I'm confused, what do banks do with the money people deposit in them if they do not lend it out?
There are a number of different levels on which this question can be answered depending on your perspective.
The first level is: your deposit at the bank is simply a number in their database. This number simply cannot be lent out in any meaningful way. It is just a number after all.
The second level deals with the way our payment and clearing system works, and in that case, the answer depends on how you deposit your money in the bank. If you deposit cash, then the bank will sort that cash and put it back into its ATMs, where it can be withdrawn either by you or by other people with deposits at the bank. If you deposit a check, it depends on who that check is drawn on. If it is drawn on an account at the same bank, then the bank simply adjusts its internal database. If it is drawn on an account at a different bank, then those banks will talk with each other, and initiate a transfer of reserves between their reserve accounts at the Fed.
If, at the end of the day, your bank has more reserves than required in its account at the Fed thanks to your deposit, then this typically means that another bank will be low on reserves. Then those banks will talk with each other and will arrange for overnight lending to be done between the banks - but note that no money is lent out to non-banks. The bank may also decide to buy treasuries using those reserves, which you can think of as the bank shifting its reserves (= high-powered money) from a checking account (the reserve account) to a savings account (the treasuries) so that it may earn a higher interest. More typically though, they will perform overnight lending, using treasuries as backing for the loans.
What you can glean from this is that a bank benefits from attracting deposits, because it might otherwise be short of reserves. Now being short of reserves does not prevent a bank from lending out money. However, it does mean that the bank will have to borrow reserves either from another bank or from the Fed (whose main purpose, besides running the payment system, is to act as lender of last resort). This reduces the profit margin for the bank.
The final level deals with the question of whether the bank changes its behavior when lending to non-banks. The answer here is that as long as a bank has enough capital, they will lend to anybody they consider credit-worthy. The people who make the lending decisions do not even know how many deposits are at the bank!
Huge companies do not ever invest in the types of new business opportunities that drive an economy.
Agreed. My point (which might not have come across very clearly) was that there is lots of capital to go around overall, but few lucrative business opportunities, which is why investors flee into assets they perceive as safe, such as bonds of huge companies. This is how companies like Google etc. are currently so easily capable of filling their war chests with money.
The best way to drive the economy is to make it simpler for someone to start a small one or two person business. Those are the types of business that most readily meet unmet needs in a down economy. The types of business opportunity that are available in an economy in the shape the current economy is in do not lend themselves to the size of investment/return that are necessary for a company like those you listed to bother even looking at them.
Well, again, you misread the intention of my point.
By the way, I agree that the best way for an economy to develop healthily is to make it simple to start a business. Thing is, the number one problem of new businesses is to get paying customers, but for some weird reason only few people ever talk about that in this particular context. It's as if everybody ignored the elephant in the room. I have my suspicions as to why that is the case, but let's not
But will they have enough money to pay you for it?
They will, if they also produce something of value. If so, we can trade those useful things with each other, and grow our wealth.
This line of thought would work if the cycles of money in our economy were simple enough to be easily replaced by barter.
If you just have two people trading with each other and both are short of money, then they can just directly trade goods of value and nothing of importance is lost. Unfortunately, the flows of money in our economy are too complicated for that.
Imagine a restaurant owner who had to close due to lack of business and an unemployed engineer. Both produce something of value, and both may be interested in what the other has to offer. But they cannot just do trade with each other in isolation: the restaurant owner needs to employ staff and get ingredients, and the engineer can only put his skills to work in a larger operation. In a well working economy this is not a problem, because money can be used to represent values exchanged. Once both have run out of money, however, they're stuck in a Catch-22 type situation that is impossible to escape without collective action.
Do we need to carry on that "risk of default"-bullshit? The US never were in any economical risk of default, given their top credit rating. Debt/GDP ratio has been worse in history and is worse in countries working just fine right now.
You can go even further. There is never any economical risk of default for a government that issues its own currency and only issues debt that is denominated in that currency. In fact, it is even misleading to think of US government bonds as debt. It's more like a savings account (as opposed to the reserve accounts at the Fed, which are like checking accounts). You can read more about the basic observations of Modern Monetary Theory (MMT) here. Debt/GDP ratios or anything like that really don't matter: the US government cannot go bankrupt.
(Note that of course, hypothetically, the US$ as a currency could be rejected by the US citizens, in which case the government would still be solvent, it just couldn't buy anything with its US$. However, then we're talking about what causes hyperinflation, and some insight into that can be found here)
The only possibility has ever been that the government voluntarily defaults (in the current case, due to the craziness of the Tea Party types).
If the money is placed in the bank, the bank has more money to lend to businesses
This is incorrect. The ability of a bank to make loans is not limited by the amount of deposits that it has. It is only limited by the amount of capital the bank has, but deposits do not count as capital (for good reasons). The bank only benefits from your deposits because it makes it slightly cheaper for them to lend.
