Essential Economics for Politicians

On pages 642-643 of Will Durant’s remarkable book Caesar and Christ(1944) he discusses Diocletian‘s economic policies. (Diocletian reigned from 282 to 305 A.D.)

In years of peace Diocletian, with his aides, faced the problems of economic decay. To overcome depression and prevent revolution he substituted a managed economy for the law of supply and demand…. To ensure the supply of necessaries for the cities and the armies, he brought many branches of industry under complete state control, beginning with the import of grain; he persuaded the shipowners, merchants, and crews engaged in this trade to accept such control in return for government guarantee of security in employment and returns…. In 301 Diocletian and his colleagues [joint rulers of an administratively divided empire] issued an Edictum de pretiis, dictating maximum legal prices or wages for all important articles or services in the Empire…. The Edict was until our time the most famous example of an attempt to replace economic laws by governmental decrees. Its failure was rapid and complete.
 
Bruddah IZ said:
CHART: Here's How 175 Various Items Affect The Rate Of Inflation

http://www.businessinsider.com/breakdown-of-consumer-price-index-basket-2014-1

Somehow we always interpret "inflation" as price change (symptom) as opposed to the cause, an increase in money supply.
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Money supply is not the only cause of inflation. A low level of inflation actually helps cushion the impact of a recession.

You believe that the Fed is responsible for the bust and boom cycles because it manipulates money supply that causes inflation. That belief is not supported empirically. In the 100 years before the Fed was created, there were 44 recessions. In the 100+ years since, there were 22. The boom and bust cycle is inherent in a free market. A free market is not entirely rational.
 
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Bruddah IZ said:
So itʻs your understanding that the 2008 crisis was cushioned by low inflation?
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To be honest with you, I'm very tempted to give you links, but you're already very well read. Plus, I definitely don't want to start a links war with you. :)
 
Laced said:
To be honest with you, I'm very tempted to give you links, but you're already very well read. Plus, I definitely don't want to start a links war with you. :)
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I'm not sure Izzy reads much of the stuff he copies. He is rarely able to discuss any of the content in a manner that would lead me to believe he understands it.
 
Laced said:
You believe that the Fed is responsible for the bust and boom cycles because it manipulates money supply that causes inflation.
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An increase in money supply (inflation of money supply) causes a decrease in the price of borrowing money (interest). A decrease in the cost of money (interest rates) causes an increase in home prices because more people have access to more money to buy/sell homes. You don't need links to understand the economic forces of supply and demand.
 
Laced said:
Money supply is not the only cause of inflation. A low level of inflation actually helps cushion the impact of a recession.

You believe that the Fed is responsible for the bust and boom cycles because it manipulates money supply that causes inflation. That belief is not supported empirically. In the 100 years before the Fed was created, there were 44 recessions. In the 100+ years since, there were 22. The boom and bust cycle is inherent in a free market. A free market is not entirely rational.
Click to expand...
"That belief" is not only empirically supported but historically supported as well. The Roman's inflated their money supply through counterfeiting /debasing until the people no longer valued Roman money for exchange.
 
Bruddah IZ said:
"That belief" is not only empirically supported but historically supported as well. The Roman's inflated their money supply through counterfeiting /debasing until the people no longer valued Roman money for exchange.
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Why do we need to look at what Romans did when we have our own history for comparison? Recession, or boom and bust cycle as your favorite economists put it, is as old as the free market. It existed before and after the creation of the Fed. Before and after the gold standard. That fact flies in the face of your argument for elimination of the Fed and reversion back to the gold standard.
 
Laced said:
Why do we need to look at what Romans did when we have our own history for comparison? Recession, or boom and bust cycle as your favorite economists put it, is as old as the free market. It existed before and after the creation of the Fed. Before and after the gold standard. That fact flies in the face of your argument for elimination of the Fed and reversion back to the gold standard.
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How does it go? "Those who don't know history.....repeat it" Why is U.S. monetary policy fundamentally unlike Rome's monetary policy?
 
Bruddah IZ said:
How does it go? "Those who don't know history.....repeat it" Why is U.S. monetary policy fundamentally unlike Rome's monetary policy?
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We have to know all history, not selectively.

Even if we eliminate the Fed, we still need a central bank. How would a central bank be different from the Fed that enjoys independence from political influences? A private central bank doesn't mean lack of government interference, as there would be government-set boundaries on the private central bank.

On a more fundamental level, government is not some abstract evil entity. Rather it's the will of the majority in a political sense. The principle of limited government is to protect minority rights free from the whims of the majority.
 
Bruddah IZ said:
How does it go? "Those who don't know history.....repeat it" Why is U.S. monetary policy fundamentally unlike Rome's monetary policy?
Click to expand...

It's interesting to see that Izzy has given up his 1890's economics theory and replaced it with 4th century economics.
 
Laced said:
Recession, or boom and bust cycle as your favorite economists put it, is as old as the free market. It existed before and after the creation of the Fed. Before and after the gold standard. That fact flies in the face of your argument for elimination of the Fed and reversion back to the gold standard.
Click to expand...
You are missing the cause of the Boom and Bust cycle. Did you know that Canada has never had a financial crisis? They've (Canada) had recessions which are not the same as a Boom and Bust cycle that lead to all U.S. financial crisis from the depression to present day. Recessions are healthy corrections to the market when not bailed out by inflating the money supply through so called quantitative easing. How perverted that, in the U.S., inflating money supply causes booms followed by bust that rely on a rescue plan that further inflates the money supply through so called quantitative easing.
 
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