Politics (formerly Election 2012)

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Re: Politics (formerly Election 2012)

Postby Sabindeus » Mon Sep 09, 2013 2:41 pm

Klaudandus wrote:I never understood the blatant need of the US to play World Police.


Paladin answer: Those with power have a moral obligation to use that power to protect the innocent and make the world a better place.

The real answer is probably a lot more complicated, but that's at least the fundamental underlying principle.
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Re: Politics (formerly Election 2012)

Postby Fridmarr » Mon Sep 09, 2013 2:49 pm

Paxen wrote:I stand by my point. A governement can spend to get a macroeconomic effect which can be beneficial, while a household can't. They operate at totally different levels, so using analogies between a household economy and fiscal policy can be very misleading, even more than analogies usually are.

The point is that a government can effectively throw money away and get a positive result, which makes no sense whatsoever if you try to compare it to a household economy.


Standing by an incorrect assertion doesn't make it correct.  That a household can spend money to increase it's income is irrefutably true.  No one suggested that the spending of a single household will affect the economy of the entire country, that seems to be a ridiculous deflection to hide behind your incorrect statement.
 
That said, you are further incorrect to say that the government can just throw money away and still result in a net positive.  By and large, it can not, otherwise every government throughout history would have been exceedingly wealthy. 
 
The government gets money by taking it from the people who earned it or by borrowing it at interest and eventually paying it back by taking money from the people that earned it.  On its own, taking money from the citizenry is a net negative and depresses economic activity.  Now if that money is spent wisely then the government can certainly enable people to generate more wealth, thereby creating a higher tax base and increased income.  However, if it is just thrown away, then there is no increase in wealth (or not enough of it) to offset the original negative.
 
The notion that every dollar spent by government is a net positive, is demonstrably false.  Otherwise government wealth would grow ad nauseum at an ever increasing rate.  It's simply impossible.
 
 
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Re: Politics (formerly Election 2012)

Postby Brekkie » Sat Sep 14, 2013 2:16 pm

Fridmarr,

The counter-argument to that is the concept of deliberately induced, slow, predictable inflation.

If the Government prints money at a slow enough rate (relative to the overall size of the monetary supply) that it doesn't cause a price shock, you CAN effectively get increased economic activity for nothing.

Inflation favors people who owe debt (which generally means young people, and middle class working people). It does this by making their debt less large in absolute terms, which makes it easier to pay off. This increases young people's freedom of movement because they have the expectation that inflation will keep their debt manageable and prevent them from being in debt servitude for life.

It harms people who have a large net worth (generally old, wealthy people; "the 1%"). It does this because they are the ones whose money is being loaned. Inflation forces you to DO something with your money if you want to maintain your fortune. You have to continue generating wealth or your riches will slowly inflate away their value. This is not a big deal for the non-rich, because to a Middle Class net worth, the effects of inflation are fairly negligible. Middle Class families aren't living carefree lives off of their massive stock portfolios; whatever money they have to invest is purely a long-term strategy. It is more effective for a Middle Class worker to just put in a little bit of overtime than quibble over whether inflation is 3% or 2%.

This is pretty much THE reason why the US (and other currencies) originally came off the gold standard. Rich people wanted to keep the gold standard, because it would ensure they remained wealthy without effort unless they somehow squandered their money. Farmers and other regular people (who were burdened by debt) wanted to get rid of the gold standard (or prior to that, make dollars exchangeable for silver too, which had the same inflationary effect).


You are absolutely right about government spending needing to take ROI into account.
In the context of stimulus spending, this is referred to as a "multiplier".
Depending on whether the money is coming from and what it is being used on, it will have an economic multiplier of greater than or less than 1.0. A type of spending whose multiplier is greater than 1.0 generates more economic activity than a scenario where the money wasn't taxed in the first place. A payroll tax break is a good example of a stimulus that has a positive multiplier, because if working people get a little bit more money broken up in small chunks over time, they tend to spend it.
Conversely, a form of stimulus whose multiplier is less than one is effectively a bad thing for the economy, because it generates less economic activity than it cost. A good example of this "bad" form of stimulus would be big income tax breaks for the wealthy, because when wealthy people get to keep more money, they generally don't spend it, they throw it in their mutual fund, which generates little added economic activity.
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Re: Politics (formerly Election 2012)

Postby Brekkie » Sat Sep 14, 2013 2:28 pm

Klaudandus wrote:
Fetzie wrote:How many billions of dollars has the USAF wasted on the joint strike fighter (that will be ready for the scrap heap before the first one rolls off the production line)? That is the kind of project that needs to be hit by the sequester, not school funding or public defenders.


