1499: "Arbitrage"

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speising
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Re: 1499: "Arbitrage"

Postby speising » Thu Mar 26, 2015 8:21 am UTC

it seems you are loosing your countenance, dude.

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Pfhorrest
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Re: 1499: "Arbitrage"

Postby Pfhorrest » Thu Mar 26, 2015 8:33 am UTC

all of my living relatives, parents and grandparents, have spent their entire lives paying most of their income for housing and to this day have no housing to their name to show for it, and now my mother is living in squalor illegally subletting from drug-addled meth heads and speed freaks who steal her medicine while she's in the hospital and drug her food with their narcotics, threaten her with violence and make inappropriate sexual advances at her, and the goddamn cops won't do a fucking thing because who gives a fuck about a dispute between poor people amirite?

meanwhile i make more than twice the income of more than half the population of the country and i'm still living in a tiny one-bedroom trailer alone instead of together with a girl who wants to marry me because the only way i have any hope of not ending up like them is to minimize my rental expenditures and it's going to be another decade before i can put a big enough payment down on a real house that we could live together in, an averagely-priced one for our state that she won't leave, such that interest alone on a mortgage wouldn't be even higher than that rent.

so how the fuck are the rest of the country, half or more of whom make half or less of what i do, doing? what kind of fucking hope do they have?

this is personal to me.
Forrest Cameranesi, Geek of All Trades
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Kit.
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Re: 1499: "Arbitrage"

Postby Kit. » Thu Mar 26, 2015 9:04 am UTC

Mikeski wrote:
Kit. wrote:
Mikeski wrote:the people/businesses/governments we're investing in can use the money.

Use for... what?

R&D, infrastructure, etc.

Used for what?

Have you seen any board of directors that would approve spending on new infrastructure when sales across the whole industry are sluggish?

Do you realize that someone is expected to eventually pay off the money the business borrowed and spent on the infrastructure, both the principal and the interest, and that "someone" will be either the consumer or the government?

Mikeski wrote:Hopefully, things that won't be produced merely as a result of "mere" consumer spending. If I want more automobile development, I can buy a new car (so maybe Ford will spend the money on new kinds of Fords), or I can invest in a new company (and something like Tesla might happen).

Something like Tesla is unlikely to happen if no consumers are willing to over-consume on the car's "status" value. Someone is actually needed to buy these cars, grossly overpriced for their utility value.

Mikeski wrote:The Internet itself was not monetized to begin with; billions of investor capital have made it what it is today, vs. its roots in the 1970s.

Yeah, when AOL started its freeloading on the government-sponsored Internet backbone by selling the backbone's free content (mostly alt.binaries.pictures.erotica, as is widely assumed) to its consumer customers, the Internet became quite a lucrative business.

Mikeski wrote:
Kit. wrote:
Mikeski wrote:Nope, hopefully advances in technology will cover that,

If you are putting the monetary pressure on advancing those technologies now, by spending your money on the same kinds of stuff you would be consuming after your retirement, then yes.

But I'd rather invest in those things, as I have little need to purchase cancer cures and anti-senescence treatments and nursing-home care right now...

Invest or sponsor? And why would you invest in this, rather than in more lucrative areas? Competing with investment money against donation money doesn't seem to be a "rational" move (according to the typical market definition of "rational").

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Klear
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Re: 1499: "Arbitrage"

Postby Klear » Thu Mar 26, 2015 12:27 pm UTC

Pfhorrest wrote:all of my living relatives, parents and grandparents, have spent their entire lives paying most of their income for housing and to this day have no housing to their name to show for it, and now my mother is living in squalor illegally subletting from drug-addled meth heads and speed freaks who steal her medicine while she's in the hospital and drug her food with their narcotics, threaten her with violence and make inappropriate sexual advances at her, and the goddamn cops won't do a fucking thing because who gives a fuck about a dispute between poor people amirite?

meanwhile i make more than twice the income of more than half the population of the country and i'm still living in a tiny one-bedroom trailer alone instead of together with a girl who wants to marry me because the only way i have any hope of not ending up like them is to minimize my rental expenditures and it's going to be another decade before i can put a big enough payment down on a real house that we could live together in, an averagely-priced one for our state that she won't leave, such that interest alone on a mortgage wouldn't be even higher than that rent.

so how the fuck are the rest of the country, half or more of whom make half or less of what i do, doing? what kind of fucking hope do they have?

this is personal to me.


That does sound horrible, but don't you think there might be a chance you are a tiny bit biased?

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squall_line
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Re: 1499: "Arbitrage"

Postby squall_line » Thu Mar 26, 2015 2:35 pm UTC

mathmannix wrote:
Kit. wrote:Some religions, for example, do/did consider lending money for profit 'evil'. Christianity used to be such a religion.

Technically, the Bible (in the OT, so it applies to Jews too) only says it's wrong to charge interest when lending money to fellow believers. It would be nice if there were "Christian-only" banks without interest, but... AFAIK there aren't, and never have been.


Actually, those exist, just not in name as "Christian-only", and not necessarily as chartered banks, as such. But I read an interesting story the other day on The Atlantic about Payday Lending reform that discussed numerous churches and other non-profit institutions that serve out zero-interest loans to their membership as a way to counteract the cycle of payday lending:

The Odd Couple Fighting Against Predatory Payday Lending

I mean, if you want to get as incensed as Pfhorrest about the institution of lending, that article should help get you at least part-way there.

And I think that it also brings up a very good point. It is quite possible to both agree with the societal institution of property rights, money, and banking, but to also get pissed off when those institutions are twisted into an incredible imbalance. Bill Gates has more accumulated monetary worth than any other human being on this planet. He uses that money to make more money. He also started a charitable organization to use that wealth to help out those who are disadvantaged.

Which brings the whole issue full-circle.

Some choose to use their position in life, their wealth, their power, and their assets, to oppress others. But a large part of our society still believes in assisting his or her fellow humans, and will choose to use their wealth, power, and assets to HELP others. If one takes away the freedom to accumulate wealth, they also take away the freedom to use that wealth for good.

