Just thought I'd share this lovely little conversation I had with an extremely Liberal friend of mine on facebook. Feel free to comment and tell me where you think I'm wrong or whatnot.
Dory Thompson
I can't even watch the news. It's disgusting. Just proves that Americans will follow anyone's lead. How can anyone with even half a brain believe in or listen to Sarah Palin??? I'm convinced the majority of the American people do not understand basic economics & no matter WHAT Obama does, republicans fight him on everything, ridicule him and refuse to work with him. How will anything get done now?
Corey Wright
Lol. Basic economics? You realize the federal government removed $2.4 trillion from the job-creating sector directly and then spent over a trillion more that nobody knows whether they'll tax for it in the future, sell more bonds, or just simply print at the Federal Reserve, yes? I mean I think Palin and a whole lot of the Republicans are pretty crazy too, but basic economics teaches that every job created by government necessitates the removal of a job of equal, if not greater value from the private sector. Government does not create or have any resources, it has to remove them from the private sector and redistribute them; that is a fundamental truth.
Sorry dor, not tryin to be a negative nancy or anything, i still luh ya!
Corey Wright
Sorry, i meant to say 2.4 trillion, etc *this year*
Here darlin, i've got another lil book for you to read

Economics in one lesson by Henry Hazlitt (pretty famous book, not a terribly long read by any means)
Www.hacer.org/pdf/hazlitt.pdfDory Thompson
Corey-
First off, not even in the most conservative world of economics does one government job equal one less private sector job-that is a faulty and flawed argument, one which the republican party sells to ignorant people who truly don't know the basics of economics. If you are so worried about the deficit, explain why the republican party refuses to keep the Bush tax cuts for the middle class until millionaires get to keep their tax cuts as well. High income individuals, even if we repeal the tax cuts are paying less in taxes than under any president-Reagan, Bush, anyone. Basically, by far the biggest reason we have the deficit is rich a-holes not paying their fair share. Research more before trying to talk economic policy on fbook. Still love ya tho!
Dory Thompson Also- the book you are telling me to read is by a guy who was prominent in the Austrian school of economics-basically a no government, laissez-faire school of economics that has been discredited by everyone but rapid tea partiers. It is more like an anti-governmental political pamphlet-NOT an economics book. You would probably fail Econ 101 using those ideas.
Corey Wright
Alrighty then. I'll have some more time to delve into your specific point after work, but trust me, i've done more than my fair share of research. I don't know where you heard the Austrian school has been discredited, but its proponents have been widely credited with predicting nearly every famous asset bubble since the 20s and giving the precise reasons why. And you're absolutely right about their lessons being against government intervention and mostly right about failing econ 101 with those ideas; the distinction being that you'd be failed by a professor who's a government schill. There's plenty of reputable programs that use that book, i googled "course outline economics in one lesson" and found plenty of results for actual college courses that use that book or an excerpt, some econ 101 :-o. Also, I've taken and passed micro, macro, cost-benefit analysis, etc. at the U and have read Keynes, so I also know and understand the statist arguments. But they truly are as wrong as wrong can be, or at least take their arguments to the wrong ends. You should at least give it a chance and see if any of it makes sense to you.
So you think that the deficit isn't caused by irresponsible spending at all? Or that the fact that every last prediction of economic turnaround made by our current administration being wrong was just caused by lack of "bipartisanship" or the rich not paying their fair share?
Dory Thompson
Corey-
Just because an econ class may use the book doesn't mean that they give credit to that book for being correct. Many econ classes study different views of economics so students understand what was taught in the past, and what doesn't hold water. My econ class did that. I also have passed all of those classes you've taken, and taken even more advanced classes about such topics because of the political science focus of my major. If you haven't heard that the Austrian school has been discredited, then you must not have been listening. I feel like you are one of those people who will become a conspiracy theorist and won't end up ever leaving your house because you think people are after you or something. Irresponsible spending? Yes of course, but not by this administration. Let's start with the war in Iraq and how much that cost. Anyone who knows anything about economics should know that economic turnaround, especially after such a deep recession, doesn't turn around over night, in a month, or in a year. Signs of progress have been made by Obama, but he is not a miracle worker. People seem to not know how long it takes to turn around such economic downturn. Did no one study the Great Depression? Things aren't fixed overnight. Money must be pumped into the economy in order to jump start it. Our country being able to work together and pass bills and laws to help turn around the economy is crucial. Everyone knows that if you can't work together as a team you're going to struggle getting anything done, it doesn't matter if you're talking about politics, work, your family or friends. So yes, the fact that republicans refuse to work with Obama and accept that he is our president has an enormous effect on the inability for things to change as quickly as they could. You too easily believe the things you read without understanding why they might not make any sense. It's sad that you think our teachers are all "government schill's" sounds more like you're just paranoid.
