The Business Cycle Theory - Economics

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Re: The Business Cycle Theory - Economics Mar 27, 2010
Yep, and they are all mainly caused by credit expansion. Blame the FED

Well for the obvious reasons of capitalist regime I can't blame FED for credit expansion.
Credit expansion has to happen to keep perpetual growth year after year without ever decreasing....

I just had to paste this to keep laughing more and to have fun...
The consumer is essential for Capitalism. The US economy is driven all most entirely by consumption. Not only must consumers buy, they must buy more every year, and still more the year after that. Without perpetual consumption, the economy would either decline or collapse.
80% of America’s $14 trillion economy is service based. Wholesale trade, the manufacturing of consumer goods and retail comprise 65% of the services sector. The US over the last 30 years has become reliant on consumption and today is the world’s largest consumer of many items.

Dr. Lorrin Koran, a professor of psychiatry at Stanford University and expert in
behavioural Science said “Its not just individuals who are addicted to shopping, our economy is too. Personal spending now plays a bigger and bigger role in keeping the modern economy going. And when things start going wrong, there is no magic pill. Governments rely on consumers to bail them out. There was a very real fear that September 11 would cause spenders to lose confidence and plunge the world into recession. Keeping people spending has become the top economic priority.”

The importance of the consumer to consume to the US economy was outlined by Richard Robbins expert in anthropology in his award wining book ‘global problem and the culture of capitalism,’
‘a couple of days after the al Qaeda operatives crashed two planes into the world trade centre on September 11th US congress members met to plan a message to the stunned public. “We’ve got to give people confidence to go back outside and go to work, buy things, go back to the stores, get ready for thanksgiving, get ready for Christmas,” said one member of congress, echoing the message of the president ‘get out’ he said “and be active members of our society.” (CNN 2001). ‘The fact that after one of the most shocking events in US history government officials were urging citizens above all to shop and work is ample testimony the significance of consumption in the effective working of our economy and indeed for the whole society.”

The events of 9/11 and with the prospects of a recession in the US, the federal reserve in cahoots with the white house reduced interest rates to virtually 0%. This made debt an attractive way to fund spending with little interest to be repaid, this also meant monthly mortgage repayments had little interest added to them.

This housing bubble is what drove the US economy since 9/11 as a large chunk of consumer spending went on the purchase of homes. Housing in turn fuelled appliance sales, home furnishings and construction. In 1940 44% of US citizens owned their own homes, by 1960 62% of Americans owned their homes. Currently nearly 70% of all housing is owned by its constituents. The increase in home ownership resulted in more and more US citizens becoming indebted, US household debt stood at $11.4 trillion in 2006.

When the housing bubble burst due to the huge increase in defaults, this essentially brought to an end the engine that drove the US economy for the last decade. This spread to the rest of the world as the US is the main engine for economic activity for the world economy. Its huge level of consumption is responsible for most of the growth being experienced by China and India. With only 5% of the world’s population the US consumes 25% of the world’s oil and imports 9% of all goods manufactured outside its borders.

With consumption playing such a key role in the functioning of Capitalism, people havecome to be symbolised by what they wear, eat and drive. Hence sensual gratification has become life’s aim and with the dwindling world resources and ever increasing numbers competing for sensual gratification greed has come to characterise Capitalist societies. Capitalism believes if individuals in society pursue their self‐interests then the right resources are produced for those who want them and this is the best way to allocate resources.

Today self interest (greed) is considered a necessary trait for the 21st century individual; its
corruption can now be seen across society. Greed is the motivation that led to predatory
mortgage brokers selling mortgages to people that have no way in paying it back, and then
increasing the rates of interest until the buyer defaults. Greed was also the motivation that led
the credit ratings agencies to rate the investments less risky than they really were, and also to
conceal that the risk was based on sub‐prime mortgage debt. Hedge funds demonstrated
greed in the way they seek to provide astonishing returns to their customers, and greed is the
motivation even for individual shareholders that want to capitalise on the falling share prices
across the economy, even though it can lead to problems for thousands of people. The effect of
this is devastating; since each element within society puts their benefit before ethics and
morals, this is why we have a situation where even if the effect of an investment decisions can
lead to a downturn in the economy, companies are prepared to make those decisions anyway.

Berrin
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Re: The Business Cycle Theory - Economics Mar 27, 2010
Right. Start with implementing the rule of law first.

Ok then wait until all the capitalist powers go bankrupt then see how islam takes over.
But hey since they are trying so hard againt islamofacism, they better implement it themselves sooner then later while the time is still ticking.

