The morning after . . . in France

It seems Mr. Hollande has been reading TheMoneyIllusion.com:

By lifting the two highest value-added tax rates in 2014, Hollande is revisiting a policy he campaigned against in his successful bid to unseat predecessor Nicolas Sarkozy earlier this year.

Hollande is setting out his plan in a week where France is coming under pressure from the International Monetary Fund and the European Commission to improve its competitiveness as Europe’s sovereign debt crisis prompts neighboring Spain and Italy to overhaul their economies. The IMF said yesterday that France needs “serious structural reform” and the commission is slated to issue another report tomorrow.

.  .  .

France’s main sales-tax rate will increase in January 2014 to 20 percent from 19.6 percent, while the second band on home renovations and restaurants will rise to 10 percent from 7 percent currently. A third rate that applies to food and energy will be cut to 5 percent from 5.5 percent in an effort to support the spending power of France’s poorest households, French Prime Minister Jean-Marc Ayrault said today.

Spending Cuts

The government will also seek to cut spending by an additional 10 billion euros ($12.8 billion).

In return, companies will receive a tax credit for all salaries between the minimum wage of 1,425.67 euros and 3,564.18 euros a month. While the credit will be in place starting next year, companies will only see the benefit on the tax bill they will pay the following year. In total, the reduction in charges to companies will be 20 billion euros and equate to a 6 percent cut in wage costs, Ayrault said.

I endorsed the Sarkozy plan earlier in the year.  I was disappointed to see Hollande campaign against it, but pleased to see that he now understands the need for supply-side reforms.  Note that he is rejecting the Krugman/Eggertsson model, which claims that reductions in labor costs can be deflationary and contractionary when at the zero bound.   Too bad the payroll tax cuts were capped at such a low figure.

PS.  I’m running way behind today, but will eventually read all the back comments.

PPS.  I see gay marriage won in three state referenda.  Just two days ago someone in the comment section mocked my “wisdom of crowds” argument, pointing to the failure of all of the gay marriage referenda.  People need some patience.  Just 30 years ago even progressives regarded the idea as far-fetched.  The younger generation is much more utilitarian.  Last night on Fox News they were horrified by polls showing a rising number of non-religious Americans.


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75 Responses to “The morning after . . . in France”

  1. Gravatar of Liberal Roman Liberal Roman
    7. November 2012 at 11:02

    Where is Morgan W???????????

    His whole idea of how the world operates has crumbled in front of his eyes yesterday. I am worried about that guy.

  2. Gravatar of Major_Freedom Major_Freedom
    7. November 2012 at 11:19

    His WHOLE idea? Maybe his US political view, but I mean, that’s small potatoes, no?

  3. Gravatar of Major_Freedom Major_Freedom
    7. November 2012 at 11:26

    So I guess when the Swedish central bankers talked about the dangers of credit expansion, it’s because they were seemingly reading the rants of some random anonymous blog poster on TheMoneyIllusion.

    It makes sense.

  4. Gravatar of Liberal Roman Liberal Roman
    7. November 2012 at 11:38

    Well, his idea that free markets ALWAYS win has crumbled. After a financial crisis like we had, it really was inevitable for the country to take a left turn.

  5. Gravatar of TravisV TravisV
    7. November 2012 at 11:38

    Professor Sumner,

    Do you have an opinion on this study by UBS?

    The Four Regimes (And 40 Years) Of Equity Valuation
    http://www.zerohedge.com/news/2012-11-07/four-regimes-and-40-years-equity-valuation

  6. Gravatar of TravisV TravisV
    7. November 2012 at 11:43

    I’m wondering if there’s a simple way to interpret the study in light of David Glasner’s finding that stock prices have recently been highly correlated with inflation expectations.

  7. Gravatar of W. Peden W. Peden
    7. November 2012 at 12:06

    Liberal Roman,

    Why was it inevitable? We had a similar financial crisis in the UK and turned marginally to the right.

  8. Gravatar of Major_Freedom Major_Freedom
    7. November 2012 at 12:54

    Liberal Roman:

    Well, his idea that free markets ALWAYS win has crumbled.

    That idea was crumbled before Morgan was even born.

  9. Gravatar of JSeydl JSeydl
    7. November 2012 at 13:13

    “Note that he is rejecting the Krugman/Eggertsson model, which claims that reductions in labor costs can be deflationary and contractionary when at the zero bound.”

    This is not how I read the Krugman/Eggertsson paper. The key issue is the debt load in the household sector. Reductions in labor costs become contractionary when the debt load is high because the deflation/spending-cut effects outweigh the expansionary supply side effects. The logic really doesn’t have much to do with the lower bound. Also, debt-to-income ratios in France are much lower than in the US.

  10. Gravatar of MikeDC MikeDC
    7. November 2012 at 14:25

    If the younger generation were much more utilitarian they would be much more market oriented.

  11. Gravatar of Wonks Anonymous Wonks Anonymous
    7. November 2012 at 14:28

    You argued that referenda are better. Gay marriage still has a much better overall track record with legislators & judges (who have gotten more liberal over time as well, the general public is less liberal). The argument that marijuana legalization is more popular among the gen pop than officials I find plausible though.

    I was going to make a comment mocking Morgan, but I see from the latest comment that he has his own site now reacting to the election rather than making excuses. And I even agree with him on “digital” property meriting less “rights” than “atomic” property, although I refuse to engage in any socialist “you deserve these free goodies” hogwash.

  12. Gravatar of Dan Dan
    7. November 2012 at 16:16

    Morgan W. seems to be blogging now at
    http://www.morganwarstler.com/

  13. Gravatar of Cthorm Cthorm
    7. November 2012 at 16:16

    @Liberal Roman

    Morgan has a post up today. I’m sure he is enjoying a whiskey sour.

    @Scott

    The younger generation is much more utilitarian. Last night on Fox News they were horrified by polls showing a rising number of non-religious Americans.

    Are you saying that religiosity is negatively correlated to utilitarianism? I prefer the label pragmatic libertarian, tomato/tomAto, but I’m not religious.

  14. Gravatar of ssumner ssumner
    7. November 2012 at 17:16

    Travis, No interest in market forecasts.

    Jseydl, I mean something else–the upward-sloping AD paper.

    Mike DC, You are confusing values and worldview. They have utilitarian values, just a mixed up sense of what economic system produces the greatest happiness. They’ll figure it out as they get older.

    Cthorm, Yes, negatively correlated. Consider the right to die issue.

  15. Gravatar of Neal Neal
    7. November 2012 at 18:57

    In completely unrelated post-election news: Scott, as a firm believer in EMH, what do you think of markets tumbling yesterday on open?

    https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1352343383139&chddm=1955&chls=IntervalBasedLine&cmpto=INDEXDJX:.DJI;INDEXNASDAQ:NDX&cmptdms=0;0&q=INDEXSP:.INX&ntsp=0&ei=3R6bUKjIKc6OqwGKiwE

  16. Gravatar of Saturos Saturos
    7. November 2012 at 20:59

    So, did Morgan win his bet?

  17. Gravatar of JSeydl JSeydl
    8. November 2012 at 00:14

    “I mean something else–the upward-sloping AD paper.”

    Indeed, which comes about because of the debt overhang, according to the paper.

  18. Gravatar of Bogdan Bogdan
    8. November 2012 at 06:16

    There is no utlilitarianism as a practical or coherent theory of welfare – the notion is just a short hand for whatever some or many people like. I thought John Rawls, Kenneth Arrow and Amartya Sen demonstrated that pretty conclusively.

  19. Gravatar of Major_Freedom Major_Freedom
    8. November 2012 at 06:39

    Bogdan:

    There is no utlilitarianism as a practical or coherent theory of welfare – the notion is just a short hand for whatever some or many people like. I thought John Rawls, Kenneth Arrow and Amartya Sen demonstrated that pretty conclusively.

    Wait, you mean you don’t accept it that utilitarianism is a spectacular ethical theory?

    Come on! Greatest good for the greatest number?

    What if the greatest number of people would feel the greatest good…if they murdered all redheads? Are you seriously claiming that anyone should stop this, thus egregiously and treacherously violating the greatest good for the greatest number awesomeness?

  20. Gravatar of Saturos Saturos
    8. November 2012 at 08:22

    The Obama win was good for monetary policy: http://macromarketmusings.blogspot.com.au/2012/11/what-obama-win-means-for-ngdp-targeting.html

  21. Gravatar of Saturos Saturos
    8. November 2012 at 09:30

    David linked to this, but I think this is worth posting separately: http://finance.fortune.cnn.com/2012/11/06/jan-hatzius-goldman/

  22. Gravatar of Josiah Josiah
    8. November 2012 at 14:37

    “For the next month or so, I’m going to layout how I let go of my driving political philosophy since the mid-1980’s and adopted Sumner’s.”

    It appears that you’ve broken Morgan Warstler.

  23. Gravatar of StatsGuy StatsGuy
    8. November 2012 at 14:43

    Romney quite possibly cost himself this election when he attacked the Fed. Had the Fed not started to pledge QE4 in September, and implemented quickly, we might have seen a market freefall going into October. It would not have taken much.

  24. Gravatar of Major_Freedom Major_Freedom
    8. November 2012 at 17:06

    Statsguy:

    Romney was a banker’s candidate. Check out his donors.

    He isn’t anti-Fed. It’s one of the reasons why he was chosen as GOP candidate over Ron Paul.

