Topic: Are all stimulants bad? (Read 4095 times)

It took a while until people realized that the king could be as wise or unwise as he wanted. The problem isn't whether he is wise or not. Injustice is caused by the very institution of the king. The entire concept of king and kingdom is flawed. Therefore, people invented a deflationary decentralized cryptocurrency. ;-)

1) The FED is wholly owned by those corrupt banks.  If you believe the banks are corrupt then so if the Fed.  It is like saying that guy is a murderer but his right eye is innocent.

2) The king might not be wise.  That is the entire root of the problem.  Greenspan admitted he was WRONG.  He thought loose money would be corrected by market forces.  That banks wouldn't take on too much risk and act in their own self interest.  Greenspan forgot (or was likely too close) to realize that assumes all the actors are rational and face real consequences.

So yes if the FED was completely incorruptible, always accurate, and it could be guaranteed that would NEVER change in the future (not in a decade, not in a millennium) then monetary intervention (tightening and loosening to match money supply growth to economic growth) could in theory be beneficial.

The reality is the FED is BOTH corrupt (beholden to the banks interest over the interests of the citizens) AND fallible.  We have 50 years of horrible monetary policy as their track records.  On a larger context that concept is called a benevolent dictatorship.  

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

Free markets are to Democracies as Centrally Planned markets are to Dictatorships.

"Democracy is the worst form of government except for all those others that have been tried."

Maybe someday technological and evolutionary progress will allow for the creation of the perfect Utopian to administer the Utopia see "The Culture" fiction (Iain M. Banks).  In the meantime Democracies and free markets are optimal given the limits of human technology and evolution.

+1
I wonder if this principle applies to the so-called "market technical analysis" pseudo-science (some call it voodoo sciense). So, let's Trade the Traders, hunt the hunters 

There is a simple fundamental reason why economics will never become a scientific theory that can accurately predict market failures no matter how hard we try: it's self-defeating. Anytime an economic theory is released that accurately predicts X, speculators armed with that theory will be able to bet on X happening and change the result in the process. If X is a depression, people will stock up on supplies and employers will hold off on starting major projects so they can do so with cheap otherwise unemployed labor. If X is a period of economic growth, banks will lend freely, savings rates will go down, and the projected graph of increasing prosperity will turn our much different from how it was originally predicted as people embark upon such various means to drag some of the prosperity of the future into the present. Then there are the self-fulfilling prophesies: a theory that predicts a bank run can cause a bank run, a theory that predicts a speculative bubble and crash will cause, or at least reinforce, the bubble and crash, etc.

Economics needs to accept a simple piece of wisdom from the field of computer science: it is impossible for a system to accurately predict the workings of a system more complex than itself.

Stimulation represents a miss-allocation of resources. Forcing the market to expend its scarce resources on something that it would otherwise not have.

This is the same problem with any centrally planed economic policy. Once you accept that values are subjective (and thus only individual rational actors can know what their own true values are) then you accept that only the collective values of the market can efficiently allocate resources according to those values. Resource allocation that is a function of a bureaucrats values results in destruction of total wealth (value). aka socialism.

Since most people just want to maximize their own personal wealth through the mechanism of voluntary trade, the market results in an incredibly efficient wealth creation machine. EVERYTHING the government does to defy this mechanism (involuntary trade, eg: taxation) makes it less efficient, hence society poorer.

It is important to realise that the manipulation of the money supply cannot on its own create new goods, it can only redistribute existing ones, or more precisely, alter our perception of the scarcity of them. According to the Austrian Business Cycle Theory, if new money is injected through the loan market, in particular loans to businesses, this leads to a change of the production structure that is unsustainable, because it does not correspond to the time preference of the market participants. Eventually the boom comes to bust, when the unsustainability manifests itself in the prices. The bust rearranges the production structure into one that is sustainable. The bust is painful, but in the long term unavoidable. You can postpone it or shift the burden around (e.g. onto the taxpayers) but eventually the mismatch between time preference and production structure will materialise somewhere.

If the stimulus is just new injection of money, this will push the economy away from the equilibrium, so it can't help.