Completely agreed. Specially since the pentagon had to lower the bar so the plane would meet their requirements.
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People give Defense technology programs a lot of flak (no pun intended) for coming in behind schedule and over-budget, but that isn't entirely fair.

Keep in mind the context that these sort of programs are on the cutting edge of science and technology as we know it. They are often attempting to build things that have capabilities that have never existed before. There is a reason why Defense is a big driver of technological progress; they are constantly pushing the frontier of what the hardware is capable of.

That said, yes there is a lot of mismanagement and inefficiency in DoD acquisitions. At the end of the day though, the US military's technological sophistication is often a generation (or more) ahead of any other country in the world.
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Re: Politics (formerly Election 2012)

Postby Brekkie » Sat Sep 14, 2013 2:32 pm

Klaudandus wrote:Perhaps, but that hasnt stopped congress to get money from lobbyists for their campaigns and proclaim that their 150K a year is not enough salary for them, quickly forgetting that the avg household income is barely a tick over 50K, and that 1.5 million households live in extreme poverty, where they subsist on less than 2 dollars a day.


Yes, but these are also not average people. Most of them come from privilege, went to Ivy League schools, and have qualifications that would be getting them high 6+ figure salaries in the private sector. If Senator John Smith wasn't a senator, he'd be a CEO or an investment fund manager or the head of a law firm, not a blue collar worker making 50k.

So the opportunity cost of running for office is often large.

Also keep in mind that Congressmen have fairly modest budgets for travel and hiring staff. Giving a Congressman a larger salary enables them to potentially take an another staff aide to do research or for them to do some foreign travel, which helps them be better informed.
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Re: Politics (formerly Election 2012)

Postby Fridmarr » Mon Sep 16, 2013 6:28 pm

Brekkie wrote:Fridmarr,

The counter-argument to that is the concept of deliberately induced, slow, predictable inflation.
While true in an economic sense (I mean how else do you expect the US to pay back its massive debt? Inflate it away IMO) it's irrelevant to the discussion I was having. The ability to control currency (print money) was already called out as a difference between household and gov't economics. I don't think anyone disagrees with that. What I'm debating was only the notion that:
A). A household can not create income by spending money
and
B). That all that the government has to do to generate income is spend money even if they are essentially throwing it away.

Both of those are vastly different than implementing currency controls.

So given that, the rest of your post is pretty much moot as it isn't addressing any point I was arguing, however, you have some fundamental principles of economics completely wrong, and I think it's worth hashing them out.

Brekkie wrote:Inflation favors people who owe debt (which generally means young people, and middle class working people). It does this by making their debt less large in absolute terms, which makes it easier to pay off. This increases young people's freedom of movement because they have the expectation that inflation will keep their debt manageable and prevent them from being in debt servitude for life.

It harms people who have a large net worth (generally old, wealthy people; "the 1%"). It does this because they are the ones whose money is being loaned.

This is the first part (and it's based partially on the flawed conclusions of the second, but I'll get back to that) and I think our current situation is a pretty good indicator of how incorrect this is. Before I get into that though, generally speaking it's pretty much a universal truth that someone with more resources to take advantage of a situation will be more effective than someone with less resources. The flip side of that is also true. A person with more resources will better be able to mitigate a negative than a person with less. So there are very few things, aside from flat out redistributing resources, in which the the wealthy are adversely affected while the poor benefit.

The current situation, in which the Fed is doing just as you suggest with QE is good evidence. While it's true the wealthy are the loaners, they are also the asset holders, and assets increase in value along with inflation. Those assets vastly outperform the decrease in gains on the loans, and hell unless inflation surpasses their yield there (which controlled inflation would be close) they may still be gaining on loans too. Never mind the negatives on an increased cost of living and defined benefit vehicles like pensions that the middle class has to deal with that the wealthy couldn't care less about.

