Nobody Understands Debt | Krugman - NYT
Nobody Understands Debt
By PAUL KRUGMAN
Published: January 1, 2012
In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.
This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.
snip
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.
snip
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.
snip
full article:
http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=1&ref=paulkrugman#
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underpants
(182,632 posts)
Peregrine
(992 posts).
SixthSense
(829 posts)"Deficits don't matter"
BootinUp
(47,093 posts)but not a surprise.
Please correct my misapprehension. What is he arguing in this piece if not "deficits don't matter"?
BootinUp
(47,093 posts)I don't believe your attempt to slant it, in such a ridiculous manner, needs much rebuttal.
SixthSense
(829 posts)It's pretty unambiguous to me. Despite the protestation of the last sentence, the entire article is a justification for any level of debt, no matter how high.
It's amazing to me how people can hear something from Dick Cheney and know it's obviously wrong and evil, but the same thing from Paul Krugman and they fall over themselves to justify it.
BootinUp
(47,093 posts)with such a serious subject. Do carry on.
So given multiple opportunities to address the assertion, you pass every time on providing an explanation of your point of view.
That is what people who know they are in the wrong do, they deflect, distract, distort, or ridicule - anything but actually address the matter at hand. So you must know in the back of your mind that my comment was spot on, or you'd have something substantial with which to argue another point of view.
I am satisfied that I will not get a decent discussion of the issue on this thread I guess, so carry on with your blind idol worship, I won't further interrupt your devotions.
BootinUp
(47,093 posts)was really enjoying this too. 
AlbertCat
(17,505 posts)Uh... instead of making up something Krugman said, why not post something he actually wrote?
Like...
"For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size."
or
"So yes, debt matters." Which is kinda the opposite of what you posted....
I think the whole point of the Op Ed (and you should read the whole thing) is that you CAN'T sum up this complicated thing is one 3 word platitude. 
(and then run away!)
SixthSense
(829 posts)except when posting what he wrote, let's keep the whole context:
"So yes, debt matters. But right now, other things matter more."
Smoother than Cheney, but semantically identical. Didn't matter that we were running up the tab under Bush because chasing terrorists mattered more.
Let's grab another quote, in context:
"First, families have to pay back their debt. Governments don’t — ..."
If a family takes out debt and never plans to pay it back, there are felony charges. When a government does it, it's an act of war.
"... all they need to do is ensure that debt grows more slowly than their tax base."
Brace yourself here because the irony is devastating. Guess when was the last time we actually grew debt more slowly than the tax base?
That would be 1983... the year Krugman himself was sitting on Reagan's Council of Economic Advisors!
Were you alive in 1983? Something like 40% of today's US population wasn't.
The bottom line with Krugman is that he is a big, big fan of central banking and anything necessary to prop up its franchise. Nothing holds the country more in thrall to the bankers than accumulation of debt - the cost of going hat in hand to bankers for money is more than the interest payments.
P.S. Where'd you get the "and then run away"? I respond to every inquiry made to me that doesn't involve going down a rabbit hole of personal invective, and in a timely manner. Disagree with me if you will, but at least try to do it honestly.
JDPriestly
(57,936 posts)can yield a return that more than covers the cost of the debt.
There is a big difference between borrowing money for a Mediterranean cruise and borrowing money for medical school. After the cruise you have only a scrapbook of pictures (unless you happen to meet and marry a millionaire thanks to the cruise). After medical school, you have a pretty secure career.
Krugman is saying (and forgive me for repeating his ideas) that, although debt does matter, right now we need to focus on investing in the business of our country -- which is helping small businesses create jobs and, if necessary, setting the process of recovery into faster motion by permitting the government to create jobs revitalizing our infrastructure.
There is no question that debt can matter a lot. In part, our current recession is due to the fact that we financed the Iraq and Afghanistan wars and a tax cut mostly for the rich with debt.
But Krugman offers a solution, and it is the solution that Occupy Wall Street and many others who look at the world from the bottom rungs of the economy up, not from the top down agree with: tax, and I would add, the rich, since they are the only people who can pay more without seriously cutting demand.
Put the big banks and corporations that pay huge salaries and hand out enormous bonuses to their CEOs and management on a fiscal diet. We don't need to starve anyone. We just need to put the excess calories those fat guys consume back into the economy so that some starving entrepreneur who is ready to run the marathon of starting a small business with a new idea can burn it in a more productive way -- and employ some people while he/she is doing it.
