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Glom
2007-Jul-14, 07:26 PM
In the episode where Homer becomes a spy for the government after screwing up his tax returns, they reveal that the Treasury had printed a trillion dollar bill to give to the French for the post war rebuilding effort.

Wouldn't simply printing a large amount of money like that lead to hyperinflation?

mr obvious
2007-Jul-14, 09:06 PM
It depends on what they do with the money, I think. I'm not an economist. Some inflation is probably inevitable, but unless they perform massive currency exchange I am uncertain if hyperinflation is guaranteed.

Glom
2007-Jul-14, 11:38 PM
I believe it only works if it goes into circulation. Because Burns stole it and didn't spend it, he took it out of circulation, thereby doing a great service to his country. He is a hero. Hyperinflation is a WMD (Mugabe certainly likes it, the nutter)

Ronald Brak
2007-Jul-15, 03:34 AM
First of all, I would like to thank the United States for the lend lease program during world war two and for the Marshal Plan that helped to rebuild a devestated Europe.

Secondly, I would say that the trillion dollar bill in the Simpson's cartoon is totally silly. A trillion dollars was four times the U.S. GDP in 1947. The entire Marshall Plan consisted of 13 billion dollars and a little bit of that was given back. There was emergancy aid given prior to the Marshall Plan, which means the total amount of aid was higher than the $13 billion, but this emergancy aid was less than the Marshall Plan aid. France received $2.3 billion in Marshall Plan aid.

Marshall plan aid came to about $90 per American citizen over four years, or about $330 per household, which was a lot of money back then when the average income was $3,550. (The aid was of course spent on goods from the U.S. and later from Canada as well.)

hhEb09'1
2007-Jul-15, 05:20 AM
Yeah, they should've printed up a quadrillion dollar bill, a trillion is too realistic and not as funny

Dogberry
2007-Jul-15, 12:31 PM
In the episode where Homer becomes a spy for the government after screwing up his tax returns, they reveal that the Treasury had printed a trillion dollar bill to give to the French for the post war rebuilding effort.

Wouldn't simply printing a large amount of money like that lead to hyperinflation?

Well, there's a lot of bad economics going about. People create web sites jeering at others as "ignorant" if they have the temerity to ask whether money spent on space exploration is worthwhile, then present an economic argument that would make "ignorant" seem like a substantial improvement. A job creation argument, for example, with the author apparently completely unaware that the same argument would apply to spending on anything, and also unaware that the job loss effects of taxation to support the spending need to be taken into account. So there are some bad economists out there, and like many of the bad scientists out there, they're convinced that it's everyone else who's ignorant.

But, to the point, as Ronald Brak pointed out, a trillion dollars was a huge amount in the years right after the war. But, ignoring the silly amount, printing large amounts of money does lead to inflation. But, you can't consider these things in isolation, you have to consider the total change in the money supply, not a single incident. If the money holdings of other people were reduced by the same amount (by whatever means, and again, the amount is silly, but let's ignore that), then there would be no effect.


Hyperinflation is a WMD (Mugabe certainly likes it, the nutter)

Hyperinflation doesn't generally come out of nowhere, it results when there are other economic problems and a government has trouble paying its bills. Printing money can be viewed as a hidden tax on everyone else in the economy, but there are limits to how much can be raised - you can't confiscate more wealth than the country has. This is why hyperinflation sometimes results, the amount of money you need to print to raise a certain amount of wealth (in real terms) is highly nonlinear in the amount of wealth. Once you've printed a large amount of money, inflation has reduced its value so much, you need to print a huge amount more to raise even a small amont of wealth, creating even more inflation, and so on...

