Ok /pol/ I've noticed a disturbing level of economic illiteracy here. For whatever reason the red pills have been taken for economics. I've also noticed occasional advocacy for Keynesianism, despite it being the lifeblood of the progressive economic agenda. I'm going to outline why savings are the backbone of economies, why Keynesianism destroys economies and why we are headed for a civilization shaking global economic collapse.
---PART ONE: WHAT ARE SAVINGS?---
When humans combine land, capital and labor they create products. The excess value when those products are sold is profit. Profits are split up to compensate the various individuals according to their contributions of land, labor and capital. Those compensations are income. Humans may consume their income immediately. Or they may defer consumption to create savings.
You have 4 choices of what to do with savings.
1) Consume. There is no risk taken, but no wealth created either.
2) Save. A person may choose to continue deferring consumption to a future time. A small amount of risk exists here because there is no such thing as a perfect store of value.
3) Lend. Savings can be loaned to others for whatever purpose they desire. There is a risk of non repayment. This risk may be compensated with interest payed from the borrower to the lender.
4) Invest. Savings may be used to create more capital. This option has the potential for the highest rate of return but is also the riskiest option as there is no guarantee that the capital will yield enough value to justify the investment.
>>69162211
Don't post this!!!!
>>69162211
---PART TWO: HOW TO USE SAVINGS AND WHAT THEY DO---
Pretty much any individual can easily make decisions between whether to consuming or save. Individuals may want the passive income from interest or investment returns, but the average individual does not have the knowledge or time to use options 3 and 4. This is what banking is for. Bankers are specialists at deciding how to use savings. They can analyze which borrowers have a high liklihood of repayment. Part of the interest charged to the borrower by the bank is paid as interest to the saver. The difference kept by the bank is essentially a fee for connecting the borrowers and savers. This is a win-win-win scenario as banks have a profit incentive to give the highest possible interest payments to the savers. Ordinary people with no financial knowledge can access the gains of options 3 and 4 by doing option 2. Savings in an economy not allocated for lending will be used for capital investment Investment bankers use knowledge of market conditions to decide which capital investment is most likely to succeed. Wealth is created when loans and investments grow to a value beyond what they would have if the resources were just left alone.
>>69162421
---PART THREE: CONSUMING VS SAVING AND INTEREST RATES---
When the economy is strong people will choose to defer more consumption thus creating more savings. This should be obvious. Weak economies mean a higher portion of peoples' incomes must be devoted to essentials. You can't defer consumption when that consumption is essential to life. Strong economies give people more disposable income. Consumption past essentials is luxury. People choose to save in banks because compounding interest allows luxuries to be consumed at greater quality and quantity in the future.
This leads us to see what Interest Rates are. They are a spontaneously created mechanism to signal to the market what the current state of savings are. Low interest rates signal that savings are abundent. The economy is creating vast amounts of surplus value so the supply of money is high, driving down interest rates. Low interest rates encourage riskier ventures. This is good. Economies should be taking risks when they have savings to fall back on. When interest rates are high, it is becasue the supply of money is low since people are saving less. High interest rates slow the rate of expansion. This is good because when people are saving less the economy should not be expanding. Expansion is the production of luxuries. An economy should not produce more luxuries when essentials are making up a higher portion of incomes.
i am enjoying this op
>>69162700
---KEYNESIANISM---
Recessions are often met with a public demand for the state to "fix" them. In reality the state can only make things worse or prolong the weak economy.In come Keynesianism. John Keynes had some clever but ultimately flawed ideas on how to make a slow economy grow. Unfortunately those ideas have probably caused trillions of dollars of wealth to be destroyed or never created at all. He believed that recessions occur because demand is too low. Essentially the logic is this: Consumers can't buy products so firms can't make profits so workers can't make money to spend as consumers. Keynesians think that the necessary fix to a recession is for government spending to make up the gap in demand. To the layman this makes sense, which is why that line of thinking has infected much of the western world. But using the aforementioned concepts of how economies function, it is easy to demonstrate why Keynesian thinking is wrong.
Government spending comes from three sources. Taxes, borrowing and (indirectly) monetary policy. Taxes cut into savings, the backbone of economies, so it has been obvious for decades that raising taxes cannot fix a recession. So governments raise funds through debt.
>>69163318
---PART 4.5---
****this should have been right becore introducing Mr. Keynes.
A broken economy is one without savings. Weak economies, when truely left alone can recalibrate amazingly well y of how powerful the interest rate mechanism is. Higher interest rates encourage more people to defer consumption of their disposable income. This rebuilds savings and stabilizes the economy. Recessions are not supposed to be catastrophic like 2008. They are supposed to be healthy recalibrations of the economy.
