Paul Krugman's Despair

I will add one thing...the three largest recessions in the last 100 years were caused by too much cheap money...all due mainly to government initiatives (either through war or just stupidity, IMO).
And in the first case (20/21 depression), Austrian School economics was used and the depression ended very quickly with public debt going down.
And in the last two cases (Great Depression and Great Recession) - Keynesian economics were utilized and the recoveries have been FAR slower and with HUGE increases in public debt.

The conclusion should be obvious to anyone with an economic open mind and asserted of common sense.

 

You're wasting your time with me because I just showed that you're either deceitful or clueless about economics and you're desperately trying to cover up the schooling you just got. Pointing out where you're either deceitful or clueless and then demolishing your other arguments is not trolling, it's schooling, and you just got schooled. And now you're back repeating this nonsense about the 1920 recession despite me already demolishing your argument to the point where you didn't even reply to the facts and evidence I presented. Your claim, like I already showed, has no basis in reality.

Austrian economics theory -- apart from the various clowns predicting hyperinflation -- says hyperinflation is an unavoidable consequence of what central banks are currently doing. That's why the clowns are parroting the theory. But we're not seeing hyperinflation, are we? That's because Austrian economics is a fringe cult which only a handful of people take seriously.

 

There are a couple possible explanations to the inflation issue.

-The money isn't circulating. The Fed pumped up the money supply in the fall of 2008 (QE1) but the TARP bill had a provision for the Fed to pay interest to the banks that got the money. Why they did that I don't know, but the effect is that the bulk of that money wasn't loaned out, which was part of the original purpose of QE1, to make sure the banks were fully capitalized. So we never got either the benefit or inflation of that money supply.

-The economy is still too weak. Most economists were not really expecting inflation during the recession, regardless of the money supply. But they figured when the economy roared back, so would the inflation. The problem is, even though we are out of recession technically, the economy has yet to roar back.

-We are not measuring it. We've changed the way we calculate inflation. We no longer calculate food and fuel. If we still measured inflation like we did in the 1970's, we would have a 10% inflation rate.

 

When did they stop including food and fuel in the CPI? Where did you hear that? News to me.

 

You schooled me on nothing.

Here is what I typed:


Your question: America had the economic and military world to itself? How did this help the economy?

My answer: It should be obvious to you.

But since it obviously is not...

how about America is the only one building the products and the world has to buy them from somewhere - so they 'buy American'?

That's a rather crudely put start.

If that is not enough...I suggest you try Google.'

I said 'start'...as in the begining of the list of reasons'. And for the rest of them I suggested you try Google.


As my chart clearly showed, America right after WW2 traded more then the next four largest countries combined.


Why I am sick of you is because you are such a baby that you cannot even answer the simplest of questions. You are obviously SO afraid to answer it that you keep avoiding it over and over.

I will try it again - I will even spell it out for you in more detail to make it easier for you;


Are you saying that there was NO advantage to America's post war economic position (that of being the only major democracy with an intact economy)?

Yes or no?

No drawn out nonsensical doubletalk.

Just 'Yes' or 'No'.



If you are such a coward that you cannot answer the simplest of questions with the absolute simplest of answers...then clearly debating with you is pointless.



Have a braver day.

 

Why redirect money toward boondoggles? Even if there are projects that would, arguably, increase wealth, very little of that money would be directed toward such projects. Even if all of those projects were wealth building, government cannot spend wealth it does not take from others and it is impossible to calculate what is lost in that redistribution.

So people who were encouraged to take on debt by the government policies should be rewarded for their excesses by having their debt pared down at the expense of others.

As for this massive "upward redistribution", which policies do you mean? I can understand the bailout of the banks and government programs which reward the politically connected and make them rich. However, people who create wealth aren't "redistributing" it by government policy. For some reason many in the middle class believe that not only are they entitled to tax their neighbors for their benefits, but the wealth creators as well who do not usually avail themselves of middle class welfare benefits.

What do you think that they do with that cash? It's not stuffed in mattresses.

To fix the banking system, the central bank must be eliminated. It exists to bailout failing banks and redistribute your wealth to bankers who have taken excessive risks. But the answer we hear from progressives and other statists is that we need more power in the hands of central bankers.

 

because without them, the mess they created would have been worse.

 

If we had a ten percent inflation rate that would mean real GDP would be falling at the rate of about eight or nine percent. Obviously that isn't happening. What we did have is high commodity prices and this fed into inflation for a while, but commodity prices are declining now so we're not seeing that anymore. And commodities were going up entirely due to supply and demand, and that's why they're currently falling.

 

I'm happy for people to make up their own minds on whether or not the schooling took place and am surprised that you keep asking a question I answered days ago. Not only did you reply to my answer but I then demolished your reply! Then for some reason you keep on asking the original question over and over.

What I would like to see is you either stop comparing the 1920 recession with the '29 Depression or make an actual case, based on facts and evidence, to show that the two were comparable.

 

What are you talking about?

Check 1981.

Inflation never dropped below 12.5% and yet what happened to real GDP?

From 1980 Q4 to 1981 Q4 it went up.

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

http://www.data360.org/dataset.aspx?Data_Set_Id=354

So much for your theory...

 

Actually it went up in 1982 Q1 as well.