Actually, the problem with our current economy is that we do not have sufficient amounts of captial in reserve to supply funds to those who wish to take advantage of new business opportunities.
Not true. There is lots of capital to go around, as you can see by how easily huge companies like Apple, Google and MSFT are able to get insane amounts of money. So why does that capital not flow to take advantage of new business opportunities?
The answer is simple: There are very few promising new business opportunities in the current economic climate, because consumers do not have enough money.
At least part of this problem could be relieved by instituting programs to create jobs for the unemployed, since the unemployed are obviously the ones with the least amount of money available and would therefore give the largest multiplier effects.
To clarify, in the savings rate that the parent linked to, paying down debt is also considered saving.
This is ultimately very reasonable, because whether you pay down a debt or pay into a savings account, the result is the same from a flows perspective: that money is a leakage that no longer adds to aggregate demand, and so consumption is less. Whether the savings flow adds to a savings stock or removes from a debt stock does not matter for the volume of goods and services traded in the economy (which is what GDP more or less measures).
If you actually produce something useful, people will want it.
But will they have enough money to pay you for it?
The distinction between notional and effective demand is crucial for understanding what's been going on for the last few decades. In fact, it is the reason why trickle-down economics cannot generate progress in the long run.
When wealth is shifted towards the top-end-of-town (as has been happening in pretty much all Western countries over the last few decades), this means less money is available to consumers. This reduces the potential size of the market that producers can sell to, and supply-side economics fails.
It is absolutely crucial for free-market capitalism to work properly that the vast majority of the population is relative well-off, i.e. has gainful employment that pays a relatively comfortable wage/salary. When consumers have more money available to buy optional goods, this creates a much larger potential customer base for entrepreneurs to target, and everybody wins.
Actually, this depends heavily on the political climate. In most countries, there was a time of two or three decades after the Second World War when wealth flowed downwards overall. It was a slow movement to be sure, but when you look at indicators like inequality, or the share of national income that goes towards wages (as opposed to rents) the trend was clearly in favor of the "small guy".
Then the politics changed, and for the last few decades we have seen the same movement but in reverse.
What this boils down to is that there is nothing inevitable about a flow upward. It comes down to political choice - though one thing that I would agree with is that a government that does not enforce strong regulations tends to favor flows that go upwards.
I like your thinking, but I do believe you're tending to a black-and-white line of thought. Capitalism and socialism are not mutually exclusive (capitalism and communism are mutually exclusive). Capitalist societies have a wide range of different wealth and income distribution outcomes, and I'm not just talking about different countries here, but even the same country at different points in time.
This whole debate about progress vs. employment is not new after all. Karl Marx develop his theories in the 19th century, and many of his contemporaries worried that labor would simply disappear. Instead, the capitalist societies of the West in both Europe and the US just saw shifts in the labor markets, and combined with increased labor rights they saw a strong move in more equal distribution of wealth in parallel with rapid technological progress.
Nowadays, labor rights are on the decline, and the distribution of wealth is swinging backwards (and has been swinging backwards for the last three or four decades or so) towards a more unequal distribution.
I believe the takeaway lesson from this is that things are hardly ever structural inevitable shifts based on technology. Instead, it's all politics. A capitalist society can become more equal by adopting socialist elements. The key is to recognize that this is not really about economic organisation, but really about who has the power. Give the power to the people via strong labor organizations, and most distribution-related problems will naturally disappear over time.
The crucial thing that all the talking heads are missing is that you and I are users of money. We have to get money before we can spend. The US federal government, on the other hand, is an issuer of money. They have to spend money before they can get it back.
We are the players of World of Warcraft, and the US federal government is Blizzard. Everything else follows from this when you think about it logically (and are prepared to challenge everything you've known so far about macroeconomics).
The Cliff Notes version is that because - in the long run - the private and external sectors save in financial assets, the currency issuer must run a deficit to maintain aggregate demand at a level where the economy does not tank - after all, the money that is being saved by the private and external sectors has to come from somewhere. The government surplus under Clinton was only possible due to the financial engineering that allowed the private sector to accumulate massive debts. These debts ultimately were not sustainable, and so it is quite reasonable to say that the Clinton surpluses are one of the causes of the global financial crisis. What we are seeing now is that the private debt burdens are shifted back to the government.
Oh I see. Yes, you are obviously right that high inflation and high unemployment went hand in hand at the same time.
However, that does not logically contradict what I have been writing. All else equal, it is entirely possible that it would have been possible to create additional jobs for the unemployed without increasing inflation at the same time. It's just that - at least in Germany, where I am best informed - this was not seriously tried because there was a general political shift towards abandoning full employment as a policy goal.