ToSeek
2007-Jul-15, 02:25 PM
Moved from "Small Media" to "Off-Topic Babbling" since it's got nothing to do with science or science fiction.

peteshimmon
2007-Jul-15, 02:58 PM
A few years ago the British economy was more
insulated from world conditions due to
currency restrictions. And we had three periods
of heavy inflation. First about 1975, second
1980 and the last 1989. The press maintained
it was stupid Unions grabbing excess pay for
working people. However if you compare the
graph of inflation during this period with
house prices, you find three peaks about
18 months previous to the inflation peaks. If
you are an honest scientific person you can
see cause and effect! Houses were built at a
cost which was lower than the eventual selling
prices. The Building Societies created money
to buy. I think it is called demand pull
inflation. If you study the news archives you
find that professional groups got their pay
increases in just after the housing peaks.
(Doctors, Lawyers etc). They knew what was
coming. Then when ordinary working people
wanted the value of their efforts, they were
castigated. It is a perfect illustration of the
old lines, "Its the rich wot gets the pleasure,
its the poor wot gets the blame". And it is a
crying shame:)

And BTW ToSeek, this is the dismal science and
it becomes science fiction with the
politicians!

cbacba
2007-Jul-15, 04:19 PM
Yeah, they should've printed up a quadrillion dollar bill, a trillion is too realistic and not as funny

If you think that's bad, there's a real news story from last month about some poor person who had their bank accounts frozen (temporarily) because she bought a book of stamps at the post office with a credit card and the machine/system had a large glitch, enough of one to be measured in the many billions of $$$.

Some say really big screwups can only be accomplished by governments. Others claim it takes a computer to really foul things up. Apparently, the combination of the two makes for the ultimate.

Dogberry
2007-Jul-15, 04:31 PM
A few years ago the British economy was more
insulated from world conditions due to
currency restrictions. And we had three periods
of heavy inflation. First about 1975, second
1980 and the last 1989. The press maintained
it was stupid Unions grabbing excess pay for
working people. However if you compare the
graph of inflation during this period with
house prices, you find three peaks about
18 months previous to the inflation peaks. If
you are an honest scientific person you can
see cause and effect! Houses were built at a
cost which was lower than the eventual selling
prices. The Building Societies created money
to buy. I think it is called demand pull
inflation. If you study the news archives you
find that professional groups got their pay
increases in just after the housing peaks.
(Doctors, Lawyers etc). They knew what was
coming. Then when ordinary working people
wanted the value of their efforts, they were
castigated. It is a perfect illustration of the
old lines, "Its the rich wot gets the pleasure,
its the poor wot gets the blame". And it is a
crying shame:)

There is a school of thought that inflation has something to do with the money supply, but I'm sure that's just government disinformation.


And BTW ToSeek, this is the dismal science and
it becomes science fiction with the
politicians!

I am often critical of politicians' economic theories, but then I come here and see what people say, and think maybe the politicians aren't so bad after all.

mr obvious
2007-Jul-15, 04:52 PM
I believe it only works if it goes into circulation. Because Burns stole it and didn't spend it, he took it out of circulation, thereby doing a great service to his country. He is a hero. Hyperinflation is a WMD (Mugabe certainly likes it, the nutter)

At the end of the episode, I believe that Burns had handed it off to Castro. Thus, his great service has a questionable coda. It depends on what happens to it [the bill] next in the Simpsons universe, but that would be more suited for the "Reset Button" thread.

Out of curiosity, couldn't the US government simply void the bill once it was stolen? If no one would accept it because it is no longer backed by the Reserve, I'm pretty sure it would have only collector interest. Since there was only that one bill, I'm not sure they had to go through the whole song-and-dance.

Zachary
2007-Jul-15, 04:52 PM
Guys, this is the simpsons!, a show where one of the main protaganists previously tried to block out the Sun. Aren't you all taking this a bit too literally?

Donnie B.
2007-Jul-15, 04:59 PM
Well, there's a lot of bad economics going about. People create web sites jeering at others as "ignorant" if they have the temerity to ask whether money spent on space exploration is worthwhile, then present an economic argument that would make "ignorant" seem like a substantial improvement.
...
I am often critical of politicians' economic theories, but then I come here and see what people say, and think maybe the politicians aren't so bad after all.

Welcome to BAUT, Dogberry.

And I must say, nice way to make friends here. We think the world of you, too.

Glom
2007-Jul-15, 05:04 PM
Moved from "Small Media" to "Off-Topic Babbling" since it's got nothing to do with science or science fiction.

Economics is a science.

Dogberry
2007-Jul-15, 05:05 PM
Welcome to BAUT, Dogberry.

Thank you!


