I think it came up in the economics thread recently, but things which benefit the rich do form part of GDP. As regrettably as one might regard that to be the case, GDP is a fairly mechanical measure of things.
Be careful of waving short-run logic around ("right now"...?), too...
It's not that I'm opposed to benefiting the rich, but I'm opposed to giving money to people who will simply stick it in a bank account and forget about it when extra currency would help so many people right now. And I don't see what's wrong with focusing on the immediate problems first and worrying about the long run later (when we're all dead and so forth).
May I introduce you to the polar bear? You may want to come quickly as there won't be many of them left much longer.
Also, we don't need to increase the amount of currency floating around, we need to increase the buying power that currency has.
I think it is fair for me to ask that you acknowledge that it is, in fact, a strict improvement in real GDP terms, for the same reason a new technology that causes people invested in the incumbent to take a 50% wage cut for a 20% decline in prices would nonetheless create an improvement in real GDP in the aggregate.
How does that improve real GDP, if the overall effect is deadweight loss from people that would like to exchange services with each other but they can't because they just don't have enough currency to do so?
This strays off-topic a little, but I should ask: how much money do you think should be stuffed in bank accounts, as a long-run sort of optimum? Taking it for granted that, indeed, 'right now' it would be nice to have less of such money?
I have no idea. It would have to depend on many other factors. For one thing, if social safety nets break down then people will need much higher savings to try and save for old age.
I've never understood the 'buy local' argument because it ignores the simple fact that you can't grow/make everything locally nor can you count all the turtles to the bottom of the universe. I very much enjoy both coffee and tea. They do not grow in temperate climates. Are you suggesting that I never drink another cup? Clearly that isn't the case. Instead you are suggesting that I buy from Cafe con Leche rather than Starbucks. However, where does Cafe con Leche get their tasty beans? Should I favour Starbucks if it turns out that their supplier engages in unfair trade practices? What about the impact that Starbuck's practices have on local economic conditions by driving up rent in the area due to an influx of new workers? And so forth and so on.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
Personally I want ambiance and a diversity of offerings. These things cost a premium and I'm willing to pay for them, up to a point.
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
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AManFromEarthLet's get to twerk!The King in the SwampRegistered Userregular
I think it came up in the economics thread recently, but things which benefit the rich do form part of GDP. As regrettably as one might regard that to be the case, GDP is a fairly mechanical measure of things.
Be careful of waving short-run logic around ("right now"...?), too...
It's not that I'm opposed to benefiting the rich, but I'm opposed to giving money to people who will simply stick it in a bank account and forget about it when extra currency would help so many people right now. And I don't see what's wrong with focusing on the immediate problems first and worrying about the long run later (when we're all dead and so forth).
That's not how bank accounts work.
No but that is how they work right now, thanks to our weird economic situation:
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AManFromEarthLet's get to twerk!The King in the SwampRegistered Userregular
Well, not overly strong. But we certainly don't want a weak dollar.
My dad's employer primarily gets its business from overseas contracts. Personally we do want a weak dollar...
Which is kind of like wanting some sort of weak local currency so that you can hope to use the exchange rate to lure more outside business into your area.
It's just that whereas this sort of thing is fine for national currencies backed by treasuries, for local economies, it's kind of pointless because you get perpetually dicked over by your own exchange rate every time you go to the neighboring township.
I've never understood the 'buy local' argument because it ignores the simple fact that you can't grow/make everything locally nor can you count all the turtles to the bottom of the universe. I very much enjoy both coffee and tea. They do not grow in temperate climates. Are you suggesting that I never drink another cup? Clearly that isn't the case. Instead you are suggesting that I buy from Cafe con Leche rather than Starbucks. However, where does Cafe con Leche get their tasty beans? Should I favour Starbucks if it turns out that their supplier engages in unfair trade practices? What about the impact that Starbuck's practices have on local economic conditions by driving up rent in the area due to an influx of new workers? And so forth and so on.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
Personally I want ambiance and a diversity of offerings. These things cost a premium and I'm willing to pay for them, up to a point.
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
Does this mean that the sole issue of locality is where the last dollar of profit goes?
Well, not overly strong. But we certainly don't want a weak dollar.
My dad's employer primarily gets its business from overseas contracts. Personally we do want a weak dollar...
