Paul Krugman's Despair

You don't answer my yes or no questions...why should I answer yours?

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.'

I proved that in '79-'81 (when inflation was way over 10%) that REAL GDP barely declined at all.

Twist it all you wish...the facts prove your statement was wrong.

Period.

Bye bye.

 

Paul who? hahahaha, what a stupid liberal he is.
He's got lots to be sad about.

 

They are if they produce nothing. If short term growth is needed, most of those things won't help.

What is the "benefit" of employment? If it's spending that you desire, why not just cut checks?

So replacing something before it needs to be replaced "saves money"? It's not going to save money in the budget if it's got to be paid off in future years.

What does Iraq and Afghanistan have to do with anything, other than that they are also money pits? Is there some valid comparison to which you wish to draw attention?

Making an issue out of deleveraging, or government indebting future generations in order to fund boondoggles with a few useful projects thrown in?

They aren't earning interest if they are just sitting on the money as you alleged. If they are earning interest, and I agree that they are, then there's someone paying them to put that money to use. So, I can only conclude that what upsets you is that they are not using the money in the fashion you deem best. That's not an economic problem, that's a moral issue.

They have? Which ones have they suppressed or prevented, particularly those crises that were not created largely by government interventions in the first place. Some dates please.

That's quite an allegation. No one was trading prior to 1825? can you show us the rate of global economic growth prior to the establishment of the British central bank and the rate of growth after? Or something to support your allegation.

No, history does not show us that. History shows us that we are better off without government meddling in the monetary systems thus creating boom/bust cycles and fiat money collapses that cause tremendous suffering for everyone but the bankers and political classes.

 

Correction - I already explained that they both were started because of cheap money.

And how one (1920/21 depression) ended far faster then the 1929 one using (generally) Austrian School 'techniques' while actually lowering the national debt in the process.

And how the Great Depression governments chose a Keynesian approach (even Hoover who signed 'protectionistic' Smoot Hawley and almost doubled spending as a % of GDP after the crash) - while hugely increasing the national debt.

Those are all facts.

If you have links to other unbiased facts...present them and I will look at them.

If you have theories...save them.

I do not generally care about theories...especially yours (on this particular subject anyway).


Have a nice day.

 

1920 was a post WWI recession caused by massive cuts in Govt spending as the economy retooled from a war economy to a civilian economy. Same thin happened in 1946.

The 1929 crash was caused by overspeculation in the stock market that crashed exacerbated by bad trade decisions and a handcuffed money system that was tied to gold. It was characterized by a massive credit market failure.

Unemployment was up to 25% in 1932 before FDR took office and feel to 15% until 1937, when big cuts to government spending cause a recession in '37-38 which sent unemployment higher again.



source: http://www.usgovernmentspending.com/


Year - % chng real GDP
1930 -8.6%
1931 -6.5%
1932 -13.1%
1933 -1.3% <-FDR takes office, spending increases
1934 10.9%
1935 8.9%
1936 13.1%
1937 5.1% <- Spending cut
1938 -3.4%
1939 8.1% <- Spending increase
1940 8.8%

Those are the facts.

 

Exactly...too much cheap money (check the chart at the bottom of this post). When the cheap money tap is turned off...collapse.

I say it was because the Fed increased the money supply from '21-'29 by over 60%.

'The first thing it 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

The unemployment rate did not fall to 15% UNTIL 1937. And you call 15% unemployment a success? Not me.


http://www.doctorhousingbubble.com/...from-the-great-depression-part-x-data-mining/

And please prove to me - using unbiased facts/stats - that it would not have come down as much (if not faster) with Austrian School techniques?
After all, it cut the unemployment rate down to BELOW pre-1920/21 recession normals in 2 years.

http://eh.net/files/graphics/encyclopedia/smiley20/image010.gif

These are...from the website you linked to above:



http://www.usgovernmentspending.com/us_20th_century_chart.html

 

What cheap money. It was spending on WWI

Source?

Possible. But they they compounded the error by constricting it during the GD at the worst time.

Compared to 25%? Sure it was. Unemployment was trending downward until the 37 recession.

