Author Topic: Economics  (Read 285757 times)

DougMacG

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Re: Economics, Churchill: Socialism = Totalitarianism
« Reply #550 on: October 03, 2021, 06:25:51 AM »
https://www.realclearhistory.com/articles/2021/09/27/churchill_truly_understood_communism_and_socialism_796439.html

[T]here can be no doubt that Socialism is inseparably interwoven with Totalitarianism and the abject worship of the State. … liberty, in all its forms, is challenged by the fundamental conceptions of Socialism. … there is to be one State to which all are to be obedient in every act of their lives. This State is to be the arch-employer, the arch-planner, the arch-administrator and ruler, and the arch-caucus boss.

A Socialist State once thoroughly completed in all its details and aspects… could not afford opposition. Socialism is, in its essence, an attack upon the right of the ordinary man or woman to breathe freely without having a harsh, clumsy tyrannical hand clapped across their mouths and nostrils.   

But I will go farther. I declare to you, from the bottom of my heart that no Socialist system can be established without a political police. Many of those who are advocating Socialism or voting Socialist today will be horrified at this idea. That is because they are shortsighted, that is because they do not see where their theories are leading them.

No Socialist Government conducting the entire life and industry of the country could afford to allow free, sharp, or violently-worded expressions of public discontent. They would have to fall back on some form of Gestapo, no doubt very humanely directed in the first instance.

And this would nip opinion in the bud; it would stop criticism as it reared its head, and it would gather all the power to the supreme party and the party leaders, rising like stately pinnacles above their vast bureaucracies of Civil servants, no longer servants and no longer civil. And where would the ordinary simple folk — the common people, as they like to call them in America — where would they be, once this mighty organism had got them in its grip?

Crafty_Dog

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Modern Monetary Theory
« Reply #551 on: January 05, 2022, 03:07:07 AM »
January 4, 2022
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What We're Reading: Myths and Memoirs
Weekly reviews of what's on our bookshelves.
By: Ryan Bridges and Ekaterina Zolotova
The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
By Stephanie Kelton

We’re all familiar with the old aphorism, “There’s no such thing as a free lunch.” I’m pretty sure it was the first thing I was told in school about economics. It’s also the first thing most critics of Modern Monetary Theory like to remind us. I didn’t expect Stephanie Kelton, the author of the MMT bible, to agree.

If you’ve been living under a rock, MMT is a school of thought that argues that a monetarily sovereign state cannot go bankrupt. Countries like the U.S., U.K. or Japan, which spend, tax and borrow in a fiat currency that they control, don’t much need to concern themselves with the budget deficit or debt because unlike other states or businesses or households they can always create more money – up to a point. It’s a simple idea that has attracted some excited proponents and even fiercer critics.

Now that I’ve read Kelton’s book, “The Deficit Myth,” I understand that what these critics are really telling us is that they haven’t done their homework. At no point does Kelton, now an economics and public policy professor at Stony Brook University, say that a government’s ability to print money and spend is limitless. Instead, she argues for “replacing an artificial (revenue) constraint [on what governments can do] with a real (inflation) constraint.” Orthodox economists are right that economies have speed limits, they’re just wrong about what they are. The true limits are defined by the economy’s productive resources, not flimsy math and not what it can extract from the private sector in the form of taxes and borrowing. To be frank, I’m not sure why this is controversial. The strongest criticisms I’ve seen of MMT were swept away before the first chapter.

But I’m also not entirely convinced that MMT’s implications are as profound as Kelton would have us believe. For one thing, I don’t think she addressed what makes some countries monetarily sovereign but not others. If a country can be one or the other, then presumably it can move between the two states. Is it possible, then, for a country to lose its monetary sovereignty through misguided policy? I’m not an economist by any stretch, but my assumption would be that a government that loses its credibility with international investors through perceived irresponsibility could lose its monetary sovereignty in the process. At that point, the conditions that make MMT feasible would cease to apply to it, and I assume catastrophe would ensue. Relatedly, Kelton, who focuses mostly on the U.S. in the book, makes no attempt to define what the American economy’s speed limit might be. The implications of MMT are radically different if the U.S. government could increase its spending by 25 percent or 5 percent.

Anyway, I highly recommend “The Deficit Myth.” It’s probably not what you’ve been told to expect; for various reasons, a lot of influential people have an interest in smothering MMT in the cradle. But Kelton’s book contains some interesting ideas about the purpose of taxes, as well as intriguing policy prescriptions, such as a federal jobs guarantee. Most important, it’s short, it’s not overly technical, and it could be the future.

DougMacG

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Re: Modern Monetary Theory
« Reply #552 on: January 05, 2022, 09:31:59 AM »
Dangerous ideology.

G M

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Re: Modern Monetary Theory
« Reply #553 on: January 05, 2022, 09:49:11 AM »
Dangerous ideology.

The left is unconstrained by reality.

They will crash the economy with their lunacy. Plan accordingly.

DougMacG

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DougMacG

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Economics, Moral Decay of Inflation
« Reply #555 on: October 08, 2022, 03:56:22 AM »
Bertrand de Jouvenel writes:

“Inflation is the moral ruin of societies, for it authorises a debtor not to make effective repayment of the real sum which he and the creditor had in mind, but only of a smaller sum, which is the same only in name. It is a school of default on the substance of promises.”

G M

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Re: Economics, Moral Decay of Inflation
« Reply #556 on: October 08, 2022, 07:20:01 AM »
Bertrand de Jouvenel writes:

“Inflation is the moral ruin of societies, for it authorises a debtor not to make effective repayment of the real sum which he and the creditor had in mind, but only of a smaller sum, which is the same only in name. It is a school of default on the substance of promises.”

