Increasing taxes on "the rich" and companies are good to some extent, but they will only take you so far.
The kind of austerity that involves taking away allowances and tax credits for the poor and middle classes is idiotic. Devaluation certainly does affect the innocent, but overall it is much more equitable (and workable).
It punishes the careful savers and rewards the profligate, and sends a signal that living high on credit is good, while those that save and live within their means are idiots.
Then you can take it one step further: If you indebted in cash or cash equivalents to buy productive assets you get to double-dip: your debt gets reduced by inflation and your productive assets aren't any less productive and their income/growth will adjust. Your overall buying power will greatly increase.
The current economic problem is a lack of aggregate demand. Too many people are cutting their spending to pay down their debts, which cuts economic activity, which puts more people out of work contributing to the lack of demand, dragging on the economy more, etc.
This means that many careful savers are finding themselves in the same boat as the profligate simply because the drop in demand cost them their jobs. We might judge individuals for not doing more to get new jobs, but market-wide, they can't all try harder and win the few remaining jobs. There simply do not exist enough jobs and some careful savers will unavoidably find themselves in the same boat as careless spenders.
Consider an allegorical ant who worked just as diligently as any other, rudely ejected from the ant hill on the onset of winter because the others decided the hill simply didn't need to be as big as it was the day before. This now-homeless ant would suddenly need to dig his own shelter, preventing them from gathering further food, costing them food to the elements and ultimately leaving them in much the same boat as any grasshopper who played the summer away and never stored a thing. Is it truly fair to judge such an ant no differently than a grasshopper?
Also, the cause of this economic problem is largely one of a supposedly-regulated and free-from-fraud industry enjoying regulatory-capture and left to run amok. Many careful savers are finding themselves in the same boat as the profligate, because they were defrauded by lenders and/or brokers. Lenders and brokers who are facing no punishment for their crimes. No return to effective regulation to prevent it from happening again. No dissolution to prevent "too big to fail" institutions from holding the economy hostage. [1]
Consider another allegorical ant who worked all spring summer and fall, as hard as any other, who wakes up one day to find that the food he'd saved has mysteriously disappeared, despite him taking no less precautions than any other, perhaps simply because his pile happened to be protected by an incompetent or possibly corrupt guard who let or helped others steal it away. And this ant now finds himself being ejected for not having anything to contribute to the hill. Should we also judge this ant no differently than a grasshopper?
You are certainly free to cast judgment and aspersions on these formerly-careful-savers for not having years and years worth of living expenses set aside. And/or for trusting that a protected-from-fraud industry actually was.
But it seems to me that they were punished for these things largely by chance -- not everyone who saved as much/little as they, or stored their money in the same ways, or researched as much/little on their investments, woke up to find themselves cast out by society and treated no differently than a degenerate check-to-check gambler.
And as such, your moral judgment strikes me as terribly myopic, hollow and false.
[1] It's debatable that these fraudsters were even directly rewarded from the bailouts on a far more massive scale than the profligate would be by a few years of modest inflation.
If you're concerned about sending a message that people who follow the rules are an idiot, your complaining about modest inflation rather than the bailouts is akin to complaining that a burglar tracked mud through your house while taking your valuables and your insurance policy leaves it up to you to pay for a carpet cleaning. Sure, that's also unfortunate, but it pales in comparison to having been burgled in the first place.
This just half-gelled a different viewpoint for me. There's nothing inherently noble about saving, because the demand doesn't vanish—that money still represents a claim on some fraction of society's resources, only they plan to consume in the future rather than now. Well, we have to align both present and future supply and demand. We can't have everyone expecting to consume all their resources in the future, because then we're wasting our capacity to produce resources in the present.
Very true.
That said, there is something inherently noble about saving. Life is unpredictable and retaining your ability to weather some reasonable fraction of bad times on your own is the most base expression of a person's ability to contribute positively to a cooperative society.
If someone can't save to a reasonable degree, they simply can't be trusted to engage society in good faith. To vote responsibly, to participate without causing undue costs on everyone else, etc.
This isn't to say that more savings is equivalent to more nobility. Nor anything like that. But there is a reasonable level of saving that, when the drive isn't present, is of very real social concern and should not be allowed to pass as a neutral behavior.
To clarify: this isn't to say that low net savings at some given point is a fault. Again, life is unpredictable and a bad hand may have been dealt early in the game, or a string of bad hands beyond any reasonable expectation. It's the desire and effort and discipline expended toward (re)building that reasonable level of savings that society should incent and recognize as noble and good.
Back before this Depression, the notion that a responsible person could or should hold two or three years of living expenses as liquid savings was absurd. Saving that much was hoarding, and prevented you from building up savings for your long-term goals or capital for your ventures.
Now every 6-month ant is suddenly being lectured on their grasshopper-hood by 3-year ants? Bullshit.
An ant wakes up one morning to find that the queen of his anthill has outsourced food production to another hill of smaller ants who eat less. He is now told that he can eat as little as them, and keep receiving food, or he can be cast out and go hungry entirely. He knows winter is coming, but no longer has enough food to feed himself and save.
Winter comes, he is cast out, and the other ants in the hill laugh at the idiot who didn't save anything for winter.
We're seeing the consequences of morality-driven economics today in Europe. Are we really worried that people that save and live in their means are going to start snorting cocaine off strippers' bellies because of devaluation?
So it's a transfer from the rich to the poor. It looks just right.
Do you really believe that to be the case? If so, why should you disregard other factors like why people got into debt in the first place or how much savers had to sacrifice in their own lives to achieve their savings?