FTFY

Good point.  It will be important in some instances to point the finger and find out who did what potentially corrupt thing with the money supply and when.  However for the coin community the important thing is to provide a security solution, a currency system in which such corruption is much more unlikely.       

It is very unlikely a single entity can control the whole system. The people around the wise king is the root of corruption. FED is not the problem, but those banks are

But anyway, in a society of high productivity, efficiency is not a concern

Basically you are asking:  can't a good king be a good system of government?  The answer of course, is yes..  it could.  Yes, it could be wise to give some really smart and totally selfless good people total control of the money system.   Yes, it could be good.  However in practice there are some security considerations we must consider due to known factors in human psychology.  A benevolent monarchy may be the best system of government for a variety of reasons (efficiency, quickness of action, printing money at the right moment) but it exists as an unstable equilibrium and all it takes is a couple sociopathic small-minded people to really fuck things up.  

Oh, and the money supply for bitcoins is increasing now which makes it today an inflationary currency, though according to plan this will change in 20 years or so.    

  

I think it's a very interesting analogy. The brain decides that the whole body should have coffee, and the brain doesn't care whether some parts of the body get "the runs" or skeletal/muscular problems or anything like that.

Similarly, a centralised government convinces the populace that a stimulus is essential because "seasonally adjusted GDP is 2% lower than last year, and me and the boys wanted to construct some really big projects in Western Australia, which is why we need to inflate the currency, thus stealing some of your savings. Remember how we said we would make the economy grow? Hope you don't mind! And even if you do, the elections are coming up in a couple of years so it's all good."


Australian economists may say certain things on tv, yet the AUD currency seems to be inflating just as fast as the USD. Bear in mind that if you look up "shadow government statistics" or "shadowstats", you'll find US inflation to be somewhere around 10%. The Aussie media also like to spread the lie that their fantastic banks must be protected against overseas problems, when in reality it's those banks doing the lobbying and creating problems.

I think the term "stimulus" used in economy is very wrong

The money FED printed in no way acts like medicine to cure the disease, they are more like the blood put into the body to keep it from dieing, and the real problem is caused by feeding too much blood into the body (loosening) and taking out too much blood from the body at a later time (tightening)

A multicellular organism is made up genetically identical cells. Its survival relies on it being in every cell's genetic self-interest and evolutionary design to help every other cell survive. If a foreign cell enters an organism's body, the organism's immune system will destroy that cell. This shows how dangerous conflict can be, and why laws that respect people's rights are important.

That part I may have to agree. Right now modern economics looks and feels more like a voodoo science.

Maybe, however right now we have no real evidence either way. In 1000 years there may be enough data collected to be able to call economics a science. Right now we are involuntary subjects in a massive economics experiment. Perhaps in the future people will look back and think of it like we do the Nazi medical experiments on the jews.

Also, I don't think keynes recommended constant stimulus (which is what happens for political reasons).

I am not even talking about being 100% correct. I am talking about evidence-based medicine.

Any economic theory is based on very small sample size. To fit your analogy, it would be equivalent to a drug only being tested on 5 people with wildly different characteristics (ages, gender, comorbid diseases, other medications, etc), and then your doctor recommending that you take it. Also, he has financial incentive for you take the drug.

Edit: It is more like your doctor tricking you into taking the medicine, and if you refuse, forcing you.

No doctor can be 100% correct.
But there's other countries and history you can study from.

Edit: I think our differences is deeper than who is going to prescript medicine. It's about whether we should use any medicine at all.
Australian's view is letting nature taking its course is the best option, any intervention is bad intervention.
As soon as you start talking about "how" and "who", you already admitted there a possibility of better outcome.
As long as such possibility exists, it's legit for someone to say  "let's try it".

What if the majority population calls for it? Mob rules?
A skin infection patient takes antibiotics, its not fair to his liver, brain, muscles...

I guess the question is, are we on the same boat? or should we just let the society fall apart.

And how was it determined which medicine to use?

When you are sick, not all cells in you body need to be drugged, yet you take your medicine, putting up with the side effects.