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The Third Depression

nytimes.com

101–110 of 119 posts

Re: The Third Depression

#101
post #61

Earlier quoted context omitted.

You do not understand the fallacy of argument from authority. I did not engage in this. Mere assertions is not going help you there. You have to explain why I am wrong.

For someone who made statements like this: "Spending money on education is all well and good, but what about the dead GIs that we can't bring back to life? How many Einsteins, Teslas, and Neumanns die in that war anyway? We probably lost some of them in that war." and "Heard of the broken window fallacy?" it's a bit too much to read this latest statement from you. A number of your statements on WWII were not relevant…

I merely point out the opportunity cost of lost human capitals due to wars. I also pointed out the rationing and economic hardship of civilians at home.

Don't tell me that you don't think a dead soldier is not a capital loss. Don't tell me that economic scarcity in time of wars is economic prosperity.

Re: The Third Depression

#102
post #89

Earlier quoted context omitted.

If I owe you a hundred dollars, I can say outright that I'm not going to pay you back or I can wait until that $100 is worth so little that it can't even buy a pack of gum at the store. The end result for the lender is pretty much the same -- the only thing that differs is the timeline.

Uh, the lender is collecting interest the entire time. The government is borrowing to invest in and ensure the continuity of it's economy, which is it's source of tax revenue. Recession and/or economic stagnation are much more expensive than debt service. Nobody would say you're a fool for taking out student loans to get a bachelor's degree. All things being average, the debt service on student loans is cheaper than…

> The government is borrowing to invest in and ensure the continuity of it's economy, which is it's source of tax revenue.

Saddling future generations of individuals and businesses with debt inhibits growth, it doesn't promote it. The revenue to pay the interest on that debt has to come from higher taxes down the road, which means higher tax rates for businesses and individuals, which means lower growth.

That's an interesting example about student loans, because that's exactly what's happening right now. For many years people have been blindly borrowing money because they too claimed they were investing in themselves and they too were their own source of revenue. Guess what? Many are now realizing the debt they incurred didn't generate anywhere near the income they needed to pay off said debt. There are threads on HN all the time discussing exactly this about recent graduates.

Re: The Third Depression

#103
post #40
post #13

Earlier quoted context omitted.

Our fear of short term pain might be the worst part of the modern political system. When people realize that they can vote themselves more money, they will. Government will then promise more than it can deliver and proceed to spend money like no tomorrow just like what happens to Greece and California. But it's heresy to suggest that democratic institutions should be scrapped altogether. Everyone thinks democracy equ…

When people realize that they can vote themselves more money, they will. I would agree had you said "When people think that they can vote themselves..." because who are they kidding? There is no "Obama Money." The government's money comes from the people, as the residents of Greece and California are discovering. I suppose you can vote yourself more money if you can vote and yet pay no taxes, which might be the true…

Perhaps in order to have a say in the direction of the country, you need to have skin in the game.

One of the original thoughts behind establishing a bi-cameral legislature was that only (real-estate) property holders could participate in the senate. The idea being to prevent the masses from voting the property to themselves. Eventually, it was settled to give the senate to those who were competent enough to organize themselves into local governments/states. Still, it would be interesting to have a house where one man == one vote and a senate where one dollar == one vote. I'm not sure human nature would allow the government to be primarily funded by power-mongering but it'd be a fun experiment to try.

Re: The Third Depression

#104

Earlier quoted context omitted.

Uh, the lender is collecting interest the entire time. The government is borrowing to invest in and ensure the continuity of it's economy, which is it's source of tax revenue. Recession and/or economic stagnation are much more expensive than debt service. Nobody would say you're a fool for taking out student loans to get a bachelor's degree. All things being average, the debt service on student loans is cheaper than…

> The government is borrowing to invest in and ensure the continuity of it's economy, which is it's source of tax revenue. Saddling future generations of individuals and businesses with debt inhibits growth, it doesn't promote it. The revenue to pay the interest on that debt has to come from higher taxes down the road, which means higher tax rates for businesses and individuals, which means lower growth. That's an in…

> Saddling future generations of individuals and businesses with debt inhibits growth, it doesn't promote it. The revenue to pay the interest on that debt has to come from higher taxes down the road, which means higher tax rates for businesses and individuals, which means lower growth.

Do you have anything to back these statements up? One, that deficit spending leads to higher taxes, at least most of the time. Two, that higher taxes directly translate to lower growth, at least most of the time. It would be nice to think of the economy in such black and white terms, but it's often orders of magnitude more complex.

The revenue to pay the interest comes from a stimulated economy, which is what we're trying to do. I am not arguing against paying down debt at all, I am arguing against paying down debt during economic crisis. There are periods in which the government has excess cash and pays down it's debts. It's ignorant to assume that it's more burdening on our children to saddle them with debt than it is to saddle them with a depressed and stagnant economy. Ultimately, this is a gamble, but one history has shown to pay off. Economic stimulus through deficit spending is a long-term solution, not a short-term fix. You are essentially saying it's alright to starve and suffer the deleterious effects of malnutrition, just to save some interest payments.

My example about student loans still holds true. The average person makes more money with a bachelors degree than without, by far. This is indisputable fact. While some may find out that they have to actually learn and work hard and perhaps some fall through the cracks, it does not discount the excellent investment that education is.

