|
|
|
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things.
|
JUST READING ABOUT THIS. Krugman's having a field day as he damn well should. More evidence people who believe in austerity are just stupid (PC version: selectively choose to ignore reality).
|
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense.
|
I remember reading that paper back in December for debate preparation and thinking of all the historical examples that it didn't jive with.
Made a heck of a good card though.
Edit: AA, it's only a problem when you can't pay it back year to year, like the US is doing right now. As long as debt grows slower than the economy and is managed well, it should be a non-issue for most countries.
|
On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things.
Rogoff has been on numerous interviews including CNN mentioning the "dangers" of the 90% cliff. It had a major influence on WSJ's articles of the past 3 years
Hell, earlier this year, the WP used R-R's
http://www.washingtonpost.com/opinions/debt-reduction-hawks-and-doves/2013/01/26/3089bd52-665a-11e2-93e1-475791032daf_story.html
If it is even slightly off [here they are talking about the debt projections], debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.
|
On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things.
to my knowledge they were using excel and their spreadsheet had errors. you're not being fair.
|
On April 20 2013 03:21 nunez wrote:Show nested quote +On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things. to my knowledge they were using excel and their spreadsheet had errors. you're not being fair.
Yes see here the blue box should extend all the way down: ![[image loading]](http://www.nextnewdeal.net/sites/default/files/styles/large/public/content_images/reinhart_rogoff_coding_error_0.png)
The error didn't have a big impact on the results. The (now questioned) methodology had a much bigger impact. I'll let someone smarter than me explain it, and give a good conclusion on the dispute:
Second, not all of the difference between RR and HAP is attributable to the spreadsheet error which has become infamous this week. In fact, it appears that only 0.3 per cent stems from this, with another 0.1 per cent coming from a transcription mistake. The remainder of the difference is due to a combination of missing data in the original RR paper, and to a methodological dispute about how countries should be weighted to produce the final results. ...
In summary, the most dramatic version of the RR stylised fact is no longer a stylised fact. RR were right to argue that, over most normal periods, higher public debt has been associated with lower real GDP growth rates, but a sudden discontinuity at 90 per cent is not proven. Furthermore, causation might work in both directions, depending on economic circumstances. The timing of these effects is not a definitive indicator of true causation, and the relationship may be very different in a time of full employment from a time of high unemployment.
The moral of this story is that it is an illusion to expect that the complicated relationship between public debt and GDP growth will always and everywhere be the same.
Link
|
On April 20 2013 03:31 JonnyBNoHo wrote:Show nested quote +On April 20 2013 03:21 nunez wrote:On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things. to my knowledge they were using excel and their spreadsheet had errors. you're not being fair. Yes see here the blue box should extend all the way down: The error didn't have a big impact on the results. The (now questioned) methodology had a much bigger impact. I'll let someone smarter than me explain it, and give a good conclusion on the dispute: Show nested quote +Second, not all of the difference between RR and HAP is attributable to the spreadsheet error which has become infamous this week. In fact, it appears that only 0.3 per cent stems from this, with another 0.1 per cent coming from a transcription mistake. The remainder of the difference is due to a combination of missing data in the original RR paper, and to a methodological dispute about how countries should be weighted to produce the final results. ...
In summary, the most dramatic version of the RR stylised fact is no longer a stylised fact. RR were right to argue that, over most normal periods, higher public debt has been associated with lower real GDP growth rates, but a sudden discontinuity at 90 per cent is not proven. Furthermore, causation might work in both directions, depending on economic circumstances. The timing of these effects is not a definitive indicator of true causation, and the relationship may be very different in a time of full employment from a time of high unemployment.
The moral of this story is that it is an illusion to expect that the complicated relationship between public debt and GDP growth will always and everywhere be the same. Link
if i understand it correctly it would bring the average growth from -0.1 to +0.2 for countries with debt more than 90% of gdp.
from the horses mouth (reinhart & rogoff): the error had a significant impact.
but i was primarily objecting to serm giving them slack because the 'program had errors'. it's a spreadsheet. it's childs play.
|
It's just a simple error that many of us make. The more important takeaway is that papers that are widely used by important decision makers should have their formulas public.
|
On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things.
Won't change much, but it should, George Osbourne, (the British Chancellor of the Exchequer, aka minister for the economy) based his entire economic budget on it, he quoted them multiple times in reports.
Unfortunately they won't back down.
|
On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense.
No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested.
|
Been saying this all along. Austerity is a pitfall, a publicity stunt with no substance. It retards economic growth and has far more damaging effects in the long run than any stimulus package.
It did horrible things to Europe and will do horrible things to the US if Obama caves in to right wing populists demanding massive spending cuts.
|
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake?
|
Cayman Islands24199 Posts
On April 20 2013 03:31 JonnyBNoHo wrote:Show nested quote +On April 20 2013 03:21 nunez wrote:On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things. to my knowledge they were using excel and their spreadsheet had errors. you're not being fair. Yes see here the blue box should extend all the way down: The error didn't have a big impact on the results. The (now questioned) methodology had a much bigger impact. I'll let someone smarter than me explain it, and give a good conclusion on the dispute: Show nested quote +Second, not all of the difference between RR and HAP is attributable to the spreadsheet error which has become infamous this week. In fact, it appears that only 0.3 per cent stems from this, with another 0.1 per cent coming from a transcription mistake. The remainder of the difference is due to a combination of missing data in the original RR paper, and to a methodological dispute about how countries should be weighted to produce the final results. ...
In summary, the most dramatic version of the RR stylised fact is no longer a stylised fact. RR were right to argue that, over most normal periods, higher public debt has been associated with lower real GDP growth rates, but a sudden discontinuity at 90 per cent is not proven. Furthermore, causation might work in both directions, depending on economic circumstances. The timing of these effects is not a definitive indicator of true causation, and the relationship may be very different in a time of full employment from a time of high unemployment.
The moral of this story is that it is an illusion to expect that the complicated relationship between public debt and GDP growth will always and everywhere be the same. Link
the weighing methodology was explained by paralleluniverse in the u.s. politics thread. basically they took 17 years of the UK over 90% data and considered that one single data point, with the same weighing as one year of -7.9% growth seen in new zealand in the one year they were over 90%.
you can see both in that spreadsheet. the countries are analyzed sort of as individual cases separated by debt to gdp ratio buckets, but without specifying how many years are included in each bucket. so the U.S. may have say, 10 years of over 90% and the U.K. 1 year, you'd never be able to tell from the way they aggregate.
I think this is not a deliberate manipulation. they wanted to establish trends within each country, to the effect that "there's higher growth for debt under 30%, and somewhat slowing at above 90% relative to the other debt ranges." then from those individual country cases, they aggregate for a cross country trend. their unweighted aggregate of all the countries was probably meant to aggregate "cases" instead of years. however, this doesn't account for sample strength difference across the cases.
http://delong.typepad.com/sdj/2013/04/gavyn-davies-on-reinhartrogoff.html
|
On April 20 2013 04:32 McBengt wrote:
Been saying this all along. Austerity is a pitfall, a publicity stunt with no substance. It retards economic growth and has far more damaging effects in the long run than any stimulus package.
It did horrible things to Europe and will do horrible things to the US if Obama caves in to right wing populists demanding massive spending cuts.
In many cases European austerity is supposed to do 'horrible things' - part of internal devaluation.
Austerity in the US is mainly capping spending growth so it's doubtful that it will be as harmful. You can certainly still make an argument that there's a large opportunity cost (lost growth due to lack of stimulus) but there's no guarantees on that.
On April 20 2013 04:44 oneofthem wrote:Show nested quote +On April 20 2013 03:31 JonnyBNoHo wrote:On April 20 2013 03:21 nunez wrote:On April 20 2013 02:39 Sermokala wrote:
To be fair it wasn't their fault but the program that they were useing that had the mathematical errors. and they didn't say it would be impossible to have growth past 90% of debt to GDP they were argueing that it dragged it by 1% growth per year.
Still pretty embarrassing but probably won't change much in the grand scheme of things. to my knowledge they were using excel and their spreadsheet had errors. you're not being fair. Yes see here the blue box should extend all the way down: The error didn't have a big impact on the results. The (now questioned) methodology had a much bigger impact. I'll let someone smarter than me explain it, and give a good conclusion on the dispute: Second, not all of the difference between RR and HAP is attributable to the spreadsheet error which has become infamous this week. In fact, it appears that only 0.3 per cent stems from this, with another 0.1 per cent coming from a transcription mistake. The remainder of the difference is due to a combination of missing data in the original RR paper, and to a methodological dispute about how countries should be weighted to produce the final results. ...
In summary, the most dramatic version of the RR stylised fact is no longer a stylised fact. RR were right to argue that, over most normal periods, higher public debt has been associated with lower real GDP growth rates, but a sudden discontinuity at 90 per cent is not proven. Furthermore, causation might work in both directions, depending on economic circumstances. The timing of these effects is not a definitive indicator of true causation, and the relationship may be very different in a time of full employment from a time of high unemployment.
The moral of this story is that it is an illusion to expect that the complicated relationship between public debt and GDP growth will always and everywhere be the same. Link the weighing methodology was explained by paralleluniverse in the u.s. politics thread. basically they took 17 years of the UK over 90% data and considered that one single data point, with the same weighing as one year of -7.9% growth seen in new zealand in the one year they were over 90%. you can see both in that spreadsheet.
That sounds right. I don't know if their methodology was appropriate or not. I'm going to need some time to let my opinion on that germinate.
|
On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake?
The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets.
|
Seems weird to me that nobody noticed this before, especially because this is a famous paper. In physics, and most scientific fields I would assume, before a paper gets published, many people will review data and methodology. It's only worse if that paper makes a significant statement. Then, most paper that get published will get challenged if there is anything questionable.
I can't believe how not tight this is =/. Messing up on a spreadsheet is pretty weak... It's not like they needed this spreadsheet absolutely, averaging 20 numbers with half of them n.a. takes a second. No offense but it seems outrageous to me that they wrote an entire paper based on this data, never rechecking that everything was in order. I check and recheck my data so much and I'm in still learning -_-, my experiments are worthless and purely academic. That their methodology sucks makes me despair even more.
I find it so hard to take the economy seriously.
|
I respectfully request a proper hyperlink to the related Reuters article. The current one does not function.
|
On April 20 2013 04:32 McBengt wrote:
Been saying this all along. Austerity is a pitfall, a publicity stunt with no substance. It retards economic growth and has far more damaging effects in the long run than any stimulus package.
It did horrible things to Europe and will do horrible things to the US if Obama caves in to right wing populists demanding massive spending cuts.
And evidence like this goes to show why people who believe increasing debt will never hurt the economy are stupid. It's obvious that time will prove the theories of people like R-R false, there's no surprise there. But that doesn't give kids like you the right to make wild claims supported by no evidence and expecting the world to take you seriously. Grow up.
Also how is this a scandal? Paper being debunked =/= scandal; it's called "debunking". Where did the scandal come from?
|
On April 20 2013 05:12 Areon wrote:Show nested quote +On April 20 2013 04:32 McBengt wrote:
Been saying this all along. Austerity is a pitfall, a publicity stunt with no substance. It retards economic growth and has far more damaging effects in the long run than any stimulus package.
It did horrible things to Europe and will do horrible things to the US if Obama caves in to right wing populists demanding massive spending cuts. And evidence like this goes to show why people who believe increasing debt will never hurt the economy are stupid. It's obvious that time will prove the theories of people like R-R false, there's no surprise there. But that doesn't give kids like you the right to make wild claims supported by no evidence and expecting the world to take you seriously. Grow up. Also how is this a scandal? Paper being debunked =/= scandal; it's called "debunking". Where did the scandal come from?
I'd say it's a rather major embarrassment to the academics concerned. Harvard economics professors don't put their name on items randomly.
Politically it's no-news, because American politics doesn't care about arguments being right or wrong. It's been a fairly randomly cited study in some debates and confrontations (mainly in Britain, this side of the Atlantic), but it's not like anyone gave it sacrosanct value. I recall Professor Krugman being confronted with it by some bespectacled self-styled "venture capitalist". He simply explained that the paper was in no way conclusive, and much more an unconfirmed preliminary result in a line of inquiry academic economics only recently started on.
Areon's claim about horrible things is not sound, at least for the US. The US is through this recession now, and set to resume sustained strong growth. The price of ignoring the sound advice of the "liberal" economists has been paid: The national debt is higher than it would be, the infrastructure that would have been built isn't there, and you've suffered some trillions of dollars in lost production. But the price is paid.
As for Europe, the problem isn't conservatism per se, it's nationalism. We are not one nation but many, and the kind of income transfers that go yearly from the North of the US to the South, are absolutely unthinkable (we are talking major fucking cash here ++100s Bns USD yearly, all tax payer money spent by the federal government), never mind the thought of a public infrastructure and works projects the South of Europe is in dire need of. It's hard enough convincing the average voter that we need to borrow them just enough to keep them solvent (the world would burn otherwise). There's already a rapid uprising of nationalist political opportunism in Northern Europe, True Finns, for example, are preaching that we should just cut the south loose (never mind that this would actually be an utterly unworkable policy) and are swiftly becoming the biggest party in my country.
The ECB is doing it's best to help things, which is key to keep us afloat, but austerity and suffering in the south will continue at least until after the next German parliament is elected. What happens then, will decide what path Europe takes out of the recession.. Whatever decisions come then, I don't think any of them will help with resuming growth in the south. We will most likely see the eurobonds, or some contributing collection of solutions to ensure southern solvency ad-infinity, but high levels of unemployment will be the new normal, until enough people emigrate north..
There simply are no mechanisms in place to allow for the south to regain competitiveness within Europe. Who knows? The next Bundeskanzler will be better prepared for the position he/she'll be in, and potentially even have vision for the future. That'll be the election to follow, and it's coming this September.
|
On April 20 2013 06:33 Kontys wrote:
Areon's claim about horrible things is not sound, at least for the US. The US is through this recession now, and set to resume sustained strong growth. The price of ignoring the sound advice of the "liberal" economists has been paid: The national debt is higher than it would be, the infrastructure that would have been built isn't there, and you've suffered some trillions of dollars in lost production. But the price is paid.
I'm going to disagree with you here a bit. The sound advice of liberal economists was largely heeded, repeatedly, early into the recession. Multiple stimulus measures were passed (under both Bush and Obama presidencies). 'Austerity' was ignored until after the recession had passed - which is pretty standard thinking.
Had the US experienced a normal, robust recovery, the current austerity criticism would likely be relegated to fringe opinion.
Ex ante if you wanted the government to support the economy after the recession had passed may have based your opinion on R&R's other work "This Time it's Different" which predicted a slow recovery and lots of debt following a financial crisis.
|
Baltimore, USA22254 Posts
Edit - unlocked due to popular demand.
|
On April 20 2013 06:56 JonnyBNoHo wrote:
I'm going to disagree with you here a bit. The sound advice of liberal economists was largely heeded, repeatedly, early into the recession. Multiple stimulus measures were passed (under both Bush and Obama presidencies). 'Austerity' was ignored until after the recession had passed - which is pretty standard thinking.
Had the US experienced a normal, robust recovery, the current austerity criticism would likely be relegated to fringe opinion.
Just found this thread.
The bolded is not standard thinking on austerity and stimulus, Jonny. In fact, if you think about it for more than ten seconds, it's terrible advice under almost all circumstances.
