The dangers of deflation, or why Ron Paul and the Austrians are wrong

[ArtworkbyMosier]

YOU ARE THE DUMBEST MOST IGNORANT FUCKING ASS GOBBLER I HAVE EVER HEARD!!!! SHUT THE FUCK UP AND TAKE UP A HOBBY THAT WILL MOST LIKLY TAKE YOUR LIFE CAUSE YOU ARE NOT WORTH THE GOD DAMN AIR THAT YOU BREATH THROUGH THAT BIG FUCKING NOSE ON YOUR FACE!!!!!! YOU HAVE NO FUCKING IDEA WHAT THE FUCK YOU ARE TALKING ABOUT ITS FUCKERS LIKE YOU THAT WE DO NOT WANT RUNNING A GOD DAMN THING!!!! EXCEPT A GOD DAMN NAIL GUN THROUGH YOUR FACE!!! DUDE THATS WHY YOU HAVE SO MANY DISLIKES CAUSE YOU LOOK STUPID

[MichaeldeParma]

Disliked the video. Due to the audio. Get a mic, it's beyond awful.

[jimmyt3411]

First of all, asset bubbles are detrimental to the economy because it misallocates resources, which leads to an eventual bust. The bust or recessions are needed because it allows consumers to save again; providing liquidity to banks and other firms to capital stricken businesses. Only from the latter can businesses return to making real investments as they anticipate future consumer demand.

[johammbass]

Idiot

[johammbass]

How's the teleprompter?

Deflationary cycle? TV'S getting cheaper is a problem? Do people stop buying them because they are getting cheaper with time? Retard, saved money is not sitting idle, it is capital investment. By the way, there is no real unemployment in a truly free market. Take your "sticky wages" and shove them up your ass

[tstruss912]

Remember the Austrian "economics" is a religion. That's why it makes no sense, but even if you point that out, it won't matter to them. Lakoff has some interesting ideas on the cognitive functions that lead to their delusional thinking.

[nosajsmas]

As to your main point, which was supposed to be that deflation is bad. I've watched the video a few times, and I can't see how you have shown that to be true. By the way, the audio is really bad, so I struggle to hear you.

[migkillertwo]

Sorry, I was pretty clear on this point. Deflation causes debt inflation and raises real wages to (by economic necessity) excessive levels, which causes unemployment.

[EnlightenedOne100]

@migkillertwo I fail to see why these principles are important in a time when the government already failed at stimulating the economy, and we are broke. Getting more confidence in investing in America seems to be more important at the moment. Meaning we need to lower are debt and stop our money from skyrocket inflation. Why are you so worried the pendulum will fly the other direction so quickly?

[nosajsmas]

"Saving money in a bank makes it available to loan, making credit cheaper, which sends a signal to producers that it is time to invest in capital goods."

Sorry, that's not exactly right. I had capital goods on the brain when I wrote it. I'll try again.

Saving money in a bank makes it available to loan, making credit cheaper, which sends a signal to producers that it is time to invest in long term projects.

[migkillertwo]

"Saving money in a bank makes it available to loan, making credit cheaper, which sends a signal to producers that it is time to invest in long term projects"

That would be true of banks were always willing to lend to businesses which were credit worthy. But in deflationary recessions, this is simply not the case. Right now, it is not the case.

[nosajsmas]

Prices: Prices are how market participants communicate. Credit has a price. That price has a function, mostly to coordinate producer and consumer activity. You can't explain the Austrian theory without consideration of the function of prices.

[nosajsmas]

Time: You can't explain the Austrian theory of the business cycle without consideration of time preference. This is crucial.

[nosajsmas]

@ 11:17 No, by overstimulated industries they do not necessarily mean capital goods. You seem to be confusing the explanation of why artificial stimulation prolongs the bubble with the explanation of the cause of the bubble.

Austrians do not believe that capital goods are not profitable. Capital goods are not profitable in and of themselves, rather they are profitable insofar as they produce consumer goods demanded by the market.

[nosajsmas]

I have to comment. I'll start by listing a few of the problems I see with your representation of the Austrian theory.

