Is a Double Dip Recession Likely?

[Malerin]

Part of the fun of discussing econ is, of course, putting your beliefs to the test and seeing how they measure up.


A double dip recession is defined broadly as a recession followed by a short-lived recovery, followed by another recession. Take "likely" to mean greater than a 50% chance.

I vote yes.

[Tippit]

Originally Posted by Malerin

Part of the fun of discussing econ is, of course, putting your beliefs to the test and seeing how they measure up.


A double dip recession is defined broadly as a recession followed by a short-lived recovery, followed by another recession. Take "likely" to mean greater than a 50% chance.

I vote yes.

Yes, because hyperinflationary depression isn't a listed option.

[Malerin]

Originally Posted by Tippit

Yes, because hyperinflationary depression isn't a listed option.

Well, one economic calamity at a time.

[timhau]

I want the Planet X option.

[drkitten]

Originally Posted by timhau

I want the Planet X option.

Look at who the first two posters are. This IS the Planet X option.

[a_unique_person]

we could be up for it now. The debt was moved from the private sector to the government sector, according to one analyst. That means it's still out there, and it's still causing havoc.

[Nosi]

Pass the bunker!

[Howie Felterbush]

So...this doesn't involve ice cream?

[TraneWreck]

Originally Posted by Tippit

Yes, because hyperinflationary depression isn't a listed option.

God. This zombie just won't die. It's devouring brains at an incredible rate.

Quote:

The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.

But what about Greece and all that? Look, right now sovereign debt problems are taking place in countries with a very specific problem: they’re part of the euro zone, AND they’re badly overvalued thanks to huge capital inflows in the good years; as a result they’re facing years of grinding deflation. Counties not in that situation are not facing any pressure from the markets for immediate cuts; as of this morning, 10-year bonds were yielding 3.51 in Britain, 3.21 in the US, 1.27 in Japan.

http://krugman.blogs.nytimes.com/201...-here-we-come/

INFLATION IS COMING, INFLATION IS COMING!!

But back in reality, we're facing deflation. That's right, after the 10 hottest years on record, the real danger is from glaciers ripping apart New York.

As to the OP, I'm very much worried about a double dip. Whether it's likely or not depends on how we behave over the next year or so. All indications seem to point towards the deficit Chicken-Littles winning out and the imposition of austerity measures.

That drastically increases the likelihood of a double dip. I would say 52-48 in favor of a double dip right now. That could easily be changed, but the political climate seems to be making it impossible.

Edit: I forgot to include Krugman's colorful description of the deficit hawks' reasoning: "Utter folly posing as wisdom. Incredible."

[Fnord]

[X] On Planet X, we only double-dip when we dance!

[Malerin]

Originally Posted by Howie Felterbush

So...this doesn't involve ice cream?

Ever had those dippin dots ice cream? Yum yum in the tum.

[Malerin]

Originally Posted by TraneWreck

God. This zombie just won't die. It's devouring brains at an incredible rate.



http://krugman.blogs.nytimes.com/201...-here-we-come/

INFLATION IS COMING, INFLATION IS COMING!!

But back in reality, we're facing deflation. That's right, after the 10 hottest years on record, the real danger is from glaciers ripping apart New York.

As to the OP, I'm very much worried about a double dip. Whether it's likely or not depends on how we behave over the next year or so. All indications seem to point towards the deficit Chicken-Littles winning out and the imposition of austerity measures.

That drastically increases the likelihood of a double dip. I would say 52-48 in favor of a double dip right now. That could easily be changed, but the political climate seems to be making it impossible.

Edit: I forgot to include Krugman's colorful description of the deficit hawks' reasoning: "Utter folly posing as wisdom. Incredible."

How do you figure? The budget deficit is projected to be $1.3 trillion (9% of GDP). I don't know how you can call that austere. Unless you think Congress will enact draconian cuts or tax increases (they won't).

[TraneWreck]

Originally Posted by Malerin

How do you figure? The budget deficit is projected to be $1.3 trillion (9% of GDP). I don't know how you can call that austere. Unless you think Congress will enact draconian cuts or tax increases (they won't).

A few things:

First, the fiscal stimulus was a wash because spending at the federal level was off-set by cuts at the state level.

http://voices.washingtonpost.com/ezr..._an_expan.html

Thus, we haven't yet engaged in expansive policies.

Second, about 37% of the deficit is made up of lost revenue. The way to close that gap is to stimulate the economy.

Finally, the problems with big deficits (creditor fear, inflation...) are not happening. Here's an excellent rundown of the state of things, including helpfully simple math (a must for the non-experts, like myself):

http://delong.typepad.com/sdj/2010/0...icits-now.html

[Malerin]

Originally Posted by TraneWreck

A few things:

First, the fiscal stimulus was a wash because spending at the federal level was off-set by cuts at the state level.

http://voices.washingtonpost.com/ezr..._an_expan.html

That's probably true. State and local govt.'s have to balance their budgets. California is like a microcosm of the federal govt:

In 2000, California spent $137 billion. By 2007, spending had increased about 40% to $194 billion. However, the population had increased less than 10%.
http://www.dof.ca.gov/budgeting/budg...ts/CHART-B.pdf

This was unsustainable, and the house of cards eventually collapsed into the morass of yearly budget battles Californians are now used to. Do you think the federal government should bail out California every year?

Quote:

Thus, we haven't yet engaged in expansive policies.

We haven't? Just in the last ten years, we've started two wars, a huge new entitlement program, an even huger entitlement program, a massive bailout of the finanicial sector, a massive stimulus bill, and done nothing about the looming mulit-trillion dollar insolvency of the entitement programs already on the books.

I think the better question is, in what area has govt. not expanded into?

Quote:

Second, about 37% of the deficit is made up of lost revenue. The way to close that gap is to stimulate the economy.

The stimulus we passed doesn't seem to have been all that stimulative.

Quote:

Finally, the problems with big deficits (creditor fear, inflation...) are not happening. Here's an excellent rundown of the state of things, including helpfully simple math (a must for the non-experts, like myself):

http://delong.typepad.com/sdj/2010/0...icits-now.html

True, the cost of borrowing is ridiculously cheap nowadays. But just because you can get a cheap loan doesn't mean you should get a cheap loan. Governments, like people, get used to living beyond their means. One of the potential problems Fitch talked about when looking at America was we have a lot of short term debt that will be rolled over soon. If there's a spike in interest rates, borrowing won't be quite so cheap anymore.

[TraneWreck]

Originally Posted by Malerin

That's probably true. State and local govt.'s have to balance their budgets. California is like a microcosm of the federal govt:

[...]

This was unsustainable, and the house of cards eventually collapsed into the morass of yearly budget battles Californians are now used to. Do you think the federal government should bail out California every year?

Countless jobs could have been saved if the Fed Gov had bailed out the states. The entire combined budget shortfall of all the states was significantly less than the money we spent on the financial sector. That money would have been paid back through increased productivity in much the same way the original bailouts have mostly been paid off.

Originally Posted by Malerin

We haven't? Just in the last ten years, we've started two wars, a huge new entitlement program, an even huger entitlement program, a massive bailout of the finanicial sector, a massive stimulus bill, and done nothing about the looming mulit-trillion dollar insolvency of the entitement programs already on the books.

I think the better question is, in what area has govt. not expanded into?

The financial bailouts have mostly been paid back and as the link above shows, there has not been a net stimulus. It was just a reallocation of funds.

I assume by entitlement program you mean the health care bill, but, of course, that is completely funded by eliminating waste and fraud in medicare as well as generating its own funding through revenue raising measures. It actually lowers the deficit, so that isn't an example of what you're talking about in the least, if that's what you meant.

As for the rest, agreed. It was a horrible idea to engage in two unecessary, unfunded wars, as well as offer irresponsible tax cuts to the rich and pass a prescription drug plan that's a $9 trillion unfunded liability. That's the hole we have to dig ourselves out of, but that won't happen with austerity. We need the economy to be functional again before cuts can be made and taxes raised.

Here's Krugman on this very topic (the entirety of the short post is highly educational):

Quote:

The key thing you need to realize is that eliminating stimulus spending, while it would inflict severe economic harm, would do almost nothing to reduce future debt problems.

