In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up!
NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action.
Well, SOMEONE should be fired over the website debacle; but who exactly gets fired I don't know and would need to look a lot closer to determined. I endorse the firing of someone though.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!).
Maybe in some cases. But I don't think in all cases. The tricky thing with determining whether something is a government job is often government contracts out to private companies. Does that count as free market (private companies get the contract) or government job creation (government is creating the demand.)
Regardless, government can create jobs where no reasonable company would dare enter on their own and yet the end result as a positive job creation and not job destruction. I will stick to Canadian examples as I am more familiar with them, but if I understand correctly with a cursory reading, the USA has a similar example in government intervening in railroad building in the North during the Civil War (Pacific Railroad Acts.)
My Canadian example is the Canadian Pacific Railway. Private companies bankrupted themselves simply trying to connect Canada West to the Maritime colonies (Grand Trunk Railway.) And to be fair, bankrupted the colonies because big business so often seems to be tied to government. If that small bit of track bankrupted companies, there was not a chance that railway companies would dare venture across to connect the East to the colonies of Vancouver Island and British Columbia. It was only with massive government intervention, guaranteed loans, land grants and other incentives that the CPR was built connecting all of Canada by railway. This created many jobs, secured the west from American expansionism (we already had already lost the first Fort Vancouver), and otherwise united coast to coast.
I do not see how jobs were destroyed as there simply would not have been a railway built. Private companies were not waiting in the wings and cursing the government because they otherwise would have tried to cross the Prairies on their own. They would have only been cursing that they did not get the government contract. Government can undertake these massive projects that create jobs and promote national interests where business would otherwise not touch on their own.
I think it's tricky because in the United States many of the railroads failed and had government assistance. In fact, the great northern railroad from Minnesota to Washington received no federal funding and most assumed it was impossible to build a railroad that high north over the Rockies. It's also one of the only railroads to not go bankrupt. It's not to say that subsidies or no subsidies are bad, just that there are anecdotal cases on both sides. So we're back at the starting point where nobody knows counter-factually.
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 08:40 DoubleReed wrote: Where's the "spend money to get employment back up" option?
Seriously. Priorities. The debt does not matter when unemployment is at 7.2% after five years. Labor participation is at a historic low.
Fix debt problems with growth.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!).
Maybe in some cases. But I don't think in all cases. The tricky thing with determining whether something is a government job is often government contracts out to private companies. Does that count as free market (private companies get the contract) or government job creation (government is creating the demand.)
Regardless, government can create jobs where no reasonable company would dare enter on their own and yet the end result as a positive job creation and not job destruction. I will stick to Canadian examples as I am more familiar with them, but if I understand correctly with a cursory reading, the USA has a similar example in government intervening in railroad building in the North during the Civil War (Pacific Railroad Acts.)
My Canadian example is the Canadian Pacific Railway. Private companies bankrupted themselves simply trying to connect Canada West to the Maritime colonies (Grand Trunk Railway.) And to be fair, bankrupted the colonies because big business so often seems to be tied to government. If that small bit of track bankrupted companies, there was not a chance that railway companies would dare venture across to connect the East to the colonies of Vancouver Island and British Columbia. It was only with massive government intervention, guaranteed loans, land grants and other incentives that the CPR was built connecting all of Canada by railway. This created many jobs, secured the west from American expansionism (we already had already lost the first Fort Vancouver), and otherwise united coast to coast.
I do not see how jobs were destroyed as there simply would not have been a railway built. Private companies were not waiting in the wings and cursing the government because they otherwise would have tried to cross the Prairies on their own. They would have only been cursing that they did not get the government contract. Government can undertake these massive projects that create jobs and promote national interests where business would otherwise not touch on their own.
I think it's tricky because in the United States many of the railroads failed and had government assistance. In fact, the great northern railroad from Minnesota to Washington received no federal funding and most assumed it was impossible to build a railroad that high north over the Rockies. It's also one of the only railroads to not go bankrupt. It's not to say that subsidies or no subsidies are bad, just that there are anecdotal cases on both sides. So we're back at the starting point where nobody knows counter-factually.
