[kerouac]

Here's an article by Krugman that makes some pretty good points.
http://www.nytimes.com/2012/01/02/opinio....html?_r=1

Quote:

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

[Samseau]

First of all, Paul Krugman is a cocksucker, a shill for big government and big banks.

With that out of the way, he's actually got a point here:

The USA could get away with much higher levels of debt. Between the FED buying bonds, and the rest of the world sinking into a depression, the USA's treasury yields will probably stay at all time lows for quite some time.

BUT they will eventually go up once inflation comes, which is taking it's sweet time due to the banks hoarding the money given to them by the FED. We won't start to see serious inflation until 2014.

I think whether or not the government spends or taxes more is a non-issue. I think the need for increased government spending is a symptom of a much larger cause, which is the banking system having a chokehold on the economy. The banks have ruined so many millions of Americans, the only way to make up for lost spending is for the US government to take over.

Complete bullshit - if Krugman really wanted Americans to spend more, why not just have the FED print money for ordinary Americas? Sure, there would be massive inflation, but at least there would be increased spending and Americans trapped in debt would free up discretionary income.

[Menace]

(01-02-2012 03:42 PM)Samseau Wrote:  

BUT they will eventually go up once inflation comes, which is taking it's sweet time due to the banks hoarding the money given to them by the FED. We won't start to see serious inflation until 2014.

Is the basis for your prediction for increased inflation 2 years from now that the banks hoarding the money will start lending it out and that people will start spending it? If so, why do you think they will wait two years?

Quote:

The banks have ruined so many millions of Americans, the only way to make up for lost spending is for the US government to take over.

Isn't your proposed solution for big government to take over big banks, resulting in big government regulated banks, which appears to be something you are opposed to viz a vis saying Krugman supports these interests (and you presumably don't)? For the record I agree that the finance industry in general, and banks in particular, have been unduly favored by government and quasi-government entities (i.e. the Fed.)

Quote:

Complete bullshit - if Krugman really wanted Americans to spend more, why not just have the FED print money for ordinary Americas? Sure, there would be massive inflation, but at least there would be increased spending and Americans trapped in debt would free up discretionary income.

I don't think Krugman is advocating Weimar-style money printing. I believe Krugman is an advocate for Public Works Administration-type government projects to create jobs by repairing our vast infrastructure, as opposed to attempting to stimulate employment and the economy via cutting taxes and spending.

[Samseau]

Quote:

Isn't your proposed solution for big government to take over big banks, resulting in big government regulated banks, which appears to be something you are opposed to viz a vis saying Krugman supports these interests (and you presumably don't)? For the record I agree that the finance industry in general, and banks in particular, have been unduly favored by government and quasi-government entities (i.e. the Fed.)

I'm not saying the U.S. Gov should take over, I'm saying it has taken over. It was a statement of fact, not normative opinion.

Quote:

Is the basis for your prediction for increased inflation 2 years from now that the banks hoarding the money will start lending it out and that people will start spending it? If so, why do you think they will wait two years?

Because money velocity is at all time lows.



If velocity is low, it doesn't matter how much money is printed because the money doesn't get into general circulation quickly enough to cause rapid inflation. Don't get me wrong, the inflation will come, but it's going to take quite some time.

[kerouac]

(01-02-2012 04:16 PM)Menace Wrote:  

I don't think Krugman is advocating Weimar-style money printing. I believe Krugman is an advocate for Public Works Administration-type government projects to create jobs by repairing our vast infrastructure, as opposed to attempting to stimulate employment and the economy via cutting taxes and spending.

+1

[Brian]

I'll let Karl Denninger do the honors..

http://market-ticker.org/post=199975

[kerouac]

Quote:

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

Quote:

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.

Quote:

Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest.

And that’s why nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today’s conventional wisdom would lead you to believe. Britain, in particular, has had debt exceeding 100 percent of G.D.P. for 81 of the last 170 years. When Keynes was writing about the need to spend your way out of a depression, Britain was deeper in debt than any advanced nation today, with the exception of Japan.

Of course, America, with its rabidly antitax conservative movement, may not have a government that is responsible in this sense. But in that case the fault lies not in our debt, but in ourselves.

So yes, debt matters. But right now, other things matter more. We need more, not less, government spending to get us out of our unemployment trap. And the wrongheaded, ill-informed obsession with debt is standing in the way.

[kosko]

UK isn't a model to aspire to, its a mess over there. USA debt is still largely "cheap" but its a problem that needs to fudementally be addressed.

The issue is that the USA tax base is on a downward spiral. The UK has been lethargically growing along because it has kept a flood gate open for newcomers to come in and take on a piece of that massive debt. USA tax receipts have peaked, it is still widely a destination of newcomers but as things breakdown internally within the foundations and institutional structure of the nation newcomers and investors won;t see USA as a cheap and stable investment for all that long. On paper the mess in the USA is worse than the EU. The EU is on the ropes because they can;t recklessly inflate there way out of it, the USA can and pundits think this is all honky dory when most citizens and at edge as it is? Okay cool debt becomes cheaper to service but nobody likes to sit and factor in how much living prices rise or how much industry gets raped when outside interests come in to grab bargains.

The real truth is that nobody understands that debt is a bill that needs to be paid. Pundits will always try to put roses on a pile of shit, the USA situation isn't panic and frantic as many alarmists paint it but it is from from "stable" or "ideal".

[vinman]

Thanks for your responses Samseau. They saved me. Any time I see anything with Paul Krugman's name on it, and it's not a call for his lynching I go apoplectic.

[JayMillz]

(01-02-2012 03:19 PM)kerouac Wrote:  

Here's an article by Krugman that makes some pretty good points.
http://www.nytimes.com/2012/01/02/opinio....html?_r=1

Thanks for the link. Krugman is usually on point with his analysis

[Handsome Creepy Eel]

Krugman's strong background in these issues and his very reasonable arguments make him a fine person to criticize the current economic mess. While I agree with all of his points on austerity in the USA, the true gold about his writing has been the way he handled the EU crisis - and predicted all the consequences of ECB not acting immediately. His points on the crisis in Spain are particularly strong (remember, a country that now needs saving, but it was never a debtor nation, in fact it ran a positive budget before the crisis). Disagreeing with him on some economic point is completely fair, but dismissing his arguments because he's a "pawn of the government" or something is way way out there.

Source: I'm an economist and have been researching the same sphere for years

[TudoBem]

(01-02-2012 03:42 PM)Samseau Wrote:  

First of all, Paul Krugman is a cocksucker, a shill for big government and big banks.

With that out of the way, he's actually got a point here:

The USA could get away with much higher levels of debt. Between the FED buying bonds, and the rest of the world sinking into a depression, the USA's treasury yields will probably stay at all time lows for quite some time.

BUT they will eventually go up once inflation comes, which is taking it's sweet time due to the banks hoarding the money given to them by the FED. We won't start to see serious inflation until 2014.

I think whether or not the government spends or taxes more is a non-issue. I think the need for increased government spending is a symptom of a much larger cause, which is the banking system having a chokehold on the economy. The banks have ruined so many millions of Americans, the only way to make up for lost spending is for the US government to take over.

Complete bullshit - if Krugman really wanted Americans to spend more, why not just have the FED print money for ordinary Americas? Sure, there would be massive inflation, but at least there would be increased spending and Americans trapped in debt would free up discretionary income.

I think you might gain a greater appreciation for Krugman if you were read some of his technical work, rather than the op-ed pieces. His ideas regarding liquidity traps and currency crises are useful in understanding dynamic situations.