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Paul Krugman: The austerity delusion

theguardian.com

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Re: Paul Krugman: The austerity delusion

#31

Post by Nimitz14 »

ancap wrote: post #24
aaronbrethorst wrote: post #15

Earlier quoted context omitted.

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. I'm guessing you can back this up with a few modern examples of where austerity programs have been successful, right?

How about in the U.S. in the past couple years[1]? [1] http://www.forbes.com/sites/johngoodman/2015/01/13/voodoo-ec...

QE is the opposite of austerity. That's what the US is still doing since god knows when.

Re: Paul Krugman: The austerity delusion

#32

Post by pbreit »

Pretty much every government could benefit immensely from austerity. The problem is, of course, that government is lousy at execution and overly political and self-preservation all and so, for example, cuts the most visible programs first.

Yes, I understand the notion of spending your way out of a recession.

Re: Paul Krugman: The austerity delusion

#33

Post by pbreit »

jhugg wrote: post #10
pluckytree wrote: post #8

If 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…

Austerity in good times? Good luck with that!

Re: Paul Krugman: The austerity delusion

#34

Post by ancap »

Nimitz14 wrote: post #31
ancap wrote: post #24

Earlier quoted context omitted.

How about in the U.S. in the past couple years[1]? [1] http://www.forbes.com/sites/johngoodman/2015/01/13/voodoo-ec...

QE is the opposite of austerity. That's what the US is still doing since god knows when.

I certainly agree with you. I'm providing an example that fits Paul Krugman's narrow definition of the word.

Re: Paul Krugman: The austerity delusion

#35

Post by mikeash »

anm89 wrote: post #20

Paul 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 Au…

I read the editorial that the "housing bubble" quote is from and it doesn't sound at all like he actually recommends it:

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip...

The theme of that article seems to be, "we're screwed, and here's why." In that context, the quote in question seems to be saying, "the only way out would be to create a housing bubble, that's how screwed we are."

I think it's ironic to complain about "treated as the word of god" in a comments section absolutely flooded with criticism of him.

I wish we could discuss the ideas rather than the author, in any case.

Re: Paul Krugman: The austerity delusion

#36

Post by Amezarak »

pluckytree wrote: post #8

If 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…

> We’ll never know who is right, though. Most of the world has been following the recommendations of this “economist” for decades.

No, they haven't. No country has passed the kind of budget-busting stimulus packages Krugman has said was necessary. The closest any country came was the US, which passed a stimulus package less than half the size of his recommendations and that consisted largely of tax breaks instead of spending increases.

> 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

No, he isn't. Unless those companies owe debt in currencies they control.

I've noticed there's a bizarre phenomenon surrounding Krugman where people just refuse to read what he says and instead put all kinds of nonsense into his mouth. It happens to all public figures to some extent, but it just seems really next-level with Krugman (and these particular claims are pretty tame compared with the wild accusations you often see.)

Re: Paul Krugman: The austerity delusion

#37

Post by mdemare »

ancap wrote: post #24
aaronbrethorst wrote: post #15

Earlier quoted context omitted.

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. I'm guessing you can back this up with a few modern examples of where austerity programs have been successful, right?

How about in the U.S. in the past couple years[1]? [1] http://www.forbes.com/sites/johngoodman/2015/01/13/voodoo-ec...

Krugman doesn't claim that the U.S. has experienced (significant) austerity during the last couple of years, especially compared to Europe. See the chart, which shows that austerity peaked in summer 2011. [1]

[1] http://krugman.blogs.nytimes.com/2014/12/28/the-obama-bounce...

Re: Paul Krugman: The austerity delusion

#38

Post by copsarebastards »

pluckytree wrote: post #8

If 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…

I agree that in the long term austerity is necessary.

However, austerity as it’s used in politics[1] is little more than a talking point. The Republicans run on the austerity platform and yet Republicans increase deficits more than Democrats. The US deficit is caused largely by military spending and corporate welfare, and the Republican party refuses to cut military spending (unless it’s to helping veterans). The Democrats also increase deficits, but at least they don’t do so while running on an austerity platform.

The few politicians who I would actually trust to be economically responsible are completely socially irresponsible.

The fact is, whether or not austerity is the right way to go is completely irrelevant to how austerity is actually used in politics. So whether or not austerity is the right way to go is a moot point.

[1] In the US—I don’t know enough about international economics to talk intelligently about them.

Re: Paul Krugman: The austerity delusion

#39

Post by [deleted] »

pluckytree wrote: post #8

If 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…

[deleted]

Re: Paul Krugman: The austerity delusion

#40

Post by Mikeb85 »

mudil wrote: post #23

The big Keynesian idea is that somehow gov't can allocate capital better than private businesses. But that patently cannot be true. (I never could understand how Keynesian economics is different from socialism.)

Not true whatsoever.

Here's the definition as stated by Wikipedia, which I find to be pretty accurate and concise:

> Keynesian economics is the view that in the short run, especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the economy).

This contrasts with the earlier theory that production creates demand.

And while Keynesian economics does suggest that the government should intervene in the economy, it's far from a command economy.

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