Even aside from rewarding rent-seekers, the government had vested strategic, political, and economic interests in the development of the railroads. For more recent examples: look at the interstate highway system and the internet, developed initially for more effective wartime transport and communication. Do you really expect any government to just close their eyes and hope these things will materialize? If they needed them when a war came, they would just order their construction, or even temporarily nationalize the industries to construct them anyway, at a greater cost than building them during peacetime. Infrastructure is not manna from heaven that will materialize wherever it is needed, or efficient, or even necessarily where it would be profitable in the long run!
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 08:40 DoubleReed wrote: Where's the "spend money to get employment back up" option?
Seriously. Priorities. The debt does not matter when unemployment is at 7.2% after five years. Labor participation is at a historic low.
Fix debt problems with growth.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive MP . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 08:40 DoubleReed wrote: Where's the "spend money to get employment back up" option?
Seriously. Priorities. The debt does not matter when unemployment is at 7.2% after five years. Labor participation is at a historic low.
Fix debt problems with growth.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Yes i have.
On October 24 2013 03:38 DoubleReed wrote: Monetary policy helps. Inflation works and has always worked to shrink unemployment.
The Article:
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
Empirical studies have shown that money is neutral in the long-run.[11]
the tea party may have thrown away their chance to repeal obamacare by shutting down the governent and creating a big stink about it while at the same time provding a ton of cover for when it came up and blew up in the admins face.
Aparently obama didn't know about the problems until a few days after the launch? I doubt hes going to start fireing people in his admin (expecialy after standing behind clinton till the end) but its going to be a very worrying road ahead for the country when a larger percentage of people think obamacare was repealed by the SCOTUS then where able to get healthcare on the exchange.
On October 24 2013 04:13 Sermokala wrote: the tea party may have thrown away their chance to repeal obamacare by shutting down the governent and creating a big stink about it while at the same time provding a ton of cover for when it came up and blew up in the admins face.
Aparently obama didn't know about the problems until a few days after the launch? I doubt hes going to start fireing people in his admin (expecialy after standing behind clinton till the end) but its going to be a very worrying road ahead for the country when a larger percentage of people think obamacare was repealed by the SCOTUS then where able to get healthcare on the exchange.
That has little to do with the success or failure of the exchange and more with the abysmal state of us news coverage.
On October 23 2013 11:09 DoubleReed wrote: [quote] No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 11:12 KwarK wrote: [quote] You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
And all that stuff where its absolute bullshit in the short run, said by the IMF by all people. And how Keynesians and New Keynesians reject it so saying that all economists take it is just false.
The White House said Wednesday that an alleged exchange between President Barack Obama and a House Republican — relayed to the public by Sen. Dick Durbin (D-IL) — "did not happen."
Durbin recounted over the weekend that a House Republican told Obama at a recent closed-door meeting that he "cannot even stand to look at" him. But White House spokesman Jay Carney said during his daily press briefing that, after touching base with a participant in the meeting, Durbin's account is not right.
On October 23 2013 11:53 JonnyBNoHo wrote: [quote] A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Yes i have.
On October 24 2013 03:38 DoubleReed wrote: Monetary policy helps. Inflation works and has always worked to shrink unemployment.
The Article:
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
Empirical studies have shown that money is neutral in the long-run.[11]
And all that stuff where its absolute bullshit in the short run, said by the IMF by all people. And how Keynesians and New Keynesians reject it so saying that all economists take it is just false.
You seem to be cherry picking.
No, Keynesians acknowledge the short term stimulus effects of monetary policy, and nothing else. Regarding the Krugman article. He wrote that thing 1998, and is probably regretting that by now. He argued that printing money, or in his analogy, coupons, would solve the recession. As we're talking here 2013 right now, we had the biggest financial crisis in Europe since the Great Depression, caused by a whole bunch of worthless "coupons". Krugman is making an assumption in his article stating:
"As long as the people were reliable—and these young professionals certainly were—what could go wrong?"
Applied to the real world you could instead have said in 1998: "As long as the banks and debtors are reliable, and these young professionals certainly are - what could go wrong?"
