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Without figures, you're correct: His estimates are worthless. But if the US government stays the course and puts money up for all of the failing US companies, w

Without figures, you're correct: His estimates are worthless. But if the US government stays the course and puts money up for all of the failing US companies, which seems to be the plan, the dollar will be in the gutter. Can't just print money, after all.

davidw 18y ago
I think your analysis is somewhat facile, and unsupported by the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days. But once again, that's why this is hacker news, and not economic news: our area of expertise is not in economics, with a few exceptions (that certainly do not include me).
- thomasmallen 18y ago
  "the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days." The bailout doesn't go into effect for at least a month. And as far as expertise goes, your website could use a few Exceptions ("printDate() is not defined") - sorry, couldn't resist.
  - DabAsteroid 18y ago
    The bailout doesn't go into effect for at least a month. That doesn't mean it can't have an effect on current prices. Market actors are capable of anticipating future market events. What is your take on Osborne Computer? Was it simply a coincidence that the market value of its then-current computer-model dropped when an improved model was announced? http://en.wikipedia.org/wiki/Osborne_effect http://en.wikipedia.org/wiki/Osborne_effect . Is it simply coincidence -- rather than market anticipation -- that every time a corporate buyout at a specific price is announced, the stock price of the target company instantly jumps to, and flatlines at, the buyout price?
    - thomasmallen 18y ago
      Have you considered that this is foreign territory for investors, most of whose opinions regarding the efficacy of Paulsen's measures have yet to crystallize? Right now, this is beyond a bear market and people are acting on negative impulses: The government's doing something? Buy. Bad financial news? Sell. It's when the former becomes "sell" that inflation will become rampant. Well, not literally; capital losses will likely cause serious deflation if the stocks really crash. But I don't see how a government pumping funny money into the market on this scale can do anything but devalue its currency severely.
- Prrometheus 18y ago
  The parent is leaving out the demand side of supply and demand for the dollar. If one increases the money supply ceteris paribus then one may expect prices to rise and the value of a currency to fall. However, if foreign investors' expectations of the future performance of the US economy improve, then there will be more demand for the dollar and its value will rise on international currency exchanges. This reduces the price of foreign goods and combats inflation. In practice, it is possible to engineer a short-term economic boom by increasing the money supply, so the supply and demand of dollars work against each other and it is impossible to say where its value will go. In the long term, the purchasing power of the dollar has dropped constantly since it went off the gold standard. However, nominal income and wealth has increased faster than the dollar's decline, so our living standards have increased. I'm not an expert, so it's possible I am missing some big factor. However, I do have some training in the field, so I hope I am more right than wrong.
  - thomasmallen 18y ago
    You're no expert, but you slanged some Latin in there, so I'll give you credit for talking over my head :^) I'm no expert either, and I appreciated that you clarified my views a bit. That's pretty much in line with my feelings about the effects this sort of action can have on an already suffering economy.
    - qwph 18y ago
      ceteris paribus == all other things being equal
      - thomasmallen 18y ago
        How unnecessary...I assumed it was one of those Latin idioms that takes a sentence or two to explain.
        Prrometheus 18y ago
        It's pretty unnecessary, but it gets thrown around from day 1 in Econ classes so you get kind of used to it.
- jhancock 18y ago
  As near as I can tell, noone's area of expertise is economics. Hackers seem to have just a good a handle on matters as the "experts". If you really want to feel "safe" do a little research and see what "Greenspan's" PhD thesis was about. Spoiler hint: You won't find it. Folks that have studied his background believe he was "gifted" his PhD in effort to allow his rise in the government. I'm not supporting this viewpoint, just pointing out the uncertainty. To add irony, Barron's thinks they found a copy and the 1977 thesis was about a housing debacle!!! http://online.barrons.com/public/article/SB120917419049046805.html?mod=mktw http://online.barrons.com/public/article/SB12091741904904680... You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point. And noone can explain the little raise in the dollar the last week. These little hiccups are almost unpredictable in a complex global economic realignment. So you may not agree with certain words such as "recession" vs. "depression" or someone's guess as to how long it will last or even if the U.S. will ever recover. But I think the non-quantitative predictions in the article are solid nonetheless.
  - davidw 18y ago
    > You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point. What I don't like is people pretending it's anything but a wild guess. You're right that the discussion of how the downturn will affect software and open source is better. That's because it's something Nat clearly knows a great deal about. He should have stuck with that.
sethg 18y ago
If a recession becomes severe enough, there is the risk of deflation--nobody wants to buy anything, so vendors keep slashing prices to try to unload their inventory and workers are willing to take lower wages to avoid unemployment. To counteract that cycle, dumping lots of money into the economy (as long as it's not too much) is just what Dr. Keynes ordered. I've also heard the argument that since businesses spent the last few years acting as if the weird bonds in their portfolios were as good as cash, then if the Treasury replaces those bonds with actual cash, it won't have a net inflationary effect. (Although I fear that Wall Street is going to take its bailout money and use the proceeds to create a silly bubble in some other asset; localized inflation, so to speak.)

