Paul Krugman's Prescription For A 'Depression'

Krugman: This is econ 101, I know I wrote the text book.

 

I'm curious of this description of austerity as if it's some sort of alternative economic policy, and one that's failing. It's not some sort of competing theory that some governments are trying out. Those governments are simply out of money. For the UK, it's either reign in spending or inflate the currency. For the Euro nations, they don't even have that choice. By the time you've reached "austerity" things already suck.

 

We can always count on conservatives to give us distorted, out-of-context snipets. Here's the whole article, for those whose concern for the truth is a bit deeper than a bumper sticker:

Will the rescuers arrive in the nick of time? Not necessarily. This movie may not be ''55 Days at Peking'' after all. It may be ''A Bridge Too Far.''

A few months ago the vast majority of business economists mocked concerns about a ''double dip,'' a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I've repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.

On the surface, the sharp drop in the economy's growth, from 5 percent in the first quarter to 1 percent in the second, is disheartening. Under the surface, it's quite a lot worse. Even in the first quarter, investment and consumer spending were sluggish; most of the growth came as businesses stopped running down their inventories. In the second quarter, inventories were the whole story: final demand actually fell. And lately straws in the wind that often give advance warning of changes in official statistics, like mall traffic, have been blowing the wrong way.

Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic. Should you be reassured?

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

Krugman wasn't making a recommendation, but a descriptive discussion of the economy after the last big bubble in the stock markets in 2000.

 

That's not a description, that's a prescription. I think the longer context makes it even more clear. Surely you can see that?

 

Krugman,the joke he was born to be,just look at his LYin' eyes.On tonight at
MSNBC and his Guilty LYin' eyes again a giveaway.Pleading in his New York
Times graft way the need for MORE Stimulus.Always more.He long ago diminished
any degree of credibility like the Little Gnome Professor Robert Reich.
These Liberal Toads are just repeaters.I was glad to hear the nominal repeater
general Wesley Clark last night.Another example of what this Country faces.A general who is
anything but on the side of Americana.Clarks granted 5 star status under his buddy and
personal friend Bill Clinton.That is what the game is.Clark a former Presidential
candidate and almost complete toadies to one-sided Liberalism or Political Correctness.
I always thought Military men were instructed to be Non-Political.
This is why we can't Trust the generals.They have been gotten to.

 

Anyway it will be interesting to watch the US economy's performance against those of the UK and the majority of Europe. We'll see which approach works.

 

Leave up to you to claim that black is white.

Anyone who isn't a lying shill can see Krugman was making a recommendation, hence the use of the word NEED. No amount of transparent spin from you will change that, but nice try anyway.

 

Gotta love you leftists.

First, you stick your own foot up your own ass, and admit that this "robust recovery" that is touted by Obama and his mouth-breathing sycophants is utter bullsh!t. Yessir - well done, there. Who you want to admit is lying about this 'recovery', Agent_286? Are you gonna have as many balls in this thread as you did in the Scott Walker thread, where you ran away too cowardly to answer the simple question I directly asked you there?

Second - and this is hilariously precious - your mindless defense of Krugman's brand of Keynesianism bloviates on completely ignorant of the fact that Keynes himself warned that if the Government comprised more than 25% of the GDP, the economy would collapse.

But there you are, caterwauling that our fiscal policies should do exactly that - and we're already well beyond the point that John Maynard himself explained would fail.

You leftists really should pick up a non-fiction book sometime.

 

lol. So if Mitt gets elected and cuts taxes further, cuts federal spending while increasing offense spending, deregulates everything, starts a trade war with China and a real one with Iran, as well as bombing Syria, how soon can we expect a balanced budget and full employment?”

 

If the US economy is growing and not stagnant and not contracting doesn't that mean that current policies are working and a recovery is actually under way?

It would be useful to get a position on that from the Keynes haters here.

 

The real criticism one should have of this recovery is that it is anemic. The recovery warrants 6 to 7 percent real GDP growth. We are not seeing such progress. In addition, this recovery has more or less been jobless. This is not just something that even Keynes haters acknowledge, but proponents of Keynesian economics note.

For example, me and my AP Macroeconomics teacher are Keynesians. We support active stabilization policy. Both of us understand that for the economy to truly recover, we need 6 to 7 percent real GDP growth, and at least 250,000 jobs created per month to speedily return to full employment output.

 

[video=youtube;d0nERTFo-Sk]http://www.youtube.com/watch?v=d0nERTFo-Sk[/video]

 

Fair comments. I wonder why job growth is a bit light on?

 

Political obstructionism by both parties is the problem. Republican opposition to short-run government spending and Democratic opposition to modest tax cuts, individual and corporate, and comprehensive tax reform is what is preventing a worthwhile recovery from taking fold.

 

Ah, ideology, partisan politics and no doubt some pandering to special interests is in the mix. Thank you for that information.

 

Markets self-correct without government intervention, and correlation is not causation.

 

Yes, but the process has rarely played out in pure form. Even prior to Keynes, governments or a conglomerate of private sector institutions often engaged in some distortion of the self-correction process. This largely came in the form of protective tariffs, changes in currency, or coordinated private sector initiated bailouts.

 

What happened before Keynes?

The classical economists of the Ricardo type, supported laissez-faire, which I think is what is being proposed by the anti-Keynes brigade, hence the term "neo-liberal". But what happened to failing economies? Did they simply collapse or did they really self-correct?