Now, direct evidence based on the current reality:
You can see that it's been the rich who have gained the most from QE policies (by far) http://www.cnbc.com/id/49031991
You can see how the rich have adjusted their investment strategy, away from lower yields http://www.cnbc.com/id/48914750
You can see that the net result of this has been a massive widening of income inequality http://finance.yahoo.com/news/richest-1 ... 35323.html

Now some other points I want to address:
Brekkie wrote:Inflation forces you to DO something with your money if you want to maintain your fortune...
because when wealthy people get to keep more money, they generally don't spend it, they throw it in their mutual fund, which generates little added economic activity.

You've mentioned this before, and I remember countering it briefly at least once, but it really needs to be hashed out, because it's a very flawed fundamental conclusion. Aside from the first part of that being exactly the opposite of reality (as I already illustrated), If you think that investing isn't DOing something with your money, then I'm not sure you understand what investing in a mutual fund actually means. It's not like gambling...your money doesn't go to a bookie who sits on it waiting for you to cash out either at a gain or loss based on speculation. A quick basic primer: http://useconomy.about.com/od/stocksand ... conomy.htm

In other words, money in a stock, mutual fund, financial security isn't doing nothing...far from it. That money is incredibly active, it's purchasing goods, building infrastructure, hiring workers, being loaned for all of the above, increasing personal income, generating tax revenue, etc. I mean how on earth do you expect that these folks make profits off of those investments? Wealth doesn't just materialize.

Now whether or not it's more effective than money taxed and spent by government is likely to start a holy war that I'm not at all interested in. You can argue that QE hasn't done much in improving the economic outlook for the middle class or that the stimulus given the costs that keep increasing with interest will ultimately be a net negative. The truth is that's a very loaded question with all sorts of apples/oranges comparisons. Both have their pluses and minuses. If I've said it once, I've said it a million times, everything has a price point and taxes are no different. But the idea that an income tax break, which doesn't qualify as spending money anyhow, (and since the bottom 47% don't pay income tax, you can't really give one to them) that includes the wealthy is necessarily a net negative because they invest that money is simply not true. Historical data shows that quite clearly.

Even the Obama administration didn't want to raise the historically low rates that the wealthy had been paying at first because of the depressing affect that would have, and he barely wanted increase it later and only to deal with short term budget issues (while padding their pockets with QE anyhow) not long term economic health. That's why QE is aimed almost exclusively at the investment community and why there's been inflation in the markets despite a still shaky economy.

More basic info:
http://www.ehow.com/info_7781396_effect ... t-gdp.html
http://www.ehow.com/info_10075518_gdp-a ... nding.html
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Re: Politics (formerly Election 2012)

Postby Brekkie » Tue Sep 17, 2013 11:56 am

What I'm debating was only the notion that:
A). A household can not create income by spending money
and
B). That all that the government has to do to generate income is spend money even if they are essentially throwing it away.


I agree with you on both these counts.

I think our current situation is a pretty good indicator of how incorrect this is.


QE is a terrible example, because the vehicle for injecting currency into the economy was by paying more than market value to buy junk bonds from bond-holders who got burned during the housing bubble. Guess who held all those bonds? The rich. From a macroeconomic point of view, it was essentially cash-for-clunkers for rich people.

If you think that investing isn't DOing something with your money, then I'm not sure you understand what investing in a mutual fund actually means. It's not like gambling...your money doesn't go to a bookie who sits on it waiting for you to cash out either at a gain or loss based on speculation.


I have a better understanding than you give me credit for. Some investment spurs growth, but not all. Much of it is just zero-sum winner-loser trading. Google doesn't hire extra employees on days when its stock is up 10 dollars a share and then fire them on days when it is down 10 dollars a share. Wealth is created when Apple invents the iPhone, not when Facebook does it's IPO. Big companies that pay dividends have stock as basically just a very sophisticated way of distributing profits.
Many ways of investing are even further removed from growth. Derivatives, for example, are just massive leveraging of the system of gambling on up and down ticks.
Mutual Funds are for the most part designed to track the performance of the economy as a whole, and so are just piggy-backing on growth that would have occurred anyway.

