4 ms·

I always feel like a retard when the discussion is about economics. Everyone seems to know exactly why things are the way they are and what needs to be done to

by itmag 15y ago

I always feel like a retard when the discussion is about economics. Everyone seems to know exactly why things are the way they are and what needs to be done to fix the situation. Whereas I really have no idea myself why these various crises happen, beyond "them thar Mericans sure borrow alotta moneys hurr durr". Am I the only one here? Is there something obvious I am missing? I am usually able to learn anything I want, but economics seems quite opaque to me for some reason. Please help me level up this domain of my knowledge :)

nhaehnle 15y ago
You are probably one of the wisest people here :) Here's my humble opinion for what you should look for if you truly want to understand this particular situation better. Forget about microeconomics (supply and demand and so on) and fancy mathematical models at least initially, and try to understand what money is. What is money? What is the relation you have with money? What is the relation the government has with money? What happens when you transfer money to pay your bills? These types of questions should be your guide initially. Look for bloggers who write on Modern Monetary Theory - there are quite a number of academics and hedge fund type people who do so, you can start e.g. here: http://neweconomicperspectives.blogspot.com/p/modern-money-primer.html http://neweconomicperspectives.blogspot.com/p/modern-money-p... - or go straight to the book "Understanding Modern Money" by Randall Wray (economist at UKMC). That is roughly the path I took over the last one and a half years, though I started via Bill Mitchell's (Australian economist) blog at http://bilbo.economicoutlook.net/blog/ http://bilbo.economicoutlook.net/blog/. As always, seek out different perspectives, but I've found that with some minor nitpicks, MMT really does seem to provide the best framework for understanding what's going on.
- itmag 15y ago
  Thanks! I'll look into that! My current analogy of money is kind of that society is a giant vending machine capable of producing eg hamburgers, thai massage, anal lube, laptops, BMWs, etc. Money is kind of tickets that you put into this vending machine. And then there are people loaning out these tickets (banks) and also there are different kinds of tickets (currencies) and vending machines (countries) with exchange rates. Another analogy: money is to the bottom-level production of value (ie real goods and services) as functional programming is to assembly language. Ie you can do a lot of cool tricks and abstractions with it, but you can also shoot yourself in the foot with endless recursive data structures and what not. Am I on the right path here? I seem to grok most things in terms of analogies and pictures btw, it's how my mind works. This isn't always a good thing, though, sometimes it's more useful to see something as sui generis (unlike anything else) rather than to say "it's like X". When I have more time I'm going to read my copy of this book: http://en.wikipedia.org/wiki/Georg_Simmel#The_Philosophy_of_Money http://en.wikipedia.org/wiki/Georg_Simmel#The_Philosophy_of_...
  - nhaehnle 15y ago
    My current analogy of money is kind of that society is a giant vending machine capable of producing eg hamburgers, thai massage, anal lube, laptops, BMWs, etc. Money is kind of tickets that you put into this vending machine. And then there are people loaning out these tickets (banks) and also there are different kinds of tickets (currencies) and vending machines (countries) with exchange rates. You may want to think about what contractual obligations are represented by those tickets. A simple example would be literal tickets such as the fare tokens you can buy for many subway systems. When you own such a ticket, you have a claim on the subway system (in an accounting sense): the system is obligated to let you enter in exchange for the ticket. When that happens, the ticket is destroyed for all intents and purposes. A deposit at a bank is also such a ticket. When you have a deposit, the bank is obligated to let you exchange your deposit for paper money. It is also obligated to let you make transfers, and that's where things become a bit more complicated. It gets weird with paper money. Paper money is a liability of the government, but the government is not obligated to give you anything "real" in exchange for the paper money. The only thing it is obligated to do is to accept your paper money as a tax payment. So at first sight, that might seem not ubiquitously useful. However, it just so happens that because paper money is the way to pay your taxes, lots of people want paper money. Hence you can use your paper money to buy things from other people, even though the paper money does not represent any kind of contractual obligation between you and the seller. (An exception to that may be in legal tender laws; but for the most part, legal tender laws are unnecessary.) Then you go back and realize that most of our monetary system actually takes place in computers and not using paper money, and you look into how deposits at banks are proxies for "government money", in particular reserves. And down the rabbit hole it goes ;)
    - itmag 15y ago
      Head is spinning.