It is truly unfortunate that there are people in this world who will take advantage of the other humans on this planet. No amount of laws written on paper will be able to fundamentally change that aprt of human nature, I fear. And while it is laudable to try to use the structure of society (government) to try to fix the evils of society, humans are still imperfect and will still do bad things.

But the evil actions of individuals within a society is not an indication that societal rules are inherently evil. It also doesn't mean that people should give up trying to change the rules or mitigate the evil.

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Re: 1499: "Arbitrage"

Postby Tyndmyr » Thu Mar 26, 2015 3:00 pm UTC

Pfhorrest wrote:all of my living relatives, parents and grandparents, have spent their entire lives paying most of their income for housing and to this day have no housing to their name to show for it, and now my mother is living in squalor illegally subletting from drug-addled meth heads and speed freaks who steal her medicine while she's in the hospital and drug her food with their narcotics, threaten her with violence and make inappropriate sexual advances at her, and the goddamn cops won't do a fucking thing because who gives a fuck about a dispute between poor people amirite?

meanwhile i make more than twice the income of more than half the population of the country and i'm still living in a tiny one-bedroom trailer alone instead of together with a girl who wants to marry me because the only way i have any hope of not ending up like them is to minimize my rental expenditures and it's going to be another decade before i can put a big enough payment down on a real house that we could live together in, an averagely-priced one for our state that she won't leave, such that interest alone on a mortgage wouldn't be even higher than that rent.

so how the fuck are the rest of the country, half or more of whom make half or less of what i do, doing? what kind of fucking hope do they have?

this is personal to me.


Pretty much the same, really. I have a six figure income, and I'm renting. It's a fine place, but I've always had a townhouse at most, usually a smallish apartment or sometimes a single room. I COULD afford more, but then, I'd be working just to pay for the place to live.

The thing is, this isn't really that odd. Living spaces in the US are not particularly small, and historically, they've been mostly growing. It's the expectation that has risen. In part, because of the housing bubble. People just kept expecting that you should buy as much house as you possibly could. This turned out poorly, but the disillusionment still isn't complete. We still have a lot of bigass houses out there that just aren't affordable. Living conditions aren't really especially bad in the US, we just went through a time when the advertised future turned out to not match up to reality. It's disappointing, but objectively, the US is still doing fairly well.

There's also the factor of where you live. Rent on a small apartment where I live is equivalent to a mortgage on a quite nice single family home elsewhere in the country. So, that's an issue for nationwide statistics. Maybe you make above average, but you have to pay above average too. For the US, at least. My little brother paid $50k for his SFH, and here, literally nothing on the market, no matter how horrific, is in that price range. It could be a tiny empty lot, running 200k in most areas. So, comparing nationwide can sometimes be deceptive.

The US is not actually very miserable as a whole, when compared to the rest of the world. We're doing damned well, even in housing. Even other developed countries view our proliferation of mcmansions as unusual. Relax, and consider that while we naturally wish to do better, we're already doing pretty well compared to a great many others. Capitalism is not a perfect thing, but our system outperforms a great many others.

ucim wrote:Further, if I want to be able to "take a break", I might work hard to buy stuff I don't need, that other people want. Then I could rent it to them. So, I actually need the stuff I don't need, because without it, I would not be able to use the fruits of my own labor in order to "take a break".


Well, yes. Feature, not bug. You WANT to incentivize people to reinvest money, because that's how you get growth. Money spent on a vacation or money spent on buying something to rent out are identical in terms of "money spent" from an economic perspective, but the latter holds the ability to produce additional wealth(assuming you bought something people wish to rent). Growth is generally desireable, so you want your economy to reward those who produce it.

Pfhorrest wrote:Also I just realized you're implying that your lifestyle is currently comfortable enough for you (you're not lacking any assets for your own use) and that you could maintain that lifestyle for less work than you currently do, but instead you work just to make money the only use of which to you is to make more money the only use of which to you is to make more money, etc, which... sounds like a crazy sort of addiction if you ask me. That must be so, because if it weren't, then you wouldn't want to reduce your work levels, because you still have things you want to buy for your own use, and need the money from work for, for purposes other than just making more money with it.


Money is a means to an end. Having extra money allows you to pursue other things. Working more now for extra money allows you security if employment becomes difficult to find, or to retire early, or whatever else. It's not an addiction, it's entirely rational. If you work only the bare minimum in order to spend it all on your current lifespan, then you have absolutely no cushion whenever something goes wrong. Such an approach is not considered prudent, and any financial advisor will recommend you build some savings/investments.

Kit. wrote:Have you seen any board of directors that would approve spending on new infrastructure when sales across the whole industry are sluggish?

Do you realize that someone is expected to eventually pay off the money the business borrowed and spent on the infrastructure, both the principal and the interest, and that "someone" will be either the consumer or the government?


It does happen. Someone's making a bid for market share or trying to cut costs, so they attempt to make things more efficient. Market share is cheaper to buy up in a down market period. If you have access to the money, of course.

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Re: 1499: "Arbitrage"

Postby Pfhorrest » Thu Mar 26, 2015 4:57 pm UTC

Tyndmyr wrote:Money is a means to an end. Having extra money allows you to pursue other things. Working more now for extra money allows you security if employment becomes difficult to find, or to retire early, or whatever else. It's not an addiction, it's entirely rational. If you work only the bare minimum in order to spend it all on your current lifespan, then you have absolutely no cushion whenever something goes wrong. Such an approach is not considered prudent, and any financial advisor will recommend you build some savings/investments.

Living below your means (or making above your needs) and saving the difference to have a cushion does not require the ability to make money make more money, just the ability to store money. Speising is the one who said that if he couldn't make his money make more money he wouldn't bother making it in the first place, and in my analysis I was assuming a safety cushion as a part of "living the lifestyle you want securely". His comment suggests that he could effectively retire (stop working or dramatically reduce his work), and only doesn't because he wants to keep making more money for the sole purpose of leveraging it to make more money for the sole purpose of etc...

Klear wrote:That does sound horrible, but don't you think there might be a chance you are a tiny bit biased?