  25. Gravatar of TravisV TravisV
    8. November 2012 at 19:04

    Professor Sumner,

    Please Help!

    I’ll try this again. I sent you this link:

    The Four Regimes (And 40 Years) Of Equity Valuation
    http://www.zerohedge.com/news/2012-11-07/four-regimes-and-40-years-equity-valuation

    In order to ask you the question: “Why were stock P/E ratios much much much lower during the 1970′s than they are today?” You surely have a blog post about that, don’t you?

  26. Gravatar of caveat bettor caveat bettor
    9. November 2012 at 03:45

    There appears to be a general correlation with the rise and fall of christian religion and economic growth, from Rome to Constantine to Spain, France, Germany, the Netherlands, Great Britain, America, South Korea. I’m not sure why South Korea has surpassed Japan in economic growth, but I’m thinking some of the differences in cultural and institutional DNA where the church has flourished in the former and never really taken hold in the latter suggest a possible relationship with a particular faith tradition.

  27. Gravatar of ssumner ssumner
    9. November 2012 at 09:12

    Neal, The markets favored Romney, and worry about the fiscal cliff.

    JSeydl, The point is that they are opposed to the Hollande policy because they think it’s contractionary. It’s not. (Although France may do poorly for other reasons–the euro, etc.)

    Bognan, No, utiliarianism lives in both economics and philosophy (Peter Singer, etc.)

    Travis V, Earnings were distorted by inflation in the 1970s, and nominal capital income was being taxed, which made the real tax rate higher.

  28. Gravatar of Saturos Saturos
    9. November 2012 at 09:16

    Josiah, some people had a different reaction…
    http://www.libertarianrepublican.net/2012/11/the-end-of-liberty-in-america-only.html

    Also see here: http://nymag.com/daily/intel/2012/11/eric-dondero-boycott-democrat-libertarian.html

  29. Gravatar of JSeydl JSeydl
    9. November 2012 at 13:23

    ssumner, the point (straight from the Krugman/Eggertsson model) is that it may be contractionary if the debt overhang is sufficiently large. And, again, debt-to-income levels are much higher in France than in the US.

  30. Gravatar of ssumner ssumner
    9. November 2012 at 18:59

    JSeydl, Which proves my point, they are ignoring Krugman’s advice.

  31. Gravatar of JSeydl JSeydl
    9. November 2012 at 22:55

    ssumner, Huh? Krugman isn’t against cuts in labor costs always; he’s against them when there is a large debt overhang. Given that household debt levels in France aren’t that elevated, Krugman probably wouldn’t have a problem with the move in France.

  32. Gravatar of Saturos Saturos
    10. November 2012 at 07:30

    Scott, how often do you watch Fox News anyway???

  33. Gravatar of Saturos Saturos
    10. November 2012 at 20:49

    Scott, read more Robin Hanson and you’ll be disabused of the notion that the newer generation supports euthanasia, gay marriage and abortion just because they are less religious and more utilitarian. And as for weed…

  34. Gravatar of ssumner ssumner
    11. November 2012 at 06:45

    JSeydl, Wait, you just old me debt levels in France are “elevated.”

    He’s against wage cuts when at the zero bound, whether there is a debt overhang or not. He’s said that in many blog posts going back over the years. Wage cuts (in his view) create deflationary expections, which depress spending. That’s the whole point of his upward-sloping AD curve.

    Saturos, Not often, I rarely watch TV. But I’ve watched Fox enough to have a general idea. I watched it on election night.

    I agree that utilitarianism may not be the only factor, but surely the world’s become far more utilitarian over the years, and I see the trend showing up very strongly in the young. They are certainly not supporting gay marriage due to some sort of “natural rights” argument, as they still oppose other forms of marriage that they don’t think is defensible on utilitarian grounds (brother/sister, multiple wives, etc.)

    One conservative joked to me that he supported gay marriage because he opposed gay sex. And marriage tends to put a damper on . . .

  35. Gravatar of JSeydl JSeydl
    11. November 2012 at 11:20

    ssumner,

    From the paper (p17):

    “Our model suggests … that when the economy is faced by a large deleveraging shock, increased price flexibility – which we can represent as a steeper aggregate supply curve – actually makes things worse, not better … Why? Because falling prices don’t help raise demand, they simply intensify the Fisher effect, raising the real value of debt and depressing spending by debtors.”

    I repeat: In the Krugman/Eggertsson model, the logic for opposing wage cuts has to do with the debt overhang, not the lower bound.

  36. Gravatar of Major_Freedom Major_Freedom
    11. November 2012 at 11:30

    JSeydl:

    It’s interesting that those who advocate for inflation as a means to prevent problems of debt overhang never address the reasons for why debt expanded in the first place (inflation in the form of credit expansion).

    They are chasing their own tails in their sub-consciousnesses.

    Credit expansion increases the supply of debt beyond the quantity of voluntary saving out of revenues. This debt is then presented as justification for arguments against refraining from more credit expansion. Lather, rinse, repeat…

  37. Gravatar of JSeydl JSeydl
    11. November 2012 at 13:56

    Major_Freedom, the debt expanded because the trade deficit exploded, which happened because the dollar became too strong. What’s the Austrian solution for dealing with countries that peg their exchange rates at artificially low values?

  38. Gravatar of Razer Razer
    11. November 2012 at 14:03

    Under a gold standard, you don’t decades long trade imbalances like you have now. They are simply impossible.

  39. Gravatar of Major_Freedom Major_Freedom
    11. November 2012 at 16:06

    JSeydl:

    Major_Freedom, the debt expanded because the trade deficit exploded, which happened because the dollar became too strong.

    Exploding trade deficits cannot exist unless there is inflation present to backstop the Treasury, so inflation is still tied up with the borrowing that goes to the spending that goes to the deficits.

    Without inflation, deficits would bankrupt the state in the way most people understand bankruptcy (cash liabilities exceed cash receivables).

    Imagine an individual household spending more than it earns, year after year. At some point, that household would not be able to borrow any more.

    What’s the Austrian solution for dealing with countries that peg their exchange rates at artificially low values?

    Austrian economics doesn’t actually contain any positive, normative recommendations. It only describes the economic laws that are deduced from the axiom of individual action.

    Having said that, Austrian economists do move outside the constraints of wertfrei praxeology, and almost all are laissez-faire advocates, so I can say that the laissez-faire solution for pegging exchange rates at artificially low values would be: remove the aggressive property violations that imposes the peg, then remove the aggressive property violations that imposes the fiat currency regime.

    All fiat regime banking cartels bring about artificially high valued currencies. Without the force of government law backing the cartel, the value of the cotton and linen Federal Reserve notes would be reduced to the value of wallpaper, or wood kindling.

    If one supports central banking, then one cannot complain of any central bank bringing about an “artificially low” or “artificially high” currency. The whole meaning of “artificial” is “deviations away from what a free market process would have resulted in.” Once you accept deviations from the market process in money, you have no consistent position in criticizing why it isn’t doing what you personally think is right. Central banking suffers from the same Impossibility Theorem of Arrow, as other forms of state power. It is a purely subjective judgment to claim money is too tight or too loose. Some are benefited by tight money, others lose by it. Some are benefited by loose money, others lose by it. No arbitrary rule for money printing confers general economic benefits.

  40. Gravatar of Major_Freedom Major_Freedom
    11. November 2012 at 16:19

    Razer:

    Under a gold standard, you don’t decades long trade imbalances like you have now. They are simply impossible.

    This is a good point. National level central banking leads to international instabilities, the same way state level central banking would destabilize countries.

    An international gold standard has a “built in” country level stabilizer. If one country’s population imports too much relative to its production, i.e. if it becomes less internationally competitive, then gold will flow out of the country and thus lower domestic prices, thus making their goods more competitive, which halts the gold outflow down to a new, lower, “equilibrium” trajectory.

    Each country would carry a money supply and domestic spending concomitant with their relative competitiveness in the world economy. This market force is seriously hampered if not eliminated by national central banking.

    With national central banking, a country can import too much relative to its production for prolonged periods of time, or vice versa, which upsets the rebalancing process and puts the world economy on a destabilized path.

  41. Gravatar of Major_Freedom Major_Freedom
    11. November 2012 at 16:28

    ssumner:

    I agree that utilitarianism may not be the only factor, but surely the world’s become far more utilitarian over the years, and I see the trend showing up very strongly in the young. They are certainly not supporting gay marriage due to some sort of “natural rights” argument, as they still oppose other forms of marriage that they don’t think is defensible on utilitarian grounds (brother/sister, multiple wives, etc.)

    It does not follow that being against brother/sister marriage or polygamy implies that one is not trying to use natural rights based arguments to defend gay marriage. They may be inconsistent, but when somsone argues from a natural rights basis to defend gay marriage, it doesn’t mean they will also hold in their minds that incest and polygamy should be defended. They may believe it is “natural” that gays marry, but not siblings and not multiple people.

    The youth are supporting gay marriage primarily from a natural rights basis. Their argument is almost always of a form that is grounded in gay people being individuals who should have the same rights as heterosexuals. They are certainly not arguing that gay marriage should be permitted on utilitarian grounds of the greatest good for the greatest number. Gays only represent a minority of the population, typically around 10%. Most youth are idealistic. Most youth are thinking gay people should be allowed to marry because they are people with certain rights and privileges.