Don't get me wrong, it is good to have a stock market, for many reasons. But not all investment is enabling to growth (I argue that MOST isn't), that is a huge self-glorifying oversimplification.

Most growth comes about as a result of venture capitalism. IPOs are just successful wealth creators cashing in on value that already existed. Claiming that the purchasing of stock in an IPO is what enabled the company to be worth was it was worth is getting the causation backwards.

Even the Obama administration didn't want to raise the historically low rates that the wealthy had been paying at first because of the depressing affect that would have


Well yeah, taxes are depressive. Ideally you'd have zero taxes and spend infinite government money, but obviously that is unsustainable, so you have to find the sweet spot.
Taxes on the wealthy are just the LEAST damaging way you could raise revenue; as opposed to EVERY single alternative the GOP was proposing (i.e. raising taxes on everybody else, cutting important programs). So if you determine that revenue MUST be raised somehow, that's how to do it.
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Re: Politics (formerly Election 2012)

Postby Koatanga » Tue Sep 17, 2013 2:02 pm

The GOP has been, since the Reagan administration, quite fond of the theory that if you give tax breaks to the rich people and corporations, it will stimulate the economy through investment. Rich people make companies that hire people and create jobs - seems pretty logical. And it is logical - in a closed system.

The US is not a closed system. Given a depressed lending market in the US, the rich invest overseas where they can get a better return on their investment. Given a need to have something manufactured, US companies look overseas where labor costs are cheaper (classic example - see Sears and The Amazing Wrench).

So working against logic, tax breaks given to rich people and corporations means less domestic investment and fewer American jobs.

Government spending tends to keep money in the US - at least at the source. Government hires Big American Company to undertake a project, and BAC hires some US people to oversee the project. However, BAC often sub-contracts to foreign companies for manufacturing, which shoots the government spending in the foot. Labor-intensive government spending, such as on infrastructure (roads, buildings, hydro plants, fibre-optic networks), does hire Americans and keeps the money in America, which stimulates the American economy.

Military spending would seem to employ a lot of Americans, but in the end you don't have a useful asset such as you would with a hydro plant, rail system, or building. You have a bomb, or tank, or airplane which has no real domestic value and will hang around being a maintenance drain until it is eventually decommissioned and/or destroyed.
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Re: Politics (formerly Election 2012)

Postby Fridmarr » Tue Sep 17, 2013 9:28 pm

As I said, I'm not real interested in the holy war around different types of economic theories, but I think there are some objective points worth making and I'll leave this digression at that.

Brekkie wrote:QE is a terrible example, because the vehicle for injecting currency into the economy was by paying more than market value to buy junk bonds from bond-holders who got burned during the housing bubble. Guess who held all those bonds? The rich. From a macroeconomic point of view, it was essentially cash-for-clunkers for rich people.

QE is exactly what you cited, you may not like that particular implementation but it's still printing money for controlled inflation (or deflation avoidance). It also didn't buy junk bonds held by the wealthy, it was just a markup on the required reserve accounts that financial institutions have with the fed, and it took the "junk bonds" which was really a lot of the mortgage backed securities off their books. That the rich benefitted the most is an inevitability of printing more money.

Brekkie wrote:Google doesn't hire extra employees on days when its stock is up 10 dollars a share and then fire them on days when it is down 10 dollars a share.

Of course Google doesn't hire/fire workers as its stock price changes, unless it's an IPO or they've released more stock, they don't get any money from a stock transaction, but the person who sold the stock does, and if he sold it at a profit, so does the gov't. These transactions don't just generate economic activity, they are economic activity.

Brekkie wrote:Some investment spurs growth, but not all. Much of it is just zero-sum winner-loser trading.

The concept of zero sum game is absolute, something either is or is not. So given that, what I'm about to say is stupid, but that's never stopped me before. The stock market is about as non zero sum game as any economic principle there is, and that is a significant distinction. Take the basic transaction... I buy a stock for $10. I'm even, having spent $10 dollars to gain an item worth $10. I sell it a year later for $20 dollars and get $10 profit...where's the offsetting loss to zero that out? There isn't one. The person who bought it is even, losing $20 cash to gain a $20 asset. I'm up $10. From the gov't perspective, the profit that is taxed is damn near free money (as the gov't has very little cost in this arena respectively).

