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Allan Manchester
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You have no idea as to where government should put its money to get the best bang for its buck? I thought you were interested in economics.
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>tchanges in monetary policy being crucial factors in both< And as I have said, money supply determines the value of money and nothing else. It is money distribution that is the determining factor in economic performance. But Bob, could you answer my question to Greg. Where do you pay? Do you really think that government hand outs and bailouts have a positive effect on the economy? If so, where do they start, and more importantly, where do they end? Where should the money go to create the best foundation to the economy?
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2. Can you please show evidence of minimum wage leveling out distribution? An easy way of doing is linking minimum wage increases to an increase in the middle class. In 1924 the US courts trashed minimum wage. Growth between 1924 and 1929 was etheric, as was proven in 1929. 1933 minimum wage was part of the NRA mandate. Very bureaucratic but the minmum wage was there. The economic collapse halted immediately and began a growth never ever seen anywhere before. 1935 the NIRA was trashed in the courts. Growth between 1935 and 1937 was etheric, as was proven in 1937. The FLSA was enacted in 1938, and since then, nothing has been able to seriously cripple the American economy in spite of very stupid policy. As for middle class, look at the places in the world that have a decent minimum wage, and compare to places that have none. Zimbabwe had a model economy between 1979 and 1989 when it slashed the minimum wage and limited union powers. Last year it went back to a minimum wage and is slowly putting the country back together. 1. How does a price increase like minimum wage increases not have the same effect as other price increases? you said earlier that an increase in price controls growth. How does minimum wage differ? Prices that are too low cripples profit and impedes spending. Prices that are too high cripples profit and impedes spending. It is not that prices should get lower nor that prices should get higher, but that prices should have a tighter formation. Minimum wage is the foundation price. What you are willing to sell your wares for is dependent on how much labor went into it. The labor rate is dependent on reference to what the newbie on minimum wage can produce. Guy one can make 2 an hour, and guy two can make 4 an hour and so guy two is worth twice the pay of what guy one is. But as I said, the cost is not the main determination in the price. The main determination of the price is the consumer demand, and guy 2 can spend twice what guy one can; but this is all related back to the foundation of guy one's wage. Without this reference, there is none, and prices spread out even farther than before. Minimum wage should be adjusted annually according to the GDP/capita or other reference to all individual earnings, so as to keep the prices from spreading out and causing stagnation.
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>My BELIEF is that there are things every American is entitled to and a job is one of them. Of course there is a cost, just as there is a cost to not doing it. I believe the cost of not doing it is higher.... you and many others dont. I wont even begin to try to prove my belief as a "truth" but I do KNOW we have the money to do it. That IS a truth.< Certainly we have the money! Certainly we want everyone working! Certainly there is a cost to getting everyone working, but WHERE do you pay?? Saying that government should be providing jobs is not the answer. Government is very inefficient at everything they do, and there is no indication that they might create jobs efficiently. Jobs come from business, but beyond that, jobs come from consumers. So again, where do we pay? You can try to pay unprofitable companies to hire more, but the company is already unprofitable, meaning that the business is redundant. You can try to pay profitable companies to hire more, but like I said before... how much profit is good profit. Where you need to pay is the consumer. Consumer demand is the source of all jobs, and so getting more money into consumer's hands so as to increase consumer demand is the only logical way to increse employment. All other methods are simply bureaucratic meddling that has more negative consequences than positive. There is no better way to increse consumer spending than by increasing the minimum wage, and if the minimum wage was high enough, (and the government bureaucracy was at present size or smaller) all economic problems would just go away.
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Well said Nick. You can not fix the problems with more money. There is certainly enough money in the system, and more money simply devalues it. The adequate money supply is just very poorly distributed. The only thing that seems to have good effect on the distribution is the minimum wage and nothing else, and the only arguments against increasing minimum wage are antiquated theories that are quite frankly wrong.