I'm not convinced in the model that Shafique presented
.
Why don't you read it all again..
Crisis of capitalism and solution of islamic economy..
http://www.khilafah.com/images/images/P ... ne2008.pdf

The sharia compliant loans (which are higher than interest bearing loans) contributed alot in the speculative nature of those property assets.

Do not mix the sharia compliant loans in capitalist system of western world with the ones in the ME banks.
Shafique already said that sharia compliant loans in the west are loans that are dressed with interest rates.

Coercive taxation is out of the order for people (like me) who's values are grounded in personal liberty and ownership rights. Coercion easily ramps up to tiranny and you probably know more about that than me.

I would say tyranny is where speculations and interest rates have become coercive greedy business.
If you wanna see what real tyranny is read from top till bottom of the article I linked above...
Seems like you don't know where actual liberty and ownership rights come from...

The Dubai property scenario keeps hanging in my view. The sharia compliant loans (which are higher than interest bearing loans) contributed alot in the speculative nature of those property assets. Absent the premium, I don't see those banks attract the capital they need for mini venture capital.


Dubai's Bubble Economy

The driving engine for Dubai was never sustainable. Dubai’s growth was initially through its oil wealth. This wealth was used to develop Dubai to attract foreign investment and soon enough, foreign companies and foreign workers arrived looking for an opportunity in Dubai. Its position as a trading hub meant many companies relocated its staff to work from Dubai which is fundamentally what brought Dubai its wealth.

This was never sustainable. The skilled workers that were developing the service sector were mostly from overseas, with only a small percentage of Dubai’s population today considered to be native Arabs. It's growth has been a direct result of it becoming an essentially tax-free zone for foreign nationals and companies. These companies, whilst providing jobs and income to people in the country, are not transferring any technical skills to the people. Its property market boom was due in large part to speculation that the prices would continue to rise.

Dubai has merely exploited limited natural resources and has been importing talent from abroad with little skills and knowledge-transfer to drive its economy. Dubai was always nothing more than a mirage in the desert; it's growth and survival was dependent upon the talent and expertise of foreign entities. It could only offer specialist services such as banking and finance as a means to guarantee it's future, along with tourism. As these sectors rely heavily on the goodwill and confidence of foreigners, if in any way this sentiment was affected, Dubai’s desert empire would crumble.

This is exactly what happened with the Global credit crunch. In order for financial companies to shore up their losses they have withdrawn their money from expensive and lavish projects. Service companies which relied on loans are now seeing this dry up as one bank after another either collapses or requires government bailouts. One expert from Nomura investment Bank encapsulated the situation in Dubai: “Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance.” As Dubai was built upon foreign money, it now awakes to find that this has dried up, so in essence Dubai’s source of growth has been cut, causing the breakneck building-boom to come to a crashing halt. The lending bonanza has evaporated and the government continues to ponder wider steps to rescue banks, including asking it's neighbouring emirate, Abu Dhabi, for financial assistance.

Shares in the region have lost around $1 trillion since the beginning of the year as investors fled. The UAE Finance Ministry announced in January 2009 that it would inject 70 billion Dirhams ($19 billion) into the banking system, and is already looking at printing even more money.

Dubai does not produce any manufactured products that the people in the city buy. It is a city that is not self-sufficient, as it neither has the infrastructure nor the natural resources in place to develop the products it consumes. Dubai was, by all means, a bubble waiting to burst.

The suggestion that Dubai offered a new model for economic development and an Islamic approach could not be further from the truth. Building an economy upon foreign wealth, external expertise and personnel is a tried-and-tested model which has a substantial track record of failure. Latin America, South East Asia and the Baltic states have all attempted this approach with catastrophic results.

The claim that Dubai offered Islamic banking does not make its development Islamic; Britain was one of the first nations in the world to offer Islamic bonds yet nobody would argue that Britain pursues an Islamic economic system. To attract foreign industry, labour and money, Dubai has had to compromise on many Islamic values to do with the mixing of the sexes and alcohol in the name of necessity. The imposition of some Islamic rules in reality is a charade.

Without industrialisation, development and defence of the country cannot be achieved.An economy geared around services, but needs one, geared around manufacturing and agriculture. This allows a nation to produce all that it needs and export any surplus. Relying and depending on imports and foreign money is not an assured path for development and survival.
Berrin
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Re: The Business Cycle Theory - Economics Mar 27, 2010
Berrin wrote:Well for the obvious reasons of capitalist regime I can't blame FED for credit expansion.
Credit expansion has to happen to keep perpetual growth year after year without ever decreasing....


Why is it so clear for everyone except Rob? The excess unemployed money, which was the cause of the cheap credits, pumped bubles, not only in the real estate but almost everywhere. Aproximately 20 million new cars per year were too many for the country with inhabitance of 280 millions.

