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Krugman: Debt Is Good

nytimes.com

11–20 of 24 posts

Re: Krugman: Debt Is Good

#11
post #5

“With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits. From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If…

I'm new here, so maybe I'm missing something, but how is this comment a substantial contribution? Are you calling him a hypocrite?

A specialist in the field changed their mind after 12 years? The inputs were much different 12 years ago. Brink of invading a country, still in a meh state after the dot bomb...

A wise person, given sufficient evidence to do so, will change their mind.

In the new article he clearly states reasons for having this new opinion.

Things change.

Re: Krugman: Debt Is Good

#12
post #5

“With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits. From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If…

I'm new here, so maybe I'm missing something, but how is this comment a substantial contribution? Are you calling him a hypocrite? A specialist in the field changed their mind after 12 years? The inputs were much different 12 years ago. Brink of invading a country, still in a meh state after the dot bomb... A wise person, given sufficient evidence to do so, will change their mind. In the new article he clearly states…

Krugman is a specialist in the field of licking a certain kind of bottom.

Re: Krugman: Debt Is Good

#13

Earlier quoted context omitted.

You are ignoring the key premise here. I am not saying that loans, bonds or debt are universally and unconditionally a bad idea. Please re-read what I wrote. I think it is very clear, no need to repeat myself.

> Issuing debt (or accepting debt) should be the absolute last resort This does seem very clear, you don't need to repeat yourself. I am disagreeing with that and stating that debt is a most natural and appropriate way to fund certain things. Whether they are efficient or not.

Are you saying you are OK with issuing bonds for a project that might waste, say, 75% of the funds?

If so, can you explain why?

Where is the threshold for you?

And, finally, why is it that you don't think it would be sesnible to demand that capital be used efficiently?

Just curious.

Re: Krugman: Debt Is Good

#14

Earlier quoted context omitted.

> Issuing debt (or accepting debt) should be the absolute last resort This does seem very clear, you don't need to repeat yourself. I am disagreeing with that and stating that debt is a most natural and appropriate way to fund certain things. Whether they are efficient or not.

Are you saying you are OK with issuing bonds for a project that might waste, say, 75% of the funds? If so, can you explain why? Where is the threshold for you? And, finally, why is it that you don't think it would be sesnible to demand that capital be used efficiently? Just curious.

> And, finally, why is it that you don't think it would be sesnible to demand that capital be used efficiently?

You don't need to make up lies about what I think. You'd find it's much more interesting to talk to the real me instead of the imaginary me you've concocted.

Re: Krugman: Debt Is Good

#15

Earlier quoted context omitted.

> Issuing debt (or accepting debt) should be the absolute last resort This does seem very clear, you don't need to repeat yourself. I am disagreeing with that and stating that debt is a most natural and appropriate way to fund certain things. Whether they are efficient or not.

Are you saying you are OK with issuing bonds for a project that might waste, say, 75% of the funds? If so, can you explain why? Where is the threshold for you? And, finally, why is it that you don't think it would be sesnible to demand that capital be used efficiently? Just curious.

Would you be okay with spending cash on a project with 75% waste?

I mean, I get that debt exacerbates the cost, but I think waste/fraud is a just a different topic than optimal debt levels.

I've done construction work for large private contractors in the nuclear energy field and the level of waste there was off the charts as well. I didn't work in management or accounting or anything, but I get the impression that certain types of large, complex, organizations are intrinsically inefficient. I don't know why, but maybe it's more costly and time consuming to try and root out the waste?

We should definitely try to improve this! But it's a really difficult management/planning problem without a clear solution and in the mean time, we still need to make choices about spending and that might mean taking on debt.

I don't really understand economics well enough to have a strong opinion on the article, but I believe the point was that higher debt levels might be better, regardless of how the money is spent.

Re: Krugman: Debt Is Good

#16

It's a good article for a topic that needs to be discussed from a factual perspective at all levels. Yet that is precisely where this article fails to some degree. It presents a sensible take on the value of debt. Namely, you can use debt to do great things. Krugman says: "issuing debt is a way to pay for useful things" And that is absolutely true. However, he, through the rest of the article, absolutely ignores the…

> taking VC money

Usually this argument is phrased as a "household debt", but the problem is the same: you're mixing up private debt mechanics with sovereign debt, which follows a completely different set of rules. Consider that startup with VC money in a situation where they can print money or define base interest rates.

Sovereigns have a lot more flexibility in how they handle debt. A successful tool used in the past with long-term thinking governments has been to simply inflate away debt. For the same reason a mortgage is sometimes considered "good debt" when it becomes cheaper with inflation, the US is still paying off debts from the Civil War.

> concluded this was a good way to run your life

It's not, but nations are different, and ignoring those differences is foolish.

> I have no clue how wasteful our governments are

In general, they are surprisingly efficient for what they are trying to do. We may disagree on what those goals should be - which is why being involved in politics is important - but we do generally get a very good value for our money in implementing those goals.

A big part of that is the fact that a government doesn't take a large initial cut as profit. An easy example of this is paying for healthcare: a government can legislate how much money is wasted in the implementation (Medicare is incredibly efficient), while private insurance companies used to take a significant percentage (15%-50%, if I remember correctly) as profit.

The phrase "government waste" is usually a euphemism for "I hate that project and don't want to see money spent on Those People" (which varies with political affiliation and opinion). Sometimes this has racist or similar tribal origins, and sometimes this has class origins. Regardless, simply calling things "waste" usually oversimplifies the situation.

Re: Krugman: Debt Is Good

#17
Always with the government debt, when the real devil is private debt. Private debt is what puts the economy to a halt, when it has been used for asset speculation rather then investment in expanded production capacity.

Re: Krugman: Debt Is Good

#18
post #12

Earlier quoted context omitted.

I'm new here, so maybe I'm missing something, but how is this comment a substantial contribution? Are you calling him a hypocrite? A specialist in the field changed their mind after 12 years? The inputs were much different 12 years ago. Brink of invading a country, still in a meh state after the dot bomb... A wise person, given sufficient evidence to do so, will change their mind. In the new article he clearly states…

Krugman is a specialist in the field of licking a certain kind of bottom.

Absolutely. He's a charlatan.

Re: Krugman: Debt Is Good

#19

It's a good article for a topic that needs to be discussed from a factual perspective at all levels. Yet that is precisely where this article fails to some degree. It presents a sensible take on the value of debt. Namely, you can use debt to do great things. Krugman says: "issuing debt is a way to pay for useful things" And that is absolutely true. However, he, through the rest of the article, absolutely ignores the…

>Taking on debt to pay for billion dollar websites (pick a number, anything north of low 10^6 is obscene), stupid wars, nation building and, to lump it all together, government waste, is not just wrong, it's dumb and irresponsible. Plug the leaks first before borrowing money to buy more water.

Hear, hear. How can we get rid of the stupid decisions that are so easily taken with Other People's Money?

Re: Krugman: Debt Is Good

#20
post #5

“With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits. From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If…

The Krugman of 2003 was clearly a Keynesian; the Krugman that wrote today's column argues for higher debt during good times and so almost sounds like he's joined the Modern Monetary Theory camp.
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