Although this thread does not function under the same strict guidelines as the USPMT, it is still a general practice on TL to provide a source with an explanation on why it is relevant and what purpose it adds to the discussion. Failure to do so will result in a mod action.
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
But the IMF must be just like me, mistaking their own ideology for facts right ?
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
I want to hear more about this idea that there is no consensus on how GDP is calculated. Tell me please. There is four ways to evaluate it, all four having the same result - and one of those four is the added value of all the goods and services produced in an economy. So every € in the GDP correspond to a something that is produced and sold. It's inflated when the number of goods and services produced barely change but that the price grow, which makes nominal GDP grow but not real GDP.
When you don't want to agree with the facts, critic the source :
The euro area periphery has seen a marked decline in activity (Figure 1.2, panel 1), driven by financial difficulties evident in a sharp increase in sovereign rate spreads (Figure 1.2, panel 2). Activity has disappointed in other economies too, notably the United States and United Kingdom. Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies. These spillovers have lowered commodity prices and weighed on activity in many commodity exporters (see the Special Feature). Th e result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1). [...]
Box 1.1. Are We Underestimating Short-Term Fiscal Multipliers? With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated. This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
Yanis has played the English-speaking Media really well. Not sure if he was really all he's made himself out to be, but he's seemed like the only person involved, on either side, that actually cared about where things will be in a few years. And his idea for an IOU and retaking the Bank of Greece were correct. You can see what the other option ended up being: complete capitulation and even worse terms, without any true end to the entire situation.
On July 14 2015 04:03 BurningSera wrote: did we forget that ireland actually got their shit together, eventhough they didnt have overwhelming of debts like the serious ones.
You can't compare Ireland to Greece. Ireland got into trouble because they bailed out the banks. More specifically they bailed out the creditors of the banks. Like the U.K. did with RBS and Lloyds.
Ireland could have let the banks fail and only spend some money to rescue the savings of its population. They really should have done that.
Here is a nice documentary of the bank bailouts in Ireland, Spain and Cyprus by Harald Schumann:
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
But the IMF must be just like me, mistaking their own ideology for facts right ?
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
I want to hear more about this idea that there is no consensus on how GDP is calculated. Tell me please. There is four ways to evaluate it, all four having the same result - and one of those four is the added value of all the goods and services produced in an economy. So every € in the GDP correspond to a something that is produced and sold. It's inflated when the number of goods and services produced barely change but that the price grow, which makes nominal GDP grow but not real GDP.
When you don't want to agree with the facts, critic the source :
The euro area periphery has seen a marked decline in activity (Figure 1.2, panel 1), driven by financial difficulties evident in a sharp increase in sovereign rate spreads (Figure 1.2, panel 2). Activity has disappointed in other economies too, notably the United States and United Kingdom. Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies. These spillovers have lowered commodity prices and weighed on activity in many commodity exporters (see the Special Feature). Th e result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1). [...]
Box 1.1. Are We Underestimating Short-Term Fiscal Multipliers? With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated. This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
Yep, corrected.
Okay, fine. But then you really have to specify which GDP you are talking about, but in any case, the point still stands:
In every economic and finance class that I have personally taken, I was taught the importance of GDP. While every teacher explained it had flaws, none expressed the correct mentality that GDP just confuses people into believing the US is a growing, producing society.
Starting with private consumption, one can already begin to see issues. If someone were to take out a loan solely for consumption, would they actually be any richer? The US is the largest debtor nation in the history of the world with the majority of our consumption done with loans. Since US household consumption makes up 70% of the GDP, this component becomes extremely important. A lot of consumption would be great if it were a reflection of production expansion. The problem is that our country gets into personal debt while working service jobs, then spends the money to buy real products produced everywhere but America.
While this talks about the US, it clearly applies to Greece in the 00s too.
As for your second point, I wasn't attacking your point that the IMF stated they overestimated the growth factor, in fact, I said that verbatim in my earlier post. I was attacking your point that hte IMF attributed the overestimated growth factor to austerity measures. That is your own assumption/interpretation, and not supported at all by any text you have supplied so far.
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
But the IMF must be just like me, mistaking their own ideology for facts right ?
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
I want to hear more about this idea that there is no consensus on how GDP is calculated. Tell me please. There is four ways to evaluate it, all four having the same result - and one of those four is the added value of all the goods and services produced in an economy. So every € in the GDP correspond to a something that is produced and sold. It's inflated when the number of goods and services produced barely change but that the price grow, which makes nominal GDP grow but not real GDP.
