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Friday, September 10, 2010 - 10:49 pm  OECD cautions over austerity cuts That's to say to America, that yes, Obama is on the right track. Spend! spend! spend! And to warn Europe, that no, the economic recovery is not yet well established and it needs more than faith. It needs spending! spending! spending! I like the way how everything can be solved in macroeconomics by shoving it with money when there's low inflation. Sounds like irony, but it isn't. +1 for team Keynes
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| Saturday, September 11, 2010 - 05:52 pm Obama -1 for team Keynes Keynes is theory, theory, theory. When we see application of the theory, it follows with failure. And then the excuse is always "we/they haven't REALLY followed Keynesian economics" blah blah blah. Economics is highs and lows. When things are high, everybody justs adjusts their expectations. When things are low, they over-react, mostly because of politics.
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| Saturday, September 11, 2010 - 07:25 pm LOL! You definitely got your theories switched. Every time a mainstream strategy fails, it is because we were not "faithful" to the theory: the state intervened, it acted too soon or too strongly or someone did something it shouldn't or a natural disaster got in the way. Keynesian economics is very straight-forward. The only thing that we can complain about is how much needs to be spent. I don't remember the figures, but I do know that the stimulus package wasn't big enough to reduce the output gap to 0, and from what I've heard, it hasn't been used at a fast rate. Economic growth has its ups and downs, but for the past decades they've been subdued due to the development of macroeconomics. A society is better off that way.
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| Saturday, September 11, 2010 - 09:54 pm As someone who actually has a degree in economics, I don't think it is as simple as spend, spend, spend. That WOULD be true if the problem was a lack of demand. However, the problem is a lack of credit. This is why the Federal Reserve has been trying to get people to LOAN, LOAN, LOAN. By providing money to banks, etc. Every dollar, however, that the federal government spends is a dollar of money that is loaned to the federal government, RATHER, than being loaned or invested in the private sector. Since the problem is one of credit, the best thing the government can actually do is to stop borrowing money. Government debt is taking money AWAY from the private sector and preventing the creation of jobs. So, the solution is not to spend more money the government doesn't have. It is actually to spend less money, so that investers will be forced to invest in the market and create jobs, rather than spend money on government bonds. Keynesian economics is NOT straight forward in a global economy. If the US stimulates its economy, a good portion of the multiplier goes overseas. Likewise, if stimulation of the markets from government spending, is offset by the government borrowing the money to do it, there is a corresponding loss to match the gain. If the government simply creates new money from thin air to stimulate the economy (true, pure Keynesian economics in the most simple form), it would not work as Keynesian predicted because the government debt market is not a compeditive market. A few key players, mainly China, own a substancial portion of US government debt, and an action to significantly reduce the value of that debt, would lead the the responce of a dumping of that debt. That, in turn, would significantly raise interest rates on the debt and such an action would, at the best cause a depression, and at the worst a situation far worse than the great depression. Bottom line is that Keynesian economics ONLY WORKS in THEORY and only in a CLOSED or mostly-closed market that is compeditive. In real life, it is not that simple. In my opinion, the best thing the government can do for the economy is balance the budget.
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| Saturday, September 11, 2010 - 11:07 pm The US cannot balance the budget. Even if they did it temporarily, already existing programs like Social Security will offset anything as the years melt away and is already destined to be bankrupt. The Republican party has thrown around the idea of killing SS programs and pushing the age up 5 years. But without an alternative, Greece will look like flag football in comparison to what will happen in the United States, and so will the Govt Response from Greece look like a flag football game. Really balancing the budget in the US has more to do with redistribution of wealth than any conservative who wants the budget balanced will ever admit. What is really killing the budget? Social Programs like Social Security, Welfare, Medicare and Medicaid. Excessive poverty in the country will only continue ballon these non negotiable benefits. Without more wealthy citizens, there will be no more private sector investment. Small Business made up an extremely important part of our economy. Why can't Obama produce Jobs? Because I cannot go to the bank without adequate collateral, or get an SBA loan for a new start up that will produce jobs. The Republicans are blocking the SB Loan guarantee bill which will continue the trend of freeze lending. What is the Alternative? Of course, more govt spending. Why you ask? Because the Govt is the only one that can get money without credit. It's paper. Just print it. Govt Stimulus will create Govt jobs that will put money in people's pockets and allow them to secure loans from private banks and then banks get their deal out of mortgages, people start spending money in the stores, stores start reporting better results and now they can start hiring people and replacing Govt jobs slowly. It has to be a cycle where the Govt kicks off the ball. We've been stuck in this lending freeze loophole for two years and at best all we can produce is a flat economy. If Republicans win the congress or house or both, stimulus will be a pipe dream and the markets will recognize that and tank for the double dip everyone is talking about. It is really unfortunate that we have faulty roads, and bridges that collapse, need for improved high speed public rail transportation, yet The republicans won't even work with Obama on that part of a limited stimulus if anything at all. I think the real problem is that there are too many fine print inclusions in bills tagged with 'healthcare reform' and "Financial Reform' and 'Stimulus'. Obama is painting with too broad a brush. Republicans persistently stifle anything getting done because among 20 issues covered in a bill, at least one or two of them will give a conservative an excuse to say no, behind the 'balance the budget' slogan. It is not realistic. Chrysostom, I don't have a degree in economics, but since you do, I am positive that you know the way our banking system is setup, there is NO WAY the budget can be balanced EVER. If you differ on that opinion let me know. I'll give you a link to something they probably don't mention in big print in your text books. In real life it is not that simple, you are correct, but what you propose cannot be done. So the real question? It is which is easier to accomplish and will produce a result now, when we need it? Stimulus, or Balancing the Budget? The choice is very clear. At least to me. But then again, I'm a dumbass lol.
