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ark
Joined: Mar 06, 2008
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 Posted: Wed Jul 02, 2008 9:49 am Post subject:
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| Inventor wrote: | | OK, i see your points... how about if I just try to predict recessions? Then I'd know when to sell my stocks and buy bonds, and when to sell bonds and buy stocks for example. |
No, actually, you wouldn't. This article explains why.
Briefly, there have been nine recessions between 1953 and 2001. The S&P 500 index had positive returns during five of those nine recessions.
If you adopt a strategy of trying to pull your money out of the market before everyone else does, you might or might not be successful. Moreover, if you do get out of the market, you then have to decide when to get back in. Getting either of these decisions wrong carries the risk of losing even more money than if you had done nothing and simply waited it out. |
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x_x
Joined: May 05, 2008
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| Posted: Wed Jul 02, 2008 9:53 am Post subject:
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I'm no economist, but...
I don't think war would necessary lead to recession. War can be good for the economy of a country too. (See USA on WW2)
Also you may want to read some of this
http://www.fas.org/sgp/crs/row/RL33604.pdf
| Quote: | However, the emergence of China as a major economic superpower has raised concern among many U.S. policymakers. Some express concern that China will overtake the United States as the world’s largest trade economy in a few years and as the world’s largest economy within the next two decades. In this context, China’s rise is viewed as America’s relative decline. Another concern are the large and growing U.S. trade deficits with China, which have risen from $10.4 billion in 1990 to an estimated $232 billion in 2006, and are viewed by many Members as an indicator that China uses unfair trade practices (such as an undervalued currency and subsidies to domestic producers) to flood U.S. markets with low-cost goods and to restrict U.S. exports, and that such practices threaten American jobs, wages, and living standards. Many warn that this situation will get worse as China increasingly moves toward production and export of more high-value products, such as cars and computers. A more recent concern has been efforts by Chinese state-owned firms to
acquire U.S. companies and China’s accumulation of U.S. Treasury securities. |
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blue hell
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| Posted: Wed Jul 02, 2008 10:04 am Post subject:
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| gsanchez wrote: | | (See USA on WW2) |
That was a good war 
But apart from that, in pre WW2 German economy was helped by building war stuff as well. Maybe it has something to do with the scale of the war? |
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Kassen
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| Posted: Wed Jul 02, 2008 10:34 am Post subject:
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| gsanchez wrote: |
I don't think war would necessary lead to recession. War can be good for the economy of a country too. (See USA on WW2)
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True, but in WWII the US took the opportunity to also turn a lot of the area they conquered/liberated into a market and export it's culture there because people were typically happy with them arriving. With Vietnam, Iraq, Afghanistan, etc, it's different. I don't think the average customer there is particularly interested in US products. Antics like Agent Orange, stuffing the ground water with radio-active contamination thanks to Uranium-core ammo and cluster-bombing civilian areas tends not to make one very popular.
The idea of simply printing more money in modern times in the West got particularly fashionable with the Vietnam war and abandoning the gold-standard. Since then it's gotten increasingly popular and Bush has been doing it like there's no tomorrow. that need not lead to recession but you *will* get inflation.
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Inventor
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| Posted: Wed Jul 02, 2008 10:38 am Post subject:
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| ark wrote: | | Inventor wrote: | | OK, i see your points... how about if I just try to predict recessions? Then I'd know when to sell my stocks and buy bonds, and when to sell bonds and buy stocks for example. |
No, actually, you wouldn't. This article explains why.
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Aha! I read the article and examined the plot: those rewards were due to the stock market being a leading indicator of recession start and end times. If you knew the recession would begin in a few months, you'd shift funds and minimize the losses, then if you knew the recession would end in a few months you'd shift funds again and reap the rewards. So *IF* you could predict the beginning and end of the recession you'd do better than just holding on to the stock.
Unfortunately the article also states that "It's inherently difficult for equity investors to 'time the economy' by getting out of—or back into—the stock market at just the right moment." - sigh.
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Kassen
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| Posted: Wed Jul 02, 2008 10:43 am Post subject:
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| Blue Hell wrote: | | Maybe it has something to do with the scale of the war? |
Probably, yes, the scale relative to the size of the country. Once the war got going I don't think you can say it was good for the German economy at all. *cough*
There's more going on. Inflation due to printing more money is one factor but another is the debt the US is in. A huge percentage of all savings in the world is borrowed to the US, both to the country and to credit-card users. At some point the money will run out, worldwide, and no more will be available for the US to borrow. Already foreign investors are becoming more reluctant to borrow money to the US because it's becoming clear that most of it will never be repaid.
