Economics

Guys remember that next Friday is the rally, so I need everyone to bring sport shoes in the backpack  so you can change the shoes in my class for the rally.
Subjects : Inflation, stagflation, hyperinflation, characters, tulip mania, WWII, CPI and the subjects  that I will post tomorrow.


Hello students  I'm going to post the activities for the next 3 weeks so we can prepare for the rally.

Friday,  03/30/2019

        We are going to study about the different economic events that are already program. We start talking about them last Friday when we saw WWII.

      For next class we are going to study " The great depression"

The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers. By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed and nearly half the country’s banks had failed. (History Channel, 2019).

Throughout the 1920s, the U.S. economy expanded rapidly, and the nation’s total wealth more than doubled between 1920 and 1929, a period dubbed “the Roaring Twenties.”

The stock market, centered at the New York Stock Exchange on Wall Street in New York City, was the scene of reckless speculation, where everyone from millionaire tycoons to cooks and janitors poured their savings into stocks. As a result, the stock market underwent rapid expansion, reaching its peak in August 1929.

By then, production had already declined and unemployment had risen, leaving stock prices much higher than their actual value. Additionally, wages at that time were low, consumer debt was proliferating, the agricultural sector of the economy was struggling due to drought and falling food prices, and banks had an excess of large loans that could not be liquidated.

The American economy entered a mild recession during the summer of 1929, as consumer spending slowed and unsold goods began to pile up, which in turn slowed factory production. Nonetheless, stock prices continued to rise, and by the fall of that year had reached stratospheric levels that could not be justified by expected future earnings.

As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and investment led factories and other businesses to slow down production and begin firing their workers. For those who were lucky enough to remain employed, wages fell and buying power decreased.

Many Americans forced to buy on credit fell into debt, and the number of foreclosures and repossessions climbed steadily.

 By 1930, 4 million Americans looking for work could not find it; that number had risen to 6 million in 1931.

Meanwhile, the country’s industrial production had dropped by half.

During Roosevelt’s first 100 days in office, his administration passed legislation that aimed to stabilize industrial and agricultural production, create jobs and stimulate recovery.

 The Depression was actually ended, and prosperity restored, by the sharp reductions in spending, taxes and regulation at the end of World War II, exactly contrary to the analysis of Keynesian so-called economists.

   
Activity: In your own words write, what was the great depression? how does the countries involved overcome the crisis.
Activity2:  which are the countries that were more affected  during the great depression

Remember,  RALLY: 04\13]2019

Friday: 04/07/2019

About WWII 

Activity: what was WWII about,  name the causes and consequences.

Let's review last class with this really cool article about  The great deppresion Ferrara P. (2013)

A common fallacy is that the Great Depression was ended by the explosive spending of World War II.  But World War II actually institutionalized the sharp decline in the standard of living caused by the Depression.  The Depression was actually ended, and prosperity restored, by the sharp reductions in spending, taxes and regulation at the end of World War II, exactly contrary to the analysis of Keynesian so-called economists.

True, unemployment did decline at the start of World War II.  But that was a statistical residue of sending millions of young American men to fight and die in the war.  There are better ways to reduce unemployment, as was shown after the war.

Statistics showed a rise in GDP during the war.  But that just reflects misdefined statistical analysis.  The military guns, tanks, ships, and planes produced and counted as showing rising GDP did not reflect improved standards of living for working people, or anyone else.  Yes, they did win the war, and that victory was a social good, just as removing Saddam Hussein from power was a social good.  But these were not economic goods and services, and should not be counted as such.

The sale prices of goods and services sold in voluntary market transactions reflects the true value of the goods and services produced, because they reflect what consumers are willing to pay for them, and so reflect the benefit that consumers see in them.  But the same voluntary market transactions where consumers are spending their own hard earned money were not involved in the government’s acquisition of the military guns, tanks, ships and planes produced during World War II.  The cost of all that military materiel was simply added to GDP, as if it reflected increased production.  But would not a better measure of the economic value of that military materiel, and of any coerced government transaction, be to subtract the cost of that production from GDP, rather than adding it?