When you don't want to agree with the facts, critic the source :
The euro area periphery has seen a marked decline in activity (Figure 1.2, panel 1), driven by financial difficulties evident in a sharp increase in sovereign rate spreads (Figure 1.2, panel 2). Activity has disappointed in other economies too, notably the United States and United Kingdom. Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies. These spillovers have lowered commodity prices and weighed on activity in many commodity exporters (see the Special Feature). Th e result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1). [...]
Box 1.1. Are We Underestimating Short-Term Fiscal Multipliers? With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated. This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7
On July 14 2015 01:16 WhiteDog wrote: [quote] It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
Yep, corrected.
Okay, fine. But then you really have to specify which GDP you are talking about, but in any case, the point still stands:
In every economic and finance class that I have personally taken, I was taught the importance of GDP. While every teacher explained it had flaws, none expressed the correct mentality that GDP just confuses people into believing the US is a growing, producing society.
Starting with private consumption, one can already begin to see issues. If someone were to take out a loan solely for consumption, would they actually be any richer? The US is the largest debtor nation in the history of the world with the majority of our consumption done with loans. Since US household consumption makes up 70% of the GDP, this component becomes extremely important. A lot of consumption would be great if it were a reflection of production expansion. The problem is that our country gets into personal debt while working service jobs, then spends the money to buy real products produced everywhere but America.
While this talks about the US, it clearly applies to Greece in the 00s too.
As for your second point, I wasn't attacking your point that the IMF stated they overestimated the growth factor, in fact, I said that verbatim in my earlier post. I was attacking your point that hte IMF attributed the overestimated growth factor to austerity measures. That is your own assumption/interpretation, and not supported at all by any text you have supplied so far.
And this sentence ?
The result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1)
Your point about GDP stand - yes the GDP as an indicator is imperfect in many regards, and maybe a good evaluation of a country should take into account the debt GDP ratio, but it does not mean that the GDP is inflated. It's not false wealth that has been created, just that the production is not sustainable in the long run (nobody is saying Greece economic behavior was sustainable btw). That's true for all countries, not just Greece and it doesn't contradict what I was saying. The GDP is not an indicator of consumption but of production ! It measure what has been produced, and sold, but since the economy is a circuit, you can measure it in different ways : through revenu, through production, etc. Actually consumption is only 60 to 70 % of the GDP, the rest being government spending and investment.
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
But the IMF must be just like me, mistaking their own ideology for facts right ?
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
I want to hear more about this idea that there is no consensus on how GDP is calculated. Tell me please. There is four ways to evaluate it, all four having the same result - and one of those four is the added value of all the goods and services produced in an economy. So every € in the GDP correspond to a something that is produced and sold. It's inflated when the number of goods and services produced barely change but that the price grow, which makes nominal GDP grow but not real GDP.
When you don't want to agree with the facts, critic the source :
The euro area periphery has seen a marked decline in activity (Figure 1.2, panel 1), driven by financial difficulties evident in a sharp increase in sovereign rate spreads (Figure 1.2, panel 2). Activity has disappointed in other economies too, notably the United States and United Kingdom. Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies. These spillovers have lowered commodity prices and weighed on activity in many commodity exporters (see the Special Feature). Th e result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1). [...]
Box 1.1. Are We Underestimating Short-Term Fiscal Multipliers? With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated. This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
Yep, corrected.
Okay, fine. But then you really have to specify which GDP you are talking about, but in any case, the point still stands:
In every economic and finance class that I have personally taken, I was taught the importance of GDP. While every teacher explained it had flaws, none expressed the correct mentality that GDP just confuses people into believing the US is a growing, producing society.
Starting with private consumption, one can already begin to see issues. If someone were to take out a loan solely for consumption, would they actually be any richer? The US is the largest debtor nation in the history of the world with the majority of our consumption done with loans. Since US household consumption makes up 70% of the GDP, this component becomes extremely important. A lot of consumption would be great if it were a reflection of production expansion. The problem is that our country gets into personal debt while working service jobs, then spends the money to buy real products produced everywhere but America.
While this talks about the US, it clearly applies to Greece in the 00s too.
As for your second point, I wasn't attacking your point that the IMF stated they overestimated the growth factor, in fact, I said that verbatim in my earlier post. I was attacking your point that hte IMF attributed the overestimated growth factor to austerity measures. That is your own assumption/interpretation, and not supported at all by any text you have supplied so far.