Standard advice is to cut spending and raise taxes after output has recovered to long-run output level. This is completely different from cutting spending and raising taxes after the GDP growth rate turns positive...which you are insisting is the standard advice an economist would give.
On April 20 2013 06:56 JonnyBNoHo wrote:
Ex ante if you wanted the government to support the economy after the recession had passed may have based your opinion on R&R's other work "This Time it's Different" which predicted a slow recovery and lots of debt following a financial crisis.
I suggest picking up a copy of This Time Is Different. R/R write directly on this subject and note it's unclear if this is just a natural occurrence or if this is a failure of government action, or if it's some combination of both. It should also be noted that they generally support increasing spending and decreasing taxes in response to financial crises, as they also note in their book.
|
On April 20 2013 04:48 Sermokala wrote:Show nested quote +On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets.
It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election.
You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it.
You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation.
|
Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor.
|
having a huge debt is still bad this will never change. Only thing that got shown now is that in theory more than 90% debt should be managable. Economics is hardly a science. all you can do is make educated guesses, so going now and saying "haha we can make as much debt as we want" is just silly.
|
Am I the only one that finds it very embarassing for Harvard-level scientists to make such basic Excel mistakes?
On economics: while too much debt is (logically) never a good thing, especially if you need more money each year than you can actually pay back, austerity clearly isn't having the results some people would have hoped. Things are just going from bad to worse in Portugal, Spain and Greece. More than 26% of Spain's population is unemployed. That's plain disastrous.
The cynic in me concludes that Europe now has three countries it can use for cheap labour. In less than three years I've lost all my faith in the European Union. It's like they've forgotten the definition of the word Union. North vs. South is all we see nowadays. Combine this with increasing nationalism across the continent, and we've got ourselves a recipe for disaster.
|
Back to Keynes we go  . Honestly I feel like supply side economics is taking so many hits now, especially with this blow to its credibility that deficit spending until economic strength returns; I just hope that supply side economic styles don't become political suicide.
|
On April 29 2013 22:16 paralleluniverse wrote:Show nested quote +On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation.
Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year?
Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt.
Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall.
|
On April 29 2013 22:31 paralleluniverse wrote:
Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor.
it's absurd how basic it is. and they can't even do that right... but it didn't matter because nobody noticed! stupefying.
|
On April 29 2013 22:16 paralleluniverse wrote:Show nested quote +On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation.
You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse").
Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
|
On April 29 2013 23:01 Sermokala wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation. Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year? Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall.
I'm not pointing to Italy as an example of good fiscal policy. I'm pointing to Italy to debunk you're absurd claim that elections show that Europe is lurching to the right. It's not true. It's lurching against the incumbent, against austerity. It's giving rise to nationalism, Euroskepticism and batshit crazy anti-establishment parties.
Yes, Obama started with a deficit roughly double where it was in 07/08, with over $1 trillion deficits through most of his first term. Why don't you tell me how he managed to pull that off given that the stimulus which was about $800 billion, spent only about $300 billion per year for a few years. Where's the other roughly $700 billion in deficits coming from? It's certainly not Obamacare, because it's not even in effect. And it's not the bailouts, which ended up profitable to the government. Maybe, just maybe, much of the budget is determined by the economic cycle.
The argument for stimulus is not an argument for reducing debt right now. It will increase debt in the short term. It's an argument to increase employment, to put people back to work, and to increase growth. In case you haven't realized, prolonged unemployment has terrible costs, people who have been out of work for a long time are nearly unemployable, skills degrade, human potential is wasted, future tax payers don't make a income and therefore don't pay tax, etc. Reducing the debt can wait until the economy has recovered. Reducing the debt now is counterproductive as Europe shows. No, don't blame the welfare state, the stronger welfare states like Germany or Norway aren't the ones screwed, and don't blame the debt, Spain was in surplus pre-crisis and it's debt is lower than Germany.
What you believe in is faith-based economics. Austerity is the only choice, not because of the evidence, but because you think it has to be true. Stimulus retards growth, well because you say so. And, as you claim, austerity is the only way to reduce debt. Where is the historical precedence for this false claim? Tell me, apart from export-led growth, which isn't really possible in a global recession, what country has cut it's way out of debt? What country has cut it's way to growth?
The highest debt level over last few hundred years of US history was after WWII. At over 100% of GDP, did this debt cause a debt crisis? Was it reduced by a mad austerity drive? No, the US simply grew its way out of debt. It didn't cut its way out of debt.
|
On April 29 2013 23:35 aksfjh wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
How then does he propose to buy a house? Or get a university education?
|
On April 29 2013 23:10 nunez wrote:Show nested quote +On April 29 2013 22:31 paralleluniverse wrote:
Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor. it's absurd how basic it is. and they can't even do that right... but it didn't matter because nobody noticed! stupefying.
The guy that debunked it passed on the colbert report : http://www.colbertnation.com/the-colbert-report-videos/425748/april-23-2013/austerity-s-spreadsheet-error
He explains that he was asked to try to reproduce the result of a "classic" paper (as an exrecice), and didn't managed to reproduce them. The fact is the author didn't let the data public. So he contacted them and asked if he could see the data to see where his error was, and found out he wasn't the guy making an error.
The problem is that it seems the paper wasn't peer reviewed (aka didn't earned the "science" stamp), and yet politics used it to justify their stuff.
|
On April 20 2013 04:17 Sub40APM wrote:Show nested quote +On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is ' accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested.
Normally, I refrain from making statements about matters of such an enourmous complexity.
Here, I'd say that generally I'd agree with the premise you mention. The problem is that many countries have been operating on budget deficits (even when accounted for inflation) for the better part of the last 30 years.
+ Show Spoiler [example-budget deficit] +USA-blue Germany-black Japan-red ![[image loading]](http://upload.wikimedia.org/wikipedia/commons/2/2a/StaaSchuBis2004.PNG)
So countries (which allegedly wanted to operate under your premise) have actually been accumulating debt in times of economic strength. I wonder, how much room does this leave to increase deficit spending during recession?
|
On April 29 2013 23:46 paralleluniverse wrote:Show nested quote +On April 29 2013 23:35 aksfjh wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business. How then does he propose to buy a house? Or get a university education?
By saving for them first. I imagine the idea is that, by saving for them and taking out the government involvement, more people could "afford" them without financing.
Not something I agree with, mind you, but I see the reasoning.
|
On April 29 2013 23:35 aksfjh wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
A nation defaulting on its debt like what would happen with every other odd eurozone country these days would destroy a country. Not just obliterate the economies of every other nation that isn't as irresponsible in the euro zone but completely destroy the nations financial basis. No one is going to want to buy greece or spains debt if Germany and china aren't backing them up. This idea that you think that fearing 25% unemployment is somehow better then exponentially exploding debt is nothing more then shitty propaganda from people who just want their governments to collapse.
On April 29 2013 23:36 paralleluniverse wrote:Show nested quote +On April 29 2013 23:01 Sermokala wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation. Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year? Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall. I'm not pointing to Italy as an example of good fiscal policy. I'm pointing to Italy to debunk you're absurd claim that elections show that Europe is lurching to the right. It's not true. It's lurching against the incumbent, against austerity. It's giving rise to nationalism, Euroskepticism and batshit crazy anti-establishment parties. Yes, Obama started with a deficit roughly double where it was in 07/08, with over $1 trillion deficits through most of his first term. Why don't you tell me how he managed to pull that off given that the stimulus which was about $800 billion, spent only about $300 billion per year for a few years. Where's the other roughly $700 billion in deficits coming from? It's certainly not Obamacare, because it's not even in effect. And it's not the bailouts, which ended up profitable to the government. Or maybe, just maybe, much of the budget is determined by the economic cycle. The argument for stimulus is not an argument for reducing debt right now. It will increase debt in the short term. It's an argument to increase employment, to put people back to work, and to increase growth. In case you haven't realized, prolonged unemployment has terrible costs, people who have been out of work for a long time are nearly unemployable, skills degrade, human potential is wasted, future tax payers don't make a income and therefore don't pay tax, etc. Reducing the debt can wait until the economy has recovered. Reducing the debt now is counterproductive as Europe shows. No, don't blame the welfare state, the stronger welfare states like Germany or Sweden aren't the ones screwed, and don't blame the debt, Spain was in surplus pre-crisis and it's debt is lower than Germany. What you believe in is faith-based economics. Austerity is the only choice, not because of the evidence, but because you think it has to be true. Stimulus retards growth, well because you say so. And, as you claim, austerity is the only way to reduce debt. Where is the historical precedence for this false claim? Tell me, apart from export-led growth, which isn't really possible in a global recession, what country has cut it's way out of debt? What country has cut it's way to growth? The highest debt level over last few hundred years of US history was after WWII. At over 100% of GDP, did this debt cause a debt crisis? Was it reduced by a mad austerity drive? No, the US simply grew its way out of debt. It didn't cut its way out of debt.
Are you seriously asking where the other deficits were coming from? The banking bailouts and auto industry bailouts (arguable corporate stimulus if anything) Kinda happened you know.
And again This idea that increasing debt in the short term for countries that are experiencing exponentially increasing debt makes no sense in any way no one is going to give money to an addict so that in some way using is going to help them get better. Reducing the debt isn't something that can just wait for spain, greece, portugal and iceland. Iceland went though a revolution and England still isn't happy about it.
No one gives a shit for what happened pre-crisis. Everyone got their legs kicked out from under them. It doesn't matter where everyone came from it just matters where everyone is right now. What I believe is common fucking sense. I don't put faith in weather forcasters and I don't understand how anyone would put faith in economists.
I believe in common fucking sense. You can't simply say "lets ignore the numbers for the next 5 years" and keep plunging into the red in some mad gambit to turn it around. Some nations didn't keep their house's in order and are paying for it now. The USA after WW2 had the only modern functioning economy, Asia now exists in an economical equation that Europe never had to account for before.
No one is going to give greece or spain the money it needs to support the stimulus packages that you're proposing. Austerity is the only thing left to them.
|
On April 30 2013 00:04 ggrrg wrote:Show nested quote +On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is ' accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. Normally, I refrain from making statements about matters of such an enourmous complexity. Here, I'd say that generally I'd agree with the premise you mention. The problem is that many countries have been operating on budget deficits (even when accounted for inflation) for the better part of the last 30 years. + Show Spoiler [example-budget deficit] +USA-blue Germany-black Japan-red So countries (which allegedly wanted to operate under your premise) have actually been accumulating debt in times of economic strength. I wonder, how much room does this leave to increase deficit spending during recession?
It leaves plenty of room if you are a stable country that prints your own, credible currency. Japan is growing their debt currently, while it's above 220% GDP. Yields on Japanese bonds are still below 1%, so there's no investor worries.
|
though I am not a big fan of the german government I think what they did when the crisis struck was right. Basically the german government payed the companies a certain amount of their employees earnings, while the companies worked shorter days, while demand was low for their products.
This allowed the companies to keep their trained staff and at the same time lowered the numbers of layoffs. This is imo the right way to use stimulus money. Artificially keeping the supply side alive with stimulus money while at the same time the demand is breaking apart doesnt help.
|
Why would a nation default on it's debt if it isn't beholden to US politics or a central bank they don't own?
|
On April 30 2013 00:18 aksfjh wrote:
Why would a nation default on it's debt if it isn't beholden to US politics or a central bank they don't own?
I don't understand your question. Are you asking why a nation would default on its debt when it can't pay the debt? are you asking why it would default on its debt when the people giveing them the bailout have conditions so that they'll be able to pay back the debt?
|
I'm asking why a country would willingly default on their debt obligations. What would have to transpire for that to happen? Why would it not be able to pay it back? What is stopping the government from paying their debt, in a place like the UK, US, or Japan? What about countries like Spain and Italy, and how did they deal with debt before the Euro?
|
On April 30 2013 00:43 aksfjh wrote:
I'm asking why a country would willingly default on their debt obligations. What would have to transpire for that to happen? Why would it not be able to pay it back? What is stopping the government from paying their debt, in a place like the UK, US, or Japan? What about countries like Spain and Italy, and how did they deal with debt before the Euro?
Are you asking why a country without any money to pay its debts is unable to pay its debts?
|
On April 29 2013 22:31 paralleluniverse wrote:
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
That remind me of a recent TL Forum thread about the correlation between a certain arbitrary number of windows mine (10) and the rate of victory of terran.
It seems to me that Harvard Economist should post on TL, they would get harsher and more in depth review of there work here :-)
|
On April 30 2013 00:46 Sermokala wrote:Show nested quote +On April 30 2013 00:43 aksfjh wrote:
I'm asking why a country would willingly default on their debt obligations. What would have to transpire for that to happen? Why would it not be able to pay it back? What is stopping the government from paying their debt, in a place like the UK, US, or Japan? What about countries like Spain and Italy, and how did they deal with debt before the Euro? Are you asking why a country without any money to pay its debts is unable to pay its debts?
I'm asking what I asked. Answer it and I'll respond in kind.
|
On April 30 2013 00:48 aksfjh wrote:Show nested quote +On April 30 2013 00:46 Sermokala wrote:On April 30 2013 00:43 aksfjh wrote:
I'm asking why a country would willingly default on their debt obligations. What would have to transpire for that to happen? Why would it not be able to pay it back? What is stopping the government from paying their debt, in a place like the UK, US, or Japan? What about countries like Spain and Italy, and how did they deal with debt before the Euro? Are you asking why a country without any money to pay its debts is unable to pay its debts? I'm asking what I asked. Answer it and I'll respond in kind.
I don't understand what your asking thats why I asked what you were asking. No one willingly defaults on their debts so I was trying to figure out what you ment by that.
|
On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense.
I don't think debt is bad. It's similar to how a business might take out a loan so that they could grow. But you shouldn't burrow with the intent of not paying back. This was a systemic problem that dragged on for a long time for a lot of countries, and now they're in this hole.
|
The whole brouhaha behind the alleged refutation is nonsense. I do not see how you can ever measure reductions in GDP since ceteris paribus conditions cannot be established. However, one can know with absolute certainty that government debt (and spending) destroys wealth because it redirects funds from what the consumers value (the only source of value), to what demagogic politicians value. However, real question is whether government spending is an effective remedy for economic downturns.
"Stimulus" is just doublespeak for inflation since massive unmonetized deficits destroy the capital markers. Keynesians never advocate unmonetized debt. The essential claim of modern Keynesianism is that wages are somehow downwardly rigid and thus inflation is required to reduce real wages. The Keynesians conclude that this will restore full employment. However, public intellectuals who advocate Keynesianism, such as Paul Krugman and Bradford Delong, obscure this fact. They babble on about "demand," when the problem has nothing to do with demand and has to do with price coordination.
There are numerous problems with this approach that make it inadvisable.
1. Inflation is a crude weapon. The non neutrality of money means that the injection will favor some at the expense of others. Ben Bernanke's inflation has resulted in a wealth transfer to the holders of equities, the holders of mortgage backed securities and treasury bonds. This has resulted in rage about the success of the "one percent". Even if inflation succeeds in sparking another boom, it will also cause distortions to the structure of production which will result in an even worse collapse later on.
2. If the inflation is disseminated through public works and infrastructure projects it will prevent the prices of capital goods from falling to a level in which they can be profitably used for private production. This will prolong the stagnation.