I heard information that after 1970 average Americans didn't get earn more. They got spend more due to life in credit. It was the main cause of the artificial demand and so artificial growth.
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Re: The Business Cycle Theory - Economics Mar 27, 2010
Red Chief wrote:
Berrin wrote:Well for the obvious reasons of capitalist regime I can't blame FED for credit expansion.
Credit expansion has to happen to keep perpetual growth year after year without ever decreasing....


Why is it so clear for everyone except Rob? The excess unemployed money, which was the cause of the cheap credits, pumped bubles, not only in the real estate but almost everywhere. Aproximately 20 million new cars per year were too many for the country with inhabitance of 280 millions.

I heard information that after 1970 average Americans didn't get earn more. They got spend more due to life in credit. It was the main cause of the artificial demand and so artificial growth.


I agree with that debt-induced growth kept the party going a little longer. For every dollar of debt added, increasing the money supply, debasing the dollar currency, takes away real purchasing power from your earned dollar. Thats a hidden taxation! Real economic growth comes from producivity increases that are visible in a stronger currency.

However, perpetual real growth in real terms is impossible. You can only continously archieve nominal growth when you debase your currency accordingly, and that is what slowly happened since they left the Gold standard in 1971, and was exemplified by massive (e.g. 15 percent YoY, 2006) credit growth during 2001-2007. This is unsustainable.

Let me show you a chart to make it clear what I mean when I say that perpetual growth is impossible. Every dollar of debt added to the system has a servicing obligation against it. When debt saturation has occured, the economy will go down no matter what. You can monetize it for a while, but eventually, your living standard goes down dramatically.

Image

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!


What do you see that I don't see Chief? Perhaps I'm missing the point you are trying to make.
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Re: The Business Cycle Theory - Economics May 21, 2010
Free Capitalism is a bankrupt as a social system.

I found an interesting article about changing situation in the US during last 35 years that confirmed it:

Between 1947 and 1973, the typical American family’s income roughly doubled in real terms. Between 1973 and 2007, however, it grew by only 22%—and this thanks to the rise of two-worker households. In 2004 men in their 30s earned 12% less in real terms than their fathers did at a similar age, according to Pew’s Economic Mobility Project. This has been blamed on everything from immigration to trade to declining rates of unionisation. But the driving factor, most economists agree, has been technological change and the consequent lowering of demand for middle-skilled workers.

Full article from the Economist is here: http://www.economist.com/world/united-s ... d=15908469
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Re: The Business Cycle Theory - Economics May 22, 2010
Add to that, the constant reflation efforts from 1970 onwards and so real wages will never keep up with nominal prices. Thats the real culprit of the decline of the American living standard.

Nominal growth rate of GDP (aggregate demand should ring a bell) is the leading indicator (not real growth rates) in Keynesian economic textbooks. If prices decline, GDP declines (deflation) and that is unacceptable to Helicopter Bernanke (Keynesian scholar) at the Federal Reserve. The FED bails out dollar denominated countries (Savings and Loan crisis, Asian debt crisis, Latin American debt crisis etc etc) and starts monetizing bad debts from the private sector, resulting in inflation of the money supply, restricted to the banking sector at first. Ever wondered why they focus to report the core-inflation statistics without food and energy prices? Hedonic adjustments baby.

Keynesian economists think in linear terms. Growth, more growth, doesn't matter if they need to print growth. Failed policy, thats why Western countries are so indebted, because they can't except the deflationary aspect of a dynamic economy. Malinvestments need to be liquidated. Institutions need to fail, but aren't allowed to impact the overal economy, so they bail out the debts. Fractional Reserve Banking (leverage) is one of the main factors that increases the risk in our economic system.

You are on the right track Chief, you need to look a little deeper at the origin of money, to determine the real cause of the decline of the American Dream. Here it is, the money supply growth by the Federal Reserve.

Image

Notice the exponential rise of the money supply after the abandonment of the Bretton Woods agreement, also known as the last link the gold standard, in 1971. All restraints on monetary policy are off at that point. Exponential increase of the money supply. Ron Paul and other Austrian economists are actually suprised that it lasted for 40 years now. But the real crisis is underway and its a currency crisis. It started as a US based subprime housing crisis, became a nation wide housing crisis, a liquidity crisis, global financial crisis and now a global sovereign debt crisis like seen in Iceland, Dubai and now its Greece. Next is Portugal, Spain, Italy, the UK and then....Japan or the US.

You must have seen the volatility in currencies recently? I did, and panic is back in the markets. Fear of contagion is growing once again. The FED opened the currency swap lines with foreign central banks again last week to supply liquidity into the markets, as panic selling was on again, close to Lehman style, sept 2008.

