[staringclown]

Interesting read.

Are we in another Great Depression? Not yet

Quote

But to return to hegemonic stability theory, Kindleberger is right: the system needs a leader, a hegemon, that is willing and able to provide international public goods. China is neither willing nor able to fulfil this function. Its economy is scarcely larger than Japan’s. The US Fed, and its ability to extend long and short-term credit to ensure liquidity in global markets is our best – possibly our only – bet.

[wulfgar]

Quote

Glad you asked. In his seminal 1973 work, The World in Depression 1929–39, the great financial historian Charles Kindleberger outlined his theory of hegemonic stability as a counterpoint to Keynesian and monetarist explanations of the Great Depression.

The cause of the original Great Depression? That's simple.........

It was due to the expansion of new goods for the market. In the 1920's, motor cars (which led to the demise of the computerized horse that knew where it was going and doubled as a garden lawn mower and weeder). Radio grams, a host of electric consumer goods.

The production of this new technology require investment to build the plant and investors thought they would make a mint!!! Trouble is when you build a lot of goods, the price naturally falls and the investors made discovery that they actually were losing money on the new technology. Then enter the FED in the 1920's to stop prices falling.......easy credit! Look no further, depressions are the consequence of the easy credit policy. The reality is the public didn't have the money to buy the goods at the high prices.......and their answer.....lend the consumer money to buy the product.

Better known as kicking the can down the road!!!

The world was effectively off the gold standard after 1914 which would have revealed money was too cheap. Quite simply it becomes cheaper to melt coinage than mine gold.

[staringclown]

wulfgar, on 09 January 2012 - 05:10 AM, said:

The cause of the original Great Depression? That's simple.........

It was due to the expansion of new goods for the market. In the 1920's, motor cars (which led to the demise of the computerized horse that knew where it was going and doubled as a garden lawn mower and weeder). Radio grams, a host of electric consumer goods.

The production of this new technology require investment to build the plant and investors thought they would make a mint!!! Trouble is when you build a lot of goods, the price naturally falls and the investors made discovery that they actually were losing money on the new technology. Then enter the FED in the 1920's to stop prices falling.......easy credit! Look no further, depressions are the consequence of the easy credit policy. The reality is the public didn't have the money to buy the goods at the high prices.......and their answer.....lend the consumer money to buy the product.

Better known as kicking the can down the road!!!

The world was effectively off the gold standard after 1914 which would have revealed money was too cheap. Quite simply it becomes cheaper to melt coinage than mine gold.

All too familiar. Just substitute computers/Plasma TV's for cars.

[wulfgar]

staringclown, on 09 January 2012 - 05:57 AM, said:

All too familiar. Just substitute computers/Plasma TV's for cars.

Quote

Price
The standard 4-seat open tourer of 1909 cost $850^[35] (equivalent to $20,709 today), when competing cars often cost $2,000–$3,000 (equivalent to $48,726–$73,089 today);^{[citation needed]} in 1913, the price dropped to $550 (equivalent to $12,181 today), and $440 in 1915 (equivalent to $9,521 today). Sales were 69,762 in 1911; 170,211 in 1912; 202,667 in 1913; 308,162 in 1914; and 501,462 in 1915.^[30] In 1914, an assembly line worker could buy a Model T with four months' pay.^[30]

By the 1920s, the price had fallen to $290 (equivalent to $3,289 today) because of increasing efficiencies of assembly line technique and volume. Henry employed vertical integration of the industries needed to create his cars.

Note the nonsense CPI figure......according to CPI an ounce of gold should be $500.

Actually the dollar really devalued from the late first decade 1900 when the real gold standard was being withdrawn to finance the armaments race. By the late 1920's so many dollars in circulation that gold would have to be repriced upwards from the $21-$22 standard. In reality the FED printed great numbers of un-backed greenbacks in WW1.

Wages went from $14 per week to $30........in reality the real dollar was cheapened to half the real purchase power.

In 1909 it took 40 ounces to buy a T and in 1920's, 14 ounces. But that was the fixed gold price, it reality the T was costing 10 ounces.

Meanwhile back in China.......big flat screen falls from $5,000 to $500.

If they built the plant on the basis of recouping more than $500 per flat-screen.........they're in trouble!

[staringclown]

wulfgar, on 09 January 2012 - 06:38 AM, said:

Note the nonsense CPI figure......according to CPI an ounce of gold should be $500.

Actually the dollar really devalued from the late first decade 1900 when the real gold standard was being withdrawn to finance the armaments race. By the late 1920's so many dollars in circulation that gold would have to be repriced upwards from the $21-$22 standard. In reality the FED printed great numbers of un-backed greenbacks in WW1.

Wages went from $14 per week to $30........in reality the real dollar was cheapened to half the real purchase power.

In 1909 it took 40 ounces to buy a T and in 1920's, 14 ounces. But that was the fixed gold price, it reality the T was costing 10 ounces.

Meanwhile back in China.......big flat screen falls from $5,000 to $500.

If they built the plant on the basis of recouping more than $500 per flat-screen.........they're in trouble!

Man the whole idea of money as an abstract concept is bending my mind. I need to think some.

So far I'm up to an invention that was so cool that absolutely every household would need one to continue to function in society. Unfortunately it was so expensive to produce that no one on earth could afford one.

[wulfgar]

staringclown, on 09 January 2012 - 09:14 AM, said:

Man the whole idea of money as an abstract concept is bending my mind. I need to think some.

So far I'm up to an invention that was so cool that absolutely every household would need one to continue to function in society. Unfortunately it was so expensive to produce that no one on earth could afford one.

No, it is extraordinarily simple mechanics.

Let's say we produce grain fed cattle for general consumption.

A major issue is the capital inputs, in particular grain for feed. Getting a grain fed cow means giving up a certain of grain that could feed humans.

After all that, a major factor in the price is the quantity of such cattle on the market and the demand for them.

[mattau]

I don't think we're headed into a Great Depression any time soon.

As for Australia, I reckon our economy is going pretty strong at the moment

[savagegoose]

oh really, global demand for everything is sliding, people are out od spending loot. and either dont want to borrow, or banks dont want to lend. and credit is only place spending loot is available.
CChina and brics seem last vestiges of pumping economies. china still primerd for feeding consumeris, and no ones consumin,g and brics mainly feeding the beast raw materials.
we are on the end of the food chain some where, feeding china and japan. yeah japans already dead, just on life support . and china is a fat man running uphill.

[Mr Medved]

mattau, on 09 January 2012 - 03:46 PM, said:

I don't think we're headed into a Great Depression any time soon.

As for Australia, I reckon our economy is going pretty strong at the moment

Which state do you live in?

[staringclown]

wulfgar, on 09 January 2012 - 01:33 PM, said:

No, it is extraordinarily simple mechanics.

Let's say we produce grain fed cattle for general consumption.

A major issue is the capital inputs, in particular grain for feed. Getting a grain fed cow means giving up a certain of grain that could feed humans.

After all that, a major factor in the price is the quantity of such cattle on the market and the demand for them.

I get the economies of scale bit.

You must have been asked this a bazillion times so my apologies in advance Wulfgar.

What are the benefits of linking a currency to standard? Why did they abandon the standard?

Because the value of money not standardised can vary I was wondering whether this would help speed technological development due to debt enabling more people to adopt the tech more quickly (with debt). The debt is still a problem of course when it becomes too heavy. How would a standard affect this? It occurs to me that gold can be leveraged in the same way as fiat. I'd be interested to hear your thoughts.