3.In the cases where potential costs increase at a similar rate as income, inflation will be completely ineffective. The unemployment caused by Obamacare or the large Spanish severance payouts cannot be eliminated by inflation even if hyperinflation annihilates the currency system. If businesses are somehow duped into hiring because their income increases unexpectedly they will soon be forced to discharge the new employees or suffer losses.
4. Entrepreneurs make speculative decisions when investing. If they believe that they will be "liquidated" as "bourgeois" by Syriza, attacked by an angry mob, or have their profits seized they will not invest. In this way the rioters have brought on there own misery.
5. If inflation comes to be expected it will fail miserably. The inflationary depression will emerge.
In order to correct the problem, governments must abstain from propping up any wages or prices. It must reform its labor markets, in order to reduce the costs of hiring. It must be prepared to defend "scabs" from harassment by labor unions. It policies should not encourage the formation of monopolistic cartels. It must allow bankrupt institutions to be liquidated and their capital to be deployed in profitable endeavors. It must refrain from any easy money policy that will merely sow the seeds of another crisis.
|
On April 30 2013 00:54 mprs wrote:Show nested quote +On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. I don't think debt is bad. It's similar to how a business might take out a loan so that they could grow. But you shouldn't burrow with the intent of not paying back. This was a systemic problem that dragged on for a long time for a lot of countries, and now they're in this hole.
I must have missed the part where those countries didn't pay their debt obligations.
|
On April 29 2013 23:01 Sermokala wrote:
Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt.
It takes 4 seconds to "realize" it's stupid.
Unfortunately, it takes 10 seconds to Google "Treasury Real Yield Curve Rates".
Link
It takes five minutes to realize that the real "cost" of stimulus is not the accounting cost, but the opportunity cost.
The debt incurred by infrastructure spending is an accounting cost. And it's almost entirely irrelevant, because accounting makes a comparison between that action and doing nothing. This is a false comparison. Unless you are fine with bridge collapses and brownouts, doing nothing is not in the set of policy options.
Link
It's easy to use "common fucking sense" or gut instinct. It's difficult to actually think about the matter.
Eurozone countries are in a horrific position where they don't have control of their own currency and labor migration is too low to quickly spread unemployment across the member countries.
|
Most absurd part is that this paper wasn't peer reviewed. I don't understand how they can be so stubborn in light of this revelation.
|
On April 30 2013 00:59 aksfjh wrote:Show nested quote +On April 30 2013 00:54 mprs wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. I don't think debt is bad. It's similar to how a business might take out a loan so that they could grow. But you shouldn't burrow with the intent of not paying back. This was a systemic problem that dragged on for a long time for a lot of countries, and now they're in this hole. I must have missed the part where those countries didn't pay their debt obligations.
I think he was saying that the ideal way for a country to use debt is to borrow in a downturn or war, but then to pay it back when stuff improves. The problem that a lot of counties got into was they were taking on more debt when they should have been paying it off in the 90's and into the 2000's. If you are taking on debt when you are growing and when not growing, you are never going to pay the debt off.
I'm actually pretty sure the rational for all the borrowing countries were doing in the 90's/2000's was that between inflation and the growth that the additional spending will cause, you would not have to pay back the money at all.
|
On April 30 2013 00:18 aksfjh wrote:
Why would a nation default on it's debt if it isn't beholden to US politics or a central bank they don't own?
Because they don't want to pay it :p
See Argentina and the ongoing pari pasu saga.
On April 30 2013 01:16 acker wrote:Show nested quote +On April 29 2013 23:01 Sermokala wrote:
Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. It takes 4 seconds to "realize" it's stupid. Unfortunately, it takes 10 seconds to Google "Treasury Real Yield Curve Rates". LinkIt takes five minutes to realize that the real "cost" of stimulus is not the accounting cost, but the opportunity cost.Show nested quote +The debt incurred by infrastructure spending is an accounting cost. And it's almost entirely irrelevant, because accounting makes a comparison between that action and doing nothing. This is a false comparison. Unless you are fine with bridge collapses and brownouts, doing nothing is not in the set of policy options. LinkIt's easy to use "common fucking sense" or gut instinct. It's difficult to actually think about the matter. Eurozone countries are in a horrific position where they don't have control of their own currency and labor migration is too low to quickly spread unemployment across the member countries.
That's a fantastic way to go about things, but someone needs to do the maths on it.
|
If i am not mistaken, this research was burned from the start by parts of the economics community, because of the choice of publication place, not revealing source information etc
Also I feel there is way to much attention for the simple spreadsheet error, which could be a simple error. Which is why there are peer reviewed publications.......
The selective picking of data I find the way more disturbing part.
|
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah.
|
On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah.
LOL
In your first sentence you clearly place yourself on the austerity team......
You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post.
|
On April 30 2013 02:37 henkel wrote:Show nested quote +On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah. LOL In your first sentence you clearly place yourself on the austerity team...... You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post.
No, I'm not on any team. I support stimulus when it makes sense, and support austerity when it makes sense. The people on teams stick with their big/small government ideology no matter how absurd things reach. Right now we are spending a future generations money to keep ourselves fat as hogs.
|
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing.
|
On April 30 2013 02:12 JonnyBNoHo wrote:
That's a fantastic way to go about things, but someone needs to do the maths on it.
Or we could use a model, per the article.
Suppose that the real interest rate for the government's long-term debt will average 3 percent over the long run. (This assumption is historically accurate.) The current real interest rate for long-term debt is about zero. Assume, also, that government finances its infrastructure spending with 20-year Treasury bonds.
In this simple model, the government saves 80 cents for every dollar it spends on infrastructure by the time the bond matures. With such discounts, the federal government should be completing almost every infrastructure project on its to-do list. Even if there's only a 50 percent chance that such work needs to be done, it makes fiscal sense to do it now.
If we're talking about infrastructure or other projects that require replacement or retrofit on a smaller time scale (say, ten years), the situation is obscenely silly, with real interest rates going into negative numbers.
The numbers can certainly be adjusted, but it seems clear that discounts now are amazing for projects we'd have to do sooner or later. And I think most people can think of projects that would almost certainly benefit from this.
|
On April 30 2013 02:58 cozenage wrote:Show nested quote +On April 30 2013 02:37 henkel wrote:On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah. LOL In your first sentence you clearly place yourself on the austerity team...... You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post. No, I'm not on any team. I support stimulus when it makes sense, and support austerity when it makes sense. The people on teams stick with their big/small government ideology no matter how absurd things reach. Right now we are spending a future generations money to keep ourselves fat as hogs.
He is actually quite right here. A stimulus for greece would be a waste of money but a stimulus for spain might just make the difference. Austerity is a measure to force reforms in the southern countries and not meant as a permament solution to the economic problems of these countries.
|
On April 30 2013 03:08 BioNova wrote:
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing.
It's impossible for the US to default because it can always, as a last resort, print money to cover its debt. The social cost of inflation doesn't compare to the long term costs of default. Heck, it's not even close.
|
On April 30 2013 02:58 cozenage wrote:Show nested quote +On April 30 2013 02:37 henkel wrote:On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah. LOL In your first sentence you clearly place yourself on the austerity team...... You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post. No, I'm not on any team. I support stimulus when it makes sense, and support austerity when it makes sense. The people on teams stick with their big/small government ideology no matter how absurd things reach. Right now we are spending a future generations money to keep ourselves fat as hogs.
We seem to be on the same line then, misunderstanding because using a term as big government implies a negative view of government interaction. Not to mention you use only the government spending as a negative example no austerity examples of "teams". Hope you understand why it seemed that way to me.
|
On April 30 2013 00:18 aksfjh wrote:
Why would a nation default on it's debt if it isn't beholden to US politics or a central bank they don't own?
if you choose to not pay back the debt, barring a military invasion, then you get to keep your money.
but good luck ever getting a loan from anyone ever again.
|
On April 30 2013 03:25 Sbrubbles wrote:Show nested quote +On April 30 2013 03:08 BioNova wrote:
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing. It's impossible for the US to default because it can always, as a last resort, print money to cover its debt. The social cost of inflation doesn't compare to the long term costs of default. Heck, it's not even close.
Not just the US, but any modern, diversified economy that prints its own money. Krugman's sentiment isn't exceptionalism, but rather a model of modern macroeconomics.
|
On April 30 2013 03:44 henkel wrote:Show nested quote +On April 30 2013 02:58 cozenage wrote:On April 30 2013 02:37 henkel wrote:On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah. LOL In your first sentence you clearly place yourself on the austerity team...... You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post. No, I'm not on any team. I support stimulus when it makes sense, and support austerity when it makes sense. The people on teams stick with their big/small government ideology no matter how absurd things reach. Right now we are spending a future generations money to keep ourselves fat as hogs. We seem to be on the same line then, misunderstanding because using a term as big government implies a negative view of government interaction. Not to mention you use only the government spending as a negative example no austerity examples of "teams". Hope you understand why it seemed that way to me.
I wouldn't worry, your bullshit detectors were right on target with this one. Take a look at this blog and then consider whether or not this cozenage guy is on a team or not 
|
On April 29 2013 22:31 Skilledblob wrote:
having a huge debt is still bad this will never change. Only thing that got shown now is that in theory more than 90% debt should be managable. Economics is hardly a science. all you can do is make educated guesses, so going now and saying "haha we can make as much debt as we want" is just silly.
They never said that you can have as much debt as you want. It's even right there in the easy to read article with bolded titles and an inviting picture of the student.
The gist of their argument is that debt has pros and cons, and in the context of a recession, debt has more pros than cons.
Part of the error of the 2 economists, if I have this right, is that the data from recent times is not in line with the conclusion that debt about 90% is categorically a 'bad' thing.
|
On April 30 2013 04:11 farvacola wrote:Show nested quote +On April 30 2013 03:44 henkel wrote:On April 30 2013 02:58 cozenage wrote:On April 30 2013 02:37 henkel wrote:On April 30 2013 02:20 cozenage wrote:
I'm always amazed at the public coming up with more reasons for the government to spend more of their children's money.
People are so easily manipulated, all you have to do is get them on a "team." Once their "team" is big government, they support more government no matter the sense it does or doesn't make. All that matters is their team winning and being right, and the other team losing and being wrong.
Austerity vs. Stimulus, Yankees vs. Dodgers. rah rah rah. LOL In your first sentence you clearly place yourself on the austerity team...... You then continue to blame team picking for people not seeing the good side of the austerity. How more hypocrite can you get in 1 post. No, I'm not on any team. I support stimulus when it makes sense, and support austerity when it makes sense. The people on teams stick with their big/small government ideology no matter how absurd things reach. Right now we are spending a future generations money to keep ourselves fat as hogs. We seem to be on the same line then, misunderstanding because using a term as big government implies a negative view of government interaction. Not to mention you use only the government spending as a negative example no austerity examples of "teams". Hope you understand why it seemed that way to me. I wouldn't worry, your bullshit detectors were right on target with this one. Take a look at this blog and then consider whether or not this cozenage guy is on a team or not
nah he just tells a nice bed time story for when the kids have misbehaved 
|
On April 30 2013 03:58 aksfjh wrote:Show nested quote +On April 30 2013 03:25 Sbrubbles wrote:On April 30 2013 03:08 BioNova wrote:
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing. It's impossible for the US to default because it can always, as a last resort, print money to cover its debt. The social cost of inflation doesn't compare to the long term costs of default. Heck, it's not even close. Not just the US, but any modern, diversified economy that prints its own money. Krugman's sentiment isn't exceptionalism, but rather a model of modern macroeconomics.
Thats just plain silly. So the solution to exponentially increasing debt is hyper inflation? Just keep Printing money until its worth nothing and everyone's savings are worth nothing? All put on the alter of Keynesian models that the great recession proved where rotten from the start.
|
On April 30 2013 03:14 acker wrote:Show nested quote +On April 30 2013 02:12 JonnyBNoHo wrote:
That's a fantastic way to go about things, but someone needs to do the maths on it. Or we could use a model, per the article. Show nested quote +
Suppose that the real interest rate for the government's long-term debt will average 3 percent over the long run. (This assumption is historically accurate.) The current real interest rate for long-term debt is about zero. Assume, also, that government finances its infrastructure spending with 20-year Treasury bonds.
In this simple model, the government saves 80 cents for every dollar it spends on infrastructure by the time the bond matures. With such discounts, the federal government should be completing almost every infrastructure project on its to-do list. Even if there's only a 50 percent chance that such work needs to be done, it makes fiscal sense to do it now.
If we're talking about infrastructure or other projects that require replacement or retrofit on a smaller time scale (say, ten years), the situation is obscenely silly, with real interest rates going into negative numbers. The numbers can certainly be adjusted, but it seems clear that discounts now are amazing for projects we'd have to do sooner or later. And I think most people can think of projects that would almost certainly benefit from this.
That's not a model that's just demonstrating that the financing is cheaper. It's incomplete.
|
As long as the gdp growth has a higher percentage then the interest percentage paid on debt times debt/gdp there is no problem. This is a mathematical indisputable fact.
I could even refine this formula with only considering the amount of debt held by "foreigners" since all interest paid on debt wich is held by non foreigners basicly stays in the economy, its only a redistribution.
Economic growth is basicly not effected by the amount of debt at all, this is a verry important concept to understand.
The debt and the interest paid on it are merely taxes on the gdp, taxes collected by the debt holders.
Reinhart is a complete idiot for not seeing this and not worthy of the title "economist"
|
On April 30 2013 04:22 Sermokala wrote:Show nested quote +On April 30 2013 03:58 aksfjh wrote:On April 30 2013 03:25 Sbrubbles wrote:On April 30 2013 03:08 BioNova wrote:
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing. It's impossible for the US to default because it can always, as a last resort, print money to cover its debt. The social cost of inflation doesn't compare to the long term costs of default. Heck, it's not even close. Not just the US, but any modern, diversified economy that prints its own money. Krugman's sentiment isn't exceptionalism, but rather a model of modern macroeconomics. Thats just plain silly. So the solution to exponentially increasing debt is hyper inflation? Just keep Printing money until its worth nothing and everyone's savings are worth nothing? All put on the alter of Keynesian models that the great recession proved where rotten from the start.
Lol, great strawman you've got there. No one is advocating exponentially increasing debt and hyperinflation isn't even close to being on the table for discussion.
Heck, I didn't even mention these issues at all (and neither did aksfj who responded to my post)! I just said a default by the US government is impossible.
|
United States3824 Posts
Evergreen State College Hwaiting!
|
On April 30 2013 04:30 JonnyBNoHo wrote:
That's not a model that's just demonstrating that the financing is cheaper. It's incomplete.
Of course it's a model, it's a simplification of reality into discrete elements. Every model pertaining to reality is incomplete.
What matters is that it shows financing is discounted by approximately 80%, assuming long-run treasuries yield 3%, current long-run bond treasuries yield 0%, and the government can finance investments with long-run treasuries. If you have issues with any one of these assumptions that would significantly change the conclusion, that investments that need to be done sooner or later are cheaper to finance now rather than after a full recovery, then you should post a more accurate second-order solution.
|
If austerity is never a good thing, when we do repay our debts though?
|
On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though?