Good thing our society doesn't suffer from moral decay at any level!

DougMacG

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Economics, Nobel Peace Prize: Ben Bernancke
« Reply #557 on: October 11, 2022, 02:38:42 PM »


The best and the brightest?



DougMacG

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« Last Edit: October 13, 2022, 07:55:10 AM by DougMacG »

DougMacG

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Re: Economics, Bono
« Reply #561 on: October 26, 2022, 08:40:01 AM »
https://www.nytimes.com/interactive/2022/10/24/magazine/bono-interview.html?searchResultPosition=1

"I ended up as an activist in a very different place from where I started. I thought that if we just redistributed resources, then we could solve every problem. I now know that’s not true. There’s a funny moment when you realize that as an activist: The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism."
...
"I didn’t grow up to like the idea that we’ve made heroes out of businesspeople, but if you’re bringing jobs to a community and treating people well, then you are a hero."
--------------------------
2006, U2 leave Ireland over taxes
https://taxfoundation.org/u2-abandons-ireland-name-taxes/
« Last Edit: November 05, 2022, 07:50:23 PM by DougMacG »

Crafty_Dog

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WSJ on Adam Smith
« Reply #562 on: December 18, 2022, 07:31:11 AM »

‘Adam Smith’s America’ Review: Wealth of a Nation
‘The Wealth of Nations’ was published the same year as the Declaration of Independence, and has informed American thinking ever since.
image
Economist Milton Friedman, 1980.
PHOTO: EVERETT/SHUTTERSTOCK
By Barton Swaim
Dec. 16, 2022 3:30 pm ET


Admirers of Adam Smith may be surprised to learn that there is an entire academic industry dedicated to the proposition that the great Scottish economist was not a proponent of free-market capitalism. Scholarly articles on Smith and the economic ideas of the Scottish Enlightenment frequently contain lengthy explanations of how he really didn’t promote amoral capitalism and unfettered markets but believed rather in a virtuous society that placed moral concerns above the market.

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Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism






Academic debates aside, the basic point about Smith’s economic views isn’t in doubt. His magnum opus, “An Inquiry Into the Nature and Causes of the Wealth of Nations” (1776), made the case that economic growth is not the result of governmental planning but the natural outcome of many people pursuing their own self-interest in the confines of an ordered polity. The problem, for academic historians and economists over the last 60 years, is that from the 1950s to the 1980s a few well-known free-market economists overtly applied the chief contentions of “Wealth of Nations” to the major political and economic questions of the postwar liberal order. They recruited Smith, in other words, to make the case against central planning and high taxation. His metaphor of an invisible hand, in their view—the self-interested merchant going about his business is “led by an invisible hand to promote an end which was no part of his intention”—exploded the fantasy that faraway planners were best equipped to create widespread prosperity.

That put Smith, one of the great thinkers of the 18th century, on the side of Ronald Reagan, William F. Buckley Jr. and this newspaper’s editorial page. There was, if I could say it plainly, no possibility that modern academics would let that association stand.

Now to be fair, “Wealth of Nations” was far more than a paean to open markets. The ideas associated with 20th-century classical liberalism were fashioned in opposition to the collectivist ideologies of fascism and communism; Smith had no notion of such things. And although Smith attacked most forms of governmental intervention in economic matters, he advanced some views that free-market economists anathematize—most notably the labor theory of value (the notion that a thing’s worth arises from the labor put into its creation). Odd, too, is the fact that Smith, the first great proponent of free trade and the scourge of protectionism, took a position in 1778 as commissioner of customs in Edinburgh—a tariff inspector.

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The scholarly argument that Smith was no proponent of free-market capitalism, however, can get pretty abstruse. It generally incorporates his only other major work, “The Theory of Moral Sentiments” (1759). In that book, he argued that man’s sense of right and wrong derives from a capacity for “sympathy”: Seeing good or bad behavior, or seeing a person experience fortune or misfortune, enables one to put oneself in the place of another and thus think and act morally.

That “The Theory of Moral Sentiments” and “Wealth of Nations” appear to be in conflict—one an exploration of sympathy, the other, seemingly, a defense of selfishness—is commonly referred to as the “Adam Smith problem.” But academic discourse has settled on a solution. It goes something like this: “The Theory of Moral Sentiments” sets the moral premises for “Wealth of Nations” and shows us that the latter, more famous book doesn’t promote atomistic capitalism and unregulated markets at all. In this view, Smith in “Wealth of Nations” defended capitalism, yes, but with a lot of purportedly “moral” regulation. The academic consensus somehow perfectly matches the center-left consensus—amazing!

There is one small glitch: “The Theory of Moral Sentiments” isn’t very good. It is not a great work of philosophy. It’s mostly unreadable, to my mind. What’s more important, its thesis lacks cogency. Sympathy as Smith defines it is far too weak a foundation on which to build an elaborate theory of morality. If he had died after writing “Moral Sentiments,” Smith would be forgotten outside philosophy departments, and likely inside them.

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The allegedly vital connection between “The Theory of Moral Sentiments” and “Wealth of Nations” has become a kind of orthodoxy, even so. Even politicians know the formula. “I have come to understand that his ‘Wealth of Nations’ was underpinned by his ‘Theory of Moral Sentiments,’ his invisible hand dependent upon the existence of a helping hand,” remarked Gordon Brown, then U.K. chancellor, in a 2005 lecture.

