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IMF Chief Economist apologizes for not recognizing how much damage austerity...

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lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
Stimulus does NOT work, austerity hasn't even been properly tried. Let go of the ideology and think rationally
Don't tell me show me with Data.

and you need to properly understand my position

Austerity doesn't work
Stimulus only delays

My position is none of it works, were fucked, it ain't getting, better before it gets very bad first. Being one of the people doing very well in this shitty world (house of cards) economy. Forgive me for wanting my little kids to be a little older before they are forced to understand the gravity of where we are. I'd much rather be fending for myself when my kids are teenagers or adults.

Thats why I prefer spending vs austerity because other than timing it doesn't matter.
 
Nov 30, 2006
15,468
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So basically, you're showing that even a small amount of austerity was enough to deep six europe's economy? Your evidence is arguing against austerity.
No. I'm not saying that. What I'm saying is that there was actually very little reduction in spending (austerity) and that the true problem is debt. Short-term stimulus is only helpful on a short-term basis. Spending more money only increases debt and exasperates the true problem on a long-term basis.
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
136
No. I'm not saying that. What I'm saying is that there was actually very little reduction in spending (austerity) and that the true problem is debt. Short-term stimulus is only helpful on a short-term basis. Spending more money only increases debt and exasperates the true problem on a long-term basis.
You think that the government debt of say... The UK is what has made their economic growth so weak starting in 2010?

What economics are you basing this on?
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,917
173
106
Someone posted a chart recently. It showed spending by the countries under "austerity". IIRC, in every case spending was up, not down. I.e., no such thing as austerity. (Having said that, I'm unsure about Greece, wouldn't be surprised if their spending did go down, but IDK.)

Fern
 
Apr 27, 2012
10,086
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Someone posted a chart recently. It showed spending by the countries under "austerity". IIRC, in every case spending was up, not down. I.e., no such thing as austerity. (Having said that, I'm unsure about Greece, wouldn't be surprised if their spending did go down, but IDK.)

Fern
Finally someone who understands, They did not make REAL spending cuts but instead kept spending and then called it "austerity"
 

chucky2

Lifer
Dec 9, 1999
10,038
36
86
issue is the folks who call the shots would much rather drag this shit on as long as they can.

i'm not just being a doom and gloomer when i say there is no way out, we are in for a very prolonged decline, things could happen to make it happen faster, but the longer it takes the less civil unrest there will be, so thats the current path.

I hope I am wrong, for my kids sake. In fact nothing would make me happier than to be wrong.
I don't have kids, but, here, we agree completely.
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
136
Someone posted a chart recently. It showed spending by the countries under "austerity". IIRC, in every case spending was up, not down. I.e., no such thing as austerity. (Having said that, I'm unsure about Greece, wouldn't be surprised if their spending did go down, but IDK.)

Fern
You realize austerity means budget cuts as compared to the baseline, it does not require cuts in absolute terms, right? In addition, a good portion of the austerity measures put in place were tax increases. (conveniently left out of that chart) you did unwittingly highlight another reason why austerity is self defeating though, people thrown out of work utilize more government services, which eats up a good bit of the spending savings.

Also, the UK population has grown somewhere around 4% since the onset of the crisis. Even with steady spending you are now serving more people. Not sure how that's not austerity either.

This claim is really based on conservatives not wanting to own up to empirical reality. Conservative suggestions for economic recovery are a failure. There's no shame in being wrong, but you should re evaluate your position when confronted with contrary evidence.
 

manimal

Lifer
Mar 30, 2007
13,561
8
0
There's no shame in being wrong, but you should re evaluate your position when confronted with contrary evidence.




How many more variations of the family budget analogy are we gonna get in this thread?



My favorite counter so far is their versions of austerity werent pure enough.
 

BoberFett

Lifer
Oct 9, 1999
37,587
9
81
Thats the real shitty thing about the whole mess, there is no getting out of it. Austerity wont work and stimulus buys time but wont work.
Unfortunately correct. The economy has to contract, but we're still trying to keep the bubble inflated. Reality hurts, and human nature is to do everything possible to avoid it.
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
136
How many more variations of the family budget analogy are we gonna get in this thread?



My favorite counter so far is their versions of austerity werent pure enough.
The path is always the same:
1) austerity works.
2) ok it didn't work here bit that's because they didn't do it right.
3) I don't care what they say I know what I know.
 

BoberFett

Lifer
Oct 9, 1999
37,587
9
81
The path is always the same:
1) austerity works.
2) ok it didn't work here bit that's because they didn't do it right.
3) I don't care what they say I know what I know.
The path is always the same:
1) stimulus works.
2) ok it didn't work here bit that's because they didn't do it right.
3) I don't care what they say I know what I know.
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
136
The path is always the same:
1) stimulus works.
2) ok it didn't work here bit that's because they didn't do it right.
3) I don't care what they say I know what I know.
No, there's pretty strong agreement that not only does stimulus work, but it worked in our most recent implementation.
 