Time was that Wall Street looked for new ideas for America and invested in them. That was way back.
It would be great if Wall Street reverted to that old methodology: investing in Main Street USA. But it is not going to do that, not at this time, when it can make higher profits investing outside the US. Not without a nudge.
Entrepreneurial Americans can't beg, borrow or steal enough money to get their ideas, their dreams off the ground. And if they do manage to put some money together, the demand for new American-made products is not great because the incomes of Americans are too low to buy the Made in the USA label.
Krugman advocates that we adopt the economic stance of a developing country (I don't think he actually says that; that is my interpretation): borrow to increase government investment in the infrastructure that makes business development possible.
But he also and more importantly advises that we should increase government revenues by raising taxes.
The standard response to this suggestion is that the government should not raise taxes in a recession. That is normally true. But there is something unusual about this recession: a disproportionate amount of US money and investment is going overseas. Of the packages under the your Christmas tree, how many contained products Made in the USA? Sure, we export a lot in dollar terms. Weapons systems are a big export item out of the US, but they are expensive and only a limited number of people are needed to manufacture and sell them.
Too little of the money we spend overseas comes back for investment on our Main Streets.
In this situation, the only hope is to borrow and then raise taxes to reduce the bleeding of US dollars into the global market and rebuild American infrastructure. Small business loans, especially in manufacturing -- let's say loans that would permit American factories to be built with all the 21st century bells and whistles in places like Detroit and Northern Ohio would be a good place to spend the tax money we could collect by increasing the taxes on multinational companies that sell goods here that they produce overseas.
We should also invest a lot more in education. How in the world can our college grads, our young, creative engineers, our cultural leaders compete with kids of their age from Europe or Asia where education is free or at least much less expensive than it is here?
Other developing countries subsidize their local businesses -- by failing to enforce labor laws, offering single payer healthcare to all (reduces the cost of health care insurance for everyone), limiting CEO pay through taxation if not through regulation, providing inexpensive public transportation for all, etc. And how do other developed countries pay for those things -- they impose and collect higher taxes from their wealthy than we do. And when they don't, look what happens: Greece.
I favor imposing taxes on trades on the commodity and stock markets plus VAT taxes similar to those in European countries.
Some say that VAT taxes are regressive, but if they are used to pay for health care or other social programs, then they are just a way of insuring that we all, rich and poor, take care of the essentials before we make discretionary purchases. I would further alleviate the regressive nature of VAT taxes by not charging them on food or medicines or services or necessities for children like clothing or textbooks. Why shouldn't people who can afford to buy I-phones and computers and other expensive items that are not made in the US pay a few pennies on the dollar to cover the loss to the US treasury that their purchase of a made-by-slave-labor in a country with open sewers and dirt roads means?
When read properly, Krugman's article is excellent. And I think I am mostly just restating Krugman's ideas with a few embellishments of my own.
Of course, there is another alternative: continue to do what we have been doing and accept the fact that we live in a slow- or no-growth economy. That might be the best alternative for our environment. But it would, in my opinion, lead to bickering if not worse about the distribution of wealth -- far more bickering than we have today -- and would probably mean ultimately a far more socialist system than would result if we simply borrow to invest, spread the tax burden fairly between imports and exports and then let our economic growth pay back the debt. If economic growth does not permit us to pay our debts then we should increase taxes. We will probably see some inflation, but we may see worse if we don't follow Krugman's prescription.
SixthSense
(829 posts)Do you think a political system that is entirely fueled by big money and corruption is capable of making "wise investments", except by accident?
Couldn't you personally come up with wiser investments than this corrupt process can?
Solyndra was one of those "wise investments" - and a total loss, while a big campaign donor somehow walked out with priority creditor claims (which is totally unprecedented).
The Volt was another, a vehicle with a net cost of nearly $300k per car (>$40k purchase price + ~$250k/ea. prorated subsidy) that will only be driven by the kind of person who can make five figure luxury purchases.
Then there's the Fisker fiasco - $500 mil of stimulus money that went to build a factory in Finland... and Tesla, another company that makes cars only luxury buyers can afford, hundreds of millions more went there.
Each of those companies is controlled by people who are politically connected at very high levels. None of that investment went to the benefit of regular people.
But, you may fairly protest, what about infrastructure, where the cost effectiveness of the investment can't be directly measured?