Brekkie wrote:Mutual Funds are for the most part designed to track the performance of the economy as a whole, and so are just piggy-backing on growth that would have occurred anyway.
This is an aside and inconsequential, but that's not at all accurate. Mutual funds are just a professionally managed group of equities that can be traded as a single unit. What a given fund's purpose is varies widely. The concept of "growth that would have occurred anyway" is nonsensical. Many people came to realize that in 2008.

Brekkie wrote:Claiming that the purchasing of stock in an IPO is what enabled the company to be worth was it was worth is getting the causation backwards.
Not every IPO is a Facebook, most go under the radar unless you are an insider. Many are companies looking to raise capital to invest back into the company for growth, while avoiding debt.

Koatanga wrote: The GOP has been, since the Reagan administration, quite fond of the theory that if you give tax breaks to the rich people and corporations, it will stimulate the economy through investment.
They cite Reagan because he was a Republican, but they also like to throw out JFK (who was a democrat) who also instituted massive tax cuts on the wealthy which resulted in significant economic growth.

Koatanga wrote:So working against logic, tax breaks given to rich people and corporations means less domestic investment and fewer American jobs.
That's just not feasible as a blanket statement. For instance, one of the effects of QE was a weakened dollar which brought a ton of foreign money to the markets. Beyond that though, it's a matter of degrees. The system doesn't have to be fully closed for that theory to work. It also matters what the tax rates are.

There's nothing magical about taxing the rich or the poor/middle class for that matter. Things work the same, but the rate at which you start to lose ROI just moves. Get below that sweetspot, and you're forgoing government income, go above that, and you're depressing the economy.

Koatanga wrote: Labor-intensive government spending, such as on infrastructure (roads, buildings, hydro plants, fibre-optic networks), does hire Americans and keeps the money in America, which stimulates the American economy.
It's very hard to imagine that investments in roads or buildings being anything but a negative. We aren't exactly short on either and they aren't free to maintain either. There are probably very few places where such investment would generate any real economic growth that isn't just cannibalized from elsewhere. However, more technological infrastructure investment (and maintenance) like your latter examples are long overdue. They get lip service sometimes...but that's about it.

Koatanga wrote:Military spending would seem to employ a lot of Americans, but in the end you don't have a useful asset such as you would with a hydro plant, rail system, or building. You have a bomb, or tank, or airplane which has no real domestic value and will hang around being a maintenance drain until it is eventually decommissioned and/or destroyed.
While I agree that military spending is much too high (and an inefficient vehicle for economic growth as you point out), there's a lot more to military spending than munitions, and there has been a lot of beneficial R&D that came out of it that would have otherwise been impractical to fund.
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Re: Politics (formerly Election 2012)

Postby Klaudandus » Tue Sep 17, 2013 9:57 pm

'cept the F35 and the Osprey as piece of shits, and a single one of those jets equals the operating costs of a school district for 2-3 years, depending on their size.
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Re: Politics (formerly Election 2012)

Postby Koatanga » Tue Sep 17, 2013 10:34 pm

R&D does have benefits, but those benefits come through manufacturing, or licensing to other companies to manufacture, both of which create foreign jobs, not domestic ones, since the US pretty much outsources everything it can.

There is a significant difference between giving upper class or corporate tax cuts, and giving middle or lower-class tax cuts. Someone who is at a subsistence income level does not have available money for anything but keeping his bills paid and food on the table. Give him more money and he's likely to spend it all, but he's likely to spend it on local things, apart from electronics and such that are manufactured overseas. But a night out to dinner, a concert, football game, etc. - all those are economy-stimulating activities.

Give a middle-class person some extra money and he may remodel the kitchen, put in a swimming pool, do some other home improvement, buy a better car, pay a chunk off the mortgage, etc. For the most part, and again excluding foreign electronics and autos, the money stays local.