And I must say, nice way to make friends here. We think the world of you, too.

I'm sorry, since I just arrived here I don't really have a good feeling for the culture. I didn't realize this was a place where, if someone posts nonsense, you're just supposed to be agreeable and not challenge it. Now I know better.

Dogberry
2007-Jul-15, 05:10 PM
Economics is a science.

That is something that people debate, although the debate is about the meaning of "science" more than anything else. Certainly in economics people cannot make predictions of events down to the second, centuries in advance, the way people can in astronomy, for example. But there are definitely aspects of the scientific method about it.

One thing that appears to be missing in many of the statements people make here is the idea that you can't get more money for something just because you want it. Oil prices are high because oil companies are greedy, for example - I suppose when oil prices are low it must be because oil companies are generous, not because of suppy and demand. This idea that prices reflect the moral qualities of the individuals in the transaction seem to be at the root of many of the faulty economic arguments made.

hhEb09'1
2007-Jul-15, 05:13 PM
Economics is a science.I think he's talking about the trillion dollar bill :)
One thing that appears to be missing in many of the statements people make here is the idea that you can't get more money for something just because you want it. Not always, but sometimes though. Don't miss that. Some people have gone to jail for it, and some haven't.

Donnie B.
2007-Jul-15, 05:33 PM
I'm sorry, since I just arrived here I don't really have a good feeling for the culture. I didn't realize this was a place where, if someone posts nonsense, you're just supposed to be agreeable and not challenge it. Now I know better.
Perhaps I should have been clearer. You'd made two posts, and in each one, it seemed you went out of your way to take a broad swipe at the contributors to this forum. You didn't respond to any particular post and dispute its claims. You just told us we were idiots.

You also suggested that the space program is not necessarily the best way for the government to spend its money, if the goal is to stimulate the economy. That may indeed be the case, but you're jousting with a straw man since I've never seen anyone here make that claim. On the contrary, the few occasions that the subject has come up (that I've seen) it's been in response to critics' claims that the space program "wastes money" or "throws money away". That's silly, of course, since I'm sure you'll agree that the money spent on the space program is spent here on Earth, and does go back into the economy. What's more, stimulating the economy is not, and never has been, the primary purpose of NASA.

Anyhow, I'm hoping that my initial impression turns out to be mistaken.

Glom
2007-Jul-15, 07:21 PM
I think that most posters here, who argue for a state space agency, do so on the basis that it is a public good. I don't believe it is a commonly held believe that it is a form of Keynesian stimulation, particularly as most people here are intelligent enough to realise:
1) Keynesian stimulation often does nothing but cause inflation.
2) A space program is a long term commitment, which means it needs funding during times of good economic performance. If the economy is doing well, then taking tax money for Keynesian stimulation is only going to be damaging, since economic activity is always more productive when in the private sector than when in the public sector.

Ronald Brak
2007-Jul-16, 04:23 AM
I think that most posters here, who argue for a state space agency, do so on the basis that it is a public good. I don't believe it is a commonly held believe that it is a form of Keynesian stimulation, particularly as most people here are intelligent enough to realise:
1) Keynesian stimulation often does nothing but cause inflation.
2) A space program is a long term commitment, which means it needs funding during times of good economic performance. If the economy is doing well, then taking tax money for Keynesian stimulation is only going to be damaging, since economic activity is always more productive when in the private sector than when in the public sector.

I don't think that word means what you think it does. If you are taking tax money for a Keynesian stimulation it is not a Keynesian stimulation. It has to be unsterilized.

Glom
2007-Jul-16, 06:57 AM
I don't think that word means what you think it does. If you are taking tax money for a Keynesian stimulation it is not a Keynesian stimulation. It has to be unsterilized.

Unsterilised? Does that mean raised through budget deficit rather than tax revenue? Yes, you're probably correct. Of course, that is a recipe for inflation.

Ronald Brak
2007-Jul-16, 07:22 AM
Unsterilised? Does that mean raised through budget deficit rather than tax revenue? Yes, you're probably correct. Of course, that is a recipe for inflation.