Which is kind of like wanting some sort of weak local currency so that you can hope to use the exchange rate to lure more outside business into your area.
It's just that whereas this sort of thing is fine for national currencies backed by treasuries, for local economies, it's kind of pointless because you get perpetually dicked over by your own exchange rate every time you go to the neighboring township.
SEE I'M BACK ON TOPIC.
Well, that and the fact that you can't pay your employees in scrip so there isn't an actual draw on outside businesses.
You can't both acknowledge the idiosyncrasy of the present disinflationary situation and then argue for a practice to be held generally.
Aside from that:
(1) That is not deadweight loss. This is deadweight loss. Also you seem to be confusing liquidity demand with real output more generally.
(2) Good to know you don't think that the ideal amount of national savings should be zero, at least. But as it happens, what do you think that social safety nets save in? What do you think happens when you save?
I've never understood the 'buy local' argument because it ignores the simple fact that you can't grow/make everything locally nor can you count all the turtles to the bottom of the universe. I very much enjoy both coffee and tea. They do not grow in temperate climates. Are you suggesting that I never drink another cup? Clearly that isn't the case. Instead you are suggesting that I buy from Cafe con Leche rather than Starbucks. However, where does Cafe con Leche get their tasty beans? Should I favour Starbucks if it turns out that their supplier engages in unfair trade practices? What about the impact that Starbuck's practices have on local economic conditions by driving up rent in the area due to an influx of new workers? And so forth and so on.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
Personally I want ambiance and a diversity of offerings. These things cost a premium and I'm willing to pay for them, up to a point.
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
Does this mean that the sole issue of locality is where the last dollar of profit goes?
It absolutely does not. There is no such thing as a "last dollar." I'd also suggest that there is never such a thing as a "sole issue" in any economy, either. Economics isn't the study of money, it's the study of choice. And in order to ever have a real choice, there can't be just one sole issue. There should always be at least two.
You can't both acknowledge the idiosyncrasy of the present disinflationary situation and then argue for a practice to be held generally.
Aside from that:
(1) That is not deadweight loss. This is deadweight loss. Also you seem to be confusing liquidity demand with real output more generally.
(2) Good to know you don't think that the ideal amount of national savings should be zero, at least. But as it happens, what do you think that social safety nets save in? What do you think happens when you save?
...Where are you going with this? I feel like I'm getting tested on my grasp of economics jargon and I don't know why...
Well, not overly strong. But we certainly don't want a weak dollar.
My dad's employer primarily gets its business from overseas contracts. Personally we do want a weak dollar...
Surely we need a balanced one that's just right, not too low or too high? I'll admit that international economics is not my strong suit.
Indeed. Rule of thumb is "low and stable inflation".
But it is generally acknowledged that in the short run of things, a weaker currency causes lower unemployment and more real output, whereas a stronger currency causes more unemployment and less real output.
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AManFromEarthLet's get to twerk!The King in the SwampRegistered Userregular
Is that not what I was suggesting? When you're at home you're able to buy more, when you're abroad you're able to buy more.
My point was really that just printing money doesn't solve the problem. If it did we'd pay of the deficit in about twenty minutes.
I've never understood the 'buy local' argument because it ignores the simple fact that you can't grow/make everything locally nor can you count all the turtles to the bottom of the universe. I very much enjoy both coffee and tea. They do not grow in temperate climates. Are you suggesting that I never drink another cup? Clearly that isn't the case. Instead you are suggesting that I buy from Cafe con Leche rather than Starbucks. However, where does Cafe con Leche get their tasty beans? Should I favour Starbucks if it turns out that their supplier engages in unfair trade practices? What about the impact that Starbuck's practices have on local economic conditions by driving up rent in the area due to an influx of new workers? And so forth and so on.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
Personally I want ambiance and a diversity of offerings. These things cost a premium and I'm willing to pay for them, up to a point.
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
Does this mean that the sole issue of locality is where the last dollar of profit goes?
It absolutely does not. There is no such thing as a "last dollar."
Then, again, how do you determine the local-ness? Especially without going beyond that first turtle? The 'locally owned' artisanal restaurant gets its beef from Japan and its cheese from Belgium. The 'multi-national' McDonald's based out of Oak Brook, IL (pretend I don't live in Chicago) uses food sourced from within 50 miles. Who should I get a tasty burger from if I value locality more than good munster?
