Global Financial Crisis scenarios

[tee-rex]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

... said he without even trying to argument for it.

I did. Read my post before yours at the end of the previous page.

[DannyElfman]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

[Erdogan]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

On the other hand in a nonfree market, that is someone disturbs the free market using the threat of physical force in violation of human rights, meaning government, prices and volume is always suboptimal. Compared to what consumers and producers want, which is the only important thing. Some random person, voter or not, is not entitled to push his values on to others.

[tee-rex]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

And now we return to the initial issue, that is the increased level of savings causes producers to lose some of their profits, right?

[ShakyhandsBTCer]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

On the other hand in a nonfree market, that is someone disturbs the free market using the threat of physical force in violation of human rights, meaning government, prices and volume is always suboptimal. Compared to what consumers and producers want, which is the only important thing. Some random person, voter or not, is not entitled to push his values on to others.

Companies are not always able to react to the market this quickly as it takes time to build new factories, to train workers to do new processes in order to make different products. Companies also need to have work in progress so they would be forced to continue building some product even after demand falls a lot because they would finish the work they have started. It is also natural to have ebbs and flows in demand so a company may think that a decline in demand is just a natural ebb in demand.

[DannyElfman]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

On the other hand in a nonfree market, that is someone disturbs the free market using the threat of physical force in violation of human rights, meaning government, prices and volume is always suboptimal. Compared to what consumers and producers want, which is the only important thing. Some random person, voter or not, is not entitled to push his values on to others.

This would happen when markets are 100% efficient and have all of the real time information that is relevant to the market

[boumalo]

"You can only save from money taken from your household earnings (you won't save from loans), that is money which you would otherwise spend on consumption. Please try to explain how this can be any good for the economy in the long"

How can it not be good? Where do you think your consumption comes from, if not someone has produced them? How can you get it, without producing something of comparable value and trade? The savings in money and investments from prudent producers is the root of increased productivity, that benefits all.

Sorry, but I don't understand how what you say is related to what I am talking about. Yes, someone has produced what I consume, so if I decide not to consume (but prefer to save instead), there is overproduction (as simple as that). We are not talking here about producers' investments.

There can never be overproduction in the free market. When one individual produces, sells his product and saves money, prices will decrease and others will be able to buy more. Saving is letting others in front of you in the consumption queue.

Overproduction and under supply can happen in free market.

Planning and mis-allocating capital can go horrible wrong even in the total decentralized system.

Over production happens when more is produced then what can reasonably be consumed. A merchant can only sell so many products before there is no demand for the product anymore and merchants often have a time limit to how soon something much sell either because of seasons or because a specific product will "go bad" after a certain time

When supply strengthens, and demand softens, the profits of that specific market is eroded, and the capital is taken to a more profitable market space. There is no overproduction. Temporalily, prices can go lower than the producers are happy with, but that is also a temporary advantage for people just on the edge of purchasing that exact stuff. Conversely with the absurd notation of under-supply.

On the other hand in a nonfree market, that is someone disturbs the free market using the threat of physical force in violation of human rights, meaning government, prices and volume is always suboptimal. Compared to what consumers and producers want, which is the only important thing. Some random person, voter or not, is not entitled to push his values on to others.

This would happen when markets are 100% efficient and have all of the real time information that is relevant to the market

Market are still the most efficient and when the State intervenes the prices go up, the service quality and innovation go down

[burekzastonj]

D) aliens invade and bring us $. THere is no solution without destruction, we are in point where wars started in history, now it's the time, sadly.

[CoinsCoinsEverywhere]

Market are still the most efficient and when the State intervenes the prices go up, the service quality and innovation go down

I mostly agree.  However, there are times when free markets get out of control (bubbles and crashes), and some limited state intervention may be required to let a little air out of bubbles and "soften the landing" when markets crash.  Like a lot of people, I think governments went way overboard after the 2008/9 recession, but I do think that some kind of response was necessary during the crisis to keep things from spiraling further out of control.

[boumalo]

Market are still the most efficient and when the State intervenes the prices go up, the service quality and innovation go down

I mostly agree.  However, there are times when free markets get out of control (bubbles and crashes), and some limited state intervention may be required to let a little air out of bubbles and "soften the landing" when markets crash.  Like a lot of people, I think governments went way overboard after the 2008/9 recession, but I do think that some kind of response was necessary during the crisis to keep things from spiraling further out of control.

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

[twiifm]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

[efreeti]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Both lending practice and low interest rate contributed to housing bubble.

[twiifm]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Both lending practice and low interest rate contributed to housing bubble.

Yeah thats what I said.  But interest is lower now than during bubble.  So interest didn't "create" the bubble.  And you can't blame the Fed for bubbles in multiple countries

And 0% is a bank rate.  Not consumer rate.

[STAyre]

Hi,

I have a question, but please direct me to a post if already asked:

In case of another GFC, would BTC bitcoin price:

a) stays on the same level 
b) skyrockets 
c) tumble down 

?

I think that when another GFC will come bitcoin price will fall down too because bitcoin is not an independent currency.

[Erdogan]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

[CoinsCoinsEverywhere]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

[sandykho47]

Of course the price will skyrockets a bit
But BTC will dead, if :
1. no power
2. no internet connection
3. no miner 

Hi,

I have a question, but please direct me to a post if already asked:

In case of another GFC, would BTC bitcoin price:

a) stays on the same level 
b) skyrockets 
c) tumble down 

Take your pick:

I pick Fiat & Crypto 

[tee-rex]

The real estate bubble has been created by the low interests rates from the FED in 2000s and they blew more air into the bubble in recent years with 0% interest rates which means the crash will be bigger and more painful that it would have been if only they allow it to happen to destroy the bad debt

No it wasn't.  It was mainly because of 90s deregulation that led to subprime lending.  What you should blame the Fed for his not allowing interest rates to rise when they saw a bubble forming.  The low interest helped accelerate the housing bubble, but it didnt cause it. 

Also, in case you didn't notice; housing bubbles were a worldwide phenomenon not only USA

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

[CoinsCoinsEverywhere]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

The only way I could see bitcoin being a store of value is if people simply decided that it would be.  As you pointed out, you can't use bitcoin for anything but payments, whereas real estate is quite useful--people will always want real estate.  If people simply decided that bitcoin would be a store of value (and it would appear that they have for right now given the price), they can also simply decide that it won't be anymore (which is something that concerns me about bitcoin, but that's another topic).

[tee-rex]

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

The only way I could see bitcoin being a store of value is if people simply decided that it would be.  As you pointed out, you can't use bitcoin for anything but payments, whereas real estate is quite useful--people will always want real estate.  If people simply decided that bitcoin would be a store of value (and it would appear that they have for right now given the price), they can also simply decide that it won't be anymore (which is something that concerns me about bitcoin, but that's another topic).

Money didn't appear by itself, people needed it and the functions it fulfills, so there is a need for a payment system. Its usefulness (utility) is as objective as a need for a home (though not as vital indeed). In this aspect, it is not that people just decided to use Bitcoin per se but for its usefulness in attaining their purposes. And since Bitcoin is deflationary by its nature at that (through limited emission), it can be used as a store of value.