 

Rebuilding roads, bridges, schooles, the national electric grid etc. aren't boondoggles. They'd actually boost economic growth greatly when they're completed and be very cheap for us to do, with the added benefit of putting the economy back to full employment. Once the economy has recovered, the stimulus can be gradually withdrawn or spread over more years. And since all this stuff has to be rebuilt anyway we'd save money in the budget in future years by doing it all now. And we can borrow for 30 years at a real rate of 1%. We could invest two trillion in the country now for a yealry payment of what we're spending in Afghanistan and Iraq every few months. And when it came time to roll over the debt in thiirty years GDP would be north of sixty five trillion so two trillion would then only be a few percent of GDP, nothing to worry about.

Most of the debt was taken on due to private market companies pushing loans they shouldn't have been doing. You and me both agree that consumers need to deleverage, I don't see why you're making an issue out of this.

The money corporations are sitting on is earning interest. They've seen demand/investment opportunities fall since 1980. Why is that?

Ever since 1825 when the nascent bank of England bailed out the british financial sector after the Canal bubble burst, central banks have proved rather handy to the development of national and international finance and the supression and prevention of crisises. before then the financial world was in more or less permanent crisis, afterwards global trade really took off and also economic growth. That's why we have central banks and why they bail the system out. I agree that individual banks shouldn't be bailed out. Central banks should guarantee debt in the system and put insolvent banks through an FDIC process, convert debt to equity and sell the cleaned-up low-leveraged new bank off to new investors. propping up the existing crooks who (*)(*)(*)(*)ed things up in the first place is immoral, guaranteeing it'll happene again etc. But we do need central banks. history shows us that they're much better than the alternative.

 

Real GDP is nominal GDP minus inflation, right?

 

So your answer was 'yes'?

So you agree with me then...finally.


And I said the 1920 and 1929 depressions were both caused by cheap money...and they were.

The former by war spending implemented by the government that was withdrawn (along with the government employment) when the war ended.

And the latter was caused by the Fed increasing the money supply by over 60% from 1921-1929.

'It is generally acknowledged that the great boom of the 1920s began around July, 1921, after a year or more of sharp recession, and ended about July, 1929. Production and business activity began to decline in July, 1929, although the famous stock market crash came in October of that year. Table 1 depicts the total money supply of the country, beginning with $45.3 billion on June 30, 1921 and reckoning the total, along with its major constituents, roughly semiannually thereafter.[8] Over the entire period of the boom, we find that the money supply increased by $28.0 billion, a 61.8 percent increase over the eight-year period.'

http://mises.org/resources.aspx?Id=405f8670-513a-4218-a836-6c6a520c1eee

'The first thing it (the Fed) did was to inflate the money supply by about 60% during the 1920's. If the Fed had been a little more careful in expanding the money supply, it might have prevented the artificial Stock market boom and subsequent crash.'

http://www.amatecon.com/gd/gdcandc.html


Have a nice day.

 

You typed 'If we had a ten percent inflation rate that would mean real GDP would be falling at the rate of about eight or nine percent.'

The chart I linked to is real GDP.

And it went up in 1981 during inflation WAY over 10%...even though you said it would go down by 8 or 9%.


Are you going to be adult enough to admit you goofed?

I am guessing no.



BTW
'What Does Real Gross Domestic Product (GDP) Mean?
An inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP".'

http://www.investopedia.com/terms/r/realgdp.asp#axzz1ZMeohCRm

 

Correction: I meant 1980..not 1981.

Although my point works (more or less) for 1981 AND 1979 as well.

 

I think in the 1980's. There is more than one "CPI" and some do include food & fuel, but the one used for inflation doesn't include those, or so this article says.

http://www.bankrate.com/finance/personal-finance/is-inflation-higher-than-you-think-1.aspx

 

That article is talking about the "core" inflation rate, not the CPI commonly referred to for measuring inflation.

Some entities (like the Fed) look at the core inflation rate for a more accurate gauge of overall inflation in the economy, because food and gas prices tend to be volatile and jump around a lot.

But the CPI inflation rate includes food and energy.

I wondered where you had heard that, because I've heard this erroneous claim a few times. Someone is putting out disinformation.

 

I'm going to say you are incorrect on that. As I said, there is more than one CPI. The CPI-U excludes food and fuel and is what is called our inflation rate.

 

Here's from the source that produces the CPI-U:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment. The seasonally adjusted increase in the all items index was broad-based, with continuing increases in the indexes for gasoline, food, shelter, and apparel.

The index for all items less food and energy increased 0.2 percent in August, the same increase as the previous month.

http://www.bls.gov/news.release/pdf/cpi.pdf

 

Sorry my bad. I meant the FEDs core inflation index, not the BLS.

 

The Fed uses the CPI-U but looks primarily at the "core" (less food and energy) rate for its view on how inflation is going for monetary policy purposes, is my understanding.

 

What you originally said was that the 1920 recession was rectified by the government not getting involved in the recovery, while the 1929 Depression went on and on because the government got involved. But as I already explained -- and you already refused to reply to my explanation -- the two situations aren't comparable. It's not how the recession s started, it's the varying responses to them that you claim show that keeping the government out of the economy is the best thing to do. But the two situations aren't remotely similar. In 1920 the Fed induced the recession by putting up interest rates to fight inflation. In 1929, the economy collapsed due to massive a massive speculatory bubble etc. So how are the two recessions similar? Again, not how they started but the actual recessions themselves.

 

I'll explain step by step so that even the slow boys in the class can follow.

We both agree that real GDP is nominal GDP minus inflation, right?

 

I already explained.
Not good enough for you?

Tough.

You can't even answer simple yes or no questions - you are a waste of my time.


Have a nice day.