To which I would ask, infrastructure for what? For factories that no longer exist, having been shipped off to China, Indonesia, Vietnam, etc.? To get people to jobs they don't have anymore? For highways like the Trans Texas Corridor, the purpose of which is to facilitate foreign access to US markets without also giving us greater access to theirs? For poorly planned public works like the CA light rail system, a hundred billions over budget? To spend over half a billion dollars on a single high school in Los Angeles? To fund NFL stadiums that produce private profit on the public dime? To subsidize particular companies moving into particular regions?
Other than fixing what we have to prevent accidents and damage, we first need new industry before we can put any new infrastructure to use. We already have infrastructure to support more industry than we have, because of all the industry that has been lost. Infrastructure supports industry but it doesn't create it. Industry is created, as Henry Ford noted, by an economy well-balanced enough that a factory worker can afford the products the factory produces.
But back to my original point, government investment can't work to increase the general standard of living when the spending is directed by, and for the benefit of, a very tiny slice of the richest people in the nation - people, I might add, who are more than capable of legally evading any level of taxes that might be levied upon them (just look at GE).
The solution to our economic woes is not to hand yet more resources over to the very people who have been causing the problem all along. The solution is to fix the corrupt political process, take the power out of the hands of the elites, and return it to the people. Until the political process is fixed, the government will simply be unable to make wise economic investments.
JDPriestly
(57,936 posts)But, failing to do something about the economy on Main Street pretty much precludes fixing the political system.
As we saw with the Tea Baggers, people who are economically disenfranchised cannot make a meaningful claim to political authority. The Tea Baggers are well represented in Congress, but their legislative program defeats the interests of the ordinary people among the Tea Baggers and promotes at the expense of those ordinary people, the interests of the wealthy, wealthy, wealthy like the Koch Brothers (not just limited to those two scoundrels).
I agree that our government has reached a point of corruption from which it can appear that there is no return.
But the number of catastrophic financial decisions of the kinds you mention that are made in the public sector are more than matched by the number of catastrophic financial decisions made in the private sector. The catastrophic decisions in the private sector are more difficult to identify sometimes. They usually occur for the same reason that the corruption occurs in government -- people trying to keep their jobs.
Year after year, privately owned companies as large as General Motors have been known to make terribly conservative decisions about technological development and design that set them far behind competing manufacturers from other countries just to try to raise the profit margin on the sale of an individual product without concern for the environment or the pocketbook of the consumer. Thus, private ownership of manufacturing facilities is not a guarantee or even maybe the best solution to corruption especially since most of our corruption comes from private interests' whether entrenched bureaucrats or aggressive private donors buying our government.
And if my example does not convince you, think of the entire tobacco industry. It sat on the science that proved that its products should be if not outlawed, regulated strongly. Yet it was silent. It instilled all of its employees who knew of the dangers of tobacco the fear of repercussions if they told anyone or it hired people. In addition, many of those it hired were already addicted to its products but in denial about their addiction and therefore had a motivation to keep the bad news out of the press.
I don't need to mention the recent scandals in banking, mortgage lending specifically and commodities trading -- all excesses in the private economy that were eased by the strategic relaxation of government oversight. And that excess and that easing were not coincidences. There was a clear structure if not a strategy behind the events that lead to the economic debacle. It was as if someone had figured out the agorythim for boom, bust and disaster and run it on the world economy.
Of course, what is needed is something beyond a good business plan. We need first a press that will tell the real story, the whole story and not just repeat propaganda. Maybe the internet and discussions such as this can provide that.
But we also need a return to a definition of morality that is not just about sex. It has to be based on what the human role in the universe is, to what extent we humans need to be able to rely on each other and therefore to what extent it is essential to be honest and, yes, generous, with each other.
Whether we are discussing business or government, corruption is the result of fear of all kinds of things, being excluded from the circle of the powerful, losing face, being poor, going hungry, all kinds of things. People do not just wake up in the morning and say "I'm going to buy a Congressman today" or "I'm going to steal my investors' money today." They convince themselves that buying influence in Congress or using investors' money for their gain beyond reasonable compensation is necessary for survival and best for everyone.
So, yes, we need to end corruption in government (and in big business), we need a complete about-face in the way we view morality and the conduct of our leaders whether in business or in government. But how do we achieve that?
I think that when you have corruption at the highest positions in business -- such as at BP, such as in the health care and financial sectors, corruption in government is simply a result. In our system, corruption in the government is the sister of corruption in the private sector.
But whether the government should borrow or not is a separate problem. A more superficial problem? Yes, there is a link between government corruption and private corruption. Taking money out of the private sector might actually lessen the corruption in the government. Just as doing away with the private sector in communist countries simply moved all of the corruption into the government and did not get rid of it.