Perhaps this economic reality can be seen better in other military conflicts.  Did the American Civil War reflect a time of soaring economic prosperity for America, when both the South and the North were producing weapons of as much mass destruction for Americans as was feasible at the time?  What about the cost of the Mexican-American War in the 1840s?  Did the cost of the Vietnam War represent a net addition to, or a net subtraction from, American GDP?  Or the cost of the most recent wars in Iraq and Afghanistan?

I am not a pacifist who thinks defense spending has no value.  But that value cannot be measured the same as consumer or productive goods and services that do increase the standard of living for working people and their families, and are purchased through voluntary market transactions.

World War II institutionalized the falling standards of living of the Depression through wage and price controls, and extensive rationing of consumer goods and services.  The economic deprivation, and reduced standards of living, continued, although people perceived it was now for a good cause.

But increased government spending does nothing to create economic recovery, growth and prosperity.  That is because the money to finance that increased government spending is drained from the private sector, either through increased taxes, or increased borrowing.  That entire transaction involves a net drag on the economy.  Increased taxes to finance the increased spending involve counterproductive incentives that reduce production and growth.  Increased government borrowing drains investment capital from productive activities in the private sector and reallocates it to non-productive government consumption.

There can never be inadequate demand for any good or service in a free market economy, which is the problem Keynesian witch doctors think they are solving.  If demand for any good or service is insufficient to buy up all the available supply, the price for the good or service will decline, increasing demand and reducing supply, until they are equal.

This was all further demonstrated by the end of World War II.  As George Gilder explains in his brilliant, recent, pathbreaking book, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World,

“After World War II, when ten million demobilized servicemen returned to an economy that had to be converted from a garrison state to civilian needs, economists steeled themselves for a renewed depression.  A sweeping Republican victory in the Congressional election of 1946, however, brought an end to the wartime government-planning regime [overregulation].  Dropping from 42 percent of GDP to 14 percent, government spending plummeted by a total of 61 percent between 1945 and 1947.  One hundred fifty thousand government regulators were laid off, along with perhaps a million other civilian employees of government.  The War Production Board, the War Labor Board, and the Office of Price Administration were dismantled [deregulation].”

Gilder explains the great debate at the time,

“Every Keynesian economist confidently predicted doom.  Sounding exactly like his future student Paul Krugman, who would beg Obama for trillions in additional ‘stimulus’ spending, Paul Samuelson in 1945 prophesied ‘the greatest period of unemployment and dislocation any economy has ever faced.’  Arnold Kling of the Cato Institute has observed that ‘as a percentage of GDP the decrease in government purchases was larger than would result from the total elimination of government today.’  As Paul Krugman points out, nominal GDP, as measured by economists, did drop a record 20.6 percent in 1946 when government spending plummeted."

But that drop was just an artifact of the government’s definition of GDP to include its own spending.  Gilder, however, explained what actually happened,

“But a drop in government spending after a war does not depress creativity; it unleashes it.  Judging the public sector contribution by its cost is the great error of Keynesian economics….the Great Depression, which had continued through the war disguised by price controls and necessary defense spending, at last came to an end.  Economic growth surged by 10 percent over two years and the civilian labor force expanded by seven million workers….[T]he private sector…launch[ed] a ten-year boom despite self-defeating tax rates on investors as high as 91 percent.  The Republican Congress compensated for the high rates by introducing joint returns, effectively cutting taxes in half for intact families.  Corporate taxes dropped drastically, and the tax burden, measured by government spending, fell more dramatically than at any other time in American history.  Low inflation and privatization led to a resurgence of large manufacturing corporations….[Emphasis added for low logic voters].

