Economics..so whats it all about?

southsiderosie

UsernameInUse wrote: »

Have you ever attended college to study economics? If so, the Keynesianism is killing your mind and your soul.

Oh, please. I'm not going to get into my background, but given the mess that trained economists have made of the whole crisis, I would venture to say that a degree in economics has little to no bearing on one's understanding of the relationship between the economy and political structures. It may be convenient to label people you disagree with, but it neither invalidates their point, nor furthers yours.

44leto

dillo2k10 wrote: »

And do you believe that would improve the quality of life for the average person in Ireland?

I was being sarcastic and it wasn't aimed at you. Its was aimed at people who believe capitalism to be inherently evil and a system that does not work, although it is not perfect its the best system tried so far, it has lifted a lot of the planet out of poverty.

lividduck

southsiderosie wrote: »

Oh, please. I'm not going to get into my background, but given the mess that trained economists have made of the whole crisis, I would venture to say that a degree in economics has little to no bearing on one's understanding of the relationship between the economy and political structures. It may be convenient to label people you disagree with, but it neither invalidates their point, nor furthers yours.

Why are you blaming economists? It was bankers, politicans and greedy public servants who got us into this mees, not economists. As I remember it , it was the economists like Morgan Kelly, PJ Drudy, Jim Power et al that were warning of what was coming!

dillo2k10

44leto wrote: »

I was being sarcastic and it wasn't aimed at you. Its was aimed at people who believe capitalism to be inherently evil and a system that does not work, although it is not perfect its the best system tried so far, it has lifted a lot of the planet out of poverty.

Sorry I didn't realise, I thought it was a bit to stupid to be believed but you just never know on boards

southsiderosie

lividduck wrote: »

Why are you blaming economists? It was bankers, politicans and greedy public servants who got us into this mees, not economists. As I remember it , it was the economists like Morgan Kelly, PJ Drudy, Jim Power et al that were warning of what was coming!

Morgan Kelly is an economic historian by training, not a free marketeer, and the neo-liberal stream of economics (laissez-faire, low/no regulation, low taxes) that has dominated economic policy in the US, Ireland, and the UK for the last 20+ years.

UsernameInUse

southsiderosie wrote: »

Oh, please. I'm not going to get into my background, but given the mess that trained economists have made of the whole crisis, I would venture to say that a degree in economics has little to no bearing on one's understanding of the relationship between the economy and political structures. It may be convenient to label people you disagree with, but it neither invalidates their point, nor furthers yours.

So you're telling us that there are no right or wrong answers in economics as to what constitutes sound economic policy?

You've completely lost the plot.

southsiderosie

UsernameInUse wrote: »

So you're telling us that there are no right or wrong answers in economics as to what constitutes sound economic policy?

You've completely lost the plot.

There isn't agreement within economics as to what constitutes sound policy, and even a basic familiarity with the field makes that abundantly clear. Keynesians will tell you something completely different than someone who hails from the Austrian school.

dillo2k10

southsiderosie wrote: »

My comments were meant to address the crisis in Ireland, but a few things:

1. The US government approved multiple bank mergers and consolidations over the last 15 years, making them too big to fail. If they had actually used existing anti-trust legislation, this would not have happened. No bank should hold enough US deposits that its failure would drag down the entire system with it.

2. The failures of the derivatives markets were in large part due to the Clinton administration's repeal of Depression-era legislation specifically designed to prevent the kind fo systemic investment-banking led meltdown that occurred. Clinton's key economic advisors at the time had close ties to the banking industry (Robert Rubin & Citibank). Wall Street bankers have also heavily donated to the Obama campaign; is it any surprise that the regulatory response from this administration has been weak, at best?

At the end of the day, it is regulation which keeps the banking system from caving in upon itself. However, levels of regulation are not an economic issue, they are a political issue: if this were strictly about banks, then we would expect to see similar banking crises across most of the developed world. But we haven't.

I'm no expert on the financial crisis so I could be completely wrong.

