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To me, the argument that fixed supply is a good thing has always been worrisome. People just parrot that viewpoint without asking whether some amount of Keynesi

To me, the argument that fixed supply is a good thing has always been worrisome. People just parrot that viewpoint without asking whether some amount of Keynesian economics is useful, because you know, government is evil. It got us out of the Great Recession and it’s been 12 years. Maybe the consequences haven’t fully manifest, but another Great Depression would have been guaranteed hell.

deleted 5y ago
[deleted]
icyfox 5y ago
Keynesian economics got us out of the actual Great Depression as well, if you consider FDR's decision to get off the gold standard and start trading dollars as a floating currency on the market. Fixed monetary supply might be one thing in theory, but fixed credit supply is the death knell to an economy. And the two are usually complimentary. Monetary supply can fill in the potholes of weakening credit supply when the latter contracts - and it inevitably will when the private issuers that generate those debt contracts pull back in a recession. If you have your hands tied to some constrained supply like gold or bitcoin, like what happened to the central banks after World War I and into the Great Depression, you end up backed up against a wall. That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. As an investor you only have to consider demand. But for any kind of widely used currency that backs an economy it's going to be problematic.
- imtringued 5y ago
  >That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. It's appealing because it keeps politicians honest, but if you have honest politicians it is just a thought experiment.
  - icyfox 5y ago
    Blessing and a curse. With a flexible monetary supply, politicians can help ease the pains of boom bust cycles. They also can print currency and inflate their debt away. With a static monetary supply, they can't dampen the pain. But they also can't leverage the financial system for their short-term gains. The last 60 years on a macro level have largely proved the Keynesian model. I think we're right to put faith in politicians in general. The solution might just be holding currency from another nation instead of your own.
  - joshuahaglund 5y ago
    Please explain how exactly a constrained monetary supply keeps politicians honest? Seems to me that is pretty much entirely dependent on an informed and participatory electorate. I think a constrained monetary supply just means the politicians we elect have less influence over the economy than the people with the most wealth. In either scenario, there will be untrustworthy politicians who need to be out voted or voted out.
- wallacoloo 5y ago
  2008 is remembered by most through phrases like “trickle down economics” and “bailouts” to the irresponsible men who built the house of cards, including “golden parachutes”. In other words, whether reasonable or not, a very large number of people don’t feel great about how our flexible monetary supply was made use of. Bitcoin is literally a direct reaction to that (e.g. view the coinbase for the Bitcoin genesis block). Newer cryptocurrencies have more sophisticated governance structures than Bitcoin (see: Tezos). Some of them could allow for an elastic monetary supply. The downside of these systems is that it takes a lot of work to properly encode the specific set of rules which decide when to increase the supply, and how to distribute the new supply. The upside is that these rules actually exist and are unambiguous.
notsureaboutpg 5y ago
>People just parrot that viewpoint without asking whether some amount of Keynesian economics is useful, because you know, government is evil. This just isn't an accurate portrayal of any of the serious criticisms of Keynesian economics. >It got us out of the Great Recession and it’s been 12 years. Maybe the consequences haven’t fully manifest, but another Great Depression would have been guaranteed hell. It feels like an unfair argument you're having because of course the opponents' whole argument is that the consequences haven't manifested AND that they would be far more dire than a continuation of the Great Recession / another Great Depression. As wealth gaps widen, as inflation rises, as our debt grows, it's possible to see a worse future ahead than one where we continued into a depression. In hindsight, we all know the problems which led to the fall of various empires (Roman, Mughal, etc.) but if you lived at the time, this same argument could be made against you for sounding the alarm: "Yeah, maybe it's better to not constantly expand our Empire and rely on mercenary soldiers who have little loyalty to a place they've never even been to, but can you imagine the hell if we lost the war against the Gauls??" (forgive me if I mangled the history there).
- imtringued 5y ago
  >As wealth gaps widen, as inflation rises, as our debt grows, I will take this opportunity to throw this link up: https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-to-service-the-national-debt/ https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-...
imtringued 5y ago
Actually, the problem right now is the complete lack of Keynesian style fiscal stimulus. China and USA already did their part and they will do more. I am mostly talking about Europe. The Eurozone basically makes fiscal stimulus impractical even though keeping it alive absolutely requires it. Every time I hear people talk about Keynesian economics ruining everything I am thinking "no such thing happened". QE fills bank reserves, interest rates drop on their own, banks never lend out money, stock market goes up without any actual investment, there is unemployment caused by the macroeconomic structure of the economy, investors are flooding governments with their money by buying bonds, inflation remains stubbornly low, trump cuts corporate taxes. The fact that things are reversing in the US is a good sign for the US economy as a whole. Biden is actually doing the fiscal stimulus that the economy was asking for decades. There may be a short term crash in the future but it's only going to get rid of the unproductive part of the economy to make everything ready for more long term growth. Meanwhile Europe will be stuck forever if the Eurozone doesn't resolve its structural problems.