I am on the better-off side of the statistical distribution of people in this country, so if I were biased it should be in favor of the rich, not the poor. I simply cannot comprehend how more people are not violently furious about their situation, and can only attribute it to some combination of sheer ignorance (studies have shown that most people think wealth should be distributed more evenly than they think it is, but they also think it's distributed way more evenly than it actually is), defensive optimism (acknowledging how bad things really are feels bad so people avoid thinking about it), just world hypothesis ("if things are bad for me then I must deserve it" / "people who have it better than me must have done something to deserve it"), and a kind of ignorant naive optimism (the poor wanting to preserve the possibility of the rich living off the backs of the poor because they expect, against all odds of which they're probably unaware, that some day they'll get to be the parasites living a life of luxury at someone else's expense).
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Kit.
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Re: 1499: "Arbitrage"

Postby Kit. » Thu Mar 26, 2015 5:33 pm UTC

Tyndmyr wrote:Well, yes. Feature, not bug. You WANT to incentivize people to reinvest money, because that's how you get growth. Money spent on a vacation or money spent on buying something to rent out are identical in terms of "money spent" from an economic perspective, but the latter holds the ability to produce additional wealth(assuming you bought something people wish to rent).

I doubt it. Otherwise spending money on renting something to rent out would be giving further growth, which is silly.

Actually, I believe, the opposite is true. Spending money on consumption promotes growth. Spending money on shifting the ownership or possession of assets doesn't.

Tyndmyr wrote:
Kit. wrote:Have you seen any board of directors that would approve spending on new infrastructure when sales across the whole industry are sluggish?

Do you realize that someone is expected to eventually pay off the money the business borrowed and spent on the infrastructure, both the principal and the interest, and that "someone" will be either the consumer or the government?

It does happen. Someone's making a bid for market share or trying to cut costs, so they attempt to make things more efficient. Market share is cheaper to buy up in a down market period. If you have access to the money, of course.

If you expect the market to rebound, then probably, although... do you know of any particular cases?

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Re: 1499: "Arbitrage"

Postby speising » Thu Mar 26, 2015 5:34 pm UTC

Pfhorrest wrote:Speising is the one who said that if he couldn't make his money make more money he wouldn't bother making it in the first place, and in my analysis I was assuming a safety cushion as a part of "living the lifestyle you want securely". His comment suggests that he could effectively retire (stop working or dramatically reduce his work), and only doesn't because he wants to keep making more money for the sole purpose of leveraging it to make more money for the sole purpose of etc...

i feel the need to point out to you that i was talking in hypotheticals. unlike you (it seems) i can discuss a system detachedly.
i also said i'm glad i'd be able to get a mortgage, if i needed one.

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Re: 1499: "Arbitrage"

Postby Pfhorrest » Thu Mar 26, 2015 7:14 pm UTC

squall_line wrote:I read an interesting story the other day on The Atlantic about Payday Lending reform that discussed numerous churches and other non-profit institutions that serve out zero-interest loans to their membership as a way to counteract the cycle of payday lending:

The Odd Couple Fighting Against Predatory Payday Lending

I mean, if you want to get as incensed as Pfhorrest about the institution of lending, that article should help get you at least part-way there.

Yeah, I just had to rescue my mom from two such places a few months ago.

Payday loans are the far extreme of how interest exacerbates differences in wealth (or lets just say what it is: lets the rich profit at the expense of the poor). Other forms of lending at interest, and rent more generally, can be significantly less bad, and for those who are pretty well off income-wise maybe even negligibly bad, but it's still the same problem underlying it the whole time, it just gets more tolerable the further from lower-class you get.

It is quite possible to both agree with the societal institution of property rights, money, and banking, but to also get pissed off when those institutions are twisted into an incredible imbalance.

I want to take this opportunity to be clear about my own position. I am strongly in favor of private property; the problem is too many people people not having their own private property and instead being charged indefinitely to use someone else's without ever accruing any of their own. I also have no objection to money, as a store of value and a medium of exchange and a unit of account and so on. And no objection to banking, in principle, just to some activities that are really popular with banks. I am generally on the pro-free-market side of things, when it comes to the false dichotomy between free market capitalism and state socialism. However, I also am not willfully blind, as many of you seem to be, to the problems that arise directly as a consequence of features of the free market capitalism as we have it now, problems that cause people to want state socialism instead, and though I'm tolerate of moderate application of state socialism as a bandaid over those problems, I'm much more interested in fixing the source of the problems, so that we can have free markets without capitalism, and socialism without state intervention. I love free markets and private property so much that I want to save them from becoming a perverse mockery or themselves and being destroyed by those who would then recognize them for the monstrosity they've become.
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Tyndmyr
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Re: 1499: "Arbitrage"

Postby Tyndmyr » Thu Mar 26, 2015 8:24 pm UTC

Pfhorrest wrote:
Tyndmyr wrote:Money is a means to an end. Having extra money allows you to pursue other things. Working more now for extra money allows you security if employment becomes difficult to find, or to retire early, or whatever else. It's not an addiction, it's entirely rational. If you work only the bare minimum in order to spend it all on your current lifespan, then you have absolutely no cushion whenever something goes wrong. Such an approach is not considered prudent, and any financial advisor will recommend you build some savings/investments.

Living below your means (or making above your needs) and saving the difference to have a cushion does not require the ability to make money make more money, just the ability to store money. Speising is the one who said that if he couldn't make his money make more money he wouldn't bother making it in the first place, and in my analysis I was assuming a safety cushion as a part of "living the lifestyle you want securely". His comment suggests that he could effectively retire (stop working or dramatically reduce his work), and only doesn't because he wants to keep making more money for the sole purpose of leveraging it to make more money for the sole purpose of etc...


Thanks to inflation, if you're not investing your money, it's bleeding away. Quite significantly, over the timeframe of a career, which is kind of a downer.

Inflation is likely to always be with us at least somewhat, so...if you want to save for retirement, you pretty much need to invest.

Kit. wrote:
Tyndmyr wrote:Well, yes. Feature, not bug. You WANT to incentivize people to reinvest money, because that's how you get growth. Money spent on a vacation or money spent on buying something to rent out are identical in terms of "money spent" from an economic perspective, but the latter holds the ability to produce additional wealth(assuming you bought something people wish to rent).

I doubt it. Otherwise spending money on renting something to rent out would be giving further growth, which is silly.