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| Sunday, September 12, 2010 - 12:40 am I remember why I don't like discussing economics with americans all that much now. Then again, I started this thread to get you guys to talk. So, on that spirit: Some people do what is necessary, some do what is right, and others prefer to act under ideology. Loans are the problem? Does anyone feel like taking a loan right now? No! Yet, interest rates are at an all time low. They don't want to contract a loan because they fear for the future, they do not trust on a good outlook. Households, firms, the State, everyone, are trying to reduce their debt to remove some liabilities. This collectively is... depressing. Like japanese depressing. You can't lower your reference interest rate to stimulate private investment and spending, so what are you going to do? Well... you can increase expected inflation, thus lowering the real interest rate and making those investments look mighty attractive, and jump-starting the economy. How can you increase expected inflation? Having the state contract a nice debt near its citizens and allocating it to public/government investment would be a nice usage and increase demand, and if enough, inflation. Plus, if inflation rises and rests at a rate higher than of the interest paid, the real value of the debt decreases. It's good business. From here on end, it's the usual business. Just don't forget to increase those interest rates later on. The Keynesian model doesn't work for small economies. But it does the job for large economies like the USA and comme ci, comme ca when the European Union works in unison. And, quite possibly, in a couple of years for China. Just because an economy is open it doesn't invalidated it. It means the effect of multiplier is dissipated. In turn, that means you need a bigger chunk to accomplish your goals, or you need to coordinate with efforts abroad. Just like it was and continues to be done. Now, who is this bloody blaggard that keeps saying that keynesian economics only works in theory in the USA? We europeans heard similar nonsense throughout in the 90s days on end - "macroeconomics needs assisted suicide" and whatnot. The guys who used to said that have been awfully quiet lately.
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| Sunday, September 12, 2010 - 12:57 am Oh, I like what Wendy said: "Puts money in people's pockets." That's far more reassuring than asking a bank for a loan. Something that you can't accurately shove into a model is what Keynes called animal spirits. And those spirits seem to be lacking.
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| Sunday, September 12, 2010 - 01:25 am Laguna - as you are European, I'm sure you know that Germany is fairing well during this crisis and they have NO stimulus plan. Perhaps that is an example that will help prove how the stimulus can backfire. Likewise, I'm sure you know that the EU places a requirement for a semi-balanced budget for its members. Further, I'm sure you are aware of the damage done by the Greece debt. Face reality or don't. Your choice. Europe is a prime example. Wendy - your whole post shows what you know. The federal government does NOT build bridges. State governments do. Nor does the federal government build roads. States do. The SMALL funds from the federal government for the roads not really meaningfull in terms of what you're talking about. We are comparing a mountain and a mole hill. The REAL problem with road funding is all the wasted money on mass transit and on education that is eating away at the road portion of transportation budgets. Your statement about the republicans not working with Obama is a joke. The Democrats have FULL control of the House and the Senate. They can do whatever they want. Blaming the republicans is illogical, as the republicans have no say and can be outvoted easily by the huge democratic majorities. Temporary government jobs do NOT boost the economy because people KNOW they are temporary. As a result, it does not have much of a multiplier. Furthermore, the larger the government debt, the LESS willing people in "stimulius jobs" are to spend money. They MORE they expect the jobs will be done when the stimulius is done. Census workers are a perfect example. Since they know the job will end, they plan based on that.
