What part of the chart shows this?
1. pegging the dollar to gold
2. inflating the dollar
3. having the Fed set the money supply by fiat rather than the pre-1914 way of letting the market forces do it
The reason countries have a central bank is so they can inflate the currency.
You never hear it anymore.
Hoover Dam, Golden Gate Bridge etc are nice takeaway of that generosity frenzy. Too bad during COVID gov just gave cash, not getting any infrastructure in return.
But even the non-rich acquire more wealth over time as well.
Reasons include:
* Children inherit wealth and knowledge of how to build wealth
* The children are doing this rather than trying to leetcode to get their first job (or rack up debt to get qualified for it etc.)
* Connections
* Compounding (despite corrections)
* Political influcence
* Can afford to hire tax/law people to avoid tax
* Tax law favours the rich. You pay no tax on a billion in capital gains if you never sell and if that yields you 50m you pay tax on that but let’s say it is half so 25m that is 2.5% of the wealth but if it goes up 75m over the same period that is tax free so you paid 20% tax on the increase in net worth. Compare that to a worker. And this is without doing any tax avoidance!
* To avoid tax at all in the previous example get the corp to buy back shares instead of paying dividends then live off borrowed money.
that knowledge is so important. When i was a kid all I was told over and over was "get a good job in an office so you don't have to work like i do". This was coming from blue collar oil and ranch hands in West Texas so that's what i did and it's worked out pretty well for me. However, I'm teaching my kids how to build wealth and that a well-paying job is an income stream to assist with that but not the whole answer.
the stressors actually strengthen which is why I brought up Taleb.
But how long the downturns last is a policy choice:
> I would summarize the Keynesian view in terms of four points:
> 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.
> 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.
> 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down.
> 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.
* https://archive.nytimes.com/krugman.blogs.nytimes.com/2015/0...
Maybe I'm projecting, but you say this like it's just a fact and that there are no tradeoffs. Keynes was a smart guy, but his word isn't gospel. It's not as simple as printing money to reduce interest rates and then magically depressions end. Printing money and lowering rates can easily lead to inflation (which would make everyone even worse off than they already are) if other underlying issues aren't addressed. We're literally seeing that in real time with economic policies form 2020-today.
So yea policy can influence how long they last, but that goes for both directions (shortening or lengthening/making worse). Striking the right balance to like "optimally" shorten/ease a depression is incredibly hard, and (shocker) tends sows the seeds of future economic downturns.
There is very likely no policy that eliminates the cyclic nature of markets/economies; it's inherent to (essentially required for) how they function.
Is this true though? Doesn't inflation just redistribute wealth rather than destroy it? We measure inflation through change in prices which are just a measure of supply and demand (dis)equilibrium, I thought.
Uncontrolled, unpredictable inflation (40%)(Zimbabwe, Turkey) is the problem as it incurs more costs on updating prices and renegotiating contracts, which introduces severe distortions on the economy. But we're not anywhere near that.
My beef with it is that it doesn't seem to be a sustainable system in the long term just like the previous system also had issues. We didn't have a great depression in 2008 (a very nasty recession instead), but the quantitative easing then and during Covid is driving inflation wild. The official numbers are generally fine, but they don't include all sorts of items that have gone up an incredible amount and are thus misleading. I'm sure some of it is corporate greed or standard supply/demand (e.g. a wood manufacturing plant going offline making construction material costs soar), but a lot seems to be because of the insanely high printing of money that has to be carried out in order to inflate away the massive runaway national debt.
So the Keynesian toolbox that can be used to get us out of something like a depression also is ultimately our downfall in the long run as our leaders can't or won't use it responsibly.
There's a blip now because of the pandemic policies - hand people a bunch of cash to sit at home which means less goods made, let them out again where they can spend it - prices go up. I'm not sure that's Keynes fault - he never had a covid policy.
It's hard to resist and not to always print money, not just occasionally, and not to (just about) always run a large deficit, not just occasionally, and not fund petty hobbies - not just productive infrastructure - with borrowing.
At that point it stops being Keynes (stimulus) spending and just becomes spending.
The point of Keynes, especially in light of when he originally wrote (the 1930s), is to boost demand to help an economy get back on its feet. Once it's running fine then the "extra" spending can be dialled back.
Of course there could be other reasons why government wants to continue (deficit) spending, but those are separate from Keynesian stimulus.
https://en.wikipedia.org/wiki/Business_cycle
you could be right too, rando, I'm willing to accept a little column A, a little column B.
If it is a cycle, you can make an easy fortune on the stock market.
If the system doesn't break, then clearly the crisis wasn't big enough just yet... but eventually it's going to break!