Actually, I believe, the opposite is true. Spending money on consumption promotes growth. Spending money on shifting the ownership or possession of assets doesn't.


Silly or not, that happens, and is perfectly reasonable economically. Businesses take out loans for startup, operating capital all the time. Including businesses who rent things out.

Imagine trying to start a rental car company. You're probably gonna go to the bank, hat in hand, because that's an industry with kind of a lot of startup costs. You benefit from the borrowing, because otherwise, you lack the funds to get involved. Now, you can make further rentals of the cars to consumers that will benefit them(and you as well, of course).

The world is filled with middlemen, and they often serve a very important purpose.

Tyndmyr wrote:
Kit. wrote:Have you seen any board of directors that would approve spending on new infrastructure when sales across the whole industry are sluggish?

Do you realize that someone is expected to eventually pay off the money the business borrowed and spent on the infrastructure, both the principal and the interest, and that "someone" will be either the consumer or the government?

It does happen. Someone's making a bid for market share or trying to cut costs, so they attempt to make things more efficient. Market share is cheaper to buy up in a down market period. If you have access to the money, of course.

If you expect the market to rebound, then probably, although... do you know of any particular cases?


I'm particularly familiar with, for various reasons, the door mat making industry. Got to tour a factory in georgia couple years back. Now, door mats are not a particularly strong growth area or anything, and china had long been eating our lunch in this(and other fairly simple, inexpensive manufacturing). So, they shelled out for heavy automation for mass production. Ended up managing to keep overall employment level, despite vastly improved productivity and lower end unit costs, sheerly on volume. This, of course, comes at the expense of the chinese companies, but roughly zero people involved gave any craps about that. So long as they were winning, meh. That's pretty normal, and thus, not every company may reflect the overal industry. Sometimes, the biggest incentives to improve come when the market gets tight. In a boom market, it's hard enough to keep up that even the weaker players may be selling at capacity, even if at a lower margin.

Now, in a monopoly scenario, you do kind of get those problems you mentioned. If the markets stagnating, there may be fairly little opportunity for a new entrant to break in, or motivation for the monopoly to improve. It's one of the reasons monopolies are bad.

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Re: 1499: "Arbitrage"

Postby Pfhorrest » Thu Mar 26, 2015 8:58 pm UTC

Tyndmyr wrote:if you want to save for retirement, you pretty much need to invest.

Investment doesn't mean lending at interest, it just means buying something that will appreciate in value at least in pace with inflation. Like stocks.

(Safe stocks that aren't tantamount to gambling, like index funds, are essentially a form of socialism themselves, among those participating in them: a bunch of people all invested in each other's business, spreading out the risk amongst each other and sharing in each other's success together. I really think money should be backed by diverse investments like this, so that just having money in the bank is automatically investing it like that, and the value of the currency automatically grows with the economy, eliminating inflation in the process as the very sort of diverse bundle of goods inflation is measured against is what backs the money, in a roundabout way, through the companies that trade such goods).

Investment doesn't mean rent and interest.

Investment doesn't mean rent and interest.

Investment doesn't mean rent and interest.

I don't know how many times I have to say that.
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Re: 1499: "Arbitrage"

Postby speising » Thu Mar 26, 2015 11:44 pm UTC

so... you buy stocks, and lean back to watch your investment grow with the company's success.
sounds a lot like letting your money work for you, you upper class parasite, you.

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Re: 1499: "Arbitrage"

Postby Pfhorrest » Fri Mar 27, 2015 2:31 am UTC

So you buy gold, and let your money work for you…

So you buy any other appreciating commodity, and let your money work for you…

Here's a fun game: identify at whose direct expense those gains come.

Still so thick in the head you can't tell a difference between objecting to getting money at someone's expense and getting money from non-zero-sum growth of value.
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Re: 1499: "Arbitrage"

Postby Pfhorrest » Fri Mar 27, 2015 4:09 am UTC

This and previous discussions with the same damn people here inspired me to write something tonight, so at least something good came out of this mire:

Hey Doc, It Hurts When I Do This: A Metaphor for the Economic Debate

A patient goes to see his doctor. The patient says, "Hey doc, it hurts when I do this".

"Then don't do that," says the doctor.

The patient thinks, What is this, a joke?, then says "But doc, I have to do this to live my day to day life. I have no other way to live but to do this, and it hurts."

"No it doesn't," says the doctor. "Don't be such a crybaby, you hypochondriac. You're probably just looking for a prescription for painkillers, you druggy addict. Patients like you come in here all the time, begging for scripts at the slightest discomfort."

"Um, no..." the patient says, more prudent than many patients who would happily just accept the drugs as a solution, but wiser than those who would just suck it up and accept their fate, too. "I'd rather not be on medications unless as necessary in moderation, I just want to fix whatever's causing this pain. I mean, if something hurts like this, isn't that the sign of a problem that should be addressed, rather than just covered up?"

"So you don't want drugs? Great! You're fine!" says the doctor. "Get out of my office, don't do that if it really hurts so much, or shut up and deal with it like everyone else."

So the patient leaves in frustration and goes to see another doctor for a second opinion.

"Hey doc, it hurts when I do this," he says to the new doctor.

"Oh my poor sweet child!" exclaims the doctor. "How could your regular physician not see the terrible pain you're in and do something about it!?"

The doctor roots around in a bin with a major pharmaceutical company logo on it, then hands the patient a small packet. "Here's a sample of the latest painkillers for you to take home today, and I'll write you a prescription for more. Just take a few of these whenever it hurts, and come see me again when you need more. I'm always here for you!"

"But," says the patient, still as prudent as before, unlike the others who would happily accept the drugs and go home, "why does it hurt when I do this? Isn't there something wrong that's causing this pain?"

"What does it matter if you've got the drugs to alleviate it?" says the doctor.

"I don't want to be dependent on drugs for the rest of my life!" says the patient. "I just want to live my life like a normal person!"

"Well if you'd rather just live with the pain..." the doctor begins.

The patient sighs, realizes he can't convince any doctor to actually even think about addressing the cause of his pain, and reluctantly accepts at least ameliorating the symptoms as the only available alternative to living in pain for the rest of his life.

