5 ms·

The feature that stands out the most to me is that the black "boom or bust" line that shows prosperity/recession is effectively never at 100. It crosses the lin

The feature that stands out the most to me is that the black "boom or bust" line that shows prosperity/recession is effectively never at 100. It crosses the line (going up or down) a bunch of times, but is almost never on the line. I have to wonder if more balance with this would result in better outcomes, or worse. Also, and this is just an eyeball analysis from the pdf, the booms seem roughly balanced with the busts until the great depression. The prosperity of WWI seems to have set up the cycle of bust for the great depression.

tim333 2y ago
I'm trying to figure what the black "boom or bust" line actually is mathematically speaking. It looks a bit like they've run a regression on GDP and show the deviation above or below trend? Maybe it's in the text? Trying to figure it.
- nonameiguess 2y ago
  It took me a few looks to figure this out, but out of all the various y axes on this chart, this appears to correspond to "business volume scale," which is exactly 0 on the flat line. The axis itself is found under the years 1845, 1895, and 1930. What "business volume scale" means or how it is measured, however, I don't see specified anywhere, and after an admittedly cursory web search plus FRASER search of 20 minutes or so, I can't figure it out. The text blurb for "business activity" seems to mean it is probably some aggregation of industrial production and consumer spending, but what 0 is indexed to and what the deviations mean is less clear.
feedforward 2y ago
The responses to your observation are hilarious. They'd have you think that the mass hiring by FAANG in 2021 and early 2022 followed by layoffs was a good thing. You accurately observe it as being screwy, which it is, but people are brainwashed into thinking it isn't - or is even a good thing.
DenisM 2y ago
Stability will beget over-confidence which will bring exuberance. If the system feeds on its own information it might be impossible to stabilize. And do you even want stability? The boom cycle produces exuberance that allows funding risky projects of which a small number become smashing success. The bust destroys the rest of risky project, which allows recycling of labor and resources. Arguably this is a better model for economic advancement, compared to a steady state where stagnating businesses continue to stagnate, hoarding resources in under-productive pursuits.
WalterBright 2y ago
> but is almost never on the line The water surface in the ocean is almost never at "sea level". Markets are a chaotic system. > the booms seem roughly balanced with the busts until the great depression Yup. Like waves in the ocean! > The prosperity of WWI seems to have set up the cycle of bust for the great depression. The setup was to peg the dollar exchange rate with gold, and then inflate the money. Such "pegging" historically has always led to a massive correction.
- coldtea 2y ago
  >The water surface in the ocean is almost never at "sea level" I'd expect it to be "at sea level" though with very small averaging (smoothing) to account for the waves. The economic plots however would amount to Everest-sized waves.
- eru 2y ago
  > The water surface in the ocean is almost never at "sea level". > Markets are a chaotic system. Don't blame the boom-and-bust in the US on markets. Their heavy-handed policies make them especially crisis prone. Their northern neighbour of Canada had much smoother sailing, thanks largely to a more laissez-faire approach to banking.
  - jamiek88 2y ago
    How do you meaningfully compare a tiny economy like Canada’s to the 800 lb gorilla of the USA, the global military and economic superpower whose currency rules the world which is conservatively ten times larger than Canada and doesn’t need/act to police the global dollar trade? Seems a non sequitur at best.
    - eru 2y ago
      In the relevant time period, the US was not the global hegemon, and there was no global dollar trade. Also a lot of the policy mistake in the US were made at the state level, and that is comparable in scale with Canada. In any case, it's easy to compare different economies, as long as you are careful what you are doing. And, if anything, overseas demand for your currency should make it easier to run your monetary and financial system.
SkyMarshal 2y ago
> I have to wonder if more balance with this would result in better outcomes, or worse. Iirc that is exactly the problem that the Soviets claimed they solved with state-owned and centrally planned production, no more boom/bust cycle. And early on it did have some in the West worried about it. Turned out not to work, probably b/c you can't stablize an inherently unstable complex system.
- coldtea 2y ago
  >Turned out not to work, probably b/c you can't stablize an inherently unstable complex system. Or because they didn't have enough computing power at the time https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/#:~:text=Leonid%20Kantorovich%2C%20inventor%20of%20linear,1975%20Nobel%20Prize%20in%20Economics https://chris-said.io/2016/05/11/optimizing-things-in-the-us....
  - refurb 2y ago
    The best critique I heard about the central planning system is that it’s just that, planning. You might be able to plan, but what about the advancements that nobody would plan for. “Don’t build a faster horse” Would a communist system ever advance beyond the planned scientific and enginnering goals? Is there someone thinking “what people need doesn’t exist?” and actually direct resources to it? That’s the beauty of the the free market system - you can come up with a crazy idea and just do it. You often fail, but if you succeed, the risk you took is rewarded. I can’t ever see a communist system coming up with an iPhone. They might copy an existing product, but that’s not innovation.
    - bayindirh 2y ago
      > I can’t ever see a communist system coming up with an iPhone. Soviets invented a lot of things, in terms of aviation, computers, celestial navigation in intercontinental missiles. There was also an article, which I read recently but failed to find it now, about how they revolutionized mechanical watches, and came out with their own quartz movements, without copying anyone. Oh lastly, they did the "iPhone of sea going vehicles", the erkanoplan, and VLIW computing which led us to Itanium at some point [0]. [0]: https://www.abortretry.fail/p/the-itanic-saga https://www.abortretry.fail/p/the-itanic-saga
eru 2y ago
Historically, the US was a particularly crisis prone economy. Have a look at Canada for something much more stable. See eg https://www.cato.org/blog/there-was-no-place-canada https://www.cato.org/blog/there-was-no-place-canada
huijzer 2y ago
> I have to wonder if more balance with this would result in better outcomes, or worse. After reading Taleb, these "boom or bust" cycles are a feature not a bug. My own simplified interpretation: You need booms to fund moonshot ideas and busts to get rid of ideas that don't work. Also a bit similar to neural network training. You first pump in all kinds of information and then aggressively prune to get rid of mostly bad information.
- imtringued 2y ago
  That doesn't explain why they all have to line up in time. If each individual boom or bust was spread over time, it would disappear in the noise.
  - andruby 2y ago
    They don't always all line up in time. Companies grow and die all the time. Trends, Hypes and Bubbles are probably a consequence of human nature: most investors have a deep fear-of-missing out, so in general money loves to jump on the hype-train. Likewise, fear and uncertainty easily spread: markets moving together. When a couple of businesses fail, that insolvency or illiquidity spreads to related businesses.
  - bobthepanda 2y ago
    Booms and busts have cyclic effects. Booms provide more capital and credit that can be reinvested and beget more booms; busts collapse demand and can contagiously bust other sectors.