[...]

So wise policy, as defined by the G20 and like-minded others, consists of destroying economic recovery in order to satisfy hypothetical irrational demands from the markets — demands that economies suffer pointless pain to show their determination, demands that markets aren’t actually making, but which serious people, in their wisdom, believe that the markets will make one of these days.

http://krugman.blogs.nytimes.com/201...-in-authority/

Originally Posted by Malerin

The stimulus we passed doesn't seem to have been all that stimulative.

It actually helped a great deal, according to the CBO, but as the earlier link shows, whatever effect it was meant to have was negated by anti-stimulus at the state and local levels. The main problem with the stimulus was that it should have been larger. Including bailouts for all the states would have kept hundreds of thousands of important jobs, but the deficit hawks irrationally sabotaged the process, and they're doing it again.

Originally Posted by Malerin

True, the cost of borrowing is ridiculously cheap nowadays. But just because you can get a cheap loan doesn't mean you should get a cheap loan. Governments, like people, get used to living beyond their means. One of the potential problems Fitch talked about when looking at America was we have a lot of short term debt that will be rolled over soon. If there's a spike in interest rates, borrowing won't be quite so cheap anymore.

10% unemployment means we should, that's real human suffering. 14 million Americans are out of work.

Governments are not people, this is the fundamental fallacy underlying all of this "pain is necessary" thinking.

That DeLong post put everything into clear numbers. What did you disagree with? We can easily grow our way out of the tiny amount of interest we would incur from borrowing. The recovery would happen much more quickly, and productivity would narrow the gap.

Pay close attention to that Krugman post. Austerity is pointless. There's not even an explanation of how it will solve the world's long-term deficit and debt issues, it's just pain for pain's sake.

What current economic indicator makes people think that the deficit is deadly?

[Arrow]

I see today Robert Reich believes we are heading toward a double dip.

http://blogs.uncommonwisdomdaily.com...an+Brodrick%29

Why We’re Falling into a Double-Dip Recession
by SEAN BRODRICK on JUNE 8, 2010
Robert Reich explains (and I agree) …

Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don’t have the dough. They can’t any longer treat their homes as ATMs, as they did before the Great Recession.

Businesses won’t rehire if there’s not enough demand for their goods and services.

The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we’re in the dip.

Go read the whole thing.

[Malerin]

[quote=TraneWreck]

Originally Posted by Malerin

That's probably true. State and local govt.'s have to balance their budgets. California is like a microcosm of the federal govt:

[...]

This was unsustainable, and the house of cards eventually collapsed into the morass of yearly budget battles Californians are now used to. Do you think the federal government should bail out California every year?

Originally Posted by TraneWreck

Countless jobs could have been saved if the Fed Gov had bailed out the states.

Well, not countless, but quite a few, I agree with you. But then moral hazard raises its ugly head. You can only bail someone out so many times before you run out of money.

Originally Posted by TraneWreck

The entire combined budget shortfall of all the states was significantly less than the money we spent on the financial sector. That money would have been paid back through increased productivity in much the same way the original bailouts have mostly been paid off.

TARP repayments total about $180 billion. TARP was originally a $700 billion bailout. But let's supposed we make money on the whole thing. You still have the moral hazard of financial institutions knowing that, if they're too big to fail, however bad their investments are, the govt. will be there to pick up the tab. Is that a road we want to go down? What will TARP II cost us?

Originally Posted by Malerin

We haven't? Just in the last ten years, we've started two wars, a huge new entitlement program, an even huger entitlement program, a massive bailout of the finanicial sector, a massive stimulus bill, and done nothing about the looming mulit-trillion dollar insolvency of the entitement programs already on the books.

I think the better question is, in what area has govt. not expanded into?

Originally Posted by TraneWreck

The financial bailouts have mostly been paid back and as the link above shows, there has not been a net stimulus. It was just a reallocation of funds.

And a huge addition to the national debt. States are having to behave like cash-strapped households that have run up their credit-cards: some belt-tightening is an order. This is not necessarily a bad thing. California, for example, was on an unsustainable path of govt. largesse. Better we deal with it now than ten years down the road. Look to Greece if you want an example of governments lying about and papering over fiscal crises. It never works in the long run.

Originally Posted by TraneWreck

I assume by entitlement program you mean the health care bill, but, of course, that is completely funded by eliminating waste and fraud in medicare as well as generating its own funding through revenue raising measures.

Come now, you can't honetly believe that. I vote Democrat across the board and even I know this health care bill will cost us big.

Quote:

It actually lowers the deficit, so that isn't an example of what you're talking about in the least, if that's what you meant.

But seriously, it will cut down on bankruptcies, which will have a positive effect. But if youi believe it will lower the deficit... I don't know what to tell you.

Originally Posted by TraneWreck

As for the rest, agreed. It was a horrible idea to engage in two unecessary, unfunded wars, as well as offer irresponsible tax cuts to the rich and pass a prescription drug plan that's a $9 trillion unfunded liability. That's the hole we have to dig ourselves out of, but that won't happen with austerity. We need the economy to be functional again before cuts can be made and taxes raised.

Well, we need something. The status quo doesn't seem to be working too well.

Originally Posted by TraneWreck

Here's Krugman on this very topic (the entirety of the short post is highly educational):

The key thing you need to realize is that eliminating stimulus spending, while it would inflict severe economic harm, would do almost nothing to reduce future debt problems.

Krugman never met a deficit he didn't like.

Originally Posted by TraneWreck

So wise policy, as defined by the G20 and like-minded others, consists of destroying economic recovery in order to satisfy hypothetical irrational demands from the markets — demands that economies suffer pointless pain to show their determination, demands that markets aren’t actually making, but which serious people, in their wisdom, believe that the markets will make one of these days.

It's not irrational. Fitch has already threatened us with a possible credit downgrade if we don't get our budget deficit under control. Moody's credit rating of Greece depends on their austerity measures.

Originally Posted by Malerin

The stimulus we passed doesn't seem to have been all that stimulative.

Originally Posted by TraneWreck

It actually helped a great deal, according to the CBO, but as the earlier link shows, whatever effect it was meant to have was negated by anti-stimulus at the state and local levels. The main problem with the stimulus was that it should have been larger. Including bailouts for all the states would have kept hundreds of thousands of important jobs, but the deficit hawks irrationally sabotaged the process, and they're doing it again.

Maybe it helped. If you spend that much, you'd be hard pressed not to see some kind of benefit from it. I would like to see us bring back the CCC and other work programs.

But back to the moral hazard problem. At some point you have to cut the states off from the federal tit. There's a limit to how many institutions we can bailout.

Originally Posted by Malerin

True, the cost of borrowing is ridiculously cheap nowadays. But just because you can get a cheap loan doesn't mean you should get a cheap loan. Governments, like people, get used to living beyond their means. One of the potential problems Fitch talked about when looking at America was we have a lot of short term debt that will be rolled over soon. If there's a spike in interest rates, borrowing won't be quite so cheap anymore.

Originally Posted by TraneWreck

10% unemployment means we should, that's real human suffering. 14 million Americans are out of work.

If it's spend in the right way, it can pay dividends down the road. We also have to address the problem of why private sector job growth has been so sluggish.

Originally Posted by TraneWreck

Governments are not people, this is the fundamental fallacy underlying all of this "pain is necessary" thinking.

Not sure what you mean here. Governments are run by people.

Quote:

That DeLong post put everything into clear numbers. What did you disagree with? We can easily grow our way out of the tiny amount of interest we would incur from borrowing. The recovery would happen much more quickly, and productivity would narrow the gap.

We would never pay down the debt. We haven't in decades. Even during the Clinton years, the debt increased. We could hope to grow our way out of it so it becomes more manageable. Failing that, we could inflate our way out of it, but that's not a road I think we want to go down.

Originally Posted by TraneWreck

Pay close attention to that Krugman post. Austerity is pointless. There's not even an explanation of how it will solve the world's long-term deficit and debt issues, it's just pain for pain's sake.

Not when ratings agencies make austerity contingent on their rating. Eventually, you have to pay all those bond holders back.

Originally Posted by TraneWreck

What current economic indicator makes people think that the deficit is deadly?

Because they know intuitively they could never take on that kind of debt and remain solvent.