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Three times I politely request someone to clarify Xevec's postings, to back him up, rephrase his arguments or his queries, and I get censured for this? Too much.
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Allan, you've pretty much exhausted my patience. Answer, don't answer, but stop with the snark. SG
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Now are you arguing, or just asking? Because if you're arguing, you should give some reason for your position/beliefs, and if you're just asking, you should try really understanding what it is that I have already said before you ask me to expand.
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>the reason I say there is no shift to the supply curve is that it is stuck with a specific supply at the original price and that isn't going to change, unless something happens to change the price to supply just one unit< The MC always goes down. Remember what I said about when the guy comes in and wants a deal for a quantity purchase? This is what happens at the wholesale level every day. The price per unit is not at all attached to the fixed costs of the firm. The markup is very flexible against an increased volume. The higher the volume gets, the lower the average total cost will be, and that includes the well defined variable costs.
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>1. If raising prices lowers growth, then I can conclude raising minimum wage lowers growth.< No. The minimum wage is the foundation price for everything, and so when it is raised it pushes prices up. All prices are in relation to the minimum wage and some may be too high. Move the foundation up, and the roof appears lower. Over time, the price landscape spreads out and things slow down. Adjust the MW annually according to the GDP/capita and you keep the roof and the foundation in a tighter formation. > If I increase the bottle of coke from $1 to $50, will I see the same amount of sales as I did before the increase? And for how long?< With that severity, your volume would probably be completely killed in the first minute. Put the coke from 1 to $5 and your volume might take a month or more to completely die off. >3. It is not true that there is "perfect volume" or even that we should teach that we should limit our potential. I wonder Allan, do you teach your children that? That they should stop at a certain point? What about in the macro? Should a country limit on how much GDP it should obtain?< How rich is rich? Once a business is providing a comfortable income, then work to limit the volume by hiking the prices and doubling the income. Such provides much more than a comfortable income and allows the businessman to live well with lower stress. The sentiment of the day is, once you've gotten to the limit of your facilities, expand the facilities. This means that the businessman will always be stress driven and probably not as wealthy.
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Could someone please render this post into an argument against what I have said?
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>Oh my..... Break out the tinfoil hats people. < Exactly! There is no reason for poverty or unemployment except that there is too much power in too few of hands. Double the minimum wage, attach it to the GDP/capita and put a sliding tax on corporations so that the bigger they are, the more tax they pay. Then you will not have business eating business but business fostering business. There is more than enough to go around, but there just is not a fair distribution.
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>I wish that were true. Then I would start a lemonade stand, and after a few days, when I was selling a few glasses a day, jack my price up to $1 billion per glass, then retire on the proceeds.< Not in that severity, but the sentiment is there. The rat race that is the western economy that is fed by the notion of ever increasing production and ever increasing efficiencies is not good for anyone. There is no benefit to big business getting bigger. The businessman should have a plan to limit his volume once it is adequate, but by what is taught in business school, you just run faster until you find the elusive zero marginal profit.
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>Economics 101 and Marketing 101 - and faced with the same problem - you might see two different analyses.< But they should be real world scenarios, and I am telling you that no business ever seeks to zero the marginal profit. MR and MC do not ever cross! Supply is always excess to demand. The "law" of supply and demand is therefore illogical.
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Can someone please put this post into something of a logical and focused argument that I can respond to.
