Austrian Economics

[theVOID]

What predictive power? I cant help but sense a mode of anger in your post. I listened to that mans ENTIRE video loop. I hope that I get some credit for putting such effort into this discussion from you

Yeah absolutely, big Kudos

When I refer to the predictive power of the Austrian model I refer to the effectiveness of the model to predict the boom/bust cycles, such as the NASDAQ and Housing bubbles, predictions the likes of which were balked at by the Keynesian economists - You can see this in dozens of 'debates' on shows like CNBC or Faux Business where the likes of Peter Schiff, Thomas Woods and Marc Farber are literally laughed at by the Keynesian economists when they present their predictions of the coming busts.

Amongst other plainly superior predictions are the ones of the dollar index, commodities, inflation etc, for instance the Austrian economists predicted the current petrol price situation long before the "Middle East uprising" that the Keynesians like to blame (at least as a substantial factor) for the higher prices, that is because in the Austrian model Inflation is defined as an expansion of the money supply and the price of goods is relative to the supply of money, so when you have more money the currency looses value and the prices of goods and services rises - As soon as the Fed announced their 'Quantitative Easing' policies the Austrians were predicting raising stock and commodity prices as well as the decline of the dollar index to the peak levels in the recession (and even beyond it).

So I think a very clear cut case can be made for the Austrian models being better predictors of economic activity.

No thankyou. I try to stay away from people like that as a waste of time and as an extremist. I will have nothing to do with extremists. I dont agree with the Libertarians, nor will I vote for them.

Extremists? His opinions are based on the efficacy of a particular model of economics and his radio show is about economics, it does sometimes touch on Politics and Libertarianism but that is tail of the dog so to speak, a tiny part of the purpose of the show.

And I don't see how you can possibly consider it a "waste of time" when the Austrian school has been able to predict economic activity far better than the Keynesian school, to the extent where people following the Austrian models have undoubtedly secured more of their wealth from losses, and in some cases even profited, from the economic turmoil - That is in dire contrast to the alternative.

Quote from Schiff

This stems from the line of thinking that recessions (contractions in the economy) are necessary to restore the imbalances in activity that accumulate over time, especially after stimulus efforts. When the economy contracts all prices should go down (ie Deflation) and one component of that is falling wages, that sounds bad and it is, it's part of correcting the flaws in the economy, but the falling wages should be in line with falling prices, the purchasing power (how much they can buy with their dollars) should stay the same roughly - The way your government is trying to remedy this short term pain is by appropriating from social security, quantitative easing and borrowing money - You may think that the Austrian solution sees people worse of, and that may be true in the short term (though by no means necessarily so because of falling prices) but in the long term a recession and some deflation is going to be much better for all people than the debt fueled stimulus effort (Deflation is actually very good for consumers).

Your purchasing power is really what matters, not the wage values themselves, and purchasing power is falling regardless, just as fast if not faster than a deflation taking down wage prices, but instead of seeing it in dollars paid you are seeing it in rising prices now and you'll see it in interest payments in the future - The difference being (and where unions come into it) is that by going for the later "solution" the government can appease unions in the short term, as well as pass blame for rising prices onto the producers rather than the inflation that they are causing. Also, when people hear "falling wages" they react negatively to it much more so than "rising prices" even in cases when the purchasing power remains the same - This can certainly product political motivations for the former option.

There is a bit more to it, but I'll wait for your response to make sure we're clear on that part first.

Here we go again with you suggesting I am stupid when it comes to economics. Not once have I suggested you are stupid or needed to be schooled on economics no matter how much I disagreed with you.

No, I just think you have some fundamental misunderstandings, which I have attempted to point out.

He obviously doesnt know squat about the construction or Industrial trades, considering his description between the shovel vs. bulldozer analogy.

How so? To say that a person who can operate a bulldozer is worth a higher wage than a person with a shovel (which I believe was the point he was trying to make) is perfectly legitimate.

I wonder how many union busters this man hired during his "consultant job" at Shearson Lehman Brothers brokerage when they were doing "aggresive management buyouts" (otherwise known as hostile corporate takeovers). I wonder how many families he ruined? I wonder how many good jobs he destroyed in the name of turning a quick profit? I wonder how many government programs this man "consulted" his clients into taking advantage of behind closed doors while in public he talks down about them?

To blame the Lehman's activities on him is nothing but a cheap shot, firstly he started his career there as a small time consultant and commodities trader, nobody of significant importance and he left in the mid 90's, secondly, he has said on numerous occasions how much disdain he has for their financial practices and ethical violations and he was happy to see their demise.

Wrong. In fact I participated in rallies that opposed the Republican majority plans to deregulate the utilities industry. Bush did not regulate the housing market. Regulations are restrictive to protect from greed, abuse, and squandering.
http://dpc.senate.gov/dpcdoc.cfm?doc_name=fs-110-2-166

*Repeats himself rather than responding as a block, somewhat insulting...