After the economy has recovered, of course. Or was your question rethorical?
|
On April 30 2013 04:37 Sbrubbles wrote:Show nested quote +On April 30 2013 04:22 Sermokala wrote:On April 30 2013 03:58 aksfjh wrote:On April 30 2013 03:25 Sbrubbles wrote:On April 30 2013 03:08 BioNova wrote:
I'm no fan of Keynesian policy, but less of a fan of austerity. Austerity imho is punishing the wrong people. If you're unwilling or unable to prosecute banks, regulators and lobbyists who as a industry have profited from one crisis/scandal after another... Well, what else is there. I'm not arguing it's morality. I'm arguing what other option fits the purpose. Reducing excessive debt and financial accountability/responsibility.
No offense, but Krugman asserting that it's not just improbable, but that it's impossible for the U.S to ever default even with continual spending increase and increasing debt? Well, it strikes me as mildy absurd. Almost to the point of economic exceptionalism, the financial parellel of american exceptionalism. It will never happen to us, cause we're better than that.
Shame R/R torpedoed their own work. The question should have been does a certain level of debt slow growth. The 90% threshold isn't a red-line. It's where some degree of stagnation becomes statistcally visible.
Neither side is 100% convincing. It's impossible for the US to default because it can always, as a last resort, print money to cover its debt. The social cost of inflation doesn't compare to the long term costs of default. Heck, it's not even close. Not just the US, but any modern, diversified economy that prints its own money. Krugman's sentiment isn't exceptionalism, but rather a model of modern macroeconomics. Thats just plain silly. So the solution to exponentially increasing debt is hyper inflation? Just keep Printing money until its worth nothing and everyone's savings are worth nothing? All put on the alter of Keynesian models that the great recession proved where rotten from the start. Lol, great strawman you've got there. No one is advocating exponentially increasing debt and hyperinflation isn't even close to being on the table for discussion. Heck, I didn't even mention these issues at all (and neither did aksfj who responded to my post)! I just said a default by the US government is impossible.
If you follow context clues you will find out that I responded to a post referring to "any modern diversified economy that prints its own money" and not the US government.
On April 30 2013 05:00 Sbrubbles wrote:Show nested quote +On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical?
Literaly no one ever says this ever. When times are good people just want to spend the surplus's more so they can have more surplus's. When things are bad are the only times when anyone thinks of paying down their debts.
|
The answer to that is realy simple:we never repay our debts, we just replace them by other debts.
Though i thought this would be obvious as in the past 100 years of debt accumulation the debt has only gone one way, wich is up. Still some people seem to think that one day we will pay off our debt, this despite the fact that the debt has been rising for over 100 years.
The only way we will pay of our debt is if there is a financial revolution wich changes the current system.
Austerity can be a good thing, it all depends on the situation.
|
On April 30 2013 05:02 Rassy wrote:
The answer to that is realy simple:we never repay our debts, we just replace them by other debts.
Though i thought this would be obvious as in the past 100 years of debt accumulation the debt has only gone one way, wich is up. Still some people seem to think that one day we will pay off our debt, this despite the fact that the debt has been raising for over 100 years ><
Austerity can be a good thing, it all depends on the situation.
Exactly. No one is saying that austerity is the new world order, just that for nations that are on the cusp of default its the only sensible choice in order to bring about any order.
|
On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though?
Your debts are my savings. If the government is running a budget surplus then someone else is running a deficit, be they foreigners or the citizens who themselves. So on a certain level the government always will be in debt -- unless we undo 30 years of conservative tax cuts or undo the modern state.
|
On April 30 2013 05:00 Sbrubbles wrote:Show nested quote +On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical?
The real answer is never.
Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you.
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s).
|
On April 30 2013 05:13 DeepElemBlues wrote:Show nested quote +On April 30 2013 05:00 Sbrubbles wrote:On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical? The real answer is never. Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you. Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s).
Yes, the horror of the 1990s US economy was truly horrible. How did we all survive!
|
On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though?
those 2 things arent the same.
|
On April 30 2013 05:15 Sub40APM wrote:Show nested quote +On April 30 2013 05:13 DeepElemBlues wrote:On April 30 2013 05:00 Sbrubbles wrote:On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical? The real answer is never. Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you. Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). Yes, the horror of the 1990s US economy was truly horrible. How did we all survive!
I agree that the 97-00 bubble was truly horrifying since we have never actually recovered from its popping.
But you're not interested in an actual conversation, you're interested in red herrings about the 1990s. Do we live in the 1990s? Is 2013 Paul Krugman the same as 2002 Paul Krugman, who was very concerned about inflation (oops, he was wrong)? Is the 2013 Democratic Party the same as the 1996 Democratic Party? 2013 GOP same as 1996 GOP? These are very simple questions and when you have trouble with answering them please make sure to throw out a sarcastic red herring.
|
Since the US can't default because it can print money to service its debt, what's preventing them from printing enough money to pay off the entire debt?
|
On April 30 2013 05:23 SilverLeagueElite wrote:
Since the US can't default because it can print money to service its debt, what's preventing them from printing enough money to pay off the entire debt?
Eventual loss of the dollar's status as world reserve currency. Which would then make it a lot harder to just print (they don't do that anymore anyway, they just type into a computer and bam 300 billion more dollars is added to the money supply) money until enough has been printed to pay off debt.
Why didn't say Argentina just print money to prevent it's default?
|
On April 30 2013 04:35 Rassy wrote:
As long as the gdp growth has a higher percentage then the interest percentage paid on debt times debt/gdp there is no problem. This is a mathematical indisputable fact.
edit: eh nevermind, i think i'm just not understanding.
|
On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s).
I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy.
Now where's that bridge?
|
On April 30 2013 05:29 DeepElemBlues wrote:Show nested quote +On April 30 2013 05:23 SilverLeagueElite wrote:
Since the US can't default because it can print money to service its debt, what's preventing them from printing enough money to pay off the entire debt? Eventual loss of the dollar's status as world reserve currency. Which would then make it a lot harder to just print (they don't do that anymore anyway, they just type into a computer and bam 300 billion more dollars is added to the money supply) money until enough has been printed to pay off debt. Why didn't say Argentina just print money to prevent it's default?
Because their debt was heavily in dollars. But yes, monetizing the debt would implicate in future inflation, which could very well endanger the dollar's position as the world reserve currency.
On April 30 2013 05:13 DeepElemBlues wrote:Show nested quote +On April 30 2013 05:00 Sbrubbles wrote:On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical? The real answer is never. Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you. Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s).
I agree that paying off the principal of the debt is not gonna happen, but because it is largely unecessary and in fact in a way harmful since monetary policy (in practical terms) hinges on the control of the interest rate through buying and selling of government bonds. But that doesn't mean debt levels have to be unstable and always rising. No sane economist would advise to that.
What seems to be the case, though, is that you're cynical not only in relation to (liberal) politicians and pundits, but to the economics profession itself. There's really no discussion to be had when you envision that those who advocate for stimulus are in fact lying about their intents of reducing the debt in the future and that those economists that agree with them using economic theory are also deceivers.
|
On April 30 2013 05:46 acker wrote:Show nested quote +On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge?
Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space.
Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views.
|
On April 30 2013 06:20 Sermokala wrote:Show nested quote +On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views.
Have you read any of his actual books?
Also, the word is "detached".
|
On April 30 2013 06:26 farvacola wrote:Show nested quote +On April 30 2013 06:20 Sermokala wrote:On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views. Have you read any of his actual books? Also, the word is "detached".
I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense.
Papa no tought me the reads good so no.
|
I really don't understand that much of economics, but that sounds like a big mistake :D
|
On April 30 2013 05:23 SilverLeagueElite wrote:
Since the US can't default because it can print money to service its debt, what's preventing them from printing enough money to pay off the entire debt?
Well, this is mostly a matter of semantic, but printing money does not actually reduce the public debt. The gov becomes increasingly more indebted to it's central bank, but how much public debt the central bank buys doesn't change the level of public indebtedness.
Government cannot default on it's debt obligations, even to it's own central bank, but naturally, the central bank deposits it's "winnings" into the treasury's pocket, thereby lessening the burden of being in debt for the government.
On the other hand, a central bank cannot just print as much money it likes, because printing lots of money means increasing expectations of inflation. High inflation has traditionally been a big problem caused by central banks financing wars and other reckless government spending. And that's basically how central banking works: You slowly increase the money supply in the economy to serve it's best interest (and the interest of the government to some limited extent), but you have to be careful how fast you go, since if you go too fast, the value of the money you are releasing into the economy will begin to fall too quickly (inflation).
These last few decades(from around the 1980s), central banks (including the fed) have mainly been charged with maintaining an expanding money supply, while keeping inflation to manageable levels, typically 1-3%.
|
I think this is a great example as to why economics can't be taken seriously as a scientific discipline until it actually gets a reliable peer review system.
This entire situation seems like a lack of oversight and review. The sad part is that the paper was used politically before it was shown to be wrong.
|
On April 30 2013 06:29 Sermokala wrote:Show nested quote +On April 30 2013 06:26 farvacola wrote:On April 30 2013 06:20 Sermokala wrote:On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views. Have you read any of his actual books? Also, the word is "detached". I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense. Papa no tought me the reads good so no.
What do you think dejected means?
|
On April 30 2013 06:29 Sermokala wrote:Show nested quote +On April 30 2013 06:26 farvacola wrote:On April 30 2013 06:20 Sermokala wrote:On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views. Have you read any of his actual books? Also, the word is "detached". I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense. Papa no tought me the reads good so no.
Well, the whole point of having an academia around, is that you don't have to make important decisions based on common sense, but on serious thinking.
Krugman is an outspoken advocate of liberal economic policy, a position he maintains for ethical reasons.
This public position has actually cost him massively during these last few years, since he has been correct on damn near everything for a decade or more, but hasn't gained political influence anywhere near what the now infamous Reinhart-Rogoff-et-al have managed to claim. A shame, but unfortunately that's how politics works.. either you are all-in or out with the people in power. In a way he is the ultimate in not-pandering, unwilling to compromise his integrity to the extent that there are people in high places who hate him, having never met him, even with all lib-con bias set aside.
I would respectfully add that Krugman does a pretty good job of explaining his thinking.
|
On April 30 2013 06:20 Sermokala wrote:Show nested quote +On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views.
Because the money spent on the military could be spent far more efficiently elsewhere. If you cut $10 from military spending and spend $5 of that on another department to employ people and save the rest, you're going to get a win-win. The only product created by the military is death or tools that lead to death, so there isn't a second (or third, etc.) cycle of productivity that is developed by a military-based job like there is in almost any other sector of the economy.
|
On April 30 2013 06:55 Stratos_speAr wrote:Show nested quote +On April 30 2013 06:20 Sermokala wrote:On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views. Because the money spent on the military could be spent far more efficiently elsewhere. If you cut $10 from military spending and spend $5 of that on another department to employ people and save the rest, you're going to get a win-win. The only product created by the military is death or tools that lead to death, so there isn't a second (or third, etc.) cycle of productivity that is developed by a military-based job like there is in almost any other sector of the economy.
That is incorrect sir. The makers of military stuff still spend their income and it goes through the economy as with any other sector. We don't measure a unit of production's usefulness by how many people's hands it passes through, but rather by how much an agent (any agent!, so long as they have the necessary purchasing power) is willing to spend on it. That's what defines how needed something is.
Military stuff maybe anti-social, but it's not bad business on purely rational terms.
|
On April 30 2013 06:29 Sermokala wrote:
I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense.
Papa no tought me the reads good so no.
FYI, just because something is common sense doesn't make it true. There's plenty of findings out there that go against intuition.
On April 30 2013 07:03 Kontys wrote:
That is incorrect sir. The makers of military stuff still spend their income and it goes through the economy as with any other sector. We don't measure a unit of production's usefulness by how many people's hands it passes through, but rather by how much an agent (any agent!, so long as they have the necessary purchasing power) is willing to spend on it. That's what defines how needed something is.
Military stuff maybe anti-social, but it's not bad business on purely rational terms.
Actually, he's generally correct; the parable of the broken windows comes to mind. Money spent on useless crap is money wasted relative to money spent on useful crap.
Otherwise there would be no difference in spending money on, say, shoveling holes in the ground compared to spending money on reducing drunk driving.
|
On April 30 2013 07:06 acker wrote:Show nested quote +On April 30 2013 06:29 Sermokala wrote:
I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense.
Papa no tought me the reads good so no. FYI, just because something is common sense doesn't make it true. There's plenty of findings out there that go against intuition. Show nested quote +On April 30 2013 07:03 Kontys wrote:
That is incorrect sir. The makers of military stuff still spend their income and it goes through the economy as with any other sector. We don't measure a unit of production's usefulness by how many people's hands it passes through, but rather by how much an agent (any agent!, so long as they have the necessary purchasing power) is willing to spend on it. That's what defines how needed something is.
Military stuff maybe anti-social, but it's not bad business on purely rational terms. Actually, he's generally correct; the parable of the broken windows comes to mind. Money spent on useless crap is money wasted relative to money spent on useful crap. Otherwise there would be no difference in spending money on, say, shoveling holes in the ground compared to spending money on reducing drunk driving.
He is not generally correct. Military assets are no less useful than reducing drunk driving in the broad sense. You can argue that military spending should be less preferred by government though, but that's politics.
The OP was arguing that money spent on military assets gets stuck and does not flow further into the economy, whilst it obviously does.
|
On April 30 2013 04:56 acker wrote:Show nested quote +On April 30 2013 04:30 JonnyBNoHo wrote:
That's not a model that's just demonstrating that the financing is cheaper. It's incomplete. Of course it's a model, it's a simplification of reality into discrete elements. Every model pertaining to reality is incomplete. What matters is that it shows financing is discounted by approximately 80%, assuming long-run treasuries yield 3%, current long-run bond treasuries yield 0%, and the government can finance investments with long-run treasuries. If you have issues with any one of these assumptions that would significantly change the conclusion, that investments that need to be done sooner or later are cheaper to finance now rather than after a full recovery, then you should post a more accurate second-order solution.
It took me a little while to recreate and think about the author's math but here it goes:
The author is not saying that the financing cost is on an 80% discount. The author is suggesting that there is an opportunity cost worth 3% per year for not borrowing money today that, over a 20 year period, will equal 80% of the borrowing not discounted.
So he's saying that the government borrowing money today is essentially equivalent to you or I putting money in an account that earns 3% per year plus inflation. Over a period of 20 years a $1000 account would grow to ~$1806 in real terms. Your gain would have been $806 or about 80% of the initial investment. That's a bit weird and I don't think it's appropriate.
To me what's appropriate would be to judge a project by way of a NPV analysis (Net Present Value). You could then use your borrowing cost in the denominator (adjusted for risk, if appropriate) and as it becomes cheaper, more projects would naturally become viable.
Edit: Just googled up a nice primer on the subject.
|
On April 30 2013 07:03 Kontys wrote:Show nested quote +On April 30 2013 06:55 Stratos_speAr wrote:On April 30 2013 06:20 Sermokala wrote:On April 30 2013 05:46 acker wrote:On April 30 2013 05:13 DeepElemBlues wrote:
Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy. Now where's that bridge? Military gives a lot of middle class level employment to poor people while training them into a middle class job idk why liberals are so keen on cutting it. Not to mention the technological advancements that the military research gives into the commercial space. Krugman Is 100% dejected from reality and is nothing more then a liberal hack that keeps feeding his people. Most of his stuff is just predatory on peoples populist views. Because the money spent on the military could be spent far more efficiently elsewhere. If you cut $10 from military spending and spend $5 of that on another department to employ people and save the rest, you're going to get a win-win. The only product created by the military is death or tools that lead to death, so there isn't a second (or third, etc.) cycle of productivity that is developed by a military-based job like there is in almost any other sector of the economy. That is incorrect sir. The makers of military stuff still spend their income and it goes through the economy as with any other sector. We don't measure a unit of production's usefulness by how many people's hands it passes through, but rather by how much an agent (any agent!, so long as they have the necessary purchasing power) is willing to spend on it. That's what defines how needed something is. Military stuff maybe anti-social, but it's not bad business on purely rational terms.