So the patient leaves, takes the sample and the script, and lives the rest of his life dependent on, and growing increasingly addicted to, the drugs which are the only solution anyone will offer him. His illness goes untreated, eventually becoming so painful that the amount of drugs the former doctor and his cohort will let the latter doctor and his cohort prescribe doesn't even help anymore, and then eventually he dies of it.

The end.
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Re: 1499: "Arbitrage"

Postby ucim » Fri Mar 27, 2015 4:20 am UTC

Pfhorrest wrote:...so that we can have free markets without capitalism, and socialism without state intervention.
That's actually quite simple; I only need one number to make it work. A number that's greater than five and less than three.

Pfhorrest, you have proposed a system that replaces rent; a system that lets (makes) people purchase and resell condos for a three day stay instead of renting hotel rooms, a system that lets people purchase and resell automobiles instead of renting a car for a day... things like that, which are supposed to mimic rent without actually "being" rent. What I don't understand is how this is actually any different, if it mimics it so well. You have responded in the past, but I simply don't believe that the things you think will come of it will actually come of it. For example, I do not at all see how the prices of houses will plummet to the levels that will let poor people buy a house without going bankrupt just because real estate is constantly changing hands for overnight hotel stays.

If you've created a system that is the same in all operational respects, you've also made the difference make no difference.

Tyndmyr wrote:Thanks to inflation, if you're not investing your money, it's bleeding away.
It seems to me that inflation is a natural product of "intrinsic value" being divorced from "means of exchange". Inflation fuels "spend it now" which keeps the economy moving, and the moving economy is the thing that gives value to currency that has no intrinsic value.

And btw, yes, it's a feature, not a bug, that you quoted me on.

Pfhorrest wrote:So you buy gold, and let your money work for you…
That's not how it works. Gold does not increase in value. Rather, currency decreases in value.

Think for a moment what "value" means, and divorce it from the idea of liquidity. What is it that makes something valueable? Why is that the thing that makes something valuable.

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Re: 1499: "Arbitrage"

Postby speising » Fri Mar 27, 2015 8:13 am UTC

as long as we make medical metaphors: there are people who go to the doctor because they want a leg amputated. a perfectly healthy leg, but they just feel it doesn't belong to them.
is it really a wonder other people have problems understanding what's supposed to be wrong with this leg?

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Re: 1499: "Arbitrage"

Postby Pfhorrest » Fri Mar 27, 2015 8:47 am UTC

Well, look who else has reading comprehension problems, but that was pretty obvious as well. Surrounded by fucking idiots in here who can't even keep a goddamn metaphor straight.

Cutting a leg off is a treatment, not an illness. Patient comes in and says "Doc, my leg is killing me, cut it off!", ok, you can argue about that course of action, but you don't get to say "Nah. My leg doesn't hurt. I stubbed my toe once, but you know what, I sucked it up like a man, and whatever's up with you leg, you can suck that up too." Until you acknowledge the existence of the problem, you don't get to participate in the discussion of solutions, [color=#FF0040snip[/color]
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Re: 1499: "Arbitrage"

Postby speising » Fri Mar 27, 2015 8:57 am UTC

there's someone who can't read through the spittle on his monitor.

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Re: 1499: "Arbitrage"

Postby Klear » Fri Mar 27, 2015 10:14 am UTC

Well, this escalated quite a lot.

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Re: 1499: "Arbitrage"

Postby Angua » Fri Mar 27, 2015 11:21 am UTC

Pfhorrest, leave the thread.
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Re: 1499: "Arbitrage"

Postby Tyndmyr » Fri Mar 27, 2015 8:17 pm UTC

ucim wrote:
Pfhorrest wrote:...so that we can have free markets without capitalism, and socialism without state intervention.
That's actually quite simple; I only need one number to make it work. A number that's greater than five and less than three.

Pfhorrest, you have proposed a system that replaces rent; a system that lets (makes) people purchase and resell condos for a three day stay instead of renting hotel rooms, a system that lets people purchase and resell automobiles instead of renting a car for a day... things like that, which are supposed to mimic rent without actually "being" rent. What I don't understand is how this is actually any different, if it mimics it so well. You have responded in the past, but I simply don't believe that the things you think will come of it will actually come of it. For example, I do not at all see how the prices of houses will plummet to the levels that will let poor people buy a house without going bankrupt just because real estate is constantly changing hands for overnight hotel stays.

If you've created a system that is the same in all operational respects, you've also made the difference make no difference.


Honestly, buying and reselling places instead of renting a room seem...much, much more troublesome. For starters, just being able to do that means you've gotta have a condo's worth of money on hand. Or you borrow the money and...crap. We're back where we started.

Tyndmyr wrote:Thanks to inflation, if you're not investing your money, it's bleeding away.
It seems to me that inflation is a natural product of "intrinsic value" being divorced from "means of exchange". Inflation fuels "spend it now" which keeps the economy moving, and the moving economy is the thing that gives value to currency that has no intrinsic value.

And btw, yes, it's a feature, not a bug, that you quoted me on.


Basically, yes. It isn't exactly, because you *can* have a deflationary fiat money system, but you wouldn't really want to. So, kind of a false choice.

Mostly the same for intrinsic value currencies. You *can* do them, but they involve significant tradeoffs. Like, skewing the crap out of the price of that item.

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Re: 1499: "Arbitrage"

Postby PinkShinyRose » Sat Mar 28, 2015 1:09 am UTC

I think it could be solved by assigning money temporarily to startups deemed useful to society. The remaining problem would be: who decides what startups have a decent chance of succeeding. This would function similar to bankloans (taking into account that banks currently don't suffer any real risks since those are effectively covered by governments) without a bank profiting from it.

But really, I'm not sure the money reproduction needs to be solved. The number of parasites is limited so the optimal strategy might just be to let them be and limit/cover the more extreme damage to individuals communally (e.g. limiting interest to reasonable amounts).

In case of land it could easily be solved by introducing a market-conforming landvaluetax, although I think the payments people already made for the land should be counted as down-payments for the landvaluetax. Maybe we should also introduce a mineralvaluetax (based on the value of minerals before mining, so deducting mining costs/risks), although it might be impractical.

