Krugman, debt, and growth

[Atreus21]

...and what is your plan if 10 years from now it still has not recovered after you've increased the debt exponentially?

I'm surprised you feel the need to ask the question.

 

[Craig234]

I haven't really sided with anyone.

You sided with a statement that 'Krugman hasn't been right one time in 30 years', based on nothing. You haven't researched it, found evidence for it.

You haven't defended the assertion when asked to.

You haven't even responded to the request.

 

[sandorski]

How does Krugman cope with the reality that we are digging ourselves deeper and deeper into the debt hole with every passing day of deficit spending? Whatever the painful contraction we might have endured by writing off the loss after the bubble collapse of 2000 or 2008, we are even more screwed now. It's easy to say "use deficit spending until the economy recovers" when no one is asking how exactly is it supposed to recover, and why hasn't is it recovered by now, and what is your plan if 10 years from now it still has not recovered after you've increased the debt exponentially.

Fact - Republicans only care about the Debt when a Democrat is in the White House. You could bet your bottom dollar that if Obama was defeated this year, that the next President wouldn't have to deal with this question, regardless of what he did fiscally.

 

[bfdd]

Fact - Republicans only care about the Debt when a Democrat is in the White House. You could bet your bottom dollar that if Obama was defeated this year, that the next President wouldn't have to deal with this question, regardless of what he did fiscally.

lol wtf? They've pimped the "deficits don't matter shit" not "debt isn't a big deal".

 

[sandorski]

lol wtf? They've pimped the "deficits don't matter shit" not "debt isn't a big deal".

One follows the other.

 

[Mxylplyx]

How does Krugman cope with the reality that we are digging ourselves deeper and deeper into the debt hole with every passing day of deficit spending? Whatever the painful contraction we might have endured by writing off the loss after the bubble collapse of 2000 or 2008, we are even more screwed now. It's easy to say "use deficit spending until the economy recovers" when no one is asking how exactly is it supposed to recover, and why hasn't is it recovered by now, and what is your plan if 10 years from now it still has not recovered after you've increased the debt exponentially.

No one is arguing that the deficit problems in this country dont need to be addressed. That needed to be done well before the recession. The argument is that attacking deficits during the midst of the greatest economic crisis since the great depression is NOT the time to do it. People in this country don't seem to understand what kind of dangerous territory we were in during the beginnings of this financial crisis. A radical round of austerity measures at that time would have tipped us into a full blown depression. Anyone who argues against that is motivated by agenda driven politics, and not well proven economic theory.

 

[sandorski]

No one is arguing that the deficit problems in this country dont need to be addressed. That needed to be done well before the recession. The argument is that attacking deficits during the midst of the greatest economic crisis since the great depression is NOT the time to do it. People in this country don't seem to understand what kind of dangerous territory we were in during the beginnings of this financial crisis. A radical round of austerity measures at that time would have tipped us into a full blown depression. Anyone who argues against that is motivated by agenda driven politics, and not well proven economic theory....

..or History.

 

[werepossum]

Fact - Republicans only care about the Debt when a Democrat is in the White House. You could bet your bottom dollar that if Obama was defeated this year, that the next President wouldn't have to deal with this question, regardless of what he did fiscally.

Sadly that's probably true. Many of the deficit hawks under Clinton were also the drunken sailors on speed under Bush.

Democrats believe government is the answer to every question.
Republicans believe government is the answer to every question as long as they are in charge.

 

[Jhhnn]

No one is arguing that the deficit problems in this country dont need to be addressed. That needed to be done well before the recession. The argument is that attacking deficits during the midst of the greatest economic crisis since the great depression is NOT the time to do it. People in this country don't seem to understand what kind of dangerous territory we were in during the beginnings of this financial crisis. A radical round of austerity measures at that time would have tipped us into a full blown depression. Anyone who argues against that is motivated by agenda driven politics, and not well proven economic theory.

..or History.

What history?

 

[sandorski]

What history?

The Great Depression.

 

[First]

Laws are never irrelevant. That is why they are called "laws".

No, I'm sorry, but it's not a law when, in this context, the law of exponents doesn't mean shit if in 100 years $1T funds something that costs $1B to fund today.

