Why does anyone pay attention to people that study "economics"?

[johnyj]

"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths.  It represents the path to big money.  The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited."  ~ George Soros

[1714759531]

1714759531

[1714759531]

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[twiifm]

Economics has always been politics, not science. From science perspective, since the value is all subjective, there is no standard in anything

This is especially true regarding money and banking, a 10 year old can understand better than economy professors: He would just copy his own money instead of singing IRR, NPV, CPI, GDP, M3, etc... And you see, FED is doing exactly the same thing

Just because you don't understand doesn't mean there is no validity to it.  A lot of macro is counterintuitive compared to micro.  Like Quantum Mechanics compared to Newtonian Physics

[twiifm]

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

Upton Sinclair

It's easy:
- Humans will always innovate, this will never stop. So there will always be increased efficiency allowing infinite expansion.
...

Infinite efficiency, ie. perpetual motion.

EDIT: Kind of on topic and maybe someone can justify it to me:

Someone borrows, say, a million dollars from a bank, the bank considers that loan an asset and invests it in stocks, borrower also invests the borrowed funds in the same stocks. Where is the stocks value?

You mean they invest your interest payment?  The loan is an asset because its your liability

What if you borrowed $1M from Chase and bought a $1M worth of JPM stock?  

[arbitrage001]

At least in the Keynsian variety.

The entire concept is built on infinite expansion which anyone with even half a brain should now know doesn't work as our Earth has "finite" resources (and our ability to find another Earth is not going to happen before we have exhausted this one's natural resources in trying to find it).

I actually think it is rather funny that we have people that are awarded Nobel prizes and given high status at universities (and in governments) when their pseudo-science is really no different to a cult or a religion.

(yes - I like to stir the pot sometimes - so come on you Keynsian fans and smite me)

Existing power structure (goverment/institution) in place operates in a top down manner, of course they will favor and promote any scholars that view the same way.

"I know what I'm talking about despite experts devoting their lives to study subjects that I know nothing about, therefore I am smart and everyone else is dumb"  hmm, I wonder

Any experience working adult can tell the difference between the truth from bs from someone who spent their entire life in academy setting.

[twiifm]

...
EDIT: Kind of on topic and maybe someone can justify it to me:

Someone borrows, say, a million dollars from a bank, the bank considers that loan an asset and invests it in stocks, borrower also invests the borrowed funds in the same stocks. Where is the stocks value?

You mean they invest your interest payment?  The loan is an asset because its your liability

What if you borrowed $1M from Chase and bought a $1M worth of JPM stock?  

No, I mean how money is created. That money doesn't exist before the loan, it's created at that point and the bank buys assets to its value, the stocks (not sure on that, I think its 100% but could be fractional) and the loan could also be used to buy the same stocks. For the bank example, what if both Chase and the borrower bought JPM stocks and on account of the rising price of the stocks both Chase and the borrower used their increased worth to justify further borrowing to buy JPM stocks?
Off topic so don't want to discuss it too much but it confuses the heck out of me.

You are correct, the money is created at that point.  Its keystroked into the banks balance sheet as asset and your balance sheet as liability.  But when you deposit into Citi, its then recorded as liability on Citi's balance sheet and asset on your account.

[twiifm]

...
You are correct, the money is created at that point.  Its keystroked into the banks balance sheet as asset and your balance sheet as liability.  But when you deposit into Citi, its then recorded as liability on Citi's balance sheet and asset on your account.

Citi then covers that by investing it? ie, they invest both loans and deposits?

No, forget about the investing part.  That's what is confusing you.

Think of money as a giant ledger (score keeping system).  When money moves from one entity to another it gets recorded as an asset on one balance sheet and a liability on another.  

What is money score keeping?  Its score keeping the actual production on the "real economy".  Because your example is all contained in finance its a bit confusing.

You borrow money from Chase to start a business.  At that moment the money is created (comes into existence).  10 years later your business is booming and you pay back the loan with interest.  At this moment the original money is taken out of existence.  But your productivity remains.  So the economy expanded compared to 10 years ago.

Now replace start a business with start an investment portfolio.  Its still the same structure

[freedomno1]

Why people study economics
This
If the GDP is Up, Why is America Down?
Why we need new measures of progress, why we do not have them, and how they would change the social and political landscape
It goes pretty in depth to your question of money etc.
http://www.theatlantic.com/past/politics/ecbig/gdp.htm

Simply put As the former World Bank economist Herman Daly puts it, the current national accounting system treats the earth as a business in liquidation.

Parenting becomes child care, visits on the porch become psychiatry and VCRs, the watchful eyes of neighbors become alarm systems and police officers, the kitchen table becomes McDonald's--up and down the line, the things people used to do for and with one another turn into things they have to buy.

