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The Third Depression

nytimes.com

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Re: The Third Depression

#71

Post by known »

davidw wrote: post #3
lionhearted wrote: post #2

I click the article. I see it's Krugman. Before I read further, I say, "Ah, Krugman. I bet his solution is to print money." > ...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. That's Krugman's answer for everything. Dot-com crash? Create more money: 2001 Krugman: “During phases of weak growth there are a…

> That's Krugman's answer for everything. Increase spending. Just like articles from reason.org or cato or mises invariably decide the problem is too much government. Which is why articles like this are best left to other sites.

Investing Cash will create new jobs, spending will preserve existing jobs and saving Cash will destroy jobs & the economy.

Re: The Third Depression

#72

Post by sethg »

hnal943 wrote: post #45
j_baker wrote: post #38

Earlier quoted context omitted.

This is a strawman argument. Krugman isn't trying to say that the debt isn't important. What he's been saying is that normal fiscal policy doesn't apply in the current crisis: http://www.nytimes.com/2008/11/14/opinion/14krugman.html?_r=... In particular, there's a reason interest rates are adjusted regularly: in different economic situations, you need different interest rates. Were interest rates too low before the c…

However, if following his advice in the past has led the world to financial ruin, wouldn't it be logical to question his assessment of the current situation?

His advice was not followed in the past.

The Keynesian prescription, basically, is for the government to run deficits during recessions and to pay back those loans when the economy recovered. During the 2000 Presidential campaign and the first three-quarters of Bush 44’s Administration, Krugman excoriated Bush’s economic policies, because those policies were running up the national debt to unprecedented levels while the economy was going well and the country could have afforded to pay down the debt.

Re: The Third Depression

#73

Post by gaius »

mark_l_watson wrote: post #17
lionhearted wrote: post #2

I click the article. I see it's Krugman. Before I read further, I say, "Ah, Krugman. I bet his solution is to print money." > ...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. That's Krugman's answer for everything. Dot-com crash? Create more money: 2001 Krugman: “During phases of weak growth there are a…

I agree with you. The most important area to save money: we have military bases and/or installations in about 3/4 of the countries on this planet. We need to stop that. We also need to allow state and local governments to go through bankruptcy to renegotiate pensions, etc. Harsh, but necessary. The easy copout is printing money.

Without a global presence it's questionable how long the USD would continue to be the world's reserve currency. If OPEC decides it'd rather trade in EUR then the USD goes into freefall and the US is pretty much screwed.

Re: The Third Depression

#74

Post by gaius »

kiba wrote: post #13
jswinghammer wrote: post #7

Considering that his Keynesianism has basically destroyed Japan's future (while at the same time he faults them for not borrowing enough) I'd hope he'd proceed with a bit more caution. The basic problem he has is that he doesn't really understand why we're here. When debt chases bad assets it's a disease that has to be cleared. He ignored some pretty serious depressions in his analysis as well. The panic of 1819 come…

Our fear of short term pain might be the worst part of the modern political system. When people realize that they can vote themselves more money, they will. Government will then promise more than it can deliver and proceed to spend money like no tomorrow just like what happens to Greece and California. But it's heresy to suggest that democratic institutions should be scrapped altogether. Everyone thinks democracy equ…

This is exactly what happened in the UK under New Labour. However now it seems the voters have come to their senses.

Re: The Third Depression

#75

Post by roel_v »

paulnelligan wrote: post #26

I often wonder why more engineers don't get into economics. It is a control system and would be well suited to engineering graduates with expertise in control systems.

Sweet mother of jesus no. Engineers would gravitate towards a centrally controlled system in no time. Economics is not a control system, it's emerging behavior from independently acting agents (free market economics is, which I argue is the only morally defensible system). A UK (?) technology-oriented scientist build a computer-controlled economic system for some South-American country in the 1970's, complete with a Star Trek like control room. There was a revolution before it could be put to proper use though. I don't remember enough details to google it, anyone else who can dig up some links?

Re: The Third Depression

#76

Post by rbranson »

d2viant wrote: post #50
j_baker wrote: post #35

Earlier quoted context omitted.