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BobTheDog
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| Posted: Wed Jul 02, 2008 11:02 am Post subject:
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| Blue Hell wrote: | | gsanchez wrote: | | (See USA on WW2) |
That was a good war :shock:
But apart from that, in pre WW2 German economy was helped by building war stuff as well. Maybe it has something to do with the scale of the war? |
WW2 destroyed the British economy, the Americans did very well out of it. We only finished paying them off recently. Not that we are bitter or anything. |
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x_x
Joined: May 05, 2008
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| Posted: Wed Jul 02, 2008 11:24 am Post subject:
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As I said in my post
| Quote: | | I don't think war would necessary lead to recession. War can be good for the economy of a country too. (See USA on WW2) |
1. I'm not implying war is good
2. I'm not implying WW2 was good for all countries in those times *sneeze*
| Kassen wrote: | | that need not lead to recession but you *will* get inflation. |
I agree, but curiously if you check the inflation rate of the US. It has been pretty constant and under 5%(http://en.wikipedia.org/wiki/Image:US_Historical_Inflation.svg). So my point (with my humble macroeconomic knowledge from high school and as I tried to express in my last post) is that there are more things to consider. |
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Kassen
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| Posted: Wed Jul 02, 2008 12:11 pm Post subject:
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| gsanchez wrote: |
1. I'm not implying war is good
2. I'm not implying WW2 was good for all countries in those times *sneeze*
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Right you are, but I still wanted to point out that WWII was mainly good for the US right before and for the period after they were actually involved in it as a party themselves.
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Wayne Higgins
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| Posted: Thu Jul 03, 2008 7:15 am Post subject:
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Afghanistan did a lot of harm to the economy in the USSR. Vietnam put the US into a recession. Iraq and Afghanistan are squeezing the US. The difference between these wars and WW2 as far as the US Economy is concerned is that the US was not trying to "occupy" a nation as we are with Iraq and Afghanistan. It's just not economically feasable anymore for one nation to attempt such an act.
The complaints in the US are presently based on prices of gas, food, medical care and other items. With the exception of medical care, the US still has nothing to complain about when compared to the rest of the world. The US economy would be in great shape if we decided American businesses decided manufacture goods within the US instead of outsourcing everything. The real problem with the US is that there are not enough people to do all the work. Big business has everything done in other nations to give the nation the delusion of lack of jobs leading to unemployment. I mean, be honest, what do American businesses do besides count money?
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Inventor
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| Posted: Thu Jul 03, 2008 12:22 pm Post subject:
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OK all you nay-sayers, I went ahead and did it! Or at least made a first attempt at it. I wrote a program that simulates a cognitive map of the US economy, and just to make it kewl I used a music programming language, ChucK! This way all the signals: excess dollars, inflation, recession, etc. are all audio tones that can be heard, haha.
The image at the bottom of this message shows the block diagram that I am using, which is derived from comments and videos posted on this thread, especially Kassen's. Muhuhaha so you see I've used your very nay-sayer proofs to create my economic model, how ironic it is! Here is a sample of the text output:
| Code: | 5.000000 years of peace, currently in prosperity -0.312755
0.500000 years of war, currently in prosperity -0.312755
1.000000 years of war, currently in prosperity -0.312755
1.500000 years of war, currently in prosperity -0.940376
2.000000 years of war, currently in prosperity -0.818488
2.500000 years of war, currently in prosperity -0.818488
3.000000 years of war, currently in prosperity -0.818488
3.500000 years of war, currently in prosperity -0.006188
4.000000 years of war, currently in prosperity -0.006188
4.500000 years of war, currently in prosperity -0.006188
5.000000 years of war, currently in prosperity 0.585979
5.500000 years of war, currently in prosperity 0.585979
6.000000 years of war, currently in prosperity 0.585979
6.500000 years of war, currently in prosperity 0.970447
7.000000 years of war, currently in recession 1.017668
0.500000 years of peace, currently in recession 1.017668
1.000000 years of peace, currently in recession 1.017668
1.500000 years of peace, currently in recession 1.332370
2.000000 years of peace, currently in recession 1.332370
2.500000 years of peace, currently in recession 1.332370
3.000000 years of peace, currently in recession 1.561788
3.500000 years of peace, currently in prosperity 0.380808
4.000000 years of peace, currently in prosperity 0.380808
4.500000 years of peace, currently in prosperity 0.529759
5.000000 years of peace, currently in prosperity -0.312881
0.500000 years of war, currently in prosperity -0.312881 |
This is part way into a simulation and it predicts 7 years of war followed by 5 years of peace, with a 3 year recession. Of course, all those times are dependent on the duration in simulated months of delay that I applied to each of the nodes of the cognitive map. Unlike a conventional cognitive map, which has no delay, I added the delay to simulate things like a bill for more currency printing going thru congress or the time it takes before weak dollars actually cause low buying power, etc.
