From Reagan to Business Cycle Theory

A conversation from Twitter.

Servius: @CraigMayhem I need to go now. I'm not an economist, I just read the best ones I can. The article I shared a bit ago is by one. #tcot

Servius: @CraigMayhem I'll modify that a bit. There's nothing wrong with earning money. It's when you MAKE it that you cause problems. #tcot

CraigMayhem: @Servius Nothing wrong with making money. Making it at the expense/detriment of others is the problem. Thus regulation.

Servius: @CraigMayhem http://mises.org/story/672 Here's a brief introduction to why inflation and cutting interest rates is the problem. #tcot

Servius: @CraigMayhem People will always try to make a much money as possible. Without gt manipulation we can do that without booms and busts.

hankracette: @jmp5329 @Servius "I believe that ... I'm going to buy gold coins and hide them ! #tcot" -- Let me hide them for you. Safer that way....

jmp5329: @Servius I believe that ... I'm going to buy gold coins and hide them ! #tcot

CraigMayhem: @Servius The point is that people wil exploit the system, high or low inflation

Servius: @CraigMayhem That if everybody withdrew their money the bank couldn't pay them back?

Servius: @CraigMayhem Do you know that all the money you put in the bank is not there? #tcot

CraigMayhem: @Servius Even people who should know better are greedy. i.e. anyone taken in by Madoff

CraigMayhem: @Servius Are you nuts? Greed causes investments such as fractional reserve banking.

Servius: @CraigMayhem Inflation is driven in large part by the Fed cutting interest rates and the banks practicing Fractional Reserve Banking #tcot

Servius: @CraigMayhem It's when inflation ends, and it always must, that we feel these busts. #tcot

Servius: @CraigMayhem See, the problem is inflation. It's inflation that causes investments that depend on more inflation. #tcot

CraigMayhem: @Servius So wait - does the govt. regulate that?

Servius: @CraigMayhem Better would be one simple regulation. No more fractional reserve banking. And no more manipulation interest rates by Fed #tcot

CraigMayhem: @Servius The opposite has already been proven. So what's YOUR suggestion?

Servius: @CraigMayhem You're also assuming people in government won't abuse their power to control these traders. #tcot

Servius: @CraigMayhem But you're presuming government is competent to keep the excess in check while allowing innovation that drives economy #tcot

CraigMayhem: @Servius Good question. Allowing banks/traders to run rampant unchecked didn't seem to work - so something different

Servius: @billstreeter http://mises.org/story/2810 Here's an article about interest rates & inflation. Same site has more. #tcot

Servius: @CraigMayhem Yes regulation to ensure bubble doesn't happen. But what regulation? #tcot

CraigMayhem: @Servius I'm all for tax reform. And regulation ensuring bubble don't happen again

Servius: @CraigMayhem I doubt any have easy time w/ 15% payroll taxes increasing inflation & underwater mortgages due to inflated housing value #tcot

Servius: @CraigMayhem re: "smaller, richer class" you're wrong about that. But I'll have to find the figures. #tcot

CraigMayhem: @Servius I doubt your financial situation reflects the vast majority of middle class.

Servius: @CraigMayhem I am a one income middle class family. My only real problems are rising inflation. #tcot

CraigMayhem: @Servius Instead we have a smaller, richer class

CraigMayhem: @Servius If supply-side economics worked for m.c. there would be leess poor and middle class.

CraigMayhem: @Servius AGAIN: middle class wages fell in the 80's and have been falling ever since. Remember 1-income middle-class families? sheesh

Servius: @CraigMayhem What huge minuses? #tcot

CraigMayhem: @Servius It STILL doesn't make up for the decline of the middle class? It's a tiny plus amongst huge minues

Servius: @billstreeter Put another way. Raising inflation causes natural interest rate to rise. Keeping interest rates below this is inflationa #tcot

Servius: @CraigMayhem Excuse me? If I can get better goods for less money or for less work I'm better off. #tcot

Servius: @billstreeter Oh please. Cutting interest rates is inflationary. Raising them is deflationary. Floating them on the market is stable. #tcot

CraigMayhem: @Servius Availability and cost of goods doesn't equate to decline of wages/lifestyle.

billstreeter: @Servius BTW high interest rates cause inflation

CraigMayhem: @Servius Maybe it's because those goods aren't made in America anymore.

Servius: @billstreeter Watch the money supply. Today, interest rates need to go up and government needs to stop spending so much. #tcot

billstreeter: @Servius who said anything about hyperinflation? WTF are you talking about?

Servius: @CraigMayhem you said middle class was worse off than before Reagan. What I can buy today vs then suggest otherwise. #tcot

Servius: @billstreeter So the answer is Zimbabwe style inflation? No. The answer is stable monetary policy and returning rates to natural levels ...

CraigMayhem: @Servius Waht does that have to do with anything?

billstreeter: @Servius we are about to enter a deflationary spiral unless something is done do you know how bad that will be?ever seen an empty store?

Servius: @CraigMayhem That's simply not true. Check out an old Sears or Penneys catalog. You can get more and better goods for your money now. #tcot

billstreeter: @Servius real wages for middle class workers fell under Reagan and never grew again

Servius: @billstreeter Right. That's what killed inflation. #tcot

CraigMayhem: @Servius RT@billstreeter middle class wages fell in the 80's and have been falling ever since

billstreeter: @Servius wtf are you talking about? Remember 20% interest rates on Mortgages? That was Reagan!

Servius: @CraigMayhem He & Volker raised interest rates which drive inflation. We've been cutting interest rates below natural level for years #tcot

CraigMayhem: @Servius You're an economist now? I could find jsut as many economists that say his policies cause the Bubble/Bust economy.

Servius: @CraigMayhem He killed inflation in the early 80s. We've restored inflation and caused a world of trouble. #tcot

CraigMayhem: @Servius "better than the 70's" doesn't mean it was a win for the middle class.

Servius: @CraigMayhem I also remember how Reagan impacted the middle class and it was a sight better than the 70s #tcot

Servius: @CraigMayhem Bush 41 never believed in cutting taxes. Bush 43 wasted chances spent his capital spending on ED & not reforming SS/MCare #tcot

CraigMayhem: @Servius The Republican party looks back with the rosiest of glasses at Reagan - probably because Bush 1 and 2 were fairly awful.

CraigMayhem: @Servius I remember Reagan, too and his financial policies and how they impacted the middle class.

CraigMayhem: @Servius Just because I think Reagan was awful doesn't mean I think Carter was great.

Servius: @CraigMayhem I also remember the '70s and the malaise of the Carter years. #tcot

Servius: @CraigMayhem Except that I remember Reagan. The first time I voted I voted for Reagan in 1984. #tcot

CraigMayhem: @Servius It's also easy to attribute great things to a mediochre president after the fact.

Servius: @CraigMayhem It's easy to predict the Soviet collapse after the fact. Reagan predicted it before. #tcot

CraigMayhem: @Servius Sure, and the Soviet Union's financial collapse had nothing to do with ending the cold war (among MANY other factors), but sure.

Servius: @CraigMayhem The wisdom to win the cold war, restore American respect, and lift the country from malaise and stagflation. I remember. #tcot

CraigMayhem: @Servius yeah, the wisdom to destroy the middle class, have an Iran / Conrta scandal and go senile.

Servius: RT @calebhays: Happy Birthday, Mr. President.... today is Pres. Ronald Reagan's birthday. Oh, how we could use your wisdom now. #tcot (v ...