The result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1)
suggests, may, part.
Compare that with your post that stated as gospel fact that austerity was the main culprit for Greek malaise. That economists argue about the exacerbating effect of austerity in Greece's depression was, in fact, exactly what I stated. The IMF took more of a stance than I expected, or remembered, but there is clear room for dissenting economists to provide research that suggests it may be otherwise.
Here's my original reply to you, including your brazen statement that austerity is clearly the root of all Greevil:
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy... The US had budgetary cuts lately, but they waited for growth and it didn't drive their economy in recession (where you can't pay your debt). The entire eurozone rules push for the exact opposite (spending during growth time and cuts during recession) explaining why we have such a high debt ratio and no efficience in fighting the crisis.
And this is exactly what im talking about. You are so sure that everything you write is 100% true. How you can just ignore the main flaw of keynesian multiplicator - the way government spending is financed. How you can ignore it when it comes to situation that is currently happening in Greece while discussing Greece situation at the same time. You sound like you just finished your economy classes at Univiersity, but your professor forgot to tell you at start of classes that theories are just theories and external and eviormental factors need to be taken into account.
And then you try to dot me with "basic macroeconomy...". Hillarious.
Also many pages ago i asked you how is Greece teaching Europe democracy in relation to the their referendum. I'm still waiting for the answer.
Hum I don't know how to respond. I made one claim, that reducing spending have negative effect on demand and push recession further and you talk to me about how to finance spending. Just the last five years in Greece is enough to support my claim, it's not economic theory, it's just basic empirical analysis : they reduced public spending and suffered a drop of 25 % of their GDP over 5 years.
I love it when people that actually disagree for ideological reasons wants to make it seems like what is proved to be true is an ideological discourse. There are many people in this thread that argue that pro Greek argument are ideological. Those arguments were ideological in 2009 when people argued for a keynesian stimuli in Europe without much discussion on the reality of europe - Keynesian stimuli would have failed btw. Five years later and the eurozone GDP has not increased at all (or barely), and some countries are still below their pre crisis level, while the US is doing way better : how is it ideology ? We're just pointing out the obvious : the solutions are not the right one, just change. The ideology is what prevent you from watching reality, not what I'm saying.
You're making a very false assumption here, which is that correlation = causation. It clearly and obviously isn't in this case. Greece's GDP was going to shrink by an enormous amount regardless of what else happened, because the unbridled borrowing of money that was causing their inflated GDP was over. Austerity wasn't the cause of the shrinkage of the GDP. Now economists can, and do, argue about whether Greece's economy had to shrink by that much, or whether austerity made things worse, but taking the latter as fact is disingenious. Especially when you discard counterarguments as nonsense (such as that austerity actually worked in Portugal and Ireland, and most recently seems to be bearing fruits in Spain too).
The EU economy growing slower than the US economy is not an argument against austerity. A million confounding factors influence that, ranging from China, through the Ukraine and Greece, to fricking Obamacare. You cannot point at one of the many factors and say: THAT is what is causing the EU economy to grow slower without a LOT more analysis than you have shown.
On July 14 2015 03:18 WhiteDog wrote: I read you comment and see a kid saying nanana with its hand on its ears. Inflated GDP ? What's that ? Most GDP indicator you see is deflated (it's in real terms). It does not measure the money in an economy, but the value added produced by one economy : it's good and services minus the cost used to produce them.
Meanwhile even the IMF has acknowledge the negative effect of the forced reform on Greek economy :
The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.
The IMF, along with the European Union and European Central Bank, are putting up $325 billion in two bailouts to keep the Greek economy from collapsing, but the deep pay cuts, tax hikes and slashed pensions it insisted upon cut so much into revenues and limited growth that it skewed how long a recovery would take, Olivier Blanchard said in a report, according to the Washington Post.
But the IMF must be just like me, mistaking their own ideology for facts right ?
The general keynesian idea of spending during recession and saving during growth periods is a very solid idea, and seems to be working. The sad reality is that it seems to be very hard to convince people of the "saving during growth" part of it, which in the end means that you have budgetary problems. Spending more money will increase your GDP, obviously. However, that money has to come from somewhere. This basically means taxes. Either taxes right now, taxes in the past if you managed to save up some money, or even more taxes in the future if you borrow the money now. And taxes will take money out of the economy and thus reduce your GDP again.