Give a rich person extra money and it gets invested. A rich person doesn't have to wait for a tax cut to remodel the kitchen - if he wants it done, he just does it because he already has the money to do it. Any extra gets invested where it's profitable to invest. That may be the domestic economy, or it may be overseas, depending upon which gives the better return. With the US economy being so sluggish and dollar pretty much hanging on China's whim, the safe money is overseas.
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Re: Politics (formerly Election 2012)

Postby Fridmarr » Wed Sep 18, 2013 6:23 am

Well that money is still mostly being invested here. Yes we have some new investment going to BRIC, but overall we are also the biggest recipient of foreign investment in the world. Even if you count corporate investment the difference isn't problematic. Also, the profits are generally realized here so the effects are not necessarily negative anyhow.
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Re: Politics (formerly Election 2012)

Postby Koatanga » Wed Sep 18, 2013 1:33 pm

Fridmarr wrote:Well that money is still mostly being invested here. Yes we have some new investment going to BRIC, but overall we are also the biggest recipient of foreign investment in the world. Even if you count corporate investment the difference isn't problematic. Also, the profits are generally realized here so the effects are not necessarily negative anyhow.


Company pays China $1 for a widget that they on-sell to the consumer for $2. Consumer pays $2 for the item. Company shows a $1 profit. Country, however, shows a $1 loss, because of the money paid to China.

It doesn't matter of the profit is realized in the US if the cost of goods goes overseas. It's a negative effect on the economy.
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Re: Politics (formerly Election 2012)

Postby econ21 » Wed Sep 18, 2013 3:01 pm

Koatanga wrote:Company pays China $1 for a widget that they on-sell to the consumer for $2. Consumer pays $2 for the item. Company shows a $1 profit. Country, however, shows a $1 loss, because of the money paid to China.

It doesn't matter of the profit is realized in the US if the cost of goods goes overseas. It's a negative effect on the economy.


No it's not. The country just got for $1 something that was worth $2. That's net gain of $1 to the country.

Don't get hung up on the balance of trade. If you are importing more than you are exporting, the flip side of that is that the rest of the world is lending you money (likely because it's a good investment for them).

[And typically, unlike your example, it's the consumer who pockets the $1 gain, not the shareholders. Buying toys for my young son in the 1990s convinced me of that.]
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Re: Politics (formerly Election 2012)

Postby Koatanga » Wed Sep 18, 2013 5:20 pm

econ21 wrote:
Koatanga wrote:Company pays China $1 for a widget that they on-sell to the consumer for $2. Consumer pays $2 for the item. Company shows a $1 profit. Country, however, shows a $1 loss, because of the money paid to China.

It doesn't matter of the profit is realized in the US if the cost of goods goes overseas. It's a negative effect on the economy.


No it's not. The country just got for $1 something that was worth $2. That's net gain of $1 to the country.

Don't get hung up on the balance of trade. If you are importing more than you are exporting, the flip side of that is that the rest of the world is lending you money (likely because it's a good investment for them).

[And typically, unlike your example, it's the consumer who pockets the $1 gain, not the shareholders. Buying toys for my young son in the 1990s convinced me of that.]

Except it's not worth $2. There's very little you can buy retail that you can then turn around and sell for full retail value after even a small amount of time.

It's true there is some value in the product, so the US would have $1 cash plus a product worth X, but still there is a difference of $1 - X that leaves the US economy for the far east. And while X eventually depreciates to nil, the $1 sent to China will always be worth $1, although the absolute value of it will of course be reduced over time by inflation.

If the US could manufacture the widget, then there would be a net gain to the economy once all the sums are done, and the economy would be stimulated by the circulation of the manufacturing dollar as well as the profit dollar.
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Re: Politics (formerly Election 2012)

Postby Koatanga » Wed Sep 18, 2013 5:22 pm

Fridmarr wrote:Well that money is still mostly being invested here. Yes we have some new investment going to BRIC, but overall we are also the biggest recipient of foreign investment in the world. Even if you count corporate investment the difference isn't problematic. Also, the profits are generally realized here so the effects are not necessarily negative anyhow.

I get what you wean from an investment standpoint - Send $100 million overseas to earn $110 million so $10 million enters the US economy. However, that money, like tax breaks, then gets re-invested. It doesn't actually filter through the domestic economy the way a group of people spending $100 million total to go see movies, eat at restaurants, etc. would.
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Re: Politics (formerly Election 2012)

Postby Fridmarr » Wed Sep 18, 2013 7:33 pm

Koatanga wrote:
econ21 wrote:
Koatanga wrote:Company pays China $1 for a widget that they on-sell to the consumer for $2. Consumer pays $2 for the item. Company shows a $1 profit. Country, however, shows a $1 loss, because of the money paid to China.

