The Treasury has decided to market its first new product in 15 years: Floating-Rate Notes. The newly conceived-of notes are described as both a haven and an investment, as the interest paid on these notes will reset periodically to match prevailing rates measured by a market index; the notes will also supposedly have a maturity of two years. This move comes as one hoping to bring more demand back to buying government bonds.

In the later 2000’s, it became evident that foreign holdings of U.S. Treasuries had fallen greatly; investors were staying away from the long-term bonds and, therefor, the U.S. Dollar. The Federal Reserve temporarily remedied the situation by buying long-term bonds from the Treasury (and a lot of them) with the Quantitative Easing programs. The Treasury has now come to a point where they are trying to figure out how to mitigate such a problem in the future by attracting investors again, but the financial condition of the U.S. Government may have reached a point of no return. The current U.S. bond bubble will burst, and when it does the government will print its way out of matured obligations, will monetize the debt further, and hyperinflate the economy.

Even if the crisis at hand is avoided, there is a major downside to these new Treasuries: it could leave more of a burden for taxpayers. Given the unlikely circumstance that the U.S. Economy makes a long-term recovery, the interest to be paid on these notes will be on the rise. Already the government is having trouble raising the money to pay off its current obligations (and ultimately it will fail unless debt is liquidated immediately), but it will now be required to gain more in revenues to pay off its investors.

talkstraight:

…So maybe one of you smart people can explain this to me.

Since, theoretically, everyone is now going to be required to purchase health insurance, but there hasn’t been an increase in health insurance providers to cover the soon-to-be huge surge in customers, what’s to prevent the insurance providers from raising their rates exorbitantly?

I mean, isn’t that what supply and demand is all about?  We’re about to have a ginormous demand for health insurance but a limited amount of suppliers sooooo…massive price raising?

Maybe I’m wrong. I don’t know.

Think about when states required all drivers to purchase car insurance before getting on the road? It’s obviously not as widespread (not everyone drives) but premiums did go up.

So you’re exactly right: Health insurance companies will make a lot more money thanks to this Act. Now the argument against this point would be to point out the fact that the Patient Protection and Affordable Care Act stipulates that insurers spend 80% of premiums on medical care.

The problem with that, as an argument, is that now that everyone will be required to have health insurance, chances are the demand for medical supplies will greatly increase, as will the demand for doctors. The demand for everything in the medical industry will be on the rise, therefore pushing up premiums and allowing for the insurer’s 20% to grow probably significantly. 

More and more money is going to be tied up in the medical industry (just like when Medicare/Medicaid were introduced to the market) which will unfortunately effect the rest of the economy poorly and leave the middle-class more strapped for cash.

transhumanisticpanspermia:

In fact, welfare can help it greatly.

Capitalism requires some amount of consistent unemployment, so that labor remains competitive. It avoids scenarios where the workforce becomes disillusioned with the “community benefits” and slows down, but there’s no disincentive against slowing down because there’s more demand for labor than supply. This creates a snowball effect of more and more inefficient labor causing less production causing less community benefits causing more disillusionment causing more inefficient labor.

A small contingent of unemployment ensures that there remains an incentive to do well at one’s job. However, that doesn’t mean that these people have to live in squalor or lose opportunity. After all, it’s not their fault, the system needs them to be unemployed to maintain society. You want a competitive workforce, so by educating and training the unemployed, you ensure a degree of turnover between rising unemployed and less efficient employed. By guaranteeing a basic standard of living, you ensure that the unemployed are at least able to be happy, and to advance. The only thing you have to do is make sure there’s some incentive to return to or enter employment; this can be engineered through a high minimum wage, special non-essential benefits for the employed (could be anything, for example privileged entertainment [obviously this is just a “tier” of entertainment, it’s not like your’re going to deprive the poor of all entertainment]), or even cultural stigma (if the system is ingrained into culture, which can take time.)

Moral of the story: welfare in capitalism both patches up an unfortunate necessity, and helps the system by producing a happy populus.

This is generally the modern day Capitalist system but is by no means Free-Market Capitalism. This is fairly clear to you, I’m sure. 

The primary case against Welfarism and the Minimum Wage is not aimed at leeches and is not meant to institute a policy that leads people to “live in squalor”; instead it evaluates the negative economic repercussions that these policies entail.