We could have created rules in the eurozone to force people to reduce public spending during growth. Meanwhile we have a rule that prevent more than 3% deficit, so everybody reach for 3% deficit whatever the economic situation, which promote the exact opposite : too much spending during growth; and not enough spending during crisis.
The IMF didn't actually attribute the "devastating effect on the Greek economy" to austerity. Insofar as I understood the report they stated that their models did not take into account the Greek economy's devastation, which was clear at the time, and one of the main criticisms of the bail-out approach by basically anybody with a modicum of common sense. But if you insist on the former, please quote a primary source, instead of a pro-Greek blogger giving his spin to a news article in the Washington Post. The IMF report is public, so I am sure you can find it if it exists.
Other than that, of course GDP can be inflated. There isn't even a consensus on how GDP is calculated. GDP is supposedly how much "produce" a country creates per year. However, what is produce? In the Greek case, they borrowed X-billion, pumped it into the local market, out rolled jobs (not actually producing anything), which got counted as GDP. It was basically a country-wide pyramid scheme, and thus yes, it was inflated. Living in Brazil I see plenty of that kind of job around me. It is a very obvious symptom of clientelism, which by all accounts was absolutely rampant in Greece (and is still very much present).
I want to hear more about this idea that there is no consensus on how GDP is calculated. Tell me please. There is four ways to evaluate it, all four having the same result - and one of those four is the added value of all the goods and services produced in an economy. So every € in the GDP correspond to a something that is produced and sold. It's inflated when the number of goods and services produced barely change but that the price grow, which makes nominal GDP grow but not real GDP.
When you don't want to agree with the facts, critic the source :
The euro area periphery has seen a marked decline in activity (Figure 1.2, panel 1), driven by financial difficulties evident in a sharp increase in sovereign rate spreads (Figure 1.2, panel 2). Activity has disappointed in other economies too, notably the United States and United Kingdom. Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies. These spillovers have lowered commodity prices and weighed on activity in many commodity exporters (see the Special Feature). Th e result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1). [...]
Box 1.1. Are We Underestimating Short-Term Fiscal Multipliers? With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated. This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7
On July 14 2015 01:27 WhiteDog wrote: [quote] Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy...
Of course most modern economists disagree between themselves. Economics would be a dead field if it wasn't the case.
The debate is not on the existence of the keynesian multiplicator of course, that wouldn't make sense; knowing if it's above 1 (and under which conditions) is still questioned. And the need for a counter cyclical policy isn't set in stone either.
Greece is a nice playground for them. Bit of a shame there are people involved.
Seriously at some point you need to stop. Some economists believe the multiplicator is close to zero ; an increase (or a decrease) of government spending would have almost no positive (or negative) effect on the economy : so everybody agree it exist, they just disagree on its importance or on the existence of a crowding effect. Economists evaluate the multiplicator with various models - like the IMF did - but those model are imperfect and open to critic. Now what's the point of the discussion ? Was I wrong in any of my comments ? Can you give me more fact and less arguments over my supposed ideological tendancies ? At which point any of your critic actually question what I said, which was that the negative impact of budgetary cuts on Greece economy was too big to permit growth and that they need another solution ?
I don't care for your ideological tendencies. Your asked a question: do modern economists agree on the existence of the keynesian multiplicator. I answer that the question does not make sense. As you so eloquently put, the discussion is on its estimation and the corresponding model.
I agree that the opinion "the negative impact of budgetary cuts on Greece economy was too big to permit growth" is a probable hypothesis at this point and the mainstream one from an economical point of view. Future will tell.
So you agree that you are wrong. Everything is settled then.
Nope. My guess is you got confused in the quote chain, missed a few posts and answered to the wrong guy. Happens
Yep, corrected.
Okay, fine. But then you really have to specify which GDP you are talking about, but in any case, the point still stands:
In every economic and finance class that I have personally taken, I was taught the importance of GDP. While every teacher explained it had flaws, none expressed the correct mentality that GDP just confuses people into believing the US is a growing, producing society.
Starting with private consumption, one can already begin to see issues. If someone were to take out a loan solely for consumption, would they actually be any richer? The US is the largest debtor nation in the history of the world with the majority of our consumption done with loans. Since US household consumption makes up 70% of the GDP, this component becomes extremely important. A lot of consumption would be great if it were a reflection of production expansion. The problem is that our country gets into personal debt while working service jobs, then spends the money to buy real products produced everywhere but America.