Sterilized means the money is coming from somewhere. Running a budget deficit involves selling I.O.U.s or T-bills, which which will be paid for out of future taxation, is sterillized. Printing new money or bonds, and so creating money out of nothing, is unsterilized and of course inflationary, which is what Keynes originally wanted as the the deflation of the great depression was quite damageing.

Basically I'm just pointing out that simulating the economy is not Keynesian unless it is to get out of a depression or recession. So if the government decides to spend X more dollars it's not Keynesian stimulation unless it intentionally or accidentally helps the economy while it's in a slump.

Glom
2007-Jul-16, 07:30 AM
Is that basically why Keynes isn't used much anymore? We've never had a deflationary depression since the 1930s?

Ronald Brak
2007-Jul-16, 08:05 AM
Is that basically why Keynes isn't used much anymore? We've never had a deflationary depression since the 1930s?

Well, quite a few people were confident that Keynes's ideas could be used to smooth out the ordinary business cycle, but getting governments to spend the right amount of money on public works at the right time proved very difficult in practice. Fortunately Milton Friedman improved on Keynes and the business cycle is now moderated by reserve banks controlling interest rates, so basically the whole world economy is moderated by an improved form of Keynesian. Keynes is used constantly.

Glom
2007-Jul-16, 08:21 AM
But what do the Austrians have to say about it?

Was the interest rate dealy Friedman's idea? I thought that was from the supply side school.

Ronald Brak
2007-Jul-16, 08:38 AM
But what do the Austrians have to say about it?

I don't think you'll find any today who are against it, or at least have a better practical solution than the inflation targeting or defacto inflation targeting done today.


Was the interest rate dealy Friedman's idea? I thought that was from the supply side school.

I guess his work on the subject would make principle architect a good description of his role.

You might have to define what you mean by supply side school.

Glom
2007-Jul-16, 11:44 AM
You might have to define what you mean by supply side school.

Laffer and co I guess.

Ronald Brak
2007-Jul-16, 12:10 PM
Laffer and co I guess.

There is no supply side school as such. The term supply side economics in the U.S. refers more to a political movement, which I don't really want to get into. While some people believe that the U.S. is on the downward slope of the Laffer curve, I know of no economicists that do.

farmerjumperdon
2007-Jul-16, 01:17 PM
Houses were built at a
cost which was lower than the eventual selling
prices.

Wouldn't you expect houses to be built for less than their eventual selling price? I mean, people need to make a profit. New homes here typically sell for the cost to build them, plus a little profit for the builder, the realtor, the seller or supplier of the land, lawyers, etc.

You wouldn't expect a house to sell for less than the cost to build it, would you?

farmerjumperdon
2007-Jul-16, 01:21 PM
Economics is a science.

But it is a behavioral science.

Not the pure type of science like physics.

farmerjumperdon
2007-Jul-16, 01:41 PM
There is no supply side school as such. The term supply side economics in the U.S. refers more to a political movement, which I don't really want to get into. While some people believe that the U.S. is on the downward slope of the Laffer curve, I know of no economicists that do.

I guess you could say it was a subset, or a component that hitched a ride on the Reagonomics School Bus; so yeah, purely a political label. Not like they came up with some new model, or even a new perspective.

Glom
2007-Jul-16, 02:13 PM
Wouldn't you expect houses to be built for less than their eventual selling price? I mean, people need to make a profit. New homes here typically sell for the cost to build them, plus a little profit for the builder, the realtor, the seller or supplier of the land, lawyers, etc.

You wouldn't expect a house to sell for less than the cost to build it, would you?

Chances are he's talking about the sale of council houses under during the Thatcher premiership. The government made a tidy profit of the sale of much of the government assets during the wave of privitisation. It was also criticised for selling below market price, thereby denying the public purse its due returns for the sale of public property. You can't win really.