by itmag 15y ago

nhaehnle 15y ago

You are probably one of the wisest people here :) Here's my humble opinion for what you should look for if you truly want to understand this particular situation better. Forget about microeconomics (supply and demand and so on) and fancy mathematical models at least initially, and try to understand what money is. What is money? What is the relation you have with money? What is the relation the government has with money? What happens when you transfer money to pay your bills? These types of questions should be your guide initially. Look for bloggers who write on Modern Monetary Theory - there are quite a number of academics and hedge fund type people who do so, you can start e.g. here: http://neweconomicperspectives.blogspot.com/p/modern-money-primer.html http://neweconomicperspectives.blogspot.com/p/modern-money-p... - or go straight to the book "Understanding Modern Money" by Randall Wray (economist at UKMC). That is roughly the path I took over the last one and a half years, though I started via Bill Mitchell's (Australian economist) blog at http://bilbo.economicoutlook.net/blog/ http://bilbo.economicoutlook.net/blog/. As always, seek out different perspectives, but I've found that with some minor nitpicks, MMT really does seem to provide the best framework for understanding what's going on.

itmag 15y ago
Thanks! I'll look into that! My current analogy of money is kind of that society is a giant vending machine capable of producing eg hamburgers, thai massage, anal lube, laptops, BMWs, etc. Money is kind of tickets that you put into this vending machine. And then there are people loaning out these tickets (banks) and also there are different kinds of tickets (currencies) and vending machines (countries) with exchange rates. Another analogy: money is to the bottom-level production of value (ie real goods and services) as functional programming is to assembly language. Ie you can do a lot of cool tricks and abstractions with it, but you can also shoot yourself in the foot with endless recursive data structures and what not. Am I on the right path here? I seem to grok most things in terms of analogies and pictures btw, it's how my mind works. This isn't always a good thing, though, sometimes it's more useful to see something as sui generis (unlike anything else) rather than to say "it's like X". When I have more time I'm going to read my copy of this book: http://en.wikipedia.org/wiki/Georg_Simmel#The_Philosophy_of_Money http://en.wikipedia.org/wiki/Georg_Simmel#The_Philosophy_of_...
- nhaehnle 15y ago
  My current analogy of money is kind of that society is a giant vending machine capable of producing eg hamburgers, thai massage, anal lube, laptops, BMWs, etc. Money is kind of tickets that you put into this vending machine. And then there are people loaning out these tickets (banks) and also there are different kinds of tickets (currencies) and vending machines (countries) with exchange rates. You may want to think about what contractual obligations are represented by those tickets. A simple example would be literal tickets such as the fare tokens you can buy for many subway systems. When you own such a ticket, you have a claim on the subway system (in an accounting sense): the system is obligated to let you enter in exchange for the ticket. When that happens, the ticket is destroyed for all intents and purposes. A deposit at a bank is also such a ticket. When you have a deposit, the bank is obligated to let you exchange your deposit for paper money. It is also obligated to let you make transfers, and that's where things become a bit more complicated. It gets weird with paper money. Paper money is a liability of the government, but the government is not obligated to give you anything "real" in exchange for the paper money. The only thing it is obligated to do is to accept your paper money as a tax payment. So at first sight, that might seem not ubiquitously useful. However, it just so happens that because paper money is the way to pay your taxes, lots of people want paper money. Hence you can use your paper money to buy things from other people, even though the paper money does not represent any kind of contractual obligation between you and the seller. (An exception to that may be in legal tender laws; but for the most part, legal tender laws are unnecessary.) Then you go back and realize that most of our monetary system actually takes place in computers and not using paper money, and you look into how deposits at banks are proxies for "government money", in particular reserves. And down the rabbit hole it goes ;)
  - itmag 15y ago
    Head is spinning.