Anyone read this guy, specifically his 7 Deadly Innocent Frauds?

I'm just reading it after seeing it reference on a couple of financial blogs. From my naive ideas of it so far, it seems like Keynesian theory on roids.

One of the key observations is that many of our recent recessions have come after periods of surpluses.

2/25/2010 11:12:13 PM

I'd describe it as "anti-monetarism"

2/25/2010 11:24:10 PM

Quote :

"One of the key observations is that many of our recent recessions have come after periods of surpluses."

Is this really a "key observation" these days? I sort of figured that the fact that the economy works in cycles and what goes up must come down was self evident to most people.

2/26/2010 7:50:45 AM

You're saying it should be self evident that when a government runs a surplus it should be followed by a recession?

2/26/2010 3:34:30 PM

^^ the economy is not a mindless force of nature, even if it acts like it in some cases.

You have almost a defeatist attitude that this is how it must be.

2/26/2010 11:23:32 PM

Not defeatist, but realistic. Like most things in life, balance in the economy is achieved not with precision but with correction back and forth across the middle. It's like someone balancing on a wire, they don't stand perfectly still, they sway and shift from side to side as they over correct one way or the other, but that correction is what achieves balance. So it is with the economy, periods of growth will be balanced with periods of decline.

2/27/2010 9:25:40 AM

its more like the guy tries to run full speed across the wire, falls off, climbs back up, and then tries to run across again. The only time he is making useful progress is when he's climbing up the ladder. There is a possibility to have an economic system that performs at sustained steady growth.

2/27/2010 9:36:32 AM

We could have steady sustained growth if we had responsible monetary policy. The boom bust cycle is caused by the Fed's tinkering with interest rates. Everyone loves the boom, but everyone hates the bust. The bust is a necessary consequence, and the government - by trying to "stimulate" during a recession - is just adding to the problem.

2/27/2010 9:42:17 AM

did you read the OP? you might find it interesting.

2/27/2010 9:45:57 AM

^^^ Well, normally such booms and busts occur within individual segments of the economy instead of the economy as a whole, thus over time the economy continues to grow. A well diversified economy will see sustained growth, but even with that growth there will be rises and declines.

2/27/2010 9:52:24 AM

I read some of the seven deadly frauds. I wish there was an "abridged" version with less rambling.

2/27/2010 10:10:51 AM

Quote :

"Imagine you are expecting your $2,000 social security payment to hit your bank account which already has $3,000 in it, and you are watching your account on your computer screen. You are about to see how government spends without having anything to spend. Presto! Suddenly your account statement that read $3,000 now reads $5,000. What did the government do to give you that money? It simply changed the number in your bank account from 3,000 to 5,000. It changed the 3 into a 5. That’s all. It didn’t take a gold coin and hammer it into a computer. All it did was change a number in your bank account by making data entries into its own spread sheet which is linked to other spread sheets in the banking system."

I see. No gold coins passed through the tubes of the internet; the government just changed numbers in your bank account.

2/27/2010 12:51:30 PM

Why does that warrant rolleyes?

2/27/2010 1:46:07 PM

Quote :

"One of the key observations is that many of our recent recessions have come after periods of surpluses."

Do surpluses often come after recessions?




What about does he say about structural unemployment and its permanent effects in the information age?

2/27/2010 11:14:58 PM

^^Even if true, the guy is making online banking sound like a fucking conspiracy.

Here's a real winner:

Quote :

"If the govt. doesn’t tax because it needs the money to spend, why tax at all? Answer: The govt taxes to regulate what economists call ‘aggregate demand’ which is a fancy word for ‘spending power’ In short, that means that if the economy is ‘too hot’ raising taxes will cool it down, and if it’s ‘too cold’ cutting taxes will warm it up. Taxes aren’t about getting money to spend, they are about regulating our spending power to make sure we don’t have too much and cause inflation, or too little which causes unemployment and recessions.****"

Yes. Right now we are being taxed because the economy is definitely "too hot." Are you ready for it: ROLLYEYES

I don't know. Maybe dumping $3 trillion a year into a few bank accounts might devalue our currency a tiny bit...

[Edited on February 28, 2010 at 8:06 AM. Reason : ]

2/28/2010 8:05:57 AM

^ To be fair, from my reading of it, he seems to believe that our government is pursuing the wrong policies at the moment, precisely because they believe these "innocent frauds". That said, I think he's vastly under estimating the effect that faith in the value of a currency has on its value in the first place. It seems to me that if a government were to continue printing money and could magically always find the proper tax rate, then either you would have no real economic gain, or you would find yourself at a point where no one values your currency, no matter how much you tax it. His entire premise seems to rest on the idea that as long as the government can tax you, they can create a demand for their currency and therefore a value for it. This is all well and good until the people decide to stop paying taxes.

That said, I have a really hard time listening to anyone who things that THIS IS THE APPROPRIATE WAY TO HIGHLIGHT A POINT THAT YOU WANT TO EMPHASIZE IN A "BOOK"

2/28/2010 10:05:31 AM

Quote :

"You're saying it should be self evident that when a government runs a surplus it should be followed by a recession?"

For the record, the last time there was an actual budget surplus (not an accounting fraud executed by counting the Social Secuity fund against the deficit) was 1969.

So starting there this guy is an idiot.

But yes, tax revenues and "surpluses" track the greater economy, this is not shocking.

2/28/2010 10:21:28 AM

Quote :

"That said, I think he's vastly under estimating the effect that faith in the value of a currency has on its value in the first place."

I still haven't had a chance to read through it all, but that too was my impression of the theory from what I've been exposed to.

This is where I saw some of the theory postulated first, via this guy Rodger Mitchell in the comments. And you can read some of the critiques

http://www.ritholtz.com/blog/2010/01/moyers-gs-corporate-tax-rate-1/

2/28/2010 11:01:19 AM

Quote :

"Maybe dumping $3 trillion a year into a few bank accounts might devalue our currency a tiny bit."

Inflation isn't the worst thing, especially during a recession. In a recession capital becomes overvalued, reducing it's value through inflation is a way to encourage investing.

2/28/2010 11:12:34 AM

Quote :

"In a recession capital becomes overvalued"

Seems like a natural event following a period where capital was undervalued thanks to credit creation.

2/28/2010 1:10:56 PM

well you want to fight off both, two wrongs don't make a right and such

2/28/2010 1:31:48 PM

That would be fine if contracting credit after the fact was a "wrong".

2/28/2010 1:40:19 PM

credit contracted itself, but it contracts far too much, fear tends to be contagious.

2/28/2010 8:42:43 PM

As does exuberance.

In both instances, someone profits and someone doesn't. So why should we favor one environment over the other?

2/28/2010 8:46:49 PM