And yet the idea of Adam Smith as a proto-capitalist won’t go away. It is, Glory Liu contends in “Adam Smith’s America,” a false understanding of Smith propounded by figures associated with the University of Chicago Department of Economics, particularly Friedrich Hayek, George Stigler and Milton Friedman. The “complexity and pluralism” of older interpretations of Smith, Ms. Liu writes, have been “overshadowed by the influence of the so-called Chicago School’s distillation of Smith’s ideas into a popular and powerful myth: that rational self-interest is the only valid premise for the analysis of human behavior, and that only the invisible hand of the market, not the heavy hand of government, could guarantee personal and political freedom.”

A “distillation” turned into a “myth”—those are strong words. In the same paragraph Ms. Liu, a lecturer in social studies at Harvard, calls the myth “a deliberate construction.” That sounds close to a fabrication, or lie. But she quickly backs away from that suggestion by saying she is “less interested in providing a definitive account of what Smith originally intended or meant than . . . in elucidating the demands that his readers have brought to his works and how that colored the lessons they have extracted from them.” I am not sure what that means, but I gather from it that Ms. Liu knows she doesn’t have the goods to claim that the Chicago School got any part of Adam Smith wrong.

The book bears the subtitle “How a Scottish Philosopher Became an Icon of American Capitalism,” but you don’t get to the bit where Smith becomes the capitalistic icon until the penultimate chapter. What lies in the middle is basically a history of Adam Smith’s reception in Europe and America. As a work of history the book has its virtues. I had not appreciated how influential “Wealth of Nations” was on the American Founders—Thomas Jefferson read it with care; Alexander Hamilton did likewise but forcefully disagreed with parts of it; John Adams owned two copies, one in French translation.


But a curious thing happens when Ms. Liu gets to the Chicago School. We learn that a pair of earlier Chicago School economists—Frank Knight and Jacob Viner, who taught and wrote mainly from the 1920s to the ’40s—faulted Smith for failing to grasp the function of prices in a free economy. This would seem to contradict Ms. Liu’s thesis that the Chicago economists falsely turned Adam Smith into a free-market hero: Knight and Viner were pointing out that Smith didn’t grasp an essential reality of markets. Yet somehow, according to Ms. Liu’s analysis, they were wrong to do so. “By framing Smith’s contribution and legacy in the pure, objective language of economics,” she writes, “his Chicago exponents constructed the social-scientific bases of their political outlook which privileged free enterprise over central planning, and market rationality over moral reasoning.”

Forgive me, but Smith, for all his greatness as an economist, was wrong about value and pricing. To say so isn’t to “privilege” free enterprise over central planning but to state what is the case. You get the feeling that no one, according to Ms. Liu, can write accurately about any one thing in Adam Smith’s oeuvre without also, at the same time, considering every other thing he ever wrote and so smothering any potential insight with a thousand qualifications.

This high-minded disapproval becomes absurd when Ms. Liu gets to Hayek, Stigler and Friedman. These scholars, concerned as they were about the advance of collectivism over much of the globe, emphasized Smith’s perception that the self-interest of merchants tends to promote the interests of society as a whole. Alas, says Ms. Liu, this “often entailed a flattening of Smith’s ideas in ways that smoothed over, or altogether obscured, the complexities, tensions, and other problematic aspects characteristic of earlier readings of Smith.” Thus did the Chicagoans give us “an invented Smithian tradition” bereft of complexities and tensions.

For all the talk of obscuring complexities and inventing traditions, one looks in vain in Ms. Liu’s treatment for any instance of Hayek, Stigler or Friedman misunderstanding or distorting a passage or idea in Smith’s writing. “Though Hayek’s readings of Smith may have been opportunistic,” Ms. Liu writes after quoting a passage from the Austrian economist’s lecture on Smith, “they were not inaccurate.” As for Stigler, the consequence of his work on Smith “was that certain aspects of Smith’s ideas were amplified and glorified, while others deemed irrelevant or unsatisfactory.” Oh, no!

Ms. Liu’s complaint seems to be that Hayek, Stigler and especially Friedman were, for lack of a less pretentious term, intellectuals. Friedman “mastered the art of distilling and repackaging abstract and complex academic theories into more palatable, usable language for a wider audience.” That phrase “mastered the art” sounds vaguely sinister, but this is a description of what intellectuals do.

We reach the point of comedy when Ms. Liu quotes the socialist agitator Michael Harrington’s criticism of Friedman’s use of the invisible-hand metaphor. “The problem with Friedman’s version of the invisible hand as a right-wing political agenda,” she concludes, “was not that it was a complete misinterpretation of Smith’s text.” (That word “complete” is sly.) “The problem, as Michael Harrington put it, was that it was ‘essentially a mythic, non-historical presentation of an abstract solution taken out of time which does not look to the tremendous evolution of capitalist society.’ ” This is preposterous. If we were to take Harrington’s complaint seriously, we would never again draw on an old book to illuminate a modern problem.

Free marketeers haven’t won many arguments lately, but they have won the argument over Adam Smith. No number of academic monographs and journal articles will persuade the ordinary reader that he doesn’t understand the defense of free enterprise and free trade in “Wealth of Nations” until he has first made his way through “The Theory of Moral Sentiments.” If Ms. Liu and her likeminded academic peers think I’m wrong about that, they’ll need to master the dark art of intellectual debate.

Mr. Swaim is an editorial-page writer for the Journal.

DougMacG

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Re: WSJ on Adam Smith
« Reply #563 on: December 19, 2022, 05:32:02 AM »
Excellent article.

DougMacG

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Re: Economics, income inequality by state
« Reply #564 on: January 02, 2023, 01:24:32 PM »


https://www.dailywire.com/news/blue-states-have-worse-inequality-than-red-ones-new-census-data-shows

I would label inequality differences wider and narrower rather than better and worse, but the point is liberal-left policies make what they consider to be unacceptable much worse.


