Political Crossfire Forums

[logic-rules]

obviously this is meant so the upper crest get their first. if i understand correctly, the extra money will be invest providing more jobs and other s**t to the lower incomes. this is not a good economic system in my view. hoping the people will invest their surplus. why not a system of "percolate up" economics. we know for a fact that americans don't save money, any surplus they get will be spent into the economy, there is a far lower chance that they are going to take their money overseas than a person that is more wealthy. the people at the top are still going to get their money because more people are going to buy their products with the surplus of money they will have. more people will have more money to spend even if some decide to sit on it. the vast majority is going to spend it. look at what has helped the economy over the past couple years. auto makers going to zero percent financing and mortgage rates lowering. it is the lower class that spent the money to pull the economy up not the rich using their tax cuts for investments. i say the time for trickle down economics is over, we know that it is a fraudulent system and it does not make as much sense as "percolate up" economics if you think critically about it.

[cap'n queasy]

"Percolate" up economics doesn't exist. Nor can it.

[logic-rules]

cap'n queasy wrote: "Percolate" up economics doesn't exist. Nor can it.

elaboration or link please

[ubikk]

cap'n queasy wrote: "Percolate" up economics doesn't exist. Nor can it.

It's called "bubble-up" economics. It does exist. It's what you call "demand-side" economics. The early union movement in the us was a demand-side economic movement. The GI bill and expanded housing credits in the 1950s were "demand-side" policies. Minimum wage and the EIC are also Demand-Side policies that are designed to increase the demand for goods and services. In fact, Presidet Bush's own personal income Tax Cut policies are bubble-up policies to a great extent. He even describes it that way.

The question you have to ask is which drives economic growth more, the demand side of the market or the supply side? Some people think it's the demand side. Demand-side theory reads something like this:

If you just push the supply side without helping demand, the suppliers will ultimately decrease quantity and upscale their products to fit what demand there is. (i.e. they will build fewer things that cost more money to buy in order to maximize profits in the available market).

If you push the demand side, suppliers will place more emphasis on increased quanitity to match the larger market of buyers.

In the 1990s, the great leap in wages and capital gains for working people with mutual funds and 401Ks and an expansion of the EIC had a bubble-up effect on the economy. The housing boom of the 2000s also had a bubble-up effect.

Ultimately have to push BOTH sides of the equation to some extent.
.

[Katsumoto]

ubikk wrote: cap'n queasy wrote: "Percolate" up economics doesn't exist. Nor can it.

It's called "bubble-up" economics. It does exist. It's what you call "demand-side" economics. The early union movement in the us was a demand-side economic movement. The GI bill and expanded housing credits in the 1950s were "demand-side" policies. Minimum wage and the EIC are also Demand-Side policies that are designed to increase the demand for goods and services. In fact, Presidet Bush's own personal income Tax Cut policies are bubble-up policies to a great extent. He even describes it that way.

The question you have to ask is which drives economic growth more, the demand side of the market or the supply side? Some people think it's the demand side. Demand-side theory reads something like this:

If you just push the supply side without helping demand, the suppliers will ultimately decrease quantity and upscale their products to fit what demand there is. (i.e. they will build fewer things that cost more money to buy in order to maximize profits in the available market).

If you push the demand side, suppliers will place more emphasis on increased quanitity to match the larger market of buyers.

In the 1990s, the great leap in wages and capital gains for working people with mutual funds and 401Ks and an expansion of the EIC had a bubble-up effect on the economy. The housing boom of the 2000s also had a bubble-up effect.

Ultimately have to push BOTH sides of the equation to some extent.
.

And how does one "push" either side without creating unnatural market bubbles that eventually must pop?

[cap'n queasy]

ubikk wrote: cap'n queasy wrote: "Percolate" up economics doesn't exist. Nor can it.

It's called "bubble-up" economics. It does exist. It's what you call "demand-side" economics. The early union movement in the us was a demand-side economic movement. The GI bill and expanded housing credits in the 1950s were "demand-side" policies. Minimum wage and the EIC are also Demand-Side policies that are designed to increase the demand for goods and services. In fact, Presidet Bush's own personal income Tax Cut policies are bubble-up policies to a great extent. He even describes it that way.

The question you have to ask is which drives economic growth more, the demand side of the market or the supply side? Some people think it's the demand side. Demand-side theory reads something like this:

If you just push the supply side without helping demand, the suppliers will ultimately decrease quantity and upscale their products to fit what demand there is. (i.e. they will build fewer things that cost more money to buy in order to maximize profits in the available market).

If you push the demand side, suppliers will place more emphasis on increased quanitity to match the larger market of buyers.

In the 1990s, the great leap in wages and capital gains for working people with mutual funds and 401Ks and an expansion of the EIC had a bubble-up effect on the economy. The housing boom of the 2000s also had a bubble-up effect.

Ultimately have to push BOTH sides of the equation to some extent.
.

