The General Economics Thread

Well, people invest in US government bonds that pay out in dollars, but I meant literally treating dollars like a commodity. "Buying" dollars and then waiting for their value to go up so you can "sell" them for a profit.

A dollar is self-evidently only ever worth one dollar. Bitcoins, if they were a real currency rather than a vehicle for market speculation, would be the same.

edited 3rd May '16 8:47:51 AM by NativeJovian

Really from Jupiter, but not an alien.

Yes it does, what is one of the reasons why there were so many people trying to mine bitcoins when it became a thing, but as more and more bitcoins are generated the blockchain calculations become more complex, thus you either get very little bitcoins out of mining or you must have a large cluster to handle all the transactions.

Inter arma enim silent leges

That also happens, but that just moves existing bitcoins around. Mining bitcoins also generates new ones from nothing at a rate determined by the algorithm and the amount of processing power being thrown at it.

Which proves my point about why bitcoin makes for a terrible currency?

Really from Jupiter, but not an alien.

Whatever happened to ostrich meat? It was so popular at the turn of the millennium, then disappeared from the shelves. I personally liked it a great deal!

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

That, too, is done; it's implicit in currency exchange transactions. If I have 100 USD now, which is worth 80 GBP today, and next year they are worth 90 GBP, I've made a 10 GBP profit by holding onto those dollars. I have not made any profit in dollars, of course, unless I take those 90 GBP and wait for the exchange rate to make them worth 120 USD, and so on.

People actually do this. Like, a lot.

edited 3rd May '16 11:34:11 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

True, it is quite common to in shitholes with shitty currencies and massive inflation. During times when their currency is valuated people buy dollars just in case rampant inflation hits again and they don't lose all their savings.

Inter arma enim silent leges

Of course, all those dollar purchases become a form of capital flight that helps drive down the value of your currency. It's one of those paradoxical cases wherein rational individual behavior is counterproductive when done by everyone.

On the flip side of the transaction, people from whom you buy dollars with your (soon to be worthless) currency will demand an increasingly higher risk premium, which will take an extra large bite out of you when they want those dollars back.

edited 3rd May '16 11:59:51 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Is "Tragedy of the Commons" the common name? Or rather "Prisoner's Dilemma"?

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

In Keynesian terminology, it's the Paradox of Thrift.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

The Venezuelans are doing that due to hyperinflation and so where the Argentinians.The capital flight to dollars is closely related to their government simply printing large excesses of money and crumbling down their own economy through incompetence.

Latin America has a long history of using dollars as a ballast or savings currency because of hyperinflation or the chronic currency changes with unpredictable exchange ratios but predictable and stable dollar exchange ratios. Even Zimbabwe uses dollars because their currency isn't even worth the paper it is printed on.

Inter arma enim silent leges

By using dollars as their de facto currency, they effectively join a currency union with the U.S. in which they have no representation and receive no fiscal transfers.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

And that's why government debt is dangerous to countries that can't issue it to mostly domestic buyers, the debt becomes a drag on the currency and helps kick off the spiral, hurt further by attempts to control the spiral and then you're in a hole where you either need that debt written down or a lost generation of painful austerity.

Those two as well as the paradox of thrift are all separate examples of the "individual action vs group action" thing, but they all refer to different things. As far as I'm aware, there's no specific name for the generic case.

Really from Jupiter, but not an alien.

They are all cases of social dilemmas

Trump claims US GDP below zero.

Does he even know what a GDP is?!

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

Global Double Penetration.

Inter arma enim silent leges

He knows that it's a thing smart people throw around when they talk about the economy.

Direct all enquiries to Jamie B Good

(Equitable Growth) Income mobility over a lifetime might be on the decline

Must-read: Martin Ford: “How Unprepared We Are for the Robot Revolution”

Must-read: Wolfgang Munchau: “The Revenge of Globalisation’s Losers”

Must-Read: Larry Summers: Four Common-Sense Ideas for Economic Growth

Basically, better Infrastructure, better policy on wealthy Immigrants and something needs to be done on financial reform.

Must-Read: Dean Baker: The Elite’s Comforting Myth: We Had to Screw Rich Country Workers to Help the World’s Poor

The Technocratic Elites can pity their country's workers for being so ruined, but they caused it and should own the filth they themselves caused.

Okay, call me crazy, but the gist of all this is that worldwide productivity has increased so much for various reasons that there simply aren't enough jobs and that will only get worse in the future.