Short video from the historian Niall Ferguson, who explains the sovereign debt problems to everyone interested, in layman terms. Watch here: http://www.businessinsider.com/niall-fe ... ece-2010-2

The support package of the EU of 1 trillion dollars (730 billion euros) is just postponing the inevitable for Southern European countries. They need a debt restructuring, but then the losses for European banks (lenders) are massive. It would cause a massive deflationary event, resulting in the collapse of several economies and world trade. Just like Sept 2008-March 2009 event. The Western world is too indebted and addicted to Keynesian style fiscal stimulus and monetization of bad debt. Failure of big institutions isn't allowed anymore. Thats a moral hazard.
Nations never became richer by debasing a currency to oblivion. Still we think this is the solution. Grouping into the European Unions after WWII was politically interesting to safeguard the peace in divided Europe, but economically into the EMU, its been a disaster. Didn't even last for 10 years. lol

If only we could restart this with Austrian economists. Unfortunately, we all have to suffer now. Hope your wealth is safe mate. Alot of people are going to lose it in the coming decade. ;)
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Re: The Business Cycle Theory - Economics May 22, 2010
Rob, why do you remember Bernanke like Shafique the Bible each time someone drives you into a corner ? 8) I took 35 !!! years period before current crisis. I'm sure that "financial geniuses" tried all remedies during that time.

So say it straight whether you agree or disagree that Capitalism is bankrupt as a social system. Constant decline of standard of living during last 35 years does not look like a business cycle. :blackeye: 8)
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Re: The Business Cycle Theory - Economics May 22, 2010
^Perhaps Bernake is as eminently quotable as the Bible? ;)

BTW - have you guy's read Stiglitz? I've just finished his 'Making Globalization Work' - he shows what was wrong with the IMF/World Bank and Capitalism (as practiced) from the inside. However, his argument is that we shouldn't blame Capitalism for the failures of the 'Washington Consensus' - but rather look to the countries where capitialism is working (eg Malaysia, Singapore).

What's your view RC?

Cheers,
Shafique
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Re: The Business Cycle Theory - Economics May 22, 2010
Shafique, don't try to derail me. I took SOCIAL aspect of the system. In this terms I believe neither Capitalism (as practiced) nor Islamic Fundamentalism (as practiced). 8)

In my view, an export economy has a little in common with Capitalism as social system because supply defines by overseas demand and has little influence on local labour market.

Moreover it has own ceiling - the neighbouring poorer countries like China. The crisis in 1998 showed how fragile this system was.

IMHO recent success of Germany is more interesting example.
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Re: The Business Cycle Theory - Economics May 22, 2010
RC - Stiglitz also focuses on the social aspects (failings actually) of the Washington consensus - that is why I brought it up.

He contrasts the failures with instances, such as Malaysia, where Capitalism has indeed brought social good. It would be interesting to compare the features of such success stories with those where Capitalism failed. I'm not sure whether Malaysia's success is based solely on overseas demand rather than embracing Capitalism - there are also the other countries such as Taiwan and even Vietnam nowadays - Capitalism seems to be working fine there and standards of living are improving.


Cheers,
Shafique
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Re: The Business Cycle Theory - Economics May 22, 2010
Shafique,

I have no inside about Malaysia except labels "Made in" on electronics that was very common even 15 years ago and constant complaints from my Chinese friends about "relaxed lazy staff" in this beatiful Moslem country.

As for PRC I know full procedure that actually banned access of the goods, produced by foreign companies on Chinese territory, to the local market even 10 years ago. As far as I know little has been changed since that time.
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Re: The Business Cycle Theory - Economics May 22, 2010
Red Chief wrote:Rob, why do you remember Bernanke like Shafique the Bible each time someone drives you into a corner ? 8) I took 35 !!! years period before current crisis. I'm sure that "financial geniuses" tried all remedies during that time.

So say it straight whether you agree or disagree that Capitalism is bankrupt as a social system. Constant decline of standard of living during last 35 years does not look like a business cycle. :blackeye: 8)


Your reply still misses the essence of the problem. Its not capitalism at fault. Thats a common mistake made by people who have no clue and are from the left side of the aisle. :blackeye: Capitalism brought wealth and prosperity for two hundred years. The problem is ideology in economics. I ain't kidding you. Its the textbooks of the Keynesian and Monetarist schools of economics that are easily debunked.

I recommend to read 'Debunking Economics' from Professor Steve Keen (Australian). I have his book lying next to me, aswell as the books from Rogoff and Reinhart, This Time its Different. If you want to know about the fallacy of composition and sovereign debt crisis, try those two books. Its not for the average reader, as they are academic literature. Highly recommended.