No, actually it's the fruit of some thinking the structure of our ageing western societies, and the fact that the most egalitarian societies are the happiest.
> Do you really believe that to be the case?
More than ever.
> If so, why should you disregard other factors like why people got into debt in the first place or how much savers had to sacrifice in their own lives to achieve their savings?
You know, I'm part of the 0.1% richest people on this planet (and you too, I suppose). However, I don't like to comfort myself thinking that I worked hard and deserved it, because I'm perfectly conscious that I never did work that hard (like digging shit in some hole) and I didn't really deserve it because my parents, and their parents before were doing pretty well already. I was lifted with the flow and not much else.
It's pretty easy to be under the illusion that as you didn't need that much effort to be what you are, whoever is below you must be a lazy ass, or stupid as a brick. Most of the time, however, they were just less lucky (OK they may be less gifted, or less intelligent, but that shouldn't make anyone deserving a lesser part of it all).
I've heard this song before of "lazy poor" and "hard working risk taking rich", about 1 billion times, and it always comes from people who had it easy. I don't really feel like beating this old horse more.
It's like when I used to discuss religion with my mother-in-law. When she first declared "There isn't a single error in the Lord's Bible", I really should have just smiled and walked away. Anyone who had lived 55 years on the planet and not absorbed the fact that the earth is demonstrably and astoundingly older than 6,000 years wasn't going to be listening to the rest of my so-called "logic".
I'm still curious when I see people express opinions like yours, though.
With all those preconceptions, what kind of affinity would you have with a site like Hacker News that glorifies the success of the entrepreneur? Are you just observing us in preparation for an invasion? :)
Hard work and good decisions are important of course. But there are good "data points" showing that people struggling with difficulties can't make good decisions. And to do hard work, you need to have an environment that allows it; for instance think about these American travellers of the 19th century shocked by Japanese laziness: we quite well know now that Japanese are hardly lazy, but in the 1840 there was simply nothing effective to do. At the individual level, hard work and good decisions matter; at the society level, not that much.
> I'm still curious when I see people express opinions like yours, though.
I find less surprising that people express such opinion as yours, because they usually attribute their own feelings a bit too literally onto others.
> With all those preconceptions, what kind of affinity would you have with a site like Hacker News that glorifies the success of the entrepreneur?
I'm a successful enough entrepreneur (depends upon your metrics of course). And I'll keep my misconceptions rather than John Galt's, if you don't mind.
A single individual's hard work and good decisions don't contribute that much to their individual well-being. Our thriving is largely predicated on millions of people making good decisions and working hard over hundreds of years.
It's the coward solution, and if you're not gonna pay 100% of the owed value, just do that instead of making old money worth more than new money.
It's the coward solution
Suppose I'm a retired gentleman in Ruritania with one million Ruritanian rurs in the bank. The King of Ruritania has got himself into some deep debt problems with foreign creditors due to his addiction to racing and eating greyhounds. He can either say:
a) "Guess what? I'm only going to pay back 10% of my debts! Suck it, creditors!", or
b) "Ohhhh, suuure, I'll pay back all my debts. Oh, did I mention that a Ruritanian rur henceforth has one tenth the value it used to? Heh, cool."
In the latter case my savings are completely wiped out, as are the savings of everyone else in Ruritania [while mortgageholders suddenly become very rich]. In the former case, while there'll probably be some damage to the currency my savings aren't affected so badly.
If everything in Ruritania is "worth" 10% of what it was, then nothing has changed. It's only foreign goods that have become more expensive, and your exports have become cheaper.
EDIT: also, are you referring to people who have their savings in cash, or investments?
People would be less likely to take their money out of the country. Foreigners would be more likely to invest.
If as a saver you invest in local businesses and property, you should do well for yourself.
No, the kind of profiligacy that allows the existence of allowances and tax credits for the poor and middle classes is idiotic.
The poor are a different argument, but there's no way the middle classes should be dependent upon government welfare. Let the middle classes earn their own money and pay a modest share in taxes, not become welfare recipients themselves.
Every European country has a lot of government spending and employees and programs that they need to eliminate, first, before they think about raising taxes.
My point is that when governments say that the best short-mid term solution to the debt crisis is to cut benefits and raise taxes on pensioners they are either lying or crazy.
In short, don't the final numbers matter more than whether we reach them with or without a tax credit?
Besides the general market efficiencies that speculation has been shown to provide, sometimes the speculators drive prices down very sharply in anticipation of commodity devaluation. No one ever seems to complain about that.
Saying that the financial sector provides no benefits to society is ill-judged, but saying that everyone should be absolved of wrong-doing just because the sector as a whole provides some benefit is equally ill-judged.
Generalizing the evil "speculators" without calling out specific sub-groups or behaviors was exactly what the OP did and why I was pointing out the reason we tolerate and encourage speculation in the first place.
>but saying that everyone should be absolved of wrong-doing just because the sector as a whole provides some benefit is equally ill-judged.
I certainly didn't say that or even mean to imply it if that's how you read it.
This privatization of profits and socialization of risk is what's at stake. If actual accountability (even if it's not entirely symmetrical) existed, I doubt anyone would care.
Right now, it's heads==they win, tails==we lose. That's a fools game, and we're the fools.
I spent some time doing futures trading a couple of years ago, so I was an evil "speculator". I could have sworn that the money that I lost when I placed a series of bad trades was my own. I really have to learn how to hedge my futures trades with options before I get back into it. :)
> This privatization of profits and socialization of risk is what's at stake.
I agree to the extent that the whole notion of "too big to fail" and government bailouts is socializing the losses. I would really prefer if we would let the free market work and allow the financial institutions that are that bad to just go out of business.