[TraneWreck]

[quote=Malerin;6013732]

Originally Posted by TraneWreck

Well, not countless, but quite a few, I agree with you. But then moral hazard raises its ugly head. You can only bail someone out so many times before you run out of money.

So many times? How about once?

Allowing states to establish balanced budgets going forward by eliminating commitments made before the economic collapse would have significantly improved the state of the country. By not doing so they essentially guaranteed that state level cuts would counteract the stimulus.

Originally Posted by Malerin

TARP repayments total about $180 billion. TARP was originally a $700 billion bailout. But let's supposed we make money on the whole thing. You still have the moral hazard of financial institutions knowing that, if they're too big to fail, however bad their investments are, the govt. will be there to pick up the tab. Is that a road we want to go down? What will TARP II cost us?

There's some confusion in the numbers here.

TARP purchased or insured up to $700 billion of troubled assets. The initial expected cost to the government was $356 billion, and the actual cost, so far, has been $89 billion. Significantly smaller in relation to GDP than the savings and loans bailouts in the 80's.

Quote:

Of the $245 billion invested in U.S. banks, over $169 billion has been paid back...

http://en.wikipedia.org/wiki/Trouble...Relief_Program

Additionally, we don't need another TARP, we need another stimulus.

Originally Posted by Malerin

And a huge addition to the national debt. States are having to behave like cash-strapped households that have run up their credit-cards: some belt-tightening is an order. This is not necessarily a bad thing. California, for example, was on an unsustainable path of govt. largesse. Better we deal with it now than ten years down the road. Look to Greece if you want an example of governments lying about and papering over fiscal crises. It never works in the long run.

This is just a wrong view of economics based on nothing in particular. Find the model that shows how austerity measures will lower the debt ten years down the road.

Please read this post again. You can whine about Krugman, but you can't wave away the actual numbers:

Quote:

The key thing you need to realize is that eliminating stimulus spending, while it would inflict severe economic harm, would do almost nothing to reduce future debt problems.

http://krugman.blogs.nytimes.com/201...-in-authority/

If you want to argue in favor of austerity, you have to do more than shake your head and rely on tired, long disproven conventional wisdom.

Originally Posted by Malerin

Come now, you can't honetly believe that. I vote Democrat across the board and even I know this health care bill will cost us big.

This is just a purely nihilistic view of our ability to learn things through study. Thousands, even millions, of labor hours were invested in constructing a bill and studying the outcomes to insure that it was deficit neutral and cut the debt over the long term.

If you have some evidence to explain why getting health care costs under control WON'T do those things, please share them. But you can't just say, "come on...no, seriously coooome on."

Originally Posted by Malerin

Well, we need something. The status quo doesn't seem to be working too well.

I agree. We need more stimulus.

Originally Posted by Malerin

Krugman never met a deficit he didn't like.

Yet he opposed the tax cuts, the unfunded wars, and the irresponsible prescription drug plan.

Krugman does not alway argue for increased spending. We are currently in a liquidity trap with private spending almost nil. Additionally we are at the zero bound, meaning we can't lower interest rates any further to stimulate the economy. When this happens, stimulus measures are necessary.

That doesn't mean deficits should be run up during more secure economic times. You're taking his prescription for a response to a crisis and bizarrely accusing him of recommending similar measures at all times.

Originally Posted by Malerin

It's not irrational. Fitch has already threatened us with a possible credit downgrade if we don't get our budget deficit under control. Moody's credit rating of Greece depends on their austerity measures.

Greece has a very special set of circumstances that do not apply to us:

Quote:

But what about Greece and all that? Look, right now sovereign debt problems are taking place in countries with a very specific problem: they’re part of the euro zone, AND they’re badly overvalued thanks to huge capital inflows in the good years; as a result they’re facing years of grinding deflation. Countries not in that situation are not facing any pressure from the markets for immediate cuts; as of this morning, 10-year bonds were yielding 3.51 in Britain, 3.21 in the US, 1.27 in Japan.

http://krugman.blogs.nytimes.com/201...-here-we-come/

They can threaten all they want, but the economic indicators show we have nothing to worry about. As Brad Delong said:

Quote:

...we have a bigger problem right now: 10% unemployment, five percentage points higher than it needs to be, something like $120 billion every month of wealth thrown away via unusued capacity and idle workers. Failing to do everything you can to solve a big problem now because the solution might--but probably won't--set us up for a smaller problem later does not seem to me to be wise policy. My answer would be different if the yield curve were flashing red, or even yellow. But it isn't.

http://delong.typepad.com/sdj/2010/0...-the-math.html

Originally Posted by Malerin

Maybe it helped. If you spend that much, you'd be hard pressed not to see some kind of benefit from it. I would like to see us bring back the CCC and other work programs.

Agreed.

Originally Posted by Malerin

But back to the moral hazard problem. At some point you have to cut the states off from the federal tit. There's a limit to how many institutions we can bailout.

Bailouts are different from stimulus programs. If you notice the latest job numbers, almost all added jobs were from temporary census positions. That means the private sector is just not creating jobs. The moral hazard of government crowding out private enterprise is currently non-existant.

But I agree with you that eventually it has to end. This is something that has been studied and discussed a great deal. The proponents of stimulus are even giving clear indicators for when government should pull back:

Quote:

Thus it is a no-brainer that we ought to be doing more fiscal stimulus. Each dollar of missing production and each unemployed worker right now is much, much more painful to the country and a much greater loss to human welfare than a dollar of missed production and an unemployed worker in normal times.

The argument for more spending is airtight as long as the arithmetic holds out. That is, until:

further increases in the deficit lead to rising expectations of inflation, leading the Federal Reserve to raise short-term interest rates, which then crowds out private-sector investment spending;
or:

further increases in the deficit lead to pressure on the federal government’s debt capacity, so that we can no longer finance additional federal government debt at such extraordinarily advantageous interest rates.
Back in December 2008 the incoming Obama National Economic Council feared that an increase in the proposed size of the Obama stimulus program, the ARRA, from $800 billion to $1.2 trillion would bring these factors into play. It is now clear that they were overly pessimistic, in large part because they were overly optimistic about the state of the economy.

Right now, bad politics is undermining good policy, hurting the American economy and legions of unemployed workers. It is long past time for another stimulus package.

http://delong.typepad.com/sdj/2010/0...icits-now.html

I would once again recommend reading this whole post. He lays out the difference between proper behavior in fiscal crises and normal times as clearly as can be done.

Originally Posted by Malerin

If it's spend in the right way, it can pay dividends down the road. We also have to address the problem of why private sector job growth has been so sluggish.

This is well understood. It's a liquidity trap. The economy contracts, people stop spending, businesses lay off workers, that leads to even less spending, which leads to even more lay offs...and so on.

The government is the only entity with the power to break that cycle. The ARRA was supposed to do this but it was too small.

Originally Posted by Malerin

Not sure what you mean here. Governments are run by people.

I don't know how else to explain it. The analogy between a federal budget and a household budget is comically flawed. The relationship between lenders and borrowers is completely different, nations exist for centuries and can borrow against their future then grow out of debt.

The world understands this, which is why there's no panic concerning our financial situation.

Originally Posted by Malerin

We would never pay down the debt. We haven't in decades. Even during the Clinton years, the debt increased. We could hope to grow our way out of it so it becomes more manageable. Failing that, we could inflate our way out of it, but that's not a road I think we want to go down.

One way to insure we don't improve the situation is to impose austerity measures.

Originally Posted by Malerin

Not when ratings agencies make austerity contingent on their rating. Eventually, you have to pay all those bond holders back.

They will not downgrade the US's rating, especially when people are so anxious to lend us money, as they are right now.

Originally Posted by Malerin

Because they know intuitively they could never take on that kind of debt and remain solvent.

I don't undertand this response. All economic indicators show that we can take on more short term debt.

[Tippit]

Originally Posted by TraneWreck

Countless jobs could have been saved if the Fed Gov had bailed out the states. The entire combined budget shortfall of all the states was significantly less than the money we spent on the financial sector. That money would have been paid back through increased productivity in much the same way the original bailouts have mostly been paid off.

