From the Atlantic Monthly. Paul Keating's line comes to mind. "Where do you people get off?"
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Nicholas which one of Bushes cronies years ago spoke of the end of "reality politics".
We had fed the heart on fantasies,
The heart's grown brutal from the fare,
More substance in our enmities
Than in our love; O honey-bees,
Come build in the empty house of the stare
Too much newly woven toxic cleverness and not nearly enough honey and wax .
I don't think it really alters the substantial point, but isn't the effect somewhat exaggerated by counting tax cuts as purely deficit-generating, when it's reasonable to assume they will have at least some stimulatory effect?
Mind you, this graph appears to be based on forward projecion of Obama's spending/taxing commitments made in his first 2 years in office. If he stays in office for 2 full terms as Bush did and keeps promising and spending more at the same rate as in those first 2 years, their respective records will end up around the same. However, with a Republican majority in both houses at the moment that's highly unlikely to occur.
I have read that the war in Iraqi has cost more than the cost of just about every other US big foreign project ( barring WW2 ) - purchase of Alaska, WWI, Vietnam and so on totaled up .
Don't expect to see a repeat of that one .
Speaking of fantasies Bush's reversal of a century of Anglo/American policy wisdom about an area of vital national interest; the ahem Persian Gulf, will make an excellent extra chapter for 'The March of Folly'.
Ken,
The TARP and other spending programs were targeted and temporary - like ours. They were actually thoughtful economic policy - though larded with pork on their way through Congress. So, like our stimulus, they are self liquidating.
By contrast Bush was starving the beast. He even got tax cuts for the wealthy through Congress on the basis that the cuts were temporary, but of course the Republicans only said that to get them through and have lobbied for their retention ever since.
Building on KP's comment, the moral of that chart is that America should amend the Constitution to outlaw one party controlling simultaneously the Presidency, Senate and House.
No Patrick,
The moral of the story is as usual Keynes was right.
you need to build surpluses ( usually substantial at that) in the good times to offset the deficits ( they should only be substantial in times such as the GFC) in the bad times.
The Republicans chose to have deficits in good times , like they chose in the 80s and then when they lost power to miraculously have surpluses in bad times ( which is just not possible).
This sums it up nicely.
Obama's Elitism, Republican Principled Ignorance and the Debt Ceiling Debate
Um yeah sure. Obama is the worst President ever.
http://portalseven.com/employment/unemployment_rate_u6.jsp
I'm sorry Marky when did Obama become President?
When was the large increase in unemployment?
Like statistical significance you have never heard of lags.
why has it levelled out even falling a tad now?
It is another reason why tax cuts are not very good as stimulus measures. not only does spending have a larger multiplier as Nick points out they are finite.
Tax cuts always needs to be financed and are the largest reason for the present deficit.
Over two and half years ago. It's time embrace responsibility. He refuses to cut the budget even as debt to GDP approaches 100% of GDP.
But spending doesn't. You are a charlatan and a numbskull.
Marky,
I'm sorry you cannot blame Obama for the Unemployment rate. That is rather silly.
A bit hard to blame him for the deficit when as has been shown few of his measures have contributed to it.
is spending the problem in the US. NO.
Like all subjects you talk about you never understand it at all.
would austerity measures help the US economy and bring down the deficit?
of course not.
I should also say the net stimulus was not very large at all in the US hence the weak recovery
If you are spending too much you cannot pay back and have massive unfunded contingent liabilities, yes you have a problem.
He has been President for 2.5 years. He had a Democrat congress for 2 years. When will he be accountable?
This is the best example of hijacking the evidence I have ever seen. Paxton the twit has just concluded that no deficits can ever be paid back - except for going into more and more debt, even when the debt repayments exceed GDP growth.
What a clown.
Marky,
I have provided evidence on both cases .
Naturally you haven't and cannot because classical econmics has been shown to be complete bunk.
Bring in Austerity measures now and you would make the deficit worse. If you understood the Unemployment graph you would know that but unfortunately you do not.
And as shown above tax cuts are by far the largest reason for the deficit.
Like what? If output growth is 3% and the national debt is 100% of GDP and the interest rates go to 4%, how are they going to pay that off let alone have positive GDP growth?
Insolvency has been debunked!