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The theory is that prices will come down until the marginal profit is zero, at which point the company will no longer be interested in selling any more. This theory is necessary to give an up sloping supply curve to the macro. There are no businesses that have a zero marginal profit. All businesses want to sell more and all businesses know that their sales volume is not directly and immediately affected by price. The theory of supply and demand is illogical
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>even if the MC curve is upward sloping and the MR curve is downward sloping.< And what, just ignore the fact that this is wrong? >which is the whole theory behind micro.< I am telling you that the whole theory is wrong; it doesn't match anything that is in the real world. >Now I recognize that employee wages affect the slope of the supply curve< No it doesn't. And in the macro, what is paid in wages comes back to business in sales, affecting the demand curve. Look at my coke example. The hourly expenses of the store were easily covered with the sales as long as there were sales. >profit is lost (bad)< The business seeks profit, but there are times in every business's life that there are none. This in itself is not bad, as long as the growth rate is pointing towards profit. As long as the business has profit, all is good. How much profit is good? Any and all profit is good. You are sugesting that any small decrease in profit is bad. No it isn't >At some price (call it Pmax) Q will $0; nobody is going to pay $10^9 for a hamburger, for example. Also at some price (call it Pmin), the produced simply won't bother or can't produce anything (e.g she can't afford to buy ground beef to make any hamburgers). < If you can't sell it at the price you decided on, you scrap it a move to the next item. And of course you don't try and sell something if you don't perceive that you can profit at some volume. But you don't move your prices up and down to try and maximize profit. You set your price where you *think* you will get the best growth, and then ride that baby until the sales volume is satisfactory to you before you start to monkey with the price. >Doesn't make any real difference of course.< Yes it does. Because your theory dictates that the prices will naturally become lower over time as the firm tries to get to the perfect price. I am telling you that the prices are more apt to get higher over time as the firm seeks the perfect volume.
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Another message deleted. Three strikes and you're out, Allan. SG
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I've deleted this comment. Allan, dial it back. SG
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>Overall, to make this your anecdote, you were very vague in the info you gave us.< I keep forgetting how obtuse you are. The fact that he controlled the pricing should clue you to the fact that he ran his own firm. >As you said, he got rid of some business that probably wasn't making him money.< And Adam said that I have trouble reading! I said that he was PLANNING to shrink his stress by shrinking his business, but he never got to it because the stress killed him! >And as you said, higher prices slow down sales.< I said that prices control growth of sales. There is a difference!
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Yes it does not happen often, and certainly not often enough. My brother was a student of your school. He felt that higher profits should mean lower prices, and so was completely uncomfortable in hiking his prices once his volume got comfortable. He felt that he would be letting his clients down or gouging on his clients, but this mindset that business should always continue to grow led to his death. Businessmen *should* grow their business until they are comfortable with the volume, and then raise the prices to limit the growth.
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>This does not happen in reality. Care to give an example of an industry or company that has done this? Or even a product line that has done what you just said?< Big business is an outgrowth of small business. I think the ancedote of my brother is quite applicable.
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The thing is, that the most superficial course in economics should render the student with a firm comprehension of what money is, and yet almost all economists think that money is a creation of a central bank. Money existed long before any central bank, and the central bank is an outgrowth, or an adendum to the bank/cash system. When you take a loan from a bank, the bank does not go into its vaults and give you paper that the CB printed. It creates an account. This account is then transferable by cheque or other order to other accounts. Money is a creation of the local bank just as it has always been. Money is the credit of the local bank, and a bank draft is as secure as any other means of money conveyance providing the credit of the issuing bank is acceptable to the depositor's bank. What really gets deposited is a loan from the depositor's bank to the issuing bank. Then came the coins and printed notes, meaning that the bank no longer had to prepare a draft every time someone wanted some "money" to carry with them. Then the banks decided to get a central "printer" to issue all the printed notes, and to "lend" these notes to the banks so that the interbank accounts could be cleared through this printer. Then people got the stupid notion that the printer was actually a bank and was actually creating money when it printed the notes.
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Adam I was trying to say that the government is not the currency issuer. Neither is the CB. It is not I who does not understand what you guys are saying, but it is you guys who are having trouble understanding what I am saying.
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>The central bank offers work at $10 per hour, paid for by printing money. < The creation of money requires a borrower and a lender. Money is not money until it is borrowed. If it is not a marker for a loan, then it has no value. This notion of the CB simply spending what it prints shows a very shallow understanding of what money is.
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