Anyway, I have been studying the roots of the financial crisis for nearly two years now. I tell you, it aint capitalism. Its the credit boom that causes the problem, the bust is just the correction. Forget bibles, learn Austrian Economics. No models, just input, logic and output. :blackeye:

You'll get there one day, good ol Commie of mine :lol: :twisted:

-- 22 May 2010, 12:32 --

shafique wrote:^Perhaps Bernake is as eminently quotable as the Bible? ;)

BTW - have you guy's read Stiglitz? I've just finished his 'Making Globalization Work' - he shows what was wrong with the IMF/World Bank and Capitalism (as practiced) from the inside. However, his argument is that we shouldn't blame Capitalism for the failures of the 'Washington Consensus' - but rather look to the countries where capitialism is working (eg Malaysia, Singapore).

What's your view RC?

Cheers,
Shafique


Bernanke only knows how the print money. It is obvious to me, that Keynesians scholars had it wrong for multiple decades. They don't have a clue about debt saturation. I like that guy who basically knows all about Japans debt problem since the boom and bust of 1990, thats Richard Koo. Watch this excellent presentation about balance sheet recessions:

Video presentation: http://www.youtube.com/watch?v=6k0_a1JS ... bFVygbIo9I
Slides: http://www.scribd.com/doc/13970982/Rich ... esentation

I like that Stiglitz guy, he has good points. I have one of his latest books "Freefall" on my list. Can't believe we are talking about Capitalism being at fault here. Its the people who make the mistakes, capitalism is just a profit model. It works fooks.

You can always go back to desert roaming and barter if you hate it. :mrgreen:
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Re: The Business Cycle Theory - Economics May 22, 2010
RobbyG wrote: I tell you, it aint capitalism. Its the boom that causes the problem, the bust is just the correction. Forget bibles, learn Austrian Economics. :blackeye:

You'll get there one day, good ol Commie of mine :lol: :twisted:


He-he. As I said current situation in US reminds me the last years of Soviet Union. At that time professors of Marxism/Leninism teached me that Communism is good as an idea, but implementaition was a problem.

As for the Bible it seems that I hit someone's nerve. :blackeye: :lol:

To be frank I'm tired of arm-chair professors with miracle recepes in monetary system. I don't know how it could help to prevent from transfering jobs and whole industries abroud. I tend to rather agree with Shafique that that trend helped people from Malaysia and another Asia and bosses and shareholders of international corporations of cause.

Well, from your reply I understood that the problem is that 35 years is not enough for business cycle. :shock: :shock: :shock:

How long could it be? if 100 years it's very close to full construction of Communism. Are you sure that folks could wait so long? :bom:

As for Commie, don't mix up Harlem with Haarlem. :wink:
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Re: The Business Cycle Theory - Economics May 22, 2010
Hey, don't get me wrong - I agree with pretty much most of what Stiglitz says went wrong and agree his solutions would certainly be an improvement. I've also got his latest book freefall on my list!

FWIW Islam's system isn't that prescriptive - it just says that trade should be real, all transactions should be written down and business ethics should be followed. Apart from saying that money needs to be invested to make returns and idle capital taxed (and interest rates should be zero) - it's pretty much aligned with capitalism in as much as it encourages entrepreneurship within a social framework. You pay your taxes and keep the rest - no socialism encouraged.

Anyway - I just thought I'd dip in and mention Stiglitz - carry on folks, the discussion is interesting.

Cheers,
Shafique
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Re: The Business Cycle Theory - Economics May 22, 2010
Bernanke only knows how the print money. It is obvious to me, that Keynesians scholars had it wrong for multiple decades. They don't have a clue about debt saturation.


well, could that be couse Americans have prefered cheap labour of China for the last 2-3 decades. That explains why china is in boom while America in bust buying and spending relentlessly..
China is also the major holder of American bonds. In this case, I guess some people have to spend continuely to repay interests on the bonds, as well speculate to make the best of all earnings.

RC I hear Mrs.Merkel fulminates to American based speculative attacks on Euro zone..
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Re: The Business Cycle Theory - Economics May 22, 2010
Berrin wrote:
Bernanke only knows how the print money. It is obvious to me, that Keynesians scholars had it wrong for multiple decades. They don't have a clue about debt saturation.


well, could that be couse Americans have prefered cheap labour of China for the last 2-3 decades. That explains why china is in boom while America in bust buying and spending relentlessly..
China is also the major holder of American bonds. In this case, I guess some people have to spend continuely to repay interests on the bonds, as well speculate to make the best of all earnings.

RC I hear Mrs.Merkel fulminates to American based speculative attacks on Euro zone..