You are hijacking more articles again Homer. The point of the Atlantic Monthly article is that the buck stops with Obama.
hijacking what?
We have the IMF showing if you introduce austerity measures it will depress growth. I could have linked a BIS study showing the same thing.
so your measures will simply make the defcit worse. You cannot get debt or the defcit down without decent growth. Austerity at present unemployment levels is madness and won't work.
As Keynes put it Austerity works in good times. As usual all we have now is further confirmation of Keynes
No it doesn't. Growth is already low. Growth grows after the fiscal consolidation.
No, you're insane.
If output growth is 3% and the national debt is 100% of GDP and the interest rates go to 4%, how are they going to pay that off let alone have positive GDP growth?
what is the point.
The IMF paper says Our estimates imply that a 1 percent of GDP fiscal consolidation
reduces real private consumption over the next two years by 0.75 percent, while real GDP
declines by 0.62 percent. but Marky says it doesn't.
go away.
in both this study and the BIS Study they find the contractionary fiscal measures are offset by cuts in interest rates and a large depreciation. In ALL cases the economy is going fine as is their major trading partners.
In other words Keynes was correct austerity works in good times.
another example of you simply making things up.
goodbye
The next two years. Also you're lying whilst freely accusing others of "making things up", you illiterate clown. I never said it didn't do that, I said it didn't matter in toto.
Big frickin deal. How long do you think it takes to pay off the US debt? The costs of a prolonged debt repayment are far larger.
O RLY?
If output growth is 3% and the national debt is 100% of GDP and the interest rates go to 4%, how are they going to pay that off let alone have positive GDP growth?
Love that first chart - a picture of polemic perfection.
Dude! Where's my surplus?!!
BTW, "(inc. projections)" is there, coyly, to remind the folk of Warmish persuasion that forecasts aren't facts. You know, just in case they hold Obama to yet another under-delivered over-promise.
Meanwhile, the SS Entitlement careens majestically towards the iceberg.
Suggest reading William James 'On the varieties of religious experience' - especially the chapters on how the sociology of the individually revealed truth religion(s) of the North German plain developed in America- And while your reading it have a listen to ' The WC Wallcots medicine show'.
The combination of slightly juicy faith healing , sexy entertainment and snake oil has very deep roots in the republican heartlands . The tea party is (like rock and roll before it ) a surprise only if you do not understand its origins in a crossing of the ecstatic Dionysian with north German Lutheran anti authoritarian faiths.
Expect they will eventually sober up, but it could be an exciting night.
I guess all those people with mortgages 600+% of their annual income with interest rates of ~7% and an annual salary increase of ~3% are financially doomed! DOOMED!
Lets see if you're premise is correct, Desipis.
$100,000 income for a $600,000 home.
With roughly $60,000 take home pay and $51,000 annual loan repayment, they wouldn't be doomed, as you say. They would be unlikely to qualify for a loan in the first place, so you're right in a sense. They would/wouldn't be doomed.
You also didn't compare like with like. If rates are going up for the sovereign, they aren't exactly going to stay steady for the home borrower either.
The rough rule of thumb according to an academic study I read recently was that 90% is the cut off point where nations eventually go broke.
I would think the problem with government spending is that it creates an impost on taxpayers. As such it seems odd to label a tax cut as a "cost". How much did the tax cut "cost" taxpayers?
I don't think anybody's suggesting there's no problem, but I am curious - what exactly is so terrible about the 100% of GDP figure? Sure, it means that every year ~4% of the nation's productivity goes towards paying interest, but it's at least feasible in principle that the debt was used to make investments that are generating better than 4% returns, yes? I'm not sure I understand why Desipis' parallel with home mortgages is so wrong - people can and do incur debts that are 3 or 4 times their current income potential, and banks are happy to lend that sort of money. The obvious difference I can see is that debts this size are typically secured.
You're potentially screwed.
If there's a down turn, more debt will pile up and according to an econometrician 90% is generally the level where nations begin to pile debt as a result of interest accumulation piling up also as debt. It doesn't have to happen but the risk is extreme.
The MMT guys at this point usually suggest the nation can print more money and of course it can if it is able to like the US and unlike Greece. This of course assumes the bond markets will of course sit there like patsies and lap up all the issuance.