The first of these that come to mind is Inflation. Reality shows that with an increase production costs (such as minimum wage), we will witness an increase in the velocity of money, resulting in an increase in the general price level. New Keynesians may refer to this as Cost-Push inflation. It does exist.

Welfarism in general may also inflate the markets with artificial demand, especially depending on the types of programs that are set in place (do these include access to credit with low rates and insurance?). In whatever the case, we would witness more price inflation and a crowding out of markets (as resources will be allocated to where the market may not need it most).

The idea obviously has good-intentions and a certain amount of validity, but it can be self-defeating and destructive to a society, rather than helpful.

banefulbastion replied to your post: “The reason I side with capitalism is because it’s, in my view, far more efficient and more innovative as well.” Typical fucking capitalist. Efficiency and entrepreneurship is what you desire most out of society? You know what’s really efficient? Slavery. Where do we draw the line? Lolbertarians.

Here’s one way to look at it: voluntary communism can occur within a total market “an-cap” system. The reverse - an-cap societies within a communist superstructure - cannot. That simple test tells us which is more restrictive.

Thank you for saying this. And you know, I’ve said this for a while now. While I am not an anarcho-capitalist, I see the possibility of, even in a Minarchy, collectivist groups forming communes. 

I’d rather you have the freedom to live in a commune collectively (which you really don’t have the freedom to do so right now) than impose the use of that freedom to prevent those wishing to voluntarily participate in the Capitalist system.

I think a system like that would allow for a much evolutionary nature of society. Shane Morris was talking about how he wants money to just go out of existence. Personally, I am against this; in fact I think it to be impossible and a regression. And I am certainly against the forcing of this. But if we gain the freedom for societies to evolve and decide this for themselves, then so be it. And if it extends to everyone within our borders? Then so be it.

Actually, slavery is pretty inefficient. You would realize this if you would take the time to understand free-markets. The line is drawn at the intrusion of every individual’s negative liberties. Because, empirically, that is where inefficiency has begun. 

You should really learn to do some research, Anon. You know why I respect your world view? Because I realize I need to show humility in the face of a debate over it. I realize that geniuses have come up with these ideas and truly truly had the best interests of the world at heart. I think you can take a lesson from me. How about, instead of walking into a discussion guns blazing and cursing, you engage in an intellectual discussion.

Who knows? You might learn something! And that would be good, because it seems you have learned very little.

I grew up with two older siblings that would always make me feel very belittled for my age; so to compensate, I started to look a lot into politics. It’s all the adults on my dad’s side of the family would talk about! They’re Italian, of course it’s all they talked about. I was really a know-it-all kid, just to get “an in” with the adults.

I always aligned myself with the liberals on social issues, like my father, and just kind of went with the flow of the Democratic Party. I kept spewing rhetoric about this-or-that and getting into conversations with people on topics I knew very very little about.

So to compensate for that, I looked into even more. A radio talk-show host in my area (his name was Irv Homer) simply said a bunch of stuff that plain-and-simple made sense. Thus, I started listening to him and became progressively more liberal. 

That continued really on the same path until I wanted be an an even bigger know-it-all prick. That meant that I needed to know about economics. Naturally the first book I read (recommended by a pretty liberal teacher) was Keynes’ General Theory. When I read his stuff, it really clicked! I was proud in my “knowledge” on how to “stabilize markets.” My next step for “knowledge” was finding people to discuss this with on forums and Yahoo! Answers.

After I heard some arguments against Keynesian economics, I thought that anyone who opposed it was just an idiot. So I had to read the other view (at the time I assumed there was only one other view, pfff). How else can you beat the other side if you don’t know them? So I read Rothbard and a book called The Great Supercycle by David Skarica. Well to be honest, that “clicked” with me too. So I really was unsure about my economic views.

Note: That book by Skarica is still one of my favorites. It’s simple and powerful. Go read it. My fellow Austrian’s should like it, as it has some strong anti-Fed sentiments. 

I kept going back and forth between economic arguments between folks like Friedman and Hayek and Tobin. I even read some of Krugman’s articles! Along the way I continued to learn more and more about more than a few theories on economic policy, and for a while now I’ve been pretty set on my views. I’m obviously no expert, but after reading multiple refutations, what makes the most sense to me is Austrian economics.