peteshimmon
2007-Jul-16, 05:22 PM
I should have said much much more than the
build price. The first house price inflation
peak was about 1972/73 when the baby boomers
came of age and wanted their nests. The second
a few years later was those who lost out the
first time and had been saving madly. The third
heh heh, was the Lawson debacle where he
restricted morgage tax relief to one house and
not individuals buying together. But the five
month notice of this led to a great scramble.
Then when young people were no longer able
to afford buying, the market stopped.
Annoying when you want to sell up to move but
you keep having to drop your asking price. Of
course if this money remains in the housing
sector it should have no effect on general
inflation. But nooooo, loans were obtained
secured against the inflated value of houses
and spent generally. Extra money that chased
restricted amounts of goods and services. Need
I go on? A classic case for economics textbooks
I think. But (conspiracy here) do writers
restrict the information put in new textbooks?
Always got to ask whats their angle:)

Lurker
2007-Jul-16, 05:26 PM
From what I saw, I think the episode was looking more for Parody than for accurate economics. :)

hhEb09'1
2007-Jul-16, 05:27 PM
But it is a behavioral science.

Not the pure type of science like physics.So it's kinda like Pluto being a minor planet--but not really a planet? :)

tdvance
2007-Jul-16, 05:31 PM
But it is a behavioral science.

Not the pure type of science like physics.

The way my Economics 101 prof explained it, economics a soft rather than hard science. He said in a hard science, a linear correlation is considered proved if plenty of well-run studies show a correlation coefficient of 0.999 or even more. In a soft science, a linear correlation is proved if the correlation coefficient is 0.3 or so.

Of course, when I mentioned this to a mathematician, he thought my prof was making an unflattering remark about his own area of study.

Todd

Glom
2007-Jul-23, 07:39 PM
There's more bad economics on I Love Lucy. The Ricardos let out their house to the Williams' for two months while they thought they were going to Hollywood. The trip fell through so the Ricardos wanted their house back.

Eventually, they negotiated a solution. The Williams' agreed to move into the guest house where the Mertzes were living, so the Ricardos can move back into their house while the Mertzes move in with them.

Instead of $200 a month, the Williams' would be expected to pay $75 a month, the same the Mertzes were paying for their tenancy. The Mertzes would pay nothing for moving in with the Ricardos in the big house.

However, Fred kicked up a fuss and refused to have Ricky let out his guest house from under them. Instead Fred insisted that he be allowed to sublet the guest house, but at a rate of $150 a month. The Williams refused to pay that point blank.

This was stupid of Fred, not just because it spoilt an otherwise amicable agreement, but because his greed cost him money.

Without the deal, Fred has to pay $150 for two months tenancy in the guest house. With the deal, Fred has to pay nothing. By trying to extort the Williams, Fred forces the deal to fall through and thereby makes himself $150 poorer.

Swift
2007-Jul-23, 07:45 PM
Not to mention some bad food science (http://www.johnmariani.com/archive/2005/050626/photoweek120.jpg), also on I Love Lucy.

Orestes
2007-Jul-23, 09:24 PM
The way my Economics 101 prof explained it, economics a soft rather than hard science. He said in a hard science, a linear correlation is considered proved if plenty of well-run studies show a correlation coefficient of 0.999 or even more. In a soft science, a linear correlation is proved if the correlation coefficient is 0.3 or so.

I really hope you are not accurately conveying what your professor said, because the thought that a professor of anything would say something like this makes me cringe.

A linear relation is considered proven in any field of study, economics or a physical science, when it is statistically significant. This means that the probability of the observed relation being due to luck (that is, not true relation exists) is small enough that we are willing to ignore it. The usual cutoff is 5% - that is, assume that there is no true relation. Then what is the probability that the relation observed in the data is spurious, just due to luck. If the probability is less than 5%, we say the result is statistically significant, and declare that the relation is proved. We might still be wrong, but the odds of that are small enough that we decide to take our chances.

This has nothing to do with the value of the correlation itself. The value of the correlation tells us how closely the two variables are related; the statistical significance tells us how confident we are that a relationship exists. If we have a very large data sample, We may be very confident that a small relation exists (small correlation, but strong statistical significance). In a small data sample, we might also estimate a very large correlation, but not be confident at all that it really exists. These are two different concepts - large correlation does not mean that the relation is "proved," and small correlation does not mean that it is not "proved".


Of course, when I mentioned this to a mathematician, he thought my prof was making an unflattering remark about his own area of study.

If the mathematician knows anything about statistics, then he probably thinks your economics professor doesn't know what he's talking about.