Sure, it's feasible. In the old days and not far off times sovereigns would issue non-recourse loans tied to specific projects. Maybe it would be a good idea reprising that again. The Chunnel was funded non-recourse I believe and it went bust, which is a good thing for the Brit and Frog taxpayers I guess, as they didn't have to support over capitalized risk.
You just lowered what he based his premise on by 42%, thereby almost 1/2ing it. Any reason?
Even then it's still ~5 times the debt ratio of the 100% / 4% example.
I guess it's possible governments in economic trouble are more likely to act like a gambling addict with a credit-card than a responsible home owner.
"The Republicans chose to have deficits during growth"? Was it considered good and educated analysis to work towards the government having a balanced budget during the 90's? Gold was $300 an ounce and it's role as a store of value laughed at .....I don't recall one party being held responsible for this or am I mistaken? http://www.gfmag.com/tools/global-database/economic-data/10395-public-deficit-by-country.html#axzz1TD4rALaT Since the early 90s most OECD governments have run deficits so is this a case of Non keynesian strategies having an ascendency? As I remember there wre 2 shocks -the tech crash and the GFC which had the shared feature of loads of liquidity being supplied to the markets. Was there any opportunity for surpluses to be accumulated in other countries? I ask this because apart form Norway , Korea and Switzerland the surpluses in the UK, Ireland and the US coincide with the craze of CDOs whcih unbalnced the system so their side effect of surpluses seems a mixed blessing. It intrigues me that the answer after the fact if so clear- just what combination of features made is so unappealing in the past?
Still around - revenue munis. A USD trillion-odd on issue, very often bonds with say $500k face value.
PSC
Aren't most of them...ummmm either implicitly or explicitly guaranteed? I can honestly only recall one time when there was a non-recourse financing done and that was the Chunnel and there was a great deal of howling but neither government forked over any more cash.
Wizo
It’s also really misleads people like Desipis to talk about debt as an expression of GDP and then look at it from an individual’s perspective, as it mkes people think the wrong things.
Firstly, as we all know GDP is a nation’s annualized production. But it all doesn’t belong to the government. The government however rakes in about 24% of that to pay its running costs. Of that 24%, around perhaps 70% of that goes to paying recurrent spending like pensions and social security etc., which is solidly fixed like the rock of Gibraltar.. In reality a government is left very little with what they call discretionary spending from which they have to pay interest on debt, as well as meet other “recurrent discretionary” spending (?) If the debt figure becomes too big it will be forced to do either of two things. It has to cut spending in other areas, which pisses a lot of people off or it has to raise taxes, which also pisses a lot of people off. And governments hate to piss anyone off.
The MMT guys say… oh but they can just print it. They can, however if the government, any government’s explicit game plan whenever it got into trouble was to simply print the cash, I can’t for the life of me think there would be any bidders their auctions again.
The explicitly guaranteed ones from GO revenue are called "double barrel" munis. There are also numbers explicitly guaranteed by such luminaries as FGIC, AMBAC and MBIA.
There is an implicit guarantee - but at the end of the day, they're mostly to pay for natural monopoly infrastructure services, and the operator always has the option to put charges up.
Governments don't act like home owners. It's wrong to even think of it like that for the most part as it leads you to think in the wrong direction.
What happens in a recession? Automatic stabilizers built into the system begin to do their work such as unemployment insurance and other welfare transfers. Don't forget also that tax receipts take a dump. So spending/receipts ratio widens out for governments.
What would happen if say your job was threatened? I could guess you would rationally act to lower your spending to income, as all rational people would, so it's the opposite.
Lol good luck collecting...
(I think) AMBAC ratted on bank of America over some phoney deal recently and BAC settled out of court, while AMBC's stock price took off because they had a $1 billion coming back to them.
I hate AMBAC, as I own a little BAC stock. They signed the guarantee as professionals and then go bawling when the security fell over suggesting they were defrauded. BAC management were wuzzes for settling.
JC, yes, the fact that US federal take of GDP is only about 25% is why their debt is more akin to a home borrower on an 100K income borrowing 400K. So, yes, rather high, but not, I would have thought, immediate concern for panic.
Terje,
The tax cut cost taxpayers a surplus and guaranteed future deficits.
The 90% figure is taken from Rogoff and Reinhart. Their methods are questioned here.