Day care adds more than $4 billion to the GDP; VCRs and kindred entertainment gear add almost $60 billion. Politicians generally see this decay
through a well-worn ideological lens: conservatives root for the market, liberals for the government. But in fact these two "sectors" are, in this respect
at least, merely different sides of the same coin: both government and the private market grow by cannibalizing the family and community realms that
ultimately nurture and sustain us.

[twiifm]

It's the finance end of things that seems messed up to me, there seems to be an exponential in it. In that example, if the bank is also in the position to invest in your company and uses your loan as an asset to do so then the company is worth twice as much but that worth is made up from two sides that should cancel each other out, they do in terms of borrower and lender but they double up in terms of market capitalisation.

EDIT: Does that assume there's a limit to the need for productivity and its survival of the fittest once that limit is reached or that productivity can grow endlessly? If limited and companies are expected to go bust how does that effect the money supply?

Your terminology is messed up so your questions don't make sense.

A loan is an asset because it needs to be repayed.  The bank doesn't use the loan to invest or buy stocks.  When they give out a loan the amount is recorded as an asset on their BALANCE SHEET.  The amount of cash on their balance sheet is something else

[Possum577]

You may be interested in this thread about Keynsian economics - https://bitcointalk.org/index.php?topic=923471.0

[johnyj]

Economics has always been politics, not science. From science perspective, since the value is all subjective, there is no standard in anything

This is especially true regarding money and banking, a 10 year old can understand better than economy professors: He would just copy his own money instead of singing IRR, NPV, CPI, GDP, M3, etc... And you see, FED is doing exactly the same thing

Just because you don't understand doesn't mean there is no validity to it.  A lot of macro is counterintuitive compared to micro.  Like Quantum Mechanics compared to Newtonian Physics

Everyone who fully understand modern economics will abandon it, they are all here  

[Razick]

There's nothing weird in infinite expansion

Except - double the world's energy consumption every year for the next 50 years are we are all gone (perhaps not weird - but the end of our species).

That's implying that technology won't improve. You are ignoring renewable energy such as sun, wind, geothermal, etc. and nuclear energy (and nuclear fusion).

[CIYAM]

That's implying that technology won't improve. You are ignoring renewable energy such as sun, wind, geothermal, etc. and nuclear energy (and nuclear fusion).

According to everything I've read all the renewable energy sources we have combined cannot solve the problem to supply the amount of energy needed, nuclear fission very unpopular (so not likely to get greatly expanded) and nuclear fusion has yet to produce more energy than has been spent on trying to achieve it (perhaps if we get *lucky* that might change).

[dewdeded]

According to everything I've read all the renewable energy sources we have combined cannot solve the problem to supply the amount of energy needed, nuclear fission very unpopular (so not likely to get greatly expanded) and nuclear fusion has yet to produce more energy than has been spent on trying to achieve it (perhaps if we get *lucky* that might change).

Yeah, in practice. But Keynesian economics is a (strongly abstact) theoretical model.

[CIYAM]

Yeah, in practice. But Keynesian economics is a (strongly abstact) theoretical model.

That is the very crux of the point.

[Karpeles]

They have a good social position and jobs. Therefore no need to make good predictions and produce useful stuff.

[CIYAM]

Whilst I don't doubt that wind or solar energy could power the entire world the most fundamental problem is that in order to construct the infrastructure you mention is equivalent to all the energy we actually have available (meaning that we can't do it unless we decide to do nothing else).

This is the point where you actually need "science" not "economics".

[CIYAM]

Let's hope that does happen before we are all choking to death (my wife and I left Beijing for that reason - if you want to experience how bad the future might be I'd recommend visiting Beijing especially around this time of year).

For a healthy person a couple of weeks isn't likely to hurt you - but living there for years is something that I'd reckon that most western GPs would advise you against doing!

[Flashman]

Methane/methanol is the biofuel that could but won't. Storage, transport and adaptation problems are trivial compared to hydrogen. However, although it can be made very cheaply, it can be undercut by fossil sources, so until they are out of the game, bio won't fly. Also, most of the tech required is public domain now not patentable. Also feedstock can be so ridiculously cheap, like brush cuttings, lawn trimmings, waste food, dead leaves, human waste, that no lobby of suppliers is going to push it along either. Anyway, that will be our fuel of last resort, it's just sitting there waiting for other energy sources to get rare or expensive enough.

[CIYAM]

You know it is funny - this topic has gone way off topic yet I (the creator of the topic) love where it has gone!

Thanks for the great posts guys (I had actually expected to just have it turn into a topic telling me what an arrogant ass I am - which may of course still be true).

[manselr]

because, they are rich (and usually, talk too and work none).

Exactly, it's all halo effect from high status due being rich. People pay more attention to rich people, it's scientifically proven.