You can't both acknowledge the idiosyncrasy of the present disinflationary situation and then argue for a practice to be held generally.
Aside from that:
(1) That is not deadweight loss. This is deadweight loss. Also you seem to be confusing liquidity demand with real output more generally.
(2) Good to know you don't think that the ideal amount of national savings should be zero, at least. But as it happens, what do you think that social safety nets save in? What do you think happens when you save?
...Where are you going with this? I feel like I'm getting tested on my grasp of economics jargon and I don't know why...
Savings go to investment. They don't "sit idle" unless in very particular circumstances, and you are citing the wrong statistics if you want to show that savings are 'idling'. You are definitely off-track if you want to assert that real savings are 'idling' in some manner.
It is dangerous to confuse between what real resources are doing and what claims on those real resources, aka money, is doing unless your grasp of economics jargon is already so superlative that you are prepared to make a subtle case in unclear terms. In that I would hesitate, myself. Real saving only happens when people defer real consumption in favor of future real consumption. Money sloshing into the Federal Reserve's computers does not make factories burst aflame and service industries rend themselves asunder; it does risk a shortage of liquidity - but happily that can be resolved by creating more liquidity, assuming the financial industry not in a state of panic.
Is that not what I was suggesting? When you're at home you're able to buy more, when you're abroad you're able to buy more.
That's not what the others are saying, no. They're saying that they want a weaker dollar at home so that they can sell more goods or services overseas and increase the number of dollars they have for purchasing goods and services without running a trade deficit and borrowing so much money.
I've never understood the 'buy local' argument because it ignores the simple fact that you can't grow/make everything locally nor can you count all the turtles to the bottom of the universe. I very much enjoy both coffee and tea. They do not grow in temperate climates. Are you suggesting that I never drink another cup? Clearly that isn't the case. Instead you are suggesting that I buy from Cafe con Leche rather than Starbucks. However, where does Cafe con Leche get their tasty beans? Should I favour Starbucks if it turns out that their supplier engages in unfair trade practices? What about the impact that Starbuck's practices have on local economic conditions by driving up rent in the area due to an influx of new workers? And so forth and so on.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
Personally I want ambiance and a diversity of offerings. These things cost a premium and I'm willing to pay for them, up to a point.
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
Does this mean that the sole issue of locality is where the last dollar of profit goes?
It absolutely does not. There is no such thing as a "last dollar."
Then, again, how do you determine the local-ness? Especially without going beyond that first turtle? The 'locally owned' artisanal restaurant gets its beef from Japan and its cheese from Belgium. The 'multi-national' McDonald's based out of Oak Brook, IL (pretend I don't live in Chicago) uses food sourced from within 50 miles. Who should I get a tasty burger from if I value locality more than good munster?
You should buy from whichever restaurant you want. Or you should buy from an entirely different restaurant. Or you can have pizza instead. This isn't Sophie's Choice. There are a wide variety of ends to which you may apply your scarce means. You are not required to select from among these two, nor are you required to justify any individual choice by a single criterion.
Also: debt devaluation, suppression of downward nominal rigidity problems in prices and wages. This may even increase real wages, if prices are stickily 'too high' (depends on your theory of the labour market, really).
ronya on
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AManFromEarthLet's get to twerk!The King in the SwampRegistered Userregular
Is that not what I was suggesting? When you're at home you're able to buy more, when you're abroad you're able to buy more.
That would only be true if monetary policy were based on my travel plans. Which would certainly be great for me...
My point was really that just printing money doesn't solve the problem. If it did we'd pay of the deficit in about twenty minutes.
That depends entirely on the circumstances of the economy at the time. Right now just printing money would actually solve a lot of our direct problems. So would increasing the deficit. Also, we should always want to have some degree of national debt the issue is whether it is structural or cyclical and where it is relative to our GDP. If we stopped issuing Treasuries thanks to balancing our budget it would fuck over a lot of rather basic things simply because there'd be no more AAA rated assets to treat like sacks of money floating around.
