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lowrentyieldmakessense(honest!)

Maybe People Will Start Listening To Those Who Predicted The Crisis

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Most of the economics profession that gets quoted in so-called respectable publications has studied the wrong textbooks over the last 50 years. They are doctors prescribing remedies based on an incorrect understanding of illness.

Most mainstream textbook economists are reading from the playbook of John Maynard Keynes. They believe, and will say on command – not because there’s any evidence that it works but because it’s how you get tenured and earn grant money or get a government job – that when private demand falls because households and business de-leverage, it is the proper role of government to boost consumption and aggregate demand by increasing public spending. Amen.

As a scientific proposition, empirically speaking, there is zero evidence that this policy works. The one example trotted out is FDR’s spending boom in the Great Depression. But the evidence now suggests that it was war-time production that dragged the American economy out of depression, not morally enlightened fiscally policy.

There no evidence to suggest the big deficit spending really is better than doing nothing. But time after time, the interventionist mantra gets trotted out like the Ten Commandments in the Ark of the Covenant to incinerate anyone who doubts its gospel truth. Yet it’s just a bunch of superstition with very little basis in fact.

Economics is simply not a science in the same way that chemistry and physics are sciences. It’s probably not a science at all, to be honest. Or, if it is, it’s a pseudo science, having more in common with psychology than geology.

Complex adaptive systems like the modern marketplace do not behave mechanistically. They cannot be controlled precisely with the rods and levers of monetary and fiscal policy. To believe so is an enormous – and as we’re finding out – costly error. It’s also massively arrogant and conceited.

There’s a reason the great Austrian economist Ludwig von Mises called his great book “Human Action.” Economics is the study of human action. And human action is sometimes rational, sometimes irrational, sometimes predictable…but ultimately…very difficult to model and predict with charts.

As Nassim Taleb points out, all the most important stuff in your life probably happened or will happen in non-predictable ways. Most of the time, today is going to be like yesterday and tomorrow is going to be liked today. But the most life-changing things happen to you at times you’d have no way of predicting or preparing for. But not everyone is comfortable with this kind of un-planned spontaneity.

Please note the Austrian School of Economics was the only school of economic thought that accurately predicted the current crisis. Why? The Austrians correctly identified the influence of credit (free money to change your life) on human action. Altering the price of money alters incentives and changes individual calculations across the breadth and depth of an economy.

The Austrians pointed out that government-controlled interest rates are the real cause of the business cycle inasmuch as they lead to credit booms and inevitable busts. When the price of money is rigged, the market isn’t free. Only if you understand the “root cause” of the business cycle can you learn how to prevent bubbles from blowing up and popping later.

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The problem with Keynes is that money gets wasted, digging a hole in a road and filling it in again isn't value for money, same with building bridges to no where won't help the economy in the long term.

If it was invested properly to generate economic returns it would work, but govts love giving money to there crony friends and it gets wasted.

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Kenyesian stimuli are still appropriate..........but not in economies like ours with huge structural deficits...........

At the top of the cycle Brown was running a 3% deficit when it should have been a surplus.....There should be no deficit until the economy tanks then you should borrow to stimulate activity/////////

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Kenyesian stimuli are still appropriate..........but not in economies like ours with huge structural deficits...........

At the top of the cycle Brown was running a 3% deficit when it should have been a surplus.....There should be no deficit until the economy tanks then you should borrow to stimulate activity/////////

eh

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The Universe is so vast, and we are so small. The only thing that we can truly control... is whether we are good or evil.

The best thing I've read in a long time - thanks.

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The best thing I've read in a long time - thanks.

I got it from Stargate... Stargate was very spiritual...

One cannot reach englightenment by running from death.

Edited by The Masked Tulip

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The problem with Keynes is that money gets wasted, digging a hole in a road and filling it in again isn't value for money, same with building bridges to no where won't help the economy in the long term.

If it was invested properly to generate economic returns it would work, but govts love giving money to there crony friends and it gets wasted.

++1

Its not coincidence that JMK is an economist from the era of virtually free energy - where waste was not even registered.

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The problem with Keynes is that money gets wasted, digging a hole in a road and filling it in again isn't value for money, same with building bridges to no where won't help the economy in the long term.

If it was invested properly to generate economic returns it would work, but govts love giving money to there crony friends and it gets wasted.

Try telling that to China, which upon finding their exports dropping has built empty motorways and shopping malls all over the country. They are falsifying their current economic health and growth.

People who predicted the crisis - there were a few, notably Peter Schiff who was laughed off Bloomberg in 2006. He predicts Gold will go up to the value that the dow falls to in the nearterm crash - maybe $3-6000.

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Kenyesian stimuli are still appropriate..........but not in economies like ours with huge structural deficits...........

At the top of the cycle Brown was running a 3% deficit when it should have been a surplus.....There should be no deficit until the economy tanks then you should borrow to stimulate activity/////////

YES! Brown was running a 6% deficit before any sign of trouble. That's why our structural deficit will so painful to deal with now. It would have been half the problem without his totally inept leadership as Chancellor and PM.

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Kenyesian stimuli are still appropriate..........but not in economies like ours with huge structural deficits...........

At the top of the cycle Brown was running a 3% deficit when it should have been a surplus.....There should be no deficit until the economy tanks then you should borrow to stimulate activity/////////

This is why Keynes is boalloacks and Von Mises is correct, because one of them is based on text book theory whilst the other is based on HUMAN ACTION and reaction. Keynes is pointless because govts are acting perfectly rationally as people by running a deficit during the boom, Keynes model is based on a fairytale

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Kenyesian stimuli are still appropriate..........but not in economies like ours with huge structural deficits...........

At the top of the cycle Brown was running a 3% deficit when it should have been a surplus.....There should be no deficit until the economy tanks then you should borrow to stimulate activity/////////

Keynes is about as applicable to economics as shooting a patient to negate the cause of a desease. Debt expansion causes economic expansion. Contraction causes collapse. Can you work out where in the cycle we now are.

http://www.bwlewis.info/2009/08/blackpool-big-dipper-crash/

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Was the spending in WW2 that ended the great depression not government spending?

nope the debt had been written off - bankruptcy

off course it would have not been known as the great depression had the interventionists not got involved

and further back had the central planners not been using easy money policies and price fixing of interest rates

still some people never learn

Edited by lowrentyieldmakessense(honest!)

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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