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Edited by Mrph1 on Nov 30th 2023 at 11:03:59 AM

TheStarshipMaxima NCC - 1701 Since: Jun, 2009
NCC - 1701
#43026: Dec 7th 2012 at 9:53:47 AM

Again, thank you all for letting me...assimilate...your knowledge and add your genius to my own.

Fighteer, bear with me. I'm really, really, really knew to this concept:

Demand is the ability of people to buy things.
I thought "demand" meant you want the thing. As in Star Wars makes money because are just that big fans of it.

It can be as simple as a drought making food scarce or as complex as a real estate bubble where an increasing amount of money is chasing a fixed supply of houses.
And thus why houses always keep getting more expensive, right? Because you can only build so much on so much land? Wait, would that mean if we somehow built homes on...the Moon, let's say, the houses here would now dip in price since they're not the only ones available?

There are two major causes of recessions: from a supply side and from a demand side. In a supply crisis, you have too much money chasing too little goods. There are a couple of solutions to this. First, increase supply — this takes the form of investment (either directly by the government or encouraged by means of rate changes and/or tax policy) and is generally a good thing as long as the demand itself isn't artificially inflated (e.g., the housing bubble). Second, reduce demand — this can be done by raising interest rates to soak up available credit or increasing taxes to soak up consumer cash.

Please elaborate in separate post.

There have been a couple of recessions in the past few decades that were triggered deliberately by the Fed, which raised interest rates to cool off an overheating economy. There was no fundamental problem with the system, it was just a gentle application of the brakes to reign in inflation — and as soon as the Fed relaxed rates, growth resumed.

What would've happend if the Fed just let it ride?

The other kind of recession is triggered by a demand crisis. The recent housing bubble is a perfect example of overreach in the private debt markets, with waves of borrowing chasing ever-increasing housing prices, fueled by lax regulatory policy and tacit encouragement by the administration, coupled with naked greed on the part of bankers. Consumers got over-leveraged, meaning they borrowed too much against assets whose value was at best expressed as "wholly fictional". When the value of the assets collapsed, consumers were forced to stop spending in order to pay down their debts; this caused a global reduction in demand that triggered mass layoffs, which further reduced demand and sent more private consumers over the edge of bankruptcy, and so forth in a vicious cycle.

Why is it basic economic theory is challenging me, but this explanation of unmitigated greed and blatant fiscal rape...I understand all too well?

In this situation, when borrowing costs are at record lows but economic activity is stagnant due to reduced consumer purchasing power, the government's role is to boost demand, kind of like a jump start on a dead car battery. Throw money into the consumer economy, which will be spent immediately. If it is sustained for long enough, it will increase net demand, which will make businesses willing to hire again, which will give consumers more money to spend, and so forth. You break the downward cycle and replace it with an upward cycle.

But then, why are people arguing for a tax increase? That seems like the opposite of "give people more spending money"?

edited 7th Dec '12 9:54:22 AM by TheStarshipMaxima

It was an honor
AceofSpades Since: Apr, 2009 Relationship Status: Showing feelings of an almost human nature
#43027: Dec 7th 2012 at 9:58:44 AM

Wanting something doesn't mean you can afford to buy it. If you can't afford to buy it, then it doesn't matter how much you want it, because you're simply not buying and thus not putting your dollars into effect. For economic purposes, it only matters if you're buying things, not whether you want them.

As for raising taxes: Taxing the rich a little more gives the government more dollars to use to put into stimulus packages, spend on road improvement, hire teachers with, use for welfare spending so that the poor people finally have money to spend. (At a certain level of wealth you can only spend so much money before you simply have a bunch of it just sitting there. The poor can't afford to accumulate like that.)

Lots of reasons for raising taxes, really.

edited 7th Dec '12 10:00:36 AM by AceofSpades

Midgetsnowman Since: Jan, 2010
#43028: Dec 7th 2012 at 9:58:56 AM

[up][up]

because most tax increases disproportionately target the rich.

