10 ms·

Here's another solution: Respect the wisdom of markets. Allow corrections to take place and don't bury malinvestment under the rug only for it rear it's ugly h

by adam419 11y ago

Here's another solution: Respect the wisdom of markets. Allow corrections to take place and don't bury malinvestment under the rug only for it rear it's ugly head worse later on by acting as if you have a better intuition on what the price of money should be. Most people accept the virtue of free markets. Yet many don't see that the actions the Fed has been taking destroys the concept of a market by artificially supplementing supply or demand in an unbounded way based on a perceived sense of greater understanding. The problem is it's really hard for most of these policy makers to build a platform based on "Let's do nothing and let the markets correct themselves". In such complex domains like an economy the action bias is very real, problematic, and the best thing to eliminate if you want to renormalize markets.

juliangregorian 11y ago
Markets are not wise by any stretch. No one agrees what a "free" market would look like, but in general they tend to favor incumbents and the powerful.
- tomp 11y ago
  That's what politicians do. Markets favor future money (i.e. profit).
- dmichulke 11y ago
  And they do so by influencing politics which in return need to abandon free markets to really favor the few. So the problem is not necessarily one of free markets but alternatively, one of corruption.
deleted 11y ago
[deleted]
tcbawo 11y ago
This is a gray area. If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries which would be gone (from the US) forever. Same with banks. As much as we detest bailing out bankers, allowing the US to economy to be cut off from credit would create lasting collateral damage.
- sedachv 11y ago
  > If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries which would be gone (from the US) forever. That's what people thought about textiles and apparel. Neither turned out to be true. Textile mills are coming back to the East Coast (http://www.nytimes.com/2015/08/03/business/chinese-textile-mills-are-now-hiring-in-places-where-cotton-was-king.html http://www.nytimes.com/2015/08/03/business/chinese-textile-m...) and the number of apparel manufacturing jobs in the Los Angeles County has stabilized in the past several years.
- adam419 11y ago
  Creating too bigger to fail out of already too big to fail industries does nothing except throw good money after bad, and increase systemic risk for an even worse repetition of a failure. Not to mention the fact that continuously proceeding with such bailouts is simply unsustainable. The problem lies in our modern inability to stomach losses and handle austerity. It's something no one rightfully wants, but when market failures or financial crises occur, it's for a reason. You're witnessing a natural repricing mechanism at work and no one is disagreeing a lot of destruction can be a by product. But I don't buy your narrative that unless we saved those industries in the US they would have permanently moved elsewhere. The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself.
  - trhway 11y ago
    >The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself. organism have finite life, they die. Washing machine can be maintained/repaired indefinitely. Of course cyborg is the best way.
    - adam419 11y ago
      Individual organisms die. Short of existential events, ecosystems last.
  - tcbawo 11y ago
    Morality aside, the US government acted in its own self-interest by protecting industries within its borders. It is likely had any major US automakers been liquidated, more wealth would have been destroyed than created. Extending the organism metaphor, forest fires can be a naturally occurring healthy event that promotes renewal. Sometimes, a fire will burn with enough intensity that the forest itself is destroyed. Should we try to prevent all forest fires, the most destructive fires, or let nature take its course?
ktothemc 11y ago
That's, uh, what we've been doing since the early 1980s, at least ideologically speaking.
andreasklinger 11y ago
markets dont self-regulate to normal distributions they seek monopols
- crusso 11y ago
  ... but normally only achieve them through government backing of the larger players. It's called cronyism and it's not free market capitalism.
BenoitEssiambre 11y ago
The value of money is completely determined by fed actions and allowing it to drift in detrimental value paths would be the farthest thing from respecting the markets. Economy wide "malinvestment" is not a thing. It entails that a person living off of others is more productive than a person working. It's nonsense. Although money should be just an intermediary tool for trade and negotiation, an artificial asset that is neutral, in the short run this intrinsically valueless paper can distort the markets, even if it has predictable value, but only if it is manipulated into being a store of value that has a better risk adjusted return than private market stores of value. Paper money has no intrinsic value in itself. If the fed keeps it predictably devaluing fast enough, always moving it towards its intrinsic value, it acts as a very useful enabler of trade by creating a unit of measurement for value and medium of exchange. But unfortunately, for fiat to enable trade, it also has to artificially be made into a store of value. If this paper is made into a store of value that retains value better than private stores of value (such as stocks, bonds, or just stockpiles of stuff), it jams the markets for private stores of value. It turns savers into accumulators of pieces of paper or numbers in accounts instead of being holders of things that are backed by economic activity and wealth creation. It becomes a subsidy from investors, entrepreneur, job creators and workers to holders of pieces of paper. It is the worst kind of subsidy because it blocks wealth and welfare creation. The only way for central banks to allow private markets to function properly, is to get money out of the way by making sure it always devalues fast enough that it doesn't overly displace private stores of value that are backed by real economic activity.
- caf 11y ago
  Isn't the value of bonds, which are essentially debt denominated in the fiat currency, intrinsically linked to the value of that currency? Debt isn't an independent store of value in the same way that equity or real property is.
  - Ankaios 11y ago
    Not necessarily. See inflation-adjusted bonds, for instance.
- marcosdumay 11y ago
Offler 11y ago
Respect disease let people die when they contract them.