Inflation solves this over time along with moderate tax increases and moderate spending cuts. Your whole law of exponents crutch isn't based in reality.

 

[Munky]

No, I'm sorry, but it's not a law when, in this context, the law of exponents doesn't mean shit if in 100 years $1T funds something that costs $1B to fund today.

Inflation solves this over time along with moderate tax increases and moderate spending cuts. Your whole law of exponents crutch isn't based in reality.

Make sure you mention that your "solution" will decrease a person's purchasing power over that time span by 99.9%

 

[Jhhnn]

Make sure you mention that your "solution" will decrease a person's purchasing power over that time span by 99.9%

Only if Repub sponsored wage suppression is allowed to continue, if the top down class warfare we've experienced for the last 30 years remains in effect.

Here's a spiffy bit of statistical analysis-

http://lanekenworthy.net/2012/03/11/is-decoupling-real/

 

[Darwin333]

No, I'm sorry, but it's not a law when, in this context, the law of exponents doesn't mean shit if in 100 years $1T funds something that costs $1B to fund today.

Inflation solves this over time along with moderate tax increases and moderate spending cuts. Your whole law of exponents crutch isn't based in reality.

I notice that you didn't mention rising wages, which isn't based in recent reality as well.....

 

[NeoV]

Krugman knows more about economics than everyone that posts here, put together.

You can of course disagree with his opinions, but to say he doesn't know what he's talking about is childish

 

[First]

Make sure you mention that your "solution" will decrease a person's purchasing power over that time span by 99.9%

True but an entirely irrelevant point if real purchasing power increases, something that has indeed factually occurred as the dollar has "lost" 95% of its previous value over the last 100 years. Despite it, purchasing power and living standards are no worse off.

 

[First]

I notice that you didn't mention rising wages, which isn't based in recent reality as well.....

I'm not sure what your point is, since I'd like to see rising wages as well. And inflation certainly does not prevent it. In reality, moderate inflation actually encourages wage earners to demand pay increases over time.

 

[Munky]

True but an entirely irrelevant point if real purchasing power increases, something that has indeed factually occurred as the dollar has "lost" 95% of its previous value over the last 100 years. Despite it, purchasing power and living standards are no worse off.

Link to source? Where are you getting that real purchasing power increased?
The printing to infinity solution you propose is not novel, Germany and Zimbabwe already tried it and it failed spectacularly. What you're effectively doing is rewarding debt binging, while discouraging savings and capital formation. Such a policy forces one to hand over his money to fund Wall St gambling, or risk living in poverty after retirement. It's policies like this that have dug us into a debt hole so far down that the only option now is to keep digging and printing, because any deflation would inevitably detonate the system.

 

[GaiaHunter]

I only have a question.

If having a debt is always in your best interest, who the hell is going to lend the money?

I'm not sure what your point is, since I'd like to see rising wages as well. And inflation certainly does not prevent it. In reality, moderate inflation actually encourages wage earners to demand pay increases over time.

And then the price of products/services go up, since it now costs more to produce. Then the price of work goes up since products are now more expensive. Then the price of products/services go up since work is more expensive. Ad-nauseum.

In the end we went from $1000 wage to $10000 wage but our food bill also went up from $200 to $2000.

 

[Jhhnn]

I only have a question.

If having a debt is always in your best interest, who the hell is going to lend the money?



And then the price of products/services go up, since it now costs more to produce. Then the price of work goes up since products are now more expensive. Then the price of products/services go up since work is more expensive. Ad-nauseum.

In the end we went from $1000 wage to $10000 wage but our food bill also went up from $200 to $2000.

Which also means that the value of debt is lower, as well. In a growing & credit driven economy, which is what we have, inflation is a necessity. Debt is easier to repay.

We had the opposite scenario in the early 1930's, when the over extended credit driven economy collapsed in a debt deflation spiral & a liquidity trap. Money increased in value just stuffed into mattresses, so that's what those who had it did with it. The same thing would have happened in 2008-2010 if not for intervention by by Treasury & the FRB in a very, very Keynesian fashion.

