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Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. Maybe we need to allo

by Altay- 11y ago

Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. Maybe we need to allow the free market to function. Who cares if house prices drom from $250,000 -> $50,000 and the Dow from 16,000 -> 3,000? They will eventually be snapped up by someone at some price, thus fulfilling 'demand.' So much debt will be wiped out through defaults in this process as well, it will be great for the average person who will finally be able to afford to meaningfully participate in the investment world. Dividends yields of 2-6% mean nothing to a small time investor, but 20% is something that we could very well see in a liquidation market.

Bromlife 11y ago
> Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. That is not what his comment says. It says we're not doing the stimulus needed.
- protomyth 11y ago
  At this point, I wish folks would look back at the USA from the conclusion of WWII to 1948 and after the 1920 crash. I don't think stimulus is the real answer.
dredmorbius 11y ago
Businesses aren't demand-side. If money is printed, it should go to consumers. Or better, find a way to raise wage levels, while dropping equities, especially real estate. I'm a fan of government as employer of last resort.
bitL 11y ago
You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of wealth (money) increases in time. This is nowadays done basically with inflation only (the profits in trading are more-less inflation these days). Now somebody said that the humanity's greatest shortcoming is the inability to understand exponential function...
- jsprogrammer 11y ago
  >wealth (money) In most existing monetary regimes, money is not wealth, but debt. >You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of debt (money) increases in time.
- Relys 11y ago
  This has always confused me. Now, I'm not an economist (I have a M.S. in CompSci and do security research), but isn't the correct model for growth in a majority of businesses sigmoidal as opposed to purely exponential? For example, let's imagine a company that sells toasters. At some point they're going to reach peak market saturation where everyone in the world has a toaster. Now during this process right when growth in it's peak we see an almost ethereal phenomenon that capitalism delivers. We see the most optimized form of an idea materialize which everyone can benefit from and gain wealth. Wealth in this case would be owning a toaster in it's most optimal form according to the laws of physics and current engineering processes. The problem is that once this epoch takes place the projected exponential growth for the business just vanishes. Instead we see gradual decline until the new market cap (replacing broken toasters etc.) is reached and an thus an equilibrium in the market is reached. During this process we see the nasty side of capitalism as the toaster company fights tooth and nail to prevent this inevitable conclusion. We see monopolization, deliberate weakening of the integrity of the product to increase time to EOL (which wreaks havoc on the environment), absurd patenting and copyrighting, digital rights management, lobbying and bailouts. This not only hurts the customer, but the economy as a whole as our political system is set up to encourage this type of behavior. Now, one of the main themes I'm seeing in this discussion is the problem of demand. It seems like a lot of "things" that our economy has relied on consumers purchasing has hit this market saturation point and is being limited by technological advancement. I think that we are at a point where we need to change our financial structure to one that helps create demand. With the minimum federal wage remaining relatively stagnant for the past few decades along with more and more low level jobs being replaced by automation people simply don't have the money to buy things let alone make investments. The only real solution I see is a push for a universal minimal income. But then again, what do I know? Like I said, I'm not an economist..
xndjdjcnfnd 11y ago
That blurb wasn't posted posted in the context of stimulus: it was posted in the context that we're entering into the same stagnation that Japan has placed themselves in where there's a feedback loop between low consumer demand and businesses cutting both wages and hiring, further hurting consumer demand which then further hurts the economy.
ucho 11y ago
Many countries are loaded with debt to the maximum their debt/GDP ratio allows and will be in big trouble when even slightest recession appears - so they will prefer to apply stimuli even if it doesn't make life better for average Joe.
steven2012 11y ago
I guess you weren't around for the financial crisis of 2008/2009. The entire monetary system was under potential collapse and there would have been a severe price to pay. You can't have houses lose 200k in value without severe repercussions to the economy around the world. House mortgages are connected to mortgage securities which are connected to pension funds, etc. If we enter a massive deflationary period as you seem to think is good, then everyone will be holding cash and no one will be spending it because everything is going down in value. You can't get 20% dividend yields in a deflationary world. Be careful what you wish for.
- abakker 11y ago
  I guess one way of looking at 2008/9 is that we avoided for a while what will be inevitable. That Severe price to pay is one I think we need to pay eventually. Forestalling it is possible, but it seems more responsible to realize that the longer we avoid it, the worse it gets. Nobody is going to make money in a deflationary period, and excess consumption will fall, but it is still necessary to consume at baseline. The stock market is a very poor representation of true consumption, as it prices in too much of the future viewed through a very specific set of circumstances and assumptions.