You cannot reduce debt or a deficit for that matter by slowing the economy down.
Otherwise you end up like Japan.
You get the economy going first. Anybody that believes you introduce austerity when Unemployment is above 9% is simply a loony.
Once you get the economy in a healthy state you bring in austerity measures which then help economic growth not hinder it. the defcit should go away and debt levels will fall.
JC, you know perfectly well that the US debt level as a percentage of GDP is entirely manageable. That's nothing to do with whether it is the right level but it is certainly manageable.
Whether the deficit, including entitlements programs, is manageable is a separate issue.
Whether there is the political will to manage either either is another separate issue.
Patrick, I don't think there is much disagreement about the problem caused by the trajectory of future spending in the US with health and social security on top of other govt spending.
As for the chart, so what. How does Bush era spending stupidity or otherwise impact on the proper assessment of current proposals? It's just stupid name calling. Spending cuts either do or do not make sense now irrespective of how the current and future spending level was reached.
"You get the economy going first. Anybody that believes you introduce austerity when Unemployment is above 9% is simply a loony."
Two problems with that statement. First, it begs the question of whether the administration policies are going to get the economy going. Not much sign of that so far. The second sentence is a straw man.
Patrick
Current US liabilities are 'manageable" or at least grown ups aren't panicking just yet. But what is both your point and Wizo's, as I don't really understand what you're trying to say.
The US has reached a concerning level of debt which if it goes further will mean trouble and something has to be done to stop the piling on.
Frankly it's a little hard to separate when the entitlements and projections are where they are.
no Pedro,
The first sentence has nothing to do with the Administration.It is simply a matter of fact.
So is the second sentence. here is more evidence from the BIS and here is what happened in Japan.
It is a pity you blokes never read about these situations or can't comprehend.
classical economics is a dead parrot. It is no more. all the evidence points to Keynes being correct as usual.
Read about that on Catallaxy. Nosiree.
JC,
Last time I checked the world economy was in pretty bad shape meaning the automatic stabilisers would already be in effect when considering debt. I think the important question is how much of the GDP is currently being used to pay off the debt. It's not a question of whether the interest exceeds growth, but rather whether the interest minus payments exceeds growth. If in the proposed example (4% interest rate, 3% growth), less than 1% of GDP was being used to pay off debt, then the problem could spiral out of control without some change. If more than 1% of GDP was being used to pay off debt then the debt would eventually be paid off without much problem.
What sort of change is required depends on the particular circumstances. Raising taxes or cutting spending risks slowing the economy too much and reducing the ability to pay off the debt beyond the gains of the extra short term payments. While attempting to boost the economy with debt based spending risks increasing the debt more than the ability to pay it off.
O rly? Borrowing on the credit card to make your mortgage payments because your spending exceeds your income ISN'T a concern? Phew. For a mo there I thought shitloads of debt was something to worry about. FFFS, HAVE YOU LEARNED NOTHING?
Homerkles,
Your link and attempted argument point @ #36 on R&R is bullshit.
The points you attempted to make @ #40 are shrouded in your usual clumsy obtuseness. What arguments are you trying to support with your references?
Which is why there's a central bank that ought to be doing its job and if they fail the senior guys ought to get booted.
The Fed's primary job is to ensure Nominal GDP doesn't collapse the way it did during periods of the GFC. They were absoltuely freaking woeful, perhaps not the worst because that trophy belongs to the ECB, but bad all the same.
Money was tight and credit was even tighter. People generally think the two are the same but they're not. If they had done their job properly we wouldn't have been in this mess.
I don't understand your point. We talking about the US economy and the relationship of debt to equity as it pertains to the US. Now you've decided to swing this to 'the world economy"? What are you doing?
Secondly the world economy did fine last year. It grew at around 4.9%. If that's bad shape, i would really love to know your definition of "good shape".
fyodor,
of course they are bullsh.t to you are you have no understanding of economics.
your arguments are nothing.
try reading this.
if you continue not to understnd try commenting at Catallaxy. They just love ignorance indeed as we have witnessed they thrive on it.
