Economics: Presidential Candidates Slip on Econ 101

[momeNt]

Obviously you didn't read the article. As it said in the article about Ron Paul


Which is something many of us with working brain have been saying for a while. The gold standard is a dumb idea.

http://en.wikipedia.org/wiki/Triffin_dilemma

All these economists that are Paul detractors are establishment shills that anxiously await a global currency to replace the dollar as the answer to all our problems. It's obvious that they would call a free market currency such as gold "dangerous".

http://www.lewrockwell.com/paul/paul303.html

Dollar hegemony is ending, there are two camps, the global currency regime camp, and the gold camp.

Note: This was a Ron Paul speech before congress in the lewrockwell link, just mentioning this to nip the conspiracy website rubbish in the bud.

 

[Mursilis]

Those both sound like really, really bad ideas. We would be shackling ourselves with all the bad parts of the gold standard without any of the benefits.

You may very well be right, and obviously these ideas need some major tinkering, but I think one thing is quite clear (and being proven in Europe right now): Without some sort of structural fiscal safeguards, democracies are doomed to dig themselves into an inescapable fiscal hole over time.

 

[frostedflakes]

That might matter if we fucking exported anything anymore.



I'd like to know what economic theory bars achieving two things at once.

Economists are like lawyers and assholes, but there is a fundamentally terrible representation of economic "facts" among politicians.

The US is one of the largest exporters in the world, only behind China and Germany. We still produce and sell a lot of stuff.

 

[fskimospy]

You may very well be right, and obviously these ideas need some major tinkering, but I think one thing is quite clear (and being proven in Europe right now): Without some sort of structural fiscal safeguards, democracies are doomed to dig themselves into an inescapable fiscal hole over time.

I actually don't think that's being proven by Europe right now at all. With Greece a non-credit worthy country was able to borrow for years based on the credit of a much more powerful country. With Italy the entire issue is market panic. It has very little to do with Italy's ability to pay its debts. (Italy in fact runs a primary account surplus)

 

[Don Vito Corleone]

That might matter if we fucking exported anything anymore.

We are the third-largest exporter of any nation in the world, and within about 20% of the largest (China). https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html

 

[the DRIZZLE]

I actually don't think that's being proven by Europe right now at all. With Greece a non-credit worthy country was able to borrow for years based on the credit of a much more powerful country. With Italy the entire issue is market panic. It has very little to do with Italy's ability to pay its debts. (Italy in fact runs a primary account surplus)

Source for Italy running a budget surplus? I believe that is incorrect.

 

[QuantumPion]

The US is one of the largest exporters in the world, only behind China and Germany. We still produce and sell a lot of stuff.

There was a time when the US exported more than it imported. That time period was known as the great depression.

 

[ShawnD1]

We are the third-largest exporter of any nation in the world, and within about 20% of the largest (China). https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html

Yesterday I was changing my tires and I noticed the big MADE IN USA on it. That makes me smile a little. I don't think I would trust Chinese tires on my car.

 

[Matt1970]

Are these the same economists who said the stimulus was going to keep us under 8% unemployment and save or create 3 million jobs?

 

[fskimospy]

Source for Italy running a budget surplus? I believe that is incorrect.

http://blogs.wsj.com/brussels/2011/08/08/italy-pays-for-sins-of-the-past/

Italy is running a primary budget surplus. That is a surplus minus interest payments on its debt. In fact Italy's surplus is greater than that of Germany's. That means if the interest rate on Italy's debt were driven down to the same rates as Germany's, they would in fact be in a BETTER position to pay off their debt than Germany is. (EDIT: There are also economic growth factors there, but still.) Since their yields are currently very high due to market panic however, they are in deep shit.

ie: if the ECB wanted to they could make Italy's budget problems go away tomorrow. Driving down the interest rates for their debt makes the entire problem disappear. What it also means is that fear of an Italian fault creates a self fulfilling prophecy. The more worried about default people are, the higher Italy's bond rates go, making them more likely to default.

