Quote from: miscreanity on August 18, 2011, 02:08:43 PM

Easy money is most closely represented by the 3rd item you listed. It's almost impossible to lose with a 0% rate, as you can use it for even highly conservative investments that might return 2% and be nearly guaranteed profit. Gov't takes all the risk and banks keep all the profit.

It's almost impossible to determine when there's excess in a modern economy of sufficient size. There are so many variables and changes take a long time to propagate through an economy. By the time the metrics used to observe an economy and decide how to manage it finally produce recognizable results, there are major distortions. That makes any actions taken more likely to cause harm and further disruption than correct any imbalances in the first place.

In order to truly be able to centrally manage an economy, massive amounts of data must be collected, increasing complexity and potential for errors. The task becomes herculean while allowing the system to manage itself would result in the distortions and imbalances resolving themselves over time.

There are many factors that influence growth rates. Yes, the human aspect among others. Raw resource availability, energy production, global competition, population growth, infrastructure development, etc...

From a macro level, it is difficult to see the truth because of many variabls and delays. Let's just look at a simple example:

A sell a horse to B at 10$
B sell back to A at 20$
A sell back to B at 40$
.
.
.
A sell the horse back to B at 1280$
.

During this procedure, since A and B are both making money, they will get good incentive to continue this activity. And the bank is willing to provide extra loan to facilitate the transactions because A&B's income are increasing steadily

We all know this is a bubble, but as long as banks are providing money to support the trading, this game could continue and the required money supply will increase exponentially

So, could we define that profit from rising in good's value are easy money and bank should not provide money to support such kind of trading?

But then how could you differentiate rising value caused by speculation or just by increase in demand? Isn't speculation itself some kind of demand?