patrick.net

Heraclitusstudent says

What you really need is less debt. You need rebalancing between deficit countries and surplus countries. And this means cutting consumption and increasing productivity in southern europe.

When you get rid of debt, you also get reduce the money supply. Productivity is hard to sustain if : Somebody makes it better/cheaper than you, they're using the same currency, and that currency is strong - and you have reduced domestic demand due to reduced consumption.

The connection between lower consumption and increased productivity would be difficult to establish, since productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

Heraclitusstudent says

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

As for Austerity in Europe, the Economist, the Socialist Worker of Neoliberalism, ran this piece:
http://www.economist.com/blogs/freeexchange/2012/05/austerity

As for the "Austerian" Economists, with Reinhard and Rogoff's book leading the charge, their methodology and mistakes were summed up well in this blog:

Reinhart and Rogoff, in case you are wondering, are two economists who wrote a very famous paper purporting to demonstrate that high public debt to GDP ratio leads to negative economic growth. This paper was then cited by Paul Ryan et al. as justification for shredding what remains of our country’s social safety net.

But SHOCKER!, the paper was wrong! As a UMass grad student recently discovered, Reinhart and Rogoff not only based their conclusions off selectively chosen data, they made a serious coding error in the Excel spreadsheet they were working with.

It’s cool though. They have written a petulant Op Ed in the Times basically explaining why none of us should WORRY about the data and the methodology they used and the Excel spreadsheet — it’s totally FINE and the original premise of their paper (which purported to demonstrate a causal relationship between high deficits and slow growth) remains sound and the best way to get out of our current economic crisis is still austerity, austerity, austerity!

Well, there’s the thing about that “small actual difference” between the critics’ paper and their paper: THEIR paper shows that high deficits lead to a negative growth rate of 0.1%; the critics’ paper shows that the same high deficits (90% ratio of public debt to GDP) are correlated with POSITIVE growth of 2.2%.

But yeah, it’s a small difference, in the grand scheme of things. For example, right now we are making -.1% interest on our checking account, when you factor in all the fees and everything but this is a “small actual difference” from the roughly 2.2% interest we made on our checking account during the heady days before the 2008 crash. Small difference. Potato, potahto.

Read more at http://wonkette.com/513931/famous-austerity-economists-just-because-our-data-is-no-longer-operative-doesnt-mean-we-were-wrong#4SkTyesYgx39aCKI.99

The critic's blog on Oxford University Press' site, talking about their now fully peer reviewed criticism of Reinhardt and Rogoff's errors and methodology. Which the two Austerians attempt to dismiss their serious cherry-picking and calculation errors as a mere "kerfluffle"
http://blog.oup.com/2014/01/public-debt-gdp-growth-austerity-why-reinhart-and-rogoff-are-wrong/

Final comment for now: In 2007, Spain's Debt to GDP was a low 34%. Lower than the US, lower than most European Countries, including Germany.

Spain

http://www.economicshelp.org/blog/5525/economics/spanish-economic-crisis-summary/

In Spain's case at least, The Financial Crisis caused the Debt, not the debt the Financial Crisis.

Germany

thunderlips11 says

productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Ass backwards

indigenous says

thunderlips11 says

productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Ass backwards

Right, in Austrian land, entrepreneurs and investors usually invest in new firms that produce goods and services for which there is no existing demand.

thunderlips11 says

Right, in Austrian land, entrepreneurs and investors usually invest in new firms that produce goods and services for which there is no existing demand.

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

thunderlips11 says

I think we're using different versions of Austerity here. Austerity has little directly to do with increasing savings, but rather cutting expenditures independent of whether it results in savings or not:

I'm using the only definition of austerity that makes sense.

If someone spends more than they earn, borrowing money every year to spend, you wouldn't call that person 'austere'. You wouldn't say their problem is that they are not consuming enough (generating end-demand).

The same goes for countries policies.

On the other hand if someone spends less then earn, they are de facto saving a lot, and you can say they are not generating enough end-demand, creating a problem in the economy by hoarding money that should be circulating.

This point is the center of understanding what is happening in southern Europe.
If you don't understand this, you don't understand the Greek crisis.

indigenous says

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

Every product every invented? As Bill should have taught you earlier, products don't create demand, they satisfy it.

tatupu70 says

indigenous says

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

Every product every invented? As Bill should have taught you earlier, products don't create demand, they satisfy it.

This is absolutely the stupidest how many angels can dance on the head of a pin discussion I've ever seen. Companies make products, if people want them then they buy them. Some were in demand but the technology didn't exist to make them (airplanes for one) , some were just good ideas that no one had thought of (velcro comes to mind). How fucking simple is that?

bob2356 says

How fucking simple is that?

Extremely, I expect nothing more from you.

The importance of this is that it creates the proper importance. I.E. the Ks spew that consumption is all important and in fact we get 1.5 times the economic activity for every dollar spent by the government.

The fact is though that the government doesn't produce anything, despite the fact that their spending get counted as GDP. This is the VERY reason that the USSR collapsed.