As it turned out in 2009, banks had sold a lot of credits that were anything but professional and reliable. And we were sitting on billions of debt that was never going to be paid. To stay with the analogy, the government issued coupons during the recession not because people didn't want to spent their own coupons/they wanted to save them, they were issued by the government because there was a lack of babysitters, or the ones who were , were not qualified enough.
And instead of addressing the issue, they were printing more coupons to make it look like everything is okay. But at one point people figured out that their coupons aren't really worth anything and so the whole thing collapsed.
Krugman is a brilliant guy, and if you take his assumptions as true he certainly is right with everything he says, but you don't need to be a Noble-prize winning economist to see that his analogy when compared to recent historical events basically falls apart.
On October 23 2013 23:46 DoubleReed wrote: [quote]
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 12:09 KwarK wrote: [quote] I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Yes i have.
On October 24 2013 03:38 DoubleReed wrote: Monetary policy helps. Inflation works and has always worked to shrink unemployment.
The Article:
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
Empirical studies have shown that money is neutral in the long-run.[11]
And all that stuff where its absolute bullshit in the short run, said by the IMF by all people. And how Keynesians and New Keynesians reject it so saying that all economists take it is just false.
You seem to be cherry picking.
No, Keynesians acknowledge the short term stimulus effects of monetary policy, and nothing else. Regarding the Krugman article. He wrote that thing 1998, and is probably regretting that by now. He argued that printing money, or in his analogy, coupons, would solve the recession. As we're talking here 2013 right now, we had the biggest financial crisis in Europe since the Great Depression, caused by a whole bunch of worthless "coupons". Krugman is making an assumption in his article stating:
"As long as the people were reliable—and these young professionals certainly were—what could go wrong?"
Applied to the real world you could instead have said in 1998: "As long as the banks and debtors are reliable, and these young professionals certainly are - what could go wrong?"
As it turned out in 2009, banks had sold a lot of credits that were anything but professional and reliable. And we were sitting on billions of debt that was never going to be paid. To stay with the analogy, the government issued coupons during the recession not because people didn't want to spent their own coupons/they wanted to save them, they were issued by the government because there was a lack of babysitters, or the ones who were , were not qualified enough.
And instead of addressing the issue, they were printing more coupons to make it look like everything is okay. But at one point people figured out that their coupons aren't really worth anything and so the whole thing collapsed.
Krugman is a brilliant guy, and if you take his assumptions as true he certainly is right with everything he says, but you don't need to be a Noble-prize winning economist to see that his analogy when compared to recent historical events basically falls apart.
Except opinions on the causes of the recession and the impact of stimulus are divided. Just because you refuse to acknowledge that an opposing, salient opinion exists doesn't mean that it doesn't hold water.
No, he did not argue that printing money would solve the recession. You're ignoring his work on Japan, which showed that monetary policy is ineffective at the zero lower bound. He talks about in the second page of the article.
But that's specifically because we hit the zero lower bound. That does not say that monetary policy doesn't do anything or is just buying time. It usually has a real effect.
Looking at Europe, a lot of it has to do with the fact the Euro essentially acts as a gold standard, and Germany has imposed harsh austerity on the outer countries.
On October 23 2013 23:46 DoubleReed wrote: [quote]
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 12:09 KwarK wrote: [quote] I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Yes i have.
On October 24 2013 03:38 DoubleReed wrote: Monetary policy helps. Inflation works and has always worked to shrink unemployment.
The Article:
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
Empirical studies have shown that money is neutral in the long-run.[11]
And all that stuff where its absolute bullshit in the short run, said by the IMF by all people. And how Keynesians and New Keynesians reject it so saying that all economists take it is just false.
You seem to be cherry picking.
No, Keynesians acknowledge the short term stimulus effects of monetary policy, and nothing else. Regarding the Krugman article. He wrote that thing 1998, and is probably regretting that by now. He argued that printing money, or in his analogy, coupons, would solve the recession. As we're talking here 2013 right now, we had the biggest financial crisis in Europe since the Great Depression, caused by a whole bunch of worthless "coupons". Krugman is making an assumption in his article stating:
"As long as the people were reliable—and these young professionals certainly were—what could go wrong?"