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Re: 1499: "Arbitrage"

Postby ucim » Sat Mar 28, 2015 1:35 pm UTC

Tyndmyr wrote:Mostly the same for intrinsic value currencies. You *can* do them, but they involve significant tradeoffs. Like, skewing the crap out of the price of that item.
It's not the use of that commodity as a monetary base (after all, all values are relative to something) but rather to any laws prohibiting private ownership of that commodity, except as money.

Otherwise, you're just trading the commodity in convenient units. Now, the intrinsic value of that commodity may change (for example, in an aluminum-based economy, inexpensive aluminum refining techniques might be discovered, or in a diamond-based or tulip-based economy, the artificial scarcity could end on a whim), and that would then skew the entire monetary system.

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Re: 1499: "Arbitrage"

Postby Tyndmyr » Mon Mar 30, 2015 9:12 pm UTC

PinkShinyRose wrote:I think it could be solved by assigning money temporarily to startups deemed useful to society. The remaining problem would be: who decides what startups have a decent chance of succeeding. This would function similar to bankloans (taking into account that banks currently don't suffer any real risks since those are effectively covered by governments) without a bank profiting from it.


Yeahhh, that basically hits the central planning problem hard. Prediction is a tough nut to crack as is, and that comes with baked-in incentives for fraud, idealism, or god knows what else taking the place of what works. Hell, even if someone is being completely honest and forthright, it's super easy to make mistakes when predicting the future.

In case of land it could easily be solved by introducing a market-conforming landvaluetax, although I think the payments people already made for the land should be counted as down-payments for the landvaluetax. Maybe we should also introduce a mineralvaluetax (based on the value of minerals before mining, so deducting mining costs/risks), although it might be impractical.


Property tax already exists. Property rights are generally handled seperately from mineral rights. You don't *actually* own a segment all the way down to the earth's core or whatever, just because you own a house.

ucim wrote:
Tyndmyr wrote:Mostly the same for intrinsic value currencies. You *can* do them, but they involve significant tradeoffs. Like, skewing the crap out of the price of that item.
It's not the use of that commodity as a monetary base (after all, all values are relative to something) but rather to any laws prohibiting private ownership of that commodity, except as money.

Otherwise, you're just trading the commodity in convenient units. Now, the intrinsic value of that commodity may change (for example, in an aluminum-based economy, inexpensive aluminum refining techniques might be discovered, or in a diamond-based or tulip-based economy, the artificial scarcity could end on a whim), and that would then skew the entire monetary system.

Jose


Well, changing efficiencies would screw with everything, yeah. Aluminum going from precious to not would be devestating, sure.

But, just making something money means a lot of it is going to be employed as being money. Let's say, gold. If we all decided to use gold as money, well, we need to have a bunch of it in coins, instead of jewelry, or electronics, or whatever else. Even if it's only gold-backed, we still need to have a reserve set aside for backing, or it's just fiat system indistinguishable from what we have today. All gold in the world is what, about 171k tons? Sounds like a lot, but, that's what, like .08 ounces per person? Even with really tiny coins and mixing with other metals, it would take kind of a lot of gold coins to work. So, a much smaller supply is available for industrial use. Gonna spike the price.

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Re: 1499: "Arbitrage"

Postby jacobstevens » Tue Mar 31, 2015 6:21 am UTC

mathmannix wrote:One of my favorite quizzes is "Bible or Bard" or something along those lines, comparing quotes from the King James Version with Shakespeare quotes, as they were from the same time period. Plus, how many people know that the Bible (at least KJV) talks (poetically) about unicorns, or the constellation Orion, or that Jesus said
When it is evening, you say, "It will be fair weather; for the sky is red." And in the morning, "It will be stormy today, for the sky is red and threatening."
and
If a house be divided against itself, that house cannot stand.


I'm sure I'd embarrass myself in this type of quiz. I didn't even know OF the original quote, here, and I didn't know Jesus quoted the sailor's maxim.

"Unicorn" is the KJV translation of Hebrew re'em which might refer to auroch, undomesticated cattle known & revered for their strength. Most all passages using re'em allude to their strength; the three passages that allude to identifiable characteristics, quite conveniently refer to horns -- plural in two cases, the third singular, literally, although in what may be a rhetorical flourish (such as "eye of the tiger," which certainly does not demonstrate ignorance of knowledge that tigers are bioptic (is that the word?)).

Orion (and Pleiades) are constellations observed & known by many various ancient cultures, each by their own name. The Hebrew Kesil was the written reference to the constellation, and the Western, Hellenized church, like with so many other things, translated these words that few would understand to those cultures' words for these otherwise known things. And in the Western, Hellenized world, history being written by the victor as peoples, cultures, libraries and bodies of knowledge were lost to conflict, Aristotle and classic Greek culture were the go-tos. So it can seem weird, but it's really what we should expect.

What really intrigues me more, personally, is what might have been meant by Mazzaroth. There's some tradition of it possibly referring not to a constellation, but of "the" zodiac or some seasonal astronomical phenomenon. The Hebrew Bible borrowed a lot from Babylonian culture, but not this one, and it may demonstrate an Israelite astronomy that predates the Exile, which would be pretty cool (to me). Also their word for Orion, Kesil, means fool, and definitely did not derive in word or myth from the Babylonian pantheon.

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Re: 1499: "Arbitrage"

Postby jacobstevens » Tue Mar 31, 2015 6:54 am UTC

Pfhorrest wrote:Here's a fun game: identify at whose direct expense those gains come.


Heh. This forum's so delightfully bright, in a way that humbles me, I came here expecting to learn things about arbitrage, like how it relates & distinguishes from speculating, hedging & investing (another one of those "four categories" taxonomies). I find this notion that many of the finance tactics for wealth building is zero-sum and intrinsically at someone else's expense to be kinda true, but tremendously dubious.

Money creation is real, and it has dangers. I think of it as the opposite of zero-sum, since it's literally adding to the money supply, but I interpret your stance (Pfhorrest's) as recognizing that societal wealth accumulates over time thanks to human labor (something Marx and Smith, patrons of the fiscal left & right, both recognized) (and in part to the shelf life and/or glut of natural resources), and that capitalist wealth-building is not producing wealth or societal value, and predicated on the presumption that economics might follow a 1st law of Thermodynamics sort of thing, if it comes from somewhere, it comes from someone else.