It seems to me that early Keynesians just made the mistake of only focusing on the price-wage spiral as a mechanism for inflation, and it's only natural that there should be other causes of inflation. I see inflation as a more general mechanism through which different parts of the economy fight for their share of the total national income. In particular, inflation is necessarily high when there are big changes in the economy. So if there is already high inflation as fallout of reorganisations in the economy, this does not necessarily invalidate the logic of putting idle resources to work.
On the other hand, I would agree that in the stagflation environment, it may have been difficult to create jobs that do not add to inflation, since production materials also need to be considered. As an example, it's no good hiring unemployed builders if for some reason there is a shortage of machinery or construction materials. The latter part needs to be dealt with first.
Please point me to an article where the relation between inflation and aggregate demand is actually proven false.
Recall what I wrote: when there are idle resources, there is room for additional non-inflationary spending. That has nothing to do with interest rates or anything, so it seems like you just completely misread what I wrote. At the very least, you left out several paragraphs of argument establishing the link, though feel free to just link me to an article establishing that link if you have one (I am interested in challenging my understanding of the topic).
Perhaps you are used to arguing with monetarists or something and are mentally reading their arguments instead of mine. For what it's worth, you seem to have your schools of thought pretty mixed up; in fact, I have never heard any group of economists in general claim that high interest rates and high unemployment cannot happen simultaneously - in fact, the opposite is usually the case, i.e. high interest rates are thought to create unemployment, and some want to use them as a policy tool in the hope that this will dampen inflation (or perhaps for more nefarious purposes altogether).
Of course, if you were to print a large enough amount of money, it would lead to inflation (or asset price bubbles, which actually seem to occur first in the current economy).
The reason for this is clear: the current system is set up to benefit the rich: see this recent entry on billy blog
Since the rich have more money than they need already, their increased income does not go into consumption. Instead, they use that income to buy stocks and other assets, hence the quick recovery of the stock market since the great recession.
Normally, it's inflationary when the Treasury issues checks, and it's deflationary when the Treasury borrows (issues bonds.) The key is that it's neither inflationary nor deflationary if they issue the same amount in bonds as they issue in checks.
Nonsense. Prices are at some point set by supply and demand. If the government goes on a crazy spending spree, it will cause inflation even if bonds are issued to match the spending, simply because demand will outstrip supply.
But note that government spending is not special in this regard: if all millionaires suddenly decided to go on a crazy spending spree, they will also cause inflation, simply because they have enough purchasing power to create demand that outstrips supply.
So to understand whether spending will be inflationary, you have to look at the bigger picture: what is demand vs. supply situation? If many resources are laying idle (as is the case right now, just look at the unemployment numbers), there is a lot of room for additional spending that doesn't cause inflation.
Of course, I am only considering demand-pull inflation here. Cost-push is a different situation, i.e. when the price of oil goes up, that's going to affect other derived prices down the line and there's nothing you can do about that, except try to substitute oil with something else.
In fact, combine the previous two paragraphs, and the obvious non-ideological policy conclusion is that the US government should use the current situation as an opportunity to massively invest in regenerative energy and other means of energy independence.
Thank you for your reasoned posts. It's encouraging to see people who "get it" when it comes to inflation.
I would only add, to emphasize the fact that inflation has only to do with aggregate demand and supply (and not with "money supply", whichever definition happens to be the preferred one of the day), that it really doesn't matter where added demand comes from.
If all those Wall Street bankers decided to go on a shopping spree with their millions and billions (instead of putting it into treasuries and the like) that would have exactly the same inflationary pressure as when the Federal government goes on a shopping spree of equal volume.
actually any kind of property ownership is hereditary
Perhaps that is the problem.
I have been asking myself for a long time now why we tolerate the inheritance of economic power long after we have done away with the inheritance of political power (well, modulo unfortunate counter-examples like the Kennedy and Bush families).
What if one of those "weak" genes turns out to hold the key to immunity against the next super-virus? How do you know that a gene that might appear to be "weak" right now won't suddenly become crucial to survival once the environment changes? See the relation between sickle cell disease and immunity against malaria for a well-known example.
I think you completely missed my point. Our understanding of the effects of individual genes is abysmal, and while we've made progress, we're a long time away from really knowing what is going on. Given that situation, it is better to have a gene pool that is as diverse as possible, because that increases the likelihood that at least some part of the population will have the genes to be prepared against the next large threat.
Gene therapy - at least for the purpose you seem to have in mind - is hubris.
IANAG, but I don't think that with a global population of many billions, intermixing happens quickly enough to really produce a mono-culture. Besides, the fact that modern medicine reduces evolutionary pressures allows the general gene diversity to increase anyway, which will help us a lot in the long run precisely because it protects against pandemics.
