Keynes Vs. Hayek

This is a discussion on Keynes Vs. Hayek within the Economic & Fundamental Analysis forums, part of the Methods category; Originally Posted by FarQuinnell FarQuinnell, yes! You are indeed very sophisticated. No flies on you......

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Old Aug 24, 2011, 10:25pm   #46
 
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Re: Keynes Vs. Hayek

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FarQuinnell, yes!
You are indeed very sophisticated. No flies on you...
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Old Aug 24, 2011, 10:29pm   #47
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Re: Keynes Vs. Hayek

to be honest I think this is a 2D or a 3D discussion for what is actually a 5D or 6D problem. Yes Atilla, an a 1D economy raising taxes will reduce defecit / increase surplus. But in a 2D economy, 10% of $10trl is better than 20% of $15trl. And, of course, tax rates are never unifirm, so you need to know whether to put a steepener or a flattener on. And, of course, you need to know (or guess) how the short end and the long end are going to react - raising taxes on the wealthy may increase tax revenues, but equally decreasing tax levels on net debtors may well accelarate any deflatio9nary cycle.

It just isn't anywhere near as simple as "charge more -> increased profits"


(and in reality its a 12 or 13D proble)
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Old Aug 24, 2011, 10:32pm   #48
 
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Re: Keynes Vs. Hayek

But Atilla, we've increased taxes, and national debt has risen. Despite tax increases, VAT et al, various cuts, and even more planned cuts, the deficit increased. Add to this the social unrest of the recent riots, the massive unemployment, particulary among young people, alarming inflation and low GDP growth. It's not working. They are trying what you suggested and it's not working. If you find yourself in a hole, stop digging. Maybe try something else.
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Old Aug 24, 2011, 10:32pm   #49
 
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Re: Keynes Vs. Hayek

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Yesterday I thought we were making progress, then I come back today and see that you slept on it and have reverted to mean. Leopards and spots springs to mind. What happened to thinking outside the box. Everyone knows what doesn't work, how about some new ideas. I hope your trading has improved from the days of the Dow Threads where every single thing you said and did was wrong. Remember all that ?
... and I thought you were beginning to see the light in the sound reason behind raising taxes...

Re: trading, agreed and I paid my dues reow trading. I'm now purely a technical trader.

I notice you are not doing too well on FX trading...
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Old Aug 24, 2011, 10:33pm   #50
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Re: Keynes Vs. Hayek

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hang on, me or him?

I think you know the answer.
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Old Aug 24, 2011, 10:37pm   #51
 
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Re: Keynes Vs. Hayek

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to be honest I think this is a 2D or a 3D discussion for what is actually a 5D or 6D problem. Yes Atilla, an a 1D economy raising taxes will reduce defecit / increase surplus. But in a 2D economy, 10% of $10trl is better than 20% of $15trl. And, of course, tax rates are never unifirm, so you need to know whether to put a steepener or a flattener on. And, of course, you need to know (or guess) how the short end and the long end are going to react - raising taxes on the wealthy may increase tax revenues, but equally decreasing tax levels on net debtors may well accelarate any deflatio9nary cycle.

It just isn't anywhere near as simple as "charge more -> increased profits"


(and in reality its a 12 or 13D proble)
Where did you learn to drive. I'd recommend IAM for some one - advanced as your good self. Don't forget to comment on hazards of watching 3D ec%my through a pri$im at 45 d3gr33 angle...
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Old Aug 24, 2011, 10:43pm   #52
 
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Re: Keynes Vs. Hayek

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And you're right, no billion pound wacky adventures until all debt is cleared.
No billion pound wacky ventures full stop .... as you are simply piling on inefficiencies that future generations will have to deal with.

I guess what you are proposing is a similar thing to what Merkel & Sarkozy were discussing & to enshrine balanced budget into the European constitution.

Remember Shakone that the economy has a natural stabilizer in place anyway. During boom times governments will tend to generate surpluses whilst during bad times, budget deficits & increased social payments will automatically have a stimulative effect. there is no need to raise taxes ..... no need messing around with your trade once you're in
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Old Aug 24, 2011, 10:45pm   #53
 
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Re: Keynes Vs. Hayek

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But Atilla, we've increased taxes, and national debt has risen. Despite tax increases, VAT et al, various cuts, and even more planned cuts, the deficit increased. Add to this the social unrest of the recent riots, the massive unemployment, particulary among young people, alarming inflation and low GDP growth. It's not working. They are trying what you suggested and it's not working. If you find yourself in a hole, stop digging. Maybe try something else.
I said UK was pursueing correct policy. I don't dispute it.

I also endorse aggressive taxation. I would also tax bonuses at a much higher level.

Let the bankers leave.

