81–90 of 100 posts
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.
Earlier quoted context omitted.
this point is valid, conditional on the assumption that current GDP level is fixed. Then, govt spending is just money that is taken away from private sector. The point though is that, under certain conditions, govt spending can raise the level of GDP. Those conditions, specifically, refers to times when private sector for reasons of essentially, risk aversion, is under investing. I am not saying that Krugman is 100%…
I actually agree that government spending can boost GDP. Where Krugman doesn't get it is that we've already distorted markets so much since 2008-2009 that a burst of government generated demand will not move the needle in a sustainable fashion. A $1 trillion government program will just get drained into rising asset prices - leaving incomes and the majority of individuals in largely the same spot as they started fina…
Earlier quoted context omitted.
I actually agree that government spending can boost GDP. Where Krugman doesn't get it is that we've already distorted markets so much since 2008-2009 that a burst of government generated demand will not move the needle in a sustainable fashion. A $1 trillion government program will just get drained into rising asset prices - leaving incomes and the majority of individuals in largely the same spot as they started fina…
Our last (and according to Yellen, et. al., our final)[1] QE was in October 2014. Is there a reason why you continue to talk about QE in the United States in the present tense? [1] http://www.cnbc.com/id/102009066
http://www.reuters.com/article/2014/10/31/us-japan-economy-b...
The European Central Bank announced QE in Jan-15.
One way to think of QE is global competitive devaluation to capture global demand. QE + ZIRP or even negative interests are the primary tool of central banks now. Capital misallocation continues on a global scale.
Earlier quoted context omitted.
Our last (and according to Yellen, et. al., our final)[1] QE was in October 2014. Is there a reason why you continue to talk about QE in the United States in the present tense? [1] http://www.cnbc.com/id/102009066
QE is happening globally. As you noted, QE3 ended in the US Oct-14. On the final day of US QE3 ending, the Bank of Japan announced another round of QE in their economy. http://www.reuters.com/article/2014/10/31/us-japan-economy-b... The European Central Bank announced QE in Jan-15. One way to think of QE is global competitive devaluation to capture global demand. QE + ZIRP or even negative interests are the primary t…
Earlier quoted context omitted.
No, it was not wrong. I am simply using the definition of austerity that Krugman commonly uses (see my above post). UK has used QE since 2009[1], BTW, but only government expenditures goes into Krugman's definition. [1] http://www.bbc.com/news/business-24614016
your sources are bad and you should stop reading them, I've read both of the links you posted before when they were ripped apart by mainstream economists
EDIT: Furthermore your response demonstrates you do not even understand my point. The purpose of the sources I have referenced are not to show support for economic plan A over economic plan B, rather they demonstrate the inconsistent and politically motivated arguments behind Krugman's anti-austerity stance. He states Europe is dangerously pursuing misguided austerity policy which he defines strictly as a cut to government expenditures. He then correlates that with a lack of GDP growth. Then, slyly, when talking of the US, he purports that austerity took place until 2011 when wiser heads prevailed, reversed the trend and then the economy boomed. The problem is, when evaluating the austerity of the US, his numbers include monetary policy, being adjusted for inflation. Why does he not do the same for Europe?
This is all to say, if Paul Krugman is your source "your sources are bad and you should stop reading them... they were ripped apart by mainstream economists".
Earlier quoted context omitted.
QE is happening globally. As you noted, QE3 ended in the US Oct-14. On the final day of US QE3 ending, the Bank of Japan announced another round of QE in their economy. http://www.reuters.com/article/2014/10/31/us-japan-economy-b... The European Central Bank announced QE in Jan-15. One way to think of QE is global competitive devaluation to capture global demand. QE + ZIRP or even negative interests are the primary t…
How would negative interest rates compete with cash which has a zero interest rate, or premium real estate which offers a long-term return?
http://www.vox.com/2015/2/5/7981461/negative-interest-rates-...
e.g. Cash is not secure in your bank account. A government backed bond, even at negative interest, may be more secure than a cash balance.
ZIRP and negative interest rates are pushing people out on the risk curve and raising asset prices.
As I said in an earlier comment, IMHO, all investment decisions are bets on central banks.
Krugman presents this as a dilemma between two choices. 1. Institute austerity now. 2. Institute stimulus now, pay down debt responsibly once the good times roll. This is a sham dilemma. The real options appear to be. 1. Institute austerity now. 2. Institute stimulus now, but half-ass the debt paydown in the future, condemning future generations to a high debt to GDP ratio. Given this real dilemma, which is worse? I…
What real-world problems do high debt/GDP ratios cause?
Isn't the whole point of stimulus to kick-start the denominator in the debt/GDP equation?
At any rate, governments don't need to "pay down debt" (which is kind of a strange thing to say, since the government is always paying off bonds.) They just need to grow the economy such that the debt is less substantial, which pretty much everyone has always done. I mean, the US wasn't going through times of tribulation paying off its 100%+/GDP debt after WWII, we just inflated it away.
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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.
Australia had a much better idea at the beginning of the GFC, they paid $1000 directly to anyone who had paid at least $1 in taxes the previous year; poor people aren't afraid to spend money...
Krugman presents this as a dilemma between two choices. 1. Institute austerity now. 2. Institute stimulus now, pay down debt responsibly once the good times roll. This is a sham dilemma. The real options appear to be. 1. Institute austerity now. 2. Institute stimulus now, but half-ass the debt paydown in the future, condemning future generations to a high debt to GDP ratio. Given this real dilemma, which is worse? I…
> Given this real dilemma, which is worse? I don't pretend to know the answer. I know austerity sucks. I also know that governments lack the self discipline to pay down debt significantly in the future. What real-world problems do high debt/GDP ratios cause? Isn't the whole point of stimulus to kick-start the denominator in the debt/GDP equation? At any rate, governments don't need to "pay down debt" (which is kind o…
http://www.nber.org/papers/w16827
I admire the candor of your second point ("we just inflated it away.") I think this is ultimately what will happen here in the USA.
I think that most people would choose austerity now over higher inflation down the road, but maybe I'm delusional. Our consumer savings rates continue to trend down so maybe people just wouldn't care much.
http://www.tradingeconomics.com/united-states/personal-savin...
Earlier quoted context omitted.
> Given this real dilemma, which is worse? I don't pretend to know the answer. I know austerity sucks. I also know that governments lack the self discipline to pay down debt significantly in the future. What real-world problems do high debt/GDP ratios cause? Isn't the whole point of stimulus to kick-start the denominator in the debt/GDP equation? At any rate, governments don't need to "pay down debt" (which is kind o…
Here's an interesting meta-study about the effects of a high debt to gdp ratio. http://www.nber.org/papers/w16827 I admire the candor of your second point ("we just inflated it away.") I think this is ultimately what will happen here in the USA. I think that most people would choose austerity now over higher inflation down the road, but maybe I'm delusional. Our consumer savings rates continue to trend down so maybe…
I know you're sincere, but I kind of had to laugh. Reinhart and Rogoff have been through the ringer for publishing that paper, which is almost entirely bunk. There was a huge storm that made it even to the mainstream media about how truly flawed that paper was (with errors getting as basic as "they can't use Excel.") It's even mentioned in the OP.
To be fair, the claim that slower economic growth is correlated with high debt is somewhat true. But most argue causation is in the other direction: slow growth causes high debt.
> I admire the candor of your second point ("we just inflated it away.")
You might recall that the time period in which we inflated that debt away was one of the most prosperous for all Americans.
Meanwhile, austerity will directly lead to people losing their jobs and an economic slowdown that will prolong the suffering people are already going through...for what?