I wish I could mod you up, because I have rarely seen this idea expressed so concisely and eloquently online. Also, I think you are absolutely right.
As much as free-market competition is a de facto religion for many, the truth is that countries truly prosper when the population experiences a feeling of unity and common purpose. When this feeling disappears, people start caring less and less about social rules. Corruption, waste and general decline follow.
Besides moral considerations, this really is the most important argument in favor of a mixture of socialism and capitalism. Capitalism is good where it enables competition, because more vivid competition means that more human brains are actively thinking about how to solve problems, and this is ultimately what moves us forward as a species. But socialism is necessary to keep the ratio between the wealthiest and the poorest in check to enable stability both politically and economically.
Do not underestimate the fact that the UN provides a relatively neutral framework for even enemies to get together and talk about stuff. Considering the childish games that diplomats like to play with withdrawing their embassies and so on, it is important to have a stable and reliable point where the children can go and have a talk. I prefer that over them using their toys to kill each other.
Look, the UN is not perfect, but as the saying goes, the perfect is the enemy of the good. The UN plays an important role as a forum for people to come together instead of bashing their heads in. Without such a forum, the world would be an even more dangerous place.
I agree that my solutions bends the posed problem quite a bit, and I understand that you cannot accept it for that reason.
However, I cannot agree with your second objection. Neither your original problem nor my answer contains anything about rational numbers at any point - we've always been talking about real numbers. In the context of real numbers, the problem with irrational numbers simply doesn't exist.
I know (from my own personal experience) that it can be hard to accept that a single real number contains enough "information" (whatever information may mean) to specify finitely many real numbers, but it's a result that you'll invariably encounter when studying set theory. A proof of this fact is illustrated nicely in "Proofs from the Book" by Martin Aigner and Günther Ziegler - I don't have an online link handy, I'm afraid.
If you count highly-unintuitive functions as well, you don't even need a point: A single real value is enough to specify a plane.
The proof goes roughly like this: The set of 3D planes has the same cardinality as R^3, as can be seen by the representation of planes via half-space functions (they have four coefficients, but since you can renormalize without changing the plane, only three are really relevant).
R^3 has the same cardinality as R (the set of real numbers). The idea behind the proof of this is that you can write a real number as its decimal expansion, put the digits into three groups (take every third digit), and re-assemble three real numbers from those three groups. The proof itself is slightly more complicated because you have to work around the fact that 0.9999... = 1.0.
I have omitted some fine detail here, but what this all means is that there are as many real numbers as there are planes in 3D cartesian space - there is a bijection between the respective sets, and this bijection is the function the Parent was asking for. It operates by splitting the real number into three real numbers, interpreting these as the coordinates of a point (or alternatively yaw/pitch/distance from zero) and constructing a plane from that as explained in other posts.
The statement about being anti-Unix is very unwise.
What if the creators of Unix back around 1970 had had terminals with built-in speakers? How high do you think are the odds that they wouldn't have included audio into the concept of a computer terminal? I bet you almost anything that we'd have a stdpcm in ISO C today.
It is absolutely ridiculous that the concept of a terminal only contains the lowest common denominator of text input and output. You should think of the terminal as an interface to the user. It logically follows that all kinds of other devices can become part of an interface, depending on the situation. Obviously, sound in/out can be a part of an interface. A USB port or a DVD drive could be part of an interface. After all, the one who physically "sits" at a device should automatically be able to control it (yes, there are exceptions, such as computer pools - the keyword is "exception", though). This would automatically eliminate all those ugly permission hacks that are necessary today, by the way. One could even imagine an interface that consists of only sound in/out *without* any form of text or video interface (e.g. interface for the blind).
Nice idea, except that this page gives you the exact same download link that you get for the "consumer" 9700/9800 series. I even checked md5sums because I wasn't sure about the download URL anymore.
And yes, glActiveTexture() & co. are still missing in the latest driver (only ARB variants are available).
(mind you, there's just been a new driver release from ATI, and I haven't installed that one yet)
I've got a 9700 Pro, and the ATI drivers have given me *a lot* of grief as a developer. There are many times when they are so blatantly non-compliant with the OpenGL standards, it's not funny.
For example, the driver claims to support OpenGL 1.3. With 1.3, ARB_multitexture has been promoted into the core, so they driver _should_ export glActiveTexture & friends without the ARB suffix. Well guess what? It doesn't. You have to use the *ARB versions of the functions.
I guess that a lot of this can be attributed to the fact that ATI is not as long in the Linux driver business as NVidia, and overall, things have in fact gotten better over time. But you should expect a bumpy ride.
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I'm confused, what do banks do with the money people deposit in them if they do not lend it out?
There are a number of different levels on which this question can be answered depending on your perspective.
The first level is: your deposit at the bank is simply a number in their database. This number simply cannot be lent out in any meaningful way. It is just a number after all.