Some regulations, the ones for consumer protection, they are the sorts of regulations that I have no real problem with, however, manipulating the direction and momentum of the market is also classified as a "regulation", they are not exclusively (or even mostly) protective, regulations made in the name of political agendas are the ones that do serious harm.

The term "regulation" is not as intuitive as you might like it to be, ideally I suppose the term would be reserved for consumer protection and in terms of those "regulations" at best they prevent consumer exploitation and at worst they create needless expenses and bureaucracies, the latter being more common than you would suspect - Unfortunately, they are but a small portion of the total of economic actions classified as regulations.

I propose we make a distinction for the remainder of the discussion, between the types of regulations; "protection" and "manipulation", sure there is some overlap but perhaps that distinction will help all the same.

Fannie and Freddie,

Was NOT regulated, in fact it was deregulated for interest group profits.

They were state owned initially and later publicly traded, classified as a "state owned asset" or "government sponsored entity", designed and established in the name of manipulation and political economic goals, namely as a secondary market to purchase loans from Brokers and other investment firms, they were widely used in derivative tradings because of their government backed assets - That latter point, the government backing of an inherently greedy industry, was the root cause of the problem.

Regulation was not the concern so much as it was the governments involvement in widespread manipulation to begin with, when you say to a gambler, "Go hard and play games, I've got your back" it doesn't so much matter to what extent you regulate their actions between slots, poker and horse racing, the fact that you have given them a guarantee in the first place is the root cause of the problem.

Dont get me started on the problems of tax breaks regardless of the political party giving them - and besides, I am not sure if that even belongs in your list. Thats a WHOLE other can of worms that I dont want to open right now.

Yeah that's a point we agree on, but they are relevant in the sense that government gives tax breaks to the industries it believes will fulfill it's economic agenda, when the administration decided to shove the financials markets towards housing it did so in part by giving tax breaks to contractors, suppliers and manufacturers so they can produce more houses than are in demand and at lower prices, the lower prices increase the demand for houses which leads to people being given government backed sub-prime loans. It wouldn't have done Bush any good if he had just made houses cheaper to build if the people couldn't get a mortgage because they were sub prime - No lender would give it to them because the chances of getting their money back are so slim, so they guarantee the loans and take on the risk for the lenders.

??? Are you using the correct term for this? Forgive me, I am not trying to say you are stupid, I just want to make sure we are on the same page. Do you mean Financial engineering of interest rate derivatives? If so, then how is this a regulation and not a perk for special interests?

Yes and no, essentially real estate loans were packaged in bulk into derivatives and leveraged against government debt in order to mitigate the risks for the people trading the derivatives, such as the 'Collateralized debt obligations', they would lump say 1,000 mortgages into a CDO and then an investor would but a share, expecting to be paid a portion of the interest, they were being sold bullshit essentially because the CDOs were full of the sub prime loans made possible by the government guarantees.

Some people argue that CDOs and other derivatives weren't regulated enough and that was the cause of that set of problems, I and others argue that if the government weren't guaranteeing loans in the first place none of this would have been possible to begin with.

Not a regulation. Regulations are restrictive. That is Interest group transfers - "regulation" that results from efforts by self-interest groups to redistribute wealth in their favor, which may disguise itself as a legitimate regulation. Who benefitted from that? Inside traders on wall street?

Again part of our disagreement on the word "regulate" - it is used to refer to much much more than restrictive measures. Absolutely the inside traders benefited, again largely made possible by government guarantees.

phony credit ratings etc etc etc...

DEFINITELY not a regulation. In fact that is the exact opposite of a regulation.[/quote]

Fair call, more the fault of S&P and the like.

..and yet you claim he regulated the system? We are talking about Bush right? We are still in context of Bush "massively regulated the housing markets!" right? How can you regulate something, but let it all fall apart at the same time. How is ANY of this regulations? Perhaps we have different ideas of the word regulations. Do me, the word regulations is restrictive. If I have to abide by military regulations at the gate, that means I get frisked, dogs sniff my car, my tools get searched, and my car gets searched for guns and bombs. In the context you are using the word "regulation", in my opinion, that same millitary gate would be a chain link fence, with no lock, and a sign that says "Guards on lunch break, back in one hour." Im not being shitty with you, nor am I calling you stupid, but we are OBVIOUSLY not using the same definition of "regulations".

Yep, I became aware of this a while back

They were parts of the "manipulation" errr, 'regulations'. They are called regulations and classified and legislated as such, at least a large portion of them are.

Regulations aren't all that necessary, and the lack of them was not the problem, it was the government manipulation. Saying that "It was because of the lack of regulation" to me seems like a purely reactionary measure when the manipulation caused the problems and if it was done away with, if the NASDAQ recession had just run it's course, these problems wouldn't have been possible.

Anyway, Until we get some agreement on terms perhaps we should pause here, if there is anything specific from your last post you'd like me to answer that I missed just post it.