Although the banks had control of too much money they could hardly have stopped them for doing so? They couldn't force new banks to open and they couldn't have forced customers to choose other banks.

I would have thought that a lack of regulation would show a lack of political involvement in the banks and so it wasn't actually a political problem?

I understand that you were speaking about Ireland but was the Irish crisis not caused by the US one?

edit: I didn't notice this :"The US government approved multiple bank mergers and consolidations" so I now see what your saying.

southsiderosie

dillo2k10 wrote: »

I'm no expert on the financial crisis so I could be completely wrong.

Although the banks had control of too much money they could hardly have stopped them for doing so? They couldn't force new banks to open and they couldn't have forced customers to choose other banks.

I would have thought that a lack of regulation would show a lack of political involvement in the banks and so it wasn't actually a political problem?

I understand that you were speaking about Ireland but was the Irish crisis not caused by the US one?

The federal government in the US can block banking mergers, but didn't. Today, an entity like Citibank is too big to fail.

Lack of regulation is a political problem in that there was little appetite for regulating banks, and one of the key assumptions of neo-liberal economists is that the market is self-correcting, hence no government involvement is needed. Neo-liberalism provided the ideological cover for the economic and political interests of financiers, who moved in and out of investment banks into the Department of the Treasury - and this was under both Clinton and Bush.

As for Ireland, I don't think the crisis was caused by the US one, but the recovery has been hampered by the US economic situation. The roots of the Irish crisis lie in a decade of overspending and wildly optimistic budgets from the Department of Finance (the 2007 budget projections are particularly laughable), and the 2008 bank guarantee.

Edit: oops, missed your edit!

UsernameInUse

southsiderosie wrote: »

There isn't agreement within economics as to what constitutes sound policy, and even a basic familiarity with the field makes that abundantly clear. Keynesians will tell you something completely different than someone who hails from the Austrian school.

Keynesian economics have brought us to our knees - I'd hazard a guess and say that nobody wants to listen to them anymore. Time for a new system - time to try Austro.

southsiderosie

UsernameInUse wrote: »

Keynesian economics have brought us to our knees - I'd hazard a guess and say that nobody wants to listen to them anymore. Time for a new system - time to try Austro.

In what way? Keynesian economics calls for governments to save in good times, and 'prime the pump' in bad times - i.e. counter-cyclical government spending. But that isn't what happened: governments spend like crazy in the good times, and then are doubly-broke now that the party has ended. So the current crisis isn't necessarily a failure of Keynesianism, it is a failure of governments to maintain even a modicum of control over spending.

Honestly, I am so sick of the lazy use of the Keynesian label. Keynesianism =/= spending like a drunken sailor.

lividduck

southsiderosie wrote: »

Morgan Kelly is an economic historian by training, not a free marketeer, and the neo-liberal stream of economics (laissez-faire, low/no regulation, low taxes) that has dominated economic policy in the US, Ireland, and the UK for the last 20+ years.

You are the one who ill advisedidly used the blanket term "Economists", perhaps you should take wittgenstiens advice and (to parapharse) "on that of which you no nothing, speak nothing"

nlgbbbblth

When I started studying Economics in fifth year we were told that the 1984 Leaving Cert paper was "the most brutal ever".

southsiderosie

southsiderosie wrote: »

Oh, please. I'm not going to get into my background, but given the mess that trained economists have made of the whole crisis, I would venture to say that a degree in economics has little to no bearing on one's understanding of the relationship between the economy and political structures. It may be convenient to label people you disagree with, but it neither invalidates their point, nor furthers yours.

lividduck wrote: »

You are the one who ill advisedidly used the blanket term "Economists", perhaps you should take wittgenstiens advice and (to parapharse) "on that of which you no nothing, speak nothing"

Wow, look at the snark on you!

Perhaps I should have been clear about who I was referring to, but as a general rule, economic historians like Morgan Kelly are not government advisors or economic policymakers. Actually, I think the fact that he is, professionally, outside of the policy arena, and didn't have a stake in the Keynes vs. Neo-lib ideological debates, meant that he was better able to see the Irish economic situation for what it was: a fiction.

