I'm sure the Greeks would be delighted to hear that more debt spending is the shot in the arm they've been looking for.
He specifically calls out Greece as a special case. His comments are directed towards economies which are not like Greece.
Paul Krugman: The austerity delusion
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Re: Paul Krugman: The austerity delusion
#12Interest rates are 0% and our economy isn't growing (Q1 '15). I find that scary.
I'm seeing the results of Krugman's philosophy on the ground: Asset prices are way up. Housing in my city is almost as expensive as it was before the '08 crash. For those of us that are lucky enough to own stocks and a house -- three cheers for Krugman, 0% interest rates, and QE!
But the asset economy is outpacing the real economy. Wages are not up. Working age labor force participation is down. Q1 GDP was flat. If you're a working person in the U.S. right now, you're not thriving.
And to me this is a sign that Keynesianism is perhaps played out. We're increasing asset prices, making housing more expensive and increasing inequality, without actually growing the economy.
Re: Paul Krugman: The austerity delusion
#13If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
Think about it from a business perspective. What makes you more money? Cutting costs, or increasing revenues?
And what is a more sustainable practice to increase revenues: price gouging, or increasing volume/sales?
Now replace these business terms with economic terms. Cutting costs = austerity. Price gouging = raising taxes.
What you want is more people working, more people paying taxes, but keeping taxes at a low enough rate that people still benefit from working, increasing productivity, and keeping their money in the country. It's a maximization curve...
The main problem with austerity is that often the first thing to get slashed is government labour and infrastructure projects, which drastically cuts the size of the workforce, and immediately reduces the amount of taxes coming in, leading to a tax raise, capital flight, and the downward spiral that all economists warn about.
Just like in business there's a certain rate at which loans make sense and a certain rate where they don't. As long as the cost of the loan is less than the interest you'll receive from your investment on said loan (and inflation helps reduce the cost of the loan), you may as well borrow.
"Austerity" in most cases is just a way for predatory lenders to ensure quicker payment, it's by far the worst economic policy.
Re: Paul Krugman: The austerity delusion
#14If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
The proper time for austerity is when things are good. When things are bad, juice it up, especially if you can borrow at rates that are negative when inflation adjusted. The problem with austerity now to make the long term better is that it's not a zero sum game. Austerity lowers GDP growth, which can offset any move toward solvency. You spend less and surprise, you also take in less. Eventually you recover, but poor…
Had the government in the UK run a surplus prior to the financial crisis I suspect the case for a larger Keynesian response from the UK public would have been better received. That is afterall what Keynes originally proposed. Modern Keynesians have disproved it's necessity and yet... public opinion ultimately drives policy, perhaps Keynes requirement of running a surplus in the good times in order to run a deficit in the bad was more about satisfying the psychology of the general public than anything else.
Re: Paul Krugman: The austerity delusion
#15If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
Given the authoritative way in which you say:
[L]iving within your means leads to greater stability,
a market where prices reflect reality, and people that
save are rewarded.
Re: Paul Krugman: The austerity delusion
#16If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
> Most of the world has been following the recommendations of this “economist” for decades.
He's a Nobel Prize winner. You putting economist in quotes only reflects poorly on yourself.
> Just because it’s a government instead of a household or a business does not making borrowing against your future when you have no capability to pay it back a good idea.
He's not advising borrowing money you can't pay back. US, UK and other major economies absolutely can pay back the money they borrow. It's a ridiculous scare tactic that the far right has been pushing for the past 20 years to say that we are so far in debt we can never pay it back. That premise is only true if you adopt the ridiculous far right policy of lowering taxes to basically nothing on large corporations and ultra wealthy individuals.
Re: Paul Krugman: The austerity delusion
#17[deleted]
Re: Paul Krugman: The austerity delusion
#18If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
Think about it from a business perspective. What makes you more money? Cutting costs, or increasing revenues? And what is a more sustainable practice to increase revenues: price gouging, or increasing volume/sales? Now replace these business terms with economic terms. Cutting costs = austerity. Price gouging = raising taxes. What you want is more people working, more people paying taxes, but keeping taxes at a low en…
"Think about it from a business perspective. What makes you more money? Cutting costs, or increasing revenues?
And what is a more sustainable practice to increase revenues: price gouging, or increasing volume?"
That assumes you want to run the country/government like a business. I think that's a fairly large assumption.
Re: Paul Krugman: The austerity delusion
#19If all you care about is the short-term, then forget about austerity. Juice things up a bit. Throw some borrowed money at it. Alleviate some economic misery. But long-term, living within your means leads to greater stability, a market where prices reflect reality, and people that save are rewarded. This is a far greater payoff in exchange for some potential short-term pain. The worst part is that many governments cla…
> Most of the world has been following the recommendations of this “economist” for decades
That's exactly what they have not been doing.
> Just because it’s a government instead of a household or a business does not making borrowing against your future when you have no capability to pay it back a good idea. This guy is the same type of person that thinks that companies carrying a lot of debt is a good idea. The sign of a healthy business. Bunk.
Extremely relevant.
https://alvaroaltamirano.files.wordpress.com/2010/05/krugman...
HN may know programming but holy shit you're on the same level as the worst subs on reddit when it comes to economics and finance.
Re: Paul Krugman: The austerity delusion
#20Paul Krugman in 2002: "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
Somehow every op-ed this guy writes gets treated as the word of god. It is important to remember that while he does have a Nobel prize, he has also said a lot of profoundly dumb stuff.
I am not saying that Austerity is inherently good or inherently bad. The truth, like for everything else, lies in the grey and is situation dependent. Krugman however is absolutely religious about fiscal stimulus and demand side economics, and is going to claim that the solution to EVERY problem is increased government spending.
These situations are nuanced and unfortunately what you are hearing from Krugman is something more akin to proselytizing his religous views on the graces of Government spending(a view which no facts or events would every sway him from) opposed to thinking critically about a difficult problem.