Corey Wright
Ok Dor, I wanted to start off by saying thanks for not deleting this; I feel like that’s what happens the majority of the time when I try to have a discussion about this kind of stuff, and I’m glad you’re willing to debate because I really get a kick out of it and hope to prove I’m not some conspiracy theorizing, tinfoil hat-wearer. I hate that kind of person, but I hold the views I do because I’m aware of the incentives had by politicians and those whom they benefit through their actions. I don’t think there’s some puppet master or group of Mr. Burnses sitting around plotting all of this.
Firstly, I wanted to say that I am not for overspending in any capacity, including defense. Clearly we have a whole lot of issues with that when we spend over 6 times as much as the next highest defense spenders. But I also would like to point out that the defense budget has grown during Obama’s tenure, and that I don’t really see a de facto difference in their policies in that they are both nation-building imperialists, albeit different nations. I was under the impression that he was going to cut defense spending, and I really do think that NOFX and all of the Democrats (as well as the war-hawk Republicans) have really given him a free pass on that one.
Ok so, on to economics. I don’t know if you’ve heard of the Austrian Business Cycle Theory, but it’s entirely pertinent to our current economic situation and this discussion. It was developed by Ludwig von Mises in the early 20th century and earned Freidrich von Hayek a Nobel Prize in 1974. It’s kind of complicated to explain in a short time, but here goes (I’m probably going to plagiarize a bit so I don’t fuck anything up). It was developed to explain the “cluster of errors” experienced in an economy that causes a boom, followed by a recession, and they determined that its cause was related to central banking. When central banks artificially manipulate interest rates through credit expansion (newly printed money given to banks raises their amount of loanable funds, lowering the interest rate), they set these errors into motion.
From Tom Woods:
“The lower interest rates stimulate investment in long-term projects, which are more interest-rate sensitive than shorter-term ones. (Compare the monthly interest paid on a thirty-year mortgage with the interest paid on a two-year mortgage — a tiny drop in interest rates will have a substantial impact on the former but a negligible impact on the latter.) Additional investment in, say, research and development (R&D), which can take many years to bear fruit, will suddenly seem profitable, whereas it would not have been profitable without the lower financing costs brought about by the lower interest rates.
We describe R&D as belonging to a "higher-order" stage of production than a retail establishment selling hats, for example, since the hats are immediately available to consumers while the commercial results of R&D will not be available for a relatively long time. The closer a stage of production is to the finished consumer good to which it contributes, the lower a stage we describe it as occupying.
On the free market, interest rates coordinate production across time. They ensure that the production structure is configured in a way that conforms to consumer preferences. If consumers want more of existing goods right now, the lower-order stages of production expand. If, on the other hand, they are willing to postpone consumption in the present, interest rates encourage entrepreneurs to use this opportunity to devote factors of production to projects not geared toward satisfying immediate consumer wants, but which, once they come to fruition, will yield a greater supply of consumer goods in the future.
Had the lower interest rates in our example been the result of voluntary saving by the public instead of central-bank intervention, the relative decrease in consumption spending that is a correlate of such saving would have released resources for use in the higher-order stages of production. In other words, in the case of genuine saving, demand for consumer goods undergoes a relative decline; people are saving more and spending less than they used to.
Consumer-goods industries, in turn, undergo a relative contraction in response to the decrease in demand for consumer goods. Factors of production that these industries once used — trucking services, for instance — are now released for use in more remote stages of the structure of production. Likewise for labor, steel, and other nonspecific inputs.
When the market's freely established structure of interest rates is tampered with, this coordinating function is disrupted. Increased investment in higher-order stages of production is undertaken at a time when demand for consumer goods has not slackened. The time structure of production is distorted such that it no longer corresponds to the time pattern of consumer demand. Consumers are demanding goods in the present at a time when investment in future production is being disproportionately undertaken.
Thus, when lower interest rates are the result of central bank policy rather than genuine saving, no letup in consumer demand has taken place. (If anything, the lower rates make people even more likely to spend than before.) In this case, resources have not been released for use in the higher-order stages. The economy instead finds itself in a tug-of-war over resources between the higher- and lower-order stages of production.
With resources unexpectedly scarce, the resulting rise in costs threatens the profitability of the higher-order projects. The central bank can artificially expand credit still further in order to bolster the higher-order stages' position in the tug of war, but it merely postpones the inevitable.
If the public's freely expressed pattern of saving and consumption will not support the diversion of resources to the higher-order stages, but, in fact, pulls those resources back to those firms dealing directly in finished consumer goods, then the central bank is in a war against reality. It will eventually have to decide whether, in order to validate all the higher-order expansion, it is prepared to expand credit at a galloping rate and risk destroying the currency altogether, or whether instead it must slow or abandon its expansion and let the economy adjust itself to real conditions.