It kinda comes from someone else. I'd be arguing semantics to deny that. I could save money for 30 years and buy a house, or I could borrow money and enjoy that house for 30 years before I own it. That costs me additional money. And I might believe that cost is worth the value I get in return. Lending money produces real wealth. The ability to expedite solving a problem that money can solve has value to people.

Some of us will pay extra for convenience. I find the fact that we'll pay for wellness (a back massage, entertainment, free-trade goods, shade-grown coffee, carbon credits, no-ad streaming services) to really challenge our assumptions about economics. Insurance provides assurance, which though I loathe it, has real economic value. It's real wealth.

That's not intrinsically exploiting people. It can manifest in exploitation. Unchecked money creation can hurt economies real bad. If we only track the transactions and follow the trail of money to their sources, it sure seems like over-leveraged lending is ex nihilo money creation, but as a service it has real value. That's not to say every lending transaction is beneficial and "worth it" to the borrower, of course.

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Re: 1499: "Arbitrage"

Postby jacobstevens » Tue Mar 31, 2015 7:16 am UTC

Anyone mind if I stem off a new conversation branch and ask about views on the gold standard? I believe there are inherent but not necessary dangers in fiat, but I'm solidly against backing currency with a natural resource of some kind, gold, silver. But I can't say I'm altogether convinced of my own reasoning.

There sure seems to be a correlation between our ending Bretton Woods II and the issue of the increasing gap in the distribution of wealth. (I'm troubled by the gap, but I'm still trying to figure out if I believe it's inherently unjust or a problem; at any rate, this doesn't quite show the correlation, but is one of my favorite treatments on the whole topic, and if you know that Volcker ended Bretton Woods II's gold backing under Nixon, you know the 1980 stemming of the current income gap folks tend to be concerned about, as explored in this Straight Dope article, and see what I'm getting at).

So in that vein I wonder if I may be wrong, and no gold backing actually produces a societal problem. But that aside, I recognize that wealth stems from two basic sources, natural resource and human labor, the latter being cumulative (and somewhat exponentially so, what with automation & population explosion), and so backing currency with a resource that's static causes . . . well I don't know what, but it kinda concerns me. The obvious point would be that the resource would continually become more & more valuable, and the thin blue line implications of protecting one's allocation becomes rather problematic. Even if electronic/paper money account for virtually all transactions, there's a guarded hole o' gold somewheres, and Ocean's Umpteen schemes abound.

Beyond that, I lose my grasp of economics. Dunno if it's wrong to think of a dollar or unit of currency as essentially a stock or share of a societal wealth aggregation, like a publicly-traded company, but I guess I do, so I'd love to see what this forum thinks about backing currency with gold.

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Re: 1499: "Arbitrage"

Postby ps.02 » Tue Mar 31, 2015 9:40 am UTC

jacobstevens wrote:Anyone mind if I stem off a new conversation branch and ask about views on the gold standard? I believe there are inherent but not necessary dangers in fiat, but I'm solidly against backing currency with a natural resource of some kind, gold, silver. But I can't say I'm altogether convinced of my own reasoning.

I'm no economist, but the following points seem reasonably obvious to me:

  • If the economy per capita grows, it means in the aggregate, we're better off; if it shrinks, we're worse off. If the population is growing, therefore, you want the economy to grow at at least that rate. Unless you think we're too well off and could do with a bit of austerity.
  • If your money supply (say, M2) grows faster than the economy (say, the GNP), you get inflation. If the money supply grows slower, you get deflation. (If they are shrinking, apply the same logic but with minus signs.) I believe Dr. Friedman demonstrated this relationship pretty convincingly in the 70s.
  • Growth of the money supply with a gold standard is tied to how much gold is mined, minus how much gold is used for non-monetary purposes like manufacturing. Neither of these factors is easy for a government to fine-tune. And in fact if you build a mechanism to fine-tune the money supply, that's basically a fiat. You've missed the point of a gold standard.
  • Inflation is a hidden tax on people who have monetary assets. (The real value of these assets erodes.) Deflation is a hidden tax on people who are in debt. (The real value of a debt grows.) For reasons that aren't entirely clear to me, deflation is really bad for the economy. A little inflation is OK, but too much inflation is also bad.
Thus in the modern world I just can't see how a gold standard could work. We expect economic growth, partly because population in much of the world is growing, partly because our expectations are really high. (See: people living in a 3-bedroom 2-bath house, with 2-car garage and air conditioning, who somehow believe people had it better in the 1950s.) And it seems as though the growth in the gold supply would not keep pace. If it did, it would be erratic and subject to pseudo-random forces like futures markets.

Maybe Bitcoin will prove me wrong, though. (That's a currency based on scarcity of a non-renewable "natural" resource, whose supply can be increased by investment in "mining".) When a major economy can be kept afloat by Bitcoin as the main currency, let me know.

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Re: 1499: "Arbitrage"

Postby speising » Tue Mar 31, 2015 9:50 am UTC

ps.02 wrote:For reasons that aren't entirely clear to me, deflation is really bad for the economy.

That's easy: if you money is growing in value if you stow it under you pillow, you won't buy unneccessary goods.

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Re: 1499: "Arbitrage"

Postby Kit. » Tue Mar 31, 2015 3:10 pm UTC

Tyndmyr wrote:Silly or not, that happens, and is perfectly reasonable economically. Businesses take out loans for startup, operating capital all the time. Including businesses who rent things out.

OK, let's put it this way:

Growth is measured by consumer spending. Withholding funds from consumer spending into investment immediately results in negative growth, with an investment possibly leading to increased productivity, thus it may increase growth in the future.

If we have only investment and no consumer spending, we have no consumption (and no need in production).
If we have only consumer spending and no investment, we have stagnated productivity.
If we have a mix of both, we can do better compared to if we have only one kind of spending. Which means that we may expect an extremum (a maximum, in particular) at some ratio of consumer spending to investment; a sort of equilibrium. If we consume more than that (an invest less), we will eventually growth slower. If we consume less (and invest more), we will eventually grow slower as well.