By 1948, the unemployment rate was 4.0% or less every month for the entire year.  For most of 1952 and 1953, unemployment was 3.0% or less.  Today, rabid leftists bloodthirsty to suck on other people’s money worship the economic glory days of the 1950s, with its 91% top income tax rate, the boom actually ushered in by the greatest reduction in government spending in world history.  But still Krugman sings daily from his same frayed Keynesian hymnal, with the broken spine and yellowed pages falling out, grinning with what he thinks is his transparent genius in repeating over and over the long proven wrong, cutting edge ideas of almost a century ago.

It was the last great Democrat President, John F. Kennedy, who put an end to the socialist tax policy, campaigning on cutting income tax rates across the board by nearly 25%, which reduced the top income tax rate from 91% to 70%.  His tax cut was enacted in 1964, after his tragic assassination.  The next year, economic growth soared by 50%, and income tax revenues increased by 41%!  Starting in December, 1965, the unemployment rate stayed at or below 4.0% for the next 4 years!  U.S. News and World Report exclaimed, “The unusual budget spectacle of sharply rising revenues following the biggest tax cut in history is beginning to astonish even those who pushed hardest for tax cuts in the first place.”

The bipartisan troika of Nixon, Ford and Carter trashed the American economy in the 1970s, with stagflation automatically increasing effective tax rates every year.  Reagan tracked in Kennedy’s footsteps with the most sweeping tax rate cuts in world history, following another 25% rate cut for everyone with the 1986 bipartisan tax reform, together reducing the top income tax rate from 70% all way down to 28%.  That combined with his (domestic discretionary) spending cuts, deregulation, and strong dollar monetary policy produced the greatest economic boom in world history.

The boom lasted for 25 years, from 1982 to 2007, what Art Laffer and Steve Moore rightly called in their 2008 book, The End of Prosperity, “the greatest period of wealth creation in the history of the planet.”  In the first 7 years alone, the real economy grew by one third, which was the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy.  Newt Gingrich and his Republican Congress added further to the tax cuts, restrained spending, and deregulation in the 1990s to keep the boom going.  That was followed by the further Bush tax cuts in 2001 and 2003, which brought the unemployment rate back down to 4.4% in December, 2006, March, 2007, and May, 2007.  Those unemployment rates will never be seen again, until some time after Air Force One departs to return Obama to his previous career as a street agitator.  Steve Forbes reports that even in the last 5 years of the Reagan boom, from year-end 2002 to year-end 2007, American economic growth was equivalent to adding the entire economy of China to the American economy.

Unfortunately, Bush’s Republicans lost sight of Reagan’s domestic spending restraint and strong dollar monetary policies, and even maintained the overregulation of housing finance, so that by 2008, the Reagan Long Boom was over.  Today, Obama’s Democrat Progressives argue that every pro-growth economic policy – tax rate cuts, spending cuts, deregulation, and strong dollar monetary policy – is contractionary.  Your average illegal alien understands America better than that.  I say keep the illegal aliens, and deport the Progressives.

We are going to review last class about the great depression  during the first hour and the second hour we are going to talk about  the Tulip Mania. 

For those that don't know who is Karl Marx

He was german philosopher, historian,economist, sociologist, political  theorist, journalist, etc.
He was born in trier Germany Marx studied law and philosophy at university. He married Jenny von Westphalen in 1843. 
Due to his political publications, Marx became stateless and lived in exile with his wife and children in London for decades,.

Works:
 The communist manifesto
Das Kapital
Pamphlet

A summary for tomorrow

 Inflation 

See the video so you can continue reading 

 inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. 

Types:

Demand pull inflation

Cost push inflation

Built it inflation

Inflation Index: Consumer Price Index

The CPI represents the cost of a basket of goods and services across the country on a monthly basis.. Those goods and services are broken into eight major group

The CPI measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation.

                   Cost of Market Basket in Given Year 

           CPI =   _______________________________  X 100

                    Cost of Market Basket in Base Year 

Stagflation is a condition of slow economic growth and relatively high unemployment accompanied by rising prices, or inflation.