  42. Gravatar of Major_Freedom Major_Freedom
    11. November 2012 at 16:31

    Ask a youth who supports gay marriage if they would change their minds and be against it if tomorrow the majority of people in society are unhappy with the practise.

    It is almost certain that they would say something like “It doesn’t matter, gay people should be allowed to marry because they are people just heterosexual people.”

    If they really were supporting gay marriage on utilitarian grounds, then they would change their minds and start arguing against it.

  43. Gravatar of JSeydl JSeydl
    12. November 2012 at 15:17

    Major Freedom,

    “Imagine an individual household spending more than it earns, year after year. At some point, that household would not be able to borrow any more.”

    Except that a household and a government are completely different. A household will die one day, whereas a government is expecting to be around in perpetuity. Ergo, the debt of a government never has to be paid off.

    Also, a government has the responsibility of looking over the macroeconomy, whereas a household does not. This usually forces a government to spend more when times are bad, so that ppl don’t die in the street.

    “remove the aggressive property violations that imposes the peg”

    Like remove the generous patent and copyright protection for the multinational corps? I agree.

    I’m going to skip the rant on fiat banking. The 1800s were not a particularly stable and prosperous century, which no one should want to go back and repeat.

    “If one supports central banking, then one cannot complain of any central bank bringing about an “artificially low” or “artificially high” currency.”

    You lost me. I don’t see how it’s not possible to have a freely floating exchange rate and a central bank.

  44. Gravatar of Doug M Doug M
    12. November 2012 at 16:26

    jseydl,

    “the debt expanded because the trade deficit exploded, which happened because the dollar became too strong.”

    Foreign investment flows must equal trade flows. The debt expanded because the trade deficit exploded — the trade deficit exploded because the debt expanded — same thing.

    The dollar was strong, high rates dives up the dollar, debt drives up rates — all interdependent.

    “Except that a household and a government are completely different. A household will die one day, whereas a government is expecting to be around in perpetuity. Ergo, the debt of a government never has to be paid off.”

    Partially true — A government can run in a state of deficit for a long time. And, may never have to pay-off its debts in its entirety. However, as Debt to GDP gets to be high, debt service becomes an increasing burden. So, long as the market maintains confidence and rates stay relatively low, the government can sustain a high debt to GDP ratio. But the confidence fairy is a fickle girl. When she flutters away, rates spike, debt service becomes unsustainable, and markets go into crisis. It is a non-linear dynamic. There is no problem until there is.

  45. Gravatar of JSeydl JSeydl
    13. November 2012 at 03:56

    Doug M,

    “The dollar was strong, high rates dives up the dollar, debt drives up rates — all interdependent.”

    Not sure what your point is. If policymakers had recognized that the whole of Asia was pegging to the dollar at low rates, then they could have driven the dollar through the floor to undo the pegging — in which case the trade deficit and the debt wouldn’t have exploded.

    “But the confidence fairy is a fickle girl. When she flutters away, rates spike, debt service becomes unsustainable, and markets go into crisis. It is a non-linear dynamic. There is no problem until there is.”

    Epic nonsense. You’re telling me we need to be worried about a problem that doesn’t exist. The fact is that interest payments as a share of GDP are at a post-war low. The debt is not a binding constraint whatsoever. In addition, it’s important to note that the deficit exploded because the economy tanked. (This point is not debatable.) The CBO’s projections prior to the bust showed the deficit gradually falling and eventually turning into a surplus in 2012. There were no major changes to tax and spending policy that would have led to $1 trillion+ deficits.

    A serious analyst might be concerned about the problem that caused the deficit to explode in the first place.

  46. Gravatar of Doug M Doug M
    13. November 2012 at 10:08

    “Not sure what your point is. If policymakers had recognized that the whole of Asia was pegging to the dollar at low rates, then they could have driven the dollar through the floor to undo the pegging — in which case the trade deficit and the debt wouldn’t have exploded.”

    We want cheap goods from asia, and we want the worlds investement dollars. Don’t worry so much about the trade deficit.

    “You’re telling me we need to be worried about a problem that doesn’t exist.”

    Absolutely, you can’t solve prevent a crisis after it happens. I think we are several years away from a tipping point, but when debt to GDP passes 200%, I would say that it will be more difficult (yet still not impossible) to escape.

  47. Gravatar of JSeydl JSeydl
    13. November 2012 at 10:25

    “We want cheap goods from asia”

    Who wants cheap goods? I’m sure a boatload of ppl in the US would be happier with well-paying mfg jobs rather than cheap goods.

    “I think we are several years away from a tipping point”

    This is what ppl like you said about the Japanese economy 15 years ago. It is incredibly irresponsible to be worried about how to reduce the deficit when nearly 25 million ppl are either unemployed, underemployed or have given up looking for work. If you don’t care about these ppl and only care about bondholders’ returns, then just admit it — I could then at least say that your view is consistent.

  48. Gravatar of Doug M Doug M
    13. November 2012 at 10:33

    The Japanese are at a tipping point. And look at the results…Japanese GDP has stagnated for nearly 20 years now.

  49. Gravatar of JSeydl JSeydl
    13. November 2012 at 11:14

    As a percentage of GDP, the interest burden on Japanese debt is lower than it was in the 1980s.

  50. Gravatar of Major_Freedom Major_Freedom
    13. November 2012 at 11:44

    Doug M:

    GDP is a nominal concept. It just measures the money spent on goods and services. Why would a constant aggregate expenditure for goods and services necessarily be a bad thing? Real growth can still take place.

    If you look at Japan’s real GDP per capita corrected for PPP, which is less problematic than GDP, then you will see that statistic to have grown during the 1990s and 2000s (before the financial crisis).

  51. Gravatar of Major_Freedom Major_Freedom
    13. November 2012 at 12:17

    JSeydl:

    “Imagine an individual household spending more than it earns, year after year. At some point, that household would not be able to borrow any more.”

    Except that a household and a government are completely different. A household will die one day, whereas a government is expecting to be around in perpetuity. Ergo, the debt of a government never has to be paid off.

    First, that’s wrong. Second, you missed my point.

    1. Governments don’t have to bring their debt to zero, but then neither do firms. But governments do have to pay their debt, or else they’ll default. If their debt liabilities exceed their receipts, then they will default. The reason I brought up households was to show why deficit running states have to print money or else they will eventually default. I am saying that deficit running states would default if they don’t print money as would a deficit running household (because they can’t).

    2. I wasn’t saying nor implying, nor did my argument require, the assumption that households and states are the same.

    My point is that governments cannot run deficits in perpetuity unless the government has monopoly over the currency in which the deficits and debt are denominated, and they “print” enough notes to cover their debts. If they don’t print money, then at some point, government debt investors will no longer lend to that government, because it will be a guaranteed loss if they do.

    Also, a government has the responsibility of looking over the macroeconomy, whereas a household does not. This usually forces a government to spend more when times are bad, so that ppl don’t die in the street.

    Governments are not needed to feed people.

    “remove the aggressive property violations that imposes the peg”

    Like remove the generous patent and copyright protection for the multinational corps? I agree.

    I agree, the solution is to remove the aggressive property rights violations that imposes the peg. Removal of violations as such would of course entail removal of all IP laws as well.

    I’m going to skip the rant on fiat banking.

    Yes, it’s better to run away and re-evaluate when you suspect that you will lose a battle. Sun Tsu.

    The 1800s were not a particularly stable and prosperous century, which no one should want to go back and repeat.

    Of course it was less prosperous. But that isn’t because there wasn’t a Fed. It’s because electricity and internal combustion engines, among other technologies, weren’t even invented yet. In general, it is because the productivity of labor was relaitvely lower, due to the relatively lower quantity of capital invested per worker. It’s harder to build houses and hospitals with hand shovels and hammers, as compared to tractors and jackhammers.

    And what good is “stability”? Humans are by their nature unstable. We learn new things, our preferences change, and unforeseen events occur. Stability is death. Life is dynamic. At any rate, the 1800s were not unusually unstable anyway. Prosperity was growing at very high rates, and it was during that time that an initially agrarian society overtook Britain as the world’s most prosperous economy. Industrial revolution? Hello?

    Furhermore, I never said I want to go back to 1800s prosperity. If you and I were living in Nazi Germany, and I said we should have something other than fascist dictatorship, then would it make any sense for you to say “Oh you just want us to go back to the 1800s way of things, when people were poorer.”?

    “If one supports central banking, then one cannot complain of any central bank bringing about an “artificially low” or “artificially high” currency.”

    You lost me. I don’t see how it’s not possible to have a freely floating exchange rate and a central bank.

    I didn’t say it’s not possible, I just said you are in no position to complain about any central bank manipulating a currency. This is because currency manipulation is what central banks are in the business of doing.

    What you are really saying to me is that you want to replace one central bank currency manipulation scheme with another central bank currency manipulation scheme. Excuse me while I don’t feel sorry for you not getting what you want.

  52. Gravatar of JSeydl JSeydl
    13. November 2012 at 15:14

    Major_Freedom

    “If their debt liabilities exceed their receipts, then they will default.”

    Right. So why the hell are we even talking about the debt? For like the 10th time, interest payments as a share of GDP are at a post-war low. There is absolutely no reason to be worried about public debt right now.

    “My point is that governments cannot run deficits in perpetuity unless the government has monopoly over the currency in which the deficits and debt are denominated, and they “print” enough notes to cover their debts. If they don’t print money, then at some point, government debt investors will no longer lend to that government, because it will be a guaranteed loss if they do.”

