Does anyone still deny the causes of the Great Depression...

[Kushinator]

You're talking about inflation as measured by CPI. All I'm talking about is the value of money. There is no way around the fact that the more of it that there is then the lower value it has than it otherwise could have had without the increase in supply.

Then why does it (money supply) behave in a non linear fashion to price levels during cyclical contractions?

 

[imagep]

You're talking about inflation as measured by CPI. All I'm talking about is the value of money. There is no way around the fact that the more of it that there is then the lower value it has than it otherwise could have had without the increase in supply.

But as our economy grows (that is, if it ever starts growing again), it seems that the increase in supply of stuff would offset any increase in the money supply. I would expect that unless we had an increase in the money supply that our economic growth would be stunted.

 

[phattonez]

But as our economy grows (that is, if it ever starts growing again), it seems that the increase in supply of stuff would offset any increase in the money supply. I would expect that unless we had an increase in the money supply that our economic growth would be stunted.

Why? In general prices would fall with time. That causes stunted growth?

 

[phattonez]

Then why does it (money supply) behave in a non linear fashion to price levels during cyclical contractions?

Here I was thinking that the money supply was controlled by more than just free market forces.

It's like you're trying to say that I think that only monetary supply determines prices. I'm saying that it has a predictable effect. The general price level can fall even if you are printing money, and this is because production can outstrip that new money.

I didn't realize that the effect printing money has on its value would be such a contentious issue.

 

[imagep]

Why? In general prices would fall with time. That causes stunted growth?

I would think that deflation would tend to be a disincentive for people to make rapid purchasing decisions. Seems like it would slow down the velocity of money (which is part of our current problem). If I was wanting a new camera, but didn't absolutely need it today, during deflationary times I would likely wait even longer to see how much the price fell. If lots of people kept putting off purchases, very little would be sold, if very little was being sold, then retailers would stop placing orders, without fresh orders coming into the factories, I would expect factories to reduce production and to reduce their staff levels.

 

[imagep]

I didn't realize that the effect printing money has on its value would be such a contentious issue.

If how much money was printed devalued it, then we would be having terrible inflation right now because so much money has been printed during the past couple of years. A couple of years ago I would have agreed with you 100%. Seems that things like the velocity of money and the distribution of money have a much greater effect on it's value than how much money is in existance.

 

[phattonez]

Oh don't worry, people are still predicting inflation. That is one of the risks that is causing the economy to stumble even more lately. The effect of inflation isn't realized immediately, but the effects of it come quickly once it is realized.

 

[phattonez]

I would think that deflation would tend to be a disincentive for people to make rapid purchasing decisions. Seems like it would slow down the velocity of money (which is part of our current problem). If I was wanting a new camera, but didn't absolutely need it today, during deflationary times I would likely wait even longer to see how much the price fell. If lots of people kept putting off purchases, very little would be sold, if very little was being sold, then retailers would stop placing orders, without fresh orders coming into the factories, I would expect factories to reduce production and to reduce their staff levels.

In the short term. That effect would not last very long.

 

[Ahlevah]

In the 30's corporate debt was the biggest single biggest debtor in the US. Consumer debt was not that big as mortgages were hard to get and required massive downpayments if I recall correctly.

The similarities between the 1920s housing boom and our more recent experience are startling, with the biggest difference being most mortgages back then were of short duration with the expectation of refinancing once a balloon payment became due:

As the U.S. economy contracted, loan delinquencies and foreclosures soared, fueled by falling household incomes and property values. Many home loans had terms of five years or less and often involved no, or only partial, payment of principal before a balloon payment was due when the loan matured or was refinanced. Refinancing was common and easily accomplished in the 1920s, an environment of rising incomes and property values, but next to impossible during the Depression. Falling incomes made it increasingly difficult for borrowers to make loan payments or to refinance outstanding loans as they came due. The failure of thousands of banks and other lenders contributed to the difficulty of refinancing, as customer relationships were severed and the costs of credit intermediation rose.

