tag:blogger.com,1999:blog-5074683.post8580063931561810315..comments2024-03-23T07:33:30.972+00:00Comments on Quodlibeta: Why Recessions HappenJameshttp://www.blogger.com/profile/01594220073836613367noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5074683.post-27398521489408063242012-04-28T22:38:16.796+01:002012-04-28T22:38:16.796+01:00This an interesting idea about recessions, and par...This an interesting idea about recessions, and partly true, IMHO, but it neglects another part of the truth: the real estate cycle. Prosperity produces higher land rents, which lead to <i>much</i> higher land prices, because the selling prices capitalize expected future increases in land rents.<br /><br />The boom continues, because land looks like a good investment for speculators, and even if you don't want to speculate, you may figure that you need to buy a lot now if you're ever going to afford a home of your own, because prices are just going to get higher.<br /><br />However, land prices (often referred to as "real estate" prices, or even "housing" prices) cannot outpace GNP and wages forever, and when somehting truly can't go on, sooner or later it doesn't. Prices stop climbing, and because they are based on the expectation of further increases, rather than on value for current use, they are not stable. They don't just stop increasing; they fall.<br /><br />Then people can't or won't pay their mortgages, CDO's based on mortgages become less valuable than the computer models predicted, defaults touch off defaults, and the contagion spreads. <br /><br />That's the main cause of depressions and unemployment; the basic idea is due to Henry George in the 19th century, and has been refined by Professor Mason Gaffney. Dr. Fred Foldvary went on record predicting the 2007-2008 crash sevral years in advance, based on his Austrian-Georgist synthesis. I recommend further study of Georgism and land value taxation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5074683.post-78370834805900171232012-02-01T01:30:33.764+00:002012-02-01T01:30:33.764+00:00Some countries have avoided the cycle - by opting ...Some countries have avoided the cycle - by opting for perpetual bust.Eckadimmocknoreply@blogger.comtag:blogger.com,1999:blog-5074683.post-41517679131738704432012-01-24T21:22:22.287+00:002012-01-24T21:22:22.287+00:00"We didn't get an early 2000s recession h..."We didn't get an early 2000s recession here in the UK. "<br /><br />I'm so provincial -- I just assume everyone writing in English lives in the U.S. until told otherwise ;-)Fake Herzoghttp://www.imnotherzog.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-5074683.post-21539375052112457172012-01-21T20:47:51.594+00:002012-01-21T20:47:51.594+00:00Austrians call it "malinvestment", and t...Austrians call it "malinvestment", and they use complex mathematical models referring to interest rates and all that. <br />But what you're saying is pretty much the same thing. Incentives get set in a way that makes it hard to change anything, because hey things are going well, don't spoil the fun. Eventually the money invested doesn't give returns, and people go down.spandrellhttp://bloodyshovel.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-5074683.post-74829515735068955872012-01-21T18:07:55.543+00:002012-01-21T18:07:55.543+00:00Austrian? My friend Daniel Hannan is a fan of Aus...Austrian? My friend Daniel Hannan is a fan of Austrian economics so I'm glad I'm echoing his views.<br /><br />We didn't get an early 2000s recession here in the UK. That Wiki article reminded me of the doomsters who can predict eight of the last four downturns.Jameshttps://www.blogger.com/profile/01594220073836613367noreply@blogger.comtag:blogger.com,1999:blog-5074683.post-59880831357784876052012-01-21T11:19:08.083+00:002012-01-21T11:19:08.083+00:00The Austrian theory of the business cycle explaine...The Austrian theory of the business cycle explained in plain language. Very good work.<br /><br />Economics should be a branch of sociology, not a political scam using graphs and equations.spandrellhttp://bloodyshovel.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-5074683.post-66607873893744246282012-01-20T22:55:50.524+00:002012-01-20T22:55:50.524+00:00Actually, the economy did experience a recession b...Actually, the economy did experience a recession beginning in March of 2001:<br /><br />http://en.wikipedia.org/wiki/Early_2000s_recession <br /><br />By the way, I love your blog. Keep up the good work.<br /><br />P.S. Your theory of recessions sounds very Austrian -- they like to talk about malinvestments, which is sort of like your idea of "crud", although they focus more on private-sector debt, rather than public-sector debt.Fake Herzoghttp://www.imnotherzog.wordpress.comnoreply@blogger.com