Right now I’m in the process of learning, way way way in-depth, Neoclassical Economics in order to prove my Austrian views through Positivism. That’s my “progression state” at the moment, but I believe I’m at, and have been at for some time now, my final conclusion.

I apologize, again, for the horrible word choice. I understand that economic theory can never be proven. I tried communicating that in my post when I said “economics is rooted in sociology.” You will never prove sociology. But with econometrics I can prevent the Austrian’s theory’s falsification even further, which is my ultimate goal.

andrewfriedle:

thoseboringpolitics:

You know, my wording before was poor. It’s not that I view it as flawed, it’s that I view Praxeology as inferior to econometrics/a Positivist approach to economic theory. Praxeology entails a much larger proportion of psychology/sociology to solid mathematics, whereas the use of Positivism ensures a much stronger argument on behalf of really any theory. But make no mistake, I’m not foolish enough to say that the use of econometrics involves no psychology. Economic theory as a whole is rooted in sociology, so to say that Positivism is 100% objective would be disingenuous at best.

Econometrics is not economic theory; it is used as a tool to test economic theory. The entire point of Austrian economics is to provide a story to the mathematics. I do not believe anyone can be a good Economics without both the mathematical tools to prove the theory and then explain intuitively why the theory makes sense. Neoclassical economics provides all the mathematical tools while Austrian economics provides the story.

In order for Austrians to be able to compete with mainstream economics, it needs to enter the same playing field. You’re not going to win a baseball game inside of an arena while your opponent is in the outfield of a stadium. Praxeology, I feel, holds the Austrian school down to an “Economics 101” basis. It uses sound logic to reach its conclusions, but is seldom justified by equations. There are certain aspects of Austrian economics that do make use of “facts and figures” (the first one coming to mind is Roger Garrison’s modeling of the Business Cycle Theory), but it is far too infrequent for me to be comfortable with.

Austrians aren’t competing with mainstream economics, they are providing the story for mainstream economics. For example, I can mathematically prove to you why demand curves slope downward, but I can also logically step by step explain from the Axiom of Human Action why demand curves slope downward. You cannot, in my opinion, be a good economist without doing both.

Where I will give merit to Praxeology is Hayek’s and Mises’ “Economic Calculation Problem”. It’s true that central planners will never have the means of collecting perfect market information to act on (even though the market will always abide by these unknown variables), but it is also true that we will know the exact numbers of policy changes via government. And it is very possible the plot out, through econometrics, the known policy changes and prove why they could be beneficial or detrimental.

What you’re referring to are Input Output models of economics. While you’re right that they can provide useful information, this information needs to be take with a huge grain of salt. Really, the only thing you can learn from Input Output models is how a system changes as a response to some initial impulse. They cannot be used to plan an economy and should not be. 

I’ve seen some books that have justified Austrian theory in a Neoclassical, even a Keynesian, framework, and I think it will be most beneficial to soak in those theories thoroughly. Yes, even if it means possibly swallowing the dreadful Rational Expectations Hypothesis in certain cases. In certain cases only. Possibly. Who knows? My purpose is to learn more about the reasoning behind the theory in opposition to Praxeology. It’s going to bring me to the same conclusions, but maybe bring me to a different reasoning of why.

It’s good that you’re exploring other options and other theories. Keep at it. My personal goal has always been to reconcile Austrian economics an Neoclassical economics. In undergraduate I use to tell people I wanted to win the Nobel Prize in Economics for my work in Austrian Mathematics! It seems that I might have some competition!

So, let me take a minute and add the following. Some take Economics to be a science, I take Economics to be a way of thinking. Critics are right that certain Economic phenomenon can be shown to hold or not hold empirically, but this is a completely naive understanding of Economics in the Austrian School of thought. This view of economics is the entire branch of Econometrics and is the use of statistics to show casual relations between certain variables of interest. It has it’s role in understanding certain human behavior, but it is not Economics in the strictest sense.

I agree with Hayek because his way of thinking about the world is irrefutable; you cannot argue it and you cannot deny it. All you can say is ‘There is no proof that Hayek is right’ which is exactly what you’re saying. What you fail to realize is that you must use your own faculties of reason to think like an Economist and to think like Hayek if you wish to understand if he is right.There is no empirical proof that human action is goal oriented but it is an argument of logic and reason.