The second level deals with the way our payment and clearing system works, and in that case, the answer depends on how you deposit your money in the bank. If you deposit cash, then the bank will sort that cash and put it back into its ATMs, where it can be withdrawn either by you or by other people with deposits at the bank. If you deposit a check, it depends on who that check is drawn on. If it is drawn on an account at the same bank, then the bank simply adjusts its internal database. If it is drawn on an account at a different bank, then those banks will talk with each other, and initiate a transfer of reserves between their reserve accounts at the Fed.
If, at the end of the day, your bank has more reserves than required in its account at the Fed thanks to your deposit, then this typically means that another bank will be low on reserves. Then those banks will talk with each other and will arrange for overnight lending to be done between the banks - but note that no money is lent out to non-banks. The bank may also decide to buy treasuries using those reserves, which you can think of as the bank shifting its reserves (= high-powered money) from a checking account (the reserve account) to a savings account (the treasuries) so that it may earn a higher interest. More typically though, they will perform overnight lending, using treasuries as backing for the loans.
What you can glean from this is that a bank benefits from attracting deposits, because it might otherwise be short of reserves. Now being short of reserves does not prevent a bank from lending out money. However, it does mean that the bank will have to borrow reserves either from another bank or from the Fed (whose main purpose, besides running the payment system, is to act as lender of last resort). This reduces the profit margin for the bank.
The final level deals with the question of whether the bank changes its behavior when lending to non-banks. The answer here is that as long as a bank has enough capital, they will lend to anybody they consider credit-worthy. The people who make the lending decisions do not even know how many deposits are at the bank!
Huge companies do not ever invest in the types of new business opportunities that drive an economy.
Agreed. My point (which might not have come across very clearly) was that there is lots of capital to go around overall, but few lucrative business opportunities, which is why investors flee into assets they perceive as safe, such as bonds of huge companies. This is how companies like Google etc. are currently so easily capable of filling their war chests with money.
The best way to drive the economy is to make it simpler for someone to start a small one or two person business. Those are the types of business that most readily meet unmet needs in a down economy. The types of business opportunity that are available in an economy in the shape the current economy is in do not lend themselves to the size of investment/return that are necessary for a company like those you listed to bother even looking at them.
Well, again, you misread the intention of my point.
By the way, I agree that the best way for an economy to develop healthily is to make it simple to start a business. Thing is, the number one problem of new businesses is to get paying customers, but for some weird reason only few people ever talk about that in this particular context. It's as if everybody ignored the elephant in the room. I have my suspicions as to why that is the case, but let's not
They will, if they also produce something of value. If so, we can trade those useful things with each other, and grow our wealth.
This line of thought would work if the cycles of money in our economy were simple enough to be easily replaced by barter.
If you just have two people trading with each other and both are short of money, then they can just directly trade goods of value and nothing of importance is lost. Unfortunately, the flows of money in our economy are too complicated for that.
Imagine a restaurant owner who had to close due to lack of business and an unemployed engineer. Both produce something of value, and both may be interested in what the other has to offer. But they cannot just do trade with each other in isolation: the restaurant owner needs to employ staff and get ingredients, and the engineer can only put his skills to work in a larger operation. In a well working economy this is not a problem, because money can be used to represent values exchanged. Once both have run out of money, however, they're stuck in a Catch-22 type situation that is impossible to escape without collective action.
Do we need to carry on that "risk of default"-bullshit? The US never were in any economical risk of default, given their top credit rating. Debt/GDP ratio has been worse in history and is worse in countries working just fine right now.
You can go even further. There is never any economical risk of default for a government that issues its own currency and only issues debt that is denominated in that currency. In fact, it is even misleading to think of US government bonds as debt. It's more like a savings account (as opposed to the reserve accounts at the Fed, which are like checking accounts). You can read more about the basic observations of Modern Monetary Theory (MMT) here. Debt/GDP ratios or anything like that really don't matter: the US government cannot go bankrupt.
(Note that of course, hypothetically, the US$ as a currency could be rejected by the US citizens, in which case the government would still be solvent, it just couldn't buy anything with its US$. However, then we're talking about what causes hyperinflation, and some insight into that can be found here)
The only possibility has ever been that the government voluntarily defaults (in the current case, due to the craziness of the Tea Party types).
If the money is placed in the bank, the bank has more money to lend to businesses
This is incorrect. The ability of a bank to make loans is not limited by the amount of deposits that it has. It is only limited by the amount of capital the bank has, but deposits do not count as capital (for good reasons). The bank only benefits from your deposits because it makes it slightly cheaper for them to lend.
You may want to read this explanation for some background.
Actually, the problem with our current economy is that we do not have sufficient amounts of captial in reserve to supply funds to those who wish to take advantage of new business opportunities.
