slapphead_otool

These are the sort of comments economists have been making for around 15 years.

The same economists failed to predict the GFC or the failure of the Euro.
you are free to believe it of you wish. I could rip it apart, but I think I would be wasting keystrokes.

I think you might eat your words in 20 years time.

Ethos83

God, I'm laughing at the ignorance.

Credit was widely available in the past. Actually that's how most people survived.

Most people had accounts at local shops where they would buy food and goods on credit and paid off the shop keeper at the end of the month when they got paid.

Most people rented, not owned, their dwellings. Plenty of people fell behind their rents when times were hard. Tenant - landlord disputes and getting the bailiffs involved were everyday occurences.

Loan sharks were commonplace in poorer areas.

Pawnshops weren't frequented only by the poor. Middle and upper class people resorted to pawnships all the time for a bit of spare cash.

Rich people frequently lived off credit. We all know the stories of landed aristocrats living far beyond their means.

Then of course were the infamous debtor prisons.

And this isn't just 1900, but 1800 and 1700 and 1600 too.

Credit and debt is possibly the most popular theme in 18th and 19th century novels. Dickens, Trollope and Thackery all wrote heavily on the topic. They would see nothing new about our current debt crisis except perhaps that it's on an even larger scale.

If there was ever a 'sensible and frugal' time, it was a short window between 1945 and 1980 and it was largely because due to postwar austerity there was little money and little credit to go around.

This isn't an attempt to justify the existence of debt and credit but to pretend that this is a new phenomena is remarkably ignorant.

Ethos83

I dunno.

No one, including you or me or anyone else, knows what the economic situation is going to be like ten years hence.

Or what country is going to have what.

Still, interesting article in the WSJ the other day - pointing out that due to rising labour costs in China a number of industries are reversing course and bringing some manufacturing back to the US as it's no longer cost effective to outsource them to China. Hmm...beginning of a trend or just an outlier?

As China matures it will unleash a new set of problems - for China more than anyone else. Only time will tell what those problems will be and how they will be resolved.

Millhouse

Resources are finite.

slapphead_otool

Exactly, and the zero sum idea is rapidly losing favour, but I fear its not worth arguing.

slapphead_otool

i am laughing at the ignorance too....

The period you talk about didn't have modern instant transnational credit. Nor was the borrowing in ANY way anything like the current level.

Yes, maybe 10,00 aristocrats borrowed a few thou to pay off gambling debts. these days 10 million borrow for their entire lives, with no idea, ability or intention of repaying.

These days whole countries (ie Greece) borrow with no idea, ability or intention of repaying. As I type this the BBC is talking about 50% write off of Greek debts....

To compare the current dept crisis to Regency England is just rank stupidity.

csdf

But innovation and ingenuity are not. Finite resources matter little if you are in a service industry where your ability to grow depends on human capital and a growing demand for your service.

Norm_uk

If you take all the economists in the world and lay them down side by side they still won't agree with anything. Weather prediction is easier than economic prediction...especially since most economists have little grasp of fundamental human trends.

N.

Ethos83

The national debt of Great Britain at the end of the Napoleonic wars was around 250% gross national income....

The human ingenuity of manipulating financial markets has been around for a long time - as long as there's been a financial market. The economic history of the world, particularly the developed Western world, is one of booms and busts and panics and failed banks and companies and it revolved around credit in one form or another. The South Sea bubble was utterly spectacular. http://en.wikipedia.org/wiki/South_S...ebt_for_equity

Thousands of banks across Europe and the United States failed throughout the 18th and 19th centuries because they loaned out too much on credit, and their collapse often led to a chain reaction that took down other banks and companies when the credit wasn't paid back.

Your statement 'these days 10 million borrow for their entire lives, with no idea, ability or intention of repaying' is correct, and it was also just as correct a hundred years ago or two hundred years ago. It was normal for people of all stripes and socio-economic levels to live their entire lives in debt. Farmers, for example, were always perpetually in debt, borrowing from last year's revenues to pay for next year's crops - despite that crop failures did happen. Poor and working class people were particularly susceptible to debt for survival and often lived in fear of the bailiffs and the shop keeper who wouldn't extend any more credit to them. Dickens' novels are filled with families torn apart by debt and credit, of loan sharks and anti-semitic portrayals of Jewish bankers manipulating global finance for their benefits.

'These days whole countries (ie Greece) borrow with no idea, ability or intention of repaying. As I type this the BBC is talking about 50% write off of Greek debts....'

It ain't new history. National defaults have been around for quite some time, dating from when ancient Athens defaulted on its debt. City states and nations have gone bankrupt in the past and the difference is that 500 years ago the neighbouring city state would usually just take over.

The past ain't a simple time with good, honest god-fearing people living frugal lives. Sure, plenty did (just as plenty do today) but plenty did not (as plenty do not today).

typical

Within the universe, yes. Meanwhile a handly local hot thing keeps flinging free energy at us

typical

I think it's more that they ignore them because they get in the way

Starting economics with "first assume all people are rational actors" always felt like starting a dating guide with "first assume you are Brad Pitt". Thing is, the confidence you'd get from doing so might still get you laid somewhere

typical

No, I think you'd fail to rip it apart. And if you think economists failed to predict the GFC or the failure of the Euro, you were listening to the wrong economists. (I didn't think it would be nearly as bad or as global as it turned out, but had been expecting a credit-bust recession for a while).

I'm not arguing for business as usual. I think we're on the cusp of another world realignment of political and economic ideology, similar to the 90s or maybe even the end of the gold standard - and I wouldn't predict where it's going to fall. But I think your doom'n'gloom is massively overblown.

I don't disagree that consumerism has gone too far.

Vikingman

What does this have to do with DUBAI

typical

It plays directly into the property ramping in Dubai three years ago...

Bahtatboy

That always got me, too, when I studied economics several decades ago. And yet the same mistaken premise is still being used--a 2.5% reduction in VAT in the belief that what people save in VAT they'll spend, and that from a Chancellor of the Exchequer. And the Japanese did something similar some years ago (although in a rather more tangible way), and the overriding response was to stuff the excess under the futon (in many cases, literally).

I've forgotten most of the Adam Smith I studied, so those of you who manage to combine common sense with economic theory, what would happen if every country in the world simultaneously printed and gave to every citizen, say, USD25k, or even USD100k? Would the risk of instability be mitigated by the universiality of the action and the short to medium-term reduction in unemployment, or would it just cause rampant inflation everywhere? Answers on a postcard...