Why do you conflate saving with hoarding? You must understand that they are not the same thing. Saving money in a bank makes it available to loan, making credit cheaper, which sends a signal to producers that it is time to invest in capital goods.

[LittleSn00py]

How to give monetary and fiscal stimulus, and not go into debt?

[HannoverFisk]

My you are a fat ugly sheep arn't you?

[D10SdelFutbol]

Keynesian Economicsis insane

[mr8ucket]

downward adjustment would be possible without minimum wage laws. Milton Friedman was against the Fed and so was Greenspan at one point. Your not an expert because you took a macro economics class.

[Theobrothers]

Also, if Sowell is your hero or something, you're in real trouble regarding understanding anything properly.

Here is all you should need to know to conclude that Sowell is no longer the intellectual powerhouse that he once was or at the very least that he's a Sellout;

jewishworldreview(.)com/cols/s­owell032007(.)php3

That and he supports Newt Economic plan in a vacuum.

[Theobrothers]

Regarding the point you are giving around the 5:00+ mark.

This is exactly why Paul and Schiff are against government intervention. The reason that wages cannot stabilize to match that of a persons nominal productivity is BECAUSE of government intervention. The "real" world cannot be brought into a theoretical discussion of deflation / inflation scenario's and their effects on wages unless one also talks about regulation / deregulation.

[aagwfan]

Can't tax deflation, debasing (inflation) a nation is about the worse thing any nation can do.

[hm220]

If Ron Paul killed kittens and wore a Darth Vader outfit I would still vote for him. RP2012

[TheAlibabatree]

Very articulate, good video. I am not as well-versed in economics as you so I may not have understood everything, but it seems you focused a lot on the idea of people hording money rather than spending it. But if deflation were to occur and the price of goods dropped wouldn't that be an incentive for people to spend?

[migkillertwo]

Normally it would be. From my (limited) reading, this is where keynesians and neo-classicists would disagree, and it can be solved through simple observation.

Empirical evidence shows that prices for labour and many other goods typically take a long time to respond to monetary contractions. We can speed up this process by fiscal and monetary stimulus.

[TheAlibabatree]

@migkillertwo Thanks for responding. I would like to apologize on behalf of all of the angry and sometimes ignorant Ron Paul supporters.

[corysgood88]

@corysgood88 fact*

[corysgood88]

who needs an econmics class to realize the more there is of something the less its worth? thats just a fucking

[999silverrush]

LMAO the intro to this video is a bunch of babbling bullshit that doesnt make any sense. The very first point is totally wrong and most everything based off of it. This shit is a waste of time. Tell this fat fuck to eat a mississippi bond and sell his gold.

[novawolverine]

There are Austrians who believe that deflation is what we need to be concerned about because they put more emphasis on the destruction of credit, like Mike Shedlock. But, most Austrians agree on how to fix the problems that we're facing. So both sides want honest money, no fed, bankruptcies/re-structuring/et­c., but disagree about whether inflation or deflation is the big fear. E

[bl782]

You want to start another stimulus program when the CPI which is not accurate or precise is annully 3%.. The fixed cost to eat is rising faster then wages. Wages, Salaries, and Fixed Incomes have not matched the price increases. It is taking longer to buy good and services then the month before or I go without. Finnaly when interest rates were raised to 20% under Vockler, why was there not a depression in the long term? Ron Paul stated Vockler acted as the best FED chairmen, who raised rates.

[migkillertwo]

"Finnaly when interest rates were raised to 20% under Vockler, why was there not a depression in the long term? Ron Paul stated Vockler acted as the best FED chairmen, who raised rates."

When interest rates were raised under Volcker, there was a huge recession until prices adjusted to monetary stability. After price stability was achieved, we had enormous economic growth until the most recent crisis.

[bl782]

@migkillertwo Excatly in the the short term there was massive deflation, gold collasped from an all time high of 850$ a great thing by the way. Gold should be closer to 35$ then 1000$. Higher intereats will collaspe price for gold, silver, commoddities, just about everything, price will readjust and we will be the better fot it. Long term higher interest rates are not a constraint on economic growth at all. Interest rate stayed high, Vockler did the righ, and raised rates. .