It is important to notice that the problem is not a deficiency of consumption spending, as the popular view would have it. If anything, the trouble comes from too much consumption spending, and as a result too little channeling of funds to other kinds of spending — namely, the expansion of higher-order stages of production that cannot be profitably completed because the necessary resources are being pulled away precisely by the relatively (and unexpectedly) stronger demand for consumer goods. Stimulating consumption spending can only make things worse, by intensifying the strain on the already collapsing profitability of investment in higher-order stages.
Note also that the precipitating factor of the business cycle is not some phenomenon inherent in the free market. It is intervention into the market that brings about the cycle of unsustainable boom and inevitable bust. As business-cycle theorist Roger Garrison succinctly puts it, ‘Savings gets us genuine growth; credit expansion gets us boom and bust.’”
The main reason I bring all of this up is because this artificial credit expansion (and you can check the federal reserve statistics on the historical money supply) had a whole heck of a lot to do with the housing bubble, the dot-com bubble, the savings and loan crisis of the 1980s in recent terms, but also the Great Depression and the Forgotten Depression of 1920. The reason the depression of 1920 is forgotten is two-fold. First, because it wasn’t a depression, and second, because it is a perfect illustration of the government doing nothing and the economy subsequently recovering in a relatively very short time.
More Tom Woods:
“The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover — falsely characterized as a supporter of laissez-faire economics — urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.
Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.
The Federal Reserve's activity, moreover, was hardly noticeable. As one economic historian puts it, "Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction." By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923.
It is instructive to compare the American response in this period to that of Japan. In 1920, the Japanese government introduced the fundamentals of a planned economy, with the aim of keeping prices artificially high. According to economist Benjamin Anderson,
‘The great banks, the concentrated industries, and the government got together, destroyed the freedom of the markets, arrested the decline in commodity prices, and held the Japanese price level high above the receding world level for seven years. During these years Japan endured chronic industrial stagnation and at the end, in 1927, she had a banking crisis of such severity that many great branch bank systems went down, as well as many industries. It was a stupid policy. In the effort to avert losses on inventory representing one year's production, Japan lost seven years.’”
This is key to understanding the solution to our current debacle. We have to allow the recession to run its course and the mal-investments to be liquidated in order to be able to start working profitably again and in order to do that, the Federal Reserve has to allow interest rates to be set by the market, in other words, to rise. In this sense, the recession is the cure. I know that sounds really bad, but it’s the only thing that’s going to work. If we keep pouring money into a misallocated economy, it will never recover, just like in the Great Depression, which genuinely didn’t end until the government cut the budget by almost half between 1946 and 1948 and the government stopped sucking resources out of the private sector.
I realize a shitload of what I said is probably pretty controversial given your high opinion of government-funded and/or diehard Liberal professors, but here’s links to the articles I got information from (if you’d like to check their citations as well), and I’d be absolutely more than happy to provide further explanation and information. Hope you don’t still think I’m nuts, Dor, cuz this just took me like an hour to put together.

Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s
http://www.independent.org/newsroom/article.asp?id=138The Forgotten Depression of 1920
http://mises.org/daily/3788Dory Thompson
Corey-
honestly, you're crazy, you're diluted, and you're so far off base with your ideas and thinking, that I can't even respond anymore. I truly love you, but hope that you realize that you are not superior to everyone who teaches economics. Just because you read extremist ideas does not mean that those people are right and the majority are wrong.
Corey Wright
Haha, ok Dor. Well I'll leave you with a few predictions, and we'll see who's crazy, given time.
1. The economy is not going to recover. Unemployment will not fall with the massive amount of capital being removed from the private sector. As always, capitalism will be blamed.
2. Housing prices will continue to fall because we overbuilt and are continuing to stimulate a burst bubble with the government-supported secondary mortgage market and low interest rates, but these will have no effect.
3. Freddie and Fannie are going to require at the very least $500 billion, more than likely a trillion-dollar bailout.
4. The dollar will continue falling against other currencies, much more quickly against gold (whose price has gone up ohhh only about 3-fold in the last 5 years, a direct representation of inflation).
5. Foreigners will stop buying our bonds; the return will be worth less than the inflation that will occur while they are holding them. When this happens, the Federal Reserve will be the only one to buy their bonds.
6. Our citizens will all have to take a massive cut in our standard of living as responsible countries will gain the purchasing power once held by the dollar in our more fiscally responsible days.
And if you would've talked to me in July, I would've told you that the Fed was going to engage in more quantitative easing (or printing money to buy gov't bonds).
http://money.cnn.com/2010/11/03/news/economy/fed_decision/index.htmI don't think I'm superior to everyone who teaches economics, but I wholeheartedly believe that Austrian Economics is more correct than Keynesian pump-priming a thousand times over, and I could prove it to you if you'd actually read any of it with a somewhat open mind.
Oh, and it's deluded.

P.S. I'd also like an example of when priming the economic pump has worked, one single time.