DougMacG

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Economics, workforce participation rate
« Reply #565 on: January 03, 2023, 06:59:49 AM »
Workforce participation rate was mentioned on the other economics thread as the best measure of the economy.

In general, it is falling for both men and women, worse for men.

How many people are pulling the wagon and how many people are riding on the wagon?

ccp

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Re: Economics
« Reply #566 on: January 03, 2023, 07:47:12 AM »
"How many people are pulling the wagon and how many people are riding on the wagon?"

great metaphor

DougMacG

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Re: Economics
« Reply #567 on: January 06, 2023, 08:54:49 AM »
"How many people are pulling the wagon and how many people are riding on the wagon?"

great metaphor

It is a great metaphor (or analogy?). Not original by me. I think I took it from Jack Kemp in the 1980s.
« Last Edit: January 06, 2023, 08:56:40 AM by DougMacG »

DougMacG

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Economics, Michael Barone, debunking Income Inequality exaggerations continued
« Reply #568 on: January 06, 2023, 09:08:01 AM »
More famous people caught reading the forum.

https://jewishworldreview.com/michael/barone010623.php3

From the article:

"Census Bureau statistics on income, on which just about everyone relies, do not include two-thirds of government transfer payments. (Income). ...
the bottom two quintiles on the income scale (each quintile is one-fifth of households) get 59% and 24% of their incomes from government transfers."
...
"Census income statistics don't account for taxes people pay. ...
the top quintile provides 83% of federal income tax revenue."

(When taking these two factors into account)
"the poverty rate, which government statistics peg at 12%, is only 2% when you cover government transfers."
(and)
"the ratio of top quintile to bottom quintile incomes from the Census Bureau's 16 to 1 decreases to Gramm, Ekelund and Early's 4 to 1."
...
"The authors also expose another myth, the idea that Americans' incomes have been stagnant over the past two generations. The reason again is misleading government statistics — inflation indexes, especially the oft-quoted CPI-U, that consistently overstate inflation and thus understate real economic growth. ...
(With real world adjustments)
then "real average hourly earnings would have risen 74% over the last fifty years rather than the official reported number of 8.7%."
(But who would want to spoil the narrative?)
More at the link.
« Last Edit: January 06, 2023, 09:24:54 AM by DougMacG »

Crafty_Dog

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Re: Economics
« Reply #569 on: January 06, 2023, 04:34:25 PM »
"that consistently overstate inflation"

I thought we were of a completely contrary point of view?

DougMacG

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Re: Economics
« Reply #570 on: January 06, 2023, 08:02:15 PM »
"that consistently overstate inflation"

I thought we were of a completely contrary point of view?

I think they refer to the substitution effect over decades, people don't buy the same basket of goods when prices change.

DougMacG

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DougMacG

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Re: Economics, Robert Mundell 1974, more 'goods'
« Reply #572 on: February 17, 2023, 06:33:26 AM »
(Doug) For 2023-2024, I would simple change 'the level of taxes' to 'the burden of government'.  And by more goods produced, we mean more products and services, and better ones, more innovation, more production. 

Inflation will not be stopped by tightening alone.  How many times do we have to learn that?
---------------------

"The level of U.S. taxes has become a drag on economic growth in the United States. The national economy is being choked by taxes—asphyxiated. Taxes have increased even while output has fallen because of the inflation. The unemployment has created vast segments of excess capacity greater than the size of the entire Belgian economy. If you could put that sub-economy to work, you would not only eliminate the social and economy costs of unemployment, you would increase aggregate supply sufficiently to reduce inflation. It is simply absurd to argue that increasing unemployment will stop inflation. To stop inflation you need more goods (produced), not less."[/b]

   - WSJ,  December 11, 1974
Robert Mundell quoted by editorial writer Jude Wanniski

https://newrepublic.com/article/161964/robert-mundell-supply-side-reaganomics
« Last Edit: February 17, 2023, 06:39:33 AM by DougMacG »

G M

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Re: Economics, Robert Mundell 1974, more 'goods'
« Reply #573 on: February 17, 2023, 06:40:39 AM »
Our basic infrastructure is falling apart around us. Hard to be a modern economic producer with a 3rd world infrastructure and a 3rd world population.


For 2023-2024, I would simple change 'the level of taxes' to 'the burden of government'.  And by more goods produced, we mean more products and services, and better ones, more innovation, more production.  Inflation will not be stopped by tightening alone.  How many times do we have to learn that?


"The level of U.S. taxes has become a drag on economic growth in the United States. The national economy is being choked by taxes—asphyxiated. Taxes have increased even while output has fallen because of the inflation. The unemployment has created vast segments of excess capacity greater than the size of the entire Belgian economy. If you could put that sub-economy to work, you would not only eliminate the social and economy costs of unemployment, you would increase aggregate supply sufficiently to reduce inflation. It is simply absurd to argue that increasing unemployment will stop inflation. To stop inflation you need more goods (produced), not less."

   - WSJ,  December 11, 1974
Robert Mundell quoted by editorial writer Jude Wanniski

https://newrepublic.com/article/161964/robert-mundell-supply-side-reaganomics

DougMacG

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Marriage Economics
« Reply #574 on: October 24, 2023, 06:07:30 AM »

Crafty_Dog

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Re: Economics
« Reply #575 on: October 26, 2023, 01:16:08 PM »
This seems to me to be a sound point.