Re: The Third Depression

#105
post #90
post #72

Earlier quoted context omitted.

His advice was not followed in the past. The Keynesian prescription, basically, is for the government to run deficits during recessions and to pay back those loans when the economy recovered. During the 2000 Presidential campaign and the first three-quarters of Bush 44’s Administration, Krugman excoriated Bush’s economic policies, because those policies were running up the national debt to unprecedented levels while…

The Keynesian prescription is fatuous because, with rare exceptions, politicians never are willing to stop the flow of goodies that get them elected (tax and borrow, spend, elect). Sure, in theory, it might work to smooth out the normal business cycle (although I have serious doubts about its applicability to catastrophes, e.g. pushing on a string), but in normal circumstances it's a recipe for ever increasing sovere…

The governments of the world have had plenty of time since Keynes to spend themselves into insolvency, and they haven’t done so yet. The US debt-to-GDP ratio dropped steadily between the end of WW2 and the Reagan administration, and dipped again during the Clinton administration. The UK ratio dropped from the end of WW2 until around 1975, held steady, and then had another dip around 1985–1990. Canada’s ratio has been declining gradually since around 1995; the nominal debt has been pretty much steady, but GDP has risen.

So it looks to me like politicians are frequently resisting the temptation to borrow as much money as they can throw at their constituents.

Re: The Third Depression

#106
post #75

I often wonder why more engineers don't get into economics. It is a control system and would be well suited to engineering graduates with expertise in control systems.

Sweet mother of jesus no. Engineers would gravitate towards a centrally controlled system in no time. Economics is not a control system, it's emerging behavior from independently acting agents (free market economics is, which I argue is the only morally defensible system). A UK (?) technology-oriented scientist build a computer-controlled economic system for some South-American country in the 1970's, complete with a…

The fact that one experiment went wrong does not a bad theory make... there are many variables to be accounted for in a complex system such as this.

I respectfully, but completely disagree with you on the fact that free market economics is morally defensible, there isn't really any conscience behind it, just an overriding aim (i.e. profit) ...

as for independently acting agents, I assume you mean various corporations, financial institutions, and government bodies... Again, I disagree, they all have a degree of interdependence and are centrally bound by regulations, and central banks, which exist whether we like it or not ...

As a disclaimer, I consider myself a liberal centrist with both libertarian and social democratic leanings.

Re: The Third Depression

#107
post #35

Earlier quoted context omitted.

He's right that the real threat is deflation, not inflation. But printing money isn't the solution. A defaulting and clearing of billions, maybe trillions, of unsustainable debt in the system is required. That will either happen chaotically, orderly, or governments will bankrupt themselves trying to prop it up and avoid it. Looks like the US is hell-bent on the latter, in no small part because most large creditors ha…

"A defaulting and clearing of billions, maybe trillions, of unsustainable debt in the system is required." Seriously? What you propose would be the economic equivalent of a nuclear winter. You can't cure a disease by killing the patient. Besides that, it could even come back to bite us. Think of how many other countries are indebted to us. If we can default on our debts, why can't they?

I wasn't referring to the US govt debt, I was referring to all the bad loans on banks' balance sheets. Particularly all the subprime and alt-A mortgage debt still packaged into CDOs and whatnot.

We're Japan in the 90s all over again. Either force the banks to mark it all to market (require them to sell 5% of it for a market price), do capital structure cramdowns to preserve the banks that can be preserved, let the others go out of business, then continue economic growth, or suffer a 'lost decade' or worse.

Re: The Third Depression

#108
post #98

Earlier quoted context omitted.

Maybe in the future, but it sure seems like a disincentive to working. I would prefer we implement a flat-rate tax on income filed as individuals and not as a family. Something like a 20/20 (first 20k exempt then 20% of the rest). I am not sure about the actual numbers (sounds like a big data crunch through the IRS income reporting would be good). Regardless of policy, it is very important to get as many people in th…

> Maybe in the future, what are the criteria for this future?

I guess when robots get too good at replacing humans (reasoning, mobile, perform skilled work).

Re: The Third Depression

#109
post #83
post #50

Earlier quoted context omitted.

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

Right now, the going rate on 30-year T-bills is a little over four percent ( http://www.ustreas.gov/offices/domestic-finance/debt-managem... ), so it seems like the people and institutions that loan “us” (i.e., the United States government) money are fairly confident that “we” will not default. (Granted, a lot of US debt is held by foreign central banks that are not purely driven by return on investment, but presumab…

[deleted]

Re: The Third Depression

#110
post #83
post #50

Earlier quoted context omitted.

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

Right now, the going rate on 30-year T-bills is a little over four percent ( http://www.ustreas.gov/offices/domestic-finance/debt-managem... ), so it seems like the people and institutions that loan “us” (i.e., the United States government) money are fairly confident that “we” will not default. (Granted, a lot of US debt is held by foreign central banks that are not purely driven by return on investment, but presumab…

China doesn't have much choice. Stop propping Treasuries, prices fall, yields & rates rise, forcing up corporate paper rates, we get the recession/depression the govt and Fed have been trying to avoid, and China feels it, possibly exposing their own bank balance sheet problems.
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