On the other hand if production is rewarded and investment in that production is rewarded we get a thriving economy.

Not only is this point not stupid it is imperative.

bob2356 says

This is absolutely the stupidest how many angels can dance on the head of a pin discussion I've ever seen. Companies make products, if people want them then they buy them. Some were in demand but the technology didn't exist to make them (airplanes for one) , some were just good ideas that no one had thought of (velcro comes to mind). How fucking simple is that?

It is simple, but it's surprising how many people can't grasp it. Your Velcro, for example--there was demand for a cheap, easy, product that would fasten things together. Demand always comes first. Demand exists even if there is no product to satisfy it.

"It is simple, but it's surprising how many people can't grasp it. Your Velcro, for example--there was demand for a cheap, easy, product that would fasten thing together. Demand always comes first. Demand exists even if there is no product to satisfy it."

Yea that is like saying there is demand to survive. What products will aide survival? All of them, therefore all products are demanded previous to there creation. Ok that is useful.

tatupu70 says

Your Velcro, for example--there was demand for a cheap, easy, product that would fasten thing together. Demand always comes first. Demand exists even if there is no product to satisfy it.

Unlike airplaines, which people wanted for centuries, no one knew they wanted velcro. Zippers, shoestrings, and buttons filled the demand quite nicely. Velcro worked better so it displaced other products, but didn't change demand.

bob2356 says

Velcro worked better so it displaced other products, but didn't change demand.

Yep, that's my point. Demand already existed. A new product doesn't change that.

Edit--a product with the same utility at a lower price will increase demand, so I guess it did change the level of demand.

indigenous says

All of the products existed before the demand. Nobody said I want a twin prop beechcraft type airplane, and more importantly there was no product to demand.

That's a new level of dumb. People wanted flying machines since the beginning of time.

tatupu70 says

bob2356 says

Velcro worked better so it displaced other products, but didn't change demand.

Yep, that's my point. Demand already existed. A new product doesn't change that.

Does that apply to hula hoops, astrioids, and pet rocks?

bob2356 says

That's a new level of dumb. People wanted flying machines since the beginning of time

Not with price discovery, Rin wants a 7 of 9 (or similiar) sex robot but until one exists there cannot be an exchange and even then he may not be willing to pay 1 million for it. You can rent a lot of Canadian hookers for 1 million, especially if Canada goes into a recession.

So demand has to be qualified as someone actually paying for the item.

bob2356 says

Keynes may or may not have been a genius. No one has actually tried implementing his ideas yet.

No economic ideology is ever going to be implemented 100%. But Keynes ideas were implemented to greater or lesser extent simply because it was easy to get the politicians in line to spend more money.

If nothing else it is interesting how the people can be fed a meme and think that it is true, despite the fact that it is pure propaganda. Funny we laugh at how ignorant the people in N Korea are kept...

sbh says

And there you are, staring back at yourself. Moron.

The diff being that CIC has something to say.

indigenous says

No economic ideology is ever going to be implemented 100%. But Keynes ideas were implemented to greater or lesser extent simply because it was easy to get the politicians in line to spend more money.

Well that proves beyond the shadow of a doubt you have no idea of any kind what keynes ideas were.

bob2356 says

Well that proves beyond the shadow of a doubt you have no idea of any kind what keynes ideas were.

Bullshit, the practical reality is exactly what I said.

I have not read general theory, but that does not mean I can not empirically see the affects Krugman has on the US economy and the Japanese economy.

Heraclitusstudent says

If someone spends more than they earn, borrowing money every year to spend, you wouldn't call that person 'austere'. You wouldn't say their problem is that they are not consuming enough (generating end-demand).

Organizations spend more than they earn all the time. Almost every large enterprise spends more money than it takes in at some point. Many organizations spend down their entire revenue and then some at times. Why should the government act differently?

Aggregate Demand Theory states that just because somebody produces it, doesn't mean it'll be sold, whatever Austrians might claim. It also observes that in a Recession, there's a propensity to save and not invest, but hold on to the money, further weakening the economy and demand. Therefore, it is stupid to cut government spending in the face of a recession: Not only will the economy struggle with finding new demand to feed the producers, it'll face an onslaught of laid off government employees and less public spending on top of it.

Indigenous' attempt to claim Aggregate Demand Theory doesn't fly and the notion that production precedes demand isn't doing well on this thread.

Furthermore, countries like Greece depend on Tourism and Ag exports, which are already suboptimal due to the high value of the Euro, so it's difficult for them to begin to "produce". Creating something like an R&D or high tech manufacturing hub would require vast outlays of investment and take years (decades, really) to come to fruition. Then they'd have to grow these businesses in the face of already existing concerns within the Eurozone AND abroad, somehow finding customers with less accumulated knowledge to produce cheaply and in quantity.