"A defaulting and clearing of billions, maybe trillions, of unsustainable debt in the system is required." Seriously? What you propose would be the economic equivalent of a nuclear winter. You can't cure a disease by killing the patient. Besides that, it could even come back to bite us. Think of how many other countries are indebted to us. If we can default on our debts, why can't they?

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

> We can't possibly pay back the money we owe.

If the government were a person, economics might agree with you, but it's not. This is what fiscal conservatives fail to see. The government can hold debt so long, that, due to inflation, it's value will fall to the point where paying it off is trivial. This is not practical for persons that have a finite lifespan. Corporations also fall in this category, albeit to somewhat less of a degree. Investors often do not see justifiable corporate debt as a problem, but an indication that the executive team understands opportunity cost.

Re: The Third Depression

#77

Post by hga »

dantheman wrote: post #69
hga wrote: post #59

Earlier quoted context omitted.

The interest we're paying on Federal debt is or soon will equal the total US defense budget (or so the Chairman of the JCS recently noted). You might also be really upset if the US returns to a pre-WWII isolationist mode (you do remember one of the things that happened as a result...). We keep the peace in large parts of the world and e.g. implicitly prevent a lot of those we're protecting from going nuclear. The onl…

Why? The US involvement in WWI led to the harshness of the Treaty of Versailles, if the US held back it's been argued that England and France would have sued for peace earlier and the harshness of the treaty wouldn't have been there and then one of the prime causes of WW2 would not have existed. The Us involvement in WW2 is due to escapades in China and the Philippines - the reason Japan attacked the US.

What are you arguing here?

The fact (well, I agree) that the US badly screwed up its first really major intervention in world affairs has little to do with the present day, unless you contend that we learned nothing from it (e.g. for WWII Unconditional Surrender and the occupation and nation building we did in Japan and West Germany).

Re: The Third Depression

#78

Post by anamax »

sethg wrote: post #72
hnal943 wrote: post #45

Earlier quoted context omitted.

However, if following his advice in the past has led the world to financial ruin, wouldn't it be logical to question his assessment of the current situation?

His advice was not followed in the past. The Keynesian prescription, basically, is for the government to run deficits during recessions and to pay back those loans when the economy recovered. During the 2000 Presidential campaign and the first three-quarters of Bush 44’s Administration, Krugman excoriated Bush’s economic policies, because those policies were running up the national debt to unprecedented levels while…

The last Bush+Republican Congress deficit was $100B and was on track to surpluses in the following years. (It had been decreasing for a couple of years by that point.)

Krugman complained bitterly.

The first Bush+Dem Congress deficit, before the current crisis, was significantly larger than $100B.

Krugman didn't make a peep.

Re: The Third Depression

#79

Post by akkartik »

lionhearted wrote: post #2

I click the article. I see it's Krugman. Before I read further, I say, "Ah, Krugman. I bet his solution is to print money." > ...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. That's Krugman's answer for everything. Dot-com crash? Create more money: 2001 Krugman: “During phases of weak growth there are a…

I like sethg's rebuttal: http://news.ycombinator.com/item?id=1468454

Re: The Third Depression

#80

Post by anamax »

rbranson wrote: post #76
d2viant wrote: post #50

Earlier quoted context omitted.

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

> We can't possibly pay back the money we owe. If the government were a person, economics might agree with you, but it's not. This is what fiscal conservatives fail to see. The government can hold debt so long, that, due to inflation, it's value will fall to the point where paying it off is trivial. This is not practical for persons that have a finite lifespan. Corporations also fall in this category, albeit to somew…

> The government can hold debt so long, that, due to inflation, it's value will fall to the point where paying it off is trivial.

Reread what he actually wrote instead of responding to a strawman. Pay particular attention to the words after "debts".

>>> We're going to do default the hard way by not paying our debts or we're going to default by inflation.

Note that inflation isn't free - it has huge costs that play out over a long time. Default's costs are suffered over a shorter period of time.

I favor default because one of two things happens afterwards - folks don't loan money when govt is borrwing dumb or folks donate money to govt (via providing loands that aren't paid back). Both are an improvement over the status quo, which the "inflation default", perpetuates.

Argentina has defaulted at least once in the last 100 years and folks still loan it money.

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