It's frustrating that someone who appears to be otherwise intelligent cannot grasp why this Keynesian policy is morally, intellectually, and literally bankrupt. First of all, you continue to ignore the fact that you can't "stimulate" the economy without depressing it somewhere else. One man's "stimulus" is another man's tax hike, either conventionally or through the inflation tax. So we're not talking about a stimulus we're talking about a redistribution of wealth. Second, creating and propping up non-productive jobs for the states is one of the reasons why we're in this mess. In order to grow, the private sector is far more likely than government to create jobs which produce goods and services that people actually want, and aren't forced to subsidize. That represents real economic growth. Third, the bailouts aren't "mostly paid off". The Fed's secret bailout eclipses tarp in size and scope. When last presented with this information, you did the online equivalent of putting your fingers in your ears and repeating "lalala", as if you couldn't hear it, it wouldn't be true. As far as the Congressional bailout, TARP, Citibank is far from having paid back it's sweet subsidized loans, and it still has the potential for huge losses. Many of the warrants owned by the government on banks in the TARP program are indeed profitable, but the banks in question are petitioning the government to not exercise them, and to renegotiate the terms of their agreements to be more favorable to the banks.

Quote:

The financial bailouts have mostly been paid back and as the link above shows, there has not been a net stimulus. It was just a reallocation of funds.

Wrong, see above. It wasn't a "reallocation of funds", it was a regressive re-distribution of wealth. You are in essence supporting the existence of a bankrupt and corrupt system, and then crying when it's profits are redirected to the big banksters as it was designed, instead of the poor.

Quote:

I assume by entitlement program you mean the health care bill, but, of course, that is completely funded by eliminating waste and fraud in medicare as well as generating its own funding through revenue raising measures. It actually lowers the deficit, so that isn't an example of what you're talking about in the least, if that's what you meant.

That remains to be seen. Lets not hold our collective breath.

Quote:

As for the rest, agreed. It was a horrible idea to engage in two unecessary, unfunded wars, as well as offer irresponsible tax cuts to the rich and pass a prescription drug plan that's a $9 trillion unfunded liability. That's the hole we have to dig ourselves out of, but that won't happen with austerity. We need the economy to be functional again before cuts can be made and taxes raised.

Finally, a paragraph from you which i can agree with. Basically, crooked politicians and banks have saddled you and I, the public, with enormous debts created out of thin air, and often funded by foreign exchange which itself is financed by foreign central banks debasing their own currencies (see China). "Austerity" represents using the funds that would ordinarily pay for public works, to be used instead to pay down mostly dishonest debts, much of which to unknown foreigners. The parasites are killing the host, and it is time for the host to shake them off by defaulting. This, instead of enacting draconian austerity measures in the form of cutting public works, or raising taxes (conventionally, or by inflation). Either of the latter two courses of action will prove to be the economic coup de grace to the American public.

Having said that, the government is a terrible allocator of capital, which is why we need to cut taxes and spending and let the productive savers among us decide how to properly invest for the future.

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Here's Krugman on this very topic (the entirety of the short post is highly educational):



http://krugman.blogs.nytimes.com/201...-in-authority/

Krugman is a liar and a shill, you would do better to examine what he's actually saying with a critical eye.

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It actually helped a great deal, according to the CBO, but as the earlier link shows, whatever effect it was meant to have was negated by anti-stimulus at the state and local levels. The main problem with the stimulus was that it should have been larger. Including bailouts for all the states would have kept hundreds of thousands of important jobs, but the deficit hawks irrationally sabotaged the process, and they're doing it again.

It shouldn't have been larger, it shouldn't have been at all. Our economy doesn't have to be held hostage to the anointed bankers and Wall Street. There is a better way, it's called monetary reform. Look in to it.

Quote:

That DeLong post put everything into clear numbers. What did you disagree with? We can easily grow our way out of the tiny amount of interest we would incur from borrowing. The recovery would happen much more quickly, and productivity would narrow the gap.

This is, to say the least, absolutely nuts. First of all, our credit rating is in jeopardy, unless you have your head in the sand like some of our other allegedly esteemed posters here. We can't expect the "generosity" of foreigners forever, and that time is quickly coming to an end as the problems in our own financial house are coming to light. Ultimately, the Fed is going to have to monetize even more debt than it already has, which has been enormous, and the consequences will be an even larger disaster. Tell me this, if you think the solution to all of our economic problems is just borrowing and printing even more insane amounts of money, why don't we just never stop? When is too much of a "good thing" enough? I think if you ever understood the answer to that question, you would understand the absurdity of the position which you've borrowed from Paul Krugman.

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Pay close attention to that Krugman post. Austerity is pointless. There's not even an explanation of how it will solve the world's long-term deficit and debt issues, it's just pain for pain's sake.

What current economic indicator makes people think that the deficit is deadly?

The fact that it is quickly growing unservicable, and would instantly become unservicable if short term interest rates were to spike. Austerity isn't pointless, it's just a transfer of yet more of our real wealth to the banking class. The parasites are killing the host.

[TraneWreck]

Originally Posted by Tippit

It's frustrating that someone who appears to be otherwise intelligent cannot grasp why this Keynesian policy is morally, intellectually, and literally bankrupt...Many of the warrants owned by the government on banks in the TARP program are indeed profitable, but the banks in question are petitioning the government to not exercise them, and to renegotiate the terms of their agreements to be more favorable to the banks.

I've been on this ride before, not that exciting.

I do enjoy the notion that providing funds to create jobs for currently unemployed citizens is a redistribution of wealth to the rich. Baffling.

Originally Posted by Tippit

Wrong, see above. It wasn't a "reallocation of funds", it was a regressive re-distribution of wealth. You are in essence supporting the existence of a bankrupt and corrupt system, and then crying when it's profits are redirected to the big banksters as it was designed, instead of the poor.

You're conflating TARP with the stimulus. The stimulus money didn't go to the bankers, it went to all kinds of projects:

http://www.recovery.gov/Pages/home.aspx

Because the states weren't supported, however, stimulus spending was counteracted by cuts at the state level. Thus, instead of a stimulus, it amounted to shifting money around.

Originally Posted by Tippit

Finally, a paragraph from you which i can agree with. Basically, crooked politicians and banks have saddled you and I, the public, with enormous debts created out of thin air, and often funded by foreign exchange which itself is financed by foreign central banks debasing their own currencies (see China)...Having said that, the government is a terrible allocator of capital, which is why we need to cut taxes and spending and let the productive savers among us decide how to properly invest for the future.

Yes, austerity rarely (if ever) means suffering for the people calling for austerity.

Originally Posted by Tippit

Krugman is a liar and a shill, you would do better to examine what he's actually saying with a critical eye.

This is beneath you. Either deal with his actual views, or ignore him, aimless slander is childish.

Originally Posted by Tippit

It shouldn't have been larger, it shouldn't have been at all. Our economy doesn't have to be held hostage to the anointed bankers and Wall Street. There is a better way, it's called monetary reform. Look in to it.

Again, bailouts and stimulus aren't the same.

Originally Posted by Tippit

This is, to say the least, absolutely nuts. First of all, our credit rating is in jeopardy, unless you have your head in the sand like some of our other allegedly esteemed posters here. We can't expect the "generosity" of foreigners forever, and that time is quickly coming to an end as the problems in our own financial house are coming to light. Ultimately, the Fed is going to have to monetize even more debt than it already has, which has been enormous, and the consequences will be an even larger disaster. Tell me this, if you think the solution to all of our economic problems is just borrowing and printing even more insane amounts of money, why don't we just never stop? When is too much of a "good thing" enough? I think if you ever understood the answer to that question, you would understand the absurdity of the position which you've borrowed from Paul Krugman.

1) Our credit rating is fine, which is why the long-term bond rates are so low. People are literally falling over themselves to lend money to us.

2) Find a single economic indicator that shows we have a debt problem. No inflation, low long-term rates, enthusiastic creditors. You're screaming "FIRE!" in the middle of Noah's Flood.

3) The solution to our problem is to borrow money now at exceedingly low rates, use that money to stimulate the economy, and once the economy is stabilized and running on all cylinders, deal with the deficit/debt.

I don't mind arguing with you, but I included detailed links that dealt with every issue you've raised. Obviously you don't have to agree with them, but instead of just reiterating an argument I've already considered, please read the link and reply to the argument therein. Otherwise nothing ever progresses.