Local currencies tend to bootstrap off alternative uses for money - to limit theft etc. in fairgrounds (mickey mouse dollars), as customer loyalty tokens, etc. - but in times of recession and excess demand for liquid money, they are capable of meeting said demand for liquidity in a way that exerts a macroeconomic impact. It's a little more subtle than offering a discount in response to poor business (although that is what it would feel like at the individual level).
Local currencies tend to bootstrap off alternative uses for money - to limit theft etc. in fairgrounds (mickey mouse dollars), as customer loyalty tokens, etc. - but in times of recession and excess demand for liquid money, they are capable of meeting said demand for liquidity in a way that exerts a macroeconomic impact. It's a little more subtle than offering a discount in response to poor business (although that is what it would feel like at the individual level).
I'm not enthusiastic about a local currency used in parallel with national currency when the local currency isn't recognized as legal tender -- but what would you think about the Greek government reintroducing the drachma as a parallel currency to the Euro?
Local currencies don't exercise power of legal tender, so for that reason they are always limited in scope and are inherently less liquid than national state-backed currencies. Introducing the Drachma would help if it didn't simultaneously cause the non-Drachma economy to go boom.
It's not less capitalist to spend your own money on some perceived local cause, fwiw. But it is fair to acknowledge that this doesn't make people better off in the aggregate and it is only very weakly capable of making people in your local area better off (insofar as you are able to spend without simply displacing someone else from said local business).
The "#!!!!#@ the rich, so I'm going to take it out on foreigners" attitude is always a bizarre one, to me. We always knew it was possible to persuade even the most passionate labour movement to tear itself apart for nationalist reasons - see Europe circa World War I - but it seems oddly easy to provoke this for fairly trivial stakes.
Ronya, as always, knows his stuff. And I'm not saying he believes the following.
But I just want to focus on the comment 'It's not less capitalist to...'
In these kind of discussions, there's always an ideological disconnect, and this is it. The idea that anyone should ever try to be more capitalist is just bizarre. It's an economic system, not a religion.
Local currencies don't exercise power of legal tender, so for that reason they are always limited in scope and are inherently less liquid than national state-backed currencies. Introducing the Drachma would help if it didn't simultaneously cause the non-Drachma economy to go boom.
I gather you're picturing a situation a Gesham's Law situation? What if the drachma wasn't compulsorily overvalued?
You may be misreading me; I was not advocating adherence to 'capitalism' on some ideological basis. I was replying to this remark:
You have two stores selling identical products, and one store sells them for more money, but you should support them anyway because they're local? How is this any less socialist than taxing me and giving the money to the store owner, or having the town take over the store, pay the former owner wages to run it, and make sure it stays open no matter what?
Which is not socialism and is indeed wholly compatible with capitalism of a fairly archetypically laissez-faire variety. Hence: it is not less capitalist.
Local currencies don't exercise power of legal tender, so for that reason they are always limited in scope and are inherently less liquid than national state-backed currencies. Introducing the Drachma would help if it didn't simultaneously cause the non-Drachma economy to go boom.
I gather you're picturing a situation a Gesham's Law situation? What if the drachma wasn't compulsorily overvalued?
Say it works; say the Greek government mandates that nobody, neither the state nor the private sector, may insist upon being paid in Drachmas if past custom and practice used Euros, so anyone who switches does so at a rate they consent to. So Greece operates on a dual-currency basis and everyone else in the Eurozone operates only on Euros, with the rate floating freely between the two.
Unfortunately this doesn't solve anything; ECB policy is inappropriately tight for Greece, but it is deliberately that tight, so Euros flooding out of Greece as they are displaced by the new currency would be just as rapidly destroyed by the ECB. So we're back to square one, at enormous transition cost. If your hope is to then hit the panic button and de-link from the Euro, then this reduces back to a plan of dropping sharp devaluation atop everybody's heads by surprise. Indeed everyone knows that your government would want to try that. Where's your credibility?
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spacekungfumanPoor and minority-filledRegistered User, __BANNED USERSregular
You may be misreading me; I was not advocating adherence to 'capitalism' on some ideological basis. I was replying to this remark:
How is this any less socialist than taxing me and giving the money to the store owner, or having the town take over the store, pay the former owner wages to run it, and make sure it stays open no matter what?
Which is not socialism and is indeed wholly compatible with capitalism of a fairly archetypically laissez-faire variety. Hence: it is not less capitalist.
