Paul Krugman economics: Deny, deny, deny!

[PiggyBank]

Quote from piezoe:

You have a much better understanding of what Keynes was advocating than does Tsing, who does not understand Keynesian economics at all.

Doubt it.

Tsing thinks we were following Keynes during the Reagan- Bush years, when in fact we were following supply side economics, which is nearly the exact opposite of what Keynes advocated. (Tsing confuses deficit spending in general with what Keynes advocated. So any time the government is operating with big deficits he thinks they are following Keynes -- now that's something that really IS hilarious.)

To apply Keynesian economics one has to use some combination of fiscal restraint and revenue increases during expansionary phases. Not so much that you cut of economic growth, but enough that you keep it from "going viral" --to use a web expression.

Modest fiscal restraint combined with modest revenue increases in boom times will do two things. It will produce small surpluses and decrease the severity of the unavoidable economic retraction phases; thus making them more tractable. Then during recession the government must borrow and increase spending to compensate for de-leveraging in the private sector. We are currently in that phase. The borrowing and spending is appropriate, perhaps there has not been quite enough job stimulus, considering the depth of the recent recession. If you look back at 2008-9, you will recognize that the economy was following a path very similar to what was experienced in 1929-30. It is only because of the brilliance of Bernanke that we have avoided what would have been deflation and depression, just like that experienced in the U.S.A. during the 1930'3.

The current government deficits are not at all too high considering the size of the U.S. economy and the depth of the financial crisis. Keep in mind that Government debt is only a third of private debt. We are speaking here of one of the world's largest economies. It is to be expected that the numbers will be on the order of ten to the twelfth.

Bernanke, a student of the great depression, has a deep understanding of Keynesian economics and he is following Keynes. Greenspan and the economists advising Reagan and Bush, particularly Reagan, were folks like Milton Friedman, and Wendy Gramm. These economists were about as far from Keynesian as you're going to find!

I get all this, it breaks down to trying to smooth out the inherent swings of capitalism. The thing is, it's just a theory. like Tsing just said, how can helicopter ben follow keynes when his predecessors didn't save any money? This idea will NEVER work in this country. And before you blame Congress, not all of our elected officials agree with this theory, so why should they go along with it?

Also, even if it could work, I would NEVER support it. You can't interfere with the 'natural cycle' of the economy without consequence. I view capitalism and true laissez faire free markets as not only the most efficient economic system, but also the most fair. if you have a govt trying to control the cycle, you are in essence putting a ceiling on asset prices during booms, and a floor during busts (or trying to). This will stifle real growth as volatility creates opportunity, not just in stocks, but any asset. Let's use our most recent fiasco for some examples, home prices are falling, some people are underwater and walking away, some are being evicted, this represents opportunity for others who were better positioned to survive (or thrive in) the crash, to buy a home. Also, the more prices fell = the more people who potentially could afford them.

If the "TBTF" banks fell, there were/are hundreds or thousands of other banks not involved with toxic derivatives, which were well positioned to expand and fill the void. Out of that crash I think we would have gotten something better, and when they KNOW the govt will let them burn, they won't be so quick to take excessive risk.

In a keynesian, socialist economy these opportunities don't exist, the already established are protected and are locking out the little guys, there's no competition. Everyone, including TBTF banks, need to pay for their mistakes to keep this fair. No society can be permanent when it rewards failure and punishes success.. capitalism on the other hand can be permanent. The strong rise and the weak fall. What we have now IS literally 'crony capitalism' for the firms who helped create the mess, socialize the losses, capitalize the gains. Get that shit out of here.. and I didn't even mention that creating money out thin air HAS to bear consequences. And although I have mentioned it already, this is the most important point, propping up the economy ISN'T a function of our govt!

I know this isn't well written or explained but hopefully you get the gist of it.

 

[Tsing Tao]

Quote from PHOENIX TRADING:

It's because of their inferiority complex. They know their ideas are inferior and cannot stand the light of straight forward evaluation.

I just wish there were a way to give them one half of the country and us the other half, and then see who was better off 10 years out.

 

[Ricter]

Quote from Tsing Tao:

I just wish there were a way to give them one half of the country and us the other half, and then see who was better off 10 years out.

You are a very frustrated, angry little man.

 

[tomdavis]

http://www.cnbc.com/id/100558455

Latvia's Prime Minister hit back on Friday at Paul Krugman's criticism of Latvia's austerity measures, saying the Nobel Prize-winning economist has "difficulty admitting his own mistake."

"Krugman famously said back in December 2008 that Latvia is the new Argentina, it will inevitably go bankrupt, and now he has difficulty apparently admitting he was wrong and so he tries to seek some problems in how Latvia is recovering from the economic crisis," Latvian leader Valdis Dombrovskis told CNBC in an interview at the EU summit in Brussels.

"But I think that the mere fact that for the last two years we are enjoying rapid growth shows that it was probably the right strategy."

Latvia's government undertook a heavy dose of austerity after a credit boom led to an economic crash in 2008. The government undertook the biggest fiscal adjustment drive of any country in the European Union and gross domestic product (GDP) plunged 24 percent in 2009.

This commitment to fiscal prudence, and Latvia's subsequent growth of 5.5 percent in 2011 and 4.5 percent in 2012, has led the country to be feted by proponents of austerity, such as German Chancellor Angela Merkel.

 

[Tsing Tao]

Quote from Ricter:

You are a very frustrated, angry little man.

Nothing little about me, junior.

 

[jem]

if only people in the U.S. had said how about we cap the spending.

