> Simon wrote:

> > Xeno wrote:

> > V.Kemp wrote:

> > "So, this thread is about introducing progressive corporate tax system to solve the economic crisis and government debt issues...."

> Which you've been informed repeatedly it wouldn't do. You're denying reality, as undisputed by literally 100% of experts and knowledgeable amateurs.

100%? that's big claim. Got source?

You mean "sources."  Specifically, every article from every economic journal ever. 

Ethanol ftw!

> Virgo Legend wrote:

> Team 8       Poley, Wornstrum, Zarf BeebleBrix - Corn

YAY!  We get the most government subsidies! 

Xeno... please define "free market" in your own words, so we all ensure we're talking about the same concepts.

> Einstein wrote:

> You say causation is not correlation

DID I JUST HEAR SOMEONE CALL FOR MY OLD FRIEND?

http://imgs.xkcd.com/comics/correlation.png

The baby boomer agenda (preserve social security, expanded health programs) is conservative?

@Kemp

First thing's first: Whoops!  Sorry...

Yeah, I understand that I'm a little confusing there.  At the same time that I was writing that, I was studying for a test on the exact same subject, so a good portion of the models and examples I was discussing there were actually used in the tests (surprisingly enough, this exact same thing happened today.  These debates are starting to be the best damn study aid ever for me!).

My argument is quite simple.  Remember, we have a central bank that manages money supplies.  Now, as you well know, central planners can't do their job perfectly by any means... now, I give the Federal Reserve more credit than most central planners because we're talking about an agency much more independent from government interference than normal, with membership generally consisting of some of the most learned economists of the day (Bernanke was well respected among economic circles before heading the Federal Reserve... he's not just a random guy).  Regardless, though, central bank actions cannot perfectly pinpoint target inflation rates within margins of error of 1-2%, much less .05%.

For example, let's assume the central bank could target a desired inflation rate within a 2% margin of error.  If the Federal Reserve said that it wanted inflation to be 1%, within a 2% margin of error, the Federal Reserve risks putting the economy in a deflationary path by having too little currency around.  However, if I said the target inflation rate would be 2%, actual inflation would end up being somewhere between 0-4%, because we assume the central bank can't perfectly plan inflation.

Now, I can't tell you exactly the margin of error in the Federal Reserve's operations because it changes from year to year.  That being said, if we absolutely know that deflation is bad, the optimal Federal Reserve policy would be one where the margin of error on the Federal Reserve's target rate is at least as high as the margin of error in order to prevent a deflationary policy.  I use 2% as a relatively safe margin of error because the inflation rate during healthy economic periods (when the Federal Reserve's job is much easier) is generally between 1-5%, indicating that they practice a target rate of 3% with a 2% margin of error.

So at least part of my justification is not "I want a 3% inflation rate" as much as "I want to keep the Federal Reserve from screwing up, so their target goal will be high enough to reduce the risk of them screwing up."  If evidence could be gathered that the Federal Reserve could target inflation at more accurate levels, the margin of error could certainly be reduced, thus reducing what I define to be an ideal target inflation rate.  And yes, I do think this is probably happening with more and more data on economic statistics being collected, and the study of economics becoming more refined over time.  Until then, we have to operate with the understanding that the Federal Reserve does not perfectly control the total money supply relative to money demand.

That being said, there is at least one macroeconomic justification for inflation.  If a rational consumer has discretionary income, and is making the choice between saving/investing, spending, and storing money, inflation will play a fundamental role in that decision.  In a deflationary period, as I described, a preference is made toward storing money (removing money from the economy entirely) because the money's buying power will increase over time, which creates a self-fulfilling cycle of deflation begetting more deflation.  At hyperinflation levels, investment becomes increasingly unstable, and storing money is just stupid, consumers will only spend.

By creating a relatively stable, balanced inflation rate, a slight favoritism is given toward spending/investment by slowly devaluing money over time, which increases the marginal cost of storing money under a mattress.  At the same time, because inflation under this scenario would be consistently occurring (i.e., we don't necessarily know what the inflation rate will be, but we know inflation will happen), people have a slight incentive favoring some sort of savings/investment (both stimulants to overall economic growth), but not of the Weimar Germany scenarios.

Finally, remember that inflation does not affect all people equally.  For example, if I'm a homeowner who is paying a mortgage constructed with the assumption that inflation would run 3% per year, a 4% inflation rate actually increases the benefit to me because it decreases the total burden I will be paying.  Now, this is not in itself a justification to inflate the economy.  That being said, I just want to note that not all people are affected equally.  This is one of my primary critiques of the current debate I am having with xeno, in that he is expecting me to give an analysis which is homogenous among all individuals, when different individuals have different economic circumstances which changes their individual relationship to inflation.

EDIT: I should emphasize this since it seems to be the #1 critique against me.  I do not ignore the microeconomic negative effects of inflation.  Yes, it exists.  However, microeconomic effects are bidirectional, and thus spurious (i.e., the person saving all their money is harmed by inflation and helped by deflation, but the person with a giant pile of home or student loan debt is helped by inflation).  At the point where the microeconomic effects are spurious, one needs to either step outside the microeconomic effects and ask about macroeconomic effects, or restrict themselves to the macroeconomic affects that can either be quantified and compared (i.e., asking whether there are more debtors than savers in the country) or that affect everyone in the country (i.e., everyone in a hyperinflationary society is forced to spend frantically).  Otherwise, you're simply playing a sort of political patronage game (i.e., simply outright valuing one group of individuals over another, sometimes larger group).

So, very short answer: My target inflation rate=1%+margin of error in inflation targeting.  If it was possible to perfectly set inflation rates, I'd say 1% inflation every year, and we'd be fine.  But that's outside the realm of reality, at least right now.

I'm doing rl school work so my post will be a bit late.  However, I do want to get one question out here first:

Xeno, by your logic, is it an ethical concern when investors obtain profits as a result of currency appreciations?  That is, is the relationship between currency and ethics reciprocal at both ends of the spectrum (unethical for an individual to have to accept either profits or losses through currency revaluations), or is it an asymmetrical ethical relationship (unethical for an individual to have to accept losses, but no ethical quandry exists over gains)?

*mashes buttons randomly*

I win, Primo!

Note, xeno, that Britain is a very unique scenario.  The libertarian argument is that non-government organizations, such as churches, can provide social services needed.  The archbishop is part of the Church of England, a sub-unit of Christianity that is headed by the Queen of England.  I don't know the specific details of governance, but it's very likely this could be a terrible representation of the libertarian ideals, since the Church of England is much more integrated into the political system than, for example, the Catholic Church.

For the record, if this happens, we might want to see if a rule can be established for these VIPs that they cannot be transferred to any IC member who was also a judge in this competition.  Otherwise, it's possible that one competitor could bribe one or more judges into deciding in their favor.  Not saying either party would do this, but this sounds like one of those instances where it's better to remove temptation.

EDIT: And for the record...

http://upload.wikimedia.org/wikipedia/commons/7/73/Roflcopter.gif

*giggles*