise it wouldn't happen at all.

Resource misallocation is all about enriching a minority at the expense of everybody else - that's why they do it.

[Richy_T]

So the misallocation of resources and its consequences does not affect you just because you dont use dollars?

For example, for those people who bought a house, the house price should fall sharply due to over supply, but now FED is supporing mortgage market with monthly buy, so actually many people have benefited from this resource misallocation

In other words, for those people who have a house but no desire to move, no benefit (other than on paper) is accrued. Meanwhile, those who want to buy a house and would otherwise be able to afford it, are screwed.

[porcupine87]

1.  No, not in a free market.  Technically, a shortage is simply a matter of the price not being able to rise to match increased demand.  Disparity between supply and demand occurs when prices are fixed either too high and overvalued, leading to a surplus, or too low and undervalued, leading to a shortage.  When the price of a good is allowed to rise or fall freely, there are no shortages or surpluses, and suppliers will not "decide to stop trading away that good".  For example, in the US after Hurricane Sandy there were reports of gasoline shortages and long lines waiting for hours forming at gas stations.  This happened because it was illegal to raise gas prices to account for the increased demand.

You just exposed what I regard as a big Austrian irrationality. In your second sentence you said a shortage could only result from increased demand [in a distorted market], and then you gave Hurricane Sandy as an example.

It destroys your claim. The problem was completely due to a drastic decrease in supply. Demand was probably down, given the number of people who had evacuated and/or lost their cars in the storm.

It's not the increase in demand or a decrease in supply (or even a combination of both) that leads to a shortage.  It's an inability or unwillingness to raise prices that causes shortages.  After Hurricane Sandy, if the free market was allowed to function and gas prices had been allowed to rise, suppliers would have found a way to bring more gasoline to the area in order to capitalize on the higher prices.  As the supply increased and more gas was made available to meet the demand, prices would begin to drop.

I am on your side, but there are events even in the free market, which lead to long lines waiting for a good. I don't know how it is in the us, but in Germany we have soccer. And sometimes there is a game, where supply is >> than demand. So when they issue the tickets and sell it, there are long lines. I always ask myself: Why do such clubs not just simply raise the price? For example: Champions Leage final in Munich. Official ticket price: 70€. Price in black market: 1000€ and more.

Do you know, why Bayern Munich, which owns the the stadion and played as well did not raise the price? Or maybe, if the where not allowed through the UEFA, why did the forbade it?

[shawshankinmate37927]

1.  No, not in a free market.  Technically, a shortage is simply a matter of the price not being able to rise to match increased demand.  Disparity between supply and demand occurs when prices are fixed either too high and overvalued, leading to a surplus, or too low and undervalued, leading to a shortage.  When the price of a good is allowed to rise or fall freely, there are no shortages or surpluses, and suppliers will not "decide to stop trading away that good".  For example, in the US after Hurricane Sandy there were reports of gasoline shortages and long lines waiting for hours forming at gas stations.  This happened because it was illegal to raise gas prices to account for the increased demand.

You just exposed what I regard as a big Austrian irrationality. In your second sentence you said a shortage could only result from increased demand [in a distorted market], and then you gave Hurricane Sandy as an example.

It destroys your claim. The problem was completely due to a drastic decrease in supply. Demand was probably down, given the number of people who had evacuated and/or lost their cars in the storm.

It's not the increase in demand or a decrease in supply (or even a combination of both) that leads to a shortage.  It's an inability or unwillingness to raise prices that causes shortages.  After Hurricane Sandy, if the free market was allowed to function and gas prices had been allowed to rise, suppliers would have found a way to bring more gasoline to the area in order to capitalize on the higher prices.  As the supply increased and more gas was made available to meet the demand, prices would begin to drop.

I am on your side, but there are events even in the free market, which lead to long lines waiting for a good. I don't know how it is in the us, but in Germany we have soccer. And sometimes there is a game, where supply is >> than demand. So when they issue the tickets and sell it, there are long lines. I always ask myself: Why do such clubs not just simply raise the price? For example: Champions Leage final in Munich. Official ticket price: 70€. Price in black market: 1000€ and more.

Do you know, why Bayern Munich, which owns the the stadion and played as well did not raise the price? Or maybe, if the where not allowed through the UEFA, why did the forbade it?

I'm not sure how the prices were determined in this example.  But, if it were up to me, when it came to sporting events, concerts, or any event with limited seating, I would figure out a way to sell at least some of the tickets in an auction format and have the auction end about 48 hours prior to the event with the tickets going to the highest bidders.  This would minimize lines at the time of the event and allow the free market decide what the tickets are worth.  Otherwise, the price is bound to be either too high, leading to empty seats, or too low, leading to what we call "scalpers" in the US, buying up the tickets.

[porcupine87]

I'm not sure how the prices were determined in this example.  But, if it were up to me, when it came to sporting events, concerts, or any event with limited seating, I would figure out a way to sell at least some of the tickets in an auction format and have the auction end about 48 hours prior to the event with the tickets going to the highest bidders.  This would minimize lines at the time of the event and allow the free market decide what the tickets are worth.  Otherwise, the price is bound to be either too high, leading to empty seats, or too low, leading to what we call "scalpers" in the US, buying up the tickets.

Hm I think they met other considerations as well. Maybe they want the sport events to be as affordable for John Doe. Let's assume one mega event. The price would be quite high, so that it seems, that only the  rich fans could affort it. Other normal fans could get easily outraged, so that they boycott normal events. And the soccer club is only that popular, because it fosters its image of not serving the common man, not only the rich people. I think the same thing goes on in world cups. Relative to the price the supply of seats in stadions is way lower than the demand. So they draw by lot who gets the ticket. So it is profitable even for non-sport fans to participate, because they can sell the ticket on ebay or the black market with a much higher price(the markte price).

I am on your side, that free moving prices can always provide an equilibrium between supply and demand. In practice even in a completly free market they will not always move freely. It tends to, but it's not perfect as we live not in a perfect market