And the rich easily have the money to give (5% of a millionaire banker's income per year is nowhere near as damaging to his lifestyle as it is to a guy who makes a mere 50,000 a year). Money that can be funneled into government programs that help give the poor further ability to spend and drive the economy upwards.

In short. taxes are generally good because theyre the easiest way to force people to stop hoarding excessive wealth and funnel said wealth to people who need it.

edited 7th Dec '12 10:00:49 AM by Midgetsnowman

Euodiachloris Since: Oct, 2010
#43029: Dec 7th 2012 at 10:02:24 AM

[up]It's also why aggressive use of austerity during a downturn via cuts in welfare programs is often counter-productive, rather than the saving it appears on paper. If those on the bottom rungs have fewer means to purchase even the basic things, not only do they suffer as a consequence... so does the local economy around them.

If all your money is going towards rent and food with nothing left over, you can't afford new shoes or winter tyres (even if you need them). tongue

This can feed back into the general depression, making it more severe. tongue

edited 7th Dec '12 10:05:34 AM by Euodiachloris

Midgetsnowman Since: Jan, 2010
#43030: Dec 7th 2012 at 10:03:42 AM

[up]

Yep. Its also why the argument of "they dont really need welfare. they'd spent it on T Vs instead of food anyhow" is silly because yes, maybe they would. But buying a TV also STIMULATES THE ECONOMY

Trivialis Since: Oct, 2011
#43031: Dec 7th 2012 at 10:04:50 AM

What would've happend if the Fed just let it ride?

It would take longer for business cycle to restabilize.

But then, why are people arguing for a tax increase? That seems like the opposite of "give people more spending money"?

Actually, Democrats want higher taxes for the rich and lower taxes for middle class, because the latter are better customers (and generally because they need it more).

But the main reason Congress calls for tax raise (and spending cuts) is to lower the debt and avoiding deficit spending. Debt and economy are separate but related issues. A bad decision might hurt the economy, but you can still force the debt to reduce (or at least not increase) if you don't spend more than you take in with taxes. If you do, that's a deficit.

The question with the fiscal cliff is whether to raise the debt more than we already have - and if not, how we're going to balance the cuts/taxes. And if Congress can't vote on a newly agreed plan by January, the previous plan will do that for us. That's the automatic cuts and tax raises.

edited 7th Dec '12 10:05:27 AM by Trivialis

DrTentacles Cephalopod Lothario from Land of the Deep Ones Since: Jul, 2012 Relationship Status: Having tea with Cthulhu
Cephalopod Lothario
#43032: Dec 7th 2012 at 10:05:01 AM

It's basic multiplier effect. If you give one person 1 million dollars, they only *have* to spend, let's say 100 thousand of it. (I'm pulling these numbers out of my ass, but the principle is sound.) If you give that 1 million dollars to 100 thousand people, then it's very likely that all of that money will be spend (because they need to spend *all* of it to meet basic needs and wants), and thus, act as stimulus to the economy. Taxing the rich is a was to ensure money is in the hands of people who will use it, and who need it.

edited 7th Dec '12 10:06:03 AM by DrTentacles

Midgetsnowman Since: Jan, 2010
#43033: Dec 7th 2012 at 10:05:34 AM

so in other fun news, Suzanne Venker and Fox news is doubling down on her idea of a "war on men" by saying women (like herself) are naturally and biologically built to serve man and be subservient to them.

http://thinkprogress.org/politics/2012/12/07/1299611/fox-news-op-ed-says-womens-nature-is-to-be-dominated-by-men/

edited 7th Dec '12 10:06:32 AM by Midgetsnowman

DrTentacles Cephalopod Lothario from Land of the Deep Ones Since: Jul, 2012 Relationship Status: Having tea with Cthulhu
Cephalopod Lothario
#43034: Dec 7th 2012 at 10:06:40 AM

[up] Then can she lead the charge back to the kitchen? Set an example, lady. I'm sure the rest of females are right behind you.