Applied to the real world you could instead have said in 1998: "As long as the banks and debtors are reliable, and these young professionals certainly are - what could go wrong?"
As it turned out in 2009, banks had sold a lot of credits that were anything but professional and reliable. And we were sitting on billions of debt that was never going to be paid. To stay with the analogy, the government issued coupons during the recession not because people didn't want to spent their own coupons/they wanted to save them, they were issued by the government because there was a lack of babysitters, or the ones who were , were not qualified enough.
And instead of addressing the issue, they were printing more coupons to make it look like everything is okay. But at one point people figured out that their coupons aren't really worth anything and so the whole thing collapsed.
Krugman is a brilliant guy, and if you take his assumptions as true he certainly is right with everything he says, but you don't need to be a Noble-prize winning economist to see that his analogy when compared to recent historical events basically falls apart.
I'm not disagreeing with you (I'm not agreeing with you either) but I do want to emphasize something here that you didn't. Our money system is a credit system and because of that the government and the central bank aren't the only ones that create money. For all of the recent huffing and puffing by central banks, the amount of money in the system has largely been stagnant in the US, the UK and the Eurozone.
Prior to the crisis was a different story, of course, with credit growth resulting in a large expansion of the money supply. The cause of that wasn't central banks (though you can still fault them for allowing it) so much as global trade imbalances and a banking system that was allowed to greatly over-lever (and all the poo that came with it).
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 08:40 DoubleReed wrote: Where's the "spend money to get employment back up" option?
Seriously. Priorities. The debt does not matter when unemployment is at 7.2% after five years. Labor participation is at a historic low.
Fix debt problems with growth.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive MP . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Yes, monetary policy have no long term effect on real variables. Do you know what "real variables" means ? Having a debt in central money is not "real"... or to say it in another way, real interest rate can be below 0%.
You've read some theory you don't know about and you just use it to support your own point of view. When they say that monetary policy have no impact on real variable, it means that you cannot (in theory) use monetary policy to lower unemployment or to push GDP : it is the conclusion modern economists have come after the discussion behind the phillips curve that advanced the idea that there was a possible trade off between inflation rate and unemployment (the more inflation, the less unemployment). Today, and since Milton Friedman and Edmund Phelps' works, we consider that this trade off doesn't work in the long run, because of rational anticipations, but is still possible in the short run due to some circumstances (mainly price rigidity). PLUS this was proved to be true only under a certain inflation rate (which explained the idea of the inflation target). Thus monetary policy might still have an impact in the long run if the inflation rate is under a certain ratio (between 2 to 4%). See Akerlof Dickens & Perry's work
This doesn't mean that we have no control over inflation rate, and that a 4% inflation would not greatly lower our debt : if you have 2% more money at the end of each month, and you have to give the exact same amount to the people who posses your debt, then the real debt has effectively lowered. There is a reason why almost every economists - from the FMI to Krugman - push for a 4% inflation ratio, despite the fact that it is supposed to disturb market allocations : it will lower our debt, force firms to push salaries up (since they are indexed to inflation and we see, since some years now, a complete split between productivity and salaries) and it might also permit a trade off between inflation and unemployment.
See, all that by changing a simple inflation target.
On October 23 2013 09:45 zlefin wrote: The military expenditures are essentially welfare in many ways; and the US military budget could be cut in half and we'd still have military hegemony over the world. As to debt, it's gonna hurt, now or later. The question is will spending now actually fix it, or just delay the pain until later? I'd rather reform the spending so it enables growth. There's a difference between CREATING jobs and employing people; too much government expenditure merely employs people without truly creating value (either short or long term).
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
You'd think this line of thought would be dead after the Carter years. If spending was the answer, why not just print up a few hundred thousand for every individual to spend, or better yet, few million. I heard Zimbabwe spent trillions - maybe we can play imitator. You can't spend something you don't have, and going into debt means you're printing the money, or mortgaging assets value. The USG will end up having to give over large chunks of land to foreign powers or, they'll just print the money and find ourselves in Weimar. The Federal Government let alone local municipalities are incompetent boobs at best and malicious thieves at worst. Besides, we all ready spent a trillion dollars we didn't have to give to the Bankers, which they mortgaged on the basis of your future labor. Hooray! (That's not on top of the trillions and trillions they all ready spend!)