I am interested in your critique of the map, as I need to add more stuff and particularly some consumer spending, export prices, budget defecits, and offshoring, etc. What would you add to the model in terms of nodes and links? I seem to be the only yay sayer and everyone else is a nay sayer about the possibility of creating a valid model, so I hope for lots of constructive criticism! Haha! It sort of works initially, though I wouldn't put any money on it just yet.
Oh, I almost forgot, I posted the ChucK code to the ChucK forum if you want to give it a try. It is really well commented with easy to understand variable names so you can read it like pseudocode even if you don't know ChucK. Cheers nay sayers!
| Description: |
| The US Economy in oversimplified cognitive map form |
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| Filesize: |
16.62 KB |
| Viewed: |
8861 Time(s) |
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ark
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| Posted: Thu Jul 03, 2008 1:09 pm Post subject:
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| Inventor wrote: | | This is part way into a simulation and it predicts 7 years of war followed by 5 years of peace, with a 3 year recession. |
The USA hasn't had a 3-year recession since 1950. What makes you think that now is any different? |
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Inventor
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| Posted: Thu Jul 03, 2008 3:28 pm Post subject:
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| ark wrote: | | Inventor wrote: | | This is part way into a simulation and it predicts 7 years of war followed by 5 years of peace, with a 3 year recession. |
The USA hasn't had a 3-year recession since 1950. What makes you think that now is any different? |
Aha, my first critique and a good one! It's because of the delays I've chosen. There is a 12 month delay in the recession node alone, and 9 months on poor standard of living. I don't know why I chose those particular delays, perhaps they are really just too long.
Also, the whole structure of the thing is really just a loop right now, so that the corrective measure of stopping the war has to flow all the way down the pipe before it takes effect. In a proper, fully developed cognitive map you have more of a mesh-like structure usually, or something amorphous, with positive and negative factors all interacting and circulating in various loops within the mesh.
That's why I'm asking for critiques of the *structure* of the map in particular, so we can get all those positive and negative juices flowing around. Once Obama gets into office, he's not just going to deal with the war, he'll try other economic tweaks to help out with the recession that will hopefully be beneficial, and I need to model those.
So in summary, the delays are arbitrarily long and the map is incomplete, that's why. Do you have any constructive criticism regarding the structure of the map? Cheers!
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Inventor
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| Posted: Fri Jul 04, 2008 3:53 am Post subject:
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After reading a Wikipedia article, or skimming it rather, I think I've got the low-down on economic simulators. You can make a general, approximate one like the one I made that says something like: "A recession will happen once in a while" pretty easily, however trying to get any kind of usable accuracy out of one is another beast entirely. The article compared three systems: the weather, the human body, and the economy. It said that simulating any of those is similar in that they consist of strong forces that are delicately balanced and you must simulate to a level of detail that is not practical, and even if you do, the system behavior is chaotic - as in chaos theory, not just wild and woolly. Small changes in the system have huge effect on the outcome, and that is just not practical to model effectively.
Case in point: all those millions of dollars put into predicting hurricanes for us Floridians and our neighbors led to the prediction years ago that we were in for a major series of storms. Where did they go? We haven't had a hurricane in years, and not a major one since Andrew. So much for simulating chaotic systems.
I remain convinced, however, that there must exist some way to do simulations, AI, etc. such that you can earn a whole lot more than just leaving your money in a fund or something stagnant like that. Surely all those people using all those fancy techniques are not just idiots. You CAN get an edge somehow, some way. I'm not in a hurry about it but I will be exploring the topic in my spare time. Keep you posted.
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blue hell
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| Posted: Fri Jul 04, 2008 12:00 pm Post subject:
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| Inventor wrote: | | Surely all those people using all those fancy techniques are not just idiots. |
No, they're well paid idiots
Still I think it's good to do research on this stuff. And models are surely helpful for that, but that's about it .. IMHO. |
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