Post by Deleted on Aug 26, 2014 21:41:43 GMT
I was commenting on the fate of pubs, and the degree of socialism that's interfering with them, driving up costs to the point where so many are going out of business, and one of the other commentators was "oldatheist", who jovially commented about going to his favourite smoke-free germ-free no-uncertificated under-25s £6.40/hr-waged regulated-to-the-hilt pub for drinks with his fellow lefties and it struck me: why is it that so many atheists are of the Left?
So, since this is a major digression, it perhaps needs its own thread under the 'chat' section.
If free markets are really the same as evolution by natural selection (competition for scarce resources by copies of existing ideas with small differences), how does this manifest itself?
I thought of the Austrian theory of the business cycle, and how the price of money (interest rates) co-ordinates activity in a free market but goes badly wrong in the socialist commonwealth (which nowadays is the USA, UK, Japan and EU rather than the former USSR).
So here goes:
In a free market, if banks want people to deposit savings, they have to attract them by offering interest. It's payment for the foregoing of the use today of one's money, so the return had better be greater: who wants to have £98 a year from now instead of £100 today?
The more aggressively the banks need to encourage people and shape their behaviour, the more attractive the interest rate.
Then, as more people start to save, the rate is lowered because nobody wants to pay more than they have to right?
So, to keep track of this imaginary situation, the interest rate (of a given bank - not 'the' central bank) is high when not enough people are saving (however that's subjectively decided by the individual bank) and low when 'too many' (or just 'enough') are saving.
Now notice this: something else is true - when people are saving their money, they're going to have more money tomorrow than they have today, so at some future point it may be possible to tempt them into withdrawing some of that money (or simply spending money ear-marked for additional saving) on some new good or service.
But when people AREN'T saving their money, if you offer some new good or service, they're going to have to sacrifice some other of their unmet preferences in order to have any of the new good or service. This will hit the profitability of the new good or service.
But luckily we have what Bastiat called "economic harmony": when the interest rate is high because not enough people are as yet saving, it's ALSO less attractive for businesses to take out development loans for providing new goods and services.
When however the interest rate is low because everyone's stashing their cash for a rainy day, it's EASIER for businesses to take out such loans and provide the new goods and services the people don't know they want yet!
So you see? Businesses are nudged towards making the right decisions: a low rate of interest means they can more easily AFFORD to borrow, and the presence of savings means what they make is more APPROPRIATE and has a ready market in reserve.
A high rate of interest puts them off making poor decisions about building something new that nobody will be able to afford and instead nudges them to use any spare cash they have for replacing and enhancing existing capital equipment to better server the customers who are busily spending all their money TODAY.
That's a beautiful piece of design without a designer.
Now enter the Intelligent Designer.
Mark Carney says the base rate everywhere is 0.5%. Credit's cheap, but is that because everyone's saving? Hardly! It's not only cheap for businesses to borrow but consumers as well, so surprise surprise there's consumer debt!
But what does this mean?
It means businesses find it more AFFORDABLE to borrow to build future goods and services but there's going to be no additional consumer spending power in the future. Those consumers who are simply spending all their money already have uses for it and to tempt them into the new stuff, it's going to have to compete hard and be unprofitable. Those consumers who are currently borrowing to consume are in an even worse condition: tomorrow when the new goods and services need customers, they'll have LESS spending power than today because they'll be paying off their loans.
This is called "malinvestment": the misallocation of resources to unsustainable development. An artificial credit-fuelled boom followed by a necessary correction to liquify the malinvested resources ready to be reapplied where they're really needed.
I'm speaking to you with concern and sincerity, comrade: all those reasons why an intelligent designer would be such a failure at making bats' sonar and pigs' pizzles apply just as strongly to the Bank Of England, the price-fixing of the price of marginal labour and the minimum price of beer.
Laissez-faire is economic atheism and you should embrace it.
Incidentally, the status quo with a 2% target for price inflation (***!!!!!!!!! why?? who really wants higher prices!) combined with Cash ISA rates of less than that - all deliberately fixed by central planners - is incredibly dangerous because when nobody CAN save, how can there be any sustainable development at all? It's a recipe for credit-fuelled spending in the short term and misery in the long term, with any and all future development facing at the very least a steep hill to climb and at worst a totally non-existent consumer-base.
I am deeply concerned at what really amounts to a total ban on the holding of money for the ordinary citizen. I'm tempted to blame the likes of Thomas Piketty but since 2010 the Tories and Liberals have been just as socialist as the Labour party: price-fixes, interference in tariffs, interference with packaging and display, age requirements, "show your papers" laws, expansion of 'services', protectionist tariffs, wholly new nationalised bodies, increased regulation, punitive fines, monetary expansion.... all of this has the same effect: drives prices up and the standard of living down while making investment unsustainable and inflating asset prices.
