patrick.net

Blurtman says

As Krugman is so invested in his pet economic theories that have gained him a
great degree of fame, he cannot even fathom the possibility that the private
sector will not be able to pick up the slack in the economy. Amazing!

You can't have it both ways - either the economy is booming because the private sector has been able to pick up the slack, or the economy is sluggish and the private sector has not taken up the slack.

Which one is it?

Call it Crazy says

Blurtman says

A common trap that we all get into is becoming so invested in a particular belief system that we become blinded to reality.

Wow, seems to be a common theme here on Patnet... Just read the other threads for verification....

I am sure I don't know what you mean...

Well, I got a Nobel price in a pseudo science by proclaiming that fiat money-printing is good for the economy and siphoned off enough money for my bullcrap, I can become irrelevant now and still have a good life. So long suckaaas, Krugman out.. ;)

mell says

Well, I got a Nobel price in a pseudo science by proclaiming that fiat money-printing is good for the economy and siphoned off enough money for my bullcrap, I can become irrelevant now and still have a good life. So long suckaaas, Krugman out.. ;)

You don't actually know what he got a Nobel prize for, do you.

egads101 says

Come to think of it, geo-politics can't be tested either with the scientific method....

so...

Couldn't argue with your comments about geopolitics.

it is not that we should not make decisions, just that the rationale is extremely imprecise, even flawed, as the underlying theory cannot be proven, and therefore the desired result is frequently not achieved, and the outcome unexpected and frequently worse than predicted .

Blurtman says

In the days of pseudo science, anyone could propose anything that might seem to explain things, and that was as good as it got.

Sounds like today's Teabaggers.

All economic theory can be tested by technology. That is the big difference between today, and 1933. Technology is the future, as well as the past.

Technology created a whole new economy based on very little labor, getting to be less all the time, and a reliance on patents.

It's all cash, with very little over head. That cash then got invested in assets, and commodities. Today those assets, and commodity prices are tracked, manipulated, and invested in for quick returns. It's speculation.

The private sector is more than capable of picking up the slack, but those low interest rates are only holding off the debt, not settling it.

The only liquidity trap is the lack of equity.

Let interest rates follow the market, and what the market will bear, pun intended, so we can see where we are in pricing compared to the debt.

We all know the debt will far out strip the value of commodities, and assets, so we just kind of pretend otherwise.

What we have is cash in reserves that will never see the light of day unless it's forced out. Getting the Fed out of the way of progress will do that.

That is one part. Another is we fall at the footsteps of free trade. Nobody trades for ideals-people trade for profit. if something is not benefiting us, then any business that wants to survive has to look at how to get back into the black.

With free trade, tens of millions of jobs have gone offshore and in return we buy cheap junk. The govt loses taxes and also pays increased welfare-a double whammy. As a country we have to look at it and decide how to get the vast majority out of welfare/low paying and undesirable jobs and back to work. Deregulation and low taxes won't help against labor available elsewhere for a buck a day. That labor stays in dorms, works 7 days a week and go see their family a few times a year(though I think the labor rates are slowly going up.)

What dismays me is that no politician even discusses that. Instead it is the war in some new country, more taxes, less taxes, more/less regulation, birth control, gays, abortion ,etc. etc. etc. Not one serious discussion or action on how to get back up and be competetive again.

egads101 says

set to idiot level.

Obviously over your head.

I also forgot to mention financial products which we package here, and sell globally, not much labor involved.

humanity says

mell says

Well, I got a Nobel price in a pseudo science by proclaiming that fiat money-printing is good for the economy and siphoned off enough money for my bullcrap, I can become irrelevant now and still have a good life. So long suckaaas, Krugman out.. ;)

You don't actually know what he got a Nobel prize for, do you.