Well, if you're considering purely rational terms, you'd have to figure out where your society stands on the risk/cost relationship between "risk of foreign intervention" and "money spent on military preparations". If you consider that that a cut in military spending would barely affect national safety then it's natural to feel like you're overpaying for it.
But yeah, all spending does end up flowing to the rest of the economy, albeit in different forms, depending which industries are affected.
|
What seems to be the case, though, is that you're cynical not only in relation to (liberal) politicians and pundits, but to the economics profession itself. There's really no discussion to be had when you envision that those who advocate for stimulus are in fact lying about their intents of reducing the debt in the future and that those economists that agree with them using economic theory are also deceivers.
I should have expanded what I wrote specifically explained more by what I meant when I said a political bridge too far.
I don't think they are lying, I think they do agree in principle with the idea of reducing the debt someday. But I think that that is mostly impossible because of change of politics from consensus to the winner-take-all disease that plagues the two major parties and most of the other political factions in the country as well. Not to say that all other countries are better off in that respect, but plenty are.
Look at sequester, it only happened because both parties chickened each other past the limit. They maneuvered themselves into two choices. 1. going to the sequester which both parties had designed to be "so painful" that it would make the other side blink. 2. Government 'shutdown.'
Whether or not the sequester will have more good than bad effects is important but to my point secondary to this: it was created by a spectacularly bad political process that economists actually have very little power to influence despite their good faith intentions. I should have used another example Krugman is in a hyper-partisan phase in his public life.
How is a decade-long (or longer) macroeconomic policy process going to be implemented in this kind of environment. What portions are followed at any particular time depends on what faction is in power.
I believe that people like Krugman would have no objection to, most obviously, cutting the military budget by $1 for every $10 of tax increases in a healthy economy, sans a war with China. In fact, I have trouble thinking of liberals who would object to decreases in military spending right now, let alone in a healthy economy.
Now where's that bridge?
Cutting the military budget and not spending that money elsewhere? I doubt that. This is not a political environment where actual federal government spending cuts are a viable option in the Democratic Party just as much as tax increases are not a viable option in the Republican Party.
The bridge is in your mind.
|
On April 30 2013 05:13 DeepElemBlues wrote:Show nested quote +On April 30 2013 05:00 Sbrubbles wrote:On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical? The real answer is never. Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you. Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s).
Ehhhh.... Well, If Krugman got his way, he would probably set to work building a Scandinavian style egalitarian society. That'd mean high taxes and high spending together to go with it.
You suggest the notion that paying down debt must involve cutting spending. This is not necessary, since when the economy recovers two things happen that improve the government's position without any political action taken: Tax revenues rise as economic activity picks up, and as people get back to work they become less dependant on government aid and expenditures fall. Therefore it is not necessary to cut spending to get public finances to a strong surplus. This is not a matter of economic theory, but is a fact we know from experience. There have been recessions and depressions before, and it is a universal occurrence.
Going further into this would definitely be US politics megathread material.. I'll keep it to economics.
|
Cayman Islands24199 Posts
On April 30 2013 07:28 JonnyBNoHo wrote:Show nested quote +On April 30 2013 04:56 acker wrote:On April 30 2013 04:30 JonnyBNoHo wrote:
That's not a model that's just demonstrating that the financing is cheaper. It's incomplete. Of course it's a model, it's a simplification of reality into discrete elements. Every model pertaining to reality is incomplete. What matters is that it shows financing is discounted by approximately 80%, assuming long-run treasuries yield 3%, current long-run bond treasuries yield 0%, and the government can finance investments with long-run treasuries. If you have issues with any one of these assumptions that would significantly change the conclusion, that investments that need to be done sooner or later are cheaper to finance now rather than after a full recovery, then you should post a more accurate second-order solution. It took me a little while to recreate and think about the author's math but here it goes: The author is not saying that the financing cost is on an 80% discount. The author is suggesting that there is an opportunity cost worth 3% per year for not borrowing money today that, over a 20 year period, will equal 80% of the borrowing not discounted. So he's saying that the government borrowing money today is essentially equivalent to you or I putting money in an account that earns 3% per year plus inflation. Over a period of 20 years a $1000 account would grow to ~$1806 in real terms. Your gain would have been $806 or about 80% of the initial investment. That's a bit weird and I don't think it's appropriate. To me what's appropriate would be to judge a project by way of a NPV analysis ( Net Present Value). You could then use your borrowing cost in the denominator (adjusted for risk, if appropriate) and as it becomes cheaper, more projects would naturally become viable. Edit: Just googled up a nice primer on the subject. the borrowed spending won't yield literally 3% per year over 20 years, but not spending that money now means foregoing output and human capital development.
|
On April 30 2013 07:28 JonnyBNoHo wrote:
It took me a little while to recreate and think about the author's math but here it goes:
The author is not saying that the financing cost is on an 80% discount. The author is suggesting that there is an opportunity cost worth 3% per year for not borrowing money today that, over a 20 year period, will equal 80% of the borrowing not discounted.
If I'm reading this correctly, the author is saying that, at the end of the 20 year period, 1.8 dollars borrowed at 0% interest over that period is worth a dollar borrowed at 3% interest over the same.
On April 30 2013 07:28 JonnyBNoHo wrote:
So he's saying that the government borrowing money today is essentially equivalent to you or I putting money in an account that earns 3% per year plus inflation. Over a period of 20 years a $1000 account would grow to ~$1806 in real terms. Your gain would have been $806 or about 80% of the initial investment. That's a bit weird and I don't think it's appropriate.
The author is saying nothing of the sort. In fact, this is the exact opposite of what he's claiming; that the government selling 20-year Treasuries at 0% today is not equivalent to the government selling 20-year Treasuries at 3%.
On April 30 2013 07:28 JonnyBNoHo wrote:To me what's appropriate would be to judge a project by way of a NPV analysis ( Net Present Value). You could then use your borrowing cost in the denominator (adjusted for risk, if appropriate) and as it becomes cheaper, more projects would naturally become viable.
I'm glad you posted the wikipedia article in order to get a second-order answer, but could you do the calculations? Off the top of my head, the answer is still equal to what Soltas wrote, unless you believe that the markets haven't correctly priced risk into the current and/or long-term bond rates.
More broadly, I'm seeing no practical imputs into the equation that lead to bonds at 0% interest being more expensive than bonds at 3% interest.
|
On April 30 2013 07:45 DeepElemBlues wrote:
Cutting the military budget and not spending that money elsewhere? I doubt that. This is not a political environment where actual federal government spending cuts are a viable option in the Democratic Party just as much as tax increases are not a viable option in the Republican Party.
Would you have facts to support this persistent, nagging doubt?
I seem to recall that you were active in the prior US Politics thread in 2011 and 2012. Surely you can pull up utter Democrat intransigence on all government spending during sequestration, the election, the fiscal cliff, or some other area? Then you could suggest that Democrats aren't willing to cut spending while the economy is below long-run output...have the Democrats ever said anything about government spending and taxes in a healthy economy? I know Krugman has, though it wouldn't support your...narrative.
Maybe the Republicans offered a 1:10 spending:tax deal some time ago. You could look for that.
Less sarcastically, I seem to recall that it was the Democrats begging the Republicans for a balanced spending:tax deal for the last two years. Is my memory fading, or did history rewrite itself recently? I have no doubt that a handful of Democrats oppose any cuts to M/M/S on principle, but not nearly enough to sink any cut in spending whatsoever. Or, for that matter, even some cuts to M/M/S.
|
On April 30 2013 08:00 Kontys wrote:Show nested quote +On April 30 2013 05:13 DeepElemBlues wrote:On April 30 2013 05:00 Sbrubbles wrote:On April 30 2013 04:58 XenOmega wrote:
If austerity is never a good thing, when we do repay our debts though? After the economy has recovered, of course. Or was your question rethorical? The real answer is never. Keynesians today don't believe in the second step of Keynes anymore. Paying down the principal on debt is a political bridge too far. There is never a time when increasing debt is not necessary. The economy is bad, we must increase our debt to make it good again. The economy is good, we must not pay off our debt because that might threaten the economy and governmental debt doesn't really matter anyway. That's modern model economic theory for you. Or do you really think that at some point in the future someone like Paul Krugman would actually support cutting spending? Even if it was 10$ of tax hikes for every 1$ cut? I have a bridge in Brooklyn to sell you if you believe that. It's a guaranteed success for you according to model modern economic theory (of the 1930s). Ehhhh.... Well, If Krugman got his way, he would probably set to work building a Scandinavian style egalitarian society. That'd mean high taxes and high spending together to go with it. You suggest the notion that paying down debt must involve cutting spending. This is not necessary, since when the economy recovers two things happen that improve the government's position without any political action taken: Tax revenues rise as economic activity picks up, and as people get back to work they become less dependant on government aid and expenditures fall. Therefore it is not necessary to cut spending to get public finances to a strong surplus. This is not a matter of economic theory, but is a fact we know from experience. There have been recessions and depressions before, and it is a universal occurrence. Going further into this would definitely be US politics megathread material.. I'll keep it to economics.
Shamelessly quoting myself to add some relevant things.
Since getting into the study of Economics a few years back I've always wondered how people manage to throw the tag "Keynesian" around so carelessly. Keynes's name as a rallying call was last really relevant in the 1970s during the emergence of so-called "monetarism", championed by Milton Friedman.
From today's student's perspective, Friedman himself is very much in agreement with Keynes, supplementing the relationships suggested by the Phillips curve ("you may trade inflation for unemployment") with a better understanding of how central banking and financial markets interact with the real economy. It all fits together quite nicely.. supplement it with understanding of the role of currency zones as investigated by Mundell and Fleming, and you've got a pretty good package to evaluate macro-policy.
In terms of purely theoretical thinking, the level of government indebtedness is not a factor in measuring a country's long term economic potential. R-R made a very surprising move to investigate it utilizing econometrics. Standard growth theory stated that government indebtedness, ceteris paribus, was not a factor. As such, their results were received with scepticism, and almost immediately begun to break apart. Others attempted to recreate their results using available historic data, but were unsuccessful. The data error was just icing on the cake.
Government indebtedness indeed doesn't matter. The US government has not been unsustainably profligate and the financial markets have failed to signal any warning on the credibility of the US debt position. The supposed "debt crisis" is all smoke and mirrors created by the Republican party utilizing the ongoing depression politically by misrepresenting it. It's called "shock treatment" among political science types: The recognition that under extreme conditions people are more likely to approve of extreme policy, even if the extreme policy demanded by politicians has nothing to do with the condition facing the country.
What is interesting though, is what are the real objectives of the republican ideologues for the future of the US?
+ Show Spoiler +They DO know all I have just spoken. They are neither stupid nor uneducated. They know what they are doing. So what is their aim? They want prosperity, inequality and military power. Unashamed concentration of wealth in the hands of the few, protected by the many poor hands which then, with little opportunity cost, may be used in global wars of domination.
Is that it? The birth of an era of unbridled American power ruling the world, incidentally not for the benefit of the many, but for the benefit of the few. Because they want the wealth for America? Because they want the military power for America? Or both, because it's their world after all, and not the Chinks' world (or whatever you call the Chinese communists :D).
I don't want to derail too much from economics. Real politik hailing from the G.W. Bush era demands that republicans continue attempts aimed at shrink the statism.
It would be interesting, as a side story, to hear what the politically conservative in this thread think about these "visions of America" hidden in the folds of political scheming.
|
On April 30 2013 08:21 acker wrote:Show nested quote +On April 30 2013 07:28 JonnyBNoHo wrote:
It took me a little while to recreate and think about the author's math but here it goes:
The author is not saying that the financing cost is on an 80% discount. The author is suggesting that there is an opportunity cost worth 3% per year for not borrowing money today that, over a 20 year period, will equal 80% of the borrowing not discounted. If I'm reading this correctly, the author is saying that, at the end of the 20 year period, 1.8 dollars borrowed at 0% interest over that period is worth a dollar borrowed at 3% interest over the same.
Yes, that's what he's saying.
1.8/1.03^20=1
Show nested quote +On April 30 2013 07:28 JonnyBNoHo wrote:
So he's saying that the government borrowing money today is essentially equivalent to you or I putting money in an account that earns 3% per year plus inflation. Over a period of 20 years a $1000 account would grow to ~$1806 in real terms. Your gain would have been $806 or about 80% of the initial investment. That's a bit weird and I don't think it's appropriate. The author is saying nothing of the sort. In fact, this is the exact opposite of what he's claiming; that the government selling 20-year Treasuries at 0% today is not equivalent to the government selling 20-year Treasuries at 3%.
Same thing. Discounting 1.8 by 3% per year over 20 years is the same as compounding 1 by 3% over 20 years. It's just the inverse of the above.
The way I worded it is correct. The author is claiming opportunity cost. That means the government (effectively and right now) has the option to earn 3%. In the author's mind, borrowing now means saving 3% thus not borrowing now involves a 3% opportunity cost.
It's a bit wonky, opportunity cost is the foregone benefit from doing something else. So when choosing to do project A the opportunity cost is project B. Here, the comparison is project A now vs project A later while saying nothing about what project A is or if it is worthwhile at all to begin with or if the value of the project changes with time.
Show nested quote +On April 30 2013 07:28 JonnyBNoHo wrote:To me what's appropriate would be to judge a project by way of a NPV analysis ( Net Present Value). You could then use your borrowing cost in the denominator (adjusted for risk, if appropriate) and as it becomes cheaper, more projects would naturally become viable. I'm glad you posted the wikipedia article in order to get a second-order answer, but could you do the calculations? Off the top of my head, the answer is still equal to what Soltas wrote, unless you believe that the markets haven't correctly priced risk into the current and/or long-term bond rates. More broadly, I'm seeing no practical imputs that lead to bonds at 0% interest being more expensive than bonds at 3% interest.
Yes I can do the calculations. It's easy. Just open excel, put in the cash flows and use the NPV formula "=NPV()".
The issue I'm raising is not the difference between a 3% and 0% bond. We're evaluating projects here, not whether or not interest rates are low or high by historical standards. NPV takes into account financing costs along with other costs and benefits while the author is only concerned with financing costs.
|
On April 20 2013 04:17 Sub40APM wrote:Show nested quote +On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested.
EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run.
|
On April 30 2013 09:27 Flyingdutchman wrote:Show nested quote +On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run.
When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down.
Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition.
As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels.
The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over.
|
On April 30 2013 09:19 JonnyBNoHo wrote:
It's a bit wonky, opportunity cost is the foregone benefit from doing something else. So when choosing to do project A the opportunity cost is project B. Here, the comparison is project A now vs project A later while saying nothing about what project A is or if it is worthwhile at all to begin with or if the value of the project changes with time.
Ok, that makes sense. OTOH...