DougMacG

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Veronique de Rugy
« Reply #576 on: November 07, 2023, 10:42:43 AM »
For some reason Kevin Williamson named his series, The way the world works, isn't that the name of Jude Wanniskis book?

Here he interviews libertarian leaning economist Veronique de Rugy. The starts kind of slow I think, about her career and starts into policy at about 16:30. If you hang in there I think there is wisdom and insights to be gained from someone with a career researching the benefits of freer markets and freer people.

https://youtu.be/TvuFaWtBOrk?si=nYhHDHv1-KpKrIkn

If you wanted just a short version skip to 59:30 where she regrets getting bogged down in details and away from talking about the importance of economic growth and abundance and the Disaster of getting away from economic growth, it's not just a loss of wealth...
« Last Edit: November 07, 2023, 04:12:21 PM by Crafty_Dog »

DougMacG

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Economics, 'transfer payments' and GDP shrinkage
« Reply #578 on: June 18, 2024, 10:10:09 AM »
Sorry I've neglected this thread but lately all things economic have been political. This one too, but we want to save the larger concepts in the science of economics thread.

https://firehydrantoffreedom.com/index.php?topic=1467.msg171034#msg171034

We say rob Peter to pay Paul. Democrats say something like the rich can afford to pay more, give that money to the poor, it's only fair. . That sounds like a breakeven transaction but it isn't. Both sides have their incentive to produce diminished. Scott Grannis' chart shows that just the worsening of that in recent years is costing us something close to 25% of potential gdp. Discussion of that at the link.

With honest advertising, if Democrats would promise to shrink the economy by 25% of its potential with their programs, we wouldn't have had their programs or the shrinkage.

George Costanza knows what pouring cold water on it does. Major shrinkage.
« Last Edit: June 18, 2024, 10:21:06 AM by DougMacG »

DougMacG

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Economics, Phillips Curve isn't a thing
« Reply #579 on: July 04, 2024, 09:54:38 PM »
Phillips Curve, the tradeoff between inflation and unemployment 1978 - 2023 shows not much more than randomness:


Crafty_Dog

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Re: Economics
« Reply #580 on: July 05, 2024, 06:01:46 AM »
Important point.

I remember when I was taking Econ at U of PA in the mid-70s, the professor was a Keynesian (the author of our textbook too) so the Phillips Curve was quite central.

DougMacG

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DougMacG

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Economics, Milton Friedman answers Humphrey Hawkins, Phillips Curve
« Reply #583 on: August 10, 2024, 08:43:32 AM »
Follow up to dollar thread Fed discussion...

In a nutshell, thinking our incompetent government can successfully tamper with dollar stability to eek out a few more jobs in the short run without doing great damage is foolhardy. 

The Phillips curve was used to show a direct tradeoff between inflation and employment, but there is so much more to it.  By the end of the 1970s we had simultaneously high inflation and high unemployment.  In the years (elections) that followed, we cured both high inflation and high unemployment, lowering both, and it could have been done simultaneously.  So let's not legislate narrow, wrong-minded thinking and let's not err on the side of constant and complete government intervention in the economy.  Look at the way markets obsess on the every word or hint from The Fed today.  There is something very wrong with that.

Milton Friedman made a rebuttal to the (failed) thinking of the 1970s that was quite prescient:

https://www.econlib.org/library/Enc/PhillipsCurve.html

At the height of the Phillips curve’s popularity as a guide to policy, Edmund Phelps and Milton Friedman independently challenged its theoretical underpinnings. They argued that well-informed, rational employers and workers would pay attention only to real wages—the inflation-adjusted purchasing power of money wages. In their view, real wages would adjust to make the supply of labor equal to the demand for labor, and the unemployment rate would then stand at a level uniquely associated with that real wage—the “natural rate” of unemployment.

Both Friedman and Phelps argued that the government could not permanently trade higher inflation for lower unemployment. Imagine that unemployment is at the natural rate. The real wage is constant: workers who expect a given rate of price inflation insist that their wages increase at the same rate to prevent the erosion of their purchasing power. Now, imagine that the government uses expansionary monetary or fiscal policy in an attempt to lower unemployment below its natural rate. The resulting increase in demand encourages firms to raise their prices faster than workers had anticipated. With higher revenues, firms are willing to employ more workers at the old wage rates and even to raise those rates somewhat. For a short time, workers suffer from what economists call money illusion: they see that their money wages have risen and willingly supply more labor. Thus, the unemployment rate falls. They do not realize right away that their purchasing power has fallen because prices have risen more rapidly than they expected. But, over time, as workers come to anticipate higher rates of price inflation, they supply less labor and insist on increases in wages that keep up with inflation. The real wage is restored to its old level, and the unemployment rate returns to the natural rate. But the price inflation and wage inflation brought on by expansionary policies continue at the new, higher rates.

Friedman’s and Phelps’s analyses provide a distinction between the “short-run” and “long-run” Phillips curves. So long as the average rate of inflation remains fairly constant, as it did in the 1960s, inflation and unemployment will be inversely related. But if the average rate of inflation changes, as it will when policymakers persistently try to push unemployment below the natural rate, after a period of adjustment, unemployment will return to the natural rate. That is, once workers’ expectations of price inflation have had time to adjust, the natural rate of unemployment is compatible with any rate of inflation.

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Economics, Inflation vs. price increases
« Reply #584 on: November 17, 2024, 01:56:00 PM »
Inflation vs. price increases

A point that Crafty and others have made on this board, Economist John Cochrane tries to sort it out for us.

https://www.grumpy-economist.com/p/inflation-vs-prices

Very good explanation but I disagree with his final point.
« Last Edit: November 17, 2024, 02:10:27 PM by DougMacG »

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Re: Economics, inflation continued
« Reply #585 on: November 17, 2024, 07:33:04 PM »
Milton Friedman: "It (inflation) is always and everywhere, a monetary phenomenon. It's always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output."

