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Dorkins

In Defense Of Economic Depression

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Paul Krugman rants and raves. He thinks governments are making a big mistake. They should forget about saving money and cutting deficits, he says. They can worry about that later. What they need to worry about now is a depression. Unless the feds get on the ball and spend money, we could sink into another Great Depression, he warns.

Martin Wolf at The Financial Times in London makes the same point. He mentioned ‘depression’ yesterday. The private sector is saving; without a lot of ‘demand’ courtesy of the state, he says, we run the risk of depression.

The two of them are so sure a depression would be a bad thing, it makes us wonder. Maybe a depression wouldn’t be so bad, after all.

More at the link.

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what a load of absolute bunkum. During the great depression people had negative savings rates - but this time it will be different says Bill Bonner!

Stupidity is doing the same thing again and expecting a different result.

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what a load of absolute bunkum. During the great depression people had negative savings rates - but this time it will be different says Bill Bonner!

Stupidity is doing the same thing again and expecting a different result.

In the world that you describe with limits to growth and negative returns to labour at the limit, perhaps depressions which wipe out massive amounts of capital are the balancing factor that you have been seeking. Once capital is wiped out, any constant return on capital increases the returns available to labour when economies eventually recover.

Perhaps depressions are a required condition for the perpetuation of our current quasi-capitalist model.

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In the world that you describe with limits to growth and negative returns to labour at the limit, perhaps depressions which wipe out massive amounts of capital are the balancing factor that you have been seeking. Once capital is wiped out, any constant return on capital increases the returns available to labour when economies eventually recover.

modern industrial democratic economies have never recovered from major depressions without a war that has either destroyed most of their own financial and industrial and human capital, or has destroyed their competitors.

that is the only balancing factor to be found down this stupid road, based on evidence we have to date. All the actual data we have relating to this particular matter tells this same story.

fools like bonner and those who agree with him prefer to ignore the actual recent history though.

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what a load of absolute bunkum. During the great depression people had negative savings rates - but this time it will be different says Bill Bonner!

Stupidity is doing the same thing again and expecting a different result.

As long as debts are being defaulted on faster than savings are being drawn down, the rebalancing effect is the same?

Also I think you're in danger of aggregating things too much, for example assume that the people who were drawing down their savings the fastest were the ones who were also in the most debt e.g. a BTL landlord covering the gap between the mortgage and his rent while hoping to find a tenant who never comes. There might have been groups of people in different situations, such as a population of live-within-your-means types who were forced to burn some cash while waiting for deflation to bring the jobs back, a population of live-slightly-beyond-your-means types who cut back on spending, and a population of live-well-beyond-your-means types who were leveraged up to the hilt when the depression hit, threw everything they had at their business model when it started to fail, were completely wiped out by margin calls or cashflow and went bankrupt. Maybe when you aggregate all three together you would get a negative savings rate, but that might be too broad a measure to accurately capture how different people were responding to the depression.

Edit: And I don't see why you have to be so rude...

Edited by Dorkins

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modern industrial democratic economies have never recovered from major depressions without a war that has either destroyed most of their own financial and industrial and human capital, or has destroyed their competitors.

that is the only balancing factor to be found down this stupid road, based on evidence we have to date. All the actual data we have relating to this particular matter tells this same story.

fools like bonner and those who agree with him prefer to ignore the actual recent history though.

At the risk of being included in your camp of fools, which wars were associated with each of the following depressions (defined as a drop in output to at least 20% below trend) :

1. Finland in the early 1990s

2. Argentina, Brazil, Chile and Mexico in the 1980s

3. Argentina in the late 1990s / early 2000s

4. The US in 1837 to 1842

5. The US from 1873 to 1896

6. New Zealand from 1974 to 1992

7. Switzerland from 1973 to the present (admittedly a controversial inclusion but it does meet the definition)

Depressions can be local / regional and not necessarily global. Local imbalances do not necessarily guarantee global imbalances.

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modern industrial democratic economies have never recovered from major depressions without a war that has either destroyed most of their own financial and industrial and human capital, or has destroyed their competitors.

that is the only balancing factor to be found down this stupid road, based on evidence we have to date. All the actual data we have relating to this particular matter tells this same story.

fools like bonner and those who agree with him prefer to ignore the actual recent history though.

MAD and the fact that the debts are owed to people who wouldn't be doing any fighting means the war route is probably off the table.

Bonner and co just want a depression because "gold is money" etc, all very sad.

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In the world that you describe with limits to growth and negative returns to labour at the limit, perhaps depressions which wipe out massive amounts of capital are the balancing factor that you have been seeking. Once capital is wiped out, any constant return on capital increases the returns available to labour when economies eventually recover.

Perhaps depressions are a required condition for the perpetuation of our current quasi-capitalist model.

