Hacker News Reader

Comment by clarkmoody | Hacker News Reader

> provide sufficiently large deficits to absorb the productive capacity of the modern economy

Are you serious? How about letting the productive capacity of the economy work for consumers rather than for politicians?

Of course I agree that there should be no bailouts for Wall Street firms, but I would also argue that the business cycle itself is induced by the lack of a sound money in the economy. Easy money tricks entrepreneurs into investing in long-term capital projects prematurely and causes malinvestment.

So Wall Street is not to blame for business cycles. It's the soft-money fiat system that causes so much economic calamity. When the Fed steps in to stop recessions, nobody asks why we had the boom that preceded the bust, which was fueled by the Fed itself.

View on HN

There was a time before the soft-money fiat system. Not really that long ago. It was also marked with many boom/bust cycles. The business cycle was probably first formally named and studied by Jean Charles Léonard de Sismondi and described in the 1819 book, "Nouveaux Principes d'économie politique"[1]. I would suggest that the cycle is not necessarily bad. During good times ideas are tried that would not be otherwise and people with little experience can get jobs and show their competence. Then some bad year forces some tightening and a serious evaluation of investments of all types.

The big downfall with recessions is that people with little or no savings can end up in a very bad place economically. Not sure how or if our consumer culture could change to a saving culture, but I'd be interested in reading a book that compares the two.

[1]https://en.wikipedia.org/wiki/Business_cycle

Savings culture has beat me into submission, it only took a couple near death experiences from hitting zero in the bank account. So now what? My life is boring, fine. I accept I am a simple piece of human meat. Save for enough years and I suppose I can dream again.

IMO it really became bad after US left the gold standard in 1971 and the petrodollar was invented.

there seem to be serious problems with the gold standard because of what attracts people, that it is rigid and unchanging. If the us economy grows a lot, how do we get more gold? what if a ship with a lot of our gold on it goes down in the middle of the ocean?

What problems would it improve? if we have a recession, how would the govt help keep things going (ie print dollars)? Most people wouldn't have been better off if most large banks had failed then.

The point would be to not print more and more dollars to "boost" the economy and run more trade deficits, especially using debt. With the gold standard trade deficits would result in less money being printed.

"How about letting the productive capacity of the economy work for consumers rather than for politicians?"

Seriously, what are you talking about? If the government gives a large tax cut to every citizen, that citizen is also a consumer. When they take that tax cut money and they go spend it, then the large deficit is being put to work for consumers rather than for politicians.

Last time I checked, the Federal government was the consumer of about 1/3rd of the Federal budget. The rest of the budget is income transfers that are spent by someone else (for instance, Social Security, and also the money transfers to state and local governments, who then become the final consumers).

There are situations where it makes sense for the government to be the consumer of goods and services -- building bridges and ports and airports and such. Also, running the military. One can make the case that the USA would benefit from infrastructure spending right now. However, my original comment was completely neutral on the subject of who should spend the deficit. I only made the point that when productive capacity is going to waste due to lack of demand (in the context of this article, following a catastrophic shock to the financial system) then Congress should ensure a deficit sufficient to ensure the use of that productive capacity.

If Wall Street is not to blame for "business cycles", why are you against bailouts?

There's no such thing as sound money, it's always being manipulated. This is by design.

If I may suggest, looking into “Keynesian economy” will make it clearer what the gp meant.

Both conservatives and progressives subscribe to this theory, so your time will not be wasted.

Reply on news.ycombinator.com