davidw 18y ago

I think your analysis is somewhat facile, and unsupported by the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days. But once again, that's why this is hacker news, and not economic news: our area of expertise is not in economics, with a few exceptions (that certainly do not include me).

thomasmallen 18y ago
"the facts: the dollar hasn't dropped at all because of the 'bailout' - quite the contrary, it has done well over the past few days." The bailout doesn't go into effect for at least a month. And as far as expertise goes, your website could use a few Exceptions ("printDate() is not defined") - sorry, couldn't resist.
- DabAsteroid 18y ago
  The bailout doesn't go into effect for at least a month. That doesn't mean it can't have an effect on current prices. Market actors are capable of anticipating future market events. What is your take on Osborne Computer? Was it simply a coincidence that the market value of its then-current computer-model dropped when an improved model was announced? http://en.wikipedia.org/wiki/Osborne_effect http://en.wikipedia.org/wiki/Osborne_effect . Is it simply coincidence -- rather than market anticipation -- that every time a corporate buyout at a specific price is announced, the stock price of the target company instantly jumps to, and flatlines at, the buyout price?
  - thomasmallen 18y ago
    Have you considered that this is foreign territory for investors, most of whose opinions regarding the efficacy of Paulsen's measures have yet to crystallize? Right now, this is beyond a bear market and people are acting on negative impulses: The government's doing something? Buy. Bad financial news? Sell. It's when the former becomes "sell" that inflation will become rampant. Well, not literally; capital losses will likely cause serious deflation if the stocks really crash. But I don't see how a government pumping funny money into the market on this scale can do anything but devalue its currency severely.
Prrometheus 18y ago
The parent is leaving out the demand side of supply and demand for the dollar. If one increases the money supply ceteris paribus then one may expect prices to rise and the value of a currency to fall. However, if foreign investors' expectations of the future performance of the US economy improve, then there will be more demand for the dollar and its value will rise on international currency exchanges. This reduces the price of foreign goods and combats inflation. In practice, it is possible to engineer a short-term economic boom by increasing the money supply, so the supply and demand of dollars work against each other and it is impossible to say where its value will go. In the long term, the purchasing power of the dollar has dropped constantly since it went off the gold standard. However, nominal income and wealth has increased faster than the dollar's decline, so our living standards have increased. I'm not an expert, so it's possible I am missing some big factor. However, I do have some training in the field, so I hope I am more right than wrong.
- thomasmallen 18y ago
  You're no expert, but you slanged some Latin in there, so I'll give you credit for talking over my head :^) I'm no expert either, and I appreciated that you clarified my views a bit. That's pretty much in line with my feelings about the effects this sort of action can have on an already suffering economy.
  - qwph 18y ago
    ceteris paribus == all other things being equal
    - thomasmallen 18y ago
      How unnecessary...I assumed it was one of those Latin idioms that takes a sentence or two to explain.
      - Prrometheus 18y ago
        It's pretty unnecessary, but it gets thrown around from day 1 in Econ classes so you get kind of used to it.
jhancock 18y ago
As near as I can tell, noone's area of expertise is economics. Hackers seem to have just a good a handle on matters as the "experts". If you really want to feel "safe" do a little research and see what "Greenspan's" PhD thesis was about. Spoiler hint: You won't find it. Folks that have studied his background believe he was "gifted" his PhD in effort to allow his rise in the government. I'm not supporting this viewpoint, just pointing out the uncertainty. To add irony, Barron's thinks they found a copy and the 1977 thesis was about a housing debacle!!! http://online.barrons.com/public/article/SB120917419049046805.html?mod=mktw http://online.barrons.com/public/article/SB12091741904904680... You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point. And noone can explain the little raise in the dollar the last week. These little hiccups are almost unpredictable in a complex global economic realignment. So you may not agree with certain words such as "recession" vs. "depression" or someone's guess as to how long it will last or even if the U.S. will ever recover. But I think the non-quantitative predictions in the article are solid nonetheless.
- davidw 18y ago
  > You may not like that someone thinks its a depression and not a recession. You may not like that someone thinks its 3 years, not 1 or 5. But hey, their guess is as good as the "pros" at this point. What I don't like is people pretending it's anything but a wild guess. You're right that the discussion of how the downturn will affect software and open source is better. That's because it's something Nat clearly knows a great deal about. He should have stuck with that.

sethg 18y ago

If a recession becomes severe enough, there is the risk of deflation--nobody wants to buy anything, so vendors keep slashing prices to try to unload their inventory and workers are willing to take lower wages to avoid unemployment. To counteract that cycle, dumping lots of money into the economy (as long as it's not too much) is just what Dr. Keynes ordered. I've also heard the argument that since businesses spent the last few years acting as if the weird bonds in their portfolios were as good as cash, then if the Treasury replaces those bonds with actual cash, it won't have a net inflationary effect. (Although I fear that Wall Street is going to take its bailout money and use the proceeds to create a silly bubble in some other asset; localized inflation, so to speak.)