http://research.stlouisfed.org/publications/review/08/05/Wheelock.pdf

 

[Ahlevah]

If we're going to pick a single cause of the Great Depression, as well as our current troubles, I put myself squarely in the Irving Fisher "too much debt" camp:

In summary, we find that: (1) economic changes include steady trends and unsteady occasional disturbances which act as starters for cyclical oscillations of innumerable kinds; (2) among the many occasional disturbances, are new opportunities to invest, especially because of new inventions; (3) these, with other causes, sometimes conspire to lead to a great volume of over-indebtedness; (4) this in turn, leads to attempts to liquidate; (5) these, in turn, lead (unless counteracted by reflation) to falling prices or a swelling dollar; (6) the dollar may swell faster than the number of dollars owed shrinks; (7) in that case, liquidation does not really liquidate but actually aggravates the debts, and the depression grows worse instead of better, as indicated by all nine factors; (8) the ways out are either laissez faire (bankruptcy) or scientific medication (reflation), and reflation might just as well have been applied in the first place.

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

Fisher mentions reflation as a solution, but some economists have argued that there comes a point at which the only way to cure the problem of an economy stuck in a deflationary funk is to allow the bubble economy to deflate.

 

[masonkiller]

There are far too many information problems to allow a truly free banking system to operate. As stands, the [sellers of our childrens future] is the most effective institution to conduct monetary policy under the objective of price stability and full employment.



I am the kind of libertarian that believes in individual freedoms, yet still respects the existence of [coercive violence and the initiation of force]. I believe [a violent monopoly] should [use force on it's citizens] on ["behalf"] of its citizens if other peoples actions begin to spill over into the lives of us all.

There is much to learn from every school of economic thoug

How can you say the fed is best for attempting to accomplish full employment when unemployment is at 22 percent right now?

Also, fixed

 

[phattonez]

Already addressed this in my comment about the steady state.

Freakoutonomics - New York Times

You never responded to this link when I posted it before. Maybe you will now?

 

[Kushinator]

Um.... It was a nice article?.?.

 

[Kushinator]

How can you say the fed is best for attempting to accomplish full employment when unemployment is at 22 percent right now?

Also, fixed

If you could provide a valid, relevant source, you wold have done so by now. Instead, you bastardized my post.

 

[phattonez]

Um.... It was a nice article?.?.

You are still holding onto the idea that the Long Depression was a depression despite all the evidence I've offered to the contrary?

 

[phattonez]

If you could provide a valid, relevant source, you wold have done so by now. Instead, you bastardized my post.

Gallup has underemployment at a pretty high number. It's not 22%, but it's way up there.

 

[Kushinator]

You are still holding onto the idea that the Long Depression was a depression despite all the evidence I've offered to the contrary?

I've already commented on the steady state, of which you have yet to reply. Which is sad, because i figured you were keen on growth economics. Normally, when populations increase, output/capita tends to decrease (makes sense right?). However, gains in productivity, monopoly power, and deflationary pressure round out such logic.

 

[Kushinator]

Gallup has underemployment at a pretty high number. It's not 22%, but it's way up there.

I was unaware the 14 (or 40) year old virgin mentioned underemployment.

 

[phattonez]

I've already commented on the steady state, of which you have yet to reply. Which is sad, because i figured you were keen on growth economics. Normally, when populations increase, output/capita tends to decrease (makes sense right?). However, gains in productivity, monopoly power, and deflationary pressure round out such logic.

I've shown you every statistic I can find on the issue, all you say is the steady state. Output per capita grew and grew fairly quickly during the time period as I've shown you many times on the issue. If you say that this really is a recession then please show that growth was higher in the steady state. However, I have a pretty graph:

This shows here that yes, there was a panic from around 1873 to 1875, however, the GNP per capita grew through 1880 despite the fact that most of the period is shaded as a period of depression. This growth rate is faster than almost the entire rest of that graph. So it looks like even when you look over time, the Long Depression was a period of growth.