Darwin333

Lifer
Dec 11, 2006
19,947
2,325
126
That's a false equivalency. Stimulus does work to the extent that it's done. We know that the stimulus saved jobs and and resulted in economic activity. Local government gets money from the feds to buy a bus, where do you think the bus comes from? Workers build it.

Austerity also works to the extent that it's done... And the work it does is worsening the economy. You lay off a government worker, he can't spend money at the local shops, he can't get his car fixed at the mechanic down the street. And what is the benefit? That's what the IMF chief is admitting, that austerity failed.
This is actually very very simple mathematics.




C= private consumption
I= gross investments
G=government spending
x= exports
M= imports


So with this rather simple formula we know for absolute fact that if you increase G you will increase GDP. The reverse is also true, if you decrease G then GDP must mathematically decrease. Lots of people debate that $1 of government spending buys more or less than $1 of GDP but that is another topic of discussion.

The point is that when the .gov pulls out deficit spending, regardless of when it is, GDP must contract. It obviously seems to hurt more during a recession and arguably might actually hurt a lot more due to various issues listed in this thread. OTOH, 4 or 5 years of added debt increases the time that you must borrow due to increased cost of debt servicing potentially leading to a situation in which you can not dig yourself out of the hole you dug.

The idea is to NOT get yourself in that position in the first place, an idea that seems to have been lost on most 1st world nations. In Europe the problem is hugely exasperated due to the fact that the individual nations do not control their own money supply so they can not use inflation to buy them a little more time like we can. Regardless, we are all at the mercy of the bond markets. They can make us or they can break us quite literally overnight.
 

Darwin333

Lifer
Dec 11, 2006
19,947
2,325
126
The path is always the same:
1) stimulus works.
2) ok it didn't work here bit that's because they didn't do it right.
3) I don't care what they say I know what I know.
Mathematically stimulus absolutely works, its simply the degree of it working that is in question and imo that has a lot to do with how its spent.

One thing I love about math is its almost always either true or false and in this case the government borrowing and spending money does in fact increase GDP. The debt service and paying it back will also reduce GDP.
 

werepossum

Elite Member
Jul 10, 2006
29,876
460
126
Don't tell me show me with Data.

and you need to properly understand my position

Austerity doesn't work
Stimulus only delays

My position is none of it works, were fucked, it ain't getting, better before it gets very bad first. Being one of the people doing very well in this shitty world (house of cards) economy. Forgive me for wanting my little kids to be a little older before they are forced to understand the gravity of where we are. I'd much rather be fending for myself when my kids are teenagers or adults.

Thats why I prefer spending vs austerity because other than timing it doesn't matter.
About how I see it too. It's a dichotomy: (A) We desperately need to cut government spending; (B) If we cut government spending, things will immediately get worse. (Also a paradox, since this will call for more government spending.) One bright side though - a little manufacturing is coming back as companies figure out the three big downsides to off-shoring. (Training your competition, forgetting first how to manufacture and then how to design your own products, and after all is said and done not really making much if any more money.) If we can steadily increase our wealth production while holding government growth under GDP growth after inflation, eventually we will become more solvent. That assumes interest rates stay low, of course.

This is actually very very simple mathematics.




C= private consumption
I= gross investments
G=government spending
x= exports
M= imports


So with this rather simple formula we know for absolute fact that if you increase G you will increase GDP. The reverse is also true, if you decrease G then GDP must mathematically decrease. Lots of people debate that $1 of government spending buys more or less than $1 of GDP but that is another topic of discussion.

The point is that when the .gov pulls out deficit spending, regardless of when it is, GDP must contract. It obviously seems to hurt more during a recession and arguably might actually hurt a lot more due to various issues listed in this thread. OTOH, 4 or 5 years of added debt increases the time that you must borrow due to increased cost of debt servicing potentially leading to a situation in which you can not dig yourself out of the hole you dug.

The idea is to NOT get yourself in that position in the first place, an idea that seems to have been lost on most 1st world nations. In Europe the problem is hugely exasperated due to the fact that the individual nations do not control their own money supply so they can not use inflation to buy them a little more time like we can. Regardless, we are all at the mercy of the bond markets. They can make us or they can break us quite literally overnight.
Very well said.
 
Oct 16, 1999
10,497
3
0
http://www.huffingtonpost.com/2013/01/04/washington-deficit-obsession_n_2409978.html

Notice anything? Like, how every time unemployment rises, the budget deficit also rises? And how every time unemployment falls, the budget deficit also falls?

Why could this be? For one thing, the budget deficit is largely a function of the government's inability to collect enough tax revenue from unemployed people. If we can just get those people back to work, then the government will get more revenue, and the deficit will shrink.
 