On April 30 2013 09:19 JonnyBNoHo wrote:
Yes I can do the calculations. It's easy. Just open excel, put in the cash flows and use the NPV formula "=NPV()".
The issue I'm raising is not the difference between a 3% and 0% bond. We're evaluating projects here, not whether or not interest rates are low or high by historical standards. NPV takes into account financing costs along with other costs and benefits while the author is only concerned with financing costs.
If you want to evaluate projects, that's your call; we'd all be better off for it. However, despite the rather illuminating ruminations on the workings of Excel (no, really!), I have yet to see you post a single result from your knowledge of NPV.
Something tells me that actually using NPV is is somewhat more complicated than posting a wikipedia article; I can understand your reluctance to run an analysis. However, that still only leaves us with the first-order solution. Which is, are there any projects that should be done, given a total savings of approximately 80 cents on every spent dollar by the time of bond maturation?
Given no second-order answers to the contrary, I'd be very surprised if this didn't encompass most federal infrastructure projects. The only projects that I might be able to see not benefiting are those concerning computerized or other high-tech works.
|
Oh god it's 4 AM again... I'm off to catch some Zs.
|
well, military spending as a form of government stimulus is fairly weak.
If you think about it, spending $20 million on a fighter jet versus a public infrastructure project is a huge world of difference in terms of which one actually will have the bigger long term benefit for the economy.
e: this is why Japan and Europe have such developed public infrastructure and we don't.
|
On April 30 2013 09:47 Kontys wrote:Show nested quote +On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over.
I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw).
I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft...
|
On April 30 2013 09:48 acker wrote:Show nested quote +On April 30 2013 09:19 JonnyBNoHo wrote:
It's a bit wonky, opportunity cost is the foregone benefit from doing something else. So when choosing to do project A the opportunity cost is project B. Here, the comparison is project A now vs project A later while saying nothing about what project A is or if it is worthwhile at all to begin with or if the value of the project changes with time. Ok, that makes sense. OTOH... Show nested quote +On April 30 2013 09:19 JonnyBNoHo wrote:
Yes I can do the calculations. It's easy. Just open excel, put in the cash flows and use the NPV formula "=NPV()".
The issue I'm raising is not the difference between a 3% and 0% bond. We're evaluating projects here, not whether or not interest rates are low or high by historical standards. NPV takes into account financing costs along with other costs and benefits while the author is only concerned with financing costs. If you want to evaluate projects, that's your call; we'd all be better off for it. However, despite the rather illuminating ruminations on the workings of Excel (no, really!), I have yet to see you post a single result from your knowledge of NPV. Something tells me that actually using NPV is is somewhat more complicated than posting a wikipedia article; I can understand your reluctance to run an analysis. However, that still only leaves us with the first-order solution. Which is, are there any projects that should be done, given a total savings of approximately 80 cents on every spent dollar by the time of bond maturation? Given no second-order answers to the contrary, I'd be very surprised if this didn't encompass most federal infrastructure projects. The only projects that I might be able to see not benefiting are those concerning computerized or other high-tech works.
Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis 
All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not.
One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it:
Comparing Benefits to Costs
Once the analyst has calculated all benefits and costs of the project alternatives and discounted them, there are several measures to compare benefits to costs in BCA. The two most widely used measures are described below.
Net present value (NPV). NPV is perhaps the most straightforward BCA measure. All benefits and costs over an alternative's life cycle are discounted to the present, and the costs are subtracted from the benefits to yield a NPV. If benefits exceed costs, the NPV is positive and the project is worth pursuing. Where two or more alternatives for a project exist, the one with the highest NPV over an equivalent analysis period should usually be pursued. Policy issues, perceived risk, and funding availability, however, may lead to the selection of an alternative with a lower, positive NPV.
Link
|
On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it.
It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel?
I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup.
|
On April 30 2013 12:31 acker wrote:Show nested quote +On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup.
I could do the calculations if I had the data... which I don't, so I can't
I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it.
Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit.
|
On April 30 2013 07:17 Kontys wrote:Show nested quote +On April 30 2013 07:06 acker wrote:On April 30 2013 06:29 Sermokala wrote:
I'm not partisan enough to say that hes detached though. I admit what he says has academic groundings but they're completly dejected from common sense.
Papa no tought me the reads good so no. FYI, just because something is common sense doesn't make it true. There's plenty of findings out there that go against intuition. On April 30 2013 07:03 Kontys wrote:
That is incorrect sir. The makers of military stuff still spend their income and it goes through the economy as with any other sector. We don't measure a unit of production's usefulness by how many people's hands it passes through, but rather by how much an agent (any agent!, so long as they have the necessary purchasing power) is willing to spend on it. That's what defines how needed something is.
Military stuff maybe anti-social, but it's not bad business on purely rational terms. Actually, he's generally correct; the parable of the broken windows comes to mind. Money spent on useless crap is money wasted relative to money spent on useful crap. Otherwise there would be no difference in spending money on, say, shoveling holes in the ground compared to spending money on reducing drunk driving. He is not generally correct. Military assets are no less useful than reducing drunk driving in the broad sense. You can argue that military spending should be less preferred by government though, but that's politics. The OP was arguing that money spent on military assets gets stuck and does not flow further into the economy, whilst it obviously does.
Military spending isn't useless, but it isn't as efficient as other expenditures.
Take random salary X that goes to a military man. This man can put his salary back into the economy, so his money is being helpful to the overall picture. However, the product of his labor is not; if he makes weapons, then those weapons are bought (one round of profit to go through the economy) and then those weapons turn into death. The efficiency stops there.
Take same salary X and imagine it is going to a teacher. That person's salary can go back into the economy, same as the military man. However, the product of his labor is more efficient; it turns into education, which benefits, countless students, which then use that education to, in turn, become more productive, making more products, which benefits the economy far more than the military man's product can.
Furthermore, this example isn't related to the economy. It can relate to hard products. Any product A can turn into the direct necessities or comforts of life, both of which contribute to an individual increasing their productivity in work; this can't happen in the military setting, as, even if the product results in a comforting sense of security that can result in being more productive, the product of a military man's work is death, which isn't economically advantageous. Furthermore, many products can be "re-used" in an economic sense, whereas weapons cannot. Military products (weapons that cause death) are unique in that their life span in the economy abruptly ends after they are made and then sold to the first individual to use them, as they just cause death (which doesn't contribute to the economy much at all). The vast majority of other produced goods can cycle through the economy in either a direct or indirect manner to further benefit society economically, whereas military weapons cannot.
The point is that, at the point where military spending goes beyond what is necessary for national security (a point that the U.S. is FAR, FAR, FAR, FAR, FAR past), that spending becomes less efficient than spending in other sectors.
|
On April 30 2013 13:16 JonnyBNoHo wrote:I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit.
If you're looking for a comprehensive analysis written in 500 words or less, that will never happen unless someone has a couple million dollars to give away. Fortunately, the first-order conditions seem well sufficient enough for things that should have been financed a decade ago, let alone now...bridge and high-hazard dam repairs come to mind, as the most concrete example.
|
On April 30 2013 00:06 Sermokala wrote:Show nested quote +On April 29 2013 23:35 aksfjh wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business. A nation defaulting on its debt like what would happen with every other odd eurozone country these days would destroy a country. Not just obliterate the economies of every other nation that isn't as irresponsible in the euro zone but completely destroy the nations financial basis. No one is going to want to buy greece or spains debt if Germany and china aren't backing them up. This idea that you think that fearing 25% unemployment is somehow better then exponentially exploding debt is nothing more then shitty propaganda from people who just want their governments to collapse.
Where are you getting this idea that default is such an awful thing? Like I said, faith-based economics. It's not necessarily true that default is a terrible thing.
Here's what the IMF, the enforcers of fiscal rectitude, the rescuers of insolvent governments have to say on the matter:
We investigated the empirical basis of the costs of sovereign defaults in its different versions. Our findings suggest that default costs are significant, but short lived. Reputation of sovereign borrowers that fall in default, as measured by credit ratings and spreads, is tainted but only for a short time. [...] Perhaps the most robust and striking finding is that the effect of defaults is short lived, as we almost never can detect effects beyond one or two years. Source: https://www.imf.org/external/pubs/ft/wp/2008/wp08238.pdf
As the paper argues, history suggests that the cost of default is basically undetectable beyond 2 years. But instead, Greece continues on the Euro and continues spiraling into a depression.
Also, the debt of Greece is backed up by the ESM and the ECB. Germany and all Eurozone countries contribute to the former. China has nothing to do with it. But I know that on the right, "China" is a knee-jerk reaction to anything relating to "debt".
Show nested quote +On April 29 2013 23:36 paralleluniverse wrote:On April 29 2013 23:01 Sermokala wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation. Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year? Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall. I'm not pointing to Italy as an example of good fiscal policy. I'm pointing to Italy to debunk you're absurd claim that elections show that Europe is lurching to the right. It's not true. It's lurching against the incumbent, against austerity. It's giving rise to nationalism, Euroskepticism and batshit crazy anti-establishment parties. Yes, Obama started with a deficit roughly double where it was in 07/08, with over $1 trillion deficits through most of his first term. Why don't you tell me how he managed to pull that off given that the stimulus which was about $800 billion, spent only about $300 billion per year for a few years. Where's the other roughly $700 billion in deficits coming from? It's certainly not Obamacare, because it's not even in effect. And it's not the bailouts, which ended up profitable to the government. Or maybe, just maybe, much of the budget is determined by the economic cycle. The argument for stimulus is not an argument for reducing debt right now. It will increase debt in the short term. It's an argument to increase employment, to put people back to work, and to increase growth. In case you haven't realized, prolonged unemployment has terrible costs, people who have been out of work for a long time are nearly unemployable, skills degrade, human potential is wasted, future tax payers don't make a income and therefore don't pay tax, etc. Reducing the debt can wait until the economy has recovered. Reducing the debt now is counterproductive as Europe shows. No, don't blame the welfare state, the stronger welfare states like Germany or Sweden aren't the ones screwed, and don't blame the debt, Spain was in surplus pre-crisis and it's debt is lower than Germany. What you believe in is faith-based economics. Austerity is the only choice, not because of the evidence, but because you think it has to be true. Stimulus retards growth, well because you say so. And, as you claim, austerity is the only way to reduce debt. Where is the historical precedence for this false claim? Tell me, apart from export-led growth, which isn't really possible in a global recession, what country has cut it's way out of debt? What country has cut it's way to growth? The highest debt level over last few hundred years of US history was after WWII. At over 100% of GDP, did this debt cause a debt crisis? Was it reduced by a mad austerity drive? No, the US simply grew its way out of debt. It didn't cut its way out of debt. Are you seriously asking where the other deficits were coming from? The banking bailouts and auto industry bailouts (arguable corporate stimulus if anything) Kinda happened you know. And again This idea that increasing debt in the short term for countries that are experiencing exponentially increasing debt makes no sense in any way no one is going to give money to an addict so that in some way using is going to help them get better. Reducing the debt isn't something that can just wait for spain, greece, portugal and iceland. Iceland went though a revolution and England still isn't happy about it. No one gives a shit for what happened pre-crisis. Everyone got their legs kicked out from under them. It doesn't matter where everyone came from it just matters where everyone is right now. What I believe is common fucking sense. I don't put faith in weather forcasters and I don't understand how anyone would put faith in economists. I believe in common fucking sense. You can't simply say "lets ignore the numbers for the next 5 years" and keep plunging into the red in some mad gambit to turn it around. Some nations didn't keep their house's in order and are paying for it now. The USA after WW2 had the only modern functioning economy, Asia now exists in an economical equation that Europe never had to account for before. No one is going to give greece or spain the money it needs to support the stimulus packages that you're proposing. Austerity is the only thing left to them.
So now you're blaming the roughly $700 billion per year in deficits, that can't be explained by stimulus, on the bailouts. But this is completely wrong, as I'd already pointed out, the bailouts will probably end up being profitable for the government.
The CBO says that only $417 billion has been spent on the bailouts. And a large proportion of that was at the start of the crisis in 08/09. Further, the report says, due to almost all of the money being paid back, the net cost will be $24 billion. So the total cost of the bailout on the cumulative deficit over Obama's first term is virtually nil, less than rounding error.
So again I ask, how did Obama manage to double the deficit to over $1 trillion per year throughout his first term? Given that TARP and the bailout accounts for around $300 billion per year, where did the other roughly $700 billion per year in deficits come from? How did Obama manage to pull that off?
Your claim that no one will give money to "debt addicts" is also nonsense. The 3 most "fiscally reckless" advanced countries are Japan, the UK and the US. Yet the countries with the lowest borrowing costs are Japan, the UK and the US.
Then you claim what happened pre-crisis doesn't matter. But a common argument for austerity is that government recklessly increased spending and blew up the budget in good times and now must pay the price with austerity. And central to this story is what happened pre-crisis. Pre-crisis Spain was quite significantly reducing it's government debt and running surpluses. So if debt is bad, and surpluses are good, and Spain was running surpluses, why is Spain screwed now? Could it be that this story is nonsense.
So you don't want to talk about the past, but you want to talk about now? Well, right now Eurostats reports that Spain's debt to GDP is 77.4%, while Germany's debt to GDP is 81.7%. Yes, Germany has higher debt than Spain, right now.
You say that US was the only functioning economy after WWII. But I could have just used the same argument applied to the UK. While the US at the end of WWII had over 100% debt to GDP, the UK's debt was over 200% (!!) of GDP. But like the US, they did not cut their way out of this massive debt, they grew their way out of debt.
Your "common fucking sense" may tell you that "debt = bad", because that's what you want to believe. But evidence, serious economic analysis, or historical fact, shows that basically everything you've said is completely wrong. Your belief that we cannot possibly wait until the economy recovers to deal with debt, and that there is no alternative to austerity, hasn't been backed up by any evidence from you. You just believe it's true, because your "common fucking sense" tells you it must be true. What you believe in is faith-based economics.
|
On April 30 2013 13:16 JonnyBNoHo wrote:Show nested quote +On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit.
One of many productive ways to spend the money would be trying to reverse this:
![[image loading]](https://lh3.ggpht.com/-Pi3q7K4IP9E/UX0t-p6dYYI/AAAAAAAAZ-w/MWTiv628FZk/s1600/PulbicBushObama.jpg)
More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.html
There was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
|
On April 30 2013 18:53 paralleluniverse wrote:Show nested quote +On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
you might as well provide this as well:
![[image loading]](http://1.bp.blogspot.com/-5nQCvcQ_emM/UX09OXe4oZI/AAAAAAAAZ_A/KvsCuzewxGI/s1600/PrivateBushObama.jpg)
I'll prefer a job increase in the private sector over the public sector
|
On April 30 2013 19:17 Flyingdutchman wrote:Show nested quote +On April 30 2013 18:53 paralleluniverse wrote:On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment. you might as well provide this as well: I'll prefer a job increase in the private sector over the public sector
Well yes. But, the public sector situation is more dire. As the graphs shows, public sector employment fell and is still falling, whereas private sector employment increased and is still increasing. Also, it's easier to increase public sector employment, as public sector workers, like teachers, policeman, firefighters, have decreased over the last few years. So they can just be rehired. Whereas to increase private sector jobs, you need to find projects first and then hand out contracts. Either would be very helpful though.
|
United Kingdom36161 Posts
On April 30 2013 10:15 Flyingdutchman wrote:Show nested quote +On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft...