 

[the DRIZZLE]

http://blogs.wsj.com/brussels/2011/08/08/italy-pays-for-sins-of-the-past/

Italy is running a primary budget surplus. That is a surplus minus interest payments on its debt. In fact Italy's surplus is greater than that of Germany's. That means if the interest rate on Italy's debt were driven down to the same rates as Germany's, they would in fact be in a BETTER position to pay off their debt than Germany is. (EDIT: There are also economic growth factors there, but still.) Since their yields are currently very high due to market panic however, they are in deep shit.

ie: if the ECB wanted to they could make Italy's budget problems go away tomorrow. Driving down the interest rates for their debt makes the entire problem disappear. What it also means is that fear of an Italian fault creates a self fulfilling prophecy. The more worried about default people are, the higher Italy's bond rates go, making them more likely to default.

I understand the terminology and logic but this more recent article from The Economist claims they are running a primary deficit.

http://www.economist.com/node/15911031
Either way it's not quite as simple as the ECB buying Italian debt. There are many concerns such as how much of it they would actually have to buy, fears about it increasing inflation expectations, and creating huge moral hazard in Italy and elsewhere in Europe.

 

[fskimospy]

I understand the terminology and logic but this more recent article from The Economist claims they are running a primary deficit.

http://www.economist.com/node/15911031
Either way it's not quite as simple as the ECB buying Italian debt. There are many concerns such as how much of it they would actually have to buy, fears about it increasing inflation expectations, and creating huge moral hazard in Italy and elsewhere in Europe.

Your article is from 2010, mine was from 2011, so actually mine is newer than yours.

It's not as simple as buying Italian debt, but by serving as a lender of last resort it could hugely mitigate the bond attacks on Italy and ensure its solvency. I also don't see how it would be creating a moral hazard since none of the debts of Italy would be reduced or covered by any other institution, simply the interest rates would be lower.

 

[Jhhnn]

She totally can. It's called a subsidy. Subsidies are why food in the US is literally half the price of food in Canada. Subsidies are also the reason recycling happens. Recycling by itself is not profitable in most cases.

That doesn't fit with her anti-gubmint free market raving. Try again.

 

[Jhhnn]

You may very well be right, and obviously these ideas need some major tinkering, but I think one thing is quite clear (and being proven in Europe right now): Without some sort of structural fiscal safeguards, democracies are doomed to dig themselves into an inescapable fiscal hole over time.

That's not really true for any nation whose debt is denominated in their own currency. Debt can be ameliorated by devaluation. Which is the problem for European debtors like Greece. The Euro functions just like the gold standard, disallowing devaluation. Euro nations can't devalue in relationship to each other, but only to the outside.

 

[Nemesis 1]

Fine for the OP . But unless he can show the other side understands economics let him wallow in his slop.
http://www.youtube.com/watch?v=JmudQLmofoc

http://www.youtube.com/watch?v=fsIM38amxa4

 

[the DRIZZLE]

Your article is from 2010, mine was from 2011, so actually mine is newer than yours.

It's not as simple as buying Italian debt, but by serving as a lender of last resort it could hugely mitigate the bond attacks on Italy and ensure its solvency. I also don't see how it would be creating a moral hazard since none of the debts of Italy would be reduced or covered by any other institution, simply the interest rates would be lower.

Oops, my bad on the article dates. It creates moral hazard because Italy could run deficits and continue selling the debt to the ECB indefinitely, or at least not run a surplus to reduce their debt. Keep in mind that although the current budget situation in Italy isn't bad, having such a high debt to GDP ratio invites this type of viscous cycle.

I'm sure you also know what the ECB is NOT allowed to act as a lender of last resort to governments by its charter. The bank would lose credibility by breaking it's own charter and credibility is everything for a central bank.

I'm mostly playing devil's advocate here. As an American I don't have a strong view on what the ECB should do, but I wanted to point out the kind of discussions that are likely happening at the ECB and in Germany.

 

[Gonad the Barbarian]

The US is one of the largest exporters in the world, only behind China and Germany. We still produce and sell a lot of stuff.

I was rather inelegantly referring to our trade deficit with China specifically.

 

[Doppel]

Doesn't matter. Politicians only have to get elected, the rest is irrelevant to them and with the general public failing at economics they have only to meet that minimal standard of competency and placate the proletariat ideas of right and wrong. I wonder if this is part of the reason why all of the presidents seem so easily to be compelled by bankers close to them, though, who exert unusual control over their policy to the benefit of themselves, not the public.