While this talks about the US, it clearly applies to Greece in the 00s too.
As for your second point, I wasn't attacking your point that the IMF stated they overestimated the growth factor, in fact, I said that verbatim in my earlier post. I was attacking your point that hte IMF attributed the overestimated growth factor to austerity measures. That is your own assumption/interpretation, and not supported at all by any text you have supplied so far.
And this sentence ?
The result of these developments is that growth has once again been weaker than projected, in significant part because the intensity of the euro area crisis has not abated as assumed in previous WEO projections. Other causes of disappointing growth include weak fi nancial institutions and inadequate policies in key advanced economies. Furthermore, a significant part of the lower growth in emerging market and developing economies is related to domestic factors, notably constraints on the sustainability of the high pace of growth in these economies and building financial imbalances. In addition, IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output, which may explain part of the growth shortfalls (Box 1.1)
suggests, may, part.
Compare that with your post that stated as gospel fact that austerity was the main culprit for Greek malaise. That economists argue about the exacerbating effect of austerity in Greece's depression was, in fact, exactly what I stated. The IMF took more of a stance than I expected, or remembered, but there is clear room for dissenting economists to provide research that suggests it may be otherwise.
Here's my original reply to you, including your brazen statement that austerity is clearly the root of all Greevil:
On July 14 2015 01:01 ticklishmusic wrote: This medical analogy is flawed. The EU didn't tell Greece to cut off an arm, it told it Greece to lose some weight because it had diabetes and heart disease in exchange for assistance to buy healthy food. Greece spent the money on gourmet candy/
It's not flawed at all, Greece did not had diabetes : this liberal idea that administration or anything is too big has been proved wrong many times. The economy is a circuit, when you reduce spending at a grand scale you create a recession by contracting the demand. It's pure logic.
Maybe you want to stop projecting your personal views as facts and stop pretending that economists agree about everything.
Yeah so modern economists do not agree on the existence of the keynesian multiplicator ? On the necessity of counter cylical economic policy ? This is really basic macroeconomy... The US had budgetary cuts lately, but they waited for growth and it didn't drive their economy in recession (where you can't pay your debt). The entire eurozone rules push for the exact opposite (spending during growth time and cuts during recession) explaining why we have such a high debt ratio and no efficience in fighting the crisis.
And this is exactly what im talking about. You are so sure that everything you write is 100% true. How you can just ignore the main flaw of keynesian multiplicator - the way government spending is financed. How you can ignore it when it comes to situation that is currently happening in Greece while discussing Greece situation at the same time. You sound like you just finished your economy classes at Univiersity, but your professor forgot to tell you at start of classes that theories are just theories and external and eviormental factors need to be taken into account.
And then you try to dot me with "basic macroeconomy...". Hillarious.
Also many pages ago i asked you how is Greece teaching Europe democracy in relation to the their referendum. I'm still waiting for the answer.
Hum I don't know how to respond. I made one claim, that reducing spending have negative effect on demand and push recession further and you talk to me about how to finance spending. Just the last five years in Greece is enough to support my claim, it's not economic theory, it's just basic empirical analysis : they reduced public spending and suffered a drop of 25 % of their GDP over 5 years.
I love it when people that actually disagree for ideological reasons wants to make it seems like what is proved to be true is an ideological discourse. There are many people in this thread that argue that pro Greek argument are ideological. Those arguments were ideological in 2009 when people argued for a keynesian stimuli in Europe without much discussion on the reality of europe - Keynesian stimuli would have failed btw. Five years later and the eurozone GDP has not increased at all (or barely), and some countries are still below their pre crisis level, while the US is doing way better : how is it ideology ? We're just pointing out the obvious : the solutions are not the right one, just change. The ideology is what prevent you from watching reality, not what I'm saying.
You're making a very false assumption here, which is that correlation = causation. It clearly and obviously isn't in this case. Greece's GDP was going to shrink by an enormous amount regardless of what else happened, because the unbridled borrowing of money that was causing their inflated GDP was over. Austerity wasn't the cause of the shrinkage of the GDP. Now economists can, and do, argue about whether Greece's economy had to shrink by that much, or whether austerity made things worse, but taking the latter as fact is disingenious. Especially when you discard counterarguments as nonsense (such as that austerity actually worked in Portugal and Ireland, and most recently seems to be bearing fruits in Spain too).