I am also enjoying this. Are you writing as you go along?
>>69163663
---PART FIVE: NATIONAL DEBT REARS ITS UGLY HEAD---
Debt is either foreign or domestic. National debt is dangerous because the government is sacrificing the economy's future savings for current consumption. Foreign debt means future earnings will be given different economies in the form of interest payments. Many Keynesians may agree with this but think domestically held national debt is ok since its paid to its own economy. It is not ok.
When governments issue bonds domestically they are raiding the savings of citizens. Normally, bankers lend to the borrowers who most efficiently use savings. Efficient use of funds is reflected in credit ratings and economic activities which bankers analyze the viability of. Businesses and individuals build their credit rating by reliable payment of liabilities. In order to pay they must opperate efficiently. Government sidesteps efficient use of funds yet still has "good" credit by being able to endlessly raid the economy by levying more taxes, taking on more debt or manipulating currency. Private entities cannot do this as they will eventually run out of savers that are willing fund their losses. When governments issue bonds domestically, they are taking from the savings that would have otherwise been given to some other more productive venture. Less available money raises the interest rates, and makes it harder for economies to recallibrate (but Keynsians call this spending "stimulating demand")
Central planning is the allocation of resources by a central authority. Economies opperate under Chaos Theory and it will never, ever be possible to calculate a more efficient use of resources than how a market can spontaneously allocate. Even with the most powerful AI and processing power imaginable, it will still not be possible to measure every variable that effects an economy. Government debt and spending ultimately amounts to a massive opportunity cost and slows growth and decreases stability.
>>69163713
Nah. Typed it up this afternoon. Just copy paste with some minor formatting
Bumping, this is top tier discussion
>>69162211
>>69162421
>>69162700
>>69163318
>>69163663
>>69164248
>>69164248
---PART SIX: ARTIFICIAL INTEREST RATES---
To counteract the loss of private funds from government debt, the state must turn to central banking. When government bonds take private savings, the interest rate will rise, reflecting the increased demand and decreased supply of money. As already established, high interest rates slow growth. Since Keynsianism is all about counteracting recessions, states must find another way to lower rates. Central Banks lend newly minted currency to banks at an interest rate lower than the market rate. The artificially lower rate signals the market to start expanding again. This of course a problem, because the underlying fundementals of the economy have not been repaired. Savings have not been restored to a level that justifies expansion and the production of luxuries. But politicians in democracies love this because it gives the short term illusion of a strong economy. In reality what is really happening is that the newly minted currency is devaluing existing savings. Effectively, this may as well be a tax on savings. Artificially low interest rates encourage savings to be lent out and consumed in ways that are not efficient. But in the short term, it will appear that the economy is growing stronger. Eventually, the illusion is caught by reality and the market backfires causing a crash.
>>69164681
The tl;dr is every meme that libertarians and ancaps make about central banks. This stuff is pretty much what Ron Paul was rattling on about for 30 years.
>>69164915
So essentially what you're saying is that the $20k saved is only worth say $15k because of all the extra money around due to low interest rates?
So theoretically I spent 20k but only received 15k worth, thus producing less spending overall, even though on paper it looks like I spent a whole 20k? Is that mostly right?
>>69164915
---PART SEVEN: WHEN BEN BERANKE SAID "BUT WAIT THERES MORE!"---
Central banks can only lower interest rates so far. The federal funds rate (The Federal Reserves interest rate of short term loans to private banks) has been hovering just above 0% for years. Actually about 0.25%. But to further kick the can down the road quantitative easing was invented. The Federal Reserve buys securities from private banks by the trillions. This is just another way of devaluing savings to give a short term injection to the economy. When the Fed buys securities it again increases liquidity and again encourages more lending and more investing. There have been three rounds of QE in the US since 2009, each larger than the last. QE4 is considered inevitable and is estimated that it would be between $12 and $15 TRILLION dollars. Considering that those numbers are nearing the entire annual GDP of the USA, it should be very concerning what will happen if that much liquidity is pumped into the economy.
The tl;dr appears to be: any government intervention is bad. Do you have an opposing view to present?
>>69165274
Technically there should be a correction that results in deflation once the artificial supply of money is turned off - i.e. the cost of goods versus money falls as money is "worth more". It's been happening in Japan for the last ~15 years because Japan tried to do in 1993 exactly the same thing that the US tried to do in 2008.
https://en.wikipedia.org/wiki/Deflation#In_Japan
The downside is that deflation means wages in real terms falls.
>>69162211
>part one
>not scarcity
Absolute fucking trash
>>69165274
Pretty much. But its not just the interest rate itself that makes your money worth less. When central banks issue money it devalues existing money. This has been observed for centuries. Inflation is a tax on savings.
