Economics

[Adriano@10]

I'm really anticipating your input here. If you need more drinks just say the word

But just wanted to add to the inflation question that everything that these big banks touch, directly or indirectly, gets inflated.

You have inflated housing/property prices, inflated share prices and so on. They do not affect the CPI of course to a large extent because they are not spending the excess in consumer products.
So yeah, I really wanna see how inflation is not going to be triggered by "free money" given to everyone. It seems to me like "increasing the minimum wage" will help the economy argumentation.

Me and pimp are refering to this: "If you brought a group of economists from 2008 to the present day and told them that central banks had bought $9 trillion in assets and were still looking for ways to boost inflation, I don't think they would believe you," said Michael Pearce, global economist at Capital Economics.

Despite the massive amount of money pumped into the markets inflation barely showed, certainly less inflation showed then what economists expected or then what models predicted. And those 9 trillion are on top of low interest rates as they came through QE.

The current proposal in the US would put an additional 3.84 trillions onto the markets ( thats approximate), this sum could most probably be reduced by around 1 bio as i m pretty sure some benefits that are paid by the government would be cancelled.
Now if you consider that for around 20-25% of the population an increase of 1000$ per month wont change their spending and most of it will just lay on some bank account or go into fin markets most probably.
So again if we d really see real inflation that cannot be combated or that would erode the benefits of the UBI is very questionable.

 

[brehme1989]

I can easily counter that as there has been a serious lack of cash flow in the market for almost a decade. Definitely the case in most of Europe.

Go to any country in Southern Europe during the 2010s and you'd hear people say that: economy X needs Y amount of billions just to be functional. Not even to boost growth.

Greece for example probably needs around half a trillion Euros just to recover some of its economic functionality.
Italy probably needs double that amount and Spain probably needs as much as Greece (only because it is in a better situation).
And that won't affect inflation. The economies are almost ruined and this is just a life vest. What it will do is give the ability for banks to collect their debts and stimulate a tiny fraction of the economy.

The money pumped into the economy mostly went to refinance banking institutions and government spending that does not stimulate growth. In practice it was used to stop a new spiral effect. In only a few places it did stimulate investment growth. At a real level of course.

I cannot see how QE can be compared to UBI other than both could be considered inflationary strategies.

As for UBI in the USA. Just consider that if I am a property owner and I know that everyone in my neighborhood now has around 1k more to spend each month, my rental price goes up by at least $400p/m. If I am greedy it goes up by more than 1k. Why? The purchasing power is there. And in the long run, the combination o lf everyone who increases prices due to the people's ability to pay more will lead to inflation.

You're basically saying that everyone will be richer by 12k annually if such a policy is implemented. That goes against everything we know about economics.

 

[Devious]

Banks are organized groups of con gangs who take people's money to buy stuff for themselves and rely on a huge flow of money cycling between withdrawal and deposits to fool their clients into thinking that their money is safe, while if all bank clients around the world asked to withdraw their hard earned money in the same day, all banks will go bankrupt and the whole banking organization will fall apart for not being able comply. Then the economy will go downhill for few years but then humanity will pick itself up, wars and poverty will vanish and there will be more just in income distribution because rich folks will be forced to invest their money into projects instead of giving them to the gangs who use it into more political agendas, more jobs and money flow in the market and numerous positives will flourish in societies around the world, only if the organized mafia of banks disappeared.

 

[brehme1989]

Well, the first major bankers were the Medici who were a proper street gang.
The next big major banking family were the Rothschilds who were pretty much dealing with the illegal activity of gold (mostly) smuggling.
They both turned bankers to become more 'legit'. With success of course.

 

[Adriano@10]

I can easily counter that as there has been a serious lack of cash flow in the market for almost a decade. Definitely the case in most of Europe.

Go to any country in Southern Europe during the 2010s and you'd hear people say that: economy X needs Y amount of billions just to be functional. Not even to boost growth.

Greece for example probably needs around half a trillion Euros just to recover some of its economic functionality.
Italy probably needs double that amount and Spain probably needs as much as Greece (only because it is in a better situation).
And that won't affect inflation. The economies are almost ruined and this is just a life vest. What it will do is give the ability for banks to collect their debts and stimulate a tiny fraction of the economy.

The money pumped into the economy mostly went to refinance banking institutions and government spending that does not stimulate growth. In practice it was used to stop a new spiral effect. In only a few places it did stimulate investment growth. At a real level of course.

I cannot see how QE can be compared to UBI other than both could be considered inflationary strategies.

UHHH because it is just throwing money into the markets it can very well be compared. And i m sorry but your theory of the money was needed in a crisis thats why there was no inflation is BS we ve seen it over and over again in countries that are in crisis and print money like theres not tomorrow that inflation will kick in no matter how shitty the economy is going inflation can and will still occure matter of fact countries with the highest inflation usually have very shitty run down economies.
the fact that the money went to banks if anything should lead to greater inflation then when it goes directly to the public the money multiplicator is way bigger with banks then it is with private citizens as banks will give out more money then they receive while many households wont spend the extra money they get. So with banks a multiple of the sum that is handed to them will flow into the markets while with citizens only a certain percentage will flow to the markets.