Here, once again, are detailed explanations of how to move the economy forward and when to stop government stimulus:

http://delong.typepad.com/sdj/2010/0...-the-math.html

http://delong.typepad.com/sdj/2010/0...icits-now.html

Obviously borrowing forever is a terrible idea. No one is suggesting that.

Originally Posted by Tippit

The fact that it is quickly growing unservicable, and would instantly become unservicable if short term interest rates were to spike. Austerity isn't pointless, it's just a transfer of yet more of our real wealth to the banking class. The parasites are killing the host.

But short term interest rates aren't spiking, they're at the zero bound and would be negative without intervention, nor do they show any signs of so doing. Deal with the problems in front of us, not chimeras of paranoid imagination.

[Tippit]

Originally Posted by TraneWreck

I do enjoy the notion that providing funds to create jobs for currently unemployed citizens is a redistribution of wealth to the rich. Baffling.

As much as I want everyone to be employed, it isn't a taxpayer obligation. If you believe otherwise, then you should probably live in a communist country, because the US Constitution isn't for you. Creating taxpayer sponsored busy-work isn't creating wealth, or growing the economy. If you want an economy that's closer to full employment, then lets abolish the Fed, which is the cause of asset inflation and speculative bubbles. The bust phase of the fiat-money fractional reserve banking system is the cause of the unemployment. If you were a physician, what you're advocating would be based on a complete misdiagnosis, with a prescription for cyanide.

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You're conflating TARP with the stimulus. The stimulus money didn't go to the bankers, it went to all kinds of projects:

You used the term "bailout". Do you equate "stimulus" with "bailout"?

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Because the states weren't supported, however, stimulus spending was counteracted by cuts at the state level. Thus, instead of a stimulus, it amounted to shifting money around.

So, not only should the Federal Government and the Federal Reserve borrow more, and print more money to bail out bankers and insurance companies, it should provide states that have completely mismanaged their budgets with even more funding. That's truly astounding, that you believe this is a good thing.

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Yes, austerity rarely (if ever) means suffering for the people calling for austerity.

Indeed. Do you support a default on US government obligations, in the event they become unservicable?

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This is beneath you. Either deal with his actual views, or ignore him, aimless slander is childish.

Krugman's economic kool-aid is beneath me. I replied to one of his blog postings and debunked his lies point-by-point on another thread. And yes, Krugman is a liar, because he's smart enough to know what his economic proposals mean, and who benefits. I only wish I could ignore hacks like him, if only economists like him weren't ruining our country.

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1) Our credit rating is fine, which is why the long-term bond rates are so low. People are literally falling over themselves to lend money to us.

Do you realize that the Fed is secretly monetizing US government debt hand over fist, thereby suppressing (manipulating) interest rates? People are falling over themselves to lend us money? What are you smoking? Someone forgot to tell China, our largest creditor. The only reason global demand for US Treasuries has spiked recently, is due to the abysmal state of the alternatives! This situation will end sooner rather than later.

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2) Find a single economic indicator that shows we have a debt problem. No inflation, low long-term rates, enthusiastic creditors. You're screaming "FIRE!" in the middle of Noah's Flood.

You're an ostrich with your head in the sand. We have the mother of all asset inflation in the US Treasury bubble, in the midst of a global meltdown in sovereign debt, of which the US will be the last house-of-cards standing. Mark my words.

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3) The solution to our problem is to borrow money now at exceedingly low rates, use that money to stimulate the economy, and once the economy is stabilized and running on all cylinders, deal with the deficit/debt.

Color me surprised at your "solution". Please, since we can borrow and print our way to prosperity, with absolutely no negative consequences, why should we ever stop? No really. Why should we worry about the debt at all, ever? I'd love to hear your rationale, and please, no more Krugman links, I want to hear what you think.

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I don't mind arguing with you, but I included detailed links that dealt with every issue you've raised. Obviously you don't have to agree with them, but instead of just reiterating an argument I've already considered, please read the link and reply to the argument therein. Otherwise nothing ever progresses.

You've already admitted you're basically a layman, and most of your contributions have been regurgitating Krugman blog posts. Yet you're wrong about virtually every aspect of the current financial crisis, from how and why it started, to how to fix the mess. You concede nothing, and pretend that everything will be ok as long as we simply do more of what has caused this disaster.

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Obviously borrowing forever is a terrible idea. No one is suggesting that.

Why is borrowing forever a terrible idea? Please elaborate.

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But short term interest rates aren't spiking, they're at the zero bound and would be negative without intervention, nor do they show any signs of so doing. Deal with the problems in front of us, not chimeras of paranoid imagination.

I suppose time will tell whether I'm paranoid, or you're ignorant. I've got a lot of money where my mouth is, and I sincerely hope that you aren't betting on Krugman. If so, you're going to get hurt badly, like millions of other Americans and people around the world.

[Damien Evans]

No, for two reasons.

1. Australia never had a recession in the first place.
2. Tippet said yes.

[TraneWreck]

Originally Posted by Tippit

As much as I want everyone to be employed, it isn't a taxpayer obligation. If you believe otherwise, then you should probably live in a communist country, because the US Constitution isn't for you. Creating taxpayer sponsored busy-work isn't creating wealth, or growing the economy. If you want an economy that's closer to full employment, then lets abolish the Fed, which is the cause of asset inflation and speculative bubbles. The bust phase of the fiat-money fractional reserve banking system is the cause of the unemployment. If you were a physician, what you're advocating would be based on a complete misdiagnosis, with a prescription for cyanide.

From the fed charter:

Quote:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

http://www.federalreserve.gov/aboutthefed/section2a.htm

I don't think the fed is doing enough on that score, but it's clearly a founding obligation.

As for the taxpayers, "obligation" is just distraction. We weren't "obligated" to do health care reform or provide social security or fight wars or anything, really. It's a matter of what policy is best.

In this case, stimulating the economy and creating employment opportunities is better for the people and our finances.

Originally Posted by Tippit

So, not only should the Federal Government and the Federal Reserve borrow more, and print more money to bail out bankers and insurance companies, it should provide states that have completely mismanaged their budgets with even more funding. That's truly astounding, that you believe this is a good thing.

Who gets punished when you take this moralistic stance towards the economy? I only care who's fault it is in so far as correcting the problems is the focus. If we wag our fingers at the states and chastize them for being irresponsible, it just means lots of teachers lose their jobs and cities fall apart.

Not to mention that (setting aside California) many of the states are having crushing budget problems because of factors beyond their control. They made financial commitments based on the quality of the economy before the collapse. It's not Kansas' fault that Wall Street speculators and gigantic banks were irresponsibly leveraging against risky financial instruments. But after the economy collapsed, their revenue bottomed out. It would have been wise to bailout that debt, allow them to reorganize their budgets from a secure position, and move forward. We just left them hanging, a terrible choice. The stimulus was cut off at the knees because of this decision.

Originally Posted by Tippit

Krugman's economic kool-aid is beneath me. I replied to one of his blog postings and debunked his lies point-by-point on another thread. And yes, Krugman is a liar, because he's smart enough to know what his economic proposals mean, and who benefits. I only wish I could ignore hacks like him, if only economists like him weren't ruining our country.

I don't know if Krugman farted on your dinner plate, or what, but your irrational hatred of the man is comically misguided. Krugman is arguing for increased stimulus precisely to help out the people that are suffering now and will suffer more with the imposition of austerity measures.

He opposed the blank-check style bailouts of the financial industry, was arguing that people notice the housing bubble years before it burst, and has been BY FAR the strongest progressive voice on economics over the last 20 years. You'e simply upset that his multiple decades of economic work makes him to qualified to accept your bizarre views.

Originally Posted by Tippit

Do you realize that the Fed is secretly monetizing US government debt hand over fist, thereby suppressing (manipulating) interest rates? People are falling over themselves to lend us money? What are you smoking? Someone forgot to tell China, our largest creditor. The only reason global demand for US Treasuries has spiked recently, is due to the abysmal state of the alternatives! This situation will end sooner rather than later.

