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Old 21st December 2011, 00:53   #31
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Default re: Understanding Economics

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Originally Posted by Samurai View Post
That is for a very good reason. Lot of things in economics are not common sense, in fact they run against it. Ten years back when I took up MBA, Economics was my first course. As an Engineer with 11 years experience at that time, I expected lots of things to be obvious, it was anything but. It came as a shock.

This is a topic lot of people feel they know, simply because they have been earning money for a long time or because they follow the stock market. Yes, they could be wrong. But there is no need to be rude and call it ranting. You are welcome to disagree politely. - Support Team

I'm sorry I came across as rude - that wasn't my intention.

My idea was to say that merely because people handle their own finances reasonably well, they shouldn't assume that half-baked theories they have read from TV-commentator experts that seem to make sense have any value in them.

Economics is a highly technical field. People wouldn't comment on the (rather simple) mechanism that brakes the car, but wouldn't spare a minute before linking devaluation of rupee, gold standard, money supply ... while at the same time saying "hey you know what - those who know something are basically babbling jargon - economics is really simple - here it is ..." that is what our friend did in the post I quoted - frankly that is rude too, though in ways too subtle to be obvious (perhaps even to the person who posted that)

Read a basic macroeconomics book, or some good blogs (Paul Krugman on NYT for example) and over time you can pick up a lot. If you are unwilling to do even that then don't take offense if some people on your comments.


EDIT: @Samurai, I do agree my words could have been a little more polite without losing their meaning. So I apologise.

However this is the track that the thread is on: http://www.team-bhp.com/forum/shifti...ml#post2616490 a "diamond standard" has cropped in somehow and then people are arguing pretty sarcastically (when they have no clue what they are talking about) with people who do know (tsk in this case) about the subject.

Anyway, I think I have made my point - the subject is too technical and is of such nature that those who do know don't talk much and those who don't just rush in with their expert comments. I don't think TBHP is the right forum for this discussion, even after a thousand posts an average man from the street will not be able to find anything useful here.

Last edited by vina : 21st December 2011 at 01:01.
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Old 21st December 2011, 01:45   #32
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Default re: Understanding Economics

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Originally Posted by vina View Post

Economics is a highly technical field. People wouldn't comment on the (rather simple) mechanism that brakes the car, but wouldn't spare a minute before linking devaluation of rupee, gold standard, money supply ... while at the same time saying "hey you know what - those who know something are basically babbling jargon - economics is really simple - here it is ..." that is what our friend did in the post I quoted - frankly that is rude too, though in ways too subtle to be obvious (perhaps even to the person who posted that)
Not really. Economics can be very easily explained to a layman, you can use jargon which can shorten the conversation if both parties understand the jargon. The problem is there are so many variables that even the best economists can miss the most obvious outcome and be perceived incompetent. Just look at wall street for example.

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Read a basic macroeconomics book, or some good blogs (Paul Krugman on NYT for example) and over time you can pick up a lot. If you are unwilling to do even that then don't take offense if some people on your comments.
And I will advise you to read a microeconomics book if you haven't. Macro concepts are very easy to mislead you if you don't know the basics of value, cost, price and such in the first place.
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Old 21st December 2011, 12:07   #33
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Default re: Understanding Economics

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Originally Posted by vina View Post
However this is the track that the thread is on: http://www.team-bhp.com/forum/shifti...ml#post2616490 a "diamond standard" has cropped in somehow and then people are arguing pretty sarcastically (when they have no clue what they are talking about) with people who do know (tsk in this case) about the subject
Thanks for your sarcasm. Your repeated wisdom never ceases to amaze.
Here is the discussion, which is still open, summarized lest you misread and misquote it again:
- subscrive posted that gold's monetary value being constant as against "printed fake money that the govt is forcing everyone to use"
- I said that is not true.
(courtesy kitco.com)
- ANY asset's value is a matter of demand and supply. If supply were to increase tremendously (say a chemical way to convert other elements into gold) then its value were to fall. Of course, for
- tsk quoted diamond as being abundant in nature but still being cartelized and maintaining prices
- The fake diamond bit i have not fully understood (and learnt that today artificial diamonds are indistinguishable!) and therefore not discussed further but the quote about diamonds being abundant is unsubstantiated even in wikipedia. Reg. cartelization, it may ofc work better in diamonds than others because the incremental cost to hoard diamonds. Though, in other commodities like oil, sometimes sentiments can triumph over cartels (e.g oil crashing to $30 in end 08)

So its all still about demand and supply, and essentially a deep dive into one commodity.