Fyodor, I never said it wasn't something to worry about - but as long as that 100% figure is stable or preferably declining, then I fail to understand your parallel with borrowing on the credit card to make mortgage payments. The immediate problem the U.S. government would seem to have is that it's not collecting sufficient revenue to cover its ongoing expenses, which would be a problem eventually no matter what its current debt level is.
Homer
re the link. You've stumbled on some MMT advocate. Those schelps always start off the same way by going the GDP equation and saying if this or that happens GDP is therefore must be impacted this way or that. Seen it all before.
The problem is that the economy isn't the GDP equation but an illustration of it.
GDP = C + I + G + (X – M)
That's just a representation of the economy in the format of an equation. It's wrong to say that if there's a fall in G it will cause a fall in GDP for a simple reason. G derives from the activities of the other variables and is totally dependent on them.
Try and think a little more if that's possible and you'll make far less (thinking) mistakes in future.
What if we're borrowing on the credit card to pay for a training course so we can get a new job because the job we had has been shipped off overseas? Sure, buying the McMansion a few years back now seems like a pretty silly move, but that doesn't mean that all future debt is just as bad. I suppose we could just try to work minimum wage until we're forced into defaulting on the mortgage...
Except I somehow doubt Fyodor believes there should even be a minimum wage.
I think it's a bit much to make the Fed solely responsible for nominal GDP. The Fed relies on the banking system to have influence over the economy. If the banking system grinds to a halt the Fed doesn't have much power.
JC,
the papers ( I have linked) from the IMF and BIS show that to be incorrect.
In a country with a low export intensity and zero bound interest rates where is the growth coming from when government spending will pound it into submission.
That is the problem with trying to talk to Catallaxy types. Haven't read the literature and therefore have a poor understanding of how economies work.
By the way he isn't an MMT type
Homer, answer this you condescending, ill educated charlatan:
If output growth is 3% and the national debt is 100% of GDP and the interest rates go to 4%, how are they going to pay that off let alone have positive GDP growth?
Keep in mind US Treasury notes are consistently higher than 4%.
Depsis - your loan idea is whacky because private entities would never qualify. Your numbers also make no sense.
You haven't read any literature you haven't butchered and then ruined the sauteing of. You're an intellectual barbarian. You are trash.
PS Vol IV of the Zimbabwean Journal of Monetary Dynamics, 1977, doesn't count.
The Fed's job is to maintain nominal GDP at a level where it doesn't keel over the rest of the economy. That's their mandate. They failed. They were too tight going into the GFC and perhaps causing it and they were too slow to react to events as they unfolded.
As for the silly stuff you posted to Fyodor...Don't get him angry as you won't like the results.
Homer:
You posted a link that i read which is basically MMT nonsensical crap.. the sort of stuff you seem attracted to these days.
When you realize that link collapsed your argument like a lead balloon, you're now sending me to other links and other stuff?
I don't know what the IMF is saying as I forgot about them a long time ago. However I'm more than a little certain the BIS isn't saying what you think they are, as they have been calling for debt retrenchment over the past several months. It wouldn't shock me in the least that you misread their missive as we all know (you included) that you have difficulty with comprehension most times.
Wizo;
Stop adding more salt to the soup. We have enough stuff to get through here than going into a discourse on labor economics.
Let's stick with what some people think why it would be a good idea to send the US economy hurtling into a brick wall.
If anything I'd argue they were too loose which only exacerbated the asset bubbles. But our disagreement should highlight the fact that the Fed was stuck between a rock and a hard place when it came to the GFC.
Marky you ill mannered ignoramus,
how and why are interest rates going to 4%?
They could only be going in such a direction if there is healthy growth.
If that was the case your case falls down completely
you cannot get deficits or debt down until growth is healthy.
you are advocating the Japanese experience whether you realise it or not.
JC please read about MMT and then come back.
you claim the private secotr will somehow grow when demand is at present low ( Unemployment is what?) interest rates cannot be cut and there is little help expected on the tradable sector.
I have provided evidence that Austerity only works when economies are going reasonably well not in the present conditions.
Yet you and the rest of Catallaxy who never read about it continue to advocate polices which will increase the defcit and the debt.
Amazing.
it is pointless arguing with Catallaxy types they are ignorant of even the most basic concepts and proud of it indeed they boast about it as we see here.
Please shut up and look at the historical averages.