tim333 2y ago

I'm trying to figure what the black "boom or bust" line actually is mathematically speaking. It looks a bit like they've run a regression on GDP and show the deviation above or below trend? Maybe it's in the text? Trying to figure it.

nonameiguess 2y ago
It took me a few looks to figure this out, but out of all the various y axes on this chart, this appears to correspond to "business volume scale," which is exactly 0 on the flat line. The axis itself is found under the years 1845, 1895, and 1930. What "business volume scale" means or how it is measured, however, I don't see specified anywhere, and after an admittedly cursory web search plus FRASER search of 20 minutes or so, I can't figure it out. The text blurb for "business activity" seems to mean it is probably some aggregation of industrial production and consumer spending, but what 0 is indexed to and what the deviations mean is less clear.

feedforward 2y ago

The responses to your observation are hilarious. They'd have you think that the mass hiring by FAANG in 2021 and early 2022 followed by layoffs was a good thing. You accurately observe it as being screwy, which it is, but people are brainwashed into thinking it isn't - or is even a good thing.

DenisM 2y ago

Stability will beget over-confidence which will bring exuberance. If the system feeds on its own information it might be impossible to stabilize. And do you even want stability? The boom cycle produces exuberance that allows funding risky projects of which a small number become smashing success. The bust destroys the rest of risky project, which allows recycling of labor and resources. Arguably this is a better model for economic advancement, compared to a steady state where stagnating businesses continue to stagnate, hoarding resources in under-productive pursuits.