There is a term that I can't remember right now that describes the effect of new money on its first users. Since the Fed lends newly created money to big banks at a lower rate, those banks effectively get to use the money at a higher value. It hasn't entered into the economy yet. So for the bank getting that 20k from the Fed, it will still be worth 20k. But once it enters circulation, that 20k will have a lower value for everyone else.
Btw this is a good thing to tell progressives who complain about big banks. Its actually the government and federal reserve that gives a handful of international banks a massive competative advantage
>>69165360
---PART EIGHT: THE END GAME---
Hyperinflation is the only end condition here. Why the US has been able to sustain unprecedented levels of currency issuing without feeling the full effect of inflation is a story for another day the short answer is that the US Dollar's status as a reserve currency has allowed inflation to be "exported" (this is why countries that have economies built on exporting to the US stay dirt poor for decades. The global monetary system effectively transfers their wealth to keep the USA on life support so we can continue consuming without producing). The Fed has said that QE4 is on the table. Perhaps more concerning is that the Fed chair Janet Yellen stated earlier this year that negative interest rates are on the table as well. This would mean that instead of earning interest from savings, instead banks would charge a fee to hold money. This would be a last ditch effort to stimulate demand and force banks to lend from savings that have been depleted and devalued. We are reaching the end of a game that started in 1913 when the Federal Reserve was created. It managed to crash the economy by 1929, and in many ways we are still recovering. Economic crisis have been more severe and more frequent as time went on. The dot com and housing bubble and their respective recessions happening so close together was practically unprecedented. The state has no tools left to delay the inevitable. And its only a matter of time before we crash again. Maybe negative interest rates will keep us afloat for few years. We don't really know. But what we do know is that the underlying economy is fundamentally broken and at this point can only repair itself after the system crashes so hard that no more destructive state action can be taken.
>>69162211
>a disturbing level of economic illiteracy here
fuck off faggot. even the niggers running the show don't know what they are doing.
nobody knows economics, it's complete shit/luck/clusterfuck
Mfw
>>69165138
I am libertarian but not a corporatism interference in government and vice versa shill. I also believe that corporations shouldn't be able to monopolize. Is this explanation you're posting something I will like?
>>69166390
---PART NINE: COLLAPSES AND YOU---
How big a collapse will be is hard to say. But the ultimate collapse will necessarily be bigger than the great depression.The reason being because the "fixes" over many decades usually just take wealth from another class or group of people to make the numbers look good for a few more years. Its now a mainstream opinion that the Euro is collapsing. But the possibility of the US Dollar collapsing is also very real, but much further off. The USD is the core of the global economy and we will be living in a unfathomably different world if it collapses. Whether or not the dollar will survive is impossible to say. But a massive global depression is certain. There are growing numbers of people that see this inevitability because of the increasing level of desperation in states' actions. It is important for you to understand what is going on and why things are happening. In the event of a collapse, power structures are destroyed and new power is up for grabs. The people who understand why everything collapsed will have a jump on this power void while everyone else is left scratching their heads. The thing about economic crashes is that they never begin as soon as predicted, but once they start they happen faster than anyone could have imagined.
>>69166631
Deffo agree with this, as a scientist economics seems like a total non-science to me but there are so many theories and equations laid out as if it is as clear cut as physics, when in reality no one has a clue.
>>69166856
///thats all folks///
>>69166972
How do I get rich off this like the guys in 'the big short'
Great thread, thanks for posting.
>>69166923
This is exactly my point. Economics is NOT a hard science. But voters, politicians and bureaucrats act like it is. It is a soft social science and needs to only make observations about market mechanisms. Keynesianism is the pinnacle of people thinking they can treat an economy like a hard science and magically calculate us into prosperity.
Economics should not be used to plan economies. Economics can, broadly speaking, explain much better than predict. That is what I am doing. There is a consistent pattern of state action that distorts markets.
The only real use for economists outside of academia is that firms can use their anaysis of market conditions to make decisions of what and how to produce.
Instead economists get cushy government jobs where they pretend that they can turn some magical knobs to optimize the economy. Its not possible
>>69166847
Yes libertarians should love this. I am making the case that the cause of every economic crash in the past 100 or so years has not only been caused by the state, but is also made more severe by the state.
As for monopolies, they are actually created by the state as well. There has never been a coercive monopoly that survived without government changing the rules in its favor or creating market conditions that allowed it.
>>69168392
Excellent I'll definitely read it and get back to the post. If I come back and the thread is gone I will first look for a new one and if there isn't one then I shall make a thread against Keynesianism with your plan photoshopped into the thread image.
>>69167872
so what reading do you recommend
for a layman that is
>>69167117
The only "tricks" are probably silver, cryptocurrency and maybe the Swiss Franc.