That said, internet discussion threads often go into sub-threads and parallel discussions. With 1000+ posts youve seen that already, no? Why the sarcasm? Why don't you provide a clue substantiated with data from your side?

Last edited by phamilyman : 21st December 2011 at 12:17.
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Old 21st December 2011, 19:35   #34
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Default re: Understanding Economics

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Sorry, it doesn't and for a very good reason - what if in the example above the supply of iphones increases but that of Gold doesn't? Prices can't fall beyond a point - there is a minimum practical transaction size - what will it be? a milligram of Gold?

In theory you can get around the above problem by having a currency based on the gold standard - but that has practical problems of its own.


"I'm not well versed with all the economic jargon" - wrong; you have basically zero idea of macroeconomics, not merely its terminology.




This is an interesting thread, for all the wrong reasons - most people have no idea about the topic o the very important question being asked, fewer still have the inclination to actually try and learn a little bit of economics. Everyone seems to be interested in ranting.
No one is ranting here. This has opened up a pretty interesting discussion, people have participated, and have opened up new avenues of thinking.

If you're an expert in macroeconomics, or whatever name you want to give it, well and good! No one is an expert an everything, in fact, at the risk of sounding crass, I can say you have zero idea in my area of specialisation. I haven't read anything on macroeconomics, and I feel there is nothing wrong in asking about something which you're interested in, from people who are far more knowledgable than you. You cannot ask every person who posts on T-BHP to read books on car engines before posting queries. The whole purpose is defeated.

People learn by sharing. If there is anything troubling you regarding this thread, you are obviously free to refrain from participating.

I reiterate, I don't intend on starting a flame war of any sorts. Every post on this thread has intrigued me, and I have got to learn a lot from here. If you have any issues regarding this thread whatsoever, you are free to take your own course of action.



@Samurai - That was a very elaborate and interesting explanation. Thank you for taking the time to put that down!
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Old 21st December 2011, 20:44   #35
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Default re: Understanding Economics

I have been following this thread with keen interest because I know nothing of economics. And then someone comes along and spoils the party. Its a discussion, no different from real life conversation in that some people will bluff. Its for the listener / reader to sieve through it and form their opinion.

Let people who know the subject kindly share. Using analogies to illustrate a point makes understanding easy for a layperson.
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Old 21st December 2011, 22:28   #36
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Default re: Understanding Economics

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Originally Posted by Samurai View Post
That is for a very good reason. Lot of things in economics are not common sense, in fact they run against it. Ten years back when I took up MBA, Economics was my first course. As an Engineer with 11 years experience at that time, I expected lots of things to be obvious, it was anything but. It came as a shock.
If doing a MBA course taught you economics, you would not have the entire banking industry sitting on the road with a begging bowl.
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Old 21st December 2011, 22:42   #37
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Default re: Understanding Economics

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@Samurai - That was a very elaborate and interesting explanation. Thank you for taking the time to put that down!
You are welcome.
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Let people who know the subject kindly share. Using analogies to illustrate a point makes understanding easy for a layperson.
That is the only way to explain under the circumstances.

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If doing a MBA course taught you economics, you would not have the entire banking industry sitting on the road with a begging bowl.
The banking industry sitting on the road with a begging bowl is not because of lack of understanding of economics, or actually finance. It is because they got greedy and ignored the risk. I have enough understanding to analyse what happened, but not enough to predict what can happen. For that matter very few economists can predict the future.
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Old 21st December 2011, 22:45   #38
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. I have enough understanding to analyse what happened, but not enough to predict what can happen. For that matter very few economists can predict the future.
The problem is that nothing really happened.... yet economists are trying to explain what happened.
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Old 21st December 2011, 22:47   #39
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Default re: Understanding Economics

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The banking industry sitting on the road with a begging bowl is not because of lack of understanding of economics, or actually finance. It is because they got greedy and ignored the risk.
The basic assumption of economics is people respond to incentives. If I don't buy more something in spite of prices falling, the whole economic principle of demand/supply fails.