Not true. There is lots of capital to go around, as you can see by how easily huge companies like Apple, Google and MSFT are able to get insane amounts of money. So why does that capital not flow to take advantage of new business opportunities?
The answer is simple: There are very few promising new business opportunities in the current economic climate, because consumers do not have enough money.
At least part of this problem could be relieved by instituting programs to create jobs for the unemployed, since the unemployed are obviously the ones with the least amount of money available and would therefore give the largest multiplier effects.
To clarify, in the savings rate that the parent linked to, paying down debt is also considered saving.
This is ultimately very reasonable, because whether you pay down a debt or pay into a savings account, the result is the same from a flows perspective: that money is a leakage that no longer adds to aggregate demand, and so consumption is less. Whether the savings flow adds to a savings stock or removes from a debt stock does not matter for the volume of goods and services traded in the economy (which is what GDP more or less measures).
If you actually produce something useful, people will want it.
But will they have enough money to pay you for it?
The distinction between notional and effective demand is crucial for understanding what's been going on for the last few decades. In fact, it is the reason why trickle-down economics cannot generate progress in the long run.
When wealth is shifted towards the top-end-of-town (as has been happening in pretty much all Western countries over the last few decades), this means less money is available to consumers. This reduces the potential size of the market that producers can sell to, and supply-side economics fails.
It is absolutely crucial for free-market capitalism to work properly that the vast majority of the population is relative well-off, i.e. has gainful employment that pays a relatively comfortable wage/salary. When consumers have more money available to buy optional goods, this creates a much larger potential customer base for entrepreneurs to target, and everybody wins.
Actually, this depends heavily on the political climate. In most countries, there was a time of two or three decades after the Second World War when wealth flowed downwards overall. It was a slow movement to be sure, but when you look at indicators like inequality, or the share of national income that goes towards wages (as opposed to rents) the trend was clearly in favor of the "small guy".
Then the politics changed, and for the last few decades we have seen the same movement but in reverse.
What this boils down to is that there is nothing inevitable about a flow upward. It comes down to political choice - though one thing that I would agree with is that a government that does not enforce strong regulations tends to favor flows that go upwards.
I like your thinking, but I do believe you're tending to a black-and-white line of thought. Capitalism and socialism are not mutually exclusive (capitalism and communism are mutually exclusive). Capitalist societies have a wide range of different wealth and income distribution outcomes, and I'm not just talking about different countries here, but even the same country at different points in time.
This whole debate about progress vs. employment is not new after all. Karl Marx develop his theories in the 19th century, and many of his contemporaries worried that labor would simply disappear. Instead, the capitalist societies of the West in both Europe and the US just saw shifts in the labor markets, and combined with increased labor rights they saw a strong move in more equal distribution of wealth in parallel with rapid technological progress.
Nowadays, labor rights are on the decline, and the distribution of wealth is swinging backwards (and has been swinging backwards for the last three or four decades or so) towards a more unequal distribution.
I believe the takeaway lesson from this is that things are hardly ever structural inevitable shifts based on technology. Instead, it's all politics. A capitalist society can become more equal by adopting socialist elements. The key is to recognize that this is not really about economic organisation, but really about who has the power. Give the power to the people via strong labor organizations, and most distribution-related problems will naturally disappear over time.
The crucial thing that all the talking heads are missing is that you and I are users of money. We have to get money before we can spend. The US federal government, on the other hand, is an issuer of money. They have to spend money before they can get it back.
We are the players of World of Warcraft, and the US federal government is Blizzard. Everything else follows from this when you think about it logically (and are prepared to challenge everything you've known so far about macroeconomics).
If you want to really challenge your understanding of all this, I suggest you read about Modern Monetary Theory. Some initial pointers are: this overview, the book 7 Deadly Innocent Frauds, and the blog of economics professor Bill Mitchell - for your particular question particularly the series Deficit Spending 101: #1, #2, #3.
The Cliff Notes version is that because - in the long run - the private and external sectors save in financial assets, the currency issuer must run a deficit to maintain aggregate demand at a level where the economy does not tank - after all, the money that is being saved by the private and external sectors has to come from somewhere. The government surplus under Clinton was only possible due to the financial engineering that allowed the private sector to accumulate massive debts. These debts ultimately were not sustainable, and so it is quite reasonable to say that the Clinton surpluses are one of the causes of the global financial crisis. What we are seeing now is that the private debt burdens are shifted back to the government.
Oh I see. Yes, you are obviously right that high inflation and high unemployment went hand in hand at the same time.
However, that does not logically contradict what I have been writing. All else equal, it is entirely possible that it would have been possible to create additional jobs for the unemployed without increasing inflation at the same time. It's just that - at least in Germany, where I am best informed - this was not seriously tried because there was a general political shift towards abandoning full employment as a policy goal.