The best solution to a threatening depression is to have one.

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modern industrial democratic economies have never recovered from major depressions without a war that has either destroyed most of their own financial and industrial and human capital, or has destroyed their competitors.

that is the only balancing factor to be found down this stupid road, based on evidence we have to date. All the actual data we have relating to this particular matter tells this same story.

fools like bonner and those who agree with him prefer to ignore the actual recent history though.

So to take your idea one step further, if we could find a non-war means to "destroy" financial/industrial/human capital, that would enable a recovery? Financial capital is easy to destroy, that's just changes to numbers in a spreadsheet. The industrial capital has already been destroyed, there is abandoned industry all over the country. And I think you could even argue that human capital has been pretty effectively wiped out too, where once there were skilled machinists there are now Argos shelfstackers and long term unemployed. So what's the missing piece of the puzzle? Sounds like a financial crash is all that's needed to create the conditions for a recovery.

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At the risk of being included in your camp of fools, which wars were associated with each of the following depressions (defined as a drop in output to at least 20% below trend) :

1. Finland in the early 1990s

2. Argentina, Brazil, Chile and Mexico in the 1980s

3. Argentina in the late 1990s / early 2000s

4. The US in 1837 to 1842

5. The US from 1873 to 1896

6. New Zealand from 1974 to 1992

7. Switzerland from 1973 to the present (admittedly a controversial inclusion but it does meet the definition)

Depressions can be local / regional and not necessarily global. Local imbalances do not necessarily guarantee global imbalances.

Something I struggle with as well.

I think that war can be seen as a "way out" if you have the wrong kind of government (e.g. Nazi Germany), but I wonder whether there is not an element of narrative fallacy at work when people quote this. I also think that skirt length and the economy goes along with "Pirates and Global Warming" and "sharks and ice cream" but I don't want to derail the thread. :D

Does Japan from 89 (ish) to present day count as a depression as well?

on the other side of the argument:

2, there was the Falklands "conflict".

6. Rainbow Warrior? That was in NZ wasn't it (clutching at straws here obviously)

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In the world that you describe with limits to growth and negative returns to labour at the limit, perhaps depressions which wipe out massive amounts of capital are the balancing factor that you have been seeking. Once capital is wiped out, any constant return on capital increases the returns available to labour when economies eventually recover.

Perhaps depressions are a required condition for the perpetuation of our current quasi-capitalist model.

In Economics recessions and depressions have one positive aspect: weed-out inefficient companies. It is cruel though, I admit, and very painful for those involved, but it may be necessary, unfortunately.

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Something I struggle with as well.

I think that war can be seen as a "way out" if you have the wrong kind of government (e.g. Nazi Germany), but I wonder whether there is not an element of narrative fallacy at work when people quote this. I also think that skirt length and the economy goes along with "Pirates and Global Warming" and "sharks and ice cream" but I don't want to derail the thread. :D

Does Japan from 89 (ish) to present day count as a depression as well?

on the other side of the argument:

2, there was the Falklands "conflict".

6. Rainbow Warrior? That was in NZ wasn't it (clutching at straws here obviously)

From what I can see, a classic mistake is being made. A bit of weak correlation suddenly becomes an assertation of causality.

From what I can recall, Brazil, Mexico and Chile weren't that involved in the Falklands.

Greenpeace and some of their opponents were involved in some fairly radical actions. While I never agreed with Greenpeace, I do credit them with shifting the terms of the debate in more mainstream circles.

I am probably more sympathetic than most with respect to the fringes of arguments as their expansion of the definition of the possible causes centrists like me to shift our opinions more than we would without their involvement.

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:) Good one.

It was effectively somthing Bill Bonner said in one of his Money Week articles last year.

I personally am in Bill Bonner's Camp but my view of the best solution may be different from many on this board because I have no assets, I am young and have cash I would like to put to work outside of bubbles.

I spoke to my Dad last night and he tells me agricultural land goes for 10K an acre (up from about 6K a few years ago), he is in the process of negotiating with a tenant to rent his land for £90-£100 per acre per annum. This represents a yield of 1%.

People seem so keen to 'protect' there purchasing power that they are willing to buy assets that have already hyperinflated. I say let the depression run its course and wipe out debt and perceived paper wealth and then lets start focusing on building a new future, I can't stand the thought of the prime of my life being consumed by a Japanese style drawn out modern depression.

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The best solution to a threatening depression is to have one.

Like ToW, I like this too.

A requirement of recovery is admitting that a problem exists.

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It was effectively somthing Bill Bonner said in one of his Money Week articles last year.

I personally am in Bill Bonner's Camp but my view of the best solution may be different from many on this board because I have no assets, I am young and have cash I would like to put to work outside of bubbles.