Trivialis Since: Oct, 2011
#43036: Dec 7th 2012 at 10:07:44 AM

Bleh, I don't like Think Progress sound bites...

She's just affirming traditional gender roles, though I wouldn't say that makes women inferior.

AceofSpades Since: Apr, 2009 Relationship Status: Showing feelings of an almost human nature
#43037: Dec 7th 2012 at 10:08:00 AM

I can't believe there are women who still believe in that kind of bullshit. It's distressing on multiple levels.

Midgetsnowman Since: Jan, 2010
#43038: Dec 7th 2012 at 10:08:26 AM

[up][up][up][up] she neatly steps around that by arguing that women can work if they want to, but should remember just because they work doesnt mean they should argue with their man (who she also insists every woman needs one of) over who is lord of the house.

@Triv: far as I can tell, her agument boils down to "okay. women are seperate but equal to men now, so we can embrace being what we really are once again instead of lying to ourselves that we actually have goals and dreams other than housewifery"

edited 7th Dec '12 10:11:37 AM by Midgetsnowman

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#43039: Dec 7th 2012 at 10:08:45 AM

I thought "demand" meant you want the thing. As in Star Wars makes money because are just that big fans of it.
Sort of. We're using economic terms here. Demand for a product is composed of two elements: the desire for it and the ability to purchase it. Apple doesn't manufacture iPads because people want them really badly; it manufactures them because people spend money to buy them. Similarly, people can have all the cash in the world but if you make a shoddy, undesirable product, demand for it will be low.

And thus why houses always keep getting more expensive, right? Because you can only build so much on so much land? Wait, would that mean if we somehow built homes on...the Moon, let's say, the houses here would now dip in price since they're not the only ones available?
Housing prices are an interesting dynamic and not the best example for a 101-level course, because you have lots of different issues affecting them. Land availability, construction costs, population growth, availability of credit, etc. In a sense, yes, the more houses we build, the less room there is to build houses, and so the price goes up. We aren't anywhere near out of space in this country, though. Building houses on the Moon is an interesting idea but it's hardly practical as the cost is so high (and will remain high for the foreseeable future) as to make it only of interest to the super-wealthy.

Please elaborate in separate post.
Let me give an analogy that might illustrate the point. A car going uphill needs the gas pedal pressed to keep it moving forward. Applying the brakes in this situation only makes the car stop faster. A car going downhill needs the brake pressed so as to keep it from going too fast and possibly crashing. Pressing the accelerator pedal only makes it go faster.

A normal economy is level, with minor hills and dips. An economy going too fast is like a steep downhill slope. Money chases scarce goods and you have to slow the car down somehow to avoid losing control. An economy going too slowly is like a steep uphill slope. If you don't accelerate — give the car more gas — then it slows down and may never reach the top.

As a gross simplification, the government's gas pedal is spending; and the government's brake pedal is interest rates and tax rates.

What would've happened if the Fed just let it ride?
In these cases, high inflation saps consumer purchasing power and can lead to bubbles like the one that happened with the housing market in 2006. Inflation caused by supply constraints is generally considered to be a bad thing. In a way, the 2006 housing crisis was caused by the government failing in its duty to apply the brakes; in fact, it was applying the accelerator pedal to a car already going too fast, with a crash as the inevitable result.

But then, why are people arguing for a tax increase? That seems like the opposite of "give people more spending money"?
All taxes are not created equal. A tax increase on the middle class would indeed be very bad at the moment, but a tax increase on the wealthy is almost insignificant to their purchasing power. It all has to do with saving versus spending. Consumers who are not wealthy spend most of their money. Spending money is what drives an economy. Saving money is useful, as it can take the form of investments and/or loans, but in a demand crisis like we're in now, there's nothing for that money to invest in and nobody to loan it to. So it sits there stagnant unless put to use, either via stimulus, or by increasing taxes.

edited 7th Dec '12 10:21:32 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Euodiachloris Since: Oct, 2010
#43040: Dec 7th 2012 at 10:10:40 AM

About Suzanne Venker: FOOOOOOM!