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| Sunday, September 12, 2010 - 01:38 am All the states are broke, that was part of the stimulus to get them to break even at least instead of defaulting their credit ratings, making borrowing even more expensive. The fact that they are broke, is the very reason that Obama has to create some jobs this way because the states simply cannot afford it.
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| Sunday, September 12, 2010 - 01:42 am Only two states are not in the red, out of 50.
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| Sunday, September 12, 2010 - 01:44 am Crysostom, Google procedural votes and stalling tactics.... its not all as simple as you say. There are safeguards to stop a simple majority from say, abolishing the Supreme Courts, or making the president a dictator. In a perfect World you are right, we would have a public option. But, House Rules are House Rules.
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| Sunday, September 12, 2010 - 01:47 am I'd really love if I could have these conversations on my blog... Simoleans need to get out more! http://madrantz.net/BlogRantz New Look, its updating almost hourly! LG, message waiting for you on LU.
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| Sunday, September 12, 2010 - 02:12 am A Keynesians best tool is a drawn out monologue to bore you to death. They can't win on historical evidence or logic, it's all a play on emotions. We can watch country after country (Argentina, Greece, Spain) spend spend spend itself into oblivion, yet there are still those people out there who say they're doing it right. Government spending only helps so much until it has major future consequences or outright failure because countries stop lending. And Chrysostom, ignore Wendy. She knows absolutely nothing about economics and she'll prove it as passionately as she can.
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| Sunday, September 12, 2010 - 02:20 am The blog looks awesome wendy 
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| Sunday, September 12, 2010 - 02:34 am Great, the infinite republican/democrat 'debate' reaches SimCountry. Is anything sacred anymore?
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Sunday, September 12, 2010 - 02:59 am
Misinformed statement is misinformed.
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| Sunday, September 12, 2010 - 04:29 am Yes I will BC. I don't need a degree in economics. Would that make a difference. The best economic minds are behind every single decision from g8 to g20 and the world's economy is f@$#ed. Am I any less qualified than any of them at this point? I don't see you giving lectures at any university on economics BC. You can ignore me if you want. ------------------------------------------- And Thanks Doubletar.
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| Sunday, September 12, 2010 - 04:33 am Simple practical solutions are what is needed right now. Print the money that doesn't exist.
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| Sunday, September 12, 2010 - 02:58 pm Need I say more?
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| Sunday, September 12, 2010 - 03:04 pm <<<<<no opinion (do have one but don't want in on this debate). Why argue about it? All money is debt anyway.
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| Sunday, September 12, 2010 - 06:46 pm Because LG brought it up for debate/argument. We've been through this in chat before. No minds ever really change.
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| Sunday, September 12, 2010 - 10:16 pm So BC, you are going to sit there and act like this isn't one big *MONEY*CONSPIRACY* *CREDIT*CONSPIRACY* *DEBT*CONSPIRACY*
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| Sunday, September 12, 2010 - 10:18 pm *CONSPIRACY!!!!!!* Go ahead BC, deny it! Deny it if you can. Yeah you can't! Call me crazy, get off the wheel and wake up man!
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| Monday, September 13, 2010 - 02:54 pm Finally a stimulating debate on SC! All of your points are valid and the different points of view is what makes a great debate. Just because someone has a degree in economics does not make them an expert, but your points are very well made. I make my living independently investing in the stock market, watching very closely what the US does every single day. I don't have a degree or read theories, I invest real money and by far am no expert. I agree with Laguna, the US is Japan all over again. I live in Canada, so we are very tied to the US economy, but have not been effected nearly as bad as the US. I believe the biggest thing the United Sates gov't and its citizens have to do is change the attitude, bigger is better. It does not matter how much the gov't pumps money into the economy, citizens can not handle any more debt. They are up to their eyeballs with mortgage payments, car payments and credit card debt and can not afford to take on any more debt without sinking (foreclosures). The US economy will never take off until the citizens can feel safe about spending money again. It is not a right for people to own 5000 sq. ft. house, or have 2 or 3 fancy cars or a 60 in. TV in every room, but the attitude of some Americans is that it is their right to own all those things and pay for them later. The US economy will not take off until people feel financially secure again. Federal and State gov't programs are fine for a quick boost, but it will take a very long time for the US economy to recover to its former glory. The idea of saving dying companies is extremely flawed and needs to be stopped. It's just a Band Aid over a bullet wound! Let the weak die and let the strong take them over and grow stronger. Gov'ts should not pick and choose who survives and who dies, let the companies decisions, good or bad, decide their own future. China is the place to be and its going to take the US a very, very, very long time to recover.