(Let's say the 10 year note)
http://www.federalreserve.gov/datadownload/Output.aspx?rel=H15&series=0b82b42463f45dbb8fc097de06640ffc&lastObs=&from=&to=&filetype=csv&label=include&layout=seriescolumn
This is rubbish, the last three years show is utter rubbish. So Homer how are they going to get growth above the bond rate? This has never happened for a prolonged period of time, particularly when times are good.
No, I'm advocating what Keating and Howard did here in Australia. You seem to think the 1990s-2008 was a loser in Australia (actually one of our best times since pre WWI). Did you miss out, you corridor power walker, you?
If you know it or not, you are advocating the Argentinian solution, Homer.
Grow a brain.
I have , Homes I have. It's crap. Complete junk. If you want to know why don't hesitate to ask.
The system allows for a central bank, whose responsibility is to target inflation (in the US between 0 and 2%). It operates under a fiat system with floating exchange rates and has authority to control the money supply. It needs to follow its authority.
The Fed can accommodate fiscal retrenchment through easier monetary policy. They've done it before, perhaps not to the degree that's required because of severity, but it's been done before.
Well don't argue it then. No one is forcing you to comment.
Marky both Keating and Howard had healthy economies hence as Keynes advocated austerity does breed growth.
There is NO comparison to the US.
A small lesson on bond yields they go up on inflation expectations. That goes hand ind hand with err healthy growth. That is why they are low in both the US and Japan!
Ever looked at historical bond yields in Japan before the lost decade.
same story.
The last three years has seen a very unhealthy economy and deficits have grown.
mind you if Bush had not had gone on a deficit spree things now wouldn't be as bad as present on the debt front.
As all the papers I have linked show Austerity ONLY works when times are good.
Even Alesina and Ardagna only showed that.
This is a very simple concept. You do not run deficits in good times. They should only be run ( and in most cases using only automatic stabilisers) deficits in bad times.
If you try to reduce deficits in bad times they get err worse. see Ireland, Greece, etc.
JC,
If you understood MMT then you wouldn't have said one of my links was so inclined.
you cut government spending/ raise taxes and miracously the private sector recovers. Except there is NO evidence for it at all.
This is like you claiming the US would suffer from rising inflation which of course is not around.
It simply happens.
The Fed has cut rates as much as they can but under a forward looking Taylor rule they are still too high. It is called a liquidity trap
no boost to demand from there. none from the external sector so where is it coming from?
answer. nowhere.
It come only come from a fiscal stimulus.
you are advocating the Japan solution and that was a miserable failure and you still haven't understood the lessons from it.
Are you really that thick?
You don't even know what you're babbling about anymore you old fool.
No.
Yes Homer, if they increase the debt to GDP ratio in America to 110% then they will grow, despite the interest bill being around 4.4% of GDP...so by adding to debt by 10% they can grow the economy at least around 4.5%?
You're a freaking genius you idiot.
Keynes advocated what he saw as stabilisation measures within tight and reasonable bounds. He never advocated what is akin to trading whilst insolvent.
Homer:
I pray to God every night now in thanks that you were never given authority over anything at the RBA or Treasury.
I do understand it. It's crank economics and there's nothing going for it.
Who said anything about raising taxes? I didn't.
What is going nowhere is your argument.
Zero bound is not the end of the road. The Fed has several more tools at its disposal than what you think it does. Zero bound is simply the price of credit and it may actually be correct to say to zero interest rates are still too high which means the Fed has to adopt other options.
Look here is where I respectfully part with the right on this issue. Debt retrenchment will cause a slow down. But at the same time right wing economists are suggesting the Fed is too loose.
How can the Fed be too loose when even at zero bound loan demand is not rising? So in effect very low interest rates are actually a sign of weakness in the economy and zero is a sign of serious weakness too I might add.
The Fed's job is to ensure the money supply and liquidity are ample when the debt retrenchment begins in earnest and perhaps there is a need for further quantitative easings.
However to suggest the Fed is limited at zero bound is nonsense. Keyness was simply wrong there.
Also, we should recall that the regulators are imposing some very serious capital requirements on the banks, which means even less lending.
The regulators and the government have done some pretty useless and damaging things.
They had loose capital requirements when the boom was on and tight capital requirements just when the recovery was taking place. They are doing the opposite of what should be happening.