deleted 5y ago

[deleted]

icyfox 5y ago

Keynesian economics got us out of the actual Great Depression as well, if you consider FDR's decision to get off the gold standard and start trading dollars as a floating currency on the market. Fixed monetary supply might be one thing in theory, but fixed credit supply is the death knell to an economy. And the two are usually complimentary. Monetary supply can fill in the potholes of weakening credit supply when the latter contracts - and it inevitably will when the private issuers that generate those debt contracts pull back in a recession. If you have your hands tied to some constrained supply like gold or bitcoin, like what happened to the central banks after World War I and into the Great Depression, you end up backed up against a wall. That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. As an investor you only have to consider demand. But for any kind of widely used currency that backs an economy it's going to be problematic.

imtringued 5y ago
>That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. It's appealing because it keeps politicians honest, but if you have honest politicians it is just a thought experiment.
- icyfox 5y ago
  Blessing and a curse. With a flexible monetary supply, politicians can help ease the pains of boom bust cycles. They also can print currency and inflate their debt away. With a static monetary supply, they can't dampen the pain. But they also can't leverage the financial system for their short-term gains. The last 60 years on a macro level have largely proved the Keynesian model. I think we're right to put faith in politicians in general. The solution might just be holding currency from another nation instead of your own.
- joshuahaglund 5y ago
  Please explain how exactly a constrained monetary supply keeps politicians honest? Seems to me that is pretty much entirely dependent on an informed and participatory electorate. I think a constrained monetary supply just means the politicians we elect have less influence over the economy than the people with the most wealth. In either scenario, there will be untrustworthy politicians who need to be out voted or voted out.
wallacoloo 5y ago
2008 is remembered by most through phrases like “trickle down economics” and “bailouts” to the irresponsible men who built the house of cards, including “golden parachutes”. In other words, whether reasonable or not, a very large number of people don’t feel great about how our flexible monetary supply was made use of. Bitcoin is literally a direct reaction to that (e.g. view the coinbase for the Bitcoin genesis block). Newer cryptocurrencies have more sophisticated governance structures than Bitcoin (see: Tezos). Some of them could allow for an elastic monetary supply. The downside of these systems is that it takes a lot of work to properly encode the specific set of rules which decide when to increase the supply, and how to distribute the new supply. The upside is that these rules actually exist and are unambiguous.

notsureaboutpg 5y ago

>People just parrot that viewpoint without asking whether some amount of Keynesian economics is useful, because you know, government is evil. This just isn't an accurate portrayal of any of the serious criticisms of Keynesian economics. >It got us out of the Great Recession and it’s been 12 years. Maybe the consequences haven’t fully manifest, but another Great Depression would have been guaranteed hell. It feels like an unfair argument you're having because of course the opponents' whole argument is that the consequences haven't manifested AND that they would be far more dire than a continuation of the Great Recession / another Great Depression. As wealth gaps widen, as inflation rises, as our debt grows, it's possible to see a worse future ahead than one where we continued into a depression. In hindsight, we all know the problems which led to the fall of various empires (Roman, Mughal, etc.) but if you lived at the time, this same argument could be made against you for sounding the alarm: "Yeah, maybe it's better to not constantly expand our Empire and rely on mercenary soldiers who have little loyalty to a place they've never even been to, but can you imagine the hell if we lost the war against the Gauls??" (forgive me if I mangled the history there).

imtringued 5y ago
>As wealth gaps widen, as inflation rises, as our debt grows, I will take this opportunity to throw this link up: https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-to-service-the-national-debt/ https://fredblog.stlouisfed.org/2018/11/how-expensive-is-it-...

imtringued 5y ago

Actually, the problem right now is the complete lack of Keynesian style fiscal stimulus. China and USA already did their part and they will do more. I am mostly talking about Europe. The Eurozone basically makes fiscal stimulus impractical even though keeping it alive absolutely requires it. Every time I hear people talk about Keynesian economics ruining everything I am thinking "no such thing happened". QE fills bank reserves, interest rates drop on their own, banks never lend out money, stock market goes up without any actual investment, there is unemployment caused by the macroeconomic structure of the economy, investors are flooding governments with their money by buying bonds, inflation remains stubbornly low, trump cuts corporate taxes. The fact that things are reversing in the US is a good sign for the US economy as a whole. Biden is actually doing the fiscal stimulus that the economy was asking for decades. There may be a short term crash in the future but it's only going to get rid of the unproductive part of the economy to make everything ready for more long term growth. Meanwhile Europe will be stuck forever if the Eurozone doesn't resolve its structural problems.