We get the impression that most of the corruption in our system is in the government because it is easier to see the corruption in the public sector than it is to see it in the private sector. Usually we don't find out about the corruption and calcification in the private sector until we notice patterns in the public sector -- like the laws that protect some big businesses against having to pay the full bill for their environmental damages -- that lay bare the ugliness of the corruption.
(It was different when most of the private sector was made up of truly small businesses. But that was long ago, in the age before Standard Oil became the model for a successful business. Today, many of the multinational corporations have more money than some nations. They can be just as corrupt, even more so than banana republics. Think of Enron.)
So just letting private corporations keep money that should go to build our economy through government investment would not lessen the corruption. It might even increase it as private companies buying our government through the campaign donations they give with money we could claim in taxes is a big part of the corruption cycle.
We need more investment here. We should have better access to broadband. We should be building computers here -- especially all computers destined for use by our military or intelligence communities should be produced here.
We need to experiment with more diversity in our energy production. I am sitting at a desk in Southern California. It is very warm and sunny. But I can't afford to put solar panels on my roof. What is wrong with that picture. Why are we still mining coal or burning oil or natural gas for heat and electricity when the an incredible amount of sun beats down on our asphalt roofs. It's a foolish waste of resources. And that is why we need government investment. What we cannot accomplish as individuals or as corporations could and should be achieved in many areas by pooling our resources.
Somehow, the private sector has a place, but so does the government. I honestly don't think that the private sector is showing the ability or the will to tackle many of our most pressing problems. So on top of corruption, our romantic ideas about capitalism v. socialism and public v. private are holding us back. I remember a time when we held on to similarly romantic ideas about women working. It just felt wrong. A woman was supposed to stay home and take care of the kids and make sure supper was on the table at 6:00 p.m. when daddy came home. Women couldn't take that after a while, so we had to give that up. And our society is in many ways the better for having more female doctors and lawyers and engineers.
Some of our ideas about the role of the public and private sectors are holding back progress. We need to let go of our idees fixes and allow progress to take us where it will.
BootinUp
(47,093 posts)How could debt have been growing faster than the tax base when we had a surplus?
SixthSense
(829 posts)there was a surplus when you count in the stolen SS money
and only on a calendar year basis, for a single year
for fiscal years - which is what the government budgets on - we haven't posted a surplus in an extremely long time - 1957!
BootinUp
(47,093 posts)How far back in time do you want to go? I assume you want us to go back to the gold standard and economic policies from before the great depression? Correct me if I'm wrong.
SixthSense
(829 posts)I'm really more against corruption and fascism than I am for any particular thing. I'm very liberal and thus there's a wide range of possibilities I'd find acceptable - anything really that's reasonably fair to all works for me.
For example, I'm indifferent to gold standard. Might be good, might not. But I am very definitely against the present situation where a select and privileged group of people gets to lever their capital 10:1 and create new money out of thin air (this is how our fractional reserve system works), when nobody else gets to do that. That is plainly unfair, it automatically creates two classes of citizens - those who can create new money and those who can't.
I don't want to go "back in time". I want the numbers to add up in a way that doesn't guarantee economic crisis. Assuming debt that will never be paid back does guarantee crisis - it's a time bomb in the system, how long can we keep it going before people realize that any money they lend to us is gone or devalued before they get it back. The present crisis is a pile of time bombs set in the decades prior all blowing up at once, as people realize en mass that various different types of loans - home, consumer, corporate, sovereign - aren't going to be paid off. Then the banks sitting on all that debt now realized to be bad, that their capital position depended on to be good, demand bailouts and here we are.
Everyone should be treated equally under law - that is the law - and our economy should reflect that.
In sum, I don't demand any specific thing other than reasonable fairness. I'll entertain any number of proposals as long as they are fair and treat everyone equally.
napoleon_in_rags
(3,991 posts)"all they need to do is ensure that debt grows more slowly than their tax base"
All they need to do is make sure more people are buying in than cashing out, and the whole thing stays stable! I don't want to use the overused P-word, but you have to notice this thing is tied not only to growth, but to exponential growth: Unpaid debt will grow exponentially in accordance with interest, so without an exponential growth in tax base (such as comes with growing population) you have problems. The stability of the whole economy system depends on constant growth, and explodes once you don't get it.
