Predicted what? That there are going to be economic cycles? (Almost) every economist knows this. Knowing it does not make anyone an economic genius
Why inflation is a terrible tax
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Lexicus
Deity
See, this is another great example of the denial in which the field's mainstream is currently immersed. They spent the 1990s and the 2000s declaring that the Great Moderation had ended the business cycle as we know it, and then the financial crisis happened and within a few years they were pretending that "everyone knows" the economy has cycles. It has been very funny to me to watch all this unfold over the past decade.
Up above you said that you lack faith in the ability of markets to regulate themselves. That's good, it shows you have some basic grasp of reality. It is curious that you are now defending the predictive power of theories and models that are based on blind faith in the ability of markets to regulate themselves.
Incidentally, here is wikipedia on this:
I increased the size of the relevant text for emphasis because there was already a bolded bit in there.
I guess we have different definitions of "mainstream". Would you say that Keynesian school of economics is mainstream? Would you say that the Keynesian school of economics does not admit the existence of market cycles?
You know what? This is getting asinine. You keep asserting stuff without even having read what I wrote. I respect your contributions here Lexicus, and although we've made some slow progress, it seems that for the most part this is going nowhere. But I nevertheless appreciate your contributions.
Lexicus
Deity
That's a good question. The problem is that we have different definitions of Keynesian, not "mainstream." The mainstream of economics since the end of World War II has been defined by the 'neoclassical synthesis.' This basically (so its adherents claimed) incorporated Keynes into the framework of classical economics. So in this sense "Keynesian" economics are "mainstream." But the problem is that this synthesis really brushed Keynes aside and kept the old equilibrium models of the economy intact. This became even more the case when the interventionist policy ideas that characterized Keynesian economics from the 1930s until the 1970s were largely ditched with the popularity of Milton Friedman and the monetarist school of thought. By now mainstream economics has almost entirely abandoned Keynes (with few individual exceptions). And virtually every mainstream "Keynesian" economist believed in the Great Moderation and that business cycles were a thing of the past. So you tell me whether they were Keynesian.
My answer would pretty much be "no." New Keynesianism, the neoclassical synthesis, is not Keynesianism. The heirs of Keynes are, in my view, those economists working within what's called the "Post-Keynesian" school, which represents a much more radical break with classical economics than the "New Keynesian" or mainstream school, for a variety of reasons some of which I can get into if you like.
Note that my challenge is something of a trick question. Keynes himself was somewhat ambivalent about his own insights, and arguably walked them back a little bit because their radical implications were fundamentally in conflict with the axioms of classical economics. The Post-Keynesians, often coming from a background of left-wing politics and Marxist economics, were much less worried about that sort of thing. It's possible to derive different readings from Keynes because of this ambivalence or contradiction in his own work.
tl;dr, best not to waste much time worrying about tropes like "Keynesianism" and instead to look at the actual substance of theories.
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It was listening to Mitchell and Wray that I learned about MMT (I was researching Guaranteed Income), and it was while listening to them that I found that they ignored too much of the real economy, which is how I noticed the damage they do by spending into the middle instead of into the bottom (and they also seemed to miss how much of Federal debt is written in real terms).
My other major complaint is that they too often use the distinction of "private" vs "public" debt, and I think that really, really misses the point. Private debt should be divided into 'productive debt' and 'consumer debt'. We want the majority of debt to be business debt, because we absolutely still want bankruptcies at a certain bubbling. And we want inflation to be low so that we can most-intuitively monitor pricing signals (which is its own type of magic). Whereas, other than special circumstances, I can see nearly no value to consumer debt.
My other major complaint is that they too often use the distinction of "private" vs "public" debt, and I think that really, really misses the point. Private debt should be divided into 'productive debt' and 'consumer debt'. We want the majority of debt to be business debt, because we absolutely still want bankruptcies at a certain bubbling. And we want inflation to be low so that we can most-intuitively monitor pricing signals (which is its own type of magic). Whereas, other than special circumstances, I can see nearly no value to consumer debt.
Lexicus
Deity
@Hehehe you weren't really doing this, sorry about that. But you were implying that the predictive power of these theories is more or less equivalent to any other theory.
In one way, it does, but in another it doesn't. Entities that control the conditions of their own repayment clearly need to be analyzed differently from entities that can't.
Consumer debt is generally the consequence of inequality imposed by capitalism (the political control of capitalists over markets). Keeping it to a minimum is ideal. Basic income is one way to do that. Historically, consumer debt was generally the major issue that drove political conflict in urbanized societies. When you drive people into debt merely to sustain themselves it is going to create a problem sooner or later.
