[ExI] "recession is going to end in about 6 weeks"

[Rafal Smigrodzki]

On Wed, May 6, 2009 at 4:15 AM, Brent Neal <brentn at freeshell.org> wrote:

>
> On 5 May, 2009, at 23:08, Rafal Smigrodzki wrote:
>
> On Mon, May 4, 2009 at 1:21 PM, Brent Neal <brentn at freeshell.org> wrote:
>>
>> This represents about 30 seconds of Googling. Unless you think that the
>>> von
>>> Mises Institute is too left wing for you, of course. :)
>>>
>>>
>>>> http://mises.org/story/2948
>>>
>>
>> ### Very nice article. How does it relate to the question of when the
>> present recession would end?
>>
>
> It doesn't. It relates to your challenge about deflationary pressures
> during recessions. You asked for "proof." I spent 30 seconds Googling it.


### But the article insists that recessions are inflationary.

---------------------------------------

>
> Because I think we're seeing what many folks (including Damien) have
> predicted - an economic disruption based on or exacerbated by the fact that
> people don't need more manufactured stuff than they already have and in fact
> are increasingly realizing that they will pay some marginal amount for LESS
> stuff.

The short term economic forecast, as has been claimed before, is linked to a
> fall in aggregate demand.


### This is completely off, I mean, Keynesianism lifting its head from the
grave. People always want to have more stuff, or more services, or more of
both. Desire is never a limiting factor on economic activity. Only the
ability to satisfy desires is a limitation. Here we have a crisis due in
part to misallocation of resources (speculative homebuilding and
homebuying) associated with misjudgement of the validity of risk-prediction
and mitigation methods (S&P credit ratings, mortgage securitization, credit
default swaps) and exacerbated by massive levels of consumer fraud. There
was no primary problem with the manufacturing sector at all here - this is a
construction, real estate and financial crisis through and through.

--------------------------------


> There are two routes that can be taken based on this - either try to prop
> up the manufacturing sector or to transition to a different type of economy.
>  We're, alas, doing the former, which I intuit will make the short term
> outlook much poorer. But, to economists and pundits completely immersed in
> industrial age economics, it appears to be the only option, so they are
> making a rational choice, in some sense.


 ### I agree with you here - politicians selected economists who support the
most idiotic way of dealing with the problems but increase the power of
politicians, that's why the apologist economists are elevated as court
economists, and reasonable economists are reduced to blogging. Yet you are
making a correct conclusion (gov't economists are wrong) from incorrect
premises (Keynesian economics mixed with some New Age postindustrial stuff).
-------------------------------


> I disagree with that route though - I think that breaking the wage-income
> link more, recognizing that networks of people have an economic potential
> that is synergistically larger than the aggregate economic potential of
> their individual units, and using something like a reverse income tax - I
> prefer to think of it as a dividend, since I think it is more accurate - to
> compensate them for that value created will ultimately be the better
> solution to the current problem.


### Reverse income tax? :)

Sounds like something fun to rip into, once you explain what you mean.

Rafal
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