How about, instead of giving the power of spending your money to these assholes called politicians to dole out to their cronies and themselves, that you instead support a program of spending the money you make yourself on what things you prefer at prices you determine to be worthwhile. I'm sure you're not going to spend a few thousand on a toilet, or 3 million on a one room shack along the Illinois River (The amount of pissing away money I saw while stationed in Milwaukee...). I am sure we can get our money's worth from Solyndra, or Northropp Gruman, or XE, or GE, or Goldman Sachs, or Citigroup...yay Jobs! Lol. The ignorance.
The Government only destroys jobs (the unseen) giving only the illusion of job creation (the seen). If the Government took all of our money and with it produced 15 jobs you would probably say they created jobs, but the effect of such a policy would be destroying millions of jobs, but you can't see this, because the jobs that would have been created if such a policy never was enacted is invisible to everyone except the sharp mind (logos!). This is why the people who poo poo logic in economics are helpless. You can't show someone who refuses to string chains of causal reality together the errors of their viewpoint.
You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive MP . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Yes, monetary policy have no long term effect on real variables. Do you know what "real variables" means ? Having a debt in central money is not "real"... or to say it in another way, real interest rate can be below 0%.
You've read some theory you don't know about and you just use it to support your own point of view. When they say that monetary policy have no impact on real variable, it means that you cannot (in theory) use monetary policy to lower unemployment or to push GDP : it is the conclusion modern economists have come after the discussion behind the phillips curve that advanced the idea that there was a possible trade off between inflation rate and unemployment (the more inflation, the less unemployment). Today, and since Milton Friedman and Edmund Phelps' works, we consider that this trade off doesn't work in the long run, because of rational anticipations, but is still possible in the short run due to some circumstances (mainly price rigidity). PLUS this was proved to be true only under a certain inflation rate (which explained the idea of the inflation target). Thus monetary policy might still have an impact in the long run if the inflation rate is under a certain ratio (between 2 to 4%). See Akerlof Dickens & Perry's work
This doesn't mean that we have no control over inflation rate, and that a 4% inflation would not greatly lower our debt : if you have 2% more money at the end of each month, and you have to give the exact same amount to the people who posses your debt, then the real debt has effectively lowered. There is a reason why almost every economists - from the FMI to Krugman - push for a 4% inflation ratio, despite the fact that it is supposed to disturb market allocations : it will lower our debt, force firms to push salaries up (since they are indexed to inflation and we see, since some years now, a complete split between productivity and salaries) and it might also permit a trade off between inflation and unemployment.
See, all that by changing a simple inflation target.
Except that is not true. Wages have never matched inflation because of the Cantillon Effect. The allocation of the newly printed money must necessarily move from the first person, to the second, and the third, and so on and so forth. Those who are at the front of this chain reap the benefits of the newly printed money (e.g. higher purchasing power), because the effects of the inflation have yet to be systematically felt. In other words, inflation is a domino affect whereby the first benefactors reap higher purchasing power at the expense of those down the chain. When you finally get the money that has been newly created months down the line you've become poorer because you've been robbed the purchasing power of the dollar you had months earlier by the people who first received the new monies. This means, that the Government has stolen your wealth from you and handed it over to its chosen few. This means large corporate entities like GE, Citigroup, MIC, and of course the Welfare recepients. Those most hurt are in the middle. The people who make too much to qualify for much of the Welfare, and those who make not enough or those who are ideologically opposed to taking the money from the Government. Essentially the Government creates a system of patronage. This was the entire point behind the Federal Reserve System and the ability to decouple the dollar from a weight of gold or silver.
Why do you think these Corporations are so large and powerful? They're creations of Government patronage. It's a perverse system that steals the wealth from Middle America and redistributes to the Government cronies whether they're rich, or poor. What do the politicians get in return? (power, wealth, etc.)
