Wednesday, February 13, 2008

Economic Circulation Debate

The following is a debate conducted via comments. The link to the post on can be found her.

Input would be apreciated.

I disagree on a critical point. A healthy economy is not defined by the quantity of money, but neither is it defined by increased velocity. Look at some collapsing economies in history where inflation is the culpurit. High velocity is almost always present as people try to get rid of the hot potato - the dollar - as quickly as possible.

That hints at what is fundamentally wrong with your idea. Increased velocity is not the answer to create a healthy economy. That suggests that people should be spending as much money as possible as quickly as possible. And that's exactly what's gotten our economy into it's current state of turmoil.

Inflation simply means today your labor hour can buy less then it did yesterday. Inflation was not always a bad thing. This model is a snapshot. In the past as Inflation presented itself, it was corrected by a slowing of the flow. This model doesn't break down the effect of credit. The pools of the wealthy are made up of credit assets. The top 4 paid CEO's in past years have been those of lending institutions. Spending of money that we don't have that has gotten our us into the situation it is in.

Actually, that's not what inflation is. Inflation is an increase in the money supply. This in turn forces prices up, because people demand more dollars for their goods and services as the amount of dollars increases.I do agree that spending money we don't have has been the cause of our problems. But the way to fix it is not spend more. People should tighten up their spending and pay their debts. This WILL cause a recession. But a recession is necessary to clean out our system.

Original disagreement: Spending money as fast as we can is not the way out of this mess. I and our legislators both disagree with you. Odd occurrence that I agree with them. I disagree with how they plan on getting that money into the system. Nobody talks about where the "economic surge" money is comming from. Printing $150 billion is wrong. Taxing rich is wrong. Adjusting the way workers are compensated is more American.

"Adjusting the way workers are compensated" is just a euphemistic description of a socialist system, where the government tries to engineer the economic system. Which, by the way, never works out right. Also, I think you need to seriously examine your velocity theory. It's fundamentally flawed.

Then we are already "socialist" because we have minimum wage, anti-monopoly laws in effect. We don't have to pay the owners of the road and help comes when we call. Socialism suggests community control of the all assets. Free enterprise democracies the government doesn't control the assets, it just sets the rules. The way out our situation is to spend real money as fast as we can. Right now 60% of us don't have any. It is impossible to have the American dream right now without financing it.

spending= jobs= spending= jobs. savings or paying off debt is good for the individual, bad for the system. A minimum percentage wage is a way to correct a flaw in the system that would be symbiotic to our economic rules. We all want TV's, dependable transportation, healthy educated family members, vacations to Disney land, ect. That includes employees of RCA, schools and Disney. Bill Gates doesn't need anymore. who is going to employ these people if we don't spend. Have other sugestions?

The problem is, you're oversimplifying the economy. You're trying to describe the economy as a machine. It's not. Think of it instead as an ecology - like a rainforest. You cannot control how an ecology works. Scientists have tried to do that with Biosphere 2 and it failed miserably. It fails just as miserably with the ecology of the economy.Are we in a system with socialist leanings? Absolutely. And we need to fix it ASAP - not continue it by trying to manage the distribution of wealth.

You are suggesting taking money from one place and putting it in another, assuming that it will be put to better use there. But look at the effects that will cause.That money has to come from somewhere - and when you take it from Group A and give it to Group B, Group A will no longer be able to use that money. They won't be able to spend it or invest it to strengthen the economy.And don't get me wrong. Spending is necessary. But the cure for a spending addiction is NOT to spend faster.

I disagree, it is a machine. The economy was created by man, the ecology was not. The economy can not be controlled because we are still using local agricultural economy based tools to control a industrial/ service based global economy. Welfare, taxes, and supply side economics have little and unpredictable influence. While these elements of socialism are counter productive, all non-violent societies must have socialistic elements to keep from collapsing into Darwinistic natural law.

The declaration of independence that our founders used to inspire men to give their life contains, " among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men..." The preamble of the constitution outline the government claiming responsibility for equal welfare to all its people. These are very socialistic statements. If the government didn't vow propagate fairness it could never retain the loyalty of the whole community.

Not suggesting the government take money from anybody. Buying power? Yes. I am simply imply that the government implement a policy that would close the disparity gap revalue the dollar. If group "A" has all of the electronics, cars, furniture, and housing space they need, they are not spending that money. Money not spent means work not done. If group "B" is empowered by deflation then they will buy the things group "A" doesn't need. In most cases group "A" ends up with the cash again anyway.