That sound is me going up like a mushroom cloud.

edited 7th Dec '12 10:11:18 AM by Euodiachloris

Midgetsnowman Since: Jan, 2010
#43041: Dec 7th 2012 at 10:13:34 AM

..course, the other new article on TP is also kind of horrifically distasteful. Apparently the NRA is claiming if Jovan Belcher's girlfriend had owned more guns, she could have shot him dead without dying herself therefore the murder-suicide is all the fault of her for not owning moar guns.

because as we all know, a shootout in a home with a child and an older woman also in it is a great idea.

edited 7th Dec '12 10:18:52 AM by Midgetsnowman

Linhasxoc Since: Jun, 2009
#43042: Dec 7th 2012 at 10:15:08 AM

And this is why, despite being moderately pro-gun, I despise the political branch of the NRA. Because nuclear deterrence was such a good idea in the Cold War, wasn't it?

NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#43043: Dec 7th 2012 at 10:23:31 AM

[up]....well, it worked, didn't it? The Cold War never went hot.

Anyway, I lost all respect for the NRA as a legitimate political advocasy group (as opposed to a shill for the right) when they continued to vehemently oppose Obama despite the fact that he expanded gun rights during his first term. The only people who hate Obama more than gun rights groups are gun control groups.

Really from Jupiter, but not an alien.
Trivialis Since: Oct, 2011
#43044: Dec 7th 2012 at 10:23:40 AM

I do think maybe it was an inappropriate comment at the time.

But I don't like that site's general tone. It's too reliant on take-that moments. Like it waits on conservatives to make yet another gaffe, and highlights it for everyone, even if it's taken out of context. It doesn't try to look at the context in good faith and parse the real message with perhaps good intentions, before it starts to judge it.

Euodiachloris Since: Oct, 2010
#43045: Dec 7th 2012 at 10:24:52 AM

[up][up]Um. So... the logic of him not being allowed near anything connected to gunpowder maybe, you know... making the whole thing one hell of a lot harder... doesn't hove into their line of sight?

Wicked223 from Death Star in the forest Since: Apr, 2009
#43046: Dec 7th 2012 at 10:25:26 AM

[W]omen shouldn’t let their success in the workplace become the biggest thing in their lives. If the ultimate goal is lasting love – and let’s face it: for most people it is – women are going to have to become comfortable with sacrifice and capitulation. …

so, she doesn't want to set women back 200 years, she just wants women to return to the role of having all the burden of maintaining "lasting love" placed back onto the women, aka where women were about... 200 years ago*

?

so much doublespeak and glittering generalities I can't even decipher it

You can't even write racist abuse in excrement on somebody's car without the politically correct brigade jumping down your throat!
Euodiachloris Since: Oct, 2010
#43047: Dec 7th 2012 at 10:28:12 AM

[up]She's got so much Newspeak and Double Think going on, she's practically into linguistic compound interest territory.

Midgetsnowman Since: Jan, 2010
#43048: Dec 7th 2012 at 10:32:00 AM

@Euo: the "she should have owned a gun and shot him" argument is apparently their retort to a news anchor arguing that if Belcher didnt have access to guns it wouldnt have happened. So no, I dont think the concept of "everyone not owning 15 guns" figures into their worldview.

edited 7th Dec '12 10:32:38 AM by Midgetsnowman

Inhopelessguy Since: Apr, 2011
#43050: Dec 7th 2012 at 10:38:37 AM

A question related:

Why is Hilary Clinton coming to the Northern Ireland Province? I don't seem to understand why US foreign policy seems to orientate towards the Province. Why is the US so concerned with the Peace Process there?


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