That's nothing to say of the Institutional problems themselves - of motivation, of conflicts of interest, of calculation problems. Prices are there to allocate resources, and by fucking with natural price mechanisms you highly distort the economy causing recessions and depressions. The Federal Reserve is equivalent to the USSR CPSU and Politburo. These people have no idea what the 300 million individuals in the US prefer at any given moment or time and expecting them to properly allocate resources (money and interest (or the price of money)), is absurd. They cause enormous economic hardship on the people of the US. They're not a boon - they're a colossal disaster.
PS: Milton Friedman finally admitted to the error of his ways by the end of his life and came to the same conclusion that Hayek and Mises long ago did - that the Federal Reserve is insidious, causes untold harms, and should be abolished and money should be the purview of competition and Denationalization of Currency/Money is essential to economic health. Take it from his own mouth:
On October 23 2013 11:09 DoubleReed wrote: [quote]
No, the debt's not going to hurt now or later. That's a false dilemma. There's no pain that comes from the debt, unless you do austerity measures, which is stupid, because it shrinks the economy and then forces more austerity. You can manage debt with growth. There's no need to slit our wrists.
This is the problem with talking about the debt with high unemployment. People suggest things that will do serious, lasting harm to our economy when our economy is still not very strong. People use scare tactics to make people think that debt needs to be managed RIGHT NOW at the cost of our economic growth, when the only solution is our economic growth.
We need to get people employed right now. The fact that we still have a sluggish economy means that many people have been out of work for several years. Those people become less desirable to hire the longer they are out of work. This essentially creates a lasting, unnecessary employment problem, which does far more harm to our economic outlook (and long-term estimates of our deficit) than budget items in a single year.
And yes, the key is government spending. The private sector has mostly recovered, and is growing a reasonable rate. The public sector, however, is lagging.
A couple questions that go along with that line of thought:
1) Whether we can get back to trend growth, ever, or if this a new normal.
2) The extent to which, going into 2014, total spending is still a driving issue.
I'm of the opinion (since the sequester kicked in) that we could be spending somewhat more now, but that depends heavily on what the money would be spent on. I'm also of the opinion that non spending issues are growing in importance.
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 11:12 KwarK wrote: [quote] You don't understand how maths works. If you're borrowing money at below the rate of inflation you're receiving free money for doing it. The US government is not about to sell Alaska to finance its debts. You think you're right but it's just because you don't know what you're talking about, your post was a long string of failures to understand the subject and shitty examples (the US is not Zimbabwe).
Well that's not entirely correct. You don't get free money, you are getting interest free money. Alhtough that's often a great deal, you are still increasing your debt. And that's an issue. Maybe not at the 90% of GDP line Rogoff and many other fiscal conservatives drew, but at some point it will get too much, and at some point you need to pay it back.
Hurray! More Debt! isn't exactly an argument. Austerity till nothing of a countries economy is left, on the other hand, obviously isn't really a smart idea too.
I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive MP . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Yes, monetary policy have no long term effect on real variables. Do you know what "real variables" means ? Having a debt in central money is not "real"... or to say it in another way, real interest rate can be below 0%.
You've read some theory you don't know about and you just use it to support your own point of view. When they say that monetary policy have no impact on real variable, it means that you cannot (in theory) use monetary policy to lower unemployment or to push GDP : it is the conclusion modern economists have come after the discussion behind the phillips curve that advanced the idea that there was a possible trade off between inflation rate and unemployment (the more inflation, the less unemployment). Today, and since Milton Friedman and Edmund Phelps' works, we consider that this trade off doesn't work in the long run, because of rational anticipations, but is still possible in the short run due to some circumstances (mainly price rigidity). PLUS this was proved to be true only under a certain inflation rate (which explained the idea of the inflation target). Thus monetary policy might still have an impact in the long run if the inflation rate is under a certain ratio (between 2 to 4%). See Akerlof Dickens & Perry's work
This doesn't mean that we have no control over inflation rate, and that a 4% inflation would not greatly lower our debt : if you have 2% more money at the end of each month, and you have to give the exact same amount to the people who posses your debt, then the real debt has effectively lowered. There is a reason why almost every economists - from the FMI to Krugman - push for a 4% inflation ratio, despite the fact that it is supposed to disturb market allocations : it will lower our debt, force firms to push salaries up (since they are indexed to inflation and we see, since some years now, a complete split between productivity and salaries) and it might also permit a trade off between inflation and unemployment.