[megawolf7]

When did you get into economics?

[RichardRoy2]

2a. ..."needless" increase in unemployment hasn't occurred via economic bubble collapses. The unfortunate thing about bailouts is the "tendency" to maintain the inefectual, ineficient practices that derailed the economy in the first place, and reward those practices.

[migkillertwo]

Given austrian assumptions about the economy, output should be rising in consumer industries while asset bubbles are liquidated. However, there isn't an explanation for why output falls in all industries in the economy.

[RichardRoy2]

@migkillertwo My understanding of these bubbles is not that they are asset bubbles, but more along the lines of false appearances. What we see is a surface that promises substance beneath, but it is actually hollow. There are no assets to liquidate, or there are too few to cover the debt promised. They were debt bubbles. The houses were worth less than what was being borrowed against them.

[RichardRoy2]

@migkillertwo 1a. The reason people ended up using particular commodities in trading was, depending on their circumstance, to make sure that their value would be wisely invested. There were imediate consumables and storage consumables. Storage consumables would be held over longer periods of time. Preserves, grains, metals; each had different storage issues, and some held longer than others. Precious metals became valuable for that reason. Inflation detracts from that. It makes money a...

[RichardRoy2]

@migkillertwo 2a. ...perishable. If you go back to barter, you might be just as well off with perishable grains, etc. As to the drop in output, once it's realized the market is contracting on such a large scale, the uncertainty should cause a contraction in production.

[surrealnumber]

@migkillertwo because the liquidation was never allowed to happen, when you bail out a business there is no reallocation, the market does not stabilize and we get what we have now, arguing that the Austrian theory does not hold water because the market is not free to correct itself does not disprove the theory that the market is auto correcting. Also i have been studying economics for at least 10 years and have not see an Austrian scholar argue that consumption drives economies,that is keynesian

[AmGoDDoGmA]

Sorry, but I think Ron Paul has a better understanding the economy than you. I've listen to Ron for years, and he makes perfect sense to me. I will be voting for Ron Paul!

[SamySantana]

@AmGoDDoGmA Just because he makes sense TO YOU doesn't automatically make him right. Belief in God MAKES SENSE to a lot of people, does that make them right?

[RichardRoy2]

1a. Some of these explanations don't set well with me. For instance, as the value of the dollar increases, due to a decrease in the supply of money relative to the supply of goods, there will likely be some reduction in the demand for labour, which would reduce the wages, not necessarily only increase unemployment. And as people would "horde" money, an increased demand for it would ensue, causing an increase in interest to encourage investing, as needed. Also, I fail to see that a needless...

[jgrayillustrate]

So basically you argue that a keynesian centrally planned economy would be safer than an austrian free market economy?

[migkillertwo]

Neither Keynes, nor I, ever advocated for a centrally planned economy. At best we are advocating a centrally "controlled" currency, which is absolutely necessary to maintain price stability.

[artonink]

@migkillertwo in a perfect world a centrally controlled currency would be most efficient, but in the real world where absolute power corrupts absolutely.. there is no room for a non backed currency.. in the end this is all that will matter

[nosajsmas]

@migkillertwo Once you accept sticky wages as an innate phenomenon where control of currency is required, you are on a slippery slope which necessarily entails ever increasing government intervention, leading inevitably to a planned economy.

While you may not advocate a planned economy, the logical outworking of Keynes' policy recommendation leads inexorably to it.

[migkillertwo]

"While you may not advocate a planned economy, the logical outworking of Keynes' policy recommendation leads inexorably to it"

That's just a bullshit statement.

[nosajsmas]

@migkillertwo "That's just a bullshit statement."

Wow. I've subscribed to your channel for quite some time, and I didn't expect such a dismissive response from you.

[migkillertwo]

Just calling it like I see it. You never supported that statement. I clearly outlined the very minimal intervention into the economy that keynesian economics prescribes. You just asserted, without reason or argument, that it somehow leads one down the "slippery slope" of central planning.

[StutteringDave]

Huh. Is a Ron Paul candidacy looking possible at this point? I suppose that you'd vote for Obama over him?