This is basically true, yeah. In the UK we had reasonably decent growth and tax receipts in the decade or so leading up to the worldwide crash, but the administration still decided to ramp up spending and run a large deficit during these 'good times'. Now we have 'austerity' where we're actually still running a large deficit and government spending is still really pretty high. Depends what you call austerity I guess.
|
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect.
|
Last week, I wrote a post summing up a week of bad news for austerity, noting that the debate seems to be shifting. Now even Politico is covering it:
And the intellectual shift away from austerity is not just coming from the left. The conservative American Enterprise Institute issued a paper last week saying Congress has already achieved enough deficit reduction for now. Other organizations not typically associated with free-spending liberalism, including the International Monetary Fund and Goldman Sachs, have cautioned that the austerity movement — which favors rapid reduction of national debt — may be worsening Europe’s economic problems and slowing down the U.S. recovery, as well. “American fiscal austerity has been moderate and probably, at the current pace of deficit reduction of about $300 billion per year over the next half decade, has proceeded far enough for now,” AEI scholar John Makin wrote last week. Read more: http://www.politico.com/story/2013/04/democrats-debt-crisis-90717.html#ixzz2Rwync8sL
The NYMag also has an interesting article on the medias portrayal of the austerity debate.
And what seems to have done it, isn't the reasoned arguments against austerity, or pointing out that RR never showed causation, or that causation could run from low growth to high debt, it wasn't just the disastrous effects of austerity in Europe, or all the talk about the fiscal cliff and sequester threatening growth and jobs on both sides of politics. No, what did it was the embarrassment that RR contained a Excel coding error and a "David v Goliath" story of "grad student debunks Harvard economists".
|
On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect.
This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now.
Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis.
There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now.
|
|
|
5003 Posts
This is why you don't try to cite papers that aren't peer reviewed, eheheheh
|
Also, the OP's link is broken. But I would also include this article on Bloomberg.
The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth:
![[image loading]](http://www.bloomberg.com/image/i63DIFaTv1io.jpg)
This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid.
|
|
|
i'd have to call the dispute negligent, and really the people arguing for it aren't fit to survive
|
On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid.
But the data doesn't go far enough. It just takes points around low growth and high debt and jumbles them together, then implies one caused the other.
|
On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid.
Firstly, showing that high debt is correlated with low growth could suggest that low growth causes high debt just as much as it could suggest that high debt causes low growth.
Secondly, Arindrajit Dube tries to untangle the causation issue, he believes that the causation more likely runs from low growth to high debt. Krugman also believes this is more likely.
Thirdly, here's the debt and GDP growth from the new paper. Notice that the negative correlation still holds. But notice how weakly the data fits the trend, and that there's no 90% "tipping point". No one should be making policy judgement based on such a badly fitted model and such an uncertain relationship.
![[image loading]](http://www.bloomberg.com/image/iBQ9noBviJc8.jpg)
Lastly, the new paper shows that the correlation changes over time, and in the most recent period, high debt countries didn't have lower growth.
![[image loading]](http://www.econbrowser.com/archives/2013/04/ap_growth_debt.gif)
I assure you, this paper is as debunked as you can get.
|
On April 30 2013 22:35 paralleluniverse wrote:Show nested quote +On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Firstly, showing that high debt is correlated with low growth could suggest that low growth causes high debt just as much as it could suggest that high debt causes low growth. Secondly, Arindrajit Dube tries to untangle the causation issue, he believes that the causation more likely runs from low growth to high debt. Krugman also believes this is more likely. Thirdly, here's the debt and GDP growth from the new paper. Notice that the negative correlation still holds. But notice how weakly the data fits the trend, and that there's no 90% "tipping point". No one should be making policy judgement based on such a badly fitted model and such an uncertain relationship. Lastly, the new paper shows that the correlation changes over time, and in the most recent period, high debt countries didn't have lower growth. I assure you, this paper is as debunked as you can get.
Do you have this stuff bookmarked, or do you just remember where you found it?
|
On April 30 2013 21:55 coverpunch wrote:Show nested quote +On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect. This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now. Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis. There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now.
That's fair. I concede the implication that it's defeatist from an optimists perspective. I'm not an optimist, and I don't tie my identity to the sinking ship of the modern United States in terms of what constitutes "surrender" or "giving up." Those are personal acts. I could care less about the system.
That being said, study history. Government spending will not be scaled back, and it will always be 5 years from now. There is no scenario where this doesn't occur barring the sudden appearance of a post-scarcity economy. Economically, we'll just put off our responsibilities and debts onto the backs of the next generation. And sure, maybe every nation in the world does this and we break even for all intensive purposes. You sill get the nightmare scenario of wealth distribution which only finance can produce.
It's all about the zeitgeist, and we've been thoroughly demoralized as a society at this point. Half of the nation no longer sees a world which is in keeping with its morals and they perceive of no way to remedy it. Hence, they surrender. Those who could fix the system are beaten down by the system and instead of social victories they concentrate on small personal ones. Why should they save something they no longer agree with or see the value in? Call them anachronistic, pig-headed, religious gun-nuts, what have you; but that's what it is.
You call doom, death. I call it the painful death throes before expiration. That doesn't mean I don't intend on living; I just don't particularly care if the current system does. My existence is not contingent on the system.
|
On April 30 2013 22:42 aksfjh wrote:Show nested quote +On April 30 2013 22:35 paralleluniverse wrote:On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Firstly, showing that high debt is correlated with low growth could suggest that low growth causes high debt just as much as it could suggest that high debt causes low growth. Secondly, Arindrajit Dube tries to untangle the causation issue, he believes that the causation more likely runs from low growth to high debt. Krugman also believes this is more likely. Thirdly, here's the debt and GDP growth from the new paper. Notice that the negative correlation still holds. But notice how weakly the data fits the trend, and that there's no 90% "tipping point". No one should be making policy judgement based on such a badly fitted model and such an uncertain relationship. Lastly, the new paper shows that the correlation changes over time, and in the most recent period, high debt countries didn't have lower growth. I assure you, this paper is as debunked as you can get. Do you have this stuff bookmarked, or do you just remember where you found it?
I usually remember where I found it. But sometimes I have to look around a bit. This stuff is only a week old, so memory is OK.
|
On April 30 2013 22:35 paralleluniverse wrote:Show nested quote +On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Firstly, showing that high debt is correlated with low growth could suggest that low growth causes high debt just as much as it could suggest that high debt causes low growth. Secondly, Arindrajit Dube tries to untangle the causation issue, he believes that the causation more likely runs from low growth to high debt. Krugman also believes this is more likely. Thirdly, here's the debt and GDP growth from the new paper. Notice that the negative correlation still holds. But notice how weakly the data fits the trend, and that there's no 90% "tipping point". No one should be making policy judgement based on such a badly fitted model and such an uncertain relationship. + Show Spoiler +Lastly, the new paper shows that the correlation changes over time, and in the most recent period, high debt countries didn't have lower growth. + Show Spoiler +I assure you, this paper is as debunked as you can get.
I don't think there's any question at all that at least some of the causation is flowing in the wrong direction, that low growth causes higher debts. In fact, we KNOW that happens because we know that both Presidents Bush and Obama massively increased spending in response to recessions. The recessions did not happen because government spending went up. This is definitely a time when informed experience > statistics.
But I don't think that debunks the question of whether excessive debt can eat into growth, which is what R-R were arguing. In fact, the United States only just approached the gray area after 2010, so we are in somewhat uncharted territory.
In addition, the 2000-2009 is not the "most recent period", it is the smallest data set and the most biased, given that there were two recessions in that period (2001, 2008). All of the data sets end in 2009.
|
On April 30 2013 22:47 Kimaker wrote:Show nested quote +On April 30 2013 21:55 coverpunch wrote:On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect. This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now. Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis. There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now. That's fair. I concede the implication that it's defeatist from an optimists perspective. I'm not an optimist, and I don't tie my identity to the sinking ship of the modern United States in terms of what constitutes "surrender" or "giving up." Those are personal acts. I could care less about the system. That being said, study history. Government spending will not be scaled back, and it will always be 5 years from now. There is no scenario where this doesn't occur barring the sudden appearance of a post-scarcity economy. Economically, we'll just put off our responsibilities and debts onto the backs of the next generation. And sure, maybe every nation in the world does this and we break even for all intensive purposes. You sill get the nightmare scenario of wealth distribution which only finance can produce. It's all about the zeitgeist, and we've been thoroughly demoralized as a society at this point. Half of the nation no longer sees a world which is in keeping with its morals and they perceive of no way to remedy it. Hence, they surrender. Those who could fix the system are beaten down by the system and instead of social victories they concentrate on small personal ones. Why should they save something they no longer agree with or see the value in? Call them anachronistic, pig-headed, religious gun-nuts, what have you; but that's what it is. You call doom, death. I call it the painful death throes before expiration. That doesn't mean I don't intend on living; I just don't particularly care if the current system does. My existence is not contingent on the system.
I would completely disagree with this but I actually moved to Japan a month ago, so I can't exactly insist on standing your ground.
But I will tell you something funny that I heard a Japanese artist say. During the 70s, he was very excited to hear and read all these stories that the world would end, definitely sometime in the early 2000s, probably at the 2012 Mayan calendar at the very latest. He was glad that he would see the end of the world. Now that it's 2013 and he's approaching his late 60s, the awful truth is sinking in that he's probably going to die and the world will just keep going without him.
So I would encourage you to prepare for the worst. Just don't go Mad Max too early.
|
On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid.
Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how?
|
On April 30 2013 23:05 coverpunch wrote:Show nested quote +On April 30 2013 22:47 Kimaker wrote:On April 30 2013 21:55 coverpunch wrote:On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect. This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now. Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis. There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now. That's fair. I concede the implication that it's defeatist from an optimists perspective. I'm not an optimist, and I don't tie my identity to the sinking ship of the modern United States in terms of what constitutes "surrender" or "giving up." Those are personal acts. I could care less about the system. That being said, study history. Government spending will not be scaled back, and it will always be 5 years from now. There is no scenario where this doesn't occur barring the sudden appearance of a post-scarcity economy. Economically, we'll just put off our responsibilities and debts onto the backs of the next generation. And sure, maybe every nation in the world does this and we break even for all intensive purposes. You sill get the nightmare scenario of wealth distribution which only finance can produce. It's all about the zeitgeist, and we've been thoroughly demoralized as a society at this point. Half of the nation no longer sees a world which is in keeping with its morals and they perceive of no way to remedy it. Hence, they surrender. Those who could fix the system are beaten down by the system and instead of social victories they concentrate on small personal ones. Why should they save something they no longer agree with or see the value in? Call them anachronistic, pig-headed, religious gun-nuts, what have you; but that's what it is. You call doom, death. I call it the painful death throes before expiration. That doesn't mean I don't intend on living; I just don't particularly care if the current system does. My existence is not contingent on the system. I would completely disagree with this but I actually moved to Japan a month ago, so I can't exactly insist on standing your ground. But I will tell you something funny that I heard a Japanese artist say. During the 70s, he was very excited to hear and read all these stories that the world would end, definitely sometime in the early 2000s, probably at the 2012 Mayan calendar at the very latest. He was glad that he would see the end of the world. Now that it's 2013 and he's approaching his late 60s, the awful truth is sinking in that he's probably going to die and the world will just keep going without him. So I would encourage you to prepare for the worst. Just don't go Mad Max too early.
I'm not a defeatist, nor am I a doom prophet.
There is no end. There are only endings. Time moves on with little regard to the scurryings of men. Men move on with equal disregard for one another. It's about what's static (nothing), it's about where you fall on the temporal pendulum and how you're built and how who you are fits into what is.
Socially:
I intend to stand my ground, when I see that the ground is once more fit for standing upon. Lots of things can change that. As it stands, nope.
Every generation the United States is a different country. Nation-states/Countries are strange things. They're extrapolations of the concept of "home," which is itself nothing more than some strange combination of geography, people, time and personal experiences. "Home" is inherently nostalgic, as is the concept of a Nation. When I see my nation reflected in society once more, I'll care. Until then, I'll bite the bit and do what I can without pretending it will all "get better". It might not. It might. That doesn't concern me.
Edit: 2000th post!
|
Cayman Islands24199 Posts
On April 30 2013 23:17 Hider wrote:Show nested quote +On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how?
"correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!)
|
On April 30 2013 18:53 paralleluniverse wrote:Show nested quote +On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
![[image loading]](http://i.imgur.com/jVV1VUb.jpg)
Edited your chart for clarity.
Basically there was a massive spike in public sector employment during last 5 years of bush's term (dare I say related to military?)
Then there was a fairly sharp downward trend beginning in obama's first term, continuing for about 2.5 years. Now there is still a slightly downward trend, but it is fairly close to level.
|
On May 01 2013 00:12 oneofthem wrote:Show nested quote +On April 30 2013 23:17 Hider wrote:On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how? "correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!)
Yes but they did they use any instrumental variables to check for reverse causation? or did they have another approach?
On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day
NPV varies depending on when it is build. So it is still relevant in terms of deciding which way to spend the public money and should be weighted according to the expected multiplier effect according to Keynesian logic.
|
Cayman Islands24199 Posts
On May 01 2013 00:46 Hider wrote:Show nested quote +On May 01 2013 00:12 oneofthem wrote:On April 30 2013 23:17 Hider wrote:On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how? "correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!) Yes but they did they use any instrumental variables to check for reverse causation? or did they have another approach? Show nested quote +
On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day
NPV varies depending on when it is build. So it is still relevant in terms of deciding which way to spend the public money and should be weighted according to the expected multiplier effect according to Keynesian logic.
since they explicitly said no causation i'd guess there was no IV
|
On April 30 2013 18:53 paralleluniverse wrote:Show nested quote +On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument.
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it.
|
On April 30 2013 10:15 Flyingdutchman wrote:Show nested quote +On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft...
The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president.
This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined.
I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
|
On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense.
Actually, that's incorrect. Debt is good for a whole number of reasons; it actually allows countries to grow economically.
|
On May 01 2013 01:23 Kontys wrote:Show nested quote +On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
What would happen if you added corporate tax gains into the equation? Or increased consumer spending due to higher wealth?
|
It know it was mentioned in this thread a couple of time but it should be mentioned again:
This paper, and their companion paper in Journal of Economic Perspective were NEVER PEER-REVIEWED.
They published it in AER Papers and Proceedings which is just publishes proceeding from an annual American Economic Association meeting. JEP on the other hand is a non-technical journal that provides summaries and more personal views on economic problems. It might be invitation only but I am not sure (need to check it).
But the mistake is super embarrassing.
I should add that in academic circles this results (especially the magic number of 90%) was never taken very seriously because it was never subject to peer-review.
|
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care.
|
On May 01 2013 01:05 JonnyBNoHo wrote:
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it.
Note: For bridges in the United States, the definition of "functionally obsolete" means that the bridge isn't suitable for current traffic and loads; your critique is incorporated into the definition.