Again theres a reason the free money usually flows through banks and the government and that reason usually is the money multiplicator money will just make more rounds in the economy if it s handed out that way then when it s given directly to the people.

As for UBI in the USA. Just consider that if I am a property owner and I know that everyone in my neighborhood now has around 1k more to spend each month, my rental price goes up by at least $400p/m. If I am greedy it goes up by more than 1k. Why? The purchasing power is there. And in the long run, the combination o lf everyone who increases prices due to the people's ability to pay more will lead to inflation.

You're basically saying that everyone will be richer by 12k annually if such a policy is implemented. That goes against everything we know about economics.

First of i said in theory your right in a classical economic model a ubi of 1000$ on the long run will lead to inflation which puts everyone in the same position they were in before the UBI. Thats why i posted that quote cause in the same model QE in the amount of 9 trillion would lead to a high inflation surely a higher inflation then we saw in those past years, hence the quote of economists pre 2008 would be baffled on how little inflation there was and that certain western countries would even have to fight deflation.

So why should an UBI lead to so much more inflation then free money on the credit markets? Even though it has a lower multiplier and the UBI that goes to the upper 30% more likely than not wont really flow to the markets as 1000$ more for them wont change their spending habits neither will it have a big impact on their spending power.

So could UBI lead to inflation yes it could very well but will the inflationary effect be as high as some state so that the UBI will basically be useless? I highly doubt it it just does not make sense that a lower amount of money pumped into the markets would all of a sudden lead to massive inflation and lets not forget that central banks can still tighten money supply through interest rates and they have the bigger lever since again their money multiplicator is bigger than that of the average citizen.



On you guys take on banks.. what can i say.......
I m not a big fan of what some banks and especially their leaders did, there were many fraudulent deals and manipulations (libor manipulation) and so on adn quite often it looks like they dont give a shit about the small saver i get all that.

But you guys are not considering the hugely important role banks played in our economic growth without a proper banking system that would never have been possible just like it would never have been possible if banks were not allowed to loan out more money then what they get deposited.

Basically the opposite of what devious describes would happen if all banks around the world would disappear

 

[brehme1989]

The other countries are not in the Eurozone. It is a very peculiar system and inflation is "dictated" by the strong economies.
Your post demands more a thorough reply which I'll save for when I am on the computer and not toying around at work with my phone between meetings
Hope by then Pimp sobers up and puts some work in a nice pro-UBI post. In theory I'm in favour, but in practice I see collision with the real world.

I am pretty much a banker so I know the system's flaws as well as its positives. The banking system essentially allowed "the west" to have its current standard of living as well as helped the technological advances. But the flaws are there too

 

[Pimpin]

I didnt really read what was written but I did promise to explain why Inflation with UBI is horseshit.

For people here who do not know how inflation happens, it is always a monetary phenomenon, ie fiscal stimulus or monetary policy - low interest rates. The amount of money in circulation gets far higher than what is produced which leads to more people bidding for the same thing( do not think people here are interested in monetary theory, money in circulation m1 m2 and those shits)

at least it was, for all the things in the 20th century, manufacturing was the main economic driver, you would have expansionary cycle and inflation would baloon, since most of the goods getting bought and sold were of that nature. In 21st century however, there has been a shift in these fundamental facts (though not all of them for the reasons which I will list later), even if you use ultra loose monetary policy and QE, inflation will literally not pick up at all(at least for the goods where its measured for). The reason for this has one answer, the ability to scale. In other words, economies of scale is when the cost of serving another customer are incremental, so instead of bidding against jeff for something, you may get it for lower price if jeff also buys it. So whereas before, if there was alot of demand, prices would go up since 2 people wanted 1 thing, now the demand is met with ease. This has been largely due to the nature of business models which are built around size, ie to serve more customers. (not a new concept but helps to explain how important it has become)

Think of most things you use, from hard products to internet(especially internet), netflix won't need to hire new team every time they have new subscribers, nor are the server costs much higher to serve an additional dude. Even if there is need, they can fill it with some 3rd country Emerging Market at virtually zero cost (the reason for their price hikes at netflix are very different from demand induced price hikes). One would make a case that when these subscribers are higher in number the service provider can actually lower prices, but that has been around for a while now (even if manufacturing plants used to hit capacity and then inflation would occur)

Now this explains why CPI is low, however, CPI does not include stuff that you can not scale, housing, medicine and especially lately education. So whereas if all of usa got netflix, that wouldn't lead to a price increase, however you give all of the bums in USA loans to study and this happens,

(there is a talk of packaging these shitty humanities graduates loans in same packages as fucking housing which lead to the crises but thats another topic. Also worth noting this picture is from 2010, in past 9 years this has gone way upwards, but its just to make a point)