It seems to me that early Keynesians just made the mistake of only focusing on the price-wage spiral as a mechanism for inflation, and it's only natural that there should be other causes of inflation. I see inflation as a more general mechanism through which different parts of the economy fight for their share of the total national income. In particular, inflation is necessarily high when there are big changes in the economy. So if there is already high inflation as fallout of reorganisations in the economy, this does not necessarily invalidate the logic of putting idle resources to work.
On the other hand, I would agree that in the stagflation environment, it may have been difficult to create jobs that do not add to inflation, since production materials also need to be considered. As an example, it's no good hiring unemployed builders if for some reason there is a shortage of machinery or construction materials. The latter part needs to be dealt with first.
Please point me to an article where the relation between inflation and aggregate demand is actually proven false.
Recall what I wrote: when there are idle resources, there is room for additional non-inflationary spending. That has nothing to do with interest rates or anything, so it seems like you just completely misread what I wrote. At the very least, you left out several paragraphs of argument establishing the link, though feel free to just link me to an article establishing that link if you have one (I am interested in challenging my understanding of the topic).
Perhaps you are used to arguing with monetarists or something and are mentally reading their arguments instead of mine. For what it's worth, you seem to have your schools of thought pretty mixed up; in fact, I have never heard any group of economists in general claim that high interest rates and high unemployment cannot happen simultaneously - in fact, the opposite is usually the case, i.e. high interest rates are thought to create unemployment, and some want to use them as a policy tool in the hope that this will dampen inflation (or perhaps for more nefarious purposes altogether).
Of course, if you were to print a large enough amount of money, it would lead to inflation (or asset price bubbles, which actually seem to occur first in the current economy).
The reason for this is clear: the current system is set up to benefit the rich: see this recent entry on billy blog
Since the rich have more money than they need already, their increased income does not go into consumption. Instead, they use that income to buy stocks and other assets, hence the quick recovery of the stock market since the great recession.
Normally, it's inflationary when the Treasury issues checks, and it's deflationary when the Treasury borrows (issues bonds.) The key is that it's neither inflationary nor deflationary if they issue the same amount in bonds as they issue in checks.
Nonsense. Prices are at some point set by supply and demand. If the government goes on a crazy spending spree, it will cause inflation even if bonds are issued to match the spending, simply because demand will outstrip supply.
But note that government spending is not special in this regard: if all millionaires suddenly decided to go on a crazy spending spree, they will also cause inflation, simply because they have enough purchasing power to create demand that outstrips supply.
So to understand whether spending will be inflationary, you have to look at the bigger picture: what is demand vs. supply situation? If many resources are laying idle (as is the case right now, just look at the unemployment numbers), there is a lot of room for additional spending that doesn't cause inflation.
Of course, I am only considering demand-pull inflation here. Cost-push is a different situation, i.e. when the price of oil goes up, that's going to affect other derived prices down the line and there's nothing you can do about that, except try to substitute oil with something else.
In fact, combine the previous two paragraphs, and the obvious non-ideological policy conclusion is that the US government should use the current situation as an opportunity to massively invest in regenerative energy and other means of energy independence.
Thank you for your reasoned posts. It's encouraging to see people who "get it" when it comes to inflation.
I would only add, to emphasize the fact that inflation has only to do with aggregate demand and supply (and not with "money supply", whichever definition happens to be the preferred one of the day), that it really doesn't matter where added demand comes from.
If all those Wall Street bankers decided to go on a shopping spree with their millions and billions (instead of putting it into treasuries and the like) that would have exactly the same inflationary pressure as when the Federal government goes on a shopping spree of equal volume.
actually any kind of property ownership is hereditary
Perhaps that is the problem.
I have been asking myself for a long time now why we tolerate the inheritance of economic power long after we have done away with the inheritance of political power (well, modulo unfortunate counter-examples like the Kennedy and Bush families).
What if one of those "weak" genes turns out to hold the key to immunity against the next super-virus? How do you know that a gene that might appear to be "weak" right now won't suddenly become crucial to survival once the environment changes? See the relation between sickle cell disease and immunity against malaria for a well-known example.
I think you completely missed my point. Our understanding of the effects of individual genes is abysmal, and while we've made progress, we're a long time away from really knowing what is going on. Given that situation, it is better to have a gene pool that is as diverse as possible, because that increases the likelihood that at least some part of the population will have the genes to be prepared against the next large threat.
Gene therapy - at least for the purpose you seem to have in mind - is hubris.
IANAG, but I don't think that with a global population of many billions, intermixing happens quickly enough to really produce a mono-culture. Besides, the fact that modern medicine reduces evolutionary pressures allows the general gene diversity to increase anyway, which will help us a lot in the long run precisely because it protects against pandemics.