Simple principles known for centuries (simple enough for grandma and grandpa to embody where sensible in practice) such as "you get better returns when you scale your trade" that unfortunately fail in practice time and time again when far more important factors change that were never taken into the equation, turned into obtuse mathematical bullshit. By that measurement almost every "economist" known to earth should have gotten the nobel prize. Might as well give it to any of our resident aspiring "economists" here on patnet ;)

Krugman has a vested financial interest in pandering to his fan base. How else is he supposed to pay off his 5 million dollar mansion in Princeton? He's got a great gig going.

I talked to a kid that took his class a while back, like any typical tenured professor, he wasn't dedicated to actually teaching at the school. He's too busy slapping his name on textbooks he didn't write and charging $25k to every place he gives a speech at.

He's easily the one of the most childish academics I've ever witnessed. When another academic challenges, him, his natural defense is to make fun of them and not address the problem.

He's also that creepy professor who marries one of their students.

egads101 says

http://www.celebritynetworth.com/richest-businessmen/wall-street/paul-krugman-net-worth/

He's worth 2.5 million, which I'll guess is more than you two nitwits, and can make speaking and writing fees easily forever now.

actually, according another source, he's worth 10 times that much...

he rides his bike to college... seems a common factor amongst economic geniuses :-)

the losh is the village idiot, everybody here knows that!

Snooki's worth $4 million. What's your point?

Doesn't Krugman think Fannie and Freddie are great ideas?

And doesn't Krugman love the QEs?

Blurtman says

he cannot even fathom the possibility that the private sector will not be able to pick up the slack in the economy.

Apparently YOU cannot fathom the possibility that the facts show he is right.

Austerity for instance, an obvious failure. Krugman is right on this one, where's the love?

egads101 says

http://www.celebritynetworth.com/richest-businessmen/wall-street/paul-krugman-net-worth/

He's worth 2.5 million, which I'll guess is more than you two nitwits, and can make speaking and writing fees easily forever now.

actually, according another source, he's worth 10 times that much...

he rides his bike to college... seems a common factor amongst economic geniuses :-)

the losh is the village idiot, everybody here knows that!

lol, rides his bike? He lives about 4 blocks from his building. He could crawl if he wanted to.

Vicente says

Blurtman says

he cannot even fathom the possibility that the private sector will not be able to pick up the slack in the economy.

Apparently YOU cannot fathom the possibility that the facts show he is right.

Austerity for instance, an obvious failure. Krugman is right on this one, where's the love?

I am not going to defend austerity. The same changes in the world from 1933 to today would also make the results of austerity even worse. But because austerity does not work does not mean that Krugman's stimunculus does.

Vicente says

Blurtman says

he cannot even fathom the possibility that the private sector will not be able to pick up the slack in the economy.

Apparently YOU cannot fathom the possibility that the facts show he is right.

Austerity for instance, an obvious failure. Krugman is right on this one, where's the love?

Krugman and his crony capitalist voodoo bullshit failed miserably. Europe is in a REAL modest, slow organic recovery with manufacturing pointing up - not clinging to such crap as housing prices. Europe's austerity was far from perfect, but it's the only mathematical possible way to get out of debt and allow a real recovery. Their collective debt/gdp is still very high, but with continued limited spending and limits on debt/gdp for its members, if enforced rigorously, they are on the right track. They have already left the clusterfuck US behind. Math doesn't lie - Krugmeisters do.

egads101 says

losh

So you have nothing to say once again.

Nothing about policy, or economy, just your own story that seems to have gotten old with the rise in interest rates, and threat of tapering QE by the Fed.

Blurtman says

I am not going to defend austerity.

It's too bad governments, here, Europe, and China chose to bail out failing businesses. Leave them alone, let them fail, and let other business take the place.

You can't hate banks, and expect our government to cover losses for them. It's a contradiction.

The infusion of Quantitative Easing is a bank bail out, let them fail, there is more than enough cash in the global economy to pick up the slack of paper losses.

David Losh says

Blurtman says

I am not going to defend austerity.