Most of your examples are wealth redistribution schemes.

And investment in 401Ks and by buying homes are not an example of demand side economics. That's an expansion of the investor class, which is a classic component of supply side economics and the entire point of the concept.

[Nathyn]

ubikk wrote: cap'n queasy wrote: "Percolate" up economics doesn't exist. Nor can it.

It's called "bubble-up" economics. It does exist. It's what you call "demand-side" economics. The early union movement in the us was a demand-side economic movement. The GI bill and expanded housing credits in the 1950s were "demand-side" policies. Minimum wage and the EIC are also Demand-Side policies that are designed to increase the demand for goods and services. In fact, Presidet Bush's own personal income Tax Cut policies are bubble-up policies to a great extent. He even describes it that way.

The question you have to ask is which drives economic growth more, the demand side of the market or the supply side? Some people think it's the demand side. Demand-side theory reads something like this:

If you just push the supply side without helping demand, the suppliers will ultimately decrease quantity and upscale their products to fit what demand there is. (i.e. they will build fewer things that cost more money to buy in order to maximize profits in the available market).

If you push the demand side, suppliers will place more emphasis on increased quanitity to match the larger market of buyers.

In the 1990s, the great leap in wages and capital gains for working people with mutual funds and 401Ks and an expansion of the EIC had a bubble-up effect on the economy. The housing boom of the 2000s also had a bubble-up effect.

Ultimately have to push BOTH sides of the equation to some extent.
.
Keynesianism = demand-side economics.

[ubikk]

Katsumoto wrote: And how does one "push" either side without creating unnatural market bubbles that eventually must pop?

You can't push too much on one side or the other. As you astutely pointed out, that often contributes to causing a "bubble" of some sort. A bubble is a lopsided demand/supply equation where the price of things is significantly out of line with the actual market. There are other factors also involved in bubbles.

In the most recent case, the Fed lowered interest rates too much to stimulate the economy and caused a housing bubble. They engineered the housing bubble in an attempt to get out of the pickle from the collapse of the tech bubble.

[ubikk]

Nathyn wrote: Keynesianism = demand-side economics.

Keynes believed that aggregate demand drives the economy. It's kind of hard to argue with that. When people demand something businesses will compete to make it for them. It works a lot better that way then when individual businesses make something and hope people will demand it.

Keynes also believed in a "mixed economy" (as opposed to laissez-faire economics) where the government should manage the economy on a macro level and businesses should manage it on a micro-level. The purpose of this is to moderate the "boom/bust" cycles of capitalism. That's pretty much what we do today. It's just that the people doing the macro-management don't always know exactly what they're doing, or else they're being influenced to do things for political reasons rather than economic ones.

[Katsumoto]

ubikk wrote: Nathyn wrote: Keynesianism = demand-side economics.

Keynes believed that aggregate demand drives the economy. It's kind of hard to argue with that. When people demand something businesses will compete to make it for them. It works a lot better that way then when individual businesses make something and hope people will demand it.

Keynes also believed in a "mixed economy" (as opposed to laissez-faire economics) where the government should manage the economy on a macro level and businesses should manage it on a micro-level. The purpose of this is to moderate the "boom/bust" cycles of capitalism. That's pretty much what we do today. It's just that the people doing the macro-management don't always know exactly what they're doing, or else they're being influenced to do things for political reasons rather than economic ones.

Government interference in the free market is the cause of booms and busts in the first place.

[LostSoul3412]

Katsumoto wrote: ubikk wrote: Nathyn wrote: Keynesianism = demand-side economics.

Keynes believed that aggregate demand drives the economy. It's kind of hard to argue with that. When people demand something businesses will compete to make it for them. It works a lot better that way then when individual businesses make something and hope people will demand it.

Keynes also believed in a "mixed economy" (as opposed to laissez-faire economics) where the government should manage the economy on a macro level and businesses should manage it on a micro-level. The purpose of this is to moderate the "boom/bust" cycles of capitalism. That's pretty much what we do today. It's just that the people doing the macro-management don't always know exactly what they're doing, or else they're being influenced to do things for political reasons rather than economic ones.

Government interference in the free market is the cause of booms and busts in the first place.

How?

My question is, what exactly causes the boom-bust cycle?

I'm inclined to believe that it is the natural course of the Capitalistic market, but I am curious to see the other side as well.

[Katsumoto]

LostSoul3412 wrote: Katsumoto wrote:

Government interference in the free market is the cause of booms and busts in the first place.

How?

My question is, what exactly causes the boom-bust cycle?

I'm inclined to believe that it is the natural course of the Capitalistic market, but I am curious to see the other side as well.

I suppose I was a little overzealous in that remark. The boom/bust cycle from my understanding is a pattern that begins when demand far outstrips supply for a given good, and entrepreneurs rise to meet that demand, and surpass it, resulting in over-production and a bust. This is a natural occurrence and in a free market these “corrections” should be very small localized events. However add government “regulation” of the money supply, interest rates, etc. into the mix and you have a recipe for disaster. The Great Depression is a classic example of this. As is every Boom and consequent Recession since.