Silver is massively undervalued compared to its historical value in relation to other precious metals. Precious metals soar when currencies collapase.
Bitcoin in the long run will grow in value. The btc economy is constantly growing. If and when a global economic collapse happens suddenly cryptocurrencies are going to look a lot better than the central bank currencies that are either abanndonned or facing hyperinflation.
The Franc may survive because the swiss have a much more stable banking system than other major currencies. When the Euro collapses the franc will most likely fill the void.
After that, its more about learning to apply this sort of analysis to various industries. The stock market is in a huge bubble right now. Whoever figures out what industry will default and pop the bubble will make a lot of money. After the collapse try to see what industries weren't propped up directly or indirectly by the government. Those will be strongest. It will probably be more fundemental products rather than lofty luxuries. Don't be afraid to jump ship on the USD if it looks like hyper inflation is coming. Doing business in a stable currency before everyone else will make you very wealthy.
>>69169531
Economics in One Lesson by Henry Hazlitt is a great intro to austrian economics.
>>69169840
>internet money surviving global crash
>I'll trade you my turnips for a few lines of code on a disc.
>I am the lord of the wasteland
Ammo, gold and canned food will be currency
>>69169531
As someone else already said, Economics in One Lesson by Henry Hazzlitt is very good.
How an Economy Grows and Why it Crashes by Peter Schiff is a very good introductory book. My first post here is actually kind of a tl;dr of the beginning of that book.
Frederick Bastiats The Law is a bit of a more philosophical approach to why state action in the economy always benefits one group at the expense of another (he calls it "plunder")
You can find countless articles about the Federal Reserve, 2008 Recession, general info about state caused market distortions and more from various libertarian and Austrian economics (thats mostly the school of Econ im using here)think tanks. Mises Institute, FEE.org, Heritage Foundation, Reason Magazine, and more.
>>69170753
Youre also right. But you need to realize why civilization ever evolved to using paper currency in the first place. Money needs to be divisible and portable. Those two traits are not filled by commoditites so people eventually used bank notes to represent those commodities. Resource backed currencies were the norm before states invented fiat money. Crypto currency will find a niche for international commerce to continue without stable international currencies. Even if states start forming new currencies, there will be a high distrust of them.
>>69170420
>>69171350
Thanks, friends. Will look them up.
>>69171747
you are absolutely right, i was just fucking around. Great thread, repost it in the future.
>>69172081
Thanks bud will do. Glad I at least got a bit of traction with it
>>69162211
thanks man I've yet to even begin reading about economics. This is pretty interesting.
>>69173000
Im OP on different wifi now btw. Glad you thought it was interesting. Theres a lot more to economics than doomsday scenarios but thats of course whats going to get interest here. Im mostly drawing from Austrian School thought which is pretty outside the mainstream, but its ideas are definitely getting more attention. For example no one at all was talking about the Federal Reserve until a couple years ago (all that credit really belongs to Ron Paul. He spent a lot his career talking about the Fed). Keynesianism is the prevailing view of most people, especially liberals because it try to justify endless taxation and spending. Conservatives that are not austrian school usually like Adam Smiths classical economic theory or Milton Friedman-esque Chicago school. Classical and Chicago are pretty free market oriented as well. But IMO Austrian school is best because it embraces the inherant problems with trying to organize and understand economies from the top-down.
>>69162211
doing keks work son
Economics, as a field of study, is where you're generally paid to be wrong. One thing most macro economists agree on is that they know fuck-all when it comes to macroeconomic forecasting...
The only relevant data they can use is ex-post, everything else is a scam.
TLDR
OP is a huge pseudo intellectual faggot who should hang himself.
>>69174888
Yes and that is my point. Economies are a result of spontaneous order and can only be destroyed by economists who try to control them. I talked about this here:
>>69167872
>>69162211
Thank you for your posts.
>>69166390
>Why the US has been able to sustain unprecedented levels of currency issuing without feeling the full effect of inflation is a story for another day the short answer is
>the full effect of inflation is a story for another day the short answer is
>story for another day
>the short answer is
And this is why you faggots are literally too stupid to be rich.
>>69174888
So much THIS.
BASED OP
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>>69177754
I typed an damn essay in a sea of shitposts and thats still not enough for you. I provided a pretty decent short answer IMO but you just ignored it.
Some people were predicting hyperinflation during some of the early rounds of QE. They made this prediction based on other currencies that fell into hyperinflationary spirals. It didn't pan out due to a unique position of the USD. The truth is that we don't really know how far a currency can be stretched when its given a global reserve currency status because it hasn't happened before. But its just that getting into the specifics of the history and analysis of the USD is worthy of another 9 max char posts that Id rather not write on my phone