It's too bad governments, here, Europe, and China chose to bail out failing businesses. Leave them alone, let them fail, and let other business take the place.

You can't hate banks, and expect our government to cover losses for them. It's a contradiction.

The infusion of Quantitative Easing is a bank bail out, let them fail, there is more than enough cash in the global economy to pick up the slack of paper losses.

Yes, QE as implemented is a bank bailout. One reason QE is failing is that overindebted consumers cannot take on more debt and for other reasons as well, the money is sitting at the banks. The velocity of the money is much less than hoped for.

But one concern in the let the banks fail scenario, among many, would be asset liquidation as the banks began going under. The stock market would have crashed, at least in the short term. Most importantly, folks with uninsured wealth accounts at the TBTF's may have been wiped out, and that would have been unacceptable.

mell says

Europe's austerity was far from perfect, but it's the only mathematical possible way to get out of debt and allow a real recovery.

Austerity is not merely "far from perfect" it has been an abject failure. Fact! The paper trotted around to show it should work, has been discreditted as riddled with basic spreadsheet errors which when corrected, showed the opposite. When theories fail in science, we discard them.

It of course is not the ONLY way, there is also defaulting on debts or renegotiating them.

You are blind to any facts or theories counter to your dogma.

Clearly, Krugman was correct with virtually everything he has said. QE didn't fail, austerity most certainly did.

Blurtman says

But because austerity does not work does not mean that Krugman's stimunculus does.

What little stimulus we did, to the real economy, did show an effect.

Had we tried "stimunculus" like the New Deal we might be out of this by now. At least maybe we'd have some CCC-style public improvements that would last many decades. But we didn't, we listened to the Gods of Austerity and the TeaTards and did almost nothing.

So if we didn't do it, how do you judge it a failure?

Vicente says

Blurtman says

But because austerity does not work does not mean that Krugman's stimunculus does.

What little stimulus we did, to the real economy, did show an effect.

Had we tried "stimunculus" like the New Deal we might be out of this by now. At least maybe we'd have some CCC-style public improvements that would last many decades. But we didn't, we listened to the Gods of Austerity and the TeaTards and did a half-assed job.

So you can't in any way claim failure this go-around, for something we didn't do.

I began this thread by claiming that Krugman could not fathom that the private sector might not be able to pick up the slack. So you replace decreased private sector spending with government spending. But the private sector does not snap back. So you keep up the government spending. But the private sector does not snap back. Then what?

Blurtman says

Then what?

A decade from now, we'll know.

If it's Mad Max, I'll be eating potatoes.

If everything's fine, you'll owe me $1,000,000.

How's that sound?

It is my opinion that the "private sector" needs a stick and not just a carrot. Krugman seems on board with this also. However nobody in Congress believes in anything other than handing out carrots in hopes the donkey will eventually pull the cart. Witness the gutting of financial reform.

Vicente says

A decade from now, we'll know.

We already know that QE is a failure, and the more that was thrown at it the worse it got.

The problem is the amount of consumer spending that is debt related. Housing, student loans, credit cards, and even Pay Day loans, are a drain on consumers, even though they recycle the money into the economy.

The consumer, like now the governments, have to pay the debt back.

The consumer borrows $100, but according to the terms of the loan they need to pay back $200.

So, the economy gets a short term infusion of $100, but the long term drain on the economy is $200, that the consumer has already promised to pay.

Because of this debt load the consumer can look at a paper equity, but in fact they are simply paying for the equity by increased payments back to the bank.

We are just spinning our wheels, once again.

Vicente says

It of course is not the ONLY way, there is also defaulting on debts or renegotiating them.

You just proved my point. Those are two tools that go hand in hand with austerity, but not with money printing and inflating your way out of the debt.

Vicente says

Blurtman says

But because austerity does not work does not mean that Krugman's stimunculus does.

What little stimulus we did, to the real economy, did show an effect.