In one way, it does, but in another it doesn't. Entities that control the conditions of their own repayment clearly need to be analyzed differently from entities that can't.
Consumer debt is generally the consequence of inequality imposed by capitalism (the political control of capitalists over markets). Keeping it to a minimum is ideal. Basic income is one way to do that. Historically, consumer debt was generally the major issue that drove political conflict in urbanized societies. When you drive people into debt merely to sustain themselves it is going to create a problem sooner or later.
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Naskra
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That Dalio video is a fine example of not-even-wrong analysis. "Total spending divided by total goods = The Price". WTH, Mr. Dalio, can I divide total dictionary entries by total eyeballs to get The Word? I don't think I'll be reading his self-help book.
????
We haven't gone down to pre-1990s levels, but we haven't added more debt. Private debt, by the way, is what's relevant to all these debt and credit cycles since public debt follows different rules.
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Not saying that supports the argument that the debt cycle acts like a mechanical wave. The axiom that financial events have real causes (obviously they have real effects too) is pretty much always true. The problem we have now is that financial events are driven too much by corporate governance problems in the finance sector. I think Hyman Minsky's theory of financial instability is a better explanation of the business cycle than this thing. BTW, I didn't watch a video but found a pdf by the same guy that appears about the same thing.
He's more on track than the mainstream of neoclassical macro because they hardly even admit that the financial sector exists, let alone that from it might emanate seismic waves that can liquefy the real economy. But I don't think his theory is all that useful except as a sort of vague description of how the business cycle occurs. Minsky's theory actually gives a pretty strong causal mechanism that is linked to the human world we inhabit.
Here is a link to a 1992 paper by Minsky summarizing that theory.
Notice he uses the term 'debt deflation' which I think is probably more accurate than 'deleveraging.'
Thing about that is that a lot of debt was just transferred from private to public holders, not wiped out. But overall private debt went straight up again not long after. So if we were on too much debt then, than why are we not having the same thing happen now?
It's not really controversial that the reason the stock market collapsed, and the banks after that, was that the money supply contracted do to US and French central bank actions to defend the gold standard. You need to get the timeline right.
I'm saying that the creation of debt and the repayment of debt is not in sync. And because it is not in sync it does not act as the cycles theory claims that it does. Now there's a minor amount of syncing which comes from the fact that there's more loans when the Fed is easing, and less when it is tightening. But that doesn't lend itself to a sufficient volume of sync to make the theory work.
The rest sounds like the Austrian Business Cycle theory, which no one in economics thinks is legitimate.
On this I'm a little heterodox, in that I'm more of an open economy kind of guy than most people. That being that money flows across borders with the ease of water. You lose the correlation when the economy is not closed.
Not necessarily. It could. But then too much of gets spent on coke and hookers.
Naskra
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No one tried to defend the gold standard. Everyone tried to pretend that their war debt was money-good. The trick was to make this fly.
Lexicus
Deity
Talk about not-even-wrong....well, nah, this is just wrong.
The French Gold Sink and the Great
Deflation of 1929–32
Douglas A. Irwin
ABSTRACT
https://www.dartmouth.edu/~dirwin/French Gold Sink.pdf
Lexicus
Deity
CATO Institute? If the implication is that without US and French 'hoarding' of gold everything would have been fine and dandy in the 1930s, I have to wonder what the author is smoking...and what models the "counterfactual simulations" are based on....
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Hoarding gold is not defending the gold standard. The Fed still hoards gold, have you ever wondered why?
Lexicus
Deity
Because the shiny yellow metal that drives the white man mad is "intrinsically valuable" or some poop
Wrong. Taking gold out of circulation for the purpose of maintaining the market price of gold at the designated price is defending the gold standard.
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That's actually a good guess, better than Bernanke's, at least.
Get some facts straight: The US defaulted on its WWI Liberty bonds. Gold bonds. The Treasury refused payment except in paper. Whatever you might call that, it is in no way construable as defense of the gold standard. Roosevelt confiscated (or tried to) all private gold. That is not defending the gold standard, it's aboloishing it.
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A deep misunderstanding here. Under a gold standard, there is no market price for gold, it's money, that thing which has no price.
Lexicus
Deity
The gold standard fixes the price of gold. That is its definition. Gold is not money under the gold standard. Money is supposedly (but not actually) "backed by" money under the gold standard.
And yes - Roosevelt threw out the gold standard, like every other nation in the world threw it out. The efforts to maintain it proved in vain, and they were eventually realized by a generation of economists to have been folly through and through. Sadly that knowledge seems to have been forgotten in the meantime.