Plus those figures apparently do not include people working on temporary Govt programs.

http://www.nber.org/papers/w0088.pdf
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=259399

They basically used Austrian school techniques prior to 1933. The Govt did little of significance to stop the death spiral, because Austrians of the day said the economy would hit bottom and bounce back. It kept going down, down, down.

1) Your graph is so broad in scope of time it's hard to see.

2) It shows spending as a percentage of GDP, not actual spending. GDP tanked 40% 1929-1932, which means it would make it appear spending had increased 66% even if it hadn't increased a dime. Which is not far from the truth, as my data in the post above shows.

 

It's still 'cheap' money. It's still money created by the government..not the economy. It is still unsustainable spending that is artificially stimulating the economy.

1) What respected Austrian Schoolers of the day said that and what exactly did they say and WHEN did they say it, please? If you are going to put down something people say, you should at least have the quote.

2) Hoover was NO Austrian Schooler. He racked up spending as a percentage of GDP (as shown in the chart below): in fact, he spent more in 1932 as a % of GDP then any year under FDR in the 1930's except 1933 - and STILL the economy tanked.
And he signed Smoot-Hawley (just a few months after the crash of 1929), which started a virtual trade war when America was a net exporter.

The Austrian Schoolers never got a chance to prove their ideas after 1929.

Imo - like with ALL recessions/depressions...the economy eventually finds it's natural bottom, and then starts to rise again. That is what happened in 1933. The economy finally fell to where it needed to and then started to rise up again.
America has averaged a recession every 6 years since it's inception (apparently). Almost all of those were basically 'left alone' (more or less) and they ended. The same thing would have happened with the Great Depression.
All Hoover/FDR should have done was put more money aside for the poor (I will give FDR credit for that at least) and just ride it out - like they more or less did in 1920/21 (minus helping the poor unfortunately).

Okay...how about this:

http://www.usgovernmentspending.com/us_20th_century_chart.html#copypaste

But spending as a % of GDP is the whole point.

As an example, if you spend $25 billion on a $100 billion economy or $25 billion on a $60 billion economy...which should have more impact (in theory)?

Obviously the latter.

 

Fair criticism. My quote of "Austrians of the day" wasn't meant to be a reference to specific Austrian school theorists (where they even around then?) but the school of thought of laissez-faire economics that the less interference the better.

Once again, you are making a conclusion on a misleading datum.

It is a fact that spending increased very little under Hoover. You are confusing the fact that GDP tanked with the non-fact of a spending increase because you are only looking at a spending to GDP ratio.

Spending increased dramatically under FDR, but again, by focusing on the GDP ratio, you get the impression that spending increases were less dramatic because GDP began rising sharply in 1934.

I don't think that would be a wise decision under most any economic school of thought.

.

Sure. With a 40% drop in GDP and 25% unemployment.

If that is your idea of an economic policy -- no thanks!

As you acknowledged, not all recessions are the same. 1920 was not like 1929. 1920 was like 1946. What worked for a post war recession would not for a credit failure based downward spiral.

I don't see the difference?

Not really. Your per capita spending hasn't changed. It's just relatively bigger to a smaller economy.

If spend $100 billion in a $1 trillion economy, you're spending 10% of GDP.

If you spend $100 billion in a $500 billion economy, you spend 20% of GDP.

You're trying to say that spending increased 100%.

When in fact it did not increase at all. GDP declined.

That's what happened under Hoover. He didn't increase spending much at all. GDP tanked.

In Hoover's case, there was no actual increase in spending to take up some of the slack of a tanking economy to provide the extra stimulus it needed to get out of the death spiral it was in. The spiral continued fueled by panicking and fear, coupled with a Fed that tightened the money supply.

The result was not a "natural bottom" but far more economic destruction than was necessary.

Booms are fueled by greed, recession by fear. The market does not act rationally. If it did the stock market would not have gotten so high or the depression so deep. But individual actors make act irrationally, or even by acting rationally act irrationally as group. Greed makes certain markets grow too fast too much, panic makes them overreact too negatively.

That is what the Austrian school doesn't recognize. A 40% decrease in GDP and 25% unemployment and massive deflation is not a good thing, it is a horrible, terrible thing, and it wasn't necessary.