I followed the links and the origin seems to be a gentleman named Chris Martenson who basically writes end-times economic porn. There's nothing substantial in his conspiratorial fear-mongering. I don't understand why you would whine about Krugman, a peer-reviewed, Nobel prize winner, and listen to some internet conspiracy theorist. Amazing.

Additionally, the article on China describes them selling bonds because of political gamesmanship. I don't see how this reflects poorly on our economy. I suppose it's one of the inevitable "we're all doomed because China owns us" arguments, but with as much money as they've lent us, they want our economy to be strong as much as we do. It's just more paranoia.

Originally Posted by Tippit

You're an ostrich with your head in the sand. We have the mother of all asset inflation in the US Treasury bubble, in the midst of a global meltdown in sovereign debt, of which the US will be the last house-of-cards standing. Mark my words.

We'll wait and see, I guess. People have been making this claim for a couple of years now, and the indicators haven't supported them one bit.

Originally Posted by Tippit

Color me surprised at your "solution". Please, since we can borrow and print our way to prosperity, with absolutely no negative consequences, why should we ever stop? No really. Why should we worry about the debt at all, ever? I'd love to hear your rationale, and please, no more Krugman links, I want to hear what you think.

What "I" think is based on the work of people who study the economy for a living. Just like my opinion of global warming is based on the work of climate scientists, not walking outside and seeing if it's hot, I don't presume to be an expert on economic issues.

I am, however, an expert on argumentation. I can read discussions between experts in a given field and understand who is presenting the more compelling case. I then learn as much as I can from those people. Krugman is an infinitely more reliable source for economic information than me. That is why I cite his work.

If you had actually read any of the links provided you would realize that no one (save, perhaps, Dick Cheney) thinks the debt is meaningless. It's a question of how to move forward in eliminating long-term deficits and the debt. Using funds borrowed at insanely low rates to stimulate the economy in order to pay off those obligations in the future is the responsible course of action in the current economic climate.

No one suggests borrowing like that forever. This is a strawman based on a misunderstanding of the issues. I even linked you a post by an economics professor that overtly described proper action in crisis vs. secure times. You're swinging at windmills.

Originally Posted by Tippit

You've already admitted you're basically a layman, and most of your contributions have been regurgitating Krugman blog posts. Yet you're wrong about virtually every aspect of the current financial crisis, from how and why it started, to how to fix the mess. You concede nothing, and pretend that everything will be ok as long as we simply do more of what has caused this disaster.

Right, citing authority is such a terrible way to progress. You've just made unsubstantiated assertions backed by no data. The posts I'm linking include 1) expert argument and 2) the data it was based on. You ignore both and just say the same thing over and over without substantiation.

You haven't made an argument here, either, just complained.

Originally Posted by Tippit

Why is borrowing forever a terrible idea? Please elaborate.

Look, I offered you a link that explained this, and you ignored it. You will ignore what I post here and just say the same things over and over. Here's the explanation again, in full, because obviously you fear links:

Quote:

Consider a $100 billion boost to government purchases or cut in taxes financed by borrowing from abroad. In a normal year, the Federal Reserve will worry about inflation, and raise interest rates somewhat to offset the inflationary impact of the fiscal boost. The multiplier will thus be something like 0.4—we will spend $100 billion on government purchases or tax cuts and gain perhaps $40 billion in extra production and associated employment out of it.

But there are costs. First, the added national debt. The national debt will not rise by the full $100 billion: Those who earn that extra $40 billion will pay taxes—perhaps $16 billion. Thus the net impact on the government debt will be that by spending an extra $100 billion we will have added some $84 billion to the national debt. That debt must then be amortized. At a 4 percent per year long-run real rate of interest on government bonds, amortizing that debt will cost Americans $3.4 billion a year.

Second, the higher tax rates needed to raise the extra $3.4 billion will also exert a cooling supply-side effect on economic activity. With higher tax rates, people will have greater incentive to spend time and energy dodging their taxes rather than doing useful work. If this effect amounts to roughly one-third of the revenue raised, then we have to add to the total cost an additional $1.1 billion shortfall from the time and energy that would have been used to produce stuff but that will instead be devoted to dodging taxes.

Third, there is another effect. The Federal Reserve’s fight against inflation, which demands an increase in interest rates, will have reduced investment. Due to the $100 billion in government purchases, perhaps $40 billion of private investment that would have been made won’t be made—it will be crowded out. As a result of the lower capital stock, some $4 billion a year of income that would have been earned won’t be. Thus the net cost of the $100 billion in government spending will be a reduction in Americans’ disposable incomes of $7.4 billion per year.

That’s an unattractive bargain. It would allow us to purchase $40 billion of extra production and income this year at the cost of a reduction in incomes of $11.9 billion—call it $12 billion—in every year in the future. That is a usurious annual real interest rate of 30 percent. No sane economist would recommend a policy with such high costs and meager benefits. Expansionary deficit-boosting fiscal policy is, or ought to be, simply a non-starter in normal times.

Originally Posted by Tippit

I suppose time will tell whether I'm paranoid, or you're ignorant. I've got a lot of money where my mouth is, and I sincerely hope that you aren't betting on Krugman. If so, you're going to get hurt badly, like millions of other Americans and people around the world.

Betting on Krugman how? Do I think we're going to get another round of stimulus? Not really. But if we don't stimulate the economy and we get another dip or a prolonged recovery, how does that reflect poorly on Krugman? He's prescribing a course of action. The only way to lose a bet on Krugman is for the government to follow that prescription and have it fail.

We're going to get hurt because people wringing their hands over the unlikely potential of inflation scare politicians into inaction or worse, austerity measures.

[Tippit]

Originally Posted by TraneWreck

I don't think the fed is doing enough on that score, but it's clearly a founding obligation.

The Fed is debasing our currency at an astounding rate. What do you want them to do, start dropping money from helicopters?

Quote:

As for the taxpayers, "obligation" is just distraction. We weren't "obligated" to do health care reform or provide social security or fight wars or anything, really. It's a matter of what policy is best.

These "policies" are tantamount to looting, nothing more, nothing less. We survived without socialized health care in this country for over two centuries, and yet now that health care inflation and oligopolistic insurance companies are out of control, once again your "solution" is based on complete ignorance of the problem.

Quote:

In this case, stimulating the economy and creating employment opportunities is better for the people and our finances.

I'm tired of politicians and bankers stealing from me, and running my life. I'm tired of thier ****** decision making when they're not stealing from me. Apparently you're a direct beneficiary of this system (at least for now), so arguing against your direct interest is probably a big waste of time.

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Who gets punished when you take this moralistic stance towards the economy? I only care who's fault it is in so far as correcting the problems is the focus. If we wag our fingers at the states and chastize them for being irresponsible, it just means lots of teachers lose their jobs and cities fall apart.

It's not a moralistic stance, it's about truth and consequences. Bad and/or corrupt decision making must have consequences, or we will only get more of the same. I'm not wagging my fingers at anyone. Just get your damn hands out of my wallet. I'm here criticizing the root of the problem, the money and banking system that caused this mess.

Quote:

Not to mention that (setting aside California) many of the states are having crushing budget problems because of factors beyond their control. They made financial commitments based on the quality of the economy before the collapse. It's not Kansas' fault that Wall Street speculators and gigantic banks were irresponsibly leveraging against risky financial instruments. But after the economy collapsed, their revenue bottomed out.

I agree, lets reform our money and banking system so this doesn't happen again. Nonetheless, I am aware of what is and what has been going on, and I have been fiscally responsible. I refuse to pay for the folly and corruption of others.

Quote:

It would have been wise to bailout that debt, allow them to reorganize their budgets from a secure position, and move forward. We just left them hanging, a terrible choice. The stimulus was cut off at the knees because of this decision.

No one is there to bail out individuals who make poor financial choices, or the ones who were unlucky enough to still be standing after the Federal Reserve's game of real estate musical chairs. The individuals who compose the state and their employees are no exception. They aren't special. If you don't like the consequences of our money system, fix the system.

Quote:

I don't know if Krugman farted on your dinner plate, or what, but your irrational hatred of the man is comically misguided. Krugman is arguing for increased stimulus precisely to help out the people that are suffering now and will suffer more with the imposition of austerity measures.