See, all that by changing a simple inflation target.
Except that is not true. Wages have never matched inflation because of the Cantillon Effect. The allocation of the newly printed money must necessarily move from the first person, to the second, and the third, and so on and so forth. Those who are at the front of this chain reap the benefits of the newly printed money (e.g. higher purchasing power), because the effects of the inflation have yet to be systematically felt. In other words, inflation is a domino affect whereby the first benefactors reap higher purchasing power at the expense of those down the chain. When you finally get the money that has been newly created months down the line you've become poorer because you've been robbed the purchasing power of the dollar you had months earlier by the people who first received the new monies. This means, that the Government has stolen your wealth from you and handed it over to its chosen few. This means large corporate entities like GE, Citigroup, MIC, and of course the Welfare recepients. Those most hurt are in the middle. The people who make too much to qualify for much of the Welfare, and those who make not enough or those who are ideologically opposed to taking the money from the Government. Essentially the Government creates a system of patronage. This was the entire point behind the Federal Reserve System and the ability to decouple the dollar from a weight of gold or silver.
Why do you think these Corporations are so large and powerful? They're creations of Government patronage. It's a perverse system that steals the wealth from Middle America and redistributes to the Government cronies whether they're rich, or poor. What do the politicians get in return? (power, wealth, etc.)
That's nothing to say of the Institutional problems themselves - of motivation, of conflicts of interest, of calculation problems. Prices are there to allocate resources, and by fucking with natural price mechanisms you highly distort the economy causing recessions and depressions. The Federal Reserve is equivalent to the USSR CPSU and Politburo. These people have no idea what the 300 million individuals in the US prefer at any given moment or time and expecting them to properly allocate resources (money and interest (or the price of money)), is absurd. They cause enormous economic hardship on the people of the US. They're not a boon - they're a colossal disaster.
Saying that inflation rate only touch the people down the chain is dead wrong. A high inflation rate first and foremost touch the people who have savings ... there is a reason why Keynes used to say inflation is the "euthanasia of the rentier". It is actually a trade off between the rich and the poor in favor of the poor, between the old and youngs in favor of the youngs, etc. Proof to that ? Look the last 30 years, with the lowest inflation rate we've had since the 2nd world war, and look how inequality have risen. Of course, it's not completly the fault of the low inflation rate, but it is pretty simple to understand how a higher inflation would have prevented those inequalities to a certain extend.
The rest of your post is... I don't know. Nothing is natural about the economy, nothing is natural about market prices, unless you're a Hayek fan and you actually believe the market is the fruit of our deep nature. Conflicts of interests, calculation problems, sure there are market distorsions when price inflate, but those are a small price to create jobs and face the crisis the "perfect" market created. Also, those distorsions are supposed to be rather small : you cannot on one hand advocate that monetary policy have no effect on unemployment, and then advocate that some inflation will completly fuck up real economy... It is contradictory. Inflation, in the long run, have little to no impact on the economy, because people understands it : salaries are indexed on it, social allocations and pensions too, so everything goes up and in the end everything stays the same.
On October 23 2013 23:46 DoubleReed wrote: [quote]
It can become the new normal if we just sit on our asses and allow unemployment to continue. That is a self-fulfilling prophecy. Unemployment can almost certainly go down even if labor participation doesn't go back up entirely because we've let it fester this long already.
Austerity is clearly driving the issue. Again, the private sector has pretty much recovered. The public sector is continuing to shed jobs. All the evidence points to a public sector issue.
I'm not sure how much of the story is austerity. The labor market has been steadily lackluster throughout the recovery, both when fiscal stimulus was high, and currently post-cuts. Employment at the Federal government has been falling, but remains elevated if you exclude the post office and back to the pre crisis level if you don't. State and local governments are still at a depressed level, but that's a separate issue from the Feds and has been ticking up this year. As for the private sector, construction has been improving but remains one of the biggest portions of the output gap.