Would you disagree that professional economists - in particular, as I noted, neo-liberal economists - played a hand in the current economic crisis?

lividduck

southsiderosie wrote: »

Wow, look at the snark on you!

Perhaps I should have been clear about who I was referring to, but as a general rule, economic historians like Morgan Kelly are not government advisors or economic policymakers. Actually, I think the fact that he is, professionally, outside of the policy arena, and didn't have a stake in the Keynes vs. Neo-lib ideological debates, meant that he was better able to see the Irish economic situation for what it was: a fiction.

Would you disagree that professional economists - in particular, as I noted, neo-liberal economists - played a hand in the current economic crisis?

Of course some agreed with the lunatic Policies, but it was the politicans, the lobbyists (ICTU/IBEC/IFA/CIF etc), and the banks who were primarily the cause, David McWilliams,PJ Drudy, Jim Power, Sean Barrett and many others oppossed very publicly the policies being pursued, if I remember correctly our then taoiseach told them they should kill themselves.
PS Whats a snark?

Capt'n Midnight

dxhound2005 wrote: »

Someone told me the other day that if I buy €10,000 in Savings Certificates or other state savings products that increases the national debt by €10,000 because the state then owes the money to me.

LOL

no it means that the state doesn't have to go to the market and pay market rates for that €10,000

Instead they pay you a little less, and perhaps someone could clarify if the state also recoups some of that interest in DIRT so making it really cheap.


If the state were to offer domestic investors an interest rate after DIRT similar to what they are paying to the bonds market then they'd be offering us a gross rate of over 10%

Capt'n Midnight

If you laid all the worlds economists end to end they wouldn't reach a conclusion.

Capt'n Midnight

Economics is about hand waving and creating financial devices like derivatives and saying "this time it will be different" and thereby getting the rules put in place after the last crisis relaxed.

When there is a crisis make new rules, and repeat the whole cycle.


Regarding banks lending each other money and other ways of magic money
http://www.bis.org/statistics/otcder/dt1920a.pdf

Table 19: Amounts outstanding of over-the-counter (OTC) derivatives
By risk category and instrument
In billions of US dollars

Notional amounts outstanding
Jun 2011

707,569

just in case you missed that

$ 707,569 Billion


That's €100,000 per person on this planet

That's more than the DOUBLE the annual income of the poorest 99% of the worlds population
http://www.globalrichlist.com/how.html [info is out of date but not that much]

No matter what way you look at it lots of middlemen will get a cut on that.
Just 2% of that figure would represent the GDP of the USA. http://www.usgovernmentrevenue.com/

So a screwup in the value of outstanding derivatives could wipe out major economies.


The EU proposed transaction tax would drastically reduce such over extending.

Oh and that was Table 19, there are others
http://www.bis.org/statistics/index.htm


Oh yeah regarding the use of the word derivatives I can't say I've ever seen Economists using advanced mathematics. Certainly not in the way that scientists and engineers use to model the world,, where you must throw away the theory if it doesn't match observations.

When this was first demonstrated people thought it would be a joke, but it actually worked well enough to be of practical use. Which says a lot about how well economists understood the economy.
http://en.wikipedia.org/wiki/MONIAC_Computer

The MONIAC was approximately 2 m high, 1.2 m wide and almost 1 m deep, and consisted of a series of transparent plastic tanks and pipes which were fastened to a wooden board. Each tank represented some aspect of the UK national economy and the flow of money around the economy was illustrated by coloured water.

K-9

UsernameInUse wrote: »

So you're telling us that there are no right or wrong answers in economics as to what constitutes sound economic policy?

You've completely lost the plot.

It's pretty simple, southsiderosie is saying that the present policies that you call Keynesian, aren't, same as Ron Paul supporters will say it wasn't neo-liberalism that got us into the mess. Both of you are right, but people will still go on hating Keynesian policies despite this being explained to them.