You could probably solve this in a variety of ways, but the problems are essentially absurd. As productivity soars, we have more than enough resources for everyone except jobs, which have become more and more scarce. While, incidentally, the rich will get richer since they employ the outsourced workers and own the robots. There simply aren't enough good jobs for everyone to have, and the more the economy grows the less jobs exist (because growth is associated with increased efficiency). Jobs are just a social construct in the first place. It's like we're suffering a "money" scarcity, in that it makes no sense.

I dunno, maybe it's just me, but I think this is the most obvious place that capitalism has failed. The resources exist, but we can't give them to people because there are no jobs for them, and we can only conceive of the distribution of wealth in terms of either wages or charity. We consider giving people something for nothing morally wrong, so we make up nonsense for them to do just so we can pay them. We create machines to help us work, but none of the time we free up is allowed to go into leisure, because the people whose jobs are theoretically made easier are immediately fired. It is literally impossible for society to improve under the current conditions, because capitalism won't let it.

I just feel like capitalism has to collapse in the next century or so.

edited 5th May '16 3:40:36 AM by Clarste

The advance of technology putting people out of work is not a new problem. Go back a century and ask candlemakers what they think about electric lights or the horse and buggy industry what they think about the automobile. Advances in technology put some people out of work, but create new jobs elsewhere. Unfortunately, this often doesn't help individuals (a guy who knows how to drive horses isn't going to get a job as a mechanic without some help), but 1) that can be solved with a strong social safety net, and 2) that's an individual problem, but not a big deal for the wider economy on the large scale.

Eventually, we will start running into what's called a "post-work society", which is where a sizable portion of working-age people simply won't be able to work because the economy is so productive that it's not profitable to hire additional workers. We are far from that point. But when we get there, the easiest and least-disruptive way to deal with it would be for the government to provide a liveable no-questions-asked income to every citizen (funded by taxing those people that DO work) and then simply accept that people will only work either because they enjoy working for its own sake, or because they want to be able to pay for expensive luxuries.

Really from Jupiter, but not an alien.

Well, clearly not enough new jobs are being created if we're running into employment problems now. And if exactly enough robot mechanic jobs are being created to make up for all the factory jobs they're replacing, then clearly there's no actual reason to buy the robot in the first place (especially since the skilled labor of the robot mechanic is presumably more expensive). No business would ever even consider buying robot arms unless it decreased the overall cost of labor: ie: there are less jobs to go around. Your position basically assumes that the economy desires infinitely more production at all times, since that's the only case in which increasing efficiency will lead to an equal number of jobs. I'm pretty sure this is not the case.

Cars didn't make horses more efficient, they just changed what exactly we were putting on our roads. By contrast, automation eliminates jobs entirely, since that is literally the whole point.

edited 5th May '16 4:25:24 AM by Clarste

Our problems with employment and lack of jobs now stems more from executives being unwilling to spend money on wages and worker's rights than any sort of existential issue with robots taking over production.

They're just greedy little shits is all.

Oh really when?

But clearly they don't need the workers to run their businesses? They could just hand over the money for absolutely nothing and it would have the exact same effect except you'd have less people wasting their time doing pointless work.

Automation and increased productivity: The way it has traditionally worked, the simplest forms of human labor are automated first. Then businesses take the money saved by automation and invest it in research and development, ultimately inventing more complex forms of goods and services. These are not automated, because they are new. By the time people understand the newer processes well enough to automate them, which means that the process has been systematized to the point where there are no unexpected errors occur during production anymore, even newer and more complex forms of goods and services have been invented, and on the cycle goes on. The problem right now is that businesses are sitting on their profits, and not investing in R and D. This keeps the economy relatively stagnant, because fewer employees means fewer consumers, and thus fewer profits.

Again, this assumes infinite growth potential. And, ultimately, you're suggesting that R&D create jobs that produce things people don't need (right now), just to keep people employed for no reason.

The assumption seems to be that work is valuable in and of itself, which is absurd. Reducing the amount of work needed overall seems like it would have far more value to society.

Edit: Basically, I don't see creating jobs as "good". I don't see how it could be good. Ultimately, all it means is that you've failed to properly assign the value of increased efficiency. Obviously we're not yet in a post-scarcity robot-slave society, but the goal should be for society to gradually work less as we steadily increase efficiency, not for us to work more. The engine of capitalism wants us to work more and more for no reason because that's the only way it can distribute wealth, and it's incredibly inefficient at that goal.

edited 5th May '16 4:49:48 AM by Clarste