This is something many Austrian Economists, particularly Mises argued passionately about was the empiricism of Economics. Mises denied the use of any mathematics or econometrics to talk about Human Action since humans cannot be reduced to a single mathematical variable. Many Neo-Austrians, I guess you could call us, accept that Mathematical rigor is good in understanding Economics and can be used in conjunction with logical arguments. Mathematics is a tool just as much as reason and logic.

As a note: I am aware that Econometrics is just another methodology. I never meant to imply that I viewed it as a theory itself.  

What you said about needing to use both, I think, is true. Though I think one who “tells the story” (with Praxeology) can do so without econometrics, while the Positivist will be required to use both his mathematical and logical tools. To me, it’s progression rather than a “two-sides-of-the-same-coin” deal.

I understand and agree with what you say about Input Output economics. I, again, did not mean to imply we should plan an economy based off of those models; however, the models can be used to show that any amount of planning would be damaging. That’s what I primarily appreciate about the use of Econometrics. 

My goal, as well, is to reconcile the Austrian and Neoclassical theories. Well, more appropriately, I’d deem my goal more along the lines of being able to prove the Austrian case inside of the Neoclassical framework. More specifically, the Austrian Business Cycle Theory (as the Monetarists and Neoclassicals see no correlation between the spur in artificial investment and the subsequent boom) is what I’d like to prove. Believe me: I 100% support Hayek’s rationale and am in agreement with it, but I do think there are certain times that Human Action can be put into equations. And as much as the combination of empirical evidence and sound logic/reason can back an argument, it will always be vulnerable without the math to back it up. I know that the ABCT is true through the “story telling” aspect of economics; it’s just a matter of proving it to others in disagreement.

Andrew, from what I see, we are in agreement. Obviously you have an expertise in the subject that will take me years to match, but we have the same ideas. Hopefully you will be renowned one day for your work in the “Neo-Austrian School”. And, hopefully, I will be the Hayek to your Mises and build off the work you will prove. We have a very common goal, you and I. I quite enjoy that.

You know, my wording before was poor. It’s not that I view it as flawed, it’s that I view Praxeology as inferior to econometrics/a Positivist approach to economic theory. Praxeology entails a much larger proportion of psychology/sociology to solid mathematics, whereas the use of Positivism ensures a much stronger argument on behalf of really any theory. But make no mistake, I’m not foolish enough to say that the use of econometrics involves no psychology. Economic theory as a whole is rooted in sociology, so to say that Positivism is 100% objective would be disingenuous at best.

In order for Austrians to be able to compete with mainstream economics, it needs to enter the same playing field. You’re not going to win a baseball game inside of an arena while your opponent is in the outfield of a stadium. Praxeology, I feel, holds the Austrian school down to an “Economics 101” basis. It uses sound logic to reach its conclusions, but is seldom justified by equations. There are certain aspects of Austrian economics that do make use of “facts and figures” (the first one coming to mind is Roger Garrison’s modeling of the Business Cycle Theory), but it is far too infrequent for me to be comfortable with.

Where I will give merit to Praxeology is Hayek’s and Mises’ “Economic Calculation Problem”. It’s true that central planners will never have the means of collecting perfect market information to act on (even though the market will always abide by these unknown variables), but it is also true that we will know the exact numbers of policy changes via government. And it is very possible the plot out, through econometrics, the known policy changes and prove why they could be beneficial or detrimental.

I’ve seen some books that have justified Austrian theory in a Neoclassical, even a Keynesian, framework, and I think it will be most beneficial to soak in those theories thoroughly. Yes, even if it means possibly swallowing the dreadful Rational Expectations Hypothesis in certain cases. In certain cases only. Possibly. Who knows? My purpose is to learn more about the reasoning behind the theory in opposition to Praxeology. It’s going to bring me to the same conclusions, but maybe bring me to a different reasoning of why.

thoseboringpolitics:

Well… looks like I’ll have to do this again. For any of you who didn’t notice before, I made a post debunking a picture regarding Republicans and their spending habits as well as one regarding Obama’s accumulated debt. It’s a shame that these thoughtless pictures won’t stop. Let’s, once again, analyze these numbers.