by adam419 11y ago

juliangregorian 11y ago

Markets are not wise by any stretch. No one agrees what a "free" market would look like, but in general they tend to favor incumbents and the powerful.

tomp 11y ago
That's what politicians do. Markets favor future money (i.e. profit).
dmichulke 11y ago
And they do so by influencing politics which in return need to abandon free markets to really favor the few. So the problem is not necessarily one of free markets but alternatively, one of corruption.

deleted 11y ago

[deleted]

tcbawo 11y ago

This is a gray area. If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries which would be gone (from the US) forever. Same with banks. As much as we detest bailing out bankers, allowing the US to economy to be cut off from credit would create lasting collateral damage.

sedachv 11y ago
> If we allowed a large automaker to go bankrupt, we probably would have lost the supply chain and many supporting industries which would be gone (from the US) forever. That's what people thought about textiles and apparel. Neither turned out to be true. Textile mills are coming back to the East Coast (http://www.nytimes.com/2015/08/03/business/chinese-textile-mills-are-now-hiring-in-places-where-cotton-was-king.html http://www.nytimes.com/2015/08/03/business/chinese-textile-m...) and the number of apparel manufacturing jobs in the Los Angeles County has stabilized in the past several years.
adam419 11y ago
Creating too bigger to fail out of already too big to fail industries does nothing except throw good money after bad, and increase systemic risk for an even worse repetition of a failure. Not to mention the fact that continuously proceeding with such bailouts is simply unsustainable. The problem lies in our modern inability to stomach losses and handle austerity. It's something no one rightfully wants, but when market failures or financial crises occur, it's for a reason. You're witnessing a natural repricing mechanism at work and no one is disagreeing a lot of destruction can be a by product. But I don't buy your narrative that unless we saved those industries in the US they would have permanently moved elsewhere. The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself.
- trhway 11y ago
  >The economy is like an organism, not a washing-machine. The most optimal repairing mechanism is itself. organism have finite life, they die. Washing machine can be maintained/repaired indefinitely. Of course cyborg is the best way.
  - adam419 11y ago
    Individual organisms die. Short of existential events, ecosystems last.
- tcbawo 11y ago
  Morality aside, the US government acted in its own self-interest by protecting industries within its borders. It is likely had any major US automakers been liquidated, more wealth would have been destroyed than created. Extending the organism metaphor, forest fires can be a naturally occurring healthy event that promotes renewal. Sometimes, a fire will burn with enough intensity that the forest itself is destroyed. Should we try to prevent all forest fires, the most destructive fires, or let nature take its course?

ktothemc 11y ago

That's, uh, what we've been doing since the early 1980s, at least ideologically speaking.

andreasklinger 11y ago

markets dont self-regulate to normal distributions they seek monopols

crusso 11y ago
... but normally only achieve them through government backing of the larger players. It's called cronyism and it's not free market capitalism.

BenoitEssiambre 11y ago

The value of money is completely determined by fed actions and allowing it to drift in detrimental value paths would be the farthest thing from respecting the markets. Economy wide "malinvestment" is not a thing. It entails that a person living off of others is more productive than a person working. It's nonsense. Although money should be just an intermediary tool for trade and negotiation, an artificial asset that is neutral, in the short run this intrinsically valueless paper can distort the markets, even if it has predictable value, but only if it is manipulated into being a store of value that has a better risk adjusted return than private market stores of value. Paper money has no intrinsic value in itself. If the fed keeps it predictably devaluing fast enough, always moving it towards its intrinsic value, it acts as a very useful enabler of trade by creating a unit of measurement for value and medium of exchange. But unfortunately, for fiat to enable trade, it also has to artificially be made into a store of value. If this paper is made into a store of value that retains value better than private stores of value (such as stocks, bonds, or just stockpiles of stuff), it jams the markets for private stores of value. It turns savers into accumulators of pieces of paper or numbers in accounts instead of being holders of things that are backed by economic activity and wealth creation. It becomes a subsidy from investors, entrepreneur, job creators and workers to holders of pieces of paper. It is the worst kind of subsidy because it blocks wealth and welfare creation. The only way for central banks to allow private markets to function properly, is to get money out of the way by making sure it always devalues fast enough that it doesn't overly displace private stores of value that are backed by real economic activity.

caf 11y ago
Isn't the value of bonds, which are essentially debt denominated in the fiat currency, intrinsically linked to the value of that currency? Debt isn't an independent store of value in the same way that equity or real property is.
- Ankaios 11y ago
  Not necessarily. See inflation-adjusted bonds, for instance.
marcosdumay 11y ago

Offler 11y ago

Respect disease let people die when they contract them.