Peter Schiff On The Economic Meltdown Part 6

Peter Schiff explains why the economic meltdown happened and why it shouldn't have surprised anyone.

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[TheBlarges]

@HannuMarijarvi

What do you think causes increased productivity? But savings and then more capital.

[HannuMarijarvi]

@Rasterius I've been trying to say for a while now that I'm not claiming consumption under normal circumstances increases growth. But to me it seems like you're not listening to me.

You didn't say that a country with more capital has better chance of fulfilling wants in future. You said "growth is caused by an increase in capital". This is not true, growth is caused by increase in productivity and total hours worked, which is not identical to increase of capital.

[Rasterius]

@HannuMarijarvi Perhaps you should look at your productions possibility curve from the Keynesian economics textbook. Country with more capital, has better chance of fulfilling wants in future, country which spends on consumption has only short term growth. Both give economic growth but only one can be good for the future. I used demand in its literal sense not economic definition we are now discussing semantics.

[HannuMarijarvi]

@Rasterius I acknowledge our definition of economic growth is the same. What I do not acknowledge is that increase in capital is identical to increase of growth. I don't agree that "growth is caused by an increase in capital".

And a want for more is not the same as demand. Demand means both a want for more and a capability to spend the money. Almost anyone would want a diamond, but that doesn't mean the demand for diamonds comes from everyone, it comes from a very specific segment.

[Rasterius]

@HannuMarijarvi Read what I say, then comment. My definition of economic growth was the exact same as yours. Let me clarify for you, demand is infinite because people have the intrinsic desire to want more. Doesn't mean they can, certainly they can't have everything they want, because they don't have enough money. People don't buy goods from companies because they don't have enough money, not demand for the good, in most cases.

[HannuMarijarvi]

@Rasterius Well if you're saying that people will buy anything and everything, how come there companies that go bankrupt from not enough people buying their products? Clearly demand is finite here.

I am not agreeing with you that growth is caused by an increase in capital. Growth is by definition caused by an increase in total production, which consists of both productivity and number of hours worked. That's not identical to increase of capital.

[HannuMarijarvi]

@Rasterius You think I've changed my position because you didn't listen to what I said my position actually was. You assumed my position was something you're against. You've spent the whole time talking about something that's completely irrelevant to what I was saying. I am only saying 1) and 2), which I outlined above.

I'm not saying economic growth under normal circumstances comes from demand, nor am I agreeing with you that capital is all one needs to think of.

[Rasterius]

@HannuMarijarvi You can thank the FED for that and the mainstream economists who believed borrowing more money for consumption, on imported goods would lead to a healthy economy. Yes true Keynesian economics is not that bad, stimulus to buy capital is fine, but the misdirected neo-conservative monetarism today is what I am against. I think I have clarified this, so I don't know what the argument is really about. I am very glad that you now know where money comes from, we made some good progress.

[Rasterius]

@HannuMarijarvi That is not fringe at all, in the words of Hayek himself. It is explains demand in human terms not economic terms, in that humans have the ability to consume as much as what is possible. If a society has lots to buy, people will buy it all. Now we come to the major point. I'm glad you realise growth is caused by an increase in capital. Some of the reasons the US has low demand is because the nation spent money it didn't have on things it didn't need, and didn't produce them.

[HannuMarijarvi]

@Rasterius Yet again a stalwart refusal from you to consider what I've actually said and not what you would have wanted me to say.

Besides, to equate increase in productivity to an increase of capital is to assume all that capital gets invested. But in a time when demand is exceptionally low investing is less rewarding and thus less of the capital will be invested. But in a time when the US is a bad investment, increased capital won't mean increased investment.