Fiscal stimulus was high during the crisis... so altho the labor market didn't showed any big "recovery" it didn't mean that it wasn't effective : you would have to evaluate the number of job it prevented from getting destroyed. To say it bluntly, it didn't create any job, it limited the rise of unemployment.
On October 23 2013 12:09 KwarK wrote: [quote] I don't think you understand the meaning of the word below in my sentence. It means that the debt depreciates faster than the interest increases it for an overall loss in the total real value of the debt. This is free money.
Okay i misunderstood you, but you can't just inflate all your debt away by printing money. If the currency loses more value than what it was actually worth wenn someone bought the bond no one is going to invest in that currency. Else you could just print a 15 trillion dollar bill and be done with it.
Why am I am not surprised that you are German ?
I could live on the moon, that wouldn't change the fact that monetary policy isn't solving any problems. All it does is buying you time and easing pressure.
What? I don't understand your characterization of monetary policy. How is it "buying time"?
Monetary policy helps. Inflation works and has always worked to shrink unemployment. Google "Baby-sitting the Economy" for how printing money can actually spur real growth depending on the conditions.
No, monetary policy has no long term effect on real variables. That is called Neutrality of money and is basically accepted by every economist.
If you lower interest rates through monetary policy, the economy basically needs to 'earn that money back'. Else you are just feeding into a bubble of worthless credits. That's why i was talking about "buying time". You need to follow an expansive monetary policy up by real-growth, monetary policy does not lead to real growth in the sense that monetary policy would create growth.
That's also why the German government opposes the idea of euro-bonds or an expansive . They fear it will take the pressure from debt ridden countries to make real structural reforms. It has nothing to do with a 'German fear of inflation', it's just the acknowledgement of the fact that printing paper or artificially low interest rates are not going to help you in the long run.
Have you read the Wikipedia article that you linked?
Yes i have.
On October 24 2013 03:38 DoubleReed wrote: Monetary policy helps. Inflation works and has always worked to shrink unemployment.
The Article:
Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, withno effect on real (inflation-adjusted) variables, like employment, real GDP, and real consumption.[1]
Empirical studies have shown that money is neutral in the long-run.[11]
And all that stuff where its absolute bullshit in the short run, said by the IMF by all people. And how Keynesians and New Keynesians reject it so saying that all economists take it is just false.
You seem to be cherry picking.
No, Keynesians acknowledge the short term stimulus effects of monetary policy, and nothing else. Regarding the Krugman article. He wrote that thing 1998, and is probably regretting that by now. He argued that printing money, or in his analogy, coupons, would solve the recession. As we're talking here 2013 right now, we had the biggest financial crisis in Europe since the Great Depression, caused by a whole bunch of worthless "coupons". Krugman is making an assumption in his article stating:
"As long as the people were reliable—and these young professionals certainly were—what could go wrong?"
Applied to the real world you could instead have said in 1998: "As long as the banks and debtors are reliable, and these young professionals certainly are - what could go wrong?"
As it turned out in 2009, banks had sold a lot of credits that were anything but professional and reliable. And we were sitting on billions of debt that was never going to be paid. To stay with the analogy, the government issued coupons during the recession not because people didn't want to spent their own coupons/they wanted to save them, they were issued by the government because there was a lack of babysitters, or the ones who were , were not qualified enough.
And instead of addressing the issue, they were printing more coupons to make it look like everything is okay. But at one point people figured out that their coupons aren't really worth anything and so the whole thing collapsed.
Krugman is a brilliant guy, and if you take his assumptions as true he certainly is right with everything he says, but you don't need to be a Noble-prize winning economist to see that his analogy when compared to recent historical events basically falls apart.
The coupon story is more of a parable against coordinated saving/spending, not so much about the dangers of credit or whatever. I wouldn't draw any more attention to it outside of its intended demonstration.
As for the "printing money would solve the recession" part, it's actually more that NOT printing money would push us further into recession.
EPT