The fact that we're not re-living 1931 tells us that Keynesian-ism works.

 

[Darwin333]

Heh. Denninger is a twit. Of course Krugman's prescription hasn't worked nay time in the last 30 years, because it's never been implemented, because it wasn't the same situation. We haven't had this magnitude of economic collapse since 1929. It was only the implementation of Keynesian policy by the FRB, the bailout, & the half assed stimulus that prevented it from being any worse than it is.

If you want to understand Krugman, then you have to read Krugman, not a right wing hatchet job directed at him.

http://krugman.blogs.nytimes.com/

He was relentlessly attacked for this, written back in 2005-

http://www.nytimes.com/2005/08/12/opinion/12krugman.html

When it turned out that it was worse than he expected, they shut up for awhile, but now they're back... they always are... they're ideologically opposed to learning anything...

I actually agree with most of that article but I have to question why he is no longer concerned about our "our dependence on foreign lenders".

Not all of them- a few can see through the ideological fog bank-

http://www.frumforum.com/were-our-enemies-right

It isn't working. We can print a 6% GDP number this year if we borrow twice as much but again, we eventually must eat our peas.

It is no different than you taking a paycut and using your credit cards to better your standard of living and saying that your financial situation is improving.

Krugman is the same jackass that called for increasing our targeted inflation rate to something like 7% (maybe 5%, to lazy to look it up) at a time that wages are more likely to decline than to rise and at a time that we are borrowing as loads of money and at a time that an interest rate hike would be the final death nail to the housing market(target 7% inflation and you won't get a 5% rate on a house).

Our policies, many of which he champions, have literally painted us into a fiscal policy corner. We are locked in to policies like ZIRP (I know, ZIRP has NEVER caused any problems, right?) and huge deficits with, imo, no realistic end in sight. So my question to you is, what happens if we don't print those really rosy GDP numbers they are counting on over the next decade?

 

[Darwin333]

Which also means that the value of debt is lower, as well. In a growing & credit driven economy, which is what we have, inflation is a necessity. Debt is easier to repay.

Debt is also much more necessary just for the average joe to continue the standard of living that they are used to since his wages are not rising to keep up with that inflation. Ir also seriously discourages "capital formation" and forces average people into riskier investments. So while the debt may be easier to pay you end up with a shitload more of it and you don't really gain anything for the increased debt.

I wouldn't call that a good thing.

 

[Craig234]

Darwin, you still have the assertion in your OP that 'Krugman hasn't been right on one thing without 30 years', you have not provided support, or even responded. Not good.

 

[Darwin333]

I'm not sure what your point is, since I'd like to see rising wages as well. And inflation certainly does not prevent it. In reality, moderate inflation actually encourages wage earners to demand pay increases over time.

Who cares if it encourages them to demand pay increases if it is basically a sum zero game (they can still buy the same amount of "stuff" from 40 hours work as they used to). Whats wrong with going with the Feds actual mandate which states "stable" not moderately increasing. Then if you do get a pay raise you are actually better off.

In reality (as in, what is really happen) wage earners have not seen an increase in their wages while they have in fact seen an increase in what stuff costs. This is a bad thing, mmmmmkay?

 

[GaiaHunter]

Which also means that the value of debt is lower, as well. In a growing & credit driven economy, which is what we have, inflation is a necessity. Debt is easier to repay.

It is also harder to pay your daily expenses since your money is worth less and it is better to buy tangible goods than lend money.

We had the opposite scenario in the early 1930's, when the over extended credit driven economy collapsed in a debt deflation spiral & a liquidity trap. Money increased in value just stuffed into mattresses, so that's what those who had it did with it. The same thing would have happened in 2008-2010 if not for intervention by by Treasury & the FRB in a very, very Keynesian fashion.

The fact that we're not re-living 1931 tells us that Keynesian-ism works.

On the other hand it seems that in the 1930's the Federal budget (spending) increased over 50%, there was the Smoot–Hawley Tariff Act, the federal government created production quotas for farms and paid for the removal of acreage to keep prices up, among other things.

Of course this was preceded by the so called roaring twenties that saw an increase of credit and drop of interest rates.