Now the question is at which side of the extremum we currently are (and whether there are any local extremums that could lead to a local effect different from one we would expect). Depending on that, we may want either to invest more or to consume more.

Tyndmyr wrote:I'm particularly familiar with, for various reasons, the door mat making industry. Got to tour a factory in georgia couple years back. Now, door mats are not a particularly strong growth area or anything,

But are the door mat sales decreasing? If so, why?

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Re: 1499: "Arbitrage"

Postby Tyndmyr » Tue Mar 31, 2015 7:47 pm UTC

Kit. wrote:
Tyndmyr wrote:Silly or not, that happens, and is perfectly reasonable economically. Businesses take out loans for startup, operating capital all the time. Including businesses who rent things out.

OK, let's put it this way:

Growth is measured by consumer spending. Withholding funds from consumer spending into investment immediately results in negative growth, with an investment possibly leading to increased productivity, thus it may increase growth in the future.

If we have only investment and no consumer spending, we have no consumption (and no need in production).
If we have only consumer spending and no investment, we have stagnated productivity.
If we have a mix of both, we can do better compared to if we have only one kind of spending. Which means that we may expect an extremum (a maximum, in particular) at some ratio of consumer spending to investment; a sort of equilibrium. If we consume more than that (an invest less), we will eventually growth slower. If we consume less (and invest more), we will eventually grow slower as well.

Now the question is at which side of the extremum we currently are (and whether there are any local extremums that could lead to a local effect different from one we would expect). Depending on that, we may want either to invest more or to consume more.


Yes, yes. All of that is irrelevant to if multi-stepped lending can increase efficiency.

Tyndmyr wrote:I'm particularly familiar with, for various reasons, the door mat making industry. Got to tour a factory in georgia couple years back. Now, door mats are not a particularly strong growth area or anything,

But are the door mat sales decreasing? If so, why?


Depends on exact time frame you're looking at. I'm not seeing a handy doormat specific source, but housing accesorization in general tends to track to the economy. Shitty recession post-housing boom results in people being generally more adverse to buy stuff. So, you have a goodly period there where a LOT of industries were stagnant to decreasing.

In a decreasing market, it's easier to grab market share if you have resources to do so. The downside is, because the market is shitty, less people have the available capital to do so. These things are obviously related, of course. Having a nice nest egg in a down market is nice. Of course, on the flip side, if the market is hot, keeping money uninvested means getting lower average returns, so it's not without risk or anything.

There are reasons to invest in both good and bad economies, they're just not the same reasons.

The exception, of course, is if you expect the entire market to go away. However, that's a bit unusual.

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Re: 1499: "Arbitrage"

Postby PinkShinyRose » Wed Apr 01, 2015 12:57 am UTC

speising wrote:
ps.02 wrote:For reasons that aren't entirely clear to me, deflation is really bad for the economy.

That's easy: if you money is growing in value if you stow it under you pillow, you won't buy unneccessary goods.

But if people have no good use for these goods there's really no point to producing them in the first place, that would just be a waste of resources (and depending on the goods very possibly the environment).

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Re: 1499: "Arbitrage"

Postby Kit. » Wed Apr 01, 2015 9:36 am UTC

PinkShinyRose wrote:there's really no point to producing them

Employment.

We have much more people than needed to produce only necessary goods.

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Re: 1499: "Arbitrage"

Postby Tyndmyr » Wed Apr 01, 2015 1:58 pm UTC

PinkShinyRose wrote:
speising wrote:
ps.02 wrote:For reasons that aren't entirely clear to me, deflation is really bad for the economy.

That's easy: if you money is growing in value if you stow it under you pillow, you won't buy unneccessary goods.

But if people have no good use for these goods there's really no point to producing them in the first place, that would just be a waste of resources (and depending on the goods very possibly the environment).


Well, there's the issue that sometimes, expending the money would useful, but not as useful as the projected gains to keeping them under the pillow. Thus, you are taking a hit to useful productivity. How much depends on the size of the deflation, but there's a risk to deflation being a self-amplifying effect.

So, deflation is very definitely negative.

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Re: 1499: "Arbitrage"

Postby PinkShinyRose » Fri Apr 03, 2015 11:30 pm UTC

Kit. wrote:
PinkShinyRose wrote:there's really no point to producing them

Employment.

We have much more people than needed to produce only necessary goods.

You could increase employment by shortening the standard workweek without excessive waste of natural resources.

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Re: 1499: "Arbitrage"

Postby speising » Fri Apr 03, 2015 11:38 pm UTC

PinkShinyRose wrote:
Kit. wrote:
PinkShinyRose wrote:there's really no point to producing them

Employment.

We have much more people than needed to produce only necessary goods.

You could increase employment by shortening the standard workweek without excessive waste of natural resources.

We have done that already repeatedly. But, if you want to keep the wages fixed, while producing less, you run into competition problems with imports from more industrious countries.

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Re: 1499: "Arbitrage"

Postby PinkShinyRose » Fri Apr 03, 2015 11:45 pm UTC

speising wrote:
PinkShinyRose wrote:
Kit. wrote:
PinkShinyRose wrote:there's really no point to producing them

Employment.

We have much more people than needed to produce only necessary goods.

You could increase employment by shortening the standard workweek without excessive waste of natural resources.

We have done that already repeatedly. But, if you want to keep the wages fixed, while producing less, you run into competition problems with imports from more industrious countries.

True, but if people waste money on useless junk they really don't need to continue having the same yearly income.

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Re: 1499: "Arbitrage"

Postby Tyndmyr » Mon Apr 06, 2015 10:29 pm UTC

PinkShinyRose wrote:True, but if people waste money on useless junk they really don't need to continue having the same yearly income.


That seems to be the current state of affairs, yeah.

But, even if stuff is useful, if imported is cheaper than locally made, the problem holds.

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Re: 1499: "Arbitrage"

Postby slinches » Tue Apr 07, 2015 1:10 am UTC

If you look at it from the perspective of a national economy, imports that aren't economically productive would be a net monetary sink. Although, I'd argue that the effects of increasing demand for labor in those "more industrious" countries is likely to cause wage inflation that levels the playing field significantly. It may not be 1 to 1, but it's not a complete waste either.


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