Had we tried "stimunculus" like the New Deal we might be out of this by now. At least maybe we'd have some CCC-style public improvements that would last many decades. But we didn't, we listened to the Gods of Austerity and the TeaTards and did almost nothing.

So if we didn't do it, how do you judge it a failure?

You need to lay your pom-poms aside. Part of why the US is a failing empire is that gullible folks like you believe in the patriotic cheerleading. I love the US but economy-wise it is has been and will continue to be on a steady decline compared to most of the rest of the world, and deficit spending aiding crony capitalism is the main reason for that. The Republican vs Democrats theater is merely a distraction for the masses, the money is simply not there, no matter what you want to believe.

The real test here is how productive the deficit spending is. For example if you can borrow at 1%, use the money for something and it creates value (adds to gdp), how much does it create exactly? If you borrow 300 billion, plug it straight into projects GDP must go up by at least 300 billion. But you also pay interest on the debt, let's say 1% and you borrowed for 1 year. If the GDP does not increase by at least 303 billion then it's a failure and the country will just sink financially if they continue to do this.

I think this is the case in the US right now. Our borrowing and spending is very unproductive and has been for years. The government directs it to areas of the economy that don't contribute to growth. The proof of this is the massively rising deficit. if the spending was productive the deficit would not be rising, it would be declining.

More spending will make the problem worse. Krugman and his gang I think believe that you can just ignore the debt and spend. It might be true in his lifetime but it won't be true for someone who is say 18yrs old today. A financial reckoning will come for sure, and it will probably fall on the people who did not create the problem.

Vicente says

Blurtman says

Then what?

A decade from now, we'll know.

If it's Mad Max, I'll be eating potatoes.

If everything's fine, you'll owe me $1,000,000.

How's that sound?

It is my opinion that the "private sector" needs a stick and not just a carrot. Krugman seems on board with this also. However nobody in Congress believes in anything other than handing out carrots in hopes the donkey will eventually pull the cart. Witness the gutting of financial reform.

I see no acknowledgement from Krugman that structural changes can occur that prevent the private sector from snapping back to pick up the slack. One can list numerous factors that might contribute to this scenario - loss of manufacturing jobs, narrowing competitiveness gap, etc. In fact, Sir James Goldsmith illustrated how wrong Laura Tyson was not to recognize this, way before this came to unfold. And when you have more and more debt to service, siphoning off useful investment dollars,...

So getting back to a point I made earlier, economics is not science. Yes, you do have to make decisions, but as economic theory is really economic hypothesis, success may not be achieved, and failure may occur in unanticipated ways.

Shabba says

I think this is the case in the US right now. Our borrowing and spending is very unproductive and has been for years.

Right. So borrowing is good if the returns are positive. Is borrowing to enable consumption of goods not produced in the borrowing country a good thing? Borrowing to invest in new technologies that may give rise to new industries may be a good thing. But you can have rising GDP with increasing unemployment and a decrease in the standard of living. So what is the better metric?

I would say borrowing to purely consume foreign made goods will most likely not have the positive return I was talking about. I also think getting the US to invest in technologies is probably not a good idea either.

The problem is they have a very bad track record at picking technologies that are feasible and make economics sense. These technologies are almost always found by the private sector first. I don't think it is ALWAYS this way, but most of the time that is true.

The country would do a lot better as a whole if the gov would just honestly regulate free markets, quit promoting one industry/company over another, go after foreign countries that rig their currencies (China) and spend less.

If we could just get one of things to happen on a large scale it would make a huge difference. Can you imagine what the country would be like if they actually regulated the banking industry up until the crash? Or what about all of the lost revenues from the loopholes all over the tax code?

It won't ever happen with the gov we have now. You have to replace the whole thing Repubs and Dems.

As far as metrics go, they should be reporting REAL GDP. With an honest inflation measure. That won't happen either because the gov can only fund it's bills through inflation.

