Wednesday, August 7, 2013

Debunking the Reddit Circlejerk: Never Again

Henry Blodget decided to regurgitate one of his old arguments about the stupidity of these large corporations who get away with paying its workers as little as possible.  This in turn gave Reddit an excuse to essentially upvote the same "corporations are evil meme" articles and have themselves a grand old time circlejerking while completely avoiding real economic discussion.  Here are some of the top rated comments and why writing them feels good, but completely banal and worthless in actual intelligent discourse.

"Ya, but they always skip the part of Adam Smith's book, Wealth of Nations.
The part that says fair wages and fair taxes are necessary . . ." - by TodaysIllusion

Fair is one of those words that mean different things to different people.  What's fair to you is unfair to someone else.  In fact, that's pretty much why we have a market system for many things so we as a society can decide rather than a centrally planned economy where the government divines what is fair.  Saying fair ______ is needed is a political speech rhetoric, not a real argument for or against anything.

"Good point to argue against outsourcing. Regardless if people in China will do it for $2, you're basically giving money to China that cannot be spent in the U.S. We're crippling ourselves in this way because less money is flowing in the U.S." - by Tantric989

I don't know what's the obsession with our balance of trade.  Most people seem obsessed to have a positive balance of trade and when we import more than we export, that is a sign of the apocalypse.  This is completely backwards.  Here is what happens when we import more than we export.  We print the money out of nothing.  Then we give these pieces of paper to some other group of people and we get goods and services NOW.  Essentially we just traded something we can print unlimited of for real scarce goods and services.  Now the recipients of this paper are in a difficult position to do something with that money and because of inflation, that money is worth less everyday.  In fact, that's why China buys so many Treasuries and why they can't sell them.  There is really nothing else they wish to do with all those dollars.  

i want to see- no i'm begging- the trickle-down thing work! NOTHING FUCKING TRICKLES DOWN! the corporations KEEP the profits and are only too happy to cut hours (wal mart, mcdonalds) to deny good citizens health-care and other benefits. THE MIDDLE CLASS IS ALL THAT MATTERS. when the middle class is happy and spends money it stimulates the economy. FUCK AYN RAND- not even good FICTION. - by wolftoes

You know when someone gets emotional and angry, that's when he makes good arguments.  Ironically, it is the middle class spending money trying to stimulate the economy is why the middle class is doing so shitty today.  If you spend all your money and have little savings, you have no flexibility when bad times hit.  When you have no flexibility, you have no leverage when you are bargaining for a job.  And this is the crux of the "capitalism is bad" trope.  All deals in the marketplace, including labor, happen in the context of supply and demand.  But because households have no savings, they have to take any deal as they cannot choose to wait until prices improve (the action of waiting lowers the supply of labor, driving prices up).  As a corollary, government cheese is essentially the floor on the price of labor.  Thus, if you wish to increase prices paid to workers, all you need to do is increase government handouts.  

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Looking forward, what I am afraid of is the death of capitalism.  Whether true or not, free market capitalism is deemed suspect number one for this crappy economy.  The obvious solution for many would be more government intervention and regulation to hold these big bad corporations responsible.  Of course I have a different view: centralized power is bad for society as a whole.  Whether it is religious, government, or corporation, any time an entity becomes large enough, it will have enough resources to do whatever it want and cannot be held responsible.  While many on the right are worried about big government and those on the left are worried about big corporations, the biggest irony is that big government and big corporations are working together to create a monstrosity while society splits itself into conservatives and liberals fighting a fake war.