WalterBright 2y ago

> but is almost never on the line The water surface in the ocean is almost never at "sea level". Markets are a chaotic system. > the booms seem roughly balanced with the busts until the great depression Yup. Like waves in the ocean! > The prosperity of WWI seems to have set up the cycle of bust for the great depression. The setup was to peg the dollar exchange rate with gold, and then inflate the money. Such "pegging" historically has always led to a massive correction.

coldtea 2y ago
>The water surface in the ocean is almost never at "sea level" I'd expect it to be "at sea level" though with very small averaging (smoothing) to account for the waves. The economic plots however would amount to Everest-sized waves.
eru 2y ago
> The water surface in the ocean is almost never at "sea level". > Markets are a chaotic system. Don't blame the boom-and-bust in the US on markets. Their heavy-handed policies make them especially crisis prone. Their northern neighbour of Canada had much smoother sailing, thanks largely to a more laissez-faire approach to banking.
- jamiek88 2y ago
  How do you meaningfully compare a tiny economy like Canada’s to the 800 lb gorilla of the USA, the global military and economic superpower whose currency rules the world which is conservatively ten times larger than Canada and doesn’t need/act to police the global dollar trade? Seems a non sequitur at best.
  - eru 2y ago
    In the relevant time period, the US was not the global hegemon, and there was no global dollar trade. Also a lot of the policy mistake in the US were made at the state level, and that is comparable in scale with Canada. In any case, it's easy to compare different economies, as long as you are careful what you are doing. And, if anything, overseas demand for your currency should make it easier to run your monetary and financial system.

SkyMarshal 2y ago

> I have to wonder if more balance with this would result in better outcomes, or worse. Iirc that is exactly the problem that the Soviets claimed they solved with state-owned and centrally planned production, no more boom/bust cycle. And early on it did have some in the West worried about it. Turned out not to work, probably b/c you can't stablize an inherently unstable complex system.

coldtea 2y ago
>Turned out not to work, probably b/c you can't stablize an inherently unstable complex system. Or because they didn't have enough computing power at the time https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/#:~:text=Leonid%20Kantorovich%2C%20inventor%20of%20linear,1975%20Nobel%20Prize%20in%20Economics https://chris-said.io/2016/05/11/optimizing-things-in-the-us....
- refurb 2y ago
  The best critique I heard about the central planning system is that it’s just that, planning. You might be able to plan, but what about the advancements that nobody would plan for. “Don’t build a faster horse” Would a communist system ever advance beyond the planned scientific and enginnering goals? Is there someone thinking “what people need doesn’t exist?” and actually direct resources to it? That’s the beauty of the the free market system - you can come up with a crazy idea and just do it. You often fail, but if you succeed, the risk you took is rewarded. I can’t ever see a communist system coming up with an iPhone. They might copy an existing product, but that’s not innovation.
  - bayindirh 2y ago
    > I can’t ever see a communist system coming up with an iPhone. Soviets invented a lot of things, in terms of aviation, computers, celestial navigation in intercontinental missiles. There was also an article, which I read recently but failed to find it now, about how they revolutionized mechanical watches, and came out with their own quartz movements, without copying anyone. Oh lastly, they did the "iPhone of sea going vehicles", the erkanoplan, and VLIW computing which led us to Itanium at some point [0]. [0]: https://www.abortretry.fail/p/the-itanic-saga https://www.abortretry.fail/p/the-itanic-saga

eru 2y ago

Historically, the US was a particularly crisis prone economy. Have a look at Canada for something much more stable. See eg https://www.cato.org/blog/there-was-no-place-canada https://www.cato.org/blog/there-was-no-place-canada

huijzer 2y ago

> I have to wonder if more balance with this would result in better outcomes, or worse. After reading Taleb, these "boom or bust" cycles are a feature not a bug. My own simplified interpretation: You need booms to fund moonshot ideas and busts to get rid of ideas that don't work. Also a bit similar to neural network training. You first pump in all kinds of information and then aggressively prune to get rid of mostly bad information.

imtringued 2y ago
That doesn't explain why they all have to line up in time. If each individual boom or bust was spread over time, it would disappear in the noise.
- andruby 2y ago
  They don't always all line up in time. Companies grow and die all the time. Trends, Hypes and Bubbles are probably a consequence of human nature: most investors have a deep fear-of-missing out, so in general money loves to jump on the hype-train. Likewise, fear and uncertainty easily spread: markets moving together. When a couple of businesses fail, that insolvency or illiquidity spreads to related businesses.
- bobthepanda 2y ago
  Booms and busts have cyclic effects. Booms provide more capital and credit that can be reinvested and beget more booms; busts collapse demand and can contagiously bust other sectors.