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| Wednesday, September 15, 2010 - 01:49 am For the Europeans that are here, they might remember that last year there were many - and some even urgent - meetings between the economic and finance ministers of each member state, the so called Ecofin. In those meetings, to put an halt to the financial crisis and following economic crisis, it was decided that all member states would extend and increase financial guarantees for banks, loans and deposits. It was also agreed among those meetings, that member states could and should increase their deficits beyond 3% without being penalized under the Stability and Growth Pack (SGP). As a result, Germany has increased it's government consumption expenditure more than the US between the last quarter of 2007 and the first quarter of 2010 - 7,3% vs. 4,4%. Government consumption expenditure rose 4,7% in the euro area during the same time. So no, Europe isn't an example that a stimulus plan isn't necessary. We operate our own way with essentially the same tools. And mind you, we were talking about the USA and not Europe. There is an important factor we haven't touched in this thread: high unemployment rate. This is a shadow that hovers and threatens the economic recovery. Money is concentrating on the hands of financial institutions and enterprises, and yet they do not hire or invest. The unemployed cannot live forever off social security and spending will decrease. So, we are producing below potential output, which explains the low inflation and it might get worse. Second, austerity cuts also reduce spending. And that is what everyone is trying to do at the same time. Again, having everyone trying to reduce their debt at once depresses the system. Even the OECD noticed that and launched a warning to have caution when cutting. So, again, the nice solution would be for your government to increase spending to reinforce - not to say save - your economic recovery. Wake up and smell the java.
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| Wednesday, September 15, 2010 - 04:11 am Laguna, I'd love to transfer your views to my bloggy.
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| Wednesday, September 15, 2010 - 06:59 pm As long as you don't make them part of a huge *CONSPIRACY!!!!11!1!!*, sure. lol
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| Thursday, September 30, 2010 - 02:33 am Games that have an economy should hire finance professionals as advisors to the programmers. That way maybe the programmers would learn how to create a realistic economy. This one isn't working.  Anyway, economics is not a science because it lacks a controlled environment. In particular, Keynesianism is a lot of left-wing opinions based on flimsy data.
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| Monday, November 1, 2010 - 06:31 pm I just found this... I have to leave for work... you KNOW I'll be back for this one
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| Monday, November 1, 2010 - 06:31 pm Oh... and I love you Wendy
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| Monday, November 1, 2010 - 06:57 pm If you are going to drag your name through the mud like Vicious, you are better off not doing so.
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| Tuesday, November 2, 2010 - 05:08 am Solomon. Whazzup! Great to have you back. At least we can have some good old fashioned forum discussions now We luuv you too Solomon.
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Tuesday, November 2, 2010 - 07:45 am
Actually the bridges here in Michigan on the FEDERAL ROADS were built and are currently being replaced with FEDERAL money. There are many. The state roads are a scam... This brings me to my first point. I have never seen any economic model include the one thing that is probably the most destructive... corruption. This is how it works in Michigan. First we have pretty tough winters which means that the ground feezes up to 42 inches deep(more than a meter). They refuse to build the foundation of any of the roads below the frost line which would cure the problem of the roads heaving every year destroying them. This is by design. If there is always money being allocated for the roads and it goes through my greedy paws I don't want it to stop. Actually I'll spend some to lobby to make sure it doesn't. That's what the construction companies do. See? there's that corruption thing they never account for. How many connected greedy paws does that money really go through? (and yes men conspire all the time). Now for the good stuff. America and her economy... Hmm It is important to realize that the game has changed since 9/11. Americans have and are waking up. 1. Rinse your brain of the soap suds that are telling you that America is a democracy. That's what they've been preaching for a very long time now because a democracy is easy to manipulate, control and CHANGE. America is a REPUBLIC which means, unlike a democracy where 51% of the people can deny the other 49% their rights, 99% of the people are not allowed to deny even 1% of the people their rights. THAT'S America. 2. The things being done in this country. These are not things nations do to themselves. Think about it... Jack the corp taxes so high that the corps bankrupt or leave the country? That brings me a reply about bailing out failing companies, why do you think they are failing?! What else DON'T nations do to themselves? Oh yeah, destroy their own currency. I'm just going to end this post here, we are so unbelievably f***ed it's... stellar. Even if we knocked the evil Brittish off of us we're still screwed, (oh and yes it's the Brittish again, always the evil Britts... Think not?) ask your self why the NO, no, no, it's a PRIVATE banking consortium. A parasite destroying it's host actually. Only named that way to masqurade as a department of the American government. Then ask your self why the Bank of England is a major player in it. Oh! and here's the icing on the cake! Even if we kicked the Federal Reserve out, and dump the dollar and reestablished a new currency (which is what needs to be done to fix this) WE CAN'T! Why? Know the gold we would use to back a new currency? The stuff that is SUPOSE TO BE in Ft. Knox Kentucky? GONE!! Yup, moved offshore and is now collateral on the national debt. ...and how about 1812? how did WE win? Here's what happened... England kicks France's ass and Napoleon looses @ Waterloo, England is now unchallenged in Europe. What happens next? USA gets invaded... we lost Detroit, DC... Wait WE won? really? When did we take Detroit back? Oh that's right those fine folks thought we should have the wealth, that's right and we're friends. It's simply a lie. They won and they wrote the history. I know this pisses off the English folks but so be it. (...think we aren't pissed?!) Truth being told it's ALL a sham. Republicans and Democrats aren't really opposed to each other. They are New World Order global eugenic fascists like their owners (the britts lol). The globalists are crashing the currencies on purpose, a crisis so that the NWO can swoop in and save your day. The wars we are involved in now and soon to start are to force all remaining non NWO countries into the order. USA is the Queen's powerslave and assets are being traded to get big players like China on board. (OH! The Royals are just a figure heads! We have parliment, StUpId!) Really? Really? I guess nobody's going to want to hold them responsable then... damn what a plan! Can't say they aren't 'brilliant'. That's English for smart. It's not just Germany and friends this time folks... this time it's global and my country was consumed by it long ago.
