21–30 of 112 posts
IMHO, of course, I am am not an economist. Not that they seem to agree on much either.
It's telling that now that their data is exposed as being incorrect, the original authors still are standing behind their conclusions.
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Naa. The paper came out in 2010, after much of the austerity debate had already crystallised, and got attention almost entirely in the US, which hasn't really implemented austerity. (No, the sequester really doesn't count.) Nor did the paper argue strongly in favour of austerity; the authors actually are pro-stimulus, and Rogoff in particular was very concerned over the effects of the Fiscal Cliff. Actual austerity h…
No average voter knows who Reinhart and Rogoff are, and no one is making any argument that they do, or that that matters.
>the actual spreadsheet errors changed their results from growth of -0.1% in high-debt countries to 0.2%; an inconsequential change.
So the 0.3% percent error was caused by incompetence at using a computer, and another 1.9% was caused by economic incompetence (equal weighting for all time periods) and deception (throwing away the first few years of data to create a convenient start date.) Is your defense that they were worse at economics than at Excel?
>the reason nobody looked too closely at the numbers is because they agree broadly with every other paper and model out there.
You've made this up. No one could reproduce their results.
Parent TL;DR: The paper didn't matter, because even though its purported evidence was wrongly conceived and badly executed, its conclusion is still right because it comports with what I have decided is common sense.
Last time that'll happen for a while.
This story is a lesson on confirmation bias: Professors that immediately decide that the student is wrong, and must be convinced otherwise. The spreadsheet financial analysis that provided the expected results and therefore never checked for errors. A single study that gave economists, and clearly an awful lot of politicians, the confirmation they needed to strengthen their resolve in the face of opposition.
Confirmation bias, at least in the politicians' cases, it just provided them with extra confidence to proceed with their agenda. Well, it may have also lent them some legitimacy.
You would be surprised how many things that exist around you are based around faulty models based on incorrect data - that's the problem with higher dimensional fields like economics and finance - it's hard to separate cause and effect and extract principal signals for an arbitrary phenomena, without getting bogged down in correlation hell. You have been warned - the further fields get from pure mathematics and isola…
David Cameron, Angela Merkel and Paul Ryan to name just three prominent politicians.
Additionally EU central bank policy has been geared almost solely around this principle. This is why after identifying that the Greek, Cypriot and Spanish economies were the victim of cheating, malfeasance and incompetence, all of the rescue plans involved pretty severe cuts to social welfare programs and government services.
Remember, ALL Cypriots had to take a haircut on their savings in banks greater than 100k euros. International finance scammers fucked the Cypriot economy, and then the pro-austerity EU forced all Cypriots to choke down the bailout.
It's like robin hood in reverse.
So what is the alternative to lowering "consistently high public debt"? Monetize it? Default on it? Debt in itself is not a problem if the growth rate is the same or decreasing as a proportion of the economy. At the current rate, some obligations would have to be forfeited, either to the direct creditors, or to those promised social services. Strangling the economy further with high taxes only makes the problem worse…
During the financial crisis, irrespective of our level of public debt, the bond rates were actually such, that people were basically PAYING the federal government to borrow money.
Instead, we had politicians on an austerity tear, and ranting about how we needed to reduce the national debt. We could have borrowed a big chunk of money, earned the interest off of it, and then just turned around and paid back the principle.
If Republicans actually believed in running the Government like a business (they don't, but they say it), it's almost criminal that we didn't take advantage of the opportunity.
Impressive that his two professors took 1 whole month to finally believe him, even though the article gives the impression that the error was obvious (a bad formula). Summary of the article: http://tldr.io/tldrs/5171189e1a18dac804000170/meet-the-28-ye...
It sounds like they grilled him until they got co-authorship for a paper with a with an uber high impact factor.
You would be surprised how many things that exist around you are based around faulty models based on incorrect data - that's the problem with higher dimensional fields like economics and finance - it's hard to separate cause and effect and extract principal signals for an arbitrary phenomena, without getting bogged down in correlation hell. You have been warned - the further fields get from pure mathematics and isola…
The USD being the international "yardstick" other currencies are measured in, "valued" against allows for a surprisingly large trade deficit. Why have inflation at home when you can just "export" your fresh paper for real goods the world over?
This is not lost to the rest of the world, but for the sake of the lesser evil they've played along as necessary. All the while creating a new supranational currency (EUR) and central banks the world over turning into net gold buyers.
I agree, the US should milk this situation for all it's worth while it lasts, which is incidentally exactly what they've been doing for the last few decades.
Global US debt is not a worry to them as it's denominated in the same currency that the US can "print" (to use the simplified wording here).
Austerity (delevering) is not a worry, they'll rather buy failing debts with more freshly produced notes --- this way, no one loses their "savings" in nominal terms, no cascading defaults etc.
Shouldn't this lead to (hyper)inflation? Not as fast as you might think --- if/as long as the rest of the world still takes them as viable reserves and for settling international trade..
You would be surprised how many things that exist around you are based around faulty models based on incorrect data - that's the problem with higher dimensional fields like economics and finance - it's hard to separate cause and effect and extract principal signals for an arbitrary phenomena, without getting bogged down in correlation hell. You have been warned - the further fields get from pure mathematics and isola…
> Also - who on earth thought austerity was ever a good idea? David Cameron, Angela Merkel and Paul Ryan to name just three prominent politicians. Additionally EU central bank policy has been geared almost solely around this principle. This is why after identifying that the Greek, Cypriot and Spanish economies were the victim of cheating, malfeasance and incompetence, all of the rescue plans involved pretty severe cu…
They do demonstrate to the world now two things:
(A) the core tenets / stability principles backing the original EUR currency idea and philosophy are not sacrificied to the current temporary economic mismanagement of one individual nation state that chose to participate in the currency, knowing fully well broad / long-range philosophy of ECB. No quick fixes, no "reckless printing" (at least not without limit or getting the country to change its ways).
(B) Big savers are encouraged to rediscover "the old ways" of saving, preserving or investing wealth -- not to hold it in "the US(D) way" of a self-feeding ever-expanding intransparent web of future promises, counterobligations, speculation. Aka "your bank account" these days.
A small country such as Cyprus is ideal to send such a strong and lasting message. People in "bigger" countries get a strong signal to "rethink their ways". Everyone learns that EUR ways are different from the USD ways in some (important) respects. And should the world ever lose confidence in the USD and/or in markets driven largely by currency debasement, deficits, debts -- the world may well remember those "early stories of the young EUR".