[ame="http://www.youtube.com/watch?v=fyW-o-Pr92M"]New York Times Breaking News: Superhero Paul Krugman Saves World from Imaginary Alien Invasion! - YouTube[/ame]
Paul Krugman really is OUT OF IT in terms of being in touch with economic reality if these comments of his are any indication.
I'm just going to snipe the first quote for now. From Krugman's perspective if the trouble with the economy currently is a lack of aggregate demand then government spending and printing money are a possible solution. From the perspective of a shop owner, or any seller of wares in the economy it's irrelevant where the money came from, so long as the money is coming in, thus encouraging him to potentially hire more employees and produce more widgets. I don't necessarily agree with this perspective because eventually those chickens have to come home to roost ie. the shop owner goes out to buy that loaf of bread and realizes it's $2 higher now. My problem is, while I think Schiff has some good idea, he presents them my not fairly representing the argument of Krugman. It's the assumption that we're too stupid to understand the underlying concepts and come to our own conclusion that irks me.
+1. Beyond that, the employer knows this spending isn't sustainable. If they staff up based on today's spending, they'll have to fire tomorrow - then pay unemployment for 99 months... Many people have their own set of underlying concepts. Schiff has been right more than most, so is cocky (and many people trust him to keep them ahead of the curve. Most economists on TV play the same game - showmanship. How humble has Krugman been?
I wonder about this... does the shop owner really know that it isn't sustainable? His perspective is very narrow, and I believe he simply enjoys the influx of new customers regardless of how they acquired the funds to purchase his wares. His problem arises when he adjusts his inventories to reflect the increased business and eventually lands himself with a shelf full of goods and no customers coming in. So he doesn't know the end is nigh, makes decisions based on it, and is punished as a result. Which is why I make every effort to avoid TV economists, just as I avoid lawyers with commercials. This wasn't meant as an upvote for Krugman, just a sleight against anyone who argues by mischaracterizing their opposition.
He should've used a hypothetical World War III, that would make more sense. But anyway, No Mr. Krugman. I don't think the economy and the world are in such dire straits that it requires a return to World War II collectivism and restraint. No thanks.
Four years ago, I would agree with you, but the last 3 years have changed that. Now, if there is a significant influx of new customers, the owner will: 1. Work longer hours, have existing staff work over time, hire a temp, or add one or more part time employees. 2. Fill near empty shelves more frequently, but not increase annual commitments. 3. I ncrease shelf space of fast movers at the expense of slow movers, increase hours of operation, not move to a larger facility.
I think that reflects a lack of confidence and not the "rational economic mans" reaction to this particular set of variables. If he believes that down turns were temporary then he'd react according to what I've written.
The rational economic man gets kicked in the teeth in 2008, watches the economy stumble forward and start to fall, but is only rational if he behaves like it was 2006? What I am describing is what business people I talk to are doing.
It's terminology, an imaginary entity who doesn't think or feel, just acts within his limit knowledge to maximize his investments. It's just a concept used to simplify human action.
I'm familiar with the term. The only people that rationally chase the upside with no concern for the downside work in companies "too big to fail", where profit is private, and loss is public.
We have an enormous national debt with a yearly deficit that is enormous. There is no realistic way of paying our debt off, and its like pulling teeth to even think of decreasing our deficit. The only way out is inflation. And it won't be 5% inflation, it will be at least 15%. This will change the way of life as we know it for quite some time. Time to prepare for reality folks, and it ain't a good reality. Its just reality. Major inflation is headed our way in the next 5 years.
Theoretically the bread would only cost $2 more if the government printed rather than borrowed money to fund expenditures. Borrowing money has consequences, but inflation is not one of them. And of course, we can always fund the expenditures with higher taxes on the wealthy, which Krugman also supports.
Not quite. Borrowed money is fiat money is inflated money. At 10% reserve, a $1,000 deposit becomes $10,000, $9,000 created out of thin air.
More economic gibberish from market evangelists. Anytime somebody uses the term "fiat money" and isn't refering to buying an Italian automobile, I know they have no knowledge of basic economics.
http://en.wikipedia.org/wiki/Fiat_money If you are the guru of economics, where does borrowed money come from?
Depends where you borrow it from. Mostly the US government borrows money from nations, institutions and individuals who buy t-bills. Does that answer your silly question? Circling back, since borrowed money doesn't (usually) involve an increase in money supply, it isn't directly inflationary.
Not even close. A new bank opens and you deposit $1000 in the bank. No one else deposits any money. I borrow $900 from that same bank and buy something from you for $900, which you deposit. Your balance is $1900. Withdraw your $1900 - you can't, the bank only has $1000. The other $900 was created out of thin air. The bank can loan $810 on the $900 you deposited, and $729 on the $810, and $656 on the $729, until $9000 was created by loan. This little money supply just increased by a factor of 10. All based on your real $1000 and a 10% reserve. Except, reserves are 10% any more, they are less. How much money was created during the housing boom, and Wall streets derivatives (used to create AAA bonds, to allow borrowing at a lower reserve rate). If that money didn't go away, why was TARP necessary, and why do stimulus spending? Why prime the pump?
My comment was based on the premise that money would be printed to finance spendingl. In either case, whether borrowed or printed, I don't have faith in the allocation processes. It's less likely to bolster aggregate demand and more likely to end up in the hands of cronies. Assuming that higher marginal rates equates to higher revenues, this isn't always the case, but regardless this is a budget and taxation issue, not really specific to the Schiff's gripe with Krugman.
I cannot believe that I just heard an actual media personality compare the US to Zimbabwe. Yes, we are on the brink of printing hundreds of trillions of dollars, and therefore being proportionally comparable to Zimbabwe. Inflation is below 2%, which is the target during non-recession time periods. How did this happen to our country
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.6 percent before seasonal adjustment. http://www.bls.gov/news.release/cpi.nr0.htm And unless most people stop eating or using gasoline - all items is the truer measure of inflation. If you disagree - you are wrong.
Core inflation is 2% or less since 2008. This is the number used by the fed to think about what sort of monetary policy we should pursue. Food and oil are not included in "core inflation" because they change too dramatically for reasons other than overall demand in the economy, the employment level, the current money supply, inflation rates etc. "Headline inflation" or any measure of inflation that includes food and oil is not an accurate reflection of the effect of monetary policy on prices. Food and oil prices this year changed because of droughts and unrest in the middle east. This may be Obama's fault for being the anti christ, apparently, but not because of printing money. Is it a more true measure of the effect of government/monetary policy on current prices? Please understand that food and oil prices went up for reasons unrelated to the money supply or printing of money. They will either go down for the same reasons or, if they stay up, they would have gone up anyway. well thats just silly