Doug takes on Milton Friedman and the previous post, John Cochrane of MIT, Berkeley, Univ of Chicago, Hoover, Stanford.

Lock in the second half of Friedman' quote above.  Inflation is the change/increase in the ratio of Money Supply to output.

It only a monetary phenomenon, change in money supply if you assume output is constant.

But taxes, regulations, demographics, incentives and disincentives affect output.

Feelings of optimism vs pessimism affect output.

Output constant equals stagnation, opposite of growth economics, or 'suuply side economics'.

A growing economy can handle more increase in the money supply than a stagnant economy can.

Cochrane closed his article with this:

"Deregulation and pro growth reforms are great economic policy for lots of reasons. But not because they will directly lower prices and thus lower inflation."

But that's not right. Economic growth, all other things equals helps lower inflation.  It increases output, the total supply of goods and services in the economy.
« Last Edit: November 17, 2024, 07:49:58 PM by DougMacG »

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Re: Economics
« Reply #586 on: November 18, 2024, 06:17:11 AM »
Here is how my mind organizes it.

Inflation is a monetary phenomenon.

The other variables that affect supply result in price changes, be they increases or decreases.

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Economics, The rich, the poor, the middle class, same person?
« Reply #587 on: December 03, 2024, 08:02:05 AM »
From a post much earlier in this thread, probably even more true today:

A report from 2007:

http://www.ustreas.gov/press/releases/hp673.htm
50% move up and out of the lower quintile in just 10 years.  Please watch for misleading quintile analyses that don't chart the improvement and movement of individuals in the economy.  This Treasury data refutes the claim that only the rich got richer.

November 13, 2007

Treasury Releases Income Mobility Study

Washington DC--The Treasury Department today released a study on income mobility of U.S. taxpayers from 1996 through 2005.

The study showed that, just as in the previous 10-year period, a majority of American taxpayers move from one income group to another over time.  The study also recognizes that the dynamism of the U.S. economy significantly contributes to income mobility.

The key findings of the study included:

    * Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years.
    * About 55 percent of taxpayers moved to a different income quintile within 10 years.
    * Among those with the very highest incomes in 1996--the top 1/100 of one percent--only 25 percent remained in the group in 2005.  Moreover, the median real income of these taxpayers declined over the study period.
    * The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
    * Economic growth resulted in rising incomes for most taxpayers over the study period:
    *
       Median real incomes of all taxpayers increased by 24 percent after adjusting for inflation;
    *
      Real incomes of two-thirds of all taxpayers increased over this period; and
    *
      Median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.

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Economics, The Inequality Bogeyman, Thomas Sowell
« Reply #588 on: December 03, 2024, 08:16:11 AM »
Digging through some older posts with "inequality in the news...

The Inequality Bogeyman

By Thomas Sowell - January 28, 2014
http://www.realclearpolitics.com/articles/2014/01/28/the_inequality_bogeyman_121379.html

During a recent lunch in a restaurant, someone complimented my wife on the perfume she was wearing. But I was wholly unaware that she was wearing perfume, even though we had been in a car together for about half an hour, driving to the restaurant.

My sense of smell is very poor. But there is one thing I can smell far better than most people -- gas escaping. During my years of living on the Stanford University campus, and walking back and forth to work at my office, I more than once passed a faculty house and smelled gas escaping. When there was nobody home, I would leave a note, warning them.

When walking past the same house again a few days later, I could see where the utility company had been digging in the yard -- and, after that, there was no more smell of gas escaping. But apparently the people who lived in these homes had not smelled anything.

These little episodes have much wider implications. Most of us are much better at some things than at others, and what we are good at can vary enormously from one person to another. Despite the preoccupation -- if not obsession -- of intellectuals with equality, we are all very unequal in what we do well and what we do badly.

It may not be innate, like a sense of smell, but differences in capabilities are inescapable, and they make a big difference in what and how much we can contribute to each other's economic and other well-being. If we all had the same capabilities and the same limitations, one individual's limitations would be the same as the limitations of the entire human species.

We are lucky that we are so different, so that the capabilities of many other people can cover our limitations.

One of the problems with so many discussions of income and wealth is that the intelligentsia are so obsessed with the money that people receive that they give little or no attention to what causes money to be paid to them, in the first place.

The money itself is not wealth. Otherwise the government could make us all rich just by printing more of it. From the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things -- goods and services.

Those goods and services are the real "wealth of nations," as Adam Smith titled his treatise on economics in the 18th century.

Yet when the intelligentsia discuss such things as the historic fortunes of people like John D. Rockefeller, they usually pay little -- if any -- attention to what it was that caused so many millions of people to voluntarily turn their individually modest sums of money over to Rockefeller, adding up to his vast fortune.

What Rockefeller did first to earn their money was find ways to bring down the cost of producing and distributing kerosene to a fraction of what it had been before his innovations. This profoundly changed the lives of millions of working people.

Before Rockefeller came along in the 19th century, the ancient saying, "The night cometh when no man can work" still applied. There were not yet electric lights, and burning kerosene for hours every night was not something that ordinary working people could afford. For many millions of people, there was little to do after dark, except go to bed.

Too many discussions of large fortunes attribute them to "greed" -- as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea, when you stop and think about it -- but who stops and thinks these days?

The transfer of money was a zero-sum process. What increased the wealth of society was Rockefeller's cheap kerosene that added hundreds of hours of light to people's lives annually.

Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. The individual fortunes represented a fraction of the wealth created.

Even those of us who create goods and services in more mundane ways receive income that may be very important to us, but it is what we create for others, with our widely varying capabilities, that is the real wealth of nations.

Intellectuals' obsession with income statistics -- calling envy "social justice" -- ignores vast differences in productivity that are far more fundamental to everyone's well-being. Killing the goose that lays the golden egg has ruined many economies.
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The Redistribution Recession:How Labor Market Distortions Contracted the Econom
« Reply #282 on: February 08, 2014, 06:40:47 AM »
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 The Redistribution Recession:How Labor Market Distortions Contracted the Economy
(bringing a couple of posts over here by request)
3rd post regarding economist Casey Mulligan, someone getting it right.  Buy his book:

http://www.amazon.com/The-Redistribution-Recession-Distortions-Contracted/dp/0199942218

The Redistribution Recession: How Labor Market Distortions Contracted the Economy Hardcover
by Casey B. Mulligan

Redistribution, or subsidies and regulations intended to help the poor, unemployed, and financially distressed, have changed in many ways since the onset of the recent financial crisis. The unemployed, for instance, can collect benefits longer and can receive bonuses, health subsidies, and tax deductions, and millions more people have became eligible for food stamps.

Economist Casey B. Mulligan argues that while many of these changes were intended to help people endure economic events and boost the economy, they had the unintended consequence of deepening-if not causing-the recession. By dulling incentives for people to maintain their own living standards, redistribution created employment losses according to age, skill, and family composition. Mulligan explains how elevated tax rates and binding minimum-wage laws reduced labor usage, consumption, and investment, and how they increased labor productivity. He points to entire industries that slashed payrolls while experiencing little or no decline in production or revenue, documenting the disconnect between employment and production that occurred during the recession. The book provides an authoritative, comprehensive economic analysis of the marginal tax rates implicit in public and private sector subsidy programs, and uses quantitative measures of incentives to work and their changes over time since 2007 to illustrate production and employment patterns. It reveals the startling amount of work incentives eroded by the labyrinth of new and existing social safety net program rules, and, using prior results from labor economics and public finance, estimates that the labor market contracted two to three times more than it would have if redistribution policies had remained constant.

In The Redistribution Recession, Casey B. Mulligan offers hard evidence to contradict the notion that work incentives suddenly stop mattering during a recession or when interest rates approach zero, and offers groundbreaking interpretations and precise explanations of the interplay between unemployment and financial markets.
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Economics: Marginal tax rates including forgone subsidies
« Reply #283 on: February 08, 2014, 06:42:23 AM »
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Marginal tax rates for Heads of Households and spouses with median earnings potential including forgone subsidies.

Note that the beginning of 2007 was when unemployment was at its low point (and when Democrats took control of Congress).



Tax something more, work in this case, and you will get less of it.
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Economics: Income Inequality and Income Mobility
« Reply #284 on: February 08, 2014, 08:50:19 AM »
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I am sorry to inform President Obama and his team of pretend economists that inequality and specifically the rich getting richer does not correspond with the poor getting poorer or having fewer opportunities to move up.  It simply isn't true.

http://www.economics21.org/commentary/great-gastby-curve-revisited-part-1
"Neither measure of inequality nor the size-of-middle-class measure has a correlation with any of the mobility measures that is statistically different from zero."

http://www.nationalreview.com/agenda/288748/guest-post-scott-winship-offers-his-closing-argument-great-gatsby-curve-wonk-fight-201
http://www.equality-of-opportunity.org/
http://www.u.arizona.edu/~lkenwor/2013thedangeroffrontloadingincomeinequality.pdf
http://www.russellsage.org/sites/all/files/Bloome%20Inequality%20&%20mobility%20April%202013.pdf
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Economics: Growth, Inequality, Redistribution debate
« Reply #285 on: February 10, 2014, 10:06:28 AM »
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For anyone interested in the inside-baseball debate of Economics, this is interesting stuff, IMO.  Links are to pdfs.

Greg Mankiw, Chair of the Harvard Economics Dept, who recently wrote, 'Defending the One Percent': http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.3.21
From the article: Optimal redistribution centers on the elasticity of labor supply
Using the force of government to seize such a large share of the fruits of someone else’s labor is unjust
No amount of applied econometrics can bridge this philosophical divide.

Redistibutionist Robert Solow, Nobel winner, MIT, takes issue and Mankiw responds:
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.1.243
Journal of Economic Perspectives, 2013-2104
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Re: Economics - Recent Trends in Intergenerational Mobility
« Reply #286 on: February 26, 2014, 08:59:18 AM »
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According to a recent study of mobility (see Figure 1), the correlation between parent's income rank and children's income rank is about 0.3.

http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf
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Von Mises
« Reply #287 on: March 24, 2014, 04:55:27 PM »
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 Ludwig von Mises, "Nation, State, and Economy" (1919):

One of the great ideas of [classical] liberalism is that it lets the consumer interest alone count and disregards the producer interest. No production is worth maintaining if it is not suited to bring about the cheapest and best supply. No producer is recognized as having a right to oppose any change in the conditions of production because it runs counter to his interest as a producer. The highest goal of all economic activity is the achievement of the best and most abundant satisfaction of wants at the smallest cost. . . .

