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"If the government bought wheat, for instance, to keep its price high and keep farmers employed; then burns it, this creates asset misallocations, though it is

"If the government bought wheat, for instance, to keep its price high and keep farmers employed; then burns it, this creates asset misallocations, though it is technically creating demand (this still happens to this day.)" This has been done successfully but without the burning. Just keep the price stables buying when the price fall and selling when the price goes up. The idea of a buffer should be easy to understand here in HN. It can be done with all kind of things: http://bilbo.economicoutlook.net/blog/?p=23578 http://bilbo.economicoutlook.net/blog/?p=23578 This "creative destruction" doesn't look very rational, don't you think? Is it not the goal of an economy to provide a good life for the human beings in that economy? We should be able to do better than destroy capital in order to start again the game, but this time with less people owning more of the pie.

Houshalter 11y ago
But that doesn't create demand, it just shifts it to the next year. That's not what the parent comments are talking about. And there is no need for the government to be involved in that either. If there was really predictable price fluctuations between years, investors could make money buying up commodities on good years and selling during bad years (and they do.)
- RobertoG 11y ago
  It's not me who said that it created demand. The grandparent suggested it. I just said that it have been used successfully as a way of buffering prices, without the need of burning anything, in comparison to this "creative destruction" that he sees as necessary.
  - Houshalter 11y ago
    Well if you don't burn it, then you have to sell it at some point. When you sell it, you decrease demand. So it can work to stabilize prices, but it isn't going to stop a recession.
    - RobertoG 11y ago
      Obviously I'm not explaining myself very well. I will make a last try. The comment I was answering, talked about a government buffering mechanism as something wrong and destructive (burning real wealth). I just pointed that this kind of mechanism is not necessarily destructive. In the next paragraph he proposes that the only way to go out of recessions is the "creative destruction" of capitalism. This is effective destruction of real wealth. It seems, that if the markets decide to destroy real wealth, then it's OK. My answer was only about that and I was not saying that the buffering mechanism created demand. Interestingly enough, even if I was not claiming anything about that before, there is a buffering mechanism that would create demand, and keep inflation in check: Job Guarantee as a buffer mechanism of jobs. http://www.epicoalition.org/docs/buffer_stock_employment_model_in.htm http://www.epicoalition.org/docs/buffer_stock_employment_mod... I am not totally convinced about the idea myself, but I think it deserves more attention

Houshalter 11y ago

But that doesn't create demand, it just shifts it to the next year. That's not what the parent comments are talking about. And there is no need for the government to be involved in that either. If there was really predictable price fluctuations between years, investors could make money buying up commodities on good years and selling during bad years (and they do.)

RobertoG 11y ago
It's not me who said that it created demand. The grandparent suggested it. I just said that it have been used successfully as a way of buffering prices, without the need of burning anything, in comparison to this "creative destruction" that he sees as necessary.
- Houshalter 11y ago
  Well if you don't burn it, then you have to sell it at some point. When you sell it, you decrease demand. So it can work to stabilize prices, but it isn't going to stop a recession.
  - RobertoG 11y ago
    Obviously I'm not explaining myself very well. I will make a last try. The comment I was answering, talked about a government buffering mechanism as something wrong and destructive (burning real wealth). I just pointed that this kind of mechanism is not necessarily destructive. In the next paragraph he proposes that the only way to go out of recessions is the "creative destruction" of capitalism. This is effective destruction of real wealth. It seems, that if the markets decide to destroy real wealth, then it's OK. My answer was only about that and I was not saying that the buffering mechanism created demand. Interestingly enough, even if I was not claiming anything about that before, there is a buffering mechanism that would create demand, and keep inflation in check: Job Guarantee as a buffer mechanism of jobs. http://www.epicoalition.org/docs/buffer_stock_employment_model_in.htm http://www.epicoalition.org/docs/buffer_stock_employment_mod... I am not totally convinced about the idea myself, but I think it deserves more attention