We do not and should not explore the very depths of public panic to see how much damage will be wrought every time there is a recession, especially a credit based one.

 

Yes, it is.

If you can prove to me (using unbiased fact/statistics) that the Great Depression would have been worse without all the government spending - I will look at it.
But we both know you cannot...no one can.

I believe that the Great Depression was - like all recessions/depressions - a necessary correction in the economy.
And that the government should just look after the increased numbers of poor and let get out of the way so the correction can get done and over with as fast as possible.

And between mid '33 and mid '42 the unemployment rate averaged 17+% and the DOW went down - all with a MASSIVE increase in national debt. If you think that is a good economic policy?
Well, I strongly disagree.

I NEVER said spending increased in my example. I always said (to my knowledge) as a % of GDP. And if I missed doing so once in a while, sorry...but that is what I meant.
That is what I meant before and you can safely assume that is what I ALWAYS mean in the context of government spending during the early 20'th century...as a % of GDP.


You seem to think total spending is more important then spending as a percentage of GDP.

I don't agree.

Period.


I AM ONLY INTERESTED IN UNBIASED FACTS AND STATISTICS...NOT IN THEORIES.

Theories prove NOTHING.

Only facts/statistics can do that.

Why SO many people on here like talking SO much about just theories is TOTALLY beyond me.

Actually, you are (imo) generally FAR better then most at using statistics to try and back up your position.

 

That's were we fundamentally disagree.

You seem to think it's just fine to let the economy destroy itself in a psychologically drive death spiral. I do not.

I'm sure I cannot prove anything to your satisfaction.

But the data posted above IMO strongly supports my position.

If you can prove to me (using unbiased fact/statistics) that the turnaround in the GDP in 1933 and strong growth thereafter that corresponded with the great expansion in spending under FDR's new deal was merely a giant coincidence, I will look at it.

But we both know you cannot.

However, I'd even look at evidence that suggests your position has merit.

Irrational markets over-correct. The GD is a prime example.

And that the government should just look after the increased numbers of poor and let get out of the way so the correction can get done and over with as fast as possible.

1) As I pointed out before, those numbers are probably inflated.

2) Unemployment increased corresponding with cuts in Govt spending in '37 and '39

3) Even 17% is a lot better than 25%+

OK, I think then we agree while GDP fell dramatically resulting in an increase in spending compared to GDP, spending did not increase much under Hoover.

That's fine, I disagree with your point as well.

But the real point is that maintaining a spending level when GDP is rapidly falling is not an increase in spending, nor the application of "Keynesian"
economy theory as you suggested.

Hoover was no Keynesian.

It wasn't until FDR took office that spending significantly increased in 1933-36, corresponding with a turnaround in the economy, robust growth, and a falling unemployment rate.

I have presented my UNBIASED FACTS AND STATISTICS proving that

1) Hoover did not substantially increase spending.

2) FDR did starting in 1933-36

3) Unemployment fell from 25% to 15% 1933-1936

4) GDP grew an average of almost 11% real from 1933-36

5) Govt spending was decreased in 1937-1938

6) The economy went into a recession in 1937-38

7) Unemployment increased in 1937-1938

8.) Govt spending increased in 1939-1940 and rapidly thereafter thru the end of WWII

9) GDP growth resumed in 1939 at an 8%+ rate and grew strongly thru the end of WWII

9) unemployment began decreasing in 1939 and decreased rapidly thereafter thru the end of WWII​

Those are facts and statistics.

The close correlations between increases and decreases in government spending with increases and decreases in economic growth and decreases and increases in unemployment strongly vindicate the Keynesian theory of economic stimulus in a depression.

Feel fee to post UNBIASED FACTS AND STATISTICS that you feel contradict this conclusion.

 

The same I always do:

1920/21 depression/recession handled with Austrian School. Result?
Both unemployment and the DOW returned to pre-depression levels in 3.5 years (the unemployment rate in TWO)...and public dent declined.

Great Depression handled with Keynesian School. Result?
From mid '33 until mid '42; unemployment averaged 17+% and the DOW declined (and did not return to pre-crash levels until 1954!) and the national debt skyrocketed.