    I agree. But again, what’s your point? The government has a monopoly over the dollar, so there’s no reason to be worried about an imminent debt crisis.

    “Governments are not needed to feed people.”

    History suggests that you are wrong. How many seniors were left to die in the streets before SS was created?

    “I agree, the solution is to remove the aggressive property rights violations that imposes the peg. Removal of violations as such would of course entail removal of all IP laws as well.”

    We are on the same page here.

    “Yes, it’s better to run away and re-evaluate when you suspect that you will lose a battle.”

    I’m not running away. I’ve just been down this silly road a thousand times, and I always feel like I’m wasting my time.

    Look, without a central bank, somebody is going to control interest rates. Before the Fed, large banks such as BNY and JPM were manipulatively controlling them. Is that the world you want to go back to?

    “currency manipulation is what central banks are in the business of doing.”

    I don’t necessarily disagree. But the previous point holds here as well: Without the Fed, the value of the dollar is set by the Wall Street robber barons. A central bank isn’t perfect, but it’s better than giving more power to the corporate interests.

  53. Gravatar of Major_Freedom Major_Freedom
    13. November 2012 at 17:28

    JSeydl:

    “If their debt liabilities exceed their receipts, then they will default.”

    Right. So why the hell are we even talking about the debt? For like the 10th time, interest payments as a share of GDP are at a post-war low. There is absolutely no reason to be worried about public debt right now.

    I wasn’t “talking about the debt” in that way. (Although I will say as a tangential point that interest payments are low because interest rates are low. I don’t think rates will stay low forever.)

    What I am saying, and only wanted to emphasize to you, was that perpetual deficits cannot exist unless there is inflation present to backstop the Treasury. So we must say that it is inflation that enables them.

    Without inflation, deficits would bankrupt the state in the way most people understand bankruptcy (cash liabilities exceed cash receivables).

    That’s all I wanted and intended to say.

    “My point is that governments cannot run deficits in perpetuity unless the government has monopoly over the currency in which the deficits and debt are denominated, and they “print” enough notes to cover their debts. If they don’t print money, then at some point, government debt investors will no longer lend to that government, because it will be a guaranteed loss if they do.”

    I agree. But again, what’s your point? The government has a monopoly over the dollar, so there’s no reason to be worried about an imminent debt crisis.

    It’s not all sunshine. If the required printing needed to avoid default would generate 10% or 20% or 100% price inflation, then there is reason to worry. It is very reckless to pin your hopes on the printing press. TANSTAAFL.

    “Governments are not needed to feed people.”

    History suggests that you are wrong.

    History is unique. History cannot prove anything wrong (or right) in the field of human action.

    If in the year 1800 someone said slavery can be abolished, or that there could be women’s suffrage, or that people have the ability to fly into space, would it make any sense for someone else to say “History says your wrong.”?

    How many seniors were left to die in the streets before SS was created?

    Close to zero. Ever heard of voluntary assistance? It’s nuts, I tell you. Check it out. If an old person needs to eat, and they have no money, then other people, perhaps even their children, nephews or nieces, can actually help them. It’s ridiculous, isn’t it?

    “I agree, the solution is to remove the aggressive property rights violations that imposes the peg. Removal of violations as such would of course entail removal of all IP laws as well.”

    We are on the same page here.

    I’m consistent. Are you? Social Security is based on aggressive violations of property rights. Some people are essentially robbed for the sake of other people. You are against patents and copyrights because they are aggressive violations of property rights, and yet you are in favor of Social Security. What does that tell you?

    “Yes, it’s better to run away and re-evaluate when you suspect that you will lose a battle.”

    I’m not running away. I’ve just been down this silly road a thousand times, and I always feel like I’m wasting my time.

    In an ideal situation, when two people disagree, what should be the ultimate foundation that intellectually establishes who should cease and desist using their bodies in a standoffish manner?

    Look, without a central bank, somebody is going to control interest rates.

    Actually the market process will decide that. It’s not so much “somebody” in the singular sense, as it is “everyone who borrows and lends”.

    Before the Fed, large banks such as BNY and JPM were manipulatively controlling them. Is that the world you want to go back to?

    LOL, as opposed to ONE MONOPOLIST controlling them? You’re funny. You say you don’t want large banks manipulatively controlling interest rates, and yet you think it is better that one monopoly bank manipulatively controls them?

    You might as well say that because you’re against large institutions manipulatively controlling the price of oil, that the solution is to abolish the oil market and have one monopolist manipulatively controlling all oil production.

    Look, a free market in interest rates is what I want. I don’t know what you mean by “large banks such as BNY and JPM manipulatively controlling” interest rates. Before the Fed, interest rates weren’t “manipulated”. They were set primarily by borrowers and lenders (primarily because there was often government interference, e.g. two national bank experiments, national bank act, etc).

    “currency manipulation is what central banks are in the business of doing.”

    I don’t necessarily disagree.

    Now there’s a non-committed statement if I have ever seen one.

    OK, so you don’t necessarily disagree. But do you agree? Or are you at this point unsure? If you’re unsure, then just consider the Fed as JPM being the sole bank in the country. It’s still bankers that control the Fed. They are the ones who are dependent on zero interest rates, and they are why we have zero interest rates. The Fed doesn’t work for you. The Fed is headquarters of the US banking cartel that consists of JPM among other “large banks.”

    Sorry to be the one to break this to you. The Federal Reserve Act, that legalized the Fed, was written by the banker House of Morgan, among others, in the early 1900s, in order to protect their interests whilst engaging in credit expansion (which sets banks up for “runs”). The bankers cartelized their operations through the Fed. Since then, they have hired ambitious and bright, yet morally degraded and credulous, economists and politicians to “educate” the masses that the Fed is there “for the good of society”.

    But the previous point holds here as well: Without the Fed, the value of the dollar is set by the Wall Street robber barons.

    LOL, as opposed to a single robber baron with the power of the state to protect it, controlled by the same robber barons?

    If you are weary about robber barons controlling money and interest rates, how in the world can those same robber barons having state monopoly protection, be an improvement? At least without the Fed, the people can stop doing business with the robber barons, bankrupting them because those robber barons don’t have access to a state protected printing press!

    Without the Fed, and without government interference in money production, the dollar would almost certainly be precious metals based. It would be set and controlled by market forces, not the arbitrary whims of a small group of people sitting in a marble palace.

    A central bank isn’t perfect, but it’s better than giving more power to the corporate interests.

    Dude, the Fed gave those corporate interests more power, not less power. That’s why it was created in the first place!

    Your conception of history is seriously flawed. Ah well, yet another public school “educated” citizen who has no idea of the real course of history because he was spoon fed the sunshine and lollipop version of power struggles. Can’t say I’m surprised. I went through the same nonsense, but thankfully I finally got unplugged from the Matrix.

  54. Gravatar of JSeydl JSeydl
    14. November 2012 at 01:18

    “If the required printing needed to avoid default would generate 10% or 20% or 100% price inflation, then there is reason to worry. It is very reckless to pin your hopes on the printing press.”

    Uh huh. And where’s your evidence to suggest that printing more money now is going to lead to hyperinflation? More specifically, were you one of the talking heads who said in 2010 that a tripling of the Fed’s BS was going to lead to hyperinflation?

    “Ever heard of voluntary assistance? It’s nuts, I tell you. Check it out. If an old person needs to eat, and they have no money, then other people, perhaps even their children, nephews or nieces, can actually help them.”

    Right. So let’s just shred the safety net and tell the poor, “Don’t worry, the rich will help you out.” News alert: People are ****ing greedy. The world you envision never existed and never will. In a world in which people are greedy, we need forced redistribution, because those with excessive wealth will never voluntarily provide enough support to help those with zero wealth.

    “I’m consistent. Are you? Social Security is based on aggressive violations of property rights. Some people are essentially robbed for the sake of other people.”

    What’s your definition of property rights? If Mitt Romney’s sons are forced to pay into SS to help the poor, is that a violation of property rights? If so, what did Mitt Romney’s sons do to deserve being born into a wealthy family with plentiful resources? Were they just better parent pickers than the children born into poor families?

    “LOL, as opposed to ONE MONOPOLIST controlling them? You’re funny. You say you don’t want large banks manipulatively controlling interest rates, and yet you think it is better that one monopoly bank manipulatively controls them?”

    The Fed is not a profit-seeking institution. Banks like BNY and JPM are. I don’t want things with profit-seeking motives to control interest rates. Sure, governance at the Fed needs to be seriously revamped. But the basic structure is better than that in the private sector.

    “I don’t know what you mean by “large banks such as BNY and JPM manipulatively controlling” interest rates. Before the Fed, interest rates weren’t “manipulated”.”

    This is sort of well known. Prior to the creation of the Fed, the large banks in NY had full control over interest rates. Again, I don’t want that power in the hands of private institutions.

    “At least without the Fed, the people can stop doing business with the robber barons, bankrupting them because those robber barons don’t have access to a state protected printing press!”

    Sorry, the real world doesn’t work this way. The OTC market is heavily unregulated, yet corruption is widespread — I know, I used to work on a trading floor. Banks regularly collude to provide bogus quotes. In addition, banks usually use their cross-sell functions to lock clients in to crappy deals. All of this suggests that more regulation, not less, in the financial industry is the responsible thing to do. The reason is because people don’t have the power to stop doing business with the banks. Do you know how much fixed costs are involved in setting up, for example, a derivatives market-making operation?

