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How do you report on business for a decade and yet hold such a visceral and character flaw type thesis about behavior that's nothing more than the intended, tex

by trotsky 14y ago

How do you report on business for a decade and yet hold such a visceral and character flaw type thesis about behavior that's nothing more than the intended, text-book result of specific monetary policy decisions?

tptacek 14y ago
What's the monetary policy that's influencing startups?
- tvladeck 14y ago
  Well, I think monetary policy is more a symptom of a larger trend than the cause, but since the massive deleveraging (or Lesser Depression) the world has been awash in excess savings looking for somewhere to go. A good explanation is here: http://krugman.blogs.nytimes.com/2009/05/02/liquidity-preference-loanable-funds-and-niall-ferguson-wonkish/ http://krugman.blogs.nytimes.com/2009/05/02/liquidity-prefer... [edit: wording]
- astine 14y ago
  He's referencing the Austrian Business Cycle theory: http://en.wikipedia.org/wiki/Austrian_business_cycle_theory http://en.wikipedia.org/wiki/Austrian_business_cycle_theory The argument is that inflationary spending is what causes the boom bust cycle. Inflation creates an initial perspective of prosperity and causes an increase and shift in investment from capital goods to consumer goods. This leads to a self reinforcing bubble which eventually drains the economy and leads to a bust. Trotsky is effectively saying that the bubble was due to interest rates and Dan Lyons is wrong to attribute it primarily to a character flaw of the persons involved. I don't wholly agree with that, but I think the ABCT does have merit.
  - trotsky 14y ago
    Note that while it's understandable to think that this is an austrian theory given all of the argument on the internet about whether or not it's a good idea, the idea that easy credit drives business expansion is absolutely agreed upon by both schools and pretty much every working economist. You can think of it a bit like amphetamines. No doctor would disagree with the idea that amphetamines produce energy in the patient. The debate would only center around how productive or destructive that energy is.
- trotsky 14y ago
  Low interest rates offered on savings (treasuries) drives investors who want to see a reasonable return on their money (most everyone) into riskier investments like equities and convertible notes.

by trotsky 14y ago

tptacek 14y ago

What's the monetary policy that's influencing startups?

tvladeck 14y ago
Well, I think monetary policy is more a symptom of a larger trend than the cause, but since the massive deleveraging (or Lesser Depression) the world has been awash in excess savings looking for somewhere to go. A good explanation is here: http://krugman.blogs.nytimes.com/2009/05/02/liquidity-preference-loanable-funds-and-niall-ferguson-wonkish/ http://krugman.blogs.nytimes.com/2009/05/02/liquidity-prefer... [edit: wording]
astine 14y ago
He's referencing the Austrian Business Cycle theory: http://en.wikipedia.org/wiki/Austrian_business_cycle_theory http://en.wikipedia.org/wiki/Austrian_business_cycle_theory The argument is that inflationary spending is what causes the boom bust cycle. Inflation creates an initial perspective of prosperity and causes an increase and shift in investment from capital goods to consumer goods. This leads to a self reinforcing bubble which eventually drains the economy and leads to a bust. Trotsky is effectively saying that the bubble was due to interest rates and Dan Lyons is wrong to attribute it primarily to a character flaw of the persons involved. I don't wholly agree with that, but I think the ABCT does have merit.
- trotsky 14y ago
  Note that while it's understandable to think that this is an austrian theory given all of the argument on the internet about whether or not it's a good idea, the idea that easy credit drives business expansion is absolutely agreed upon by both schools and pretty much every working economist. You can think of it a bit like amphetamines. No doctor would disagree with the idea that amphetamines produce energy in the patient. The debate would only center around how productive or destructive that energy is.
trotsky 14y ago
Low interest rates offered on savings (treasuries) drives investors who want to see a reasonable return on their money (most everyone) into riskier investments like equities and convertible notes.