Preferring the producer interest over the consumer interest, which is characteristic of antiliberalism, means nothing other than striving artificially to maintain conditions of production that have been rendered inefficient by continuing progress. Such a system may seem discussible when the special interests of small groups are protected against the great mass of others, since the privileged party then gains more from his privilege as a producer than he loses on the other hand as a consumer; it becomes absurd when it is raised to a general principle, since then every individual loses infinitely more as a consumer than he may be able to gain as a producer. The victory of the producer interest over the consumer interest means turning away from rational economic organization and impeding all economic progress.
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Re: Economics
« Reply #288 on: April 10, 2014, 03:30:30 PM »
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“After theology—economics is the most important science to study because the two things that impact everyone are God and the market.”

  - http://thpspeaks.org/post/81769904394/economics-breaking-the-vicious-cycle-through-education
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Pravda on the Hudson: Marx rises again
« Reply #289 on: April 20, 2014, 09:13:34 AM »
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IN the season of resurrection, it’s fitting that he’s with us once again — bearded, prophetic, moralistic, promising to exalt the humble and cast down the mighty from their thrones.

Yes, that’s right: Karl Marx is back from the dead.

Not on a Soviet-style scale, mercifully, and not with the kind of near-scriptural authority that many Marxists once invested in him. But Marxist ideas are having an intellectual moment, and attention must be paid.

As Timothy Shenk writes in a searching essay for The Nation, there are two pillars to the current Marxist revival. One is the clutch of young intellectuals Shenk dubs the “Millennial Marxists,” whose experience of the financial crisis inspired a new look at Old Karl’s critique of capitalism. The M.M.’s have Occupy Wall Street as a failed-but-interesting political example; they have new-ish journals (Jacobin, The New Inquiry, n + 1) where they can experiment and argue; they are beginning to produce books, two of which Shenk reviews and praises.

What they lack, however, is a synthesis, a story, of the kind that Marx himself offered. This is where the other pillar rises — Thomas Piketty’s “Capital in the Twenty-First Century,” a sweeping interpretation of modern economic trends recently translated from the French, and the one book this year that everyone in my profession will be required to pretend to have diligently read.

Piketty himself is a social democrat who abjures the Marxist label. But as his title suggests, he is out to rehabilitate and recast one of Marx’s key ideas: that so-called “free markets,” by their nature, tend to enrich the owners of capital at the expense of people who own less of it.

This idea seemed to be disproved in the 20th century, by the emergence of a prosperous, non-revolutionary working class. But Piketty argues that those developments were transitory, made possible mostly by the massive destruction of inherited capital during the long era of world war.

Absent another such disruption, he expects a world in which the returns to capital permanently outstrip  —  as they have recently  —  the returns to labor, and inequality rises far beyond even today’s levels. Combine this trend with slowing growth, and we face a future like the 19th-century past, in which vast inherited fortunes bestride the landscape while the middle class fractures, weakens, shrinks.

Piketty’s dark vision relies, in part, on economic models I am unqualified to assess. But it also relies on straightforward analysis of recent trends in Western economies, and here a little doubt-raising is in order.

In particular, as the Manhattan Institute’s Scott Winship has pointed out, Piketty’s data seems to understate the income gains enjoyed by most Americans over the last two generations. These gains have not been as impressive as during the post-World War II years, but they do exist: For now, even as the rich have gotten much, much richer, the 99 percent have shared in growing prosperity in real, measurable ways.

Winship’s point raises the possibility that even if Piketty’s broad projections are correct, the future he envisions might be much more stable and sustainable than many on the left tend to assume. Even if the income and wealth distributions look more Victorian, that is, the 99 percent may still be doing well enough to be wary of any political movement that seems too radical, too utopian, too inclined to rock the boat.

This possibility might help explain why the far left remains, for now, politically weak even as it enjoys a miniature intellectual renaissance. And it might hint at a reason that so much populist energy, in both the United States and Europe, has come from the right instead — from movements like the Tea Party, Britain’s UKIP, France’s National Front and others that incorporate some Piketty-esque arguments (attacks on crony capitalism; critiques of globalization) but foreground cultural anxieties instead.

The taproot of agitation in 21st-century politics, this trend suggests, may indeed be a Marxian sense of everything solid melting into air. But what’s felt to be evaporating could turn out to be cultural identity — family and faith, sovereignty and community — much more than economic security.

And somewhere in this pattern, perhaps, lies the beginnings of a  more ideologically complicated critique of modern capitalism — one that draws on cultural critics like Daniel Bell and Christopher Lasch rather than just looking to material concerns, and considers the possibility that our system’s greatest problem might not be the fact that it lets the rich claim more money than everyone else. Rather, it might be that both capitalism and the welfare state tend to weaken forms of solidarity that give meaning to life for many people, while offering nothing but money in their place.

Which is to say that while the Marxist revival is interesting enough, to become more relevant it needs to become a little more ... reactionary.

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Economics, Carter Misery Index = 22
« Reply #591 on: December 30, 2024, 05:07:04 AM »
Without the election of Reagan in 1980, the economic misery would have ended when?  How?

Robert Mundell Nobel Laureate said we needed a two-pronged approach, tight money combined with stimulus by alleviating the asphyxiating effect of super high tax rates.

Jimmy Carter appointed Paul Volcker to head the Fed and step one, tight money, followed. But the stimulus of tax rate cuts did not happen until, 1) Reagan won the election, 2), Reagan got the tax rate cuts through Congress with a Democrat-run House, and 3) the delayed and phased-in tax rate cuts fully took effect, 3 years later.

This would have happened when under Carter?

Never.

Try to revise that history.

"But Jimmy Carter built houses for the poor."

Not nearly enough to make up for the millions of houses not built during double digit interest rates and double digit unemployment.

Those were sad times of economic illiteracy in this country, and only one party, the party of Gerald Ford, learned anything from it.
« Last Edit: December 30, 2024, 05:17:14 AM by DougMacG »