Quote from tomdavis:

http://www.cnbc.com/id/100558455

Latvia's Prime Minister hit back on Friday at Paul Krugman's criticism of Latvia's austerity measures, saying the Nobel Prize-winning economist has "difficulty admitting his own mistake."

"Krugman famously said back in December 2008 that Latvia is the new Argentina, it will inevitably go bankrupt, and now he has difficulty apparently admitting he was wrong and so he tries to seek some problems in how Latvia is recovering from the economic crisis," Latvian leader Valdis Dombrovskis told CNBC in an interview at the EU summit in Brussels.

"But I think that the mere fact that for the last two years we are enjoying rapid growth shows that it was probably the right strategy."

Latvia's government undertook a heavy dose of austerity after a credit boom led to an economic crash in 2008. The government undertook the biggest fiscal adjustment drive of any country in the European Union and gross domestic product (GDP) plunged 24 percent in 2009.

This commitment to fiscal prudence, and Latvia's subsequent growth of 5.5 percent in 2011 and 4.5 percent in 2012, has led the country to be feted by proponents of austerity, such as German Chancellor Angela Merkel.

 

[PHOENIX TRADING]

Quote from tomdavis:

http://www.cnbc.com/id/100558455

Latvia's Prime Minister hit back on Friday at Paul Krugman's criticism of Latvia's austerity measures, saying the Nobel Prize-winning economist has "difficulty admitting his own mistake."

"Krugman famously said back in December 2008 that Latvia is the new Argentina, it will inevitably go bankrupt, and now he has difficulty apparently admitting he was wrong and so he tries to seek some problems in how Latvia is recovering from the economic crisis," Latvian leader Valdis Dombrovskis told CNBC in an interview at the EU summit in Brussels.

"But I think that the mere fact that for the last two years we are enjoying rapid growth shows that it was probably the right strategy."

Latvia's government undertook a heavy dose of austerity after a credit boom led to an economic crash in 2008. The government undertook the biggest fiscal adjustment drive of any country in the European Union and gross domestic product (GDP) plunged 24 percent in 2009.

This commitment to fiscal prudence, and Latvia's subsequent growth of 5.5 percent in 2011 and 4.5 percent in 2012, has led the country to be feted by proponents of austerity, such as German Chancellor Angela Merkel.

Funny how it takes a former soviet satellite
to be able to learn from our economic history.


https://mises.org/daily/3788

 

[piezoe]

Quote from Tsing Tao:

Thank you for proving my point. I specifically state that they weren't aligned with Keynes's "save during boom times" aspect, but they still followed the "debt/spending = growth" philosophy.

Maybe it's time to replace those reading glasses that only see what you want them to see.

I also notice how you refuse to answer my other questions yet again (shocking).

Excuse me, but "debt/spending = growth" philosophy is not Keynesian, it's not even well managed supply side economics. It does describe however what was going on in the Reagan and early Bush years rather well. In those years spending was increased and taxes were reduced during boom times. This is the opposite of what Keynes advocated. Reagan's economists were supply siders, not Keynesians. You can read about "Reaganomics" here, http://www.ushistory.org/us/59b ,as well as many other places..and here is a balanced article comparing Keynes' economic ideas with Reagan's supply siders. http://en.wikipedia.org/wiki/Supply-side_economics

I well recall Bush referring to Reaganomics as "Voodoo economics" during the 1980 campaign. Then Bush had to go along when he became V.P. After he himself was elected, he reneged on his no new taxes pledge. It cost him the election, but it was the right thing to do. He should have done it on the first day in office, however, and not waited so long, because "Voodoo economics" continued during the first couple years of the Bush administration.

Keynes advocated deficit spending when an economy is in recession, not during periods of full employment and normal growth.
And when normal growth and full employment return, he advocated raising taxes or cutting spending, certainly not lowering taxes and increasing spending, which was the hallmark of the Reagan administration's "voodoo economics."

 

[Tsing Tao]

Quote from piezoe:

Excuse me, but "debt/spending = growth" philosophy is not Keynesian, it's not even well managed supply side economics. It does describe however what was going on in the Reagan and early Bush years rather well. In those years spending was increased and taxes were reduced during boom times. This is the opposite of what Keynes advocated. Reagan's economists were supply siders, not Keynesians. You can read about "Reaganomics" here, http://www.ushistory.org/us/59b ,as well as many other places..and here is a balanced article comparing Keynes' economic ideas with Reagan's supply siders. http://en.wikipedia.org/wiki/Supply-side_economics

It's right here on the wiki article

Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle.

(my bolding)

Another quote.

Keynes saw the economy as unable to maintain itself at full employment and believed that it was necessary for the government to step in and put under-utilised savings to work through government spending.

Then you say:

Quote from piezoe:


Keynes advocated deficit spending when an economy is in recession, not during periods of full employment and normal growth.

From Wiki again:

Keynesian economics (pron.: /ˈkeɪnziən/ KAYN-zee-ən; or Keynesianism) is the view that in the short run, especially during recessions, productive activity is strongly influenced by aggregate demand (total spending in the economy); and that aggregate demand does not necessarily equal the productive capacity of the economy. Instead, aggregate demand is influenced by a host of factors and sometimes behaves erratically, affecting production, employment, and inflation.

Now, putting aside that "especially" doesn't mean "only", Reagan was President during a recession, and followed the public spending philosophy quite well.

You want to try to weasel around this once more?

 

[piezoe]

That you for reading up on what Keynes advocated, and what occurred during the Reagan Presidency. Keep on with your reading. Your in the process of becoming informed. I wish I could say that for some of your colleagues in this thread.