America's relationship with China is not about cheap labor, it's about trade. To make those products in the US would be impossible because of minimum wages, benefits, unions, cost of goods. China's boom isn't based on America's trade alone. Where in the world don't you see "Made in China" on goods?

America gets its cheap labor, per se, from India - that's where thousands of jobs went and were lost in the US with the creation of call centers in India. America pays companies in India to run those call centers and the wages paid (and any benefits, if there are any) to the staff are set by the employers. At the end of the day its a flat fee - no wages, no benefits, no unions.
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Re: The Business Cycle Theory - Economics May 22, 2010
Red Chief wrote:
RobbyG wrote: I tell you, it aint capitalism. Its the boom that causes the problem, the bust is just the correction. Forget bibles, learn Austrian Economics. :blackeye:

You'll get there one day, good ol Commie of mine :lol: :twisted:


He-he. As I said current situation in US reminds me the last years of Soviet Union. At that time professors of Marxism/Leninism teached me that Communism is good as an idea, but implementaition was a problem.


"but implementation was a problem"...lol, thats because it didn't work in the first place. First lesson in every economic system: Greed is good, it creates prosperity... you just have to structure it right. Capitalism shows out of wack, simply because curruption is rampant. Its no capitalism anymore, its corporatism.

As for the Bible it seems that I hit someone's nerve. :blackeye: :lol:


Haha, I don't have the slightest connection or interest with the bible, so it passes me without notice. Sorry mate :D

To be frank I'm tired of arm-chair professors with miracle recepes in monetary system. I don't know how it could help to prevent from transfering jobs and whole industries abroud. I tend to rather agree with Shafique that that trend helped people from Malaysia and another Asia and bosses and shareholders of international corporations of cause.


Lets keep things in perspective. Malaysia and Singapore's economic models are all based on capitalist profit models. There's nothing new there. Stellar example of how you can run your country undemocratically in the emerging phase, but eventually shifts into a more open party system where changes are sluggish.

I don't think democratic systems in the Western world work very efficient. Governance is always based on the majority rule of consensus (middle way, often weak policy) and minority with good ideas can be ignored.

China is ruled on capitalist footing with a communist leadership where 9 guys in a room determine the allocation of capital in China. Wanna bet you get boom and bust cycles in China? Check out Chinese tier 1 city real estate already. $3500-$4500 a square meter in Bejing, Shanghai is absurd. Pure speculation of the rich :shock: Average worker in China earns $3000 dollar a year. Errorrrrr :drunken:

Watch real estate prices unfold in the coming year. The big finance boys have already taken position to short the construction sector in China. That includes the banks that have put out those loans to China's construction sector. All thanks to the government who directs the Chinese banks to put out loans per decree. There is no free market model in China. Its directed by few people who lead 1.3 billion people. This can never continue forever without social unrest and lots of booms and busts.

I can already predict, that the blame will be laid upon capitalism, while in fact, its about the political policy and absence of pure free market allocation of capital and labour. Non existant.

Well, from your reply I understood that the problem is that 35 years is not enough for business cycle. :shock: :shock: :shock:

How long could it be? if 100 years it's very close to full construction of Communism. Are you sure that folks could wait so long? :bom:


The business cycle based on fiat paper currency is already at an end. The world has seen many currencies being primed to oblivion. The dollar is not different. It also will disappear, perhaps sooner than people think in my opinion. Euro same story.

The real medium of exchange is one that has true value, like silver coins or a paper with conversion to gold at a fixed ratio. I refer back to the gold standard without massive leverage and without massive banker profits (market should set interest rates, not Central banks).

But then again, you don't like armchair economics, so that a CUT...end of movie. :wink:

As for Commie, don't mix up Harlem with Haarlem. :wink:


Oops, I threw you a bible there. At least someone read it. Just think of the trees that have been chopped for that pile of doctrine paper. Such a shame.

http://www.youtube.com/watch?v=-12qAAsn ... re=related

Enjoy
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Re: The Business Cycle Theory - Economics May 22, 2010
Rob, long conversations with Sir Shafique made you evasive. It's not about the "the opiate of the people" but simple question. Once more, Is Capitalism bankrupt as a social system (not cash machine)? I showed it with stat for last 35 years.

Replies like It is Developed Socialism insted of Communism or Corporatism instead of Capitalism will not be counted. :wink:
Red Chief
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Re: The Business Cycle Theory - Economics May 22, 2010
LoL, evasive he says. :D

Capitalism is a system. A model of capital formation based on savings and investments with a profit motive. It worked for hundreds of years now. Just look around you what it brought us in material wealth. No wait, take the difference between you being born and current modern days.

The debt situation and wealth squandering has a political and economic ideological cause. Humans aren't perfect, we need to learn constantly to improve ourselves.