I wish I could mod you up, because I have rarely seen this idea expressed so concisely and eloquently online. Also, I think you are absolutely right.
As much as free-market competition is a de facto religion for many, the truth is that countries truly prosper when the population experiences a feeling of unity and common purpose. When this feeling disappears, people start caring less and less about social rules. Corruption, waste and general decline follow.
Besides moral considerations, this really is the most important argument in favor of a mixture of socialism and capitalism. Capitalism is good where it enables competition, because more vivid competition means that more human brains are actively thinking about how to solve problems, and this is ultimately what moves us forward as a species. But socialism is necessary to keep the ratio between the wealthiest and the poorest in check to enable stability both politically and economically.
Do not underestimate the fact that the UN provides a relatively neutral framework for even enemies to get together and talk about stuff. Considering the childish games that diplomats like to play with withdrawing their embassies and so on, it is important to have a stable and reliable point where the children can go and have a talk. I prefer that over them using their toys to kill each other.
Look, the UN is not perfect, but as the saying goes, the perfect is the enemy of the good. The UN plays an important role as a forum for people to come together instead of bashing their heads in. Without such a forum, the world would be an even more dangerous place.
I agree that my solutions bends the posed problem quite a bit, and I understand that you cannot accept it for that reason.
However, I cannot agree with your second objection. Neither your original problem nor my answer contains anything about rational numbers at any point - we've always been talking about real numbers. In the context of real numbers, the problem with irrational numbers simply doesn't exist.
I know (from my own personal experience) that it can be hard to accept that a single real number contains enough "information" (whatever information may mean) to specify finitely many real numbers, but it's a result that you'll invariably encounter when studying set theory. A proof of this fact is illustrated nicely in "Proofs from the Book" by Martin Aigner and Günther Ziegler - I don't have an online link handy, I'm afraid.
If you count highly-unintuitive functions as well, you don't even need a point: A single real value is enough to specify a plane.
The proof goes roughly like this:
The set of 3D planes has the same cardinality as R^3, as can be seen by the representation of planes via half-space functions (they have four coefficients, but since you can renormalize without changing the plane, only three are really relevant).
R^3 has the same cardinality as R (the set of real numbers). The idea behind the proof of this is that you can write a real number as its decimal expansion, put the digits into three groups (take every third digit), and re-assemble three real numbers from those three groups. The proof itself is slightly more complicated because you have to work around the fact that 0.9999... = 1.0.
I have omitted some fine detail here, but what this all means is that there are as many real numbers as there are planes in 3D cartesian space - there is a bijection between the respective sets, and this bijection is the function the Parent was asking for. It operates by splitting the real number into three real numbers, interpreting these as the coordinates of a point (or alternatively yaw/pitch/distance from zero) and constructing a plane from that as explained in other posts.
You can always set a clipping rectangle for the graphics card, so the obvious solution is to mess with this rectangle.
This allows you to render at odd resolution *without* having to mess with transformation matrices.
The statement about being anti-Unix is very unwise.
What if the creators of Unix back around 1970 had had terminals with built-in speakers? How high do you think are the odds that they wouldn't have included audio into the concept of a computer terminal?
I bet you almost anything that we'd have a stdpcm in ISO C today.
It is absolutely ridiculous that the concept of a terminal only contains the lowest common denominator of text input and output. You should think of the terminal as an interface to the user. It logically follows that all kinds of other devices can become part of an interface, depending on the situation.
Obviously, sound in/out can be a part of an interface. A USB port or a DVD drive could be part of an interface. After all, the one who physically "sits" at a device should automatically be able to control it (yes, there are exceptions, such as computer pools - the keyword is "exception", though). This would automatically eliminate all those ugly permission hacks that are necessary today, by the way.
One could even imagine an interface that consists of only sound in/out *without* any form of text or video interface (e.g. interface for the blind).
Nice idea, except that this page gives you the exact same download link that you get for the "consumer" 9700/9800 series. I even checked md5sums because I wasn't sure about the download URL anymore.
And yes, glActiveTexture() & co. are still missing in the latest driver (only ARB variants are available).
(mind you, there's just been a new driver release from ATI, and I haven't installed that one yet)
I've got a 9700 Pro, and the ATI drivers have given me *a lot* of grief as a developer. There are many times when they are so blatantly non-compliant with the OpenGL standards, it's not funny.
For example, the driver claims to support OpenGL 1.3. With 1.3, ARB_multitexture has been promoted into the core, so they driver _should_ export glActiveTexture & friends without the ARB suffix. Well guess what? It doesn't. You have to use the *ARB versions of the functions.
I guess that a lot of this can be attributed to the fact that ATI is not as long in the Linux driver business as NVidia, and overall, things have in fact gotten better over time. But you should expect a bumpy ride.