So why does price of uni go up you ask? because if the university is at capacity, and everyone fulfills the GPA quota, it hits capacity, it can't take an unlimited amount of students, therefore they hike the price of tuition. Even if there was new universities to accommodate the new demand, the new universities would be like Trump University, with no history, shady as fuck and no one would pay money to study there (which is why the unis in top 100 are all 100+ year old, minus a few, that central european univeristy from hungary comes to mind and the 2 from saudi arabia i think). Which leads to inelastic demand and easy credit for medieval french sexuality and gender segregation studies. Another thing is the Housing bit, it is labor intensive, it has very limited supply potential (especially in countries like uk with strict house rules, tip: if you want to solve a housing crises, perhaps don't force people to live like fucking medieval noblemen) so when demand goes up supply can't meet it. Medicine as well gets expensive because if you and jeff are bidding for the same specialist, it won't lead to increase in supply (at least not in 30 years until a new specialist gets trained) therefore prices go up. Another is the patented goods (us has quite a flawed patent system but i think at times is necessary), leading to a very inelastic demand, and the sheer amount of money needed to discover new drugs.


How does this connect with UBI? Well in basic macro there are two metrics used to explain behaviour, Marginal Propensity to Consume and Marginal Propensity to Save. If you are rich you are more likely to save. However if you are a broke mf and get 1000 dollars from UBI this will lead to higher spending, which in turn (in theory in past) it used to lead to inflation. But i dont think anyone in here thinks that if 300 million americans signed up to netflix the prices would go up.. Which renders the point of inflation moot, there will probably never be that kind of inflation.


Now there is also another dimension to UBI. Usually it is thought UBI to be used to substitute all other social programs. So, thinking that would cause inflation, is foolish to say the least. The amount of UBI would be far less and far more efficient then a bloated beurocracy. Add to the fact that most of the future jobs will be done by robots or AI, unless we teach them to consume, they will not feel disappointed like humans do that someone else is getting paid while they do hard work, in a way they will be our servants, living to please us, therefore the conventional arguments against UBI are moot. The people instead will focus on universe and nuking mars, as we leave the robots to do the mundane shit. All the jobs that are getting automated, are jobs that people do not want in first place (ever met a happy truck driver?)


ps. I just read of QE and why it didnt cause inflation, governmental debt is only one part of the story, i dont wanna scare you guys but peep this.

and qe did lead to inflation, but not the one that would be detected by cpi, but it came in forms of higher valuation for firms due to increased M&A activity (leveraged loans hit record highs in 2018), the premiums paid usually were above 40% and that's at a time where s&p is at record highs...

 

[thatdude]

Jesus Christ bro you just wrote a whole economics paper for fun on a inter forum. Honestly that’s amazing

 

[Javier'sSon]

Wow, so pimp does know something other than f̶o̶r̶c̶i̶n̶g̶ ̶h̶i̶m̶s̶e̶l̶f̶ ̶o̶n̶ fuckin ugly girls weekly.

 

[Fitzy]

Good read. Cheers all.

 

[Pimpin]

So I don't know if i wrote hear, but basically i've been working for a think tnak for almost a year now, and i am thinking of quitting over some tobacco study.

I never knew i gave a shit about things like this.

 

[K.I.]

They want it to be in favor / or against tobacco?

 

[Wobblz]

They want it to be in favor / or against tobacco?

What do you think?

 

[K.I.]

I would hope they are against it kay:

I know they are prob for it and there are studies that support it but i am not sure what the process is for supporting, advocating or conducting such a study. The shit kills, people know it and they are responsible for what they do, why the study? for government policy?

 

[brehme1989]

Pimp, what do you think of the US implementing yet another QE policy. Seems like an inflation oriented move.

Sure sure, it's not a QE policy as they say

 

[K.I.]

Pimp, what do you think of the US implementing yet another QE policy. Seems like an inflation oriented move.

Sure sure, it's not a QE policy as they say

The US government is not available right now, please leave a message and they will get back to you in 50 years.

 

[Pimpin]

They want it to be in favor / or against tobacco?

 

[ADRossi]

So when is this next recession hitting America?

 

[Wobblz]

Right around the corner.

 

[Adriano@10]

So when is this next recession hitting America?

Yup around the corner Unemployment at record lows, job growths is stalling, manufacturing output is falling as is investor confidence. Shillers P/e has only been higher prior to black monday and prior to the IT crash in the 2000s. On top of that yield curve has inverted multiple times this year, repo rate seems to be out of control the last 10 days. Then you got the eu struggling with parts already hitting a recession you got a trade war with china and a chinese economy that is also slowing.

Only thing that keeps the US going currently is consumer spending but even there wit credit card debt at all time highs shit s gonna hit the fan pretty fucken soon.


Also i dont think the question of when is a recession hitting was ever answered correctly.