    Also, I know you’re not a big fan of history, but history does indeed suggest that an unregulated financial sector will lead to economic ruin.

    “Without the Fed, and without government interference in money production, the dollar would almost certainly be precious metals based. It would be set and controlled by market forces, not the arbitrary whims of a small group of people sitting in a marble palace.”

    No, it wouldn’t. It would be set by the likes of Wells Fargo, JPMorgan, Citi, et al. Again, such power is better in the public sector than in the private sector.

  55. Gravatar of JSeydl JSeydl
    14. November 2012 at 02:13

    “Close to zero.”

    By the way, I forgot to comment on this assertion, which deserves a pile of ridicule. The poverty rate for those 65 and older was literally cut in half after SS was implemented.

  56. Gravatar of Major_Freedom Major_Freedom
    14. November 2012 at 13:50

    JSeydl:

    “If the required printing needed to avoid default would generate 10% or 20% or 100% price inflation, then there is reason to worry. It is very reckless to pin your hopes on the printing press.”

    Uh huh. And where’s your evidence to suggest that printing more money now is going to lead to hyperinflation?

    I didn’t make that argument. Why am I obligated to show evidence for it? I am just saying that it is not necessarily sunshine and lollipops that states can print their own money. Yes, the nominal debt problem can be avoided, but there are costs.

    More specifically, were you one of the talking heads who said in 2010 that a tripling of the Fed’s BS was going to lead to hyperinflation?

    No. Who said there would be hyperinflation in 2012?

    “Ever heard of voluntary assistance? It’s nuts, I tell you. Check it out. If an old person needs to eat, and they have no money, then other people, perhaps even their children, nephews or nieces, can actually help them.”

    Right. So let’s just shred the safety net and tell the poor, “Don’t worry, the rich will help you out.” News alert: People are ****ing greedy.

    If people are greedy, then how can you expect those in the state, who are greedy, to give to the poor?

    Newsflash: People are giving away hundreds of billions of dollars each year to charity, and that is WITHIN a society where those same people are told that the state will take care of the poor through stealing from those same people!

    The world you envision never existed and never will.

    OK, Nostradamus. Next thing you’ll tell me that humans will never walk on the moon, and that we will never abolish slavery, and that humans will never change.

    You are historically demonstrably wrong. Prior to the progressive era policies going on steroids, churches and hospitals and many other institutions gave free services to poor people.

    Just because you are so greedy that you can’t envision anyone else being anything other than greedy, it doesn’t mean your worldview is correct. Your warped mindset about humanity is clouding your reason.

    In a world in which people are greedy, we need forced redistribution, because those with excessive wealth will never voluntarily provide enough support to help those with zero wealth.

    You just sneakily introduced the term “excessive” in order to absolve your own self from being included in the population that is robbed from. That’s what all totalitarian minded people like you do. You say forced redistribution is justified, but you always put yourself in the middle, and those who make more than you are robbed, and those below you, possibly including you, are given the loot.

    If the world is greedy, then it would be impossible for those who force others to pay, to then give to the poor to help them, without asking for anything in return. Your worldview is self-contradictory.

    “I’m consistent. Are you? Social Security is based on aggressive violations of property rights. Some people are essentially robbed for the sake of other people.”

    What’s your definition of property rights?

    Funny you ask that now, AFTER you already said you are against IP on the basis of property rights.

    My definition of property rights is the understanding that one who produces, purchases, or originally appropriates a good, is the sole and exclusive party to decide the disposition of said good.

    If Mitt Romney’s sons are forced to pay into SS to help the poor, is that a violation of property rights?

    If they are taxed of property they earned via production or exchange, then yes.

    If so, what did Mitt Romney’s sons do to deserve being born into a wealthy family with plentiful resources?

    What did they do to deserve being robbed?

    I guess you would be OK then with me coming over to your home, taking everything you own save that which you need to barely stay alive, so that I can use it to help impoverished African children on the verge of death. If you were as forthright in your actions as you are in your professed morality, then you should be totally fine with my actions.

    And if you resist, then I will just quote your own statement, and say “In a world in which people are greedy, we need forced redistribution.”

    Were they just better parent pickers than the children born into poor families?

    Did those sons hurt others? What did they do to deserve being robbed?

    “LOL, as opposed to ONE MONOPOLIST controlling them? You’re funny. You say you don’t want large banks manipulatively controlling interest rates, and yet you think it is better that one monopoly bank manipulatively controls them?”

    The Fed is not a profit-seeking institution.

    Of course it is. The Fed allows the large banks to generate profits through fractional reserve lending.

    The Fed also earns profits on the bonds it buys with printed money, and sends less than 100% of those profits back to the Treasury, keeping the rest for itself. That’s profit seeking.

    Banks like BNY and JPM are. I don’t want things with profit-seeking motives to control interest rates.

    Then you don’t want the Fed to control interest rates.

    Sure, governance at the Fed needs to be seriously revamped. But the basic structure is better than that in the private sector.

    No it isn’t. It is far inferior to the private sector. Profit seeking is seeking to satisfy consumer preferences. People can’t earn profits unless they produce and offer something of value to others that is more valuable than the resources they used up.

    To be against profit making is to be against the very fabric of a free society.

    If you are against profit making, and that interest rates are too serious a matter to be left to free individuals, then by logical extension, if you view food, water, clothing, shelter, and medicine as more important than the height of interest rates, which I am sure you do, then you must hold that profit seeking providers of these goods should be nationalized, so that profit seeking behavior can be abolished for these even more important things.

    In other words, the logic of your worldview is an overthrow of capitalism and re-re-re-introduction of socialism. Might I remind you that hundreds of millions of people have died under socialist rule…because of the very principle of “greed” that the socialist leaders enacted?

    The governance at the Fed cannot be fixed. It is a monopoly institution. Any economist will tell you that monopolies tend to degrade in terms of quality, and increase in terms of costs. They face no market force regulation. How would greedy people behave when their behavior is not checked by voluntary consumer abstentions when they make bad decisions?

    “I don’t know what you mean by “large banks such as BNY and JPM manipulatively controlling” interest rates. Before the Fed, interest rates weren’t “manipulated”.”

    This is sort of well known. Prior to the creation of the Fed, the large banks in NY had full control over interest rates. Again, I don’t want that power in the hands of private institutions.

    Your answer is not good enough. You essentially just repeated the same mantra without justification.

    Tell me, how can large banks have full control over interest rates? Remember, there are both lenders AND BORROWERS to every exchange, including debt contracts. Lenders cannot raise interest rates unless there are borrowers willing to pay those rates.

    “At least without the Fed, the people can stop doing business with the robber barons, bankrupting them because those robber barons don’t have access to a state protected printing press!”

    Sorry, the real world doesn’t work this way.

    Of course the real world doesn’t work that way. The real world contains the Fed. I am making an argument of an economy without a Fed. You can’t possibly argue against it by merely saying it doesn’t currently exist. Human life doesn’t work that way.

    The OTC market is heavily unregulated, yet corruption is widespread — I know, I used to work on a trading floor.

    What corruption?

    You don’t have to buy OTC products. I don’t believe you when you say you used to work on a trading floor. Your comments betray any knowledge whatsoever about how markets work.

    Banks regularly collude to provide bogus quotes.

    What bogus quotes? You mean like the bogus quotes from the Fed of who got multi-trillion bailouts from the Fed? The Fed regularly colludes with banks in backdoor dealings, and they cite “independence” as justification.

    In addition, banks usually use their cross-sell functions to lock clients in to crappy deals.

    What crappy deals?

    All of this suggests that more regulation, not less, in the financial industry is the responsible thing to do.

    Regulators don’t know the details of trading. They are always one step behind. Plus, the regulators themselves are almost always from the banking industry, and the revolving door allows greedy bankers to become regulators, set laws favorable to the very banks they are regulating, then when they leave office, they get re-hired with more pay.

    Asking for more “regulations”, instead of more customer sovereignty, is only going to weaken the incentive not to cheat even more. The financial industry is one of the most heavily regulated industries in the country.

    The reason is because people don’t have the power to stop doing business with the banks.

    That’s because the banks keep getting bailed out by the Fed, the very institution the banks clamored for to ensure that they don’t go bankrupt.

    People don’t have the power to bankrupt firms that benefit from printed money. It’s the very Fed itself that is causing the problems you see.

    Do you know how much fixed costs are involved in setting up, for example, a derivatives market-making operation?

    You mean the costs of getting state regulator approval? Or the market costs?

    Also, I know you’re not a big fan of history, but history does indeed suggest that an unregulated financial sector will lead to economic ruin.

    I know that you don’t know history, but history shows that we don’t have an unregulated financial sector. The Fed is not a free market institution.

    “Without the Fed, and without government interference in money production, the dollar would almost certainly be precious metals based. It would be set and controlled by market forces, not the arbitrary whims of a small group of people sitting in a marble palace.”

    No, it wouldn’t. It would be set by the likes of Wells Fargo, JPMorgan, Citi, et al. Again, such power is better in the public sector than in the private sector.

    Wrong. It would be set by lenders AND BORROWERS. Lenders do not have autarchic control over a rate that is based on exchanges between them and external parties.

    You have no idea how the market process works. You are merely spewing old, outdated and oft refuted socialist fallacies. It’s just anti-capitalist prattle.