We now enter into another phase, but we move forward with lessons learned and forward with capitalism. Corruption will liquidate itself eventually. Just look at the TEA party movements. People are taking over democratically instead of revolutionary, with the occassional riots in front of parliament.

Greece is a stellar example of corruption. 1 in 4 workers is in government, they pay next to no taxes, retire at 52 or 55 years old and collect 3000 euro's a month in retirement benefits AND receive a 13th and 14 month each year EXTRA!

After years of uncompetitiveness, the Greeks riot because they have to take austerity measures in return for bailout funding of 110 billion euros, as goodwill from the strongest economies. fcuk them Greeks, let them work for my taxmoney!


And the Dutch, Germans, work until 65 yrs old, soon 67, to keep the social security fully funded. 1 in 10 workers works in government, and is already reducing expenditures in austerity measures. We don't get shit for free!

I'm against a bailout of Europe and people should come to terms with themselves. You either work for your money, or you get none. Only the handicapped should receive social safetynet money. Now thats fair. Work for a better way of life. Personal greed with ethical guidelines from proper education.

Social system is only viable if your political will is not corrupt and focusses on wealth generation and prosperity. The Greeks fooled their government numbers for years and now they want even more to bail them out. I don't feel the need to rescue an overpaid worker in the name of social stability for a bunch of profiteers? Would you?

Fiscal austerity is the answer, just like we handle our Dutch finances for hundreds of years and lived frugal in Europe. As a country, we nearly never defaulted in relation to history of nations and sovereign debt crisis. Just look at us shining at the low end of this chart. :D

Image

Political will baby, thats the key to social stability.
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
Carry on boys, enjoying this.

Let me know if you want any 'evasive' coaching. :mrgreen:

Let's aim for some agreement on some points.... do you think you could do that? :)

Cheers,
Shafique
shafique
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Re: The Business Cycle Theory - Economics May 22, 2010
If he doesn't understand the capitalistic system, we will never come to agreement.

He still thinks Communism was viable. I'll better stop here.
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
RobbyG wrote:LoL, evasive he says. :D

Capitalism is a system. A model of capital formation based on savings and investments with a profit motive. It worked for hundreds of years now. Just look around you what it brought us in material wealth. No wait, take the difference between you being born and current modern days.


Well... as I look around me and see almost all infrastructure was built in time of Soviet Union. For next 15 years after collaps of that country almost no big plant, electric plant, pipe-line or highway have been built in Russia. You would be laugh but price for square meter in Moscow for economy grade in suburb is $5000 and salary $200 is very good in 200 km from the capital.

Each year we have devastating accident on the huge structures like 4th in the World Hydroelectric Plant last year and the largest mine now due to tear and wear for 25-30 years. So for Russia reply is evident, but I was very surprised the stat about US. As I understood you have not found time to read this small article about requiem for the dream.

Anyway don't compare US and Europe in 60s-70s. The main slogan of Ford in 1962 was "The second Ford to the household." I doubt that at that time every single family in Europe had even one car. So Americans were much richer than Europeans in 60s-70s.

I know that US is the huge economy and they could decay in decades as Russia still alive after 20 years of chaos.
Red Chief
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Re: The Business Cycle Theory - Economics May 22, 2010
I agree that Communism has some benefits, but it doesn't increase the overall standard of living.

The reason why your Moscow is having $5000 square meter real estate prices is because of the elites and the oligarchs from the resource sector. Your politics is also a weird mix of capitalism and autocratic governance like in China. True or not? Please confirm.

The benefit of Communism in Russia was the pale concrete and affordable housing for the poor, with central heating from steam pipes through a building and the self sustaining mentality of the harsch Russian mindset. You lot a survivors mate.

If the USA experiences depression, which they probably will in the near future, things are somewhat similar with the fall of Communism, besides that American's are fat fucks who get their food from centralized food distributions systems that need massive transportation needs to arrive at destination. Agriculture is almost gone in the US.

Sure, communism has some remnants that make life a bit easier in a depression, but its not a solution to the problems of the fallacies of current day keynesian economics in a capitalist system. The capitalistic mindset is aimed at creating prosperity and lifting the individual's standard of living. Entrepreneurs need incentives to produce and gain. Profit! Nobody ever gained from redistribution.

The American's will suffer way more in a depression when energy (oil, electric grid, agriculture, water) systems will become out of reach for millions. Thats a fact. But I'm sure they start over. Its a mindset of victory and hard work.

American's are just as tough as Russians. One for the pursuit of individual prosperity and the other from cold hard labour.
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
RobbyG wrote:If he doesn't understand the capitalistic system, we will never come to agreement.