Have a nice day.

 

As you've acknowledged, that is a completely difference recession with very different circumstances. It was a post war recession caused by Govt spending cuts and the doughboys returning home. Same thing happened in 1948. The economy could recover from a post war recession without stimulus because it was simply changing from one mode to the other.

Closer to 16% by my calculation, but all that generalization tells us is that the GD was very severe, which no one disputes.

You too.

 

You didn't explain at all.

Your original contention was, in a nutshell, with the 1920 recession the government didn't get involved and it was over in a year. 1929 recession the government got involved and turned it into a Depression.

I asked you to compare the two recessions to show how they and the responses to them prove your contention.

You replied by saying how similar circumstances (you claim "cheap money", increase in the money supply) caused the recessions, nothing about the recessions themselves or their aftermath.

And your two claims are nonsense. Money wasn't cheap at all going into the 1920 recession. The Fed funds rate didn't hit the same pre-1920 level until a. just before the 1929 recession and b................ 1968!

And the money supply increased 60 odd percent. So what? Go check how much GDP increased over the same period. What would you expect the money supply to do? We were still on the gold standard too, remember?

I'll have lots more to say about your hilarious answer when you eventually answer how the two recessions were similar. Or you can continue to refuse to answer and we can cancel the rest of your lessons on this subject. I'm betting I know which option you'll pick.

 

Inflation can be 20 or 50% and real GDP can increase. That's because real GDP is nominal GDP minus inflation! What part of this don't you understand?

It looks like you're going to have to retake Economics 101 again from the start.

 

Pumping trillions of dollars into the economy over the short term won't help the short-term economy?

And buy a history of banking. You can get them in book shops. It'll show you how central banking evolved, and why it evolved. And it evolved because it proved to be a very good thing compared to the alternative. A small piece of the puzzle I just found :

At this stage in the worldwide fight against depression, it is useful to stop and consider just how conservative the policies implemented by the world’s central banks, treasuries, and government budget offices have been. Almost everything that they have done – spending increases, tax cuts, bank recapitalisation, purchases of risky assets, open-market operations, and other money-supply expansions – has followed a policy path that is nearly 200 years old, dating back to the earliest days of the Industrial Revolution, and thus to the first stirrings of the business cycle.

The place to start is 1825, when panicked investors wanted their money invested in safe cash rather than risky enterprises. Robert Banks Jenkinson, Second Earl of Liverpool and First Lord of the Treasury for King George IV, begged Cornelius Buller, Governor of the Bank of England, to act to prevent financial-asset prices from collapsing. “We believe in a market economy,” Lord Liverpool’s reasoning went, “but not when the prices a market economy produces lead to mass unemployment on the streets of London, Bristol, Liverpool, and Manchester.”

The Bank of England acted: it intervened in the market and bought bonds for cash, pushing up the prices of financial assets and expanding the money supply. It loaned on little collateral to shaky banks. It announced its intention to stabilize the market – and that bearish speculators should beware.

Ever since, whenever governments largely stepped back and let financial markets work their way out of a panic out by themselves – 1873 and 1929 in the United States come to mind – things turned out badly. But whenever government stepped in or deputised a private investment bank to support the market, things appear to have gone far less badly. For example, the US government essentially authorized J.P. Morgan to act as the country’s central bank in the aftermath of the 1893 and 1907 panics, created the Resolution Trust Corporation at the start of the 1990’s, and, together with the IMF, intervened to support Mexico in 1995 and the East Asian economies in 1997-98.


http://delong.typepad.com/sdj/2009/...dicate-with-conservative-interventionism.html

You can also look at America pre-Fed. In the 1890s we have the closest economic setup we've ever had to what the Austrians want and we had double digit unemployment. The weird thing is that none of this is even controversial or debated elsewhere in the world. It's only a tiny bunch of American nuts who think we'd be better of without central banking.

 

I never said 'completely' different.

I said that ALL recessions/depressions are different...meaning no two are EXACTLY alike.

But both the 20/21 depression and the '29 one were started generally the same way - with too much cheap money.

The former was the government 'printing' money for WW1 and the latter was the Fed inflating the monetary supply between '21 and '29.