    “Close to zero.”

    By the way, I forgot to comment on this assertion, which deserves a pile of ridicule. The poverty rate for those 65 and older was literally cut in half after SS was implemented.

    You moved the goal posts. Originally you said dying in the streets. Now you’re saying specific wealth levels. Of course SS payments to old people will increase their incomes, but it comes at a cost of reduced incomes of others, so it’s not a general benefit. The state cannot help A unless it harms B.

    If you are in favor of helping old people, then again, you should be OK with me coming over to your house and taking everything save that which you need to stay alive, and then use it to help old people today who have little to no income, in this country and around the world (since I am assuming your socialism is only good for Americans, while Africans can suck it).

  57. Gravatar of Major_Freedom Major_Freedom
    14. November 2012 at 13:50

    JSeydl:

    This is what happens when the state gets involved in welfare:

    http://i.imgur.com/0kgk7.png

  58. Gravatar of JSeydl JSeydl
    15. November 2012 at 04:19

    Major_Freedom,

    “I didn’t make that argument. Why am I obligated to show evidence for it? I am just saying that it is not necessarily sunshine and lollipops that states can print their own money. Yes, the nominal debt problem can be avoided, but there are costs.”

    Then you haven’t even said anything. You’ve just noted that only countries with a printing press can run chronic deficits, and even then there are risks. This is something that I — and most likely every other competent person on the planet — already knew.

    “No. Who said there would be hyperinflation in 2012?”

    When core inflation jumped in early 2011, all of your Austrian buddies made nonsensical claims about how inflation would spiral out of control.

    “If people are greedy, then how can you expect those in the state, who are greedy, to give to the poor?”

    SS is an automatic redistribution scheme. Ergo, it doesn’t require greedy politicians to use discretion to determine how much should be redistributed.

    “Newsflash: People are giving away hundreds of billions of dollars each year to charity, and that is WITHIN a society where those same people are told that the state will take care of the poor through stealing from those same people!”

    Apparently, not enough is given. News flash: Poverty rates are at a 45-year high. Moreover, a standard welfare-maxmising cost-benefit approach would require nearly 50 percent of income earned in the US to be shipped to Africa. In reality, about 0.001 percent is. Relying on “generosity” will never provide enough support to the needy and disabled.

    “You are historically demonstrably wrong. Prior to the progressive era policies going on steroids, churches and hospitals and many other institutions gave free services to poor people.

    Just because you are so greedy that you can’t envision anyone else being anything other than greedy, it doesn’t mean your worldview is correct. Your warped mindset about humanity is clouding your reason.”

    Again, this is complete nonsense. Do you ever even look at data? The creation of the modern welfare state lead to across-the-board reductions in poverty rates. I’m sure you truly believe that churches and hospitals will generously support the needy without state-run welfare — you can’t be that inhumane — but the data say that you’re wrong.

    “You just sneakily introduced the term “excessive” in order to absolve your own self from being included in the population that is robbed from. That’s what all totalitarian minded people like you do. You say forced redistribution is justified, but you always put yourself in the middle, and those who make more than you are robbed, and those below you, possibly including you, are given the loot.”

    I have nothing against ppl making money; I have a whole lot against ppl who rig the system in order to capture rents. Open your eyes: The modern financial system is a complete sham; doctors and lawyers are overpaid protectionists; CEOs of large companies set their own salaries with no accountability; and so on.

    In other words, you’re defending the indefensible.

    “If they are taxed of property they earned via production or exchange, then yes.”

    OK, and what if their family background is what enabled them to produce so much in the first place. More specifically, what if the poor kid who grew up in north philly could have produced as much as Mitt’s sons if he were born with the same resources that Mitt’s sons were born with? I think you see where I’m going.

    “I guess you would be OK then with me coming over to your home, taking everything you own save that which you need to barely stay alive, so that I can use it to help impoverished African children on the verge of death. If you were as forthright in your actions as you are in your professed morality, then you should be totally fine with my actions.”

    I’m of the belief of luck-egalitarism, which says that you are entitled to what is a result of hard work and effort, but not that which is a result of luck. If you are born into a family in which resources are plentiful, that is luck.

    “Did those sons hurt others? What did they do to deserve being robbed?”

    Of course they hurt others. Everything in economics is relative. (Read some of R. Frank’s research). The fact that Mitt has the ability to get his sons into HBS with one phone call hurts the other similarly qualified students who don’t have the same connection — there are only so many spots in each year’s class at HBS, after all.

    “The Fed also earns profits on the bonds it buys with printed money, and sends less than 100% of those profits back to the Treasury, keeping the rest for itself. That’s profit seeking.”

    Profit seeking would be selling the bonds for a profit after they have appreciated. Everything the Fed buys is held to maturity. While the Fed has made profits — especially in recent years — that is not the same thing as saying that the fed is profit-seeking.

    “Profit seeking is seeking to satisfy consumer preferences.”

    Not always. When information is asymmetric and externalities are abound, profit seeking leads to exploitation.

    Look, your rant was cute, but you can’t escape the fact that after the banking sector was deregulated, exploitation increased. Some industries — like banking, healthcare, insurance, etc.. — are special and need to be regulated. Each time have deregulated these industries, corruption spread.

    “Tell me, how can large banks have full control over interest rates? Remember, there are both lenders AND BORROWERS to every exchange, including debt contracts. Lenders cannot raise interest rates unless there are borrowers willing to pay those rates.”

    Rates on loans are market determined — look at where bill, notes, and bonds are trading, and that’s were rates on loans will be set. Without a Fed, large banks will have a monopoly on trading these securities. Ergo, without a Fed, they will set interest rates in the economy.

    “Of course the real world doesn’t work that way. The real world contains the Fed. I am making an argument of an economy without a Fed. You can’t possibly argue against it by merely saying it doesn’t currently exist. Human life doesn’t work that way.”

    And so your argument is complete conjecture. Given that we don’t know what the world will look like without a Fed, the best we can do is look at how the world actually was the last time there wasn’t a Fed. Again, that’s not a pleasant world — for thousands of reasons that can be found with one google search.

    “What corruption?

    You don’t have to buy OTC products. I don’t believe you when you say you used to work on a trading floor. Your comments betray any knowledge whatsoever about how markets work.”

    WTF are you talking about? Every company needs to buy and sell derivatives for hedging purposes. Derivatives are bought and sold in the OTC market. A specific example — since you clearly didn’t follow: say a large company wants to buy oil futures to hedge against a spike in oil prices. Banks with commodity operations will say, “OK, here’s the quote and if you don’t like it, too bad, because we’ll deny treasury management services to you if you don’t accept the quote.” And of course the company can’t shop around because only a select few banks offer treasury management services on a large enough scale, and they each operate in the same way. Go spend some time on a trading floor.

    That’s it from me for now. Too busy to address everything else.

  59. Gravatar of Major_Freedom Major_Freedom
    18. November 2012 at 00:36

    JSeydl:

    “I didn’t make that argument. Why am I obligated to show evidence for it? I am just saying that it is not necessarily sunshine and lollipops that states can print their own money. Yes, the nominal debt problem can be avoided, but there are costs.”

    Then you haven’t even said anything.

    False. The statement that there are costs to inflation is a statement that contains positive content that is something other than “nothing”.

    You’ve just noted that only countries with a printing press can run chronic deficits, and even then there are risks. This is something that I — and most likely every other competent person on the planet — already knew.

    You don’t seem to understand the actual costs.

    “No. Who said there would be hyperinflation in 2012?”

    When core inflation jumped in early 2011, all of your Austrian buddies made nonsensical claims about how inflation would spiral out of control.

    Who? Give me names and citations of hyperinflation in 2012.

    “If people are greedy, then how can you expect those in the state, who are greedy, to give to the poor?”

    SS is an automatic redistribution scheme.

    It is not automatic. It is set up by positive human action.

    Ergo, it doesn’t require greedy politicians to use discretion to determine how much should be redistributed.

    False. It requires actual decisions made by individual people, who you claim are greedy. God didn’t impose SS. Humans did.

    “Newsflash: People are giving away hundreds of billions of dollars each year to charity, and that is WITHIN a society where those same people are told that the state will take care of the poor through stealing from those same people!”

    Apparently, not enough is given.

    Anything less than 100% charity is enough to you.

    News flash: Poverty rates are at a 45-year high.

    So is government intervention.

    Moreover, a standard welfare-maxmising cost-benefit approach would require nearly 50 percent of income earned in the US to be shipped to Africa. In reality, about 0.001 percent is. Relying on “generosity” will never provide enough support to the needy and disabled.

    You are fallaciously extrapolating from a statist system, when in reality a movement away from a statist system would contain charity that replaces what the state steals.

    “You are historically demonstrably wrong. Prior to the progressive era policies going on steroids, churches and hospitals and many other institutions gave free services to poor people.”

    “Just because you are so greedy that you can’t envision anyone else being anything other than greedy, it doesn’t mean your worldview is correct. Your warped mindset about humanity is clouding your reason.”

    Again, this is complete nonsense. Do you ever even look at data? The creation of the modern welfare state lead to across-the-board reductions in poverty rates.

    This is demonstrably false. The modern welfare state halted the decline in poverty by creating a generation of dependents.

    I’m sure you truly believe that churches and hospitals will generously support the needy without state-run welfare — you can’t be that inhumane — but the data say that you’re wrong.