Nonsense.
I'm not advocating tax increases and I'm advocating even looser Fed policies.
Coming from you that's a complement, Homes.
Homer is the same bloke who accused Reagan of being dishonest and knowingly went into debt, knowing that his tax cuts “wouldn’t work” (wrong, they did), i.e deficits didn’t matter and he didn’t give a damn.
Now Homer is advocating the same thing through ever high Government spending.
We could accuse Homer of the same thing given the obvious malfunctioning of programmes like railways to nowhere and “cash for clunkers”.
What an ugly, stupid hypocrite.
Imagine what Homerstan would look like.
only a complete imbecile would think the US economy under Reagan and the US economy is similar. for starters Reagan didn't face a liquidity trap.Therefore he didn't need any boost from fiscal policy.
This is rather a very simple concept yet neither Marky nor JC can get their heads around it.
Need anyone say any more.
No one here said that you illiterate arseclown.
It's not relevant you flaming deadshit.
Devastating response, Homerkles. What's next? "I know you are but what am I?"
Answer the question.
I know you struggle with even undergraduate economics, but I don't. If you're going to regurgitate vulgar Keynesianism at least attempt to incorporate an open economy and capital account.
*awaits Homerklean brainfart*
"Pfft"
Boo-hoo, Homer's lost his friends.
"only a complete imbecile would think the US economy under Reagan and the US economy is similar" Homer, you're certainly well place to identify the ramblings of a complete imbecile. Krugman has basically acknowledged that the liquidity trap is a figment of his assumption that the Fed wouldn't talke the monetary steps available to it.
@ #35: "So, yes, rather high, but not, I would have thought, immediate concern for panic."
It's not stable. It's not declining. It's rising at a rapid rate. Next.
WTF? Is this some perversion of Micawber's Law? To torture your facile analogy even further, if you're in trouble with your mortgage you don't grant yourself a wage increase; you cut back on expenses.
I'm not one for "believing" in general. Not that it matters a hill of beans.
Fyodor:
What do you think are the ramifications of the Aug 2 deadline .......it doesn't go through and is perceived not to go through for a while?
The "deadline" is symbolic and - largely - irrelevant as the debt ceiling itself is a fucking joke.
The political deadlock is so toxic that there is no possibility of agreement on fundamental change, so all that's feasible - and thus "necessary" - are various last-minute political fixes that will paper over the problem and achieve nothing substantive, leaving the underlying issues unresolved. I see little prospect of the US government sorting its fiscal position before 2013. It's clusterfucked.
Leaving these underlying issues unresolved? A bit like the Greek debt solution?
Fyodor is there really such a nuanced difference between "not something to worry about" and "not immediate concern for panic" that I need to explain it?
Let's at least agree that the fact that the U.S. debt is still climbing is what we should be worried about.
And I wouldn't have thought it controversial that to point out that the US government isn't collecting enough revenue to cover its expenses. The solution to that can be anything from reducing expenses fully to match current revenue, to increasing revenue to fully match current expenses (as I understand it, the optimal approach is likely to be somewhere halfway between such extremes).
It's worse murph. The US Dollar looks like it's about the literally fall off the highrise. The Yuan is linked to the dollar and falling along with it therefore tightening everyone else bt default. Gold is skyrocketing and the rumor is that 2nd and 3rd tier central banks are dumping the US dollar and buying currencies like the Aussie, sending it up to almost 1.1100 today... causing monetary conditions to tighten, also tightening, as a result of the RBA acting hawkish.
It's a fucking potential disaster for everyone here.. potentially.
If the US stock market craters we could have another one of our now regular monthly crisis on our hands... AGAIN.
You tell me. I'm not the one seeing a difference. You are.
Really? What makes 50/50 so optimal, other than your desire for a face-saving compromise?
I worry about lots of things all the time Fyodor. I don't remember the last time I panicked.
I've seen a number of figures thrown about, from 20% reducing expenses/80% increasing revenue to something close to the reverse. "Halfway" didn't imply a precise "50/50". Ultimately what probably matters more at this point is what's politically possible.
Pedro.
A liquidity trap is when monetary policy is not working you know like now in the US.
Interest rates are essentially zero. They cant be negative. Duh!