Interesting to note that there has been a big winner in every boom-bust cycle since the Fed was established—the US Government.

[LostSoul3412]

Katsumoto wrote: I suppose I was a little overzealous in that remark. The boom/bust cycle from my understanding is a pattern that begins when demand far outstrips supply for a given good, and entrepreneurs rise to meet that demand, and surpass it, resulting in over-production and a bust. This is a natural occurrence and in a free market these “corrections” should be very small localized events. However add government “regulation” of the money supply, interest rates, etc. into the mix and you have a recipe for disaster. The Great Depression is a classic example of this. As is every Boom and consequent Recession since.

Interesting to note that there has been a big winner in every boom-bust cycle since the Fed was established—the US Government.

Does government cause deflation?

[Katsumoto]

LostSoul3412 wrote: Katsumoto wrote: I suppose I was a little overzealous in that remark. The boom/bust cycle from my understanding is a pattern that begins when demand far outstrips supply for a given good, and entrepreneurs rise to meet that demand, and surpass it, resulting in over-production and a bust. This is a natural occurrence and in a free market these “corrections” should be very small localized events. However add government “regulation” of the money supply, interest rates, etc. into the mix and you have a recipe for disaster. The Great Depression is a classic example of this. As is every Boom and consequent Recession since.

Interesting to note that there has been a big winner in every boom-bust cycle since the Fed was established—the US Government.

Does government cause deflation?

Yes. By decreasing the supply of its fiat money.

Edit: there is also a steady tendancy toward deflation in a free market based on hard currency (such as gold). But that is actually a good thing.

[Brooklyn]

Quote: My question is, what exactly causes the boom-bust cycle?

The Federal Reserve's monetary policy is the primary cause of the business cycle. The fed lowers interest rates or uses open market operations to increase the money supply. More money available for loans or lines of credit usually causes economic growth. The real economy grows until it reaches potential output. Any growth beyond potential output is only nominal (inflationary). So the fed lowers bank reserves and raises interest rates to decrease the supply of money thus slowing the inflation rate.

[Free Thinkr]

Brooklyn wrote: Quote: My question is, what exactly causes the boom-bust cycle?

The Federal Reserve's monetary policy is the primary cause of the business cycle. The fed lowers interest rates or uses open market operations to increase the money supply. More money available for loans or lines of credit usually causes economic growth. The real economy grows until it reaches potential output. Any growth beyond potential output is only nominal (inflationary). So the fed lowers bank reserves and raises interest rates to decrease the supply of money thus slowing the inflation rate.
On the contrary, the Fed is supposed to head off the boom/bust cycle; the cycle was present before the Fed was in existence. I prefer George's explanation of the cycle.

[Brooklyn]

Quote: On the contrary, the Fed is supposed to head off the boom/bust cycle

Just because the fed can't prevent it, doesnt mean its not trying.

Quote: the cycle was present before the Fed was in existence.

I am not sure how the banking system worked before the Federal Reserve came to be, but I would still be willing to bet that business cycles could be attributed to money in those days as well.

As far as George's explanation goes, well, I would have to read more about that but quite frankly, I'm a little tired of every discussion turning into a discussion about land. I will give it a read though.

[LostSoul3412]

Katsumoto wrote: Yes. By decreasing the supply of its fiat money.

Can a government ever drop money supplies? If money is in circulation, it doesn't just disappear. Government can certainly stunt the addition of money into the market, but can the government actively take money out?

[Free Thinkr]

Brooklyn wrote: Quote: On the contrary, the Fed is supposed to head off the boom/bust cycle

Just because the fed can't prevent it, doesnt mean its not trying.
Yes, that's my point: the Fed is not the cause of the cycle, it's the answer to it. Clearly, it's not a perfect solution.

Quote: Quote: the cycle was present before the Fed was in existence.

I am not sure how the banking system worked before the Federal Reserve came to be, but I would still be willing to bet that business cycles could be attributed to money in those days as well.
As well?

Quote: As far as George's explanation goes, well, I would have to read more about that but quite frankly, I'm a little tired of every discussion turning into a discussion about land. I will give it a read though.
Hey, land is 1/3 of all factors of production; clearly, then, the fact that all of it is controlled by a minority of people will have serious ramifications. Labor controls itself, and capital is a product of labor; land is the cause of the problem.

[Katsumoto]

LostSoul3412 wrote: Katsumoto wrote: Yes. By decreasing the supply of its fiat money.

Can a government ever drop money supplies? If money is in circulation, it doesn't just disappear. Government can certainly stunt the addition of money into the market, but can the government actively take money out?

Easy, the government via the banks currently takes old, worn currency out of circulation regularly. It is usually replaced with new currency. But instead of replacing the currency the government could instead raise interest rates. The result would be deflation.