    You have a depraved view of humanity. Regardless, lack of charity does not justify theft.

    “You just sneakily introduced the term “excessive” in order to absolve your own self from being included in the population that is robbed from. That’s what all totalitarian minded people like you do. You say forced redistribution is justified, but you always put yourself in the middle, and those who make more than you are robbed, and those below you, possibly including you, are given the loot.”

    I have nothing against ppl making money; I have a whole lot against ppl who rig the system in order to capture rents.

    Then you must be against regulation, government intervention, and welfare. For that is exactly what is created with violent intervention in the market, regardless of intentions.

    Open your eyes: The modern financial system is a complete sham; doctors and lawyers are overpaid protectionists; CEOs of large companies set their own salaries with no accountability; and so on.

    The modern financial system contains tremendous violent intervention and violent protections against competition, which encourages immoral behavior.

    In other words, you’re defending the indefensible.

    You’re defending the indefensible: Violence against property rights.

    “If they are taxed of property they earned via production or exchange, then yes.”

    OK, and what if their family background is what enabled them to produce so much in the first place.

    What did they do wrong that justifies stealing against them? Making more money than you?

    More specifically, what if the poor kid who grew up in north philly could have produced as much as Mitt’s sons if he were born with the same resources that Mitt’s sons were born with? I think you see where I’m going.

    Yes, I do. You’re going to wanting to steal from wealthy people because of a feeling of jealousy and resentment.

    If you want to talk about being born wealthy, then you should have no problems with me stealing everything you have save that which you need to stay alive, so that I can help people far more poorer than you.

    “I guess you would be OK then with me coming over to your home, taking everything you own save that which you need to barely stay alive, so that I can use it to help impoverished African children on the verge of death. If you were as forthright in your actions as you are in your professed morality, then you should be totally fine with my actions.”

    I’m of the belief of luck-egalitarism, which says that you are entitled to what is a result of hard work and effort, but not that which is a result of luck. If you are born into a family in which resources are plentiful, that is luck.

    Compared to poor people in Africa, you were born lucky. Ergo, according to you, you sanction me taking your wealth to feel poor people who were born unlucky.

    “Did those sons hurt others? What did they do to deserve being robbed?”

    Of course they hurt others.

    That is a vicious condemnation of innocent people. They didn’t hurt others merely by virtue of earning more than they.

    Everything in economics is relative.

    Meaningless platitude.

    (Read some of R. Frank’s research). The fact that Mitt has the ability to get his sons into HBS with one phone call hurts the other similarly qualified students who don’t have the same connection — there are only so many spots in each year’s class at HBS, after all.

    You haven’t shown how wealthy people necessarily hurt others.

    “The Fed also earns profits on the bonds it buys with printed money, and sends less than 100% of those profits back to the Treasury, keeping the rest for itself. That’s profit seeking.”

    Profit seeking would be selling the bonds for a profit after they have appreciated. Everything the Fed buys is held to maturity. While the Fed has made profits — especially in recent years — that is not the same thing as saying that the fed is profit-seeking.

    Profit is earned on interest payments as well.

    “Profit seeking is seeking to satisfy consumer preferences.”

    Not always. When information is asymmetric and externalities are abound, profit seeking leads to exploitation.

    False. Respect for property rights and profit seeking are synonymous with satisfying customer preferences, including information asymmetries. If a seller exploits asymmetries, customers can solicit other sellers. There is a built in regulatory system when competition is open.

    Look, your rant was cute, but you can’t escape the fact that after the banking sector was deregulated, exploitation increased.

    The banking sector is one of the most regulated sectors in the economy. The production of money is literally communist. There is a state monopoly in it. It is academic fraud to assert that the banking sector is deregulated. It is the exact opposite.

    Some industries — like banking, healthcare, insurance, etc.. — are special and need to be regulated. Each time have deregulated these industries, corruption spread.

    The exact opposite is true. You are saying the opposite of what is true.

    “Tell me, how can large banks have full control over interest rates? Remember, there are both lenders AND BORROWERS to every exchange, including debt contracts. Lenders cannot raise interest rates unless there are borrowers willing to pay those rates.”

    Rates on loans are market determined

    Glad you recant.

    “Of course the real world doesn’t work that way. The real world contains the Fed. I am making an argument of an economy without a Fed. You can’t possibly argue against it by merely saying it doesn’t currently exist. Human life doesn’t work that way.”

    And so your argument is complete conjecture.

    No, it is based on axioms derived from painstaking self-reflection and analysis. It is not complete conjecture.

    Given that we don’t know what the world will look like without a Fed, the best we can do is look at how the world actually was the last time there wasn’t a Fed. Again, that’s not a pleasant world — for thousands of reasons that can be found with one google search.

    False induction. You might as well say that in 1800 AD, before slave emancipation occurred, that because there was no “data” of a world of emancipation, that we must conclude that emancipating slaves would be like living in 1800 AD, because that is the last time slaves existed in the US.

    “What corruption?

    u don’t have to buy OTC products. I don’t believe you when you say you used to work on a trading floor. Your comments betray any knowledge whatsoever about how markets work.”

    WTF are you talking about? Every company needs to buy and sell derivatives for hedging purposes. Derivatives are bought and sold in the OTC market.

    False. Not all companies need to buy derivatives.

    A specific example — since you clearly didn’t follow: say a large company wants to buy oil futures to hedge against a spike in oil prices. Banks with commodity operations will say, “OK, here’s the quote and if you don’t like it, too bad, because we’ll deny treasury management services to you if you don’t accept the quote.” And of course the company can’t shop around because only a select few banks offer treasury management services on a large enough scale, and they each operate in the same way. Go spend some time on a trading floor.

    You mean a trading floor that was granted permission by the state? Not a trading floor that sprang up without state permission? They don’t exist.

    That’s it from me for now. Too busy to address everything else.

    Too bad you’re not busy reading economics and history.

  60. Gravatar of JSeydl JSeydl
    18. November 2012 at 15:04

    I can’t even read half the crap you wrote, because the format is so bad. But I want to push you on one point. Suppose that we could determine how much of Mitt’s son’s wealth is attributable to luck rather than hard work. Would you support taxing away that portion? And no snarky appeal to realism; suppose that we could determine, with 100% certainty, how much of the wealth is due to luck.

  61. Gravatar of Major_Freedom Major_Freedom
    18. November 2012 at 16:31

    JSeydl:

    I can’t even read half the crap you wrote, because the format is so bad.

    Sorry about that. It’s ugly.

    But I want to push you on one point. Suppose that we could determine how much of Mitt’s son’s wealth is attributable to luck rather than hard work. Would you support taxing away that portion? And no snarky appeal to realism; suppose that we could determine, with 100% certainty, how much of the wealth is due to luck.

    I don’t support theft against legitimate property owners, even if they acquired a sum of wealth by luck. If someone wins the lottery, then I would not advocate for someone else to steal from him. If A wins the lotto, then by what right does B have in stealing it from A?

    If you were walking down the street, and you found a $20 bill in the gutter, and there is no way to verify who’s $20 it is, then I would not advocate that someone rob you and take that $20 for themselves.

    You are essentially just saying that theft is justified if you feel jealous about someone coming into ownership of wealth through something other than “hard work”, however one defines that.

  62. Gravatar of JSeydl JSeydl
    19. November 2012 at 13:30

    OK, so the means through which property owners acquire property has no bearing on whether they are allowed to keep their property (presumably as long as their actions to do harm others)?

    That’s fine. Now let’s push the envelope further. Imagine a society where 80% of wealth acquisition is due to luck (20% to hard work). Presumably, the lucky ones still get to keep the wealth, right? But if you’re part of the unlucky 20% percent, isn’t there a disincentive to work? After all, there’s a good chance that no matter how hard you work, you’ll never be as rich as those who were lucky. What if wealth acquisition is 99% due to luck? Why on earth would anyone in this society who is unlucky put forth any effort to acquire wealth?

    Key question: Don’t you think societies are more productive when everyone has the same shot at acquiring wealth?

  63. Gravatar of Major_Freedom Major_Freedom
    19. November 2012 at 14:12

    JSeydl:

    OK, so the means through which property owners acquire property has no bearing on whether they are allowed to keep their property (presumably as long as their actions to do harm others)?

    The means matters very much. Someone who pointed a gun at someone else and took their property, would possess the property, but they would not, IMO, be considered a legitimate property owner.

    That’s fine. Now let’s push the envelope further. Imagine a society where 80% of wealth acquisition is due to luck (20% to hard work). Presumably, the lucky ones still get to keep the wealth, right? But if you’re part of the unlucky 20% percent, isn’t there a disincentive to work?

    How is there a disincentive to working? If you work more and earn more, and work less and earn less, then the incentive to work is as high as the value one attaches to the income one can earn through working.

    After all, there’s a good chance that no matter how hard you work, you’ll never be as rich as those who were lucky. What if wealth acquisition is 99% due to luck? Why on earth would anyone in this society who is unlucky put forth any effort to acquire wealth?

    To earn an income.

    Key question: Don’t you think societies are more productive when everyone has the same shot at acquiring wealth?

    Not if this “same shot” is founded upon coercively confiscating the wealth of others. That will reduce those people’s productivity because their incentive to work is reduced.

    Individuals are productive in a division of labor through cooperation. The more individual property rights are respected, the more productive individuals will be, and hence the more productive “society”, which is all of us individuals, will be.