Austerity is the boogeyman you can cling to and be angry at, but fair austerity actually takes more from the rich than from the poor. It is not much different from the deflationary forces during 2008 who brought wealth disparity down. If printing fiat = borrowing money from future generations and giving it to cronies (QE) would work, then Detroit and Zimbabwe would be prosperous paradises. Why not give everyone a printing press so they can print exactly the money they think they need, after all it's good for the economy! Welcome to Krugmeisters utopia ;)

Shabba says

I also think getting the US to invest in technologies is probably not a good idea either.

The problem is they have a very bad track record at picking technologies that are feasible and make economics sense. These technologies are almost always found by the private sector first. I don't think it is ALWAYS this way, but most of the time that is true.

MY guess is that the following research was govt subsidized. Good ol solar keeps marching right along.

http://phys.org/news/2013-09-stacked-solar-cells-energy-suns.html

Sure gov. has success in investing in tech. Do they have a lot of success compared to the amount of money they invest? Absolutely not. Why would the gov. be better at investing than the private sector? The gov has no incentive to spend wisely, the private sector does. If the private sector investor poorly they end up unemployed and broke. If the gov invests poorly they get re-elected by low info/low IQ voters like egads101.

mell says

but fair austerity actually takes more from the rich than from the poor. It is not much different from the deflationary forces during 2008 who brought wealth disparity down.

When did the wealth gap shrink?

Deflation only hurts those who are leveraged to the hilt, heavy in real estate and stocks with little cash. An example would be that dolt from "Queen of Versailles". It doesn't hurt at all the truly wealthy. They have armies of accountants and lawyers to escape consequences. They know that layers of shell corporations and so on protect them so they can dump underwater property they overpaid for, without ever paying a cent in penalties or taxes. Then they use their cash to buy "distressed" properties in quantity and ride it out.

Deflation hardly touches Richie Rich. However the "responsible" lower classes pull their heads into their shells and consequently miss out on nearly every opportunity to grow their own wealth.

You shouldn't be so hard on marcus over Zimmerman....

Call it Crazy says

Blurtman says

A common trap that we all get into is becoming so invested in a particular belief system that we become blinded to reality.

Wow, seems to be a common theme here on Patnet... Just read the other threads for verification....

David Losh says

The Fed creates a false sense of infusion by adding to the deficit.

When the fed buys teasury bonds and notes (not to be confused with their involvement in the short term TBill market) , two main things happen

1) Long term rates are allowed to be lower, because of this additional demand for bonds.

2) the fed takes those bonds as an asset into their portfolio (or in some cases in to the banking system).

The bonds and notes that were issued (that the fed buys)was debt that the government was taking on anyway, the fed is only affecting the price. In other cases mortgage backed or other securities were bought, to clean up the balance sheets of some of the too big to fail institutions. Some of these new assets put the banking system in a stronger position than they would otherwise be.

This is an oversimplification, but my point is that QE doesn't really add to the deficit. If anything it makes it a little lower than it would be if higher interest rates had to be paid for money the govt borrows.

So where does the money come from, that they buy all this with ? It's sort of like it's digitally printed. But the Fed says they will reverse the process when the economy is stronger.

marcus says

This is an oversimplification, but my point is that QE doesn't really add to the deficit. If anything it makes it a little lower than it would be if higher interest rates had to be paid for money the govt borrows.

So where does the money come from, that they buy all this with ? It's sort of like it's digitally printed. But the Fed says they will reverse the process when the economy is stronger.

That's great! So we can give everyone a digital printing press because it doesn't "really" add to the deficit and we can only come out stronger as a nation! Let's start with my printing press please, as soon as my personal economy is stronger I will reverse the process - I promise! ;)

Marcus,

Sorry, but you don't know what the hell you are talking about. The fed is printing money out of thin air and buying overpriced assets.

How does it get that money back when the price of its way overpriced assets falls? The fed has created a disaster.