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| Tuesday, November 2, 2010 - 08:19 am Some shocking ignorance in that post...it's always easy to tell when someone is spewing BS when they point to corporate tax rates as an actual issue. Corporations don't pay the actual corporate tax rates, it's pretty clear if you ever bother to look at a financial statement. As far as corporations going bankrupt or leaving the country, first, we have an economy and political system under almost complete corporate control...and the corporations that know how to use this are doing quite well. Second, corporations leave the U.S. not because of tax rates but because of labor costs...taxes are easy to avoid through accounting tricks and money/profit transfers...labor, not so much.
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| Tuesday, November 2, 2010 - 09:13 am As if that's not by the same design? Wage inflation is a tool. Who claimed they were using only one tool? Insults... shows you're weak in your position and you know it... just FYI
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| Tuesday, November 2, 2010 - 09:20 am here try this out: This game's been going a long time
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| Tuesday, November 2, 2010 - 09:49 am ...and I take more issue with that, what business especially small business do you know of that doesn't file quarterly? Please don't say 'church' lol Company I work for gets raked over the coals Uncle bought locksmith business 10 years ago gets raked over the coals, still.
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| Tuesday, November 2, 2010 - 04:32 pm Yes the little one is quite hostile, quick to point a finger and throw insults but hasn't stopped for two seconds to make sure his head isn't still securely up he's own arse! Solomon, I think you know all this is one big
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| Tuesday, November 2, 2010 - 05:14 pm THEORY!!!!
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| Tuesday, November 2, 2010 - 05:32 pm I like the part of the speech where Robert Welch says: "Ask yourselves in all honesty, what on Earth is wrong with the United States simply minding it's own business or with having it's foreign police function primarily for the safty and benefit of the American people? Which is exactly what we had done for the first 140 years of our existance as a nation to the incredible advantage of ourselves and everybody else. Everybody that is except a numerically small clique of power lusting conspirators who have somehow inflicted themselves on a gullable world."
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| Tuesday, November 2, 2010 - 06:23 pm Did any of you know that government officials can use money we voters "approved" for roads for other more "important" things like politician wages? I remember voting yes on measure O which was the pot hole tax...ie to fix potholes and improve our roads and the last time I checked the money it has raised has gone to the "much needed" local politician salaries.........from now on I'm just voting no on any increased taxes.
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| Tuesday, November 2, 2010 - 06:44 pm "Foreign Police"... lol aint that the truth Froydian slip! *Policy
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| Tuesday, November 2, 2010 - 06:47 pm Like the lottery money supporting schools?
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| Tuesday, November 2, 2010 - 11:23 pm Instead of hijacking my thread, you could have started your own... but whatever.
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| Wednesday, November 3, 2010 - 01:08 am LG I think with the Republicans taking over our government there will be no cutting of our cutting. The end of stimulus and the dumbing down of America is upon us!
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| Wednesday, November 3, 2010 - 01:35 am Wasting hundreds of billions of dollars is harmful to a nation's economy, no matter under what banner it is perpetrated. Keynes didn't advocate pisspoor allocation of resources, did he?
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| Wednesday, November 3, 2010 - 01:39 am I like almonds. They are particularly tasty.
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| Wednesday, November 3, 2010 - 03:55 am I don't think there is much more to say about the general ignorance of people who believe that "Spending money is the