The EU economy growing slower than the US economy is not an argument against austerity. A million confounding factors influence that, ranging from China, through the Ukraine and Greece, to fricking Obamacare. You cannot point at one of the many factors and say: THAT is what is causing the EU economy to grow slower without a LOT more analysis than you have shown.
It is a statement from the IMF, of course they are going to measure their words. But if you use your logic, you'd know that if you evaluate the multiplier at 1.2 or 1.4, it means any budgetary cut have very high negative effect on GDP. Also, I posted a comment directly from Christine Lagarde, president of the IMF, where she basically state that had they evaluated the multiplier right, they would have made things differently for Greece and Europe - same plan but in a longer time, with more time to recover.
On July 14 2015 04:03 BurningSera wrote: did we forget that ireland actually got their shit together, eventhough they didnt have overwhelming of debts like the serious ones.
You can't compare Ireland to Greece. Ireland got into trouble because they bailed out the banks. More specifically they bailed out the creditors of the banks. Like the U.K. did with RBS and Lloyds.
Ireland could have let the banks fail and only spend some money to rescue the savings of its population. They really should have done that.
On July 13 2015 20:32 unsaeglich wrote: EU is always a loss for each country, a loss of Freedom, an economic loss.
Like a comment in a german newspaper said: An affectionate partnership turned into a violent marriage.
There is a reason the Euro is generally popular, and its because its not a loss of freedom for an individual person in a country, just like the dollar doesn't piss off a Californian or Alabamian. It actually protects then, to an extent, from their local government. What it does do is reduce the freedom of governments because they cannot inflate away their debts, or debts in general.
This is important, because it demonstrates how the Greek government can be profligate and irresponsible, without attacking individual Greeks.
As far as we know from history, the only federations that have worked at a comparable level with EU are USA, Canada, Australia and India. India is a bit of a different\more complex story, but for others, they all had a thing in common, the native population has been exterminated and replaced with a new one with same language, politically and culturally united, with a leadership developed as a whole. I'm sorry to say but EU countries are a bit different from Alabama, they made the world history as you know it today, and if you think part of the rivalry between France and Germany was originated in a battle happened in the 1870 you start to understand why comparing Alabama or California to any EU nation is just laughable, and same goes for the federation that can bond them compared with USA.
On July 14 2015 05:55 c0ldfusion wrote: I feel like I have to apologize for my fellow Americans when they make these inappropriate analogies. It embarrasses us all.
Its ok, our time will come when people from the EU have to comment on some even in the US and draw inappropriate analogies. The great wheel will continue to turn.
InVerno, you didn't really argue cLutZ point about the Euro being a protection for individuals in Eurozone countries against their local governments. [EDITED: I wrote three redundant sentences and felt stupid afterwards, feeling the need to edit them out]
EDIT: To illustrate cLutZ's point, here's a chart for the rate of inflation in Portugal from 1977 to 2009:
On July 14 2015 06:11 warding wrote: InVerno, you didn't really argue cLutZ point about the Euro being a protection for individuals in Eurozone countries against their local governments. You went somewhere else entirely. Somewhere else that is rather irrelevant to cLutZ's point.
I'd say irrelevant in general, and in a rather hamfisted way.
Also, heaping India in with "federal states that succeeded" is a rather risky point in and of itself. Why India and not Brazil? I'd also like to point out that Australian provinces have a lot less autonomy than US states do, and presumably every other federation has its own specific constitution (Brazil definitely does) that makes the entire comparison even more futile.
There is a reason the EU is sometimes referred to as the Great European Experiment, and it is because something like this has ever been tried before. Pointing out that France and Germany are more different than Alabama and California is both obvious and completely beside the point. Both the point clutz was trying to make and any other one.
On July 14 2015 05:55 c0ldfusion wrote: I feel like I have to apologize for my fellow Americans when they make these inappropriate analogies. It embarrasses us all.
Why? He is kind of right. This experiment called EU is very bold, it's 'achievability' uncertain. You can take some learnings from Belgium for example, but in the grand scheme of things there is no president for a union between people living in so many different societies. The same Language, culture, politics, history all hugely important fields that countries normally rely on for communion, but that are absent in the EU. There is no 'European public', no real companionship and I doubt I will ever see one in my lifetime. So how do you form a union with just 'friendly associates'?
EPT
![[image loading]](http://i0.wp.com/estatisticasenumeros.economiafinancas.com/wp-content/uploads/2010/01/Infla%C3%A7%C3%A3o-em-Portugal-1977-a-2009.jpg)