by Altay- 11y ago

Bromlife 11y ago

> Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. That is not what his comment says. It says we're not doing the stimulus needed.

protomyth 11y ago
At this point, I wish folks would look back at the USA from the conclusion of WWII to 1948 and after the 1920 crash. I don't think stimulus is the real answer.

dredmorbius 11y ago

Businesses aren't demand-side. If money is printed, it should go to consumers. Or better, find a way to raise wage levels, while dropping equities, especially real estate. I'm a fan of government as employer of last resort.

bitL 11y ago

You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of wealth (money) increases in time. This is nowadays done basically with inflation only (the profits in trading are more-less inflation these days). Now somebody said that the humanity's greatest shortcoming is the inability to understand exponential function...

jsprogrammer 11y ago
>wealth (money) In most existing monetary regimes, money is not wealth, but debt. >You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of debt (money) increases in time.
Relys 11y ago
This has always confused me. Now, I'm not an economist (I have a M.S. in CompSci and do security research), but isn't the correct model for growth in a majority of businesses sigmoidal as opposed to purely exponential? For example, let's imagine a company that sells toasters. At some point they're going to reach peak market saturation where everyone in the world has a toaster. Now during this process right when growth in it's peak we see an almost ethereal phenomenon that capitalism delivers. We see the most optimized form of an idea materialize which everyone can benefit from and gain wealth. Wealth in this case would be owning a toaster in it's most optimal form according to the laws of physics and current engineering processes. The problem is that once this epoch takes place the projected exponential growth for the business just vanishes. Instead we see gradual decline until the new market cap (replacing broken toasters etc.) is reached and an thus an equilibrium in the market is reached. During this process we see the nasty side of capitalism as the toaster company fights tooth and nail to prevent this inevitable conclusion. We see monopolization, deliberate weakening of the integrity of the product to increase time to EOL (which wreaks havoc on the environment), absurd patenting and copyrighting, digital rights management, lobbying and bailouts. This not only hurts the customer, but the economy as a whole as our political system is set up to encourage this type of behavior. Now, one of the main themes I'm seeing in this discussion is the problem of demand. It seems like a lot of "things" that our economy has relied on consumers purchasing has hit this market saturation point and is being limited by technological advancement. I think that we are at a point where we need to change our financial structure to one that helps create demand. With the minimum federal wage remaining relatively stagnant for the past few decades along with more and more low level jobs being replaced by automation people simply don't have the money to buy things let alone make investments. The only real solution I see is a push for a universal minimal income. But then again, what do I know? Like I said, I'm not an economist..

xndjdjcnfnd 11y ago

That blurb wasn't posted posted in the context of stimulus: it was posted in the context that we're entering into the same stagnation that Japan has placed themselves in where there's a feedback loop between low consumer demand and businesses cutting both wages and hiring, further hurting consumer demand which then further hurts the economy.

ucho 11y ago

Many countries are loaded with debt to the maximum their debt/GDP ratio allows and will be in big trouble when even slightest recession appears - so they will prefer to apply stimuli even if it doesn't make life better for average Joe.

steven2012 11y ago

I guess you weren't around for the financial crisis of 2008/2009. The entire monetary system was under potential collapse and there would have been a severe price to pay. You can't have houses lose 200k in value without severe repercussions to the economy around the world. House mortgages are connected to mortgage securities which are connected to pension funds, etc. If we enter a massive deflationary period as you seem to think is good, then everyone will be holding cash and no one will be spending it because everything is going down in value. You can't get 20% dividend yields in a deflationary world. Be careful what you wish for.

abakker 11y ago
I guess one way of looking at 2008/9 is that we avoided for a while what will be inevitable. That Severe price to pay is one I think we need to pay eventually. Forestalling it is possible, but it seems more responsible to realize that the longer we avoid it, the worse it gets. Nobody is going to make money in a deflationary period, and excess consumption will fall, but it is still necessary to consume at baseline. The stock market is a very poor representation of true consumption, as it prices in too much of the future viewed through a very specific set of circumstances and assumptions.