Now I am confused. How is taxing people and giving the money to a store owner to keep the store owner in business or having the municipality buy and operate the store using taxpayer money capitalist?
Local currencies don't exercise power of legal tender, so for that reason they are always limited in scope and are inherently less liquid than national state-backed currencies. Introducing the Drachma would help if it didn't simultaneously cause the non-Drachma economy to go boom.
I gather you're picturing a situation a Gesham's Law situation? What if the drachma wasn't compulsorily overvalued?
Say it works; say the Greek government mandates that nobody, neither the state nor the private sector, may insist upon being paid in Drachmas if past custom and practice used Euros, so anyone who switches does so at a rate they consent to. So Greece operates on a dual-currency basis and everyone else in the Eurozone operates only on Euros, with the rate floating freely between the two.
Unfortunately this doesn't solve anything; ECB policy is inappropriately tight for Greece, but it is deliberately that tight, so Euros flooding out of Greece as they are displaced by the new currency would be just as rapidly destroyed by the ECB. So we're back to square one, at enormous transition cost. If your hope is to then hit the panic button and de-link from the Euro, then this reduces back to a plan of dropping sharp devaluation atop everybody's heads by surprise. Indeed everyone knows that your government would want to try that. Where's your credibility?
It might interest you to point out that, according to http://en.wikipedia.org/wiki/Local_currency#Modern_local_currencies, there are several local currencies being used right now in Greece.
Unfortunately their web sites are all in Greek so I can't really tell you anything else about them.
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spacekungfumanPoor and minority-filledRegistered User, __BANNED USERSregular
Understood. Of course that is not really socialist, but exerting social pressure to persuade people to support a failing business just on the basis that it is local instead of patronizing the "better" business just does not feel capitalist to me. I know that we have a sort of hybrid system here with elements of socialism like minimum wage laws, social security, and even more direct things like redistributing profits from successful insurers to less successful insurers under the ACA, but the idea that we should save a failing business even as it refuses to actually change its business model so that it can suceed just doesn't feel right to me.
Understood. Of course that is not really socialist, but exerting social pressure to persuade people to support a failing business just on the basis that it is local instead of patronizing the "better" business just does not feel capitalist to me.
That's really sort of your hang-up though, right? Each individual consumer has the right in a free-market economy to decide for himself what constitutes a "better" business based on what that individual values. If you personally disagree with what that other person decides to value, that's not socialism or whatever. That is, in fact, the very nature of freedom.
You can't both acknowledge the idiosyncrasy of the present disinflationary situation and then argue for a practice to be held generally.
Aside from that:
(1) That is not deadweight loss. This is deadweight loss. Also you seem to be confusing liquidity demand with real output more generally.
(2) Good to know you don't think that the ideal amount of national savings should be zero, at least. But as it happens, what do you think that social safety nets save in? What do you think happens when you save?
...Where are you going with this? I feel like I'm getting tested on my grasp of economics jargon and I don't know why...
Savings go to investment. They don't "sit idle" unless in very particular circumstances, and you are citing the wrong statistics if you want to show that savings are 'idling'. You are definitely off-track if you want to assert that real savings are 'idling' in some manner.
It is dangerous to confuse between what real resources are doing and what claims on those real resources, aka money, is doing unless your grasp of economics jargon is already so superlative that you are prepared to make a subtle case in unclear terms. In that I would hesitate, myself. Real saving only happens when people defer real consumption in favor of future real consumption. Money sloshing into the Federal Reserve's computers does not make factories burst aflame and service industries rend themselves asunder; it does risk a shortage of liquidity - but happily that can be resolved by creating more liquidity, assuming the financial industry not in a state of panic.
Is that not what I was suggesting? When you're at home you're able to buy more, when you're abroad you're able to buy more.
My point was really that just printing money doesn't solve the problem. If it did we'd pay of the deficit in about twenty minutes.
To be blunt: right now the US would benefit from a weaker currency.
Aren't you basically agreeing with me then that right now, under current conditions, the US would benefit from more and weaker currency? And since the federal government and federal reserve seem unable/unwilling to accomplish that, why not have local communities take matters into their own hands by printing their own currency?