He opposed the blank-check style bailouts of the financial industry, was arguing that people notice the housing bubble years before it burst, and has been BY FAR the strongest progressive voice on economics over the last 20 years. You'e simply upset that his multiple decades of economic work makes him to qualified to accept your bizarre views.

Krugman is just a thug, an economic hit man. That you call him progressive, still shows you don't understand the essence of what he represents. Then again, you don't believe inflation is a tax either, I guess.

YouTube Video This video is not hosted by the JREF. The JREF can not be held responsible for the suitability or legality of this material. By clicking the link below you agree to view content from an external website.

I AGREE

Quote:

I am, however, an expert on argumentation. I can read discussions between experts in a given field and understand who is presenting the more compelling case. I then learn as much as I can from those people. Krugman is an infinitely more reliable source for economic information than me. That is why I cite his work.

Krugman shares your predisposed ideological views, and so you trust what he says implicitly, even though you have little idea what he's talking about.

Quote:

If you had actually read any of the links provided you would realize that no one (save, perhaps, Dick Cheney) thinks the debt is meaningless. It's a question of how to move forward in eliminating long-term deficits and the debt. Using funds borrowed at insanely low rates to stimulate the economy in order to pay off those obligations in the future is the responsible course of action in the current economic climate.

It's not responsible to the people whose purchasing power is being devalued and who are being priced out of financial assets that the parasitical elite live off of.

[TraneWreck]

Originally Posted by Tippit

The Fed is debasing our currency at an astounding rate. What do you want them to do, start dropping money from helicopters?

[...]

It's not responsible to the people whose purchasing power is being devalued and who are being priced out of financial assets that the parasitical elite live off of.

As usual, our discussion has run its course. You didn't offer an argument, an evaluation of any data I provided, or anything resembling a response to my points.

I will just point out, for the millionth time, that all your consternation about inflation is wholly misguided. There is no inflation. There's a danger of deflation. You stand in the midst of the warmest ten years on record frantically warning the citizens Barcelona that a glacier is approaching.

[Nogbad]

I voted yes in a localised sort of way. The nanny's nasty medicine approach adopted by the new coalition increases the chances of an economic downturn. I'm not sure the structure of our economy is well placed to take advantage if other countries are pulling out of recession and therefore I think we could trail any recovery. If others also dip then I think we are ever so screwed.

[Tippit]

Originally Posted by TraneWreck

As usual, our discussion has run its course. You didn't offer an argument, an evaluation of any data I provided, or anything resembling a response to my points.

I did, you just fail to acknowledge the truth as it is presented to you. But I agree, we're just talking past each other at this point. The only thing left to do is watch the spectacle continue to unfold.

After watching that Ben Bernanke video, can you at least admit that yes, inflation is a tax? I'm betting no. People who quote liars typically have no problem deceiving themselves, especially if they stand to gain.

Quote:

I will just point out, for the millionth time, that all your consternation about inflation is wholly misguided. There is no inflation. There's a danger of deflation. You stand in the midst of the warmest ten years on record frantically warning the citizens Barcelona that a glacier is approaching.

Actually, there is. It's in the US Treasury market right now. That bubble will burst, however, it's just a question of when. There is a great danger of already inflated assets deflating, yes. But that will be accompanied by a rise in the price of things you need, like food, and fuel. Watch and see.

[Emperor_Gestahl]

My issue with state bailouts is that it will institutionalize unsustainable public salaries and benefits (which have barely felt the recession). Bailing out states won't create new jobs, just protect the insulated, overpaid jobs that are destroying those state budgets in the first place.

Garbagemen and teachers in 50% dropout rate districts get paid 100k/year while others have no jobs at all, believe me the public unions won't let the state governments "spread the wealth" if bailed out. Even with bailouts the created money will go to the same people receiving all the state's money presently.

Someone explain to me how putting the many into more debt to preserve the lifestyles of the lucky "government class" would be a progressive or liberal policy?

[drkitten]

Originally Posted by Emperor_Gestahl

Someone explain to me how putting the many into more debt to preserve the lifestyles of the lucky "government class" would be a progressive or liberal policy?

Because the alternative is that the lucky government class is unemployed as well -- and your garbage fails to be picked up.

[Malerin]

Originally Posted by Emperor_Gestahl

My issue with state bailouts is that it will institutionalize unsustainable public salaries and benefits (which have barely felt the recession). Bailing out states won't create new jobs, just protect the insulated, overpaid jobs that are destroying those state budgets in the first place.

Garbagemen and teachers in 50% dropout rate districts get paid 100k/year while others have no jobs at all, believe me the public unions won't let the state governments "spread the wealth" if bailed out. Even with bailouts the created money will go to the same people receiving all the state's money presently.

Someone explain to me how putting the many into more debt to preserve the lifestyles of the lucky "government class" would be a progressive or liberal policy?

I get paid $100k? And my district didn't lay off 25% of its teachers? So the last two years were just a bad dream?

[Emperor_Gestahl]

Originally Posted by Malerin

I get paid $100k? And my district didn't lay off 25% of its teachers? So the last two years were just a bad dream?

http://www.projo.com/news/content/ce...2.398afed.html

http://en.wikipedia.org/wiki/Central_Falls

$72k-78k in the school district in question, now consider benefits and how many digits are we talking? And the median income is $23k in the area according to wiki. The problem with the "$100k garbageman" situation is that 3 people could be employed privately for the money needed to keep that 1 garbageman in his cushy job.

Keynesian economics has one other aspect other than just "spend like crazy if you're in a recession". People nowadays seem to think that's the whole theory, spend spend spend when there's trouble. Keynes called for cutting spending and running surpluses during boom years, that's where the money is to come from when it's time to spend spend spend. Layering debt on top of debt is not the Keynesian plan, no leaders seem to have the political will for real Keynesian economics.

Anyway, does anyone know of an instance where a debt crisis was solved by more debt? I can't personally think of any economic crises where adding to the problem was the solution. Didn't do Japan a lick of good I know, but I'm no historical scholar so if this has ever worked before someone enlighten me.

[TraneWreck]

Originally Posted by Emperor_Gestahl

My issue with state bailouts is that it will institutionalize unsustainable public salaries and benefits (which have barely felt the recession). Bailing out states won't create new jobs, just protect the insulated, overpaid jobs that are destroying those state budgets in the first place.

Garbagemen and teachers in 50% dropout rate districts get paid 100k/year while others have no jobs at all, believe me the public unions won't let the state governments "spread the wealth" if bailed out. Even with bailouts the created money will go to the same people receiving all the state's money presently.

Someone explain to me how putting the many into more debt to preserve the lifestyles of the lucky "government class" would be a progressive or liberal policy?

I'll let others handle the shaky facts, but there are two ways to approach this:

1) You oppose fiscal stimulus. Then it's obviously a bad idea to bail out the states.

2) You support fiscal stimulus. Then you have to bail out the states otherwise their spending cuts negate any federal money.

Those are the two options, and we can make arguments for either. The problem is that our brilliant leaders, cowed by the deficit-mongerers, half-assed the stimulus and effectively hamstrung the program.

Following the lead of Krugman and DeLong, I think more stimulus is desperately needed, mostly in the form of some type of jobs program. One easy way to get that started is to simply pay for states to retain their employees.

The plan should be spending to save in the future. Temporarily raise the deficit to stimulate the economy and get to the belt tightening (tax increases and spending cuts) around 2015.

[TraneWreck]

Originally Posted by Emperor_Gestahl

...no leaders seem to have the political will for real Keynesian economics.

This is certainly true.

Originally Posted by Emperor_Gestahl

Anyway, does anyone know of an instance where a debt crisis was solved by more debt? I can't personally think of any economic crises where adding to the problem was the solution. Didn't do Japan a lick of good I know, but I'm no historical scholar so if this has ever worked before someone enlighten me.

The highest deficits in American history occured during WWII. That successfully blasted the abysmal US economy out of the Great Depression.

[Malerin]

Originally Posted by Emperor_Gestahl

http://www.projo.com/news/content/ce...2.398afed.html

http://en.wikipedia.org/wiki/Central_Falls

$72k-78k in the school district in question, now consider benefits and how many digits are we talking? And the median income is $23k in the area according to wiki. The problem with the "$100k garbageman" situation is that 3 people could be employed privately for the money needed to keep that 1 garbageman in his cushy job.