Also, from the Wikipedia article on the Long Depression:
"Figures from Milton Friedman and Anna Schwartz show net national product increased 3 percent per year from 1869 to 1879 and real national product grew at 6.8 percent per year during that time frame."

And population grew by 25% 1869-1879. Even if we exclude the fact that it is not a perfect comparison, we see that real national product grew 6.8%*7 = 47.6%, outstripping population growth and that net national product grew 21% (I guess that this doesn't account for the deflation which makes the growth larger than it seems), which is very close to the population growth.

So Goldenboy, where is your argument here?

 

[phattonez]

I was unaware the 14 (or 40) year old virgin mentioned underemployment.

I thought I'd help him out, besides, he's probably using some other unemployment measure, ones you are well aware of.

 

[Kushinator]

I've shown you every statistic I can find on the issue, all you say is the steady state. Output per capita grew and grew fairly quickly during the time period as I've shown you many times on the issue. If you say that this really is a recession then please show that growth was higher in the steady state. However, I have a pretty graph:

This shows here that yes, there was a panic from around 1873 to 1875, however, the GNP per capita grew through 1880 despite the fact that most of the period is shaded as a period of depression. This growth rate is faster than almost the entire rest of that graph. So it looks like even when you look over time, the Long Depression was a period of growth.

Also, from the Wikipedia article on the Long Depression:
"Figures from Milton Friedman and Anna Schwartz show net national product increased 3 percent per year from 1869 to 1879 and real national product grew at 6.8 percent per year during that time frame."

And population grew by 25% 1869-1879. Even if we exclude the fact that it is not a perfect comparison, we see that real national product grew 6.8%*7 = 47.6%, outstripping population growth and that net national product grew 21% (I guess that this doesn't account for the deflation which makes the growth larger than it seems), which is very close to the population growth.

So Goldenboy, where is your argument here?

My argument is what it has always been. I do find it hilarious that you resort to using aggregates (while simultaneously down talking the use in other arguments). Considering the average rates of growth prior and following this period, we can say this was a period of stagnation and hardship for not only America, but the rest of the world.

 

[phattonez]

My methods aren't sufficient for you, so I used your methods as well. And looking at that graph, how can you claim that the graph shows slower growth during this period as compared to the surrounding periods? From 1873 to 1875 yes, but not the entire period known as the Long Depression.

 

[hazlnut]

I'm sure there are many out there who blame the Great Depression on private, capitalistic entities that were so greedy, the Depression was just bound to happen. Given that Milton Friedman and others have successfully proven the theory incorrect, why is it so hard for people to acknowledge the role the government played? Why must individuals constantly defend and champion for bigger, greater government, as if the right candidate with the greatest charm will somehow usher everyone into the greatest utopia? Why follow a leader like a sheep instead of following your own heart and mind, like a rational, thinking individual?

So the unregulated stock market and banks had nothing to do with it???

Oh, boy...

 

[masonkiller]

Gallup has underemployment at a pretty high number. It's not 22%, but it's way up there.

The 22 percent comes from the SGS statistic that factors in long-term discouraged workers.

Instead, you bastardized my post.

I didn't bastardize it, I translated the statist vocabulary.

 

[Mensch]

So the unregulated stock market and banks had nothing to do with it???

Oh, boy...

I know the stock market may be somewhat regulated today, it is certanly not considered regulated by the most reasonable standards. Banks have been around for centuries. Whatever "regulation" placed on the stock market has been fairly recent, while a system of stock trading has also been around for centuries. Yet, there's only one Great Depression. Are you honestly arguing that regulation solved the Great Depression or has somehow fireproofed our economy so that it will never happen again? What happened during the bank runs? How long did those financial panics last? Not long at all, despite the nonexistance of any major regulation.