Paul Krugman: The austerity delusion • Hacker News Board

Re: Paul Krugman: The austerity delusion

#51

Post by shit_parade2 » Wed, Apr 29, 2015, 6:28 PM UTC

ebbv wrote: post #16

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…

> 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 an…

And Obama won the Nobel Peace prize

Krugman is a hired shill who no longer even professes his original economic thinking.

But great job on your mindless obedience to authority and honors. Try studying economics and looking at the world instead.

Re: Paul Krugman: The austerity delusion

#52

Post by Amezarak » Wed, Apr 29, 2015, 6:28 PM UTC

adventured wrote: post #44

Amezarak wrote: post #4

Earlier quoted context omitted.

Krugman has written a lot about Japan, and Abenomics. According to Krugman's own analysis, Abenomics would not be very effectual and warned that particular Abenomics policies (like the tax increases) would indeed worsen the economy. It's a little disingenuous to say the economy is worse: growth did improve (until the VAT increase Krugman warned would be disastrous) and unemployment did fall, and Krugman wasn't worrie…

To get that growth, Japan massively debased the Yen, chopping down the Japanese standard of living and reduced the real value of all of that debt Japanese citizens are expecting to be paid back by the government. If you have to significantly harm your currency to get growth, what you're getting is not actual growth, merely an illusion.

In what sense do you mean Japan has "debased" the yen? Inflation has been virtually nonexistent. A weaker yen promotes exports; obviously not something that is automatically bad for the economy. It's absolutely not true that having a weaker currency means growth is illusory.

Re: Paul Krugman: The austerity delusion

#53

Post by dragonwriter » Wed, Apr 29, 2015, 6:30 PM UTC

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…

> Most of the world has been following the recommendations of this “economist” for decades.

Er, no, most of the world has not been following Krugman's advice for decades. In fact, pretty much none of it has.

Re: Paul Krugman: The austerity delusion

#54

Post by Amezarak » Wed, Apr 29, 2015, 6:31 PM UTC

pjkundert wrote: post #41

cjensen wrote: post #11

Earlier quoted context omitted.

He specifically calls out Greece as a special case. His comments are directed towards economies which are not like Greece.

Ah. The trusty "No True Scottsman" fallacy...

No, it's not a "No True Scotsman" fallacy. Greece, crucially, does not print its own currency and there was no real lender of last resort available at the time.

It's been a trivial exercise for many years to point out that countries with even more debt than Greece are not going into debt crises for those exact reasons, with Japan as the almost canonical example with its still-low interest rates.

Re: Paul Krugman: The austerity delusion

#55

Post by mytoaster » Wed, Apr 29, 2015, 6:33 PM UTC

jhulla wrote: post #22

What Krugman and his ilk fail to address is capital misallocation. Placing capital into its most productive use is the definition of a well functioning market. We tolerate market distortion for greater social good: safety regulations, environmental regulation, labor laws, etc. Unfortunately, with QE1,2,twist,3 and ZIRP, we are now well past properly functioning capital markets. At a gross scale, every single investme…

Here are some numbers: the core of the massive distortion is in govt debt. This was in Fall of 2014 where half of govt debt yields less than 1%, it's actually gotten worse since.

http://www.bloomberg.com/news/articles/2014-09-04/almost-hal...

Negative(?!) yield 10-years.

http://www.reuters.com/article/2015/04/08/swiss-treasury-idU...

Anyone would be hard-pressed to say that this is a well functioning market.

Re: Paul Krugman: The austerity delusion

#56

Post by dragonwriter » Wed, Apr 29, 2015, 6:34 PM UTC

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…

> The proper time for austerity is when things are good.

Arguably, government fiscal restraint in strong economic times isn't "austerity" in any meaningful sense, but I'd agree that that countercyclical approach is right -- you want the government spending less (as a share of GDP) when the private sector economy is strong, and more when it is weak.

Re: Paul Krugman: The austerity delusion

#57

Post by ancap » Wed, Apr 29, 2015, 6:34 PM UTC

mdemare wrote: post #37

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...

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...

In talking of austerity Krugman neglects monetary policy[1] ("The key measure you want to look at is the ratio of debt to G.D.P." [2]), yet that chart you reference is inflation-adjusted 2009 dollars. That is to say, it is an apples to oranges comparison if we are going to talk of Krugman's version of austerity.

[1] http://www.forbes.com/sites/realspin/2015/03/12/the-austerit...

[2] http://www.nytimes.com/2013/05/06/opinion/krugman-the-chutzp...

Re: Paul Krugman: The austerity delusion

#58

Post by douglasisshiny » Wed, Apr 29, 2015, 6:35 PM UTC

Mikeb85 wrote: post #47

Amezarak wrote: post #36

Earlier quoted context omitted.

> 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…

> 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's because he writes like a Nobel award winning economist. Meaning a dry writing style, and advanced concepts. Most people hated economics in school (either because they don't understand it, or found it boring - it's basically math that most people see n…

He often tries to communicate in layman's terms on his blog.

Re: Paul Krugman: The austerity delusion

#59

Post by AJ007 » Wed, Apr 29, 2015, 6:37 PM UTC

jhulla wrote: post #22

What Krugman and his ilk fail to address is capital misallocation. Placing capital into its most productive use is the definition of a well functioning market. We tolerate market distortion for greater social good: safety regulations, environmental regulation, labor laws, etc. Unfortunately, with QE1,2,twist,3 and ZIRP, we are now well past properly functioning capital markets. At a gross scale, every single investme…

Or is he just a good liar? There are big negative consequences irregardless of what path is taken, voluntarily or otherwise -- but certain choices allow others time to run for cover. Perhaps he believes what he is saying, but absolutely individuals with self-serving intentions benefit by repeating it: corporations, government, and ultra-wealthy.

If the problem is a shortage of money, then the future is full of things that are built with borrowed money: roads, cars, bridges, power plants, factories, chain retail stores, restaurants, suburban sprawl, hotels, and high rise apartment/condo/office buildings. These guys imagine taking the last 50 years and plotting financed growth indefinitely in to the future. There is not much imagination in a nation plastered from one border to another with McDonalds and cookie cutter communities, but what is financed must have past blueprints to provide mathematical models behind the loan.

If an economy must have continuously increasing prices to succeed, then Krugman is right. In tech, I think we would be fucked if we had to pay more money for less every year. That is what Krugman wants. (What I've observed tends to happen is prices of what is financed speed up vs what is not financed, like wages.)

The thing that stuck out to me in 2007 was how low yields were for very unattractive debt. It has happened again. Watch out.

Re: Paul Krugman: The austerity delusion

#60

Post by Nimitz14 » Wed, Apr 29, 2015, 6:39 PM UTC

mdemare wrote: post #48

Nimitz14 wrote: post #31

Earlier quoted context omitted.

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

QE is definitely not the opposite of austerity. Fiscal stimulus is. QE means that the central bank buy up bonds. The hope is that this lowers interest rates on bonds, making it less attractive for banks to hoard bonds instead of lending money to companies wanting to invest.

You're right, but I think you would yourself admit you're being pedantic, the great divide between policies in the US and EU was QE (until recently). It was wrong of the previous poster to paint the US as a country following austerity that was successful.