As discussed on another thread, "Lucky" or "Hard Working" countries like Germany got all kinds of deals the Greeks never got. Cancellation of half their war rebuilding debt in 1953, outright grants, the spending of countless Allied soldiers for years bringing money and demand and thus jobs into the country (how did the Beatles start?) - not to mention local contracts for catering, barracks construction, fuel storage facilities, and so on. Technology Transfers from US and UK Companies, directed investment, directed contracts for the express purpose of building up West German industry AND keeping unemployment low to reduce the appeal of Communism and Socialism.

Germany was allowed to violate Maastricht requirements on deficits and spending to incorporate East Germany.

Greece never got those things. Greece got itself bombed by Churchill until it accepted the same parties that collaborated with the Nazis and brought their widely despised hated King back. Then a military coup a few decades later. Greece got nothing like the German treatment.

Spain went into the recession with the lowest deficit spending in Europe, around 33%, much less than the US or Germany (about half).

indigenous says

I have not read general theory, but that does not mean I can not empirically see the affects Krugman has on the US economy and the Japanese economy.

What official position does Krugman hold in the US Government since the Recession began?

thunderlips11 says

What official position does Krugman hold in the US Government since the Recession began?

He is the official spewer of meme...

thunderlips11 says

Organizations spend more than they earn all the time.

There is a difference between going in debt to invest in new productive endeavors that will bring new revenues in the future, and going in debt to finance your life style: on-going expenses, pensions, etc... Companies that do the later fragilize their positions and will eventually go bankrupt unless they change their ways.

thunderlips11 says

Aggregate Demand Theory states that just because somebody produces it, doesn't mean it'll be sold

The theory is that if you have idle production capacity this can be used if you have more spending, and spending can be created arbitrarily by government spending. This ignores what happens when production capacity is outside the country. You can't simply spend more and hope it will do much good to your economy if you just buy more Chinese stuff. It's not like this would by itself create factory jobs in Greece. It wouldn't. (unless of course quitting global trade).

After a spending boom, when you spent far more than you earned, you need to go back to reality and align what you spend with what you earn. This means an economic contraction, which in the case of Greece was severe, but this is normal and expected. It just highlight how artificial the boom was.

thunderlips11 says

countries like Greece depend on Tourism and Ag exports, which are already suboptimal due to the high value of the Euro, so it's difficult for them to begin to "produce".

The real economy is independent of the currency value. Prices adjust both ways. People adjust how much they ask to align with what they can get.

The key point seldom discussed in the US, it that this is not just about tight government spending. A lot of German requirements are move to modernize the country's economy. If don't even have a tax collection department, then maybe you ought to have one, and people don't like to pay taxes but maybe they should. Maybe they need to take steps to make companies more efficient. A lot of the "pain" in Greece is precisely being forced to change old bad habits. Without it Greece will never be able to prosper.

This is where monetary stimulus is just masking the bad structures. It just allows the country to not change, not adjust to reality, never do anything to become more efficient. It remove all incentives for change. Yes you can print money and spend it. And yes that is "demand" (for the Chinese). But no country ever prospered out of this in the long term. You are far better off by confronting your problems and adjusting to the reality.

thunderlips11 says

As discussed on another thread, "Lucky" or "Hard Working" countries like Germany got all kinds of deals the Greeks never got.

[Shrug] You can debate endlessly about who had it tougher in the past.
To God, all things are good.

I would also remind that in the 2000's Germany took tough steps to moderate wage growth and improve its competitiveness, and was considered "the sick man of Europe", while other countries were spending debt money and having it easy. So there is a time for others to adjust.

Also remember Greece is getting help amounting to a Marshall plan. It already had a good chunk of its debt cancelled. It's not like other countries are just killing Greece. They are also helping it.

What Heraclitusstudent fails to realize is the culture is not the problem.

With a current account surplus some other country has a deficit to balance the trade.

If Greece agrees to take loans from Germany or Goldman or whoever they are forced to be the deficit country.

The only real solution if for them to simply quit taking the cheap money.

But to not think Germany is not complicit in this is absurd.

indigenous says

If Greece agrees to take loans from Germany or Goldman or whoever they are forced to be the deficit country.

The loans are balancing what remains of the deficit after the Greek are forced to take tough actions toward re-balancing and cutting the deficit.

Saying they are "forced to run a deficit" fails to describe the reality.

Heraclitusstudent says

Saying they are "forced to run a deficit" fails to describe the reality.

OK they were seduced, like Rin is seduced by his partners.

indigenous says

bob2356 says

Well that proves beyond the shadow of a doubt you have no idea of any kind what keynes ideas were.

Bullshit, the practical reality is exactly what I said.

I have not read general theory, but that does not mean I can not empirically see the affects Krugman has on the US economy and the Japanese economy.

If you don't know what his ideas are then how in the world do you know his ideas are being implemented? Do you actually read what you write. What does krugman have to do with it?

bob2356 says

If you don't know what his ideas are then how in the world do you know his ideas are being implemented? Do you actually read what you write. What does krugman have to do with it?

I just listen to what Krugman says, a self described Keynesian, he is the master mind behind Abenomics. Krugman has everthing to do with it, how can you not know that?