I spoke to my Dad last night and he tells me agricultural land goes for 10K an acre (up from about 6K a few years ago), he is in the process of negotiating with a tenant to rent his land for £90-£100 per acre per annum. This represents a yield of 1%.

People seem so keen to 'protect' there purchasing power that they are willing to buy assets that have already hyperinflated. I say let the depression run its course and wipe out debt and perceived paper wealth and then lets start focusing on building a new future, I can't stand the thought of the prime of my life being consumed by a Japanese style drawn out modern depression.

Once in a generation, wealth is transferred from borrowers to lenders. This generation's turn is coming within 3 to 5 years.

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MAD and the fact that the debts are owed to people who wouldn't be doing any fighting means the war route is probably off the table.

Bonner and co just want a depression because "gold is money" etc, all very sad.

he got the timing ok though

and the cure for a depression is a depression - we cant go back in time to stop the debt creation - i suppose we could all just say stuff the banks they never lent us any money anyway

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he got the timing ok though

and the cure for a depression is a depression - we cant go back in time to stop the debt creation - i suppose we could all just say stuff the banks they never lent us any money anyway

The cure for a depression is to imprion the bankers (or similar) and cancel both debts and deposits.

We get a depression because only one side of the ledger gets cleared. Need to sort out both to avoid the depression(and then preferably not use such an insane system again going forward.)

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The cure for a depression is to imprion the bankers (or similar) and cancel both debts and deposits.

We get a depression because only one side of the ledger gets cleared. Need to sort out both to avoid the depression(and then preferably not use such an insane system again going forward.)

sounds good

what chance

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At the risk of being included in your camp of fools, which wars were associated with each of the following depressions (defined as a drop in output to at least 20% below trend) :

2. Argentina, Brazil, Chile and Mexico in the 1980s

civil war, falklands war

3. Argentina in the late 1990s / early 2000s

civil war, riots, protests

4. The US in 1837 to 1842

5. The US from 1873 to 1896

I said modern industrialised economies

6. New Zealand from 1974 to 1992

7. Switzerland from 1973 to the present (admittedly a controversial inclusion but it does meet the definition)

I don't know much about these. I'll accept that individual nations with small armies falling into depression now and again are not much to worry about. But see below.,

Depressions can be local / regional and not necessarily global. Local imbalances do not necessarily guarantee global imbalances.

are you saying there is not a global imbalance. Are you serious? Are you seriously suggesting this current crisis is not global? When was the last time global total output actually contracted?

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Once in a generation, wealth is transferred from borrowers to lenders. This generation's turn is coming within 3 to 5 years.

what are you talking about. Wealth is always transferred from borrowers to lenders. All the time.

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So to take your idea one step further, if we could find a non-war means to "destroy" financial/industrial/human capital,

...You know what that reminds me of?

ingsoc_logotype.jpg

War is Peace, because by destroying financial/industrial/human capital, people are kept in poverty and the fabric of 1984 dystopian society is held together...

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what are you talking about. Wealth is always transferred from borrowers to lenders. All the time.

But it is not as obvious during credit fuelled booms in asset prices. During credit booms, the prudent question their behaviour and get confirmation of their prudence during the ensuing busts.

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2. Argentina, Brazil, Chile and Mexico in the 1980s

civil war, falklands war

3. Argentina in the late 1990s / early 2000s

civil war, riots, protests

4. The US in 1837 to 1842

5. The US from 1873 to 1896

I said modern industrialised economies

6. New Zealand from 1974 to 1992

7. Switzerland from 1973 to the present (admittedly a controversial inclusion but it does meet the definition)

I don't know much about these. I'll accept that individual nations with small armies falling into depression now and again are not much to worry about. But see below.,

are you saying there is not a global imbalance. Are you serious? Are you seriously suggesting this current crisis is not global? When was the last time global total output actually contracted?

I am not convinced that the build up of excess borrowing is global.

Excess borrowing is an implicit transfer of power from borrowers to lenders.

As long as the financial power of lenders is matched by their military power, this transfer will occur with a whimper rather than a bang.

I expect that the BRICs will gain a huge amount of power in the next generation accompanied by barely audible whimpers from the US, the UK and much of the EZ.

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modern industrial democratic economies have never recovered from major depressions without a war that has either destroyed most of their own financial and industrial and human capital, or has destroyed their competitors.

that is the only balancing factor to be found down this stupid road, based on evidence we have to date. All the actual data we have relating to this particular matter tells this same story.

fools like bonner and those who agree with him prefer to ignore the actual recent history though.

Sceppy, if ever I found the very definition of 'useful idiot', it's you. You're absolutely grasping in this thread, even by your own standards. WWII effectively began at the bottom of the Great Depression in the US. With your sample size reduced from 1 to 0, where does this leave your argument?

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  • 145 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% +
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      • Even
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      • up 5%



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