    —————–

    What you are saying is that you choose to reduce your personal work effort voluntarily when you merely see others getting wealthier by luck. You are saying that you would put forth more work effort if the amount of wealth acquired by others through luck is minimized, if not eliminated.

    To me, you are only hurting yourself when you do that. Yes, if you were so resentful and jealous that you would willingly work less and have a lower standard of living, then I can see you would believe that “society” would be better off if only you received more freebies by coercion. But to claim that “society” would be better off, when what you are really looking for is for you to be better off, is just sniveling parasitic greed masquerading as benevolent altruism.

  64. Gravatar of JSeydl JSeydl
    20. November 2012 at 00:18

    “Yes, if you were so resentful and jealous that you would willingly work less and have a lower standard of living, then I can see you would believe that “society” would be better off if only you received more freebies by coercion.”

    But standard of living is a relative thing. People judge their successes against that of others. These judgements are also the basis for higher levels of happiness (There is a tremendous literature on this, by the way). The point: Why are some people permitted higher levels of happiness for a relative superiority that they didn’t do anything to create? Relative success should be a deserved thing, no?

    Moving on: The next question is, do you incent laziness the other way around? You don’t believe that the unlucky will reduce their work habits (unless their sniveling greedy masquerading parasites), but how about the lucky? If Mitt’s sons weren’t born with a direct line into HBS, would they not have had to work harder to get into HBS if that’s where they really wanted to go to school?

  65. Gravatar of Major_Freedom Major_Freedom
    20. November 2012 at 08:10

    JSeydl:

    But standard of living is a relative thing. People judge their successes against that of others. These judgements are also the basis for higher levels of happiness (There is a tremendous literature on this, by the way).

    Yes, I know the literature on conspicuous consumption. But this issue is a philosophical problem. Only if you a priori think that wealth is important not because of what it does for the individual in the objective sense, but rather because of what one’s consumption appears to other people, will you believe what you believe.

    But I think to a different philosophy, one where MY life is improved or not on the basis of what I do, what I produce, and what I consume. The doctrine of consipcuous consumption is an anti-rational attack on individual reason and how it relates to the external world through material prosperity.

    The point: Why are some people permitted higher levels of happiness for a relative superiority that they didn’t do anything to create? Relative success should be a deserved thing, no?

    Why are some people permitted to use threats of violence (ultimately death) against those who acquired wealth by luck, while everyone else is not?

    Moving on: The next question is, do you incent laziness the other way around? You don’t believe that the unlucky will reduce their work habits (unless their sniveling greedy masquerading parasites), but how about the lucky? If Mitt’s sons weren’t born with a direct line into HBS, would they not have had to work harder to get into HBS if that’s where they really wanted to go to school?

    You must be against gift giving at Christmas. You must hate charity. You must hate those who acquired wealth in any way other than working in mines all day. Why else would you advocate for violence against the receivers?

    Property rights INCLUDES having the right to give one’s property to anyone one desires. If I cannot give my property away for nothing, and bring “luck” to someone else, because you or one of your hired thugs is threatening me with violence if I don’t give my wealth to them instead, and you support that, then you support theft, period. Well, if you support theft against me, then why should I respect your property rights? Why not let’s have a society of might makes right tribal mob rule where everything is up for grabs?

  66. Gravatar of JSeydl JSeydl
    21. November 2012 at 09:21

    The issue is that you haven’t made an argument for why property rights trumps everything else. You keep saying that it’s self-evident that any infringement on property rights is theft, but why?

    To make an argument for property rights, you could say: the children born into wealthy families deserve their situations because of their responsible actions in a previous life (i.e., Karma). That’s a silly argument, but at least it’s *an argument*.

  67. Gravatar of Doug M Doug M
    21. November 2012 at 13:12

    “The human right of every man to his own life implies the right to find and transform resources: to produce that which sustains and advances life. That product is a man’s property. That is why prop­erty rights are foremost among human rights and why any loss of one endangers the others.”

    “A man’s home is his castle.”

    Ammendments 3,4, and 5 of the bill of rights address property rights directly.

    “No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner…”

    “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”

    “No person shall be … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

    A person’s rigts to privacy and securty extend from his right to private property.

  68. Gravatar of Doug M Doug M
    21. November 2012 at 13:13

    shall NOT be deprived of life liberty of property….

  69. Gravatar of Major_Freedom Major_Freedom
    21. November 2012 at 13:35

    JSeydl:

    The issue is that you haven’t made an argument for why property rights trumps everything else.

    You haven’t made an argument for why theft trumps everything else.

    You keep saying that it’s self-evident that any infringement on property rights is theft, but why?

    Because theft is by definition non-consensual property confiscation. The concept of theft only makes sense in a context of property. The question then is what is the justification of property, that manifests the concept of theft.

    This question can only be answered via self-reflection, because, IMO, the foundation of property is within yourself as an individual, rather than “out there” to be observed.

    So to answer your question, I will ask you to think about what it is you are presupposing in the very act of you denying that property rights are absolute. I trust that you will be able to understand that you are presuming to have the sole exclusive control over your body, and the material means needed, to make the argument that property rights are not absolute. By saying I am wrong, you are making use of your body and your computer, at least. Nobody else could deny you of these things in order for you to even do what you did. Since property is presupposed in your act of denying property, you are committing what’s called a performative contradiction.

    Now, this then leads to the question of why your actions should be constrained to what is logically evident. Fine, says you, you are committing such a contradiction. So what? Why do your actions still have to be so constrained? Why can’t you just go out and take what you want? Well, if you want to go to that level, then you are no longer basing your convictions on rational grounds, but rather you are implying that morality is an illusion, and the real reality is simply might makes right. You can claim to own anything you want, produced by anyone else, and no matter if you take what someone else produced or traded for, as long as you have the power to control that property by force, then the justification is the fact that you are successfully possessing it.

    If that is what you want to accept, then my only answer to you is that I no longer have any intellectual justification to deal with you. If you deny rationality as a constraint, if you really believe that might makes right, then you open yourself up to having your entire life savings robbed, by me, and for you to be tied up and gagged, by me, and I will do all this willingly and with great satisfaction, because I am acting exactly in accordance with how you intend to treat others. You can try to stop me, and we’ll see who is more powerful than the other.

    Is that the kind of world you want to live in? Add in women and children into the mix, and you will see the kind of horrors that are unleashed when you start down the path of denying property. Property is literally the backstop of civilized society. If you want to destroy civilization, then may the stronger men win.

    To make an argument for property rights, you could say: the children born into wealthy families deserve their situations because of their responsible actions in a previous life (i.e., Karma). That’s a silly argument, but at least it’s *an argument*.

    I won’t respond to that.

  70. Gravatar of Saturos Saturos
    21. November 2012 at 13:43

    MF, can’t Jseydl argue against you with things belonging to someone else? Can’t a slave argue against you?

  71. Gravatar of Major_Freedom Major_Freedom
    21. November 2012 at 13:54

    MF, can’t Jseydl argue against you with things belonging to someone else?

    My explanation above assumes the justification for property is still up in the air. If you’re assuming that the things belong to someone else, then you have already concluded property is justified.

    Can’t a slave argue against you?

    Slavery also assumes property.

    The way to think of this is to suspend for a moment any concept of property and theft, and to abstract away from them. Then ask what is going on.

  72. Gravatar of Major_Freedom Major_Freedom
    21. November 2012 at 13:56

    Doug M:

    I don’t think JSeydl is talking about property justifications according to law, because that kind of begs the question of why there are property rights laws in the first place.

    No, you have to abstract away from positive law, and address the foundations.

  73. Gravatar of Doug M Doug M
    21. November 2012 at 14:41

    MF,

    If the state, or your fellow citizens don’t respect your right, then does it really exist?

    Regardless, I think I covered both the natural law and the postive law.

  74. Gravatar of Major_Freedom Major_Freedom
    21. November 2012 at 16:17

    If the state, or your fellow citizens don’t respect your right, then does it really exist?

    IMO: Neither those in the state nor those not in the state can create or destroy rights by fiat or opinion, or even action. Rights are an ethic, and there is a distinct ethic associated with human action that precludes all other possible ethics.

    If another person acts in a way that, in your judgment, violates my property rights, then if you look closely you will see that he would only be acting in a way that presupposes those same rights for himself. If he denies my property rights and takes my computer, then he has presupposed property rights to that computer for himself. He wouldn’t steal the computer if the thief believed that someone else has a right to it and is going to immediately snatch it up in their hands. No, the thief has claimed that he, and not me or anyone else, has the sole exclusive right to control the computer.

    Regardless, I think I covered both the natural law and the postive law.

    Well, as far as I can see, you quoted only positive law.

  75. Gravatar of JSeydl JSeydl
    22. November 2012 at 14:46

    MF,

    You’re long diatribe sidestepped the question I asked. We are talking about property as in the physical things that people own, not property as in actions within the mind or whatever. Don’t confuse the matter.

    As it stands, you just keep repeating that any infringement on property rights is theft because property rights are absolute, without explaining why they are absolute. Are they absolute because man was born with them? What right did the first person on earth have to enclose his own piece of land? You could say that he had that right because he worked on that land, and used its resources to make valuable things. But if that’s true, then we’re back into the world of luck egalitarianism.

    Oh, and please shorten your responses. I’m really getting tired of reading like 10 paragraphs making a point that could be made in two sentences.

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