He still thinks Communism was viable. I'll better stop here.


He-he, I only tried to add some pepper to this insipid soup. It looks that I still can press right buttons.
8) 8) 8)
Red Chief
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Re: The Business Cycle Theory - Economics May 22, 2010
Talk some sense for a change mate. I'm trying to be serious in response to your responses.
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
RobbyG wrote:I agree that Communism has some benefits, but it doesn't increase the overall standard of living.

It had increased overall standard of living until 1979. Then sanctions after invasion to Afganistan. It was the Cold War, not competition and the collaps of SU did not stop it.

Your politics is also a weird mix of capitalism and autocratic governance like in China. True or not? Please confirm.


Nothing in common with China. Chines invest all profit to the own country. Our thieves (most of them kikes) are parasites on mineral resourses and made investment to Chelsea (football club and property around stadium). Goverment-run companies makes even less investments than private ones.

The capitalistic mindset is aimed at creating prosperity and lifting the individual's standard of living.


It's a myth but still simbol of your faith. Read the article with digits that shows absolutely different trend for last 35 years. In the same artcle there is a statement that index of inequality in US is even larger than in Russia. So the conclusion about real goal of Capitalism is obvious. It does not contradict with Marx because current capitalism became very close to the one which described by Marx.
Red Chief
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Re: The Business Cycle Theory - Economics May 22, 2010
I don't agree. Index of inequality says nothing about the capitalist sytem, its says more about political will to support the corporations, than to support the hard working average citizen.

like I said earlier, you just need to govern greed right. US two party politics is captured in corporate lobbying. Of course you get inequality because of this political 'status quo' situation. If only the market rigging Federal Reserve kept away from the printing press, then the consequences wouldn't be so dire. The market is distorted and definately not free.

I guess you have another set of indicators than me. But then again, I follow the Austrian School of Economics.
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
Well I'll be as persistent as Sir Shafique.
Once more.

The capitalistic mindset is aimed at creating prosperity and lifting the individual's standard of living.


Why is it comming from Capitalism? It could be a side effect of Capitalism for some period but not the goal. Moreover stat for decades does not give any evidence of that.
Red Chief
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Re: The Business Cycle Theory - Economics May 22, 2010
You stubborn princess. If you don't trust what I write, then read another source:

Capitalism is an economic system in which the means of production are privately owned; supply, demand and price are mostly set by market forces rather than economic planning; and profit is distributed to owners who invest in businesses. Capitalism also refers to the process of capital accumulation.

There is however no consensus on the definition of capitalism, nor how it should be used as an analytical category.[1] There are a variety of historical cases over which it is applied, varying in time, geography, politics and culture.[2] Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Scholars in the social sciences, including historians, economic sociologists, economists, anthropologists and philosophers have debated over how to define capitalism, however there is little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism[3]; although these fundamental elements, such as private property, often have various different meanings in different disciplines and in different theories.

Economists usually put emphasis on the degree that government does not have control over markets (laissez faire), and on property rights,[4][5] while most political economists emphasize private property, power relations, wage labor and class.[6] There is a general agreement that capitalism encourages economic growth.[7] The extent to which different markets are "free", as well as the rules determining what may and may not be private property, is a matter of politics and policy and many states have what are termed "mixed economies."[6]

Capitalism as a system developed incrementally from the 16th century in Europe,[8] although capitalist-like organizations existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages.[9][10][11] Capitalism became dominant in the Western world following the demise of feudalism.[11] Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of industrialization throughout much of the world.[2]

Variants on capitalism may include, depending on the theorist, such concepts as anarcho-capitalism, corporate capitalism, crony capitalism, finance capitalism, laissez-faire capitalism, technocapitalism, Neo-Capitalism, late capitalism, post-capitalism, state capitalism and state monopoly capitalism. There are also anti-capitalist movements and ideologies including Anti-capitalism and negative associations with the system such as tragedy of the commons, corporatism and wage slavery.


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

-- 22 May 2010, 19:12 --

Red Chief wrote:Well I'll be as persistent as Sir Shafique.
Once more.

The capitalistic mindset is aimed at creating prosperity and lifting the individual's standard of living.


Why is it comming from Capitalism? It could be a side effect of Capitalism for some period but not the goal. Moreover stat for decades does not give any evidence of that.


Why do you work?

Do your work for your government to pay taxes, or do you work for your own prosperity?

Take a minute if you want. :wink:
RobbyG
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Re: The Business Cycle Theory - Economics May 22, 2010
Well. I will not pretend Shafique if you stop pretending Berrin with his extensive cut and paste.

Anyway read the article. It helps you release your ears from the liquid that was pissed by propaganda.

Have a nice night. :wink:
Red Chief
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