Keynesian economics has one other aspect other than just "spend like crazy if you're in a recession". People nowadays seem to think that's the whole theory, spend spend spend when there's trouble. Keynes called for cutting spending and running surpluses during boom years, that's where the money is to come from when it's time to spend spend spend. Layering debt on top of debt is not the Keynesian plan, no leaders seem to have the political will for real Keynesian economics.

Anyway, does anyone know of an instance where a debt crisis was solved by more debt? I can't personally think of any economic crises where adding to the problem was the solution. Didn't do Japan a lick of good I know, but I'm no historical scholar so if this has ever worked before someone enlighten me.

Congrats, you found a district in RI with a bunch of old teachers that STILL don't make anywhere close to $100K. Now, if you want to tack on benefits, you would get in the $80K range, possible $90K (the top district in my area provides a $14,000 a year health plan). But that's not salary. That's salary AND benefits.

The median salary for a teacher in the United States isn't even half of what you claimed:
http://www.payscale.com/research/US/...eachers/Salary

[Emperor_Gestahl]

Originally Posted by Malerin

The median salary for a teacher in the United States isn't even half of what you claimed:

I didn't claim anything about median teacher wages nationally, my point isn't that all teachers and garbagemen are making $100k. I'm saying the public sector generally is in better shape in this economy than everyone else. Note that median private wage in this district is $23k. This essay here has some charts that support my contention (I've been seeing similar stats around for some time):

http://www.paindependent.com/todays_...ecession-proof

You're factually wrong that $70k plus benefits is less than $100k total:

http://www.bls.gov/news.release/ecec.nr0.htm

"Wages and salaries" comprise only 65% of public worker compensation, so yes, six figure total compensation. And summers off.

State bailouts would do nothing but maintain this status quo, burdening the taxpayer to bail out the only people not suffering overall from the recession. But I suppose that's the pattern, last time around we bailed out people who were still receiving fat bonuses while the private sector leaked jobs like a sieve. We don't need to fire all the garbagemen, we just need to pay them something closer to in-line with what private sector employees make.. Cue the public unions to not let us do that and force the states to fire people so the unfired can stay firmly on the public gravy train.

Similarly, we don't need to destroy the financial system, we just need to get them back into balance, I recommend reinstating Glass-Steagal for a start.



And TraneWreck, government policy didn't get us out of the 1930s depression. It's well established that the destruction (or seizure by hostile forces) of most of the 1st world industrial base, while mainland U.S. industrial capacity remained at full strength (or even stronger due to the war machine), is what ended our depression. The manufacturing competition was literally bombed almost out of existence leaving us with every possible economic advantage. Unless our plan involves bombing most of the factories in China with no retaliation I don't see that situation repeating.

So still waiting on an example of successfully fixing debt with other debt.

[Tippit]

Originally Posted by Emperor_Gestahl

[url]Keynesian economics has one other aspect other than just "spend like crazy if you're in a recession". People nowadays seem to think that's the whole theory, spend spend spend when there's trouble. Keynes called for cutting spending and running surpluses during boom years, that's where the money is to come from when it's time to spend spend spend. Layering debt on top of debt is not the Keynesian plan, no leaders seem to have the political will for real Keynesian economics.

Do you think it's realistic to hand bankers and politicians a monetary printing press, and then expect them not to spend during the boom years?

[TraneWreck]

Originally Posted by Emperor_Gestahl

And TraneWreck, government policy didn't get us out of the 1930s depression. It's well established that the destruction (or seizure by hostile forces) of most of the 1st world industrial base, while mainland U.S. industrial capacity remained at full strength (or even stronger due to the war machine), is what ended our depression. The manufacturing competition was literally bombed almost out of existence leaving us with every possible economic advantage. Unless our plan involves bombing most of the factories in China with no retaliation I don't see that situation repeating.

And how, pray tell, did we take advantage of that global opportunity? Surely it couldn't be with the massive industrial base and awesome production that was forcibly ramped up with government spending.

No, we were the exact nation struggling through the 30's, we just had less competition.

But if you want a clear example, the actual 1930's are the best. FDR was elected in 1932 and immediately began massive government spending programs. They were amazingly successful and likely would have ended the Depression, but FDR caved to political pressure in '36 and tried to balance the budget. Withdrawing that government spending led to the "double dip" referenced in the thread title.

[Emperor_Gestahl]

Originally Posted by TraneWreck

And how, pray tell, did we take advantage of that global opportunity? Surely it couldn't be with the massive industrial base and awesome production that was forcibly ramped up with government spending.

No, we were the exact nation struggling through the 30's, we just had less competition.

But if you want a clear example, the actual 1930's are the best. FDR was elected in 1932 and immediately began massive government spending programs. They were amazingly successful and likely would have ended the Depression, but FDR caved to political pressure in '36 and tried to balance the budget. Withdrawing that government spending led to the "double dip" referenced in the thread title.

Was that the reason though? You can't just "account for" millions of tons of bombs dropped on everyone but us. Most US hegemony the last century can likely be linked to us receiving that dramatic advantage in the postwar era. U.S. factories then were so ready to soak up world demand because they were churning out weaponry in unprecedented amounts. What's keeping our factories running? What are we churning out in record amounts? Malarkey? Malarkey doesn't count!

[Emperor_Gestahl]

Originally Posted by Tippit

Do you think it's realistic to hand bankers and politicians a monetary printing press, and then expect them not to spend during the boom years?

No. I believe Keynesian economics are simply impossible in a democracy of any kind.. No one who wants to stay popular is capable of taking the necessary steps to restrain finance during the good times. For the voters (or cronies) no times are ever good enough. We see sunshine and rainbows around the corner and we demand our politicians take us there, or else.. As a result no lasting fiscal sustainability can ever be achieved by elected politicians.

The government's plan is fairly openly "Keynesian", but IMO won't work because they've skipped the first and most important step entirely. They pick the most personally useful parts out of economic theory like it was a buffet. Similar to how many of the Jesus worshipers are so keen on passages about the gays but not so hot on giving all their possessions to the poor. It's rather central to the whole philosophy, yet it's ignored entirely.

[Malerin]

Originally Posted by Emperor_Gestahl

I didn't claim anything about median teacher wages nationally, my point isn't that all teachers and garbagemen are making $100k. I'm saying the public sector generally is in better shape in this economy than everyone else. Note that median private wage in this district is $23k. This essay here has some charts that support my contention (I've been seeing similar stats around for some time):

http://www.paindependent.com/todays_...ecession-proof

You're factually wrong that $70k plus benefits is less than $100k total:

http://www.bls.gov/news.release/ecec.nr0.htm

"Wages and salaries" comprise only 65% of public worker compensation, so yes, six figure total compensation. And summers off.

State bailouts would do nothing but maintain this status quo, burdening the taxpayer to bail out the only people not suffering overall from the recession. But I suppose that's the pattern, last time around we bailed out people who were still receiving fat bonuses while the private sector leaked jobs like a sieve. We don't need to fire all the garbagemen, we just need to pay them something closer to in-line with what private sector employees make.. Cue the public unions to not let us do that and force the states to fire people so the unfired can stay firmly on the public gravy train.

Similarly, we don't need to destroy the financial system, we just need to get them back into balance, I recommend reinstating Glass-Steagal for a start.



And TraneWreck, government policy didn't get us out of the 1930s depression. It's well established that the destruction (or seizure by hostile forces) of most of the 1st world industrial base, while mainland U.S. industrial capacity remained at full strength (or even stronger due to the war machine), is what ended our depression. The manufacturing competition was literally bombed almost out of existence leaving us with every possible economic advantage. Unless our plan involves bombing most of the factories in China with no retaliation I don't see that situation repeating.

So still waiting on an example of successfully fixing debt with other debt.

I agree with a lot of your anti-Keynesian rant. Just don't get the idea that all these teachers are living the high life pulling in a hundred grand and untouched by the recession. My district went from 134 teachers to 108. Class size went from a max of 20 students a class in K-3 to over 30 students, per class. Nor was my district an anamoly. Every district in my area has laid off teachers. My wife's bad luck to get a teaching credential last year.