It doesn't matter of the profit is realized in the US if the cost of goods goes overseas. It's a negative effect on the economy.


No it's not. The country just got for $1 something that was worth $2. That's net gain of $1 to the country.

Don't get hung up on the balance of trade. If you are importing more than you are exporting, the flip side of that is that the rest of the world is lending you money (likely because it's a good investment for them).

[And typically, unlike your example, it's the consumer who pockets the $1 gain, not the shareholders. Buying toys for my young son in the 1990s convinced me of that.]

Except it's not worth $2. There's very little you can buy retail that you can then turn around and sell for full retail value after even a small amount of time.

It's true there is some value in the product, so the US would have $1 cash plus a product worth X, but still there is a difference of $1 - X that leaves the US economy for the far east. And while X eventually depreciates to nil, the $1 sent to China will always be worth $1, although the absolute value of it will of course be reduced over time by inflation.

If the US could manufacture the widget, then there would be a net gain to the economy once all the sums are done, and the economy would be stimulated by the circulation of the manufacturing dollar as well as the profit dollar.

That doesn't matter, it's worth $2 to you and that's why you bought it. It's worth less once it's used, but you paid to use it, you got your value. Otherwise transactions for goods (especially perishable goods) regardless of where they were manufactured would be a zero-sum game, but they aren't.

Koatanga wrote:I get what you wean from an investment standpoint - Send $100 million overseas to earn $110 million so $10 million enters the US economy. However, that money, like tax breaks, then gets re-invested. It doesn't actually filter through the domestic economy the way a group of people spending $100 million total to go see movies, eat at restaurants, etc. would.
You mentioned that we offshore every chance that we can. Are you suggesting that the big corporation that owns the movie theatre (where all that money just went) only buys products made in the US? That they don't ever invest any money overseas. When the middle class runs to the store to buy their goods, those are all made in the US? (aside: And what are the long term global impacts of that?). If we offshore every chance we can, than why is it only offshore money spent by the rich that matters?

I also don't get why re-investing changes things, the first time through you admit that wealth was created and tax revenue generated, as long as those returns repeat that will keep happening, and when they don't that money will likely be moved.

Damn it, I'm getting drug into this again... I'll just leave it at that, my only real point for entering this particular thread was dealt with long ago.
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Re: Politics (formerly Election 2012)

Postby Koatanga » Wed Sep 18, 2013 9:54 pm

Other than the movies themselves, the big cost to theaters is the staff, which pretty much represents a domestic commodity.

But that's just one example - people will undertake a plethora of different things if given money. The distinction I am making is when a larger group of people receive a smaller sum (still the same overall money), that money doesn't go very far, so it's spent locally. Whether or not it eventually ends up overseas through a theater-owner's investment portfolio, it'll pass through a-few-to-many domestic hands before exiting the economy.
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Re: Politics (formerly Election 2012)

Postby Passionario » Thu Sep 19, 2013 3:01 am

Meanwhile in Russia, things get more and more depressing with each passing week. :(

As of yesterday, citizens of countries other than France and Italy are no longer allowed to adopt Russian children, including those with disabilities and in need of urgent help. All ongoing adoptions will be immediately cancelled and the children will be left to suffer and die in Russian orphanages. Oh, and they'll probably be told that their new parents don't want them anymore (just as the last time, when US adoptions were banned).
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Re: Politics (formerly Election 2012)

Postby Nooska » Thu Sep 19, 2013 3:34 am

To this whole economic debate;