"Structurally deficient" is more complicated, but indicates a defect (any defect, from cracked concrete to total retrofit) that "requires attention" (for current operations). I suspect that only bridges that need defect repair for current operations require attention; to take the most extreme case, an unused bridge would not require attention. I'm less sure on this, though.
http://www.fhwa.dot.gov/bridge/nbi.cfm
http://nationalbridges.com/guide-to-ratings
No doubt the bridge report by the ASCE is simplified, as all such reports must be. As always, you are free to provide a more accurate second-order analysis on the condition of bridges and repair/replacement in America. Nonetheless, it seem that even a second-order answer would indicate quite a few billion dollars are necessary for repairs, retrofit, and replacement.
|
On May 01 2013 01:55 Hider wrote:Show nested quote +On May 01 2013 01:23 Kontys wrote:On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US. What would happen if you added corporate tax gains into the equation? Or increased consumer spending due to higher wealth?
A good question. Increased consumer spending and corporate tax gains relative to what? The long run average I presume. I think US government going into surplus mid 90s does not reflect the government wrongly anticipating lower revenues, but rather the great upheaval that was the republicans winning the Congress for the first time in decades. This is when government shrinking as official dogma begun to have effect, but the democrats still occupied the White House, meaning that Congress couldn't just cut taxes AND spending at the same time. They needed Clinton's signature to make legislation law, and he would not accept spending cuts for the purpose of cutting taxes.
Economics vise, I took my time thinking about this answer, and it is an interesting question to ask what the real-economic effects of an ongoing stock bubble are. Extensive spending of national savings on an overvalued sector of the economy means financial illness once the bubble bursts, but what does it mean whilst the bubble is still going up? The US never grew as an economy much faster than it's long run average in the 1990s (no more than 1-2 percentage points year on year for some 4-5 years), but could this small figure still hide significantly elevated consumer spending and corporate revenues? I doubt it could.
The story of what happened to the US gov debt position in the 1990s was a matter of politics. The republicans won congress with a cut spending agenda in 1994, and were obliged at length by President Clinton (there were debt ceiling fights and a narrowly averted government shutdown iirc). However no significant tax cuts happened until after Bush Jr was elected.
EDIT: It was 1994 when the Republican party first won the Congress.
|
On May 01 2013 02:17 DiamondTear wrote:
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care.
Because public education, infrastructure and emergency housing projects for example are luxury products.
No, seriously, they are, if you aren't dependent on them, which is the case for most well-off people.
Keeping them going even when tax revenue goes slack may still be a good idea though. Public sector tax revenue becomes depressed when the economy is depressed, and recovers as the economy recovers.
This makes me want to phrase a notion that is not often openly stated, though we should be more concerned about it during public discussion. There are people who don't want the public sector to go into debt, because debt is a bad. Then there are people who don't want the public sector to be there, because the public sector is bad. These two positions become easily colluded as speakers may well masquerade as one and in fact be the other.
I'll therefore note that I am honestly in favour of a smaller public sector than the one we currently have in Finland. Pursuing the goal of a smaller public sector through policy implemented now however would be self-destructive, as tearing down existing economic systems during a slump, when there is no strong private sector to pick up the slack (or to put the vacated resources into use elsewhere), would lead to a deeper and more prolonged recession.
|
On May 01 2013 02:58 acker wrote:Show nested quote +On May 01 2013 01:05 JonnyBNoHo wrote:
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it. Note: For bridges in the United States, the definition of "functionally obsolete" means that the bridge isn't suitable for current traffic and loads; your critique is incorporated into the definition."Structurally deficient" is more complicated, but indicates a defect (any defect, from cracked concrete to total retrofit) that "requires attention" (for current operations). I suspect that only bridges that need defect repair for current operations require attention; to take the most extreme case, an unused bridge would not require attention. I'm less sure on this, though. http://www.fhwa.dot.gov/bridge/nbi.cfmhttp://nationalbridges.com/guide-to-ratingsNo doubt the bridge report by the ASCE is simplified, as all such reports must be. As always, you are free to provide a more accurate second-order analysis on the condition of bridges and repair/replacement in America. Nonetheless, it seem that even a second-order answer would indicate quite a few billion dollars are necessary for repairs, retrofit, and replacement.
Sort of. All that means is that some benefit would be derived from upgrading/fixing. It doesn't tell you how much benefit you'd be getting or let you know if alternatives would provide greater benefits. It also says nothing as to whether nor not the remedy is cost efficient or not.
As to your point about my hypothetical second-order answer, why do you assume it would result in less spending? Greater rigor and analysis could very well paint a picture of chronic underinvestment in any interest rate environment. Something to keep in mind if interest rates rise back to that historical average
|
On May 01 2013 04:12 Kontys wrote:Show nested quote +On May 01 2013 02:17 DiamondTear wrote:
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care. Because public education, infrastructure and emergency housing projects for example are luxury products. No, seriously, they are, if you aren't dependent on them, which is the case for most well-off people. Keeping them going even when tax revenue goes slack may still be a good idea though. Public sector tax revenue becomes depressed when the economy is depressed, and recovers as the economy recovers. This makes me want to phrase a notion that is not often openly stated, though we should be more concerned about it during public discussion. There are people who don't want the public sector to go into debt, because debt is a bad. Then there are people who don't want the public sector to be there, because the public sector is bad. These two positions become easily colluded as speakers may well masquerade as one and in fact be the other. I'll therefore note that I am honestly in favour of a smaller public sector than the one we currently have in Finland. Pursuing the goal of a smaller public sector through policy implemented now however would be self-destructive, as tearing down existing economic systems during a slump, when there is no strong private sector to pick up the slack (or to put the vacated resources into use elsewhere), would lead to a deeper and more prolonged recession.
The last thing you want is a private education system like they have in the US and other anglo-saxon countries. It's downright attrocious that students have to start their professional lives heavily indebted.
States have obligations towards their citizens. Affordable education is one of them. A country that considers education a luxury (i.e. something that's not really necessary, something only the well-off should be able to get) is basically destroying its own long-term future.
I don't really understand why infrastructure and emergency housing projects should be considered luxury products either. A good transportation system (roads, railroads, cannals) is vital for any economy and no human being should be forced to sleep under the stars. Sure, there are people who lost their homes because of their own mistakes, but there are also those who just had bad luck.
|
I will say that empirically, you need to a little more careful when supporting public works like bridges with so little reservation. The San Francisco Bay Area has been trying to build a new Bay Bridge since 2002. The city's original estimate was $780 million with a completion date of 2007, and as of 2013, they've spent $6.3 billion and the bridge has structural problems that means it might won't open this year either.
I know that the Bay Bridge is a worst-case scenario, but I am trying to point out that there's a difference between wise and wasteful government spending. My biggest problem with liberal economists is their faith that the government should just spend spend spend with very little regard for what they're buying.
The critical difference with the Great Depression is World War II. All governments massively increased government spending, but there was arguably far less waste because each side was trying to win the war. What scares me is that without that focusing problem, too much of the money is just frittered away as waste or corruption.
|
On May 01 2013 01:23 Kontys wrote:Show nested quote +On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote:On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is 'accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
Maybe I was a little too specific mentioning capital gains taxes instead of the dotcom bubble in general. You're spot on with your analysis of US politics imo.
|
On May 01 2013 06:46 maartendq wrote:Show nested quote +On May 01 2013 04:12 Kontys wrote:On May 01 2013 02:17 DiamondTear wrote:
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care. Because public education, infrastructure and emergency housing projects for example are luxury products. No, seriously, they are, if you aren't dependent on them, which is the case for most well-off people. Keeping them going even when tax revenue goes slack may still be a good idea though. Public sector tax revenue becomes depressed when the economy is depressed, and recovers as the economy recovers. This makes me want to phrase a notion that is not often openly stated, though we should be more concerned about it during public discussion. There are people who don't want the public sector to go into debt, because debt is a bad. Then there are people who don't want the public sector to be there, because the public sector is bad. These two positions become easily colluded as speakers may well masquerade as one and in fact be the other. I'll therefore note that I am honestly in favour of a smaller public sector than the one we currently have in Finland. Pursuing the goal of a smaller public sector through policy implemented now however would be self-destructive, as tearing down existing economic systems during a slump, when there is no strong private sector to pick up the slack (or to put the vacated resources into use elsewhere), would lead to a deeper and more prolonged recession. The last thing you want is a private education system like they have in the US and other anglo-saxon countries. It's downright attrocious that students have to start their professional lives heavily indebted.States have obligations towards their citizens. Affordable education is one of them. A country that considers education a luxury (i.e. something that's not really necessary, something only the well-off should be able to get) is basically destroying its own long-term future. I don't really understand why infrastructure and emergency housing projects should be considered luxury products either. A good transportation system (roads, railroads, cannals) is vital for any economy and no human being should be forced to sleep under the stars. Sure, there are people who lost their homes because of their own mistakes, but there are also those who just had bad luck.
Well, the US has a mix of public and private universities and while student debt is a growing issue, it's not as dire as you make it out to be. An education is far more valuable in the US than Belgium and taxes are lower too so a recent graduate's ability to pay back the debt may be substantially greater than you realize.
|
On May 01 2013 06:17 JonnyBNoHo wrote:Sort of. All that means is that some benefit would be derived from upgrading/fixing. It doesn't tell you how much benefit you'd be getting or let you know if alternatives would provide greater benefits. It also says nothing as to whether nor not the remedy is cost efficient or not. As to your point about my hypothetical second-order answer, why do you assume it would result in less spending? Greater rigor and analysis could very well paint a picture of chronic underinvestment in any interest rate environment. Something to keep in mind if interest rates rise back to that historical average
If "functionally obsolescent" meant that some benefit would be derived from upgrading or fixing with no regards to the opportunity cost, every bridge in America would be defined as functionally obsolescent. A cost/benefit analysis has been done, though I doubt that the FHA has the money to run a fully-comprehensive analysis.
Obviously, if you have found a more accurate analysis and report, you are free to post it.
As to your second paragraph, let's just say that your posting history is quite...regular.
|
On May 01 2013 12:06 acker wrote:Show nested quote +On May 01 2013 06:17 JonnyBNoHo wrote:Sort of. All that means is that some benefit would be derived from upgrading/fixing. It doesn't tell you how much benefit you'd be getting or let you know if alternatives would provide greater benefits. It also says nothing as to whether nor not the remedy is cost efficient or not. As to your point about my hypothetical second-order answer, why do you assume it would result in less spending? Greater rigor and analysis could very well paint a picture of chronic underinvestment in any interest rate environment. Something to keep in mind if interest rates rise back to that historical average If "functionally obsolescent" meant that some benefit would be derived from upgrading or fixing with no regards to the opportunity cost, every bridge in America would be defined as functionally obsolescent. A cost/benefit analysis has been done, though I doubt that the FHA has the money to run a fully-comprehensive analysis. Obviously, if you have found a more accurate analysis and report, you are free to post it. As to your second paragraph, let's just say that your posting history is quite...regular.
I don't want to beat a dead horse anymore so I'll just leave you with this:
+ Show Spoiler +
Link
Just try to keep an open mind as you look at it
|
On May 01 2013 13:28 JonnyBNoHo wrote:I don't want to beat a dead horse anymore so I'll just leave you with this: + Show Spoiler +LinkJust try to keep an open mind as you look at it
The highway trust fund encompasses way more than bridges (actually, from reading more, it doesn't even encompass all bridges, just those part of the highway system). That said, looks like you've found somewhere we should spend thirty billion dollars on, as well as passing congestion fees.
I have no problems whatsoever with increased congestion fees, they're probably generally too low now as is.
|
Cayman Islands24199 Posts
jonny's from boston so maybe his idea of highway project is the big dig.
|
On May 01 2013 13:46 oneofthem wrote:
jonny's from boston so maybe his idea of highway project is the big dig.
I'm from the western half of the state. The Big Dig was a boondoggle that drained precious resources from my beloved homeland.
Remember the Quabbin! Never forget! Rawr!
|
On May 01 2013 01:05 JonnyBNoHo wrote:Show nested quote +On April 30 2013 18:53 paralleluniverse wrote:On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment. Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument. And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it.
Well, part of the decline in public employment is attributable to teachers. And given that they started getting fired after 2008, it's obvious it's due to tight budgets, and not because teachers suddenly became unnecessary and out of fashion in 2008.
As for the structurally deficient bridges, as the report says these bridges get millions of trips, so it's not like no one is using these bridges. While it's an option to wait a little bit longer, it's not acceptable to simply choose not to fix these bridges. Because then they'll eventually collapse.
|
On May 01 2013 19:09 paralleluniverse wrote:Show nested quote +On May 01 2013 01:05 JonnyBNoHo wrote:On April 30 2013 18:53 paralleluniverse wrote:On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment. Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument. And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it. Well, part of the decline in public employment is attributable to teachers. And given that they started getting fired after 2008, it's obvious it's due to tight budgets, and not because teachers suddenly became unnecessary and out of fashion in 2008. As for the structurally deficient bridges, as the report says these bridges get millions of trips, so it's not like no one is using these bridges. While it's an option to wait a little bit longer, it's not acceptable to simply choose not to fix these bridges. Because then they'll eventually collapse.
It's perfectly acceptable. Just wait until a bridge collapses and gains media coverage. Then comes the condolences from politicians. A flurry of discussions will happen and legislation will be proposed but the process drags. When the process takes long enough that the emotional trauma passes by, there will not be enough attention paid and the can can safely be kicked by politicians until the next tragedy occurs.
Happens with global warming issues, happens with terrorist attacks, happens with human rights violations, happens with massacres, etc. It works.
If on the other hand it is profitable or in the interest of the politicians, it will take a couple of days and perhaps with minimal media coverage.
|
On May 01 2013 19:09 paralleluniverse wrote:Show nested quote +On May 01 2013 01:05 JonnyBNoHo wrote:On April 30 2013 18:53 paralleluniverse wrote:On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment. Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument. And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it. Well, part of the decline in public employment is attributable to teachers. And given that they started getting fired after 2008, it's obvious it's due to tight budgets, and not because teachers suddenly became unnecessary and out of fashion in 2008. As for the structurally deficient bridges, as the report says these bridges get millions of trips, so it's not like no one is using these bridges. While it's an option to wait a little bit longer, it's not acceptable to simply choose not to fix these bridges. Because then they'll eventually collapse.
On May 01 2013 19:09 paralleluniverse wrote:Show nested quote +On May 01 2013 01:05 JonnyBNoHo wrote:On April 30 2013 18:53 paralleluniverse wrote:On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment. Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument. And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it. Well, part of the decline in public employment is attributable to teachers. And given that they started getting fired after 2008, it's obvious it's due to tight budgets, and not because teachers suddenly became unnecessary and out of fashion in 2008. As for the structurally deficient bridges, as the report says these bridges get millions of trips, so it's not like no one is using these bridges. While it's an option to wait a little bit longer, it's not acceptable to simply choose not to fix these bridges. Because then they'll eventually collapse.
Sure we could spend a bit more on teachers in some areas. The student teacher ratio seems to be holding up though.
See here (stable),
or here (small uptick).
So it seems like at least some of those losses were in non-teacher positions in education settings (not that they necessarily don't matter).
As for the bridges, generally they're still doing some repair and maintenance work on them. They're not being completely neglected and they're not on a doomsday path to collapse. Some would benefit from accelerated repair, others perhaps not.
|
Cayman Islands24199 Posts
education resource is pretty unequally distributed. without some kind of top heavy distribution for budget cuts, it'll have disproportional effect on already resource strained schools. but hey, kids can do without arts classes. just watch more tv.
|
|
|
|
|
|
EPT![[image loading]](https://dl.dropboxusercontent.com/u/72070179/Hwys.JPG)