Yep I'm feeling the pain too. Know what you mean. But no alternative.


I was arguing against

1. Cutting taxes
2. Raising interest rates

As some have prescribed which is suicide imho. Not for me but for the whole of UK as a Nation. At some point individuals need to place the country ahead of their self interests. Adam Smith's invisible hand is BS theorem dog eat dog world. Back to the Victorian era.

Although as CV trumpets - economic books will tell you otherwise. Theory is not always good practice.

I'm signing off. Have fun guys...

Enjoy all that you do and say
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Old Aug 24, 2011, 10:50pm   #54
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Re: Keynes Vs. Hayek

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... and I thought you were beginning to see the light in the sound reason behind raising taxes...

Re: trading, agreed and I paid my dues reow trading. I'm now purely a technical trader.

I notice you are not doing too well on FX trading...
There is no sound reasoning for raising taxes. Theres plenty of good reasons to lower them though. Incentives people to work harder, make more money and indirectly pay taxes through their personal spending.

The single biggest thing that needs to be done is slash govt and state along with a bonfire of red tape, restrictive legislation, bureaucracy and so on.

PS don't confuse real trading where I posted plenty of statements recently with competition demo trades which are completely irrelevant
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Old Aug 24, 2011, 10:52pm   #55
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Re: Keynes Vs. Hayek

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Where did you learn to drive. I'd recommend IAM for some one - advanced as your good self. Don't forget to comment on hazards of watching 3D ec%my through a pri$im at 45 d3gr33 angle...
the London School of Economics.

You?
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Old Aug 24, 2011, 11:05pm   #56
 
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Re: Keynes Vs. Hayek

Oh ..... those communists

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the London School of Economics.

You?
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Old Aug 24, 2011, 11:39pm   #57
 
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Re: Keynes Vs. Hayek

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No billion pound wacky ventures full stop .... as you are simply piling on inefficiencies that future generations will have to deal with.

I guess what you are proposing is a similar thing to what Merkel & Sarkozy were discussing & to enshrine balanced budget into the European constitution.

Remember Shakone that the economy has a natural stabilizer in place anyway. During boom times governments will tend to generate surpluses whilst during bad times, budget deficits & increased social payments will automatically have a stimulative effect. there is no need to raise taxes ..... no need messing around with your trade once you're in
Again, good post, there is a natural stabiliser. As I see it though, the politicians interfere with the natural stabilisation in the wrong direction, which makes it more unstable. I'd suggest that lowering taxes in bad times and raising in good will make things more stable. However, if the suggestion is that government don't interfere at all, then I'm not entirely against that, as long as they do it consistently in both boom and bust. Sadly it's unlikely. The idiots will want to govern even when it's not needed. And CV is right that the state needs drastic slashing. Again unlikely though.
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Old Aug 25, 2011, 9:59am   #58
 
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Re: Keynes Vs. Hayek

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Giving up the will to live...

Look policy is simple...

1. Raise Taxes
2. Reduce Spending
3. Mild inflation > interest rates

Hey presto debt paid off in no time.

Anything else is pissing in the wind...
1) Raise taxes:

I have explained the Laffer curve to you but you refuse or cannot understand.

2) Reduce Spending

When the government says it will reduce spending it means it will reduce the amount it increases the deficit. That is like someone who is building up a debt of £500/month on their credit card saying that they have reduced spending because now it's only £450/month. You are too gullible and naive to understand.

3. Mild inflation > interest rates

The problem is that you don't understand what inflation is and you don't understand how interest rates are set.

Saying 'Mild inflation' is like saying a little bit pregnant. At one point you said taxes curb inflation "Raise taxes - demand side management to curb inflation", then you say "Exchange rates are NOT centrepiece of UK monetary policy. It is control of inflation. Exchange rates are consequence of interest rate, inflation and BoP".

For someone who keeps saying "Basic Economics" it is clear that you don't know the difference between Monetary Policy and Fiscal Policy. You also have never heard of an inflationary depression.

Inflation is an expansion of the Money Supply.

When was the last time you heard an analyst say: "The stock market is inflating"?
When was the last time you heard an analyst say: "The price of gold is inflating"?

Doesn't make sense does it?

Similairly, when was the last time you said that you need to raise your tyre or a balloon?

Doesn't make sense either.

Prices go up and down, money supply inflates and deflates. A balloon expands and increases in size when it is inflated, and likewise, money supply expands or increases in size when it is inflated.

The definition of inflation has changed over time and is now accepted to mean something very different from its original definition. Dictionaries only reflect what is currently popular, so such definitions should not be blindly accepted.