Understood. Of course that is not really socialist, but exerting social pressure to persuade people to support a failing business just on the basis that it is local instead of patronizing the "better" business just does not feel capitalist to me.
That's really sort of your hang-up though, right? Each individual consumer has the right in a free-market economy to decide for himself what constitutes a "better" business based on what that individual values. If you personally disagree with what that other person decides to value, that's not socialism or whatever. That is, in fact, the very nature of freedom.
To be fair, it's not exactly a free choice if you're doing it just so that your neighbors won't get mad at you. I don't really know whether that counts as capitalism or socialism though.
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May I introduce you to the polar bear? You may want to come quickly as there won't be many of them left much longer.
Also, we don't need to increase the amount of currency floating around, we need to increase the buying power that currency has.
I have no idea. It would have to depend on many other factors. For one thing, if social safety nets break down then people will need much higher savings to try and save for old age.
I don't think anyone -- not even the most vocal (or narrow-sighted) of the "Buy Local" advocates -- expect you to live your life like a sketch character on Portlandia. No one's expecting you to drive to the farm to make sure that the chicken you're buying was not only raised free-range, but that they farmer is also living his life in a way that you'd approve of. I imagine that all anyone expects is for you to do what you already do:
As a consumer, that perfectly defines what effect your purchasing power has on the economy. You're looking for a certain intangible quality to a hypothetical tangible good, and you choose to place a certain value on it. Everyone does this to some respect, it's only a matter of degrees.
Well, not overly strong. But we certainly don't want a weak dollar.
My dad's employer primarily gets its business from overseas contracts. Personally we do want a weak dollar...
No but that is how they work right now, thanks to our weird economic situation:
Surely we need a balanced one that's just right, not too low or too high? I'll admit that international economics is not my strong suit.
Which is kind of like wanting some sort of weak local currency so that you can hope to use the exchange rate to lure more outside business into your area.
It's just that whereas this sort of thing is fine for national currencies backed by treasuries, for local economies, it's kind of pointless because you get perpetually dicked over by your own exchange rate every time you go to the neighboring township.
SEE I'M BACK ON TOPIC.
Does this mean that the sole issue of locality is where the last dollar of profit goes?
Well, that and the fact that you can't pay your employees in scrip so there isn't an actual draw on outside businesses.
Aside from that:
(1) That is not deadweight loss. This is deadweight loss. Also you seem to be confusing liquidity demand with real output more generally.
(2) Good to know you don't think that the ideal amount of national savings should be zero, at least. But as it happens, what do you think that social safety nets save in? What do you think happens when you save?
It absolutely does not. There is no such thing as a "last dollar." I'd also suggest that there is never such a thing as a "sole issue" in any economy, either. Economics isn't the study of money, it's the study of choice. And in order to ever have a real choice, there can't be just one sole issue. There should always be at least two.
We need a weak currency when I'm at home and a super strong one when I go see my Uncle in Italy sometime next year. Neapolitan tailoring isn't cheap.
...Where are you going with this? I feel like I'm getting tested on my grasp of economics jargon and I don't know why...
Indeed. Rule of thumb is "low and stable inflation".
But it is generally acknowledged that in the short run of things, a weaker currency causes lower unemployment and more real output, whereas a stronger currency causes more unemployment and less real output.
My point was really that just printing money doesn't solve the problem. If it did we'd pay of the deficit in about twenty minutes.
Then, again, how do you determine the local-ness? Especially without going beyond that first turtle? The 'locally owned' artisanal restaurant gets its beef from Japan and its cheese from Belgium. The 'multi-national' McDonald's based out of Oak Brook, IL (pretend I don't live in Chicago) uses food sourced from within 50 miles. Who should I get a tasty burger from if I value locality more than good munster?
Savings go to investment. They don't "sit idle" unless in very particular circumstances, and you are citing the wrong statistics if you want to show that savings are 'idling'. You are definitely off-track if you want to assert that real savings are 'idling' in some manner.
It is dangerous to confuse between what real resources are doing and what claims on those real resources, aka money, is doing unless your grasp of economics jargon is already so superlative that you are prepared to make a subtle case in unclear terms. In that I would hesitate, myself. Real saving only happens when people defer real consumption in favor of future real consumption. Money sloshing into the Federal Reserve's computers does not make factories burst aflame and service industries rend themselves asunder; it does risk a shortage of liquidity - but happily that can be resolved by creating more liquidity, assuming the financial industry not in a state of panic.
