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<div class="gmail_quote">On Wed, May 6, 2009 at 4:15 AM, Brent Neal <span dir="ltr"><<a href="mailto:brentn@freeshell.org">brentn@freeshell.org</a>></span> wrote:<br>
<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><br>On 5 May, 2009, at 23:08, Rafal Smigrodzki wrote:<br><br>
<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid">On Mon, May 4, 2009 at 1:21 PM, Brent Neal <<a href="mailto:brentn@freeshell.org" target="_blank">brentn@freeshell.org</a>> wrote:<br>
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<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid">This represents about 30 seconds of Googling. Unless you think that the von<br>Mises Institute is too left wing for you, of course. :)<br>
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<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><br></blockquote><a href="http://mises.org/story/2948" target="_blank">http://mises.org/story/2948</a><br>
</blockquote><br>### Very nice article. How does it relate to the question of when the<br>present recession would end?<br></blockquote><br>It doesn't. It relates to your challenge about deflationary pressures during recessions. You asked for "proof." I spent 30 seconds Googling it.</blockquote>
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<div>### But the article insists that recessions are inflationary.</div>
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<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><br>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. </blockquote>
<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><span id=""></span>The short term economic forecast, as has been claimed before, is linked to a fall in aggregate demand.</blockquote>
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<div>### 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.</div>
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<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><span id=""></span>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.</blockquote>
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<div>### 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).</div>
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<blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid"><span id=""></span>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.</blockquote>
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<div>### Reverse income tax? :)</div>
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<div>Sounds like something fun to rip into, once you explain what you mean.</div>
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<div>Rafal</div></div>