From Clinton’s inauguration date to the end of his presidency, the Dow Jones Industrial Average rose from 3,256.81 to 10,587.59. The percentage increase under Clinton was pretty much what the picture suggests: it’s about 225%. This boom occurred chiefly because of loose monetary policy in the late 80’s (and later in the mid 90’s) by Alan Greenspan; it was the perfect breeding ground for the NASDAQ bubble (which carried the Dow up with it). Though when the bust came, the NASDAQ felt most of it, as the Dow only dropped to about 8,000. 

Now if we truly want to credit someone with that boom, it should be to Alan Greenspan: the man in charge of the money. Not Bill Clinton. But hey, I’ll play it both sides. Let’s go ahead and credit Mr. Clinton with that 1990’s boom. Wouldn’t he then be the reason the economy busts? 

This is where we bring in George W. Bush. Here comes in Mr. Bush to a still-booming economy that is on the brink. In the first year of Bush’s presidency, the burst of the Dot-com Bubble came, and we experienced the Terrorist Attacks on 9/11.

So, let me tackle 9/11 real quick. 9/11’s effects on the stock-market was what is known as a “real shock”. There was no real fiscal reasoning behind its drop there; it was just investors becoming afraid about more attacks and their money. No one can pin this blame on George W. Bush. At all. Al-Qaeda and its friends hated the United States since Gerald Ford. It actually goes even further than that. Then Clinton instigated Bin-Laden in 1993 with the Gulf War as well! So the actions of multiple presidents brought attacks on our soil, and it happened to be within Bush’s very first year. 

Now people really love to say “Obama inherited Bush’s recession!” It’s true. But it works both ways. Bush inherited Clinton’s busting economy. So this in combination with the real shock of 9/11 sunk the economy hard. How can one fault the blame to him for that? You can’t. The economy was near it’s then-all-time-high when Bush entered office, and that’s tough to recoup after someone else’s economy busts.

The graph is right on it’s numbers here, too. From inauguration to the very end, the market changed from 10,587.59 to 8,077.56. Which is a 23% change (but in the negative). Like I said I’ll play it both ways: the massive boom under Bush (and the inevitable crash) must be blamed on Alan Greenspan. His monetary policy allowed for the Housing Bubble and the bust that followed. Bush doesn’t deserve that blame so much. In fact, many blame Clinton for the Housing Bubble (because of his signing of the Gramm-Leach-Bliley Act). But I don’t really fault him for that. 

Moving on, let’s say it was Bush’s fault. Bush tried to recover from Clinton’s bust. And he did (if you credit him with it). But the issue here is that President Obama entered office at the low of the stock-market in 2009. So of course it’s going to be easier to recoup 56% of an economy on the brink of Depression. Obama just regained what was already lost not on his time. 

My summation is this: The numbers on this are correct. But are we really going to ignore the actions taken in each man’s presidency and the timing of stock changes? Clinton’s economy busted at the start of Bush, and Bush’s economy felt 9/11 on top of that! Then, very unlike Bush, Obama comes in at the very low of the recession. Of course it’s going to look like Bush is the “baddie”! And, by my view, the “recovery” isn’t Obama’s doing, it’s Bernanke’s. And it’s just going to deliver us another bust very soon. As always.

For my 100 new followers. These posts are what I usually do besides arguing for libertarianism, because I really do love tackling all fallacies. And if you search through my posts you will probably see many denouncing militant anything. 

I said this about a million times before and I’ll say it again: If “the other side” actually believed what we said they believed, then no one would believe it. As in, try to have a thorough and complete understanding of opposing ideologies before you argue against them. And when you argue against them, you best be showing humility. Geniuses compose these ideologies and can surely kick a Tumblogger’s ass in a debate, so don’t act like everything you don’t agree with is idiotic. 

In summation: I debunk fallacies, regardless of whether the proposed argument is for or against “my side”; I will always show respect and empathy for your ideas, because I understand that a lot of thought and reason went into them; I generally expect the same amount of humility from other people, and not necessarily to me, but to all others; I will argue on behalf of libertarianism when I find a good debate/idea to post. 

So there you have it, I hope you all enjoy your stay! Ask box is open to all for any questions, comments, insults, debates, etc.