What causes economic crashes?

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What causes economic crashes?

Post by Cirion Spellbinder » Thu Jul 05, 2018 10:01 pm

Any good reading materials?

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Post by Red » Thu Jul 05, 2018 10:17 pm

I'm confused by the topic title and the post, but I'll try answering it the best I can.

A lot of economic panics stems from people taking out more money than they can reasonably pay back, such as in the Panic of 1819, or even the Great Depression (unless you're one of those people who say that FDR exacerbated the depression by increasing government intervention, but I doubt that claim, it was mostly the laissez faire policies of Harding, Coolidge and Hoover. Others say it was the Stock Market Crash, but that alone wouldn't ensue such a depression).

Just take a look at some of the Wikipedia articles, and read up on the causes. They are different all the time, whether it be tariffs, an irresponsible people, or terrible government action.
https://en.m.wikipedia.org/wiki/Panic_of_1819
https://en.m.wikipedia.org/wiki/Panic_of_1837
https://en.m.wikipedia.org/wiki/Panic_of_1857
https://en.m.wikipedia.org/wiki/Panic_of_1893

As for literature, try reading The Conscience of a Liberal.
https://en.m.wikipedia.org/wiki/The_Con ... _a_Liberal
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Post by Red » Fri Jul 06, 2018 8:47 am

Looks like Trump is starting his trade war with China (and pretty much the rest of the world) with these tariffs. If these tariffs aren't repealed or at the very least lowered, I predict an economic collapse within the next 10 years.

I don't think Trump knows what he's doing; he's already very unpopular, and these tariffs only really help big business, which the majority of people aren't really a part of.
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Post by sykkelmannen » Wed Jul 11, 2018 12:17 pm

State power has an unbroken record of inability to do anything efficiently, economically, disinterestedly or honestly. The State has never shown itself able to keep its own finances from sinking promptly into the slough of misfeasance, wastefulness and corruption.
Our Enemy, the State
by Albert Jay Nock -- 1935
http://www.bigeye.com/enemy.htm

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Post by carnap » Thu Jul 12, 2018 2:39 am

There are a variety of reading materials but there are conflicting theories most of with are politicized. One of the biggest problems with economic theory is that it gets mixed with politics, that is, economics can also be seen as a tool to achieve certain political ends.

Current economic theory cannot predict recessions and you won't find much agreement on the cause of past recessions which is another way of saying that nobody really knows what, in general, causes recessions.

But the place to start here is really a basic book on macro-economics, to understand recessions you need to understand the basics of macro-economics. Just find some popular but past edition of a Macro-economics textbook used on Amazon.

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Post by carnap » Thu Jul 12, 2018 2:48 am

Red wrote:
Fri Jul 06, 2018 8:47 am
Looks like Trump is starting his trade war with China (and pretty much the rest of the world) with these tariffs. If these tariffs aren't repealed or at the very least lowered, I predict an economic collapse within the next 10 years.
Predict based on what? Just a random guess? There is no reason to believe that Trump's tariffs would result in an "economic collapse". He is calling for tariffs from 10~25%. Even if you did that on $500 billion goods that would be $50~$125 billion in tariffs assuming nobody shifted to other sources (but many would shift). You can think of tariffs like taxes and currently people pay $3.8 trillion in total federal, state and local taxes. So an increase of $50~$125 billion would amount to a tax increase of 1~3% which is by no means large enough to cause an "economic collapse". Also remember tax revenue doesn't go into a hole, it gets spent by the government which generates economic activity.

Always good to do some basic math before you make predictions.

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Post by Red » Thu Jul 12, 2018 7:12 am

It isn't a random guess, it's based on what most economists are saying (unless this is 'fake news');
https://www.reuters.com/article/us-usa- ... SKCN1GQ02G

These tariffs are unusually high, and if tariffs stay this way, an economic collapse seems plausible in the next decade.

And honest question, are you an economist? I merely predicited, not guarantee (maybe collapse was too strong a term?). And are you arguing that it'll have positive, negative, or neutral effects?
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Post by carnap » Fri Jul 13, 2018 1:17 am

Red wrote:
Thu Jul 12, 2018 7:12 am
It isn't a random guess, it's based on what most economists are saying (unless this is 'fake news');
Did you read the article? Not sure how you walked away from it with the idea that "most economists" think Trump's tariffs will cause an economic collapse. Many economists think the tariffs are counter-productive and may reduce GDP growth but that is much different than calling for "economic collapse".

Red wrote:
Thu Jul 12, 2018 7:12 am
And honest question, are you an economist? I merely predicited, not guarantee (maybe collapse was too strong a term?). And are you arguing that it'll have positive, negative, or neutral effects?
By profession I'm not an economist. Yes you're predicting, but your predictions are baseless. You're not even crunching even the most basic numbers.

I don't know what impact the tariffs will have on the economy, there are too many variables to predict. The US has a large trade deficit with China so the US would "win" any trade war with China.

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Post by Red » Sun Jul 15, 2018 9:54 pm

carnap wrote:
Fri Jul 13, 2018 1:17 am
Did you read the article? Not sure how you walked away from it with the idea that "most economists" think Trump's tariffs will cause an economic collapse. Many economists think the tariffs are counter-productive and may reduce GDP growth but that is much different than calling for "economic collapse".
I didn't say they said that, it's just my prediction. Not saying it's fact. Since overall, the economists believe it will have a neutral or negative effect, it is reasonable to assume a negative effect. Maybe not a collapse like I said (again, maybe it was too strong a term), but the experts aren't predicting much good.
carnap wrote:
Fri Jul 13, 2018 1:17 am
By profession I'm not an economist. Yes you're predicting, but your predictions are baseless. You're not even crunching even the most basic numbers.
Well, then why should we trust your word for it then? Would it not also be speculative?
carnap wrote:
Fri Jul 13, 2018 1:17 am
I don't know what impact the tariffs will have on the economy, there are too many variables to predict. The US has a large trade deficit with China so the US would "win" any trade war with China.
I don't see why we have to have a 'war,' since AFAIK it just seems that Trump wants to get back at China, which doesn't seem to be focusing on doing the most good.
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Post by carnap » Mon Jul 16, 2018 10:26 pm

Red wrote:
Sun Jul 15, 2018 9:54 pm
I didn't say they said that, it's just my prediction. Not saying it's fact. Since overall, the economists believe it will have a neutral or negative effect, it is reasonable to assume a negative effect. Maybe not a collapse like I said (again, maybe it was too strong a term), but the experts aren't predicting much good.
Right its your prediction but my point is your prediction is really just an outlandish guess. If you crunch the basic numbers here its clear there is no reason to suspect the tariffs to cause an "economic collapse" or anything remotely similar.

Some economists argue that the tariffs could reduce GDP growth but that is much different than predicting a recession let alone an "economic collapse". For example let's say the GDP growth in the US was going to be 2.75%, the tariffs may reduce that to 2.40%.
Red wrote:
Sun Jul 15, 2018 9:54 pm
Well, then why should we trust your word for it then? Would it not also be speculative?
You shouldn't, that is why I presented some basic math here to show the economic impact of the tariffs.
Red wrote:
Sun Jul 15, 2018 9:54 pm
I don't see why we have to have a 'war,' since AFAIK it just seems that Trump wants to get back at China, which doesn't seem to be focusing on doing the most good.
You think China should continue to steal intellectual property from the US and the US can continue to maintain a trade deficit of $370 billion? Approximately 60% of the United States trade deficit is due to China.

Trump didn't create the issues with China, they are long standing issues. His approach may not be the best but a "trade war" of sorts was becoming pretty inevitable.

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