Deflation is the opposite of inflation.   Deflation refers to  situation, where there is decline in general price levels.   Thus, deflation occurs when the inflation rate falls below 0% (or it is negative inflation rate).   Deflation increases the real value of money and allows one to buy more goods with the same amount of money over time.

Hyperinflation is a situation where the price increases are too sharp.  Hyperinflation often occurs when there is a large increase in the money supply, which is  not supported by growth  in Gross Domestic Product (GDP).  Such a situation results  in an imbalance in the supply and demand for the money.  In this this remains  unchecked;  it results into sharp increase in prices and depreciation of the domestic  currency.

Characters

Marx: He was german philosopher, historian,economist, sociologist, political  theorist, journalist, etc. Works: Das Kapital, the communist manifesto, pamphlet.

Engel: German, works:the origin of the family, private property and state, socialism utopian and scientific, he worked with Marx  in Das Kapital and in the communist manifesto.\

Smith:  was a Scottish economist, philosopher  and author  as well as a moral philosopher  a pioneer of political economy  and a key figure during the Scottish enlightment  also known as ''The Father of Economics''.Smith wrote two classic works, The Theory of Moral Sentiments  and An Inquiry into the Nature and Causes of the Wealth of Nations . The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. In his work, Adam Smith introduced his theory of absolute advantage. Smith laid the foundations of classical free market  economic theory.

Stuart Mill: , was a British philosopher, political economist, and civil servant. One of the most influential thinkers in the history of classical liberalism, he contributed widely to social theory, political theory and political economy. Mill's early economic philosophy  was one of free markets. However, he accepted interventions in the economy, such as a tax on alcohol, if there were sufficient utilitarian grounds. He also accepted the principle of legislative intervention for the purpose of animal welfare.Mill originally believed that "equality of taxation" meant "equality of sacrifice " and that progressive taxation penalised those who worked harder and saved more and was therefore "a mild form of robbery". Work:

Essay on economics and society.

Stanley Jevons: 

was an English economist and logician. Work: A General Mathematical Theory of Political Economy 

 It made the case that economics as a science concerned with quantities is necessarily mathematical^.. In so doing, it expounded upon the "final" (marginal) utility theory of value.  marked the opening of a new period in the history of economic thought. Jevons's contribution to the marginal revolution in economics in the late 19th century established his reputation as a leading political economist and logician of the time.he published General Mathematical Theory of Political Economy in 1862, outlining the marginal utility theory of value, and A Serious Fall in the Value of Gold in 1863. For Jevons, the utility or value to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns, at least beyond some critical quantity.  

Menger:

was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theory of marginalism,  which rejected the cost-of-production theories of value, such as were developed by the classical economists such as Adam Smith and David Ricardo. Works:Principles of Economics,The Theory of Capital, On the origins of money.

The Communist Manifesto

The Communist Manifesto summarises Marx and Engels' theories concerning the nature of society and politics, namely that in their own words "[t]he history of all hitherto existing society is the history of class struggles". It also briefly features their ideas for how the capitalist society of the time would eventually be replaced by socialism.

Das Kapital by Karl Marx is a foundational theoretical text in materialist philosophy, economics and politics.^[Marx aimed to reveal the economic patterns underpinning the capitalist mode of production, in contrast to classical political economists such as Adam Smith, Jean-Baptiste Say, David Ricardo and John Stuart Mill. Marx did not live to publish the planned second and third parts, but they were both completed from his notes and published after his death by his colleague Friedrich Engels. Das Kapital is the most cited book in the social sciences published before 1950.

Capitalism:  is an economic system based on the private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets.

WWII : trade was reduced by the 25% and the unemployment reached 30%.

 Tulip Mania and the great depression 

Also study the meaning of socialism and communism please.

SEE YOU TOMORROW SWEETIES.

remember sport shoes in the backpacks we are going to need them for tomorrow activity.

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