To be blunt: right now the US would benefit from a weaker currency.
That's not what the others are saying, no. They're saying that they want a weaker dollar at home so that they can sell more goods or services overseas and increase the number of dollars they have for purchasing goods and services without running a trade deficit and borrowing so much money.
You should buy from whichever restaurant you want. Or you should buy from an entirely different restaurant. Or you can have pizza instead. This isn't Sophie's Choice. There are a wide variety of ends to which you may apply your scarce means. You are not required to select from among these two, nor are you required to justify any individual choice by a single criterion.
That would only be true if monetary policy were based on my travel plans. Which would certainly be great for me...
That depends entirely on the circumstances of the economy at the time. Right now just printing money would actually solve a lot of our direct problems. So would increasing the deficit. Also, we should always want to have some degree of national debt the issue is whether it is structural or cyclical and where it is relative to our GDP. If we stopped issuing Treasuries thanks to balancing our budget it would fuck over a lot of rather basic things simply because there'd be no more AAA rated assets to treat like sacks of money floating around.
I'm not enthusiastic about a local currency used in parallel with national currency when the local currency isn't recognized as legal tender -- but what would you think about the Greek government reintroducing the drachma as a parallel currency to the Euro?
Local currencies don't exercise power of legal tender, so for that reason they are always limited in scope and are inherently less liquid than national state-backed currencies. Introducing the Drachma would help if it didn't simultaneously cause the non-Drachma economy to go boom.
Ronya, as always, knows his stuff. And I'm not saying he believes the following.
But I just want to focus on the comment 'It's not less capitalist to...'
In these kind of discussions, there's always an ideological disconnect, and this is it. The idea that anyone should ever try to be more capitalist is just bizarre. It's an economic system, not a religion.
I gather you're picturing a situation a Gesham's Law situation? What if the drachma wasn't compulsorily overvalued?
Which is not socialism and is indeed wholly compatible with capitalism of a fairly archetypically laissez-faire variety. Hence: it is not less capitalist.
Poor man speechified himself to death
Say it works; say the Greek government mandates that nobody, neither the state nor the private sector, may insist upon being paid in Drachmas if past custom and practice used Euros, so anyone who switches does so at a rate they consent to. So Greece operates on a dual-currency basis and everyone else in the Eurozone operates only on Euros, with the rate floating freely between the two.
Unfortunately this doesn't solve anything; ECB policy is inappropriately tight for Greece, but it is deliberately that tight, so Euros flooding out of Greece as they are displaced by the new currency would be just as rapidly destroyed by the ECB. So we're back to square one, at enormous transition cost. If your hope is to then hit the panic button and de-link from the Euro, then this reduces back to a plan of dropping sharp devaluation atop everybody's heads by surprise. Indeed everyone knows that your government would want to try that. Where's your credibility?
Now I am confused. How is taxing people and giving the money to a store owner to keep the store owner in business or having the municipality buy and operate the store using taxpayer money capitalist?
It might interest you to point out that, according to http://en.wikipedia.org/wiki/Local_currency#Modern_local_currencies, there are several local currencies being used right now in Greece.
Unfortunately their web sites are all in Greek so I can't really tell you anything else about them.
Understood. Of course that is not really socialist, but exerting social pressure to persuade people to support a failing business just on the basis that it is local instead of patronizing the "better" business just does not feel capitalist to me. I know that we have a sort of hybrid system here with elements of socialism like minimum wage laws, social security, and even more direct things like redistributing profits from successful insurers to less successful insurers under the ACA, but the idea that we should save a failing business even as it refuses to actually change its business model so that it can suceed just doesn't feel right to me.
That's really sort of your hang-up though, right? Each individual consumer has the right in a free-market economy to decide for himself what constitutes a "better" business based on what that individual values. If you personally disagree with what that other person decides to value, that's not socialism or whatever. That is, in fact, the very nature of freedom.
Aren't you basically agreeing with me then that right now, under current conditions, the US would benefit from more and weaker currency? And since the federal government and federal reserve seem unable/unwilling to accomplish that, why not have local communities take matters into their own hands by printing their own currency?