An increase in the money supply might not necessarily lead to rising prices, but if you have rising prices after a huge increase of the money supply then you would have to conclude it is a direct consequence of the money supply expansion. Much like what is happening now.

If modern economists were miners, they would walk into a coal mine with a canary and upon seeing the canary drop dead they would begin to theorise on what might have killed it. One would say that perhaps it was a heart attack, another would say that it may have died of a brain tumour, another would say it was malnutrition. The modern economist miners will keep theorising about what killed the canary until they all dropped dead from inhaling noxious gases.

Increasing the money supply - Debasement. (BASIC ECONOMICS!)

When gold and silver was used in legal tender a government that wanted to spend more money than it had would increase the supply of money by altering the quantity of gold and silver in the coins. By adding less valuable metals in the mix it could make more coins out of the supply of gold and silver that it had.

This is simple arithmetic.

1 ounce gold makes 1 x 1 ounce coin with a face vaue of £100-

Mix gold with copper:

Result

1 ounce gold makes 2 x 1 ounce coins with a face vaue of £100-

Currency has been debased but the Government tries to pass it off as pure gold. Smart people know that each coin is now worth only HALF what it used to so they now demand two coins as payment for their goods and services.

Result, prices have risen as a direct result of debasement or expansion of the money supply.

Bad money drives out good.

As people begin to realise that their money is being devalued they hoard the 'good' money so it is now removed from circulation until only the new, 'bad' money is in the economy. Because there is less money circulating in the economy the Government would have to make hoarding illegal, but it would be too costly and inconvenient to send police from door to door to find and confiscate the pure gold coins.

Solution?

Paper money. The government can increase the money supply so that it can spend more than it earns. The government does not have to worry about hoarding because any money that you 'hoard' is devalued automatically.

Result? Prices rise.

Inflation is also known as a stealth tax as it robs hard working citizens of their purchasing power. A government would be very unpopular if it taxed citizens 5% a year on their savings in the bank. It is much easier to reduce purchasing power by 5% a year because most people are like Atilla in that they don't understand economics and what is really going on.

The smart people know what is going on and they try to 'hoard' money by buying gold or other fixed assets that the Government cannot debase, or they change their money into a different, more sound currency.

Result?

Local money loses value against other currencies. Imports become more expensive. If imported raw materials become more expensive then any locally produced products which use those raw materials also become more expensive.


Inflation and interest rates.

If inflation is a debtors best friend then it must logically follow that inflation is a creditors worst nightmare. Who would lend out money if they were to get less in return? NOBODY (apart from Atilla), that is who!

When you put money in the bank you are essentially a creditor of the bank.

Who in their right mind would want to earn a rate of interest that is less than the rate of inflation? The answer is - nobody apart from Atilla, who thinks it is a brilliant idea.

So, nobody (apart from Atilla) will keep their money in the bank. Result? Interest rates need to rise to encourage savings so the bank has capital that it can use to make loans.

How does the Bank of England override this and keep interest rates artificially low so that Government can keep spending newly printed, debased money?

Answer: Debt Monetization and Q.E

How does the Government pay for this?

Increased taxes!

So, as you become impoverished by having to pay more money for your food, more money for your gas, more money for your electricity, more money for your clothing, more money for your petrol, more money for your rent, and more and more taxes while earning less income on your savings, just say to yourself that Atilla thinks it is all wonderful. None of this will fix the economy.
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Old Aug 25, 2011, 11:41am   #59
 
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Re: Keynes Vs. Hayek

All through history Govts have kept the masses just well, happy and active enough to do the work while the ruling elite took it easy in luxury. In the USA they even invented "The American Dream" and it does keep the Joe Sixpacks working and hoping.
HOPE
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Old Aug 25, 2011, 1:10pm   #60
 
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Re: Keynes Vs. Hayek

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So, as you become impoverished by having to pay more money for your food, more money for your gas, more money for your electricity, more money for your clothing, more money for your petrol, more money for your rent, and more and more taxes while earning less income on your savings, just say to yourself that Atilla thinks it is all wonderful. None of this will fix the economy.
Dude... Let time settle the score... We'll see outcome in another couple of years time...

Current policy is good - steady as she goes... All this you don't know this and you don't understand that blah blah blah is utter tosh... You go right ahead and burst a blood vessel... Don't make a mess on the floor...


Simply put with no political BS... or economic mumbo jumbo... Layman terms.

1. Raise Taxes
2. Reduce Spending
3. Mild inflation > interest rates

Pay off debts asap...

Whether anybody likes it or not is of no consequence as this is current government policy and correct one. I may have issues with application and delivery but it is good imho - better learn to deal with it and adapt. Taxes are also yet to bite in full.


Like I said anything else is pissing in the wind...


Time will tell... We'll wait and see.
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