re:cureall "I received this slightly amusing joke via email but it made me think: "It is a slow day in a little Greek Village. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt and everybody lives on credit. On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the taverna. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money and leaves town. No one produced anything. No one earned anything. However the whole village is now out of debt and looking to the future with optimism. And that, Ladies and Gentlemen, is how a bailout package should works! " The above ONLY works if all the parties absolve the others of paying any interest for their credit. Could it work in practice? I don't know, but the injection of a massive interest free loan to pay off all debts and then repaid in full and all at zero interest (or accepting the debt paid in full and 'forgiving' the creditors previously agreed inteest - who knows?' Deflation is wonderful.
At the point that you don't agree that lending grinds to a halt when in a deflationary economy is the point you're living in la la land. Did you seriously just say that Warren Buffet with what, $500B in shareholders market cap, is going to ride a white horse in to save the $19T 'murican economy loaning money out at negative interest rates because once in 2008 he sold a single T-bill for $90 over $5M par so he's "participated in saving the USA"? And I'm confused, two posts ago you said "Lending creates money supply you twit." Now in answer to the question "If no-one lends, can significant money supply be created by lending?" you answer "International money flows and asset purchases by foreigners to name a couple." First of all international money flows and asset purchases by foreigners aren't "money supply created by lending", and what happened to the factor that was so important that it made me a twit? You're absurdly arguing for deflation, or you're just arguing for the sake of arguing and don't even remember what you're arguing about at this point? And seem to be confused in thinking that we can have all this money creation by lending but we don't need anyone to spend money? How does that work again?
One critical difference between Engineering and Economics is that Economics is filled with theories, and with Engineering, we actually have laws based on scientific principles. In Economics, you can have guys with degrees continue to fight about how the world actually works and what policy will be beneficial without coming to a conclusive answer. In engineering, hopefully we don't have 2 guys with degrees both fighting if a building will stand up. The math will prove who is right.
Since I've advocated for pretty much the opposite of that on the S&P at least right here on ET, that statement is about as wrong as everything else you've said. And common sense says the earth is flat and the sun revolves around it, that's why the opinion of someone who's spent no time studying something is worth jack shit compared to someone who has. It's pretty big so not sure how you missed it, but I'll put it up again for you just in case. That isn't sustainable, just in case you're questioning that, especially not for Japan. And by the way, its the opposite of "savings in the bank". Again, the ability to see trends coming instead of waiting until you personally witness a elderly person dying in the streets is what separates moderns society from the dark ages. Does this look sustainable to you? Do you think maybe it would be prudent to see this thing coming and take action to prevent it, thus ensuring that we never see the "doomsday" that you insist is required actually happen before you'll change your mind? What do you do for a living anyway, I can't imagine it being anything that required the ability to forecast or even think beyond the next couple days? Apparently you just go on in denial until bad things actually happen, then you might take action, but damn it until it actually occurs it's all "just a load of crap"?
That's not exactly true. For example, I spent a couple years in a job forecasting the appropriate level of spare parts for several large aircraft fleets spread across the world. There was limited funding, long lead times on some parts, and most were mission critical meaning if we ran out of spares aircraft were down hard. And while we knew an estimated mean time between failure and the distribution, that was itself a random variable that changed unpredictably based on aging, use, and million other things that were hard to define. So it was hard as crap, much harder than just designing a circuit. And there was no "right answer" and lot's of fights about the most beneficial way to statistically model and implement this thing. Keep in mind this was a bunch of folks with advanced statistics degrees mixed with a bunch of pilots and aircraft maintainers, with some overlap folks who were both. The anti-intellectuals of the world would say that since that was an unbounded problem full of theories and no right answer, we weren't "real" practitioners and everything we did was bullshit...exactly as they say about economists. In truth just because it was hard as shit doesn't mean we didn't do a pretty good job compared to the alternative of "using common sense" which the military had done before with far poorer results. Another example I have first hand experience with as a professional pilot, weather forecasting. Again hard as shit, often wrong, and yet an experienced forecaster is significantly better at forecasting than someone "using common sense" and a lot of lives, including probably my own, have depended on it. So while it's true that the bounded universe of most engineering is easier, it doesn't make it better than the much tougher unbounded and often difficult to test problems like we see in economics and a lot of fields most don't think of so pejoratively as they do economics.
Fair enough, but you're not exactly disproving my point. There might be some jobs in Engineering that require guestimations, like in Economics, but lets face it, if even 10% of structures designed in the west fell over, we would have a very big problem. Conversely, if only 10% of the time economists got things wrong, meaning 90% right, well, we would really have something here!
I'd challenge your idea that economists are wrong more than 10% of the time. What basic tenant of micro or macro economics have economists been wrong on in the last 20 years? Quick, off the top of your head? Not cutting edge stuff (after all, how many rockets have blown up and that's bounded science) or the few outliers that a political party latches onto to lend some veneer of respectability. I'm talking basic economics tenants like, to get back on topic here, the fact that deflation kills economic growth? I'd maintain that, compared to say, doctors or rocket scientists, macro economics is pretty accurate given the difficulty of things like performing an experiment with controls (although the "Kansas Experiment" that Brownback unwittingly performed was an awesome repudiation of the "supply side economics" concept). My main point is that you can't simply dismiss a field like spare parts forecasting (we were certainly wrong 10% of the time), economics, medicine, weather.... and the experts in it with the idea that any jackass with an opinion is equally qualified to speak on the topic as an expert in the field. Simply because they don't work in closed form solutions. And yes, it's equally ludicrous that someone without the most basic understanding of macro thinks their "common sense" opinion on the subject is anything more than gibberish, same as if I was to opine on medical procedures or bridge design.
Honestly, I don't know much about economics, but the fact that we can't come to concrete conclusions about how for example a tax cut will affect the budget and the citizens is what is worrying. If you design a building, its pretty clear how many columns you need to build to support the structure. But when you need to stimulate the economy, nobody really knows if a tax cut will help, or if just giving money to people will help, or if taxing the rich will be more productive, or if a trade war is good or bad in the long run, or.... That is the general point I'm making.
But actually that's not true at all and is exactly my point! I (who am not an economist but have at least taken a number of courses) and any economists not on a certain political party's payroll could and did predict with absolute certainty that a major tax cut would drive up deficits...and lo and behold that's exactly what transpired, just to give a recent example. All the major tenants of macro are well established and generally hold true. The fact that politicians and political hacks say otherwise doesn't make it so, nor does the handful of economists they can trot out to try to support that point. The assertion that "nobody knows" what will happen when it comes to anything in economics is simply false, full stop, please please please get that idea out of your mind at least until you've taken a couple macro courses and can say that with some rigor behind it. And again why don't we hold doctors to this "engineer" standard, or weather forecasters, or parts forecasters. Isn't it worrying that 80% of the patients of some oncology fields die of cancer? At this point 100% of Alzheimer patients. Is the field of medicine "nobody knows", might as well not even try, dismal science and all that?
Ok, that's fair enough, I will grant you that. But its bewildering then how this professional opinion can be drowned out at the hands of the politicians, and also how none of this is reflected in the market. Of course I shouldn't even drag the market into this so as not to open up a can of worms. Medicine is tricky. On the one hand, drug trials represent some sort of good science where you're at least trying to measure properly how well something will work (although I'm sure you can argue that results still need interpretation), but on the flip side, you can also get totally different prescribed levels of care depending on the physician. So perhaps medicine is more like Economics and less like Engineering.