Krugman has made no such assertion at all. another Catallaxy inaccuracy amongst many. you can't tell reality so you make it up.
Marky seems to think it isn't relevant, you know tightening fiscal policy when the econmy is going well is the same as tightening when the economy is doing badly.
wow. I link working papers from the IMF and BIS showing it is but again Marky is right again and the world is wrong. Look at Japan a withering success tightening when you shouldn't.
Fyodor,
you searing wit and repartee is just too much.
wow fiscal policy not working in an open economy. Hmm US is not a really open economy and the assumptions behind fiscal policy not working in an open economy are what?
when you find out come back with that devastating style.
Oh my God you have the temerity to call yourself an economist but doesn't realise there can be such a thing as negative real rates?
Bullshit they are right. How come America hasn't recovered you fuck knuckle?
FFS learn some second year macroeconomics, like what happens in an open economy with a capital account. Loser.
By what authority are you saying monetary policy is not working in the US, Homer?
What exactly did the actions of QE1 and QE2 at zero bound represent? You think they were replicas of the famous passenger ocean liner?
It wasn't wit I was searing, Homerkles. But that's not what you meant...or was it? It's hard to follow your arguments at the best of times...
...which wouldn't include the following tripe:
What Le Fuck is this supposed to mean when it's at home having tea on a Tuesday?
Find out?! Still lost in translation, me old China. Is there another language you could use, one less vulnerable to your mangling?
I checked out the CBO's projected debt going out to 2021 in $trillions
2010 55.1
11 63.4
12 67.7
13 68.9
14 68.5
15 67.9
16 68.0
17 68.1
18 68.0
19 68.3
20 68.6
21 68.9
It jumped by about $15 trillion from what i can figure stating from around $40 trillion before and at the height of the recession in 2008/ 2009.
As far as % to GDP goes it looks like this
2011 62
12 69
13 74
14 75
15 75
16 75
17 75
18 75
10 75
20 76
21 76
The problem is that it doesn't take into account another recession that would absolutely devastate the budget in those forward years.
The 2008/09 recession moved the deficit 38% for those two years, which is like a wrecking ball going through the finances. Okay, some people may say, it wouldn't be that severe, but I'm not sure the markets wouldn't make it as severe if it became concerned with debt level.
One thing looks possible to me though, that if there's debt retrenchment in the US, you can possibly rely on the US Dollar remaining weak for the next decade or so as the Fed is not going to be thinking of tightening the screw much, so the Aussie could stay pretty high all things being equal.
The CBO link is worth taking a looksee.
ops sorry, ignore the first row as it's meaningless. I incorrectly picked and pasted up some other figures instead of the raw Dollar amount.
Marky go and learn the difference between nominal interest rates which the Fed controls and real interest rates.
Duh.
Fyodor can't help you. Ken Henry knew the answer and given Australia successfully used fiscal policy that theory didn't work out.
A bit like your love of classical economics. wonderful in theory but study after study finds it wanting as I have shown.
Jc,
Zero bound doesn't limit monetary policy?
well seems to disagrees.
Indeed indeed Glen Rudebusch shows the effect of the QEs and the liquidity trap is still there.
gosh wrong again.
damn that link is here.
You stupid fool do you think the central bank targets mortgage rates etc implictly through monetary policy or not?
If bank margins in Australia come down, the RBA is tempted to raise rates sometimes.
Homer has just rejected the notion of a bank credit multiplier yet wants to lecture us on monetary economics.
Interesting times.
I don't want to get into a whole debate here, I just want to point out that JC is wrong about MMT. This is particularly telling in the following:
>The MMT guys at this point usually suggest the nation can print more money and of course it can if it is able to like the US and unlike Greece. This of course assumes the bond markets will of course sit there like patsies and lap up all the issuance.
You argue that printing money is only possible so long as the bond markets comply, which you assume to be a shared assumption. The problem is that MMT does not share this assumption. They argue that the idea that a currency monopolist needs to finance its spending by issuing bonds or taxes is nonsensical once it is realised that bonds function to maintain stable interest rates (reserve effect of government spending) and taxes function to create demand for government currency. The bond market doesn't finance government spending, rather the government is providing bond markets with an interest earning financial asset, which allows financial institutions to manage and assess risk, and manage their portfolios, among other things.