SixthSense
(829 posts)the debt hasn't grown more slowly than the tax base in something like 30 years
That comes close to endorsing the MMT point of view, as I understand it. He seems to stopped short of saying the size of the debt is irrelevant as long as it's denominated in dollars, but he came close. Didn't think he liked the MMT people.
OnyxCollie
(9,958 posts)straightforward sign of "bad administration" or of insufficient wealth.
If a state wishes to build a great railroad for, let us say, 50 billion DM,
it would be neither just nor understandable if it sought to raise this
through a tax - for example, in Germany of 1 mark per person. It is
not simply the present generation that is alive that uses the railroad;
and, it is not simply the present Minister for Finance who will collect
the income from it. Therefore, it is right that we also act on behalf of
our heirs, and that occurs when we borrow the money, pay interest,
and gradually pay the whole sum back out of taxes over a longer term.
The burden of the tax is thereby divided up between the present and
the future. For example, Prussia would otherwise have had to cover the
cost of the 5 billion (DM) which it expended for the purchase of railroads
over a period of 10 years through something like 500 million in
special yearly taxes - and that would have been a foolish and impossible
undertaking. It is something wholly different, and a matter of
poor financial management, when a state has to borrow money for
needs that continually recur; for example, paying the costs of its
bureaucrats and its army. In that case, the generation that is living
shifts the burdens to the succeeding generation, which must then bear
it; the state would thereby be managing its budget with a deficit, which
the next generation is expected to pay.
Weber, M. (2000). Stock and commodity exchanges ("Die Börse" (1894)). Theory and Society, 29(3), 305-338.
JDPriestly
(57,936 posts)
Max4Congress
(35 posts)A few years ago, I was the aviation department manager for a wealthy Republican. While on a trip to Palm Springs to play golf, the owner of the $2 million Falcon 10 I was flying, was told by his secretary, his personal checking account was $250,000.00 overdrawn. To the 99% that would be a real problem. For me, it would mean I would have to turn off all of the utilities to my house, withdraw my daughter from college, sell the family car and move into a tent city. However, my boss had many more assets available to him and he just told the secretary to "sell the K-Mart stock". If you folks are having trouble following me, let me draw the analogy between this little story and the US debt.
The federal government is not in the business of building a large savings account. It has certain services that the representatives of the citizens who go to Washington request of it. Over many years there are many services. Those services are for regulations that ensure that we have clean air and water, that are children are being educated properly, that our energy industry is functioning properly, that our financial industry is operating fairly and on and on.
From time to time things happen in the health of the economy that affects the balance between the income and outflow of the finances of the government. When the GOP took over the Presidency and the Congress in 2000, it had a national dept of $6 trillion. Within eight year that amount was $12 trillion. This was due to the shortfall of the taxes paid by wealthier American through a lowering of the top income rates and a move by them from "earned income" to "capital gains" as a way to generate their fortunes. At the same time, we entered into three unfunded undertakings, the Afghanistan and Iraq wars and "Prescription Drug" act.
Now we find ourselves in a position to choose whether we want to act responsibly and ask the Billionaires to help the country out of this national emergency, or do we want to lay off all of the public sector employees in the country, further reduce the taxes on the Billionaires and totally destroy the greatest society in the history of the world.
If the citizens of this country set back and allow the misdirected Libertarians like Ron Paul to pull this "smoke and mirrors" campaign over their thinking, I might as well start working on my first book, "The Rise and Fall of the United States Empire".
Max Martin
Democratic Congressional Candidate, Texas 36th District
Clear Lake City
econoclast
(543 posts)A Fiscal Train Wreck
By PAUL KRUGMAN
... it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.
So what? ... we're looking at a fiscal crisis that will drive interest rates sky-high.
A leading economist recently summed up one reason why: "When the government reduces saving by running a budget deficit, the interest rate rises."
But what's really scary ? what makes a fixed-rate mortgage seem like such a good idea ? is the looming threat to the federal government's solvency.
That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 ? make that 3, O.K., maybe 4 ? percent of G.D.P. But that misses the point. "Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen." So says the Treasury under secretary; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.
How will the train wreck play itself out? ... my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.
BootinUp
(47,093 posts)January 2, 2012, 2:51 pm
Mistakes and How To Deal With Them
So Alex Tabarrok thinks he has a great gotcha in my warnings about deficits and interest rates from 2003. Except, I’ve already acknowledged that mistake: http://krugman.blogs.nytimes.com/2010/09/01/mistakes/
The second [big mistake] was circa 2003, over the Bush administration’s use of the illusion of victory in Iraq to push through more tax cuts, even though the optimistic budget projections used to justify the first round had proved completely wrong. It’s worth pointing out that the situation was not at all like the present, where I support temporary deficit spending to deal with a depressed economy; the Bushies were pushing permanent tax cuts that had nothing to do with economic stimulus, and did so at a time of war with no offsetting spending cuts (and then pushed through an unfunded expansion of Medicare too). This struck me at the time as banana-republic behavior, and still does.