In this case they had an incentive to make bad deals while making profits for themselves. Personally I think they are sitting on the road because of economics (which can be evil depending upon how it's applied), not because of a lack of it.
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Old 21st December 2011, 23:00   #40
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Default re: Understanding Economics

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The problem is that nothing really happened.... yet economists are trying to explain what happened.
If nothing happened, why are we having recession?
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If I don't buy more something in spite of prices falling, the whole economic principle of demand/supply fails.
No, it just means the demand curve has changed. It need not be constant.
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In this case they had an incentive to make bad deals while making profits for themselves. Personally I think they are sitting on the road because of economics (which can be evil depending upon how it's applied), not because of a lack of it.
The sub-prime mess was a financial scam, why are we dragging in economics here.

Anyway, I really don't want to get into dissecting sub-prime or other scams here. Better to stick with explaining economic principles.
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Old 21st December 2011, 23:11   #41
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No, it just means the demand curve has changed. It need not be constant.
That was an example. The basis of every economic theory is still the fact that people make rational decisions.

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The sub-prime mess was a financial scam, why are we dragging in economics here
it was referring to whatever else you meant by greedy people ignoring risk. They still made rational decisions for themselves. In hindsight it may look different.
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Old 21st December 2011, 23:48   #42
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If nothing happened, why are we having recession?
Bogeymans are needed.
There is some recession, but not what it is made out to be.
Its somewhat of an excuse. Europe is seeing some crisis, again not has big as corporations would want you to believe
Name:  wealthandinequality.gif
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I am unable to find the chart upto 2010.

Corporate earnings, ceo pay, profits are up to record levels, yet production works pay has increased only 4.6%(inflation adjusted) in past 50 years

Last edited by tsk1979 : 21st December 2011 at 23:50.
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Old 22nd December 2011, 00:07   #43
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Default re: Understanding Economics

you can't be serious. Are you implying that all that has happened is simply a redistribution of wealth?
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Old 22nd December 2011, 00:24   #44
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you can't be serious. Are you implying that all that has happened is simply a redistribution of wealth?
Figures don't lie, do they

Workers(employees) pay has risen by 5% in 50 years, while average CEO pay has gone up by 400%+

how do you explain this.

In this recession, the wealth of world hasn't reduced, its just gotten more concentrated.

Pull these out
1. Corporate earnings
2. CEO employee pay ratio
3. Worker earnings

Look at 1950 to current(data available online)

Closer home, look at data of MLA/MP asset value in 2005 vs 2010

Or wealth and salaries of top honchos. Then ask yourself, avg CEO salary doubled in past 5 years, why didn't salary at your level double in last 5 years?

Heck you are at a higher level than what you were 5 years ago. Did your salary double?

So I will reply to the original poster.
If the total amount of cash in world is constant, then if you make a profit, somebody else will make a loss.

If the total wealth increase in the world(eg GDP) is less than total salary increase of some people, some people will have to take a salary cut.
I guess I have answered the OPs question

Last edited by tsk1979 : 22nd December 2011 at 00:49.
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Old 22nd December 2011, 02:06   #45
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Thanks for your sarcasm. Your repeated wisdom never ceases to amaze..

.....


- tsk quoted diamond as being abundant in nature but still being cartelized and maintaining prices
- The fake diamond bit i have not fully understood (and learnt that today artificial diamonds are indistinguishable!) and therefore not discussed further but the quote about diamonds being abundant is unsubstantiated even in wikipedia. Reg. cartelization, it may ofc work better in diamonds than others because the incremental cost to hoard diamonds.

....
That said, internet discussion threads often go into sub-threads and parallel discussions. With 1000+ posts youve seen that already, no? Why the sarcasm? Why don't you provide a clue substantiated with data from your side?
Well, just like you thought my comments were sarcastic (they were not meant to be) I thought you were being sarcastic to tsk (you explain you were not, I was mistaken) - because of the "news to me" followed by three exclamation marks.

tsk has already provided info on diamonds. Wiki has more. If you want even more, I should be able to point to more information send me a PM.

I agree with you on almost everything else (you are right - I didn't read the entire discussion, I apologise for that).
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