Tom

Lifer
Oct 9, 1999
13,294
1
76
Do you think its fallacy or do you think there are some that benefit from debt? maybe those folks that benefit from debt also help to dictate public policy?
spending doesn't cause debt. spending and not paying for it causes debt.

the whole "austerity" argument as most conservative Americans understand it is based on a false premise, that government spending is bad, and that private spending creates more growth.

Complete fallacy. Because the philosphy is based on a belief that is just wrong, of course following it leads to disaster.
 

werepossum

Elite Member
Jul 10, 2006
29,876
460
126
spending doesn't cause debt. spending and not paying for it causes debt.

the whole "austerity" argument as most conservative Americans understand it is based on a false premise, that government spending is bad, and that private spending creates more growth.

Complete fallacy. Because the philosphy is based on a belief that is just wrong, of course following it leads to disaster.
Total government spending in America is roughly 40% of GDP. Were we to pay for it, 40% out of GDP from the private sector's 60% would be devoted to funding government. You might think removing two-thirds of the private sector's output is a good thing, but considering that little of our GDP is actually wealth production, there wouldn't be much left over. This is why we have a huge national debt, huge yearly deficits, and especially humongous unfunded mandates; we borrow and we set up programs to loot today in return for promises of tomorrow to cover this fact.
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
136
Total government spending in America is roughly 40% of GDP. Were we to pay for it, 40% out of GDP from the private sector's 60% would be devoted to funding government. You might think removing two-thirds of the private sector's output is a good thing, but considering that little of our GDP is actually wealth production, there wouldn't be much left over. This is why we have a huge national debt, huge yearly deficits, and especially humongous unfunded mandates; we borrow and we set up programs to loot today in return for promises of tomorrow to cover this fact.
Your math doesn't quite check out there. You are double counting all but about $1t of government spending.
 

Jhhnn

No Lifer
Nov 11, 1999
61,856
14,004
136
Total government spending in America is roughly 40% of GDP. Were we to pay for it, 40% out of GDP from the private sector's 60% would be devoted to funding government. You might think removing two-thirds of the private sector's output is a good thing, but considering that little of our GDP is actually wealth production, there wouldn't be much left over. This is why we have a huge national debt, huge yearly deficits, and especially humongous unfunded mandates; we borrow and we set up programs to loot today in return for promises of tomorrow to cover this fact.
So, uhh, the answer is to cut govt spending to reduce GDP to create growth, right?

Yeh, that'll work great in a depressed economy with a liquidity trap...
 

Tom

Lifer
Oct 9, 1999
13,294
1
76
Total government spending in America is roughly 40% of GDP. Were we to pay for it, 40% out of GDP from the private sector's 60% would be devoted to funding government. You might think removing two-thirds of the private sector's output is a good thing, but considering that little of our GDP is actually wealth production, there wouldn't be much left over. This is why we have a huge national debt, huge yearly deficits, and especially humongous unfunded mandates; we borrow and we set up programs to loot today in return for promises of tomorrow to cover this fact.
that isn't the reason we have huge debt. We have huge debt because we don't collect enough revenue to pay for the government we have.

There's two kinds of spending. Spending that improves productivity and spending that improves quality of life. And even those two broad categories can overlap, eg. healthy workers are more productive and have a better quality of life; adequate roads improve productivity and improve quality of life by reducing congestion.

And that applies to spending in the private sector and the public sector. There's nothing magical about spending in the private sector that makes it more beneficial than government spending, at least as far as economics is concerned.

The real difference between government spending and private sector spending isn't the economic effect, its who gets to decide what to spend. Considering the three broaqd categories of spenders, individuals, corporations, and the government, each has their own advantages and disadvantages. And we need all three, but we also need to pay attention to all three.

Simplistics views like if the government's doing it its bad, are just wrong, and relying on those mistaken ideas is why we have a big debt more than anything else. Because people who think that way actually want big government services, but only for their personal needs, and so think all the rest of the spending is a waste and keep electing politicians who appeal to their greed to get elected.
 
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Throckmorton

Lifer
Aug 23, 2007
16,833
1
0
Total government spending in America is roughly 40% of GDP. Were we to pay for it, 40% out of GDP from the private sector's 60% would be devoted to funding government. You might think removing two-thirds of the private sector's output is a good thing, but considering that little of our GDP is actually wealth production, there wouldn't be much left over. This is why we have a huge national debt, huge yearly deficits, and especially humongous unfunded mandates; we borrow and we set up programs to loot today in return for promises of tomorrow to cover this fact.
That's not how GDP works
 

fskimospy

Elite Member
Mar 10, 2006
71,837
22,010
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You said government spending comprises 40% of GDP output. All but about $1T of that is already funded through tax dollars, ie: it is already accounted for when you take into account what percentage of GDP each sector has.

So basically what's happening here is that in a totally private world private sector GDP would be 100% of GDP. In our world we tax that to make it into public sector GDP. Add in borrowing and you get 40%. Leaving the private sector with 60%. You're trying to count the 40% against the 60% a second time when you say that government would consume 2/3rds of the private economy.
 

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