Originally Posted by PopinFRESH
You obviously ignored the second paragraph in which you quoted me. You tried to assume a single commodity market with simple math and then felicitously assume away reality. A recession is a symptom not an economic shock. You can't just plop your fictitious economy into a recession and assume the result as fact. The thing about dealing with simple math you wanted to use is that you can only deal in a single snapshot in time. A free market will maintain equilibrium indefinitely until it is impacted by an economic shock. The topic of this article is an example of such an economic shock. A recession is not an economic shock, it's a result of an economic shock, a symptom.
In your last post I quoted, you make an erroneous statement about supply side vs demand side incentives (which would also be economic shocks) and then fail miserably trying to justify your point of view. "Give people more money and they buy", what do they buy and exactly how is that materially different than what the companies (you obviously hate) buy? "Give companies more tax cuts on profits"? Profits are not taxed, Income before interest and taxes are what is taxed. Profit/loss is what is left over after subtracting all expenses including interest and taxes from income. Obviously companies are irrational and only "hoard or at best make often stupid investments" unlike people who buy (what do they buy again?).
I'd continue but your last paragraph jumps around so incoherently It would be a waste of my time trying to parse your delusions and I have to go do that thing you clearly hate, try to make a profit.
P.S. I love the lead in, obviously you know more than those stupid economists who write text books.
To the latter part. Yes I do. My degree is mathematics and engineering. Economics is a social science. But econ 101 is not real economics anyway.
To the personal attack - I don't hate large companies, I love Apple, however I don't believe in supply side. I've also owned a company albeit a small one.
As for your statement that profits are not taxed but "income before interest and taxes" are taxed. That's both tautological and wrong. Clearly you are not taxed after tax. And income is not taxed, profits are. Otherwise companies making a loss would be taxed.
My main point was simple:
1) companies don't react to wage cuts by hiring people so standard econ 101 is incorrect.
2) there are feedbacks in mass economies, where workers are consumers, which would in fact exacerbate recessions if everybody believed econ 101 and took a wage cut.
3) there are bigger gains to the economy from workers getting wage increases and tax cuts than companies getting tax cuts.
4) not paying taxes - cf Apples effective rate - doesn't guarantee investment.
5) banks are not very good at lending these days, when they have surplus capital instead of funding businesses they tend to fund house and other asset bubbles.
Btw nobody believes simple economics except undergraduates and the badly read. No serious economist. It probably shouldn't be taught anymore.Edited by asdasd - 3/25/14 at 1:18am