So, since this is a major digression, it perhaps needs its own thread under the 'chat' section.
If free markets are really the same as evolution by natural selection (competition for scarce resources by copies of existing ideas with small differences), how does this manifest itself?
I thought of the Austrian theory of the business cycle, and how the price of money (interest rates) co-ordinates activity in a free market but goes badly wrong in the socialist commonwealth (which nowadays is the USA, UK, Japan and EU rather than the former USSR).
So here goes:
In a free market, if banks want people to deposit savings, they have to attract them by offering interest. It's payment for the foregoing of the use today of one's money, so the return had better be greater: who wants to have £98 a year from now instead of £100 today?
The more aggressively the banks need to encourage people and shape their behaviour, the more attractive the interest rate.
Then, as more people start to save, the rate is lowered because nobody wants to pay more than they have to right?
So, to keep track of this imaginary situation, the interest rate (of a given bank - not 'the' central bank) is high when not enough people are saving (however that's subjectively decided by the individual bank) and low when 'too many' (or just 'enough') are saving.
Now notice this: something else is true - when people are saving their money, they're going to have more money tomorrow than they have today, so at some future point it may be possible to tempt them into withdrawing some of that money (or simply spending money ear-marked for additional saving) on some new good or service.
But when people AREN'T saving their money, if you offer some new good or service, they're going to have to sacrifice some other of their unmet preferences in order to have any of the new good or service. This will hit the profitability of the new good or service.
But luckily we have what Bastiat called "economic harmony": when the interest rate is high because not enough people are as yet saving, it's ALSO less attractive for businesses to take out development loans for providing new goods and services.
When however the interest rate is low because everyone's stashing their cash for a rainy day, it's EASIER for businesses to take out such loans and provide the new goods and services the people don't know they want yet!
So you see? Businesses are nudged towards making the right decisions: a low rate of interest means they can more easily AFFORD to borrow, and the presence of savings means what they make is more APPROPRIATE and has a ready market in reserve.
A high rate of interest puts them off making poor decisions about building something new that nobody will be able to afford and instead nudges them to use any spare cash they have for replacing and enhancing existing capital equipment to better server the customers who are busily spending all their money TODAY.
That's a beautiful piece of design without a designer.
Now enter the Intelligent Designer.
Mark Carney says the base rate everywhere is 0.5%. Credit's cheap, but is that because everyone's saving? Hardly! It's not only cheap for businesses to borrow but consumers as well, so surprise surprise there's consumer debt!
But what does this mean?
It means businesses find it more AFFORDABLE to borrow to build future goods and services but there's going to be no additional consumer spending power in the future. Those consumers who are simply spending all their money already have uses for it and to tempt them into the new stuff, it's going to have to compete hard and be unprofitable. Those consumers who are currently borrowing to consume are in an even worse condition: tomorrow when the new goods and services need customers, they'll have LESS spending power than today because they'll be paying off their loans.
This is called "malinvestment": the misallocation of resources to unsustainable development. An artificial credit-fuelled boom followed by a necessary correction to liquify the malinvested resources ready to be reapplied where they're really needed.
I'm speaking to you with concern and sincerity, comrade: all those reasons why an intelligent designer would be such a failure at making bats' sonar and pigs' pizzles apply just as strongly to the Bank Of England, the price-fixing of the price of marginal labour and the minimum price of beer.
Laissez-faire is economic atheism and you should embrace it.
Incidentally, the status quo with a 2% target for price inflation (***!!!!!!!!! why?? who really wants higher prices!) combined with Cash ISA rates of less than that - all deliberately fixed by central planners - is incredibly dangerous because when nobody CAN save, how can there be any sustainable development at all? It's a recipe for credit-fuelled spending in the short term and misery in the long term, with any and all future development facing at the very least a steep hill to climb and at worst a totally non-existent consumer-base.
I am deeply concerned at what really amounts to a total ban on the holding of money for the ordinary citizen. I'm tempted to blame the likes of Thomas Piketty but since 2010 the Tories and Liberals have been just as socialist as the Labour party: price-fixes, interference in tariffs, interference with packaging and display, age requirements, "show your papers" laws, expansion of 'services', protectionist tariffs, wholly new nationalised bodies, increased regulation, punitive fines, monetary expansion.... all of this has the same effect: drives prices up and the standard of living down while making investment unsustainable and inflating asset prices.