Globalisation is a fact currently - its bad for he "old" countries - not because of trade balance, but because of lost jobs (meaning less production, meaning less goods to export).
HOWEVER
This is a short term problem.
Most physical production will return to the countries that consume the majority of a product (this can mean globalised production, or rather local production globally).
1 hour of time in India is not worth less than 1 hour of time in europe or the US (india may be a bad example is its quickly rising).
Local wages are based on local expenses. We know from history as well as all finacial/economic theory I've ever laid eyes on, that when you input money into a local system, inflation results; reason is simple. money is not worth anything in and of itself, money is a measure of trust. Trust that this {piece of paper} / {metallic token} can be exchanged for X goods. If more tokens enter circulation, then the trust that everyone can get X good decreases, so it requires more tokens.
This also results in an inevitable stabilisation from global trade in regards to time spent normalized for skillsets (different skillsets can still be worth different amounts).
What we will see is that the wages will even out - it won't be quick and it won't be a one-time equalisation, we will probably see waves where it goes up and down, but over time, wages will even out.
What will also be an inevitabilty is the disappearence of wages based on full skillset, and be more of wages based on applied skillset (that I have a university degree in, say law or human sciences, is not a useful skillset in manual labour, except in some edge cases).
Selfemployed people will of course also be able to reap the rewards of having diverse skillsets (mainly through not having to hire someone to do job Y), but that won't be as obvious, a sthis is already the case most places.

As a socialist, I am also very realistic - I don't like capitalism, but as long as we can't convert air to energy, or air to "stuff" there will be rich people, poor people and those in between - as I think we discussed earlier in the thread (like a hundred or more pages back), we can't all live on the same parcel of land for example.
I don't disagree with Marx that society has an endgoal of "reverting" to "Ur-communism" (I can't actually remember if that was a term he coined or whether its been applied later), but I disagree that it is an actually feasible end - at least untill we have unlimited* energy and energy/matter conversion technology* - or something else that can stand in its place.


*Virtually unlimited, and conversion practically speaking
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Re: Politics (formerly Election 2012)

Postby Fivelives » Thu Sep 19, 2013 3:53 am

I thought the argument for spending your way out of debt was explained either here or somewhere else like this:

Joe Q Public loses his job, and can't pay taxes. The government doesn't give Joe Q Public welfare, so he can't afford groceries, which means the grocery store goes out of business because they can no longer afford to buy food to resell at a profit. That grocery store supplier is no longer receiving the income from that grocery store, which means that the supplier goes out of business because of a lack of income, and so on and so forth. So by spending money on social programs for Joe Q Public, the government is actually preventing an even bigger loss, and when Joe Q Public transitions back to the workforce and is once again a taxpaying member of society, the government eventually recoups the losses.

And inflation reduces debt because debt is an absolute. You owe Billy $10. Say inflation has raised the minimum wage up from $5/hr to $10/hr, it now only takes you one hour to pay Billy back the loan, as opposed to two hours (this is EXTREMELY simplified, because it's basically my take-away from the entire conversation that I'm not really grasping). However, Billy may be getting his $10 back, but that $10 won't buy nearly as much as it would have before the debt was "inflated away", so he's experienced a net loss in the deal.

Does that sound about right, or am I missing this whole thing entirely?
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Re: Politics (formerly Election 2012)

Postby Nooska » Thu Sep 19, 2013 6:26 am

For a very simple explanation, yes.

Its t he same thing that was in our math textbooks back when I was in 9th grade - an example of why it was better to borrow money in the bank to spend than save up, due to inflation being higher than the interest, so the 100 bucks you borrowed would be less when you payed them back a year later (even though it was still more than 100 bucks due to interest).
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Re: Politics (formerly Election 2012)

Postby KysenMurrin » Thu Sep 19, 2013 6:37 am

Aren't loan interest rates generally close to or above inflation?
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Re: Politics (formerly Election 2012)

Postby Klaudandus » Thu Sep 19, 2013 8:33 am

The Element of Forum Hyperbole
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Re: Politics (formerly Election 2012)

Postby Koatanga » Thu Sep 19, 2013 2:58 pm

The sticky thing about inflation is that China owns vast quantities of US debt - in 2009 it was 63% of the US GDP. Should inflation rise at too high a rate, China may elect to cut their losses and sell off US debt at pennies on the dollar, devaluing the US dollar, causing other countries to dump the US dollar, and sending the US economy into free-fall Zimbabwe-style.

At least then US wages would allow for competitive manufacturing, and the US has enough natural resources that if it re-tooled the economy for manufacturing it could work its way out of the hole, but the country as a whole would probably not survive the exercise. Once the federal currency tanked, richer states would flee the failing Union. The Free State of California would have agricultural and other resources to trade itself into respectability within little time, although it would have to annex Nevada and Arizona in order to meet demands for water and electrical power.
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