I'm confused... If the government is taking away buying power, how is it not taking away money? Maybe I'm missing something...Again, I think you're oversimplifying the situation and the economy as a whole. I know I mentioned "group A" and "group B" - but there is no clear division like that. I used those terms because those were the terms you were communicating in, but the fact of the matter is, there is no "group A" and there is no "group B."

Economic force on the bottom by increasing the minimum wage, buying power is taken from the top, though the tops wages remain steady. Good news; every small loss at the top is a huge boost to the bottom. Bad news: when minimum wage is increased, a period of economic adjustment occurs, the bottom end of the income ends up back to where they were, if not worse off. A term known as wage disparity. "Class" breakdown is determined by this figure.

An approach that raises buying power and is so effective at the bottom while holding the top wage earners to an indirect effect is the only way out of the current crisis. In 2007 Apple's company wage disparity rating was about .0032%.That is the difference of it's CEO and it's janitor at $10 p/hr. an increase to .005% = about $12,000 increase for the janitor. Huge to the janitor, nothing to the CEO. Want to give the CEO a million dollar raise? Got to give the janitor a $50 yearly raise.

There is an "A" and a "B". "A" = those who can afford to buy the things they need to pursue the dream with out credit. Group "B" is made up of those who's only way out is to risk the credit game. Group "A" has all of their basic and extended basic needs. They don't want or need more TV's cars, housing, leisure products."B" lives paycheck to paycheck. Just one major set back away from being belly up. The balance between keeping the family happy and keeping them healthy is often a tough choice.

Sure, you could say that "group A" includes the "haves" and "group B" includes the have-nots, but that distinction is so impractical that it ought to be left in Sherwood Forest for Robin Hood and his Merry Men to deal with. The problem is, the economy is a complex thing. I know you say that it is like a machine, since it is created by man - but I would argue that it really isn't created by man. I personally that God has put it into place and man uses it like all of God's other creations.

Of course, you may not believe in God, but it is still a stretch to compare the economy to a machine - subject to man's constant tinkering. A carefully balanced organism is a far more apt description.

And I have to disagree adamantly about the founding documents supporting - even to a small level - socialism. In the Declaration of Independance, right after the part about the endowment of certain unalienable rights (which you quoted), it says that the government's job is to secure these RIGHTS. It doesn't say that the government should provide for them. As Will Smith said so well in The Pursuit of Happyness, happiness is something that has to be pursued. The government can't give it to us.

Socialism - a broad array of ideologies with the goal of a socio-economic system in which property and the distribution of wealth are subject to control by the community. This screams, "by the people for the people." You can not disconnect the fact that the instant the government says it is going to enforce the will of the people to govern common shared resources evenly. Those resources include protection of rights. if you make it a "representative democracy" you are knee deep in socialism.

Remember a pure democracy the government does only the will of the majority vote. If the majority says, "kill the minority." Pure democracy government must do the will of the majority. Any intervening factor introduces a leftward movement of the needle. The senate was defiantly a socialistic idea. Your state no matter how big or small, in area or population gets an equal vote in the table. Rhode Island has just as much power in the senate as California. That is darn near a communistic idea.

You can spend up to 12 years getting a doctorate in which you study how different adjustments effect the economy.Designing an car is a collaboration. The body designers do things only to find the engine placement won't allow the arrangement. A discussion and then a correction in plans occur. So it is with the economy. There are so many forces that governments manipulate, never quite sure how it is going to fit into the system. Man has only two options with an organism. Kill it, or let it live.

First, for perspective, I am probably the worlds only Christian Agnostic. I believe Jesus existed. His words are my master and my teacher. If the world followed his advice we could be using our technology expanding too other planets and not killing each other. But as for who his father is? We depart there. I have always said that if I was an apostle I would have been Thomas who needed to touch Christ's wounds upon resurrection. Jesus was a Hippie, and heaven a big commune. No money needed.

Jesus was once asked about paying taxes that seemed unfair. In Mathew 15-22 he clearly states, "Give me a coin. Whose image and signature is on it?" "Creaser" they replied. Render therefore unto Caesar the things which be Caesar's, and unto God the things which be God's. Every religion that is dominate functional regions of the world, have prophets who are not concerned with the economics of men. It is "the root of all evil". Only man can create such vile inspiration for greed.

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