However, I wrongly believed that markets would look at it the same way, and that they would lose faith in American governance, driving up interest rates on our debt. Instead, bond investors discounted the politics, and acted as if they believed that America would eventually pull itself together and start behaving responsibly. The jury’s still out on that, but clearly my short-run prediction proved wrong.
http://krugman.blogs.nytimes.com/2012/01/02/mistakes-and-how-to-deal-with-them/
econoclast
(543 posts)In the article you cite Krugman admits that his short term prediction was off base.... But does not repudiate his analysis.
Tax cuts ..... Still in existence. Unfunded expansion of Medicare....still here too. Additional tax cut on SS. Total US debt up by 8 TRILLION dollars since 2003.
So we are still engaged in "banana republic" finance. And I believe Krugmans warning from 2003 is more valid than ever ...
"How will the train wreck play itself out? ... my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
And as that temptation becomes obvious, interest rates will soar."
BootinUp
(47,093 posts)taken back the white house and are threatening to get the budget back on track. Remember Clinton and the surplus?
The wealthy class that have gotten all their unwise tax cuts during the bush years are fighting to the death to keep them. So one way for them to fight is to simultaneously screw up government (run it badly, irresponsibly) and then claim it must be starved of revenue because it can't do anything right. Don't fall for it. The government in the end is us.
merkozy
(9 posts)Haven't we heard this before? Of the many believers in the magical power of government stimulus packages as the wonder pill to stimulate the essential organs of the economy, Professor Paul Krugman is by far the most committed cadre. Since the economic crisis erupted in 2008 the good Prof has used his regular column in The New York Times to goad the ‘indecisive’ Obama administration into using more Shock and Awe to defeat the economic crisis.
Like most of his fellow fiscal stimulus adherents, Professor Krugman agrees with most of us about the chief cause of the subprime crisis- our overambitious compatriots who were tricked by Wall Street into swallowing more than their small tummies could take. Yet when it comes to the possible solutions, the Professor and his followers begin to speak in tongues. Having watched with horror as the loaded tummies burst, the stimulus brigade say Uncle Sam must now take the vomit, this in order to maintain consumption at previous levels. Yes. In order to lose weight and improve their BMI, the morbidly obese must eat more burgers and donner kebabs.
Remember this is the same hording-style consumption level that is universally agreed as having been induced by Wall Street fraud and motivated by raw greed and naked ambition on the part of the victims. The same consumption many now agree was totally devoid of reality. Why, one may wonder, not take the opportunity afforded by the crisis to settle on a sustainable level of consumption? The answer is simple: never allow the ugly truth to stand in the way of a fabulous dream
http://www.maverickonomics.com/
BootinUp
(47,093 posts)About Us
Let’s get done with the big question. So, who the hell are we? Well, unfortunately that’s a difficult one. But we will give it a try. We’re computer scientists, plumbers, housewives, post men, students, doctors…everything really except economists. No wonder people often ask, “You guys are no economists. So how in God’s name do you think you’re qualified to comment on the greatest socio-economic scandal of our times?” Our response? “Our point exactly!” Sure, we’re no economists. But then neither were they. Yes. Despite all the mind-numbing theories and nerve-wrecking formulas, neither were economists. Hence the sub-prime crisis, arguably the biggest outbreak of mass madness in recorded history.
Here at Maverickonomics.com we believe economics need not be difficult. After all, it is simply a study of man’s daily endeavors, first to survive and then to thrive. It was not invented by John Maynard Keynes, and certainly there is no patent registered in the name of Adam Smith. And so at this juncture, in the midst of the greatest socio-economic upheaval of our times, we believe it is about time people reclaim the economic debate from the self-anointed Gods of wisdom who, once the boom busted and the fraud upon the people became all too apparent, quickly grabbed all the ringside seats, monopolizing the discourse and elevating bread ‘n butter issues into the realms of rocket science, far beyond the majority of us peasants with an IQ the size of a jelly fish’s. On this blog the fight back begins. Indeed we ask, if not now when this most dismal of sciences is down on its dodgy knees, then when?