 

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 provided proved that in '79-'81 (when inflation was way over 10%) that REAL GDP barely declined at all. In at least one case - it went up.

Yes or No?

Answer - yes.


Result - your statement was wrong...big time.

Too bad you are not mature enough to admit it - NO surprise there.

You keep trying to ignore/twist the results - and I will be HAPPY to keep posting them.


Have a more mature day.

 

OK. 1920 was not anything like hte GD.

Nonsense. 1920 was caused by the end of WWI as the Govt furloughed millions of doughboys and the economy retooled from a war to civilian footing.

The GD was caused by a bubble in the stock market and subsequent banking system collapse. Neither of which were incidents of the post war recession.

You didn't have thousands of banks failing and panic in 1920.

What is the evidence they were "printing" money? Do you mean spending?

 

No - that is your interpretation.
If you want to know what I mean...here's a novel idea...why not go and read what I actually typed?



http://www.usgovernmentspending.com..._F0t_US_Government_Spending_As_Percent_Of_GDP

Not cheap as in low rates! Cheap as in it was too easily available...like printing too much or allowing high margin rates or subjective loan terms.


Other then to correct your obvious mistakes through arrogance and/or ignorance (like above)...I am not wasting my time answering your questions when you still have not done the courtesy of answering several of mine from days ago.

Do that AND then provide links to data/stats to back up your questions/statements and then will I answer them.

I am going to ask you one last time and if the answer is anything but 'yes' I am going to ignore your responses from here on out directed at me (unless you misquote me again - which I will correct).
You are, imo, nothing but an arrogant, insulting, often wrong troll. And I have already wasted FAR too much time on you.

So - are you going to answer my previous questions of you?

Yes or No?


Have a more honorable day.

 

I guess I am not making myself clear enough.

I DO NOT CARE MUCH ABOUT THEORIES...ONLY UNBIASED FACTS/STATS.


And speaking of facts - I wanted to confirm my unemployment rate average I posted earlier.

I said from mid '33 until mid '42. Well I could not find any mid-year, unemployment rate statistics from that era.
So I used 1933 until 1941 (since 1942 was obviously a full WW2 war economy).

So for 1933 to 1941 the unemployment rate averaged 17.6%.

http://www.shmoop.com/great-depression/statistics.html

ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt


BTW - the unemployment rate in 1929 was 3.2%.

Either, both, whatever...you decide.


Have a nice day.

 

So why did you post opinions like these?:

But both the 20/21 depression and the '29 one were started generally the same way - with too much cheap money.

How is what I post any less UNBIASED FACTS/STATS that what you post?

Why all agree the GD was really bad. What's your point?

I thought you DO NOT CARE ABOUT THEORIES...ONLY UNBIASED FACTS/STATS?

 

Because (imo) those are facts and I used statistics as evidence to back-up my point.

It's called 'clarifying my position'.

I can see you are leaving your 'post stats/facts to back up my theories' side and going into your 'I am just going to nit pick every tiny little point I can to continue the conversation as long as possible side so I can try and eek out the tiniest of debating victories because that is something I enjoy' side.

Let me know when the former comes back because I neither care enough nor have an unlimited life span to justify engaging in the latter.


Have a nice day.

 

Do you even glance at the links I give you? Or are you too afraid they will make you look as ignorant as you did with your 'high inflation/REAL GDP' point? I am guessing the latter.

The two links I gave you (especially the former) can explain it FAR, FAR better then I (as I have typed many times - I AM NO EXPERT on this):

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

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


If you have a problem with them, take it up with them.


Have a less trolling day.

 

Money isn't wealth. If it were, Zimbabwe would be the richest nation on earth.

It might be the the massive redirection of wealth would create the illusion of a benefit, but the government does not create wealth, so the money used to redirect it means the wealth is taken from those who do have it.

Yes, a very good thing for bankers. Who wouldn't want their excessive risk taking underwritten and subsidized by taxpayers and the police powers of government?

I don't buy the argument that because a system evolved, it must be good, or that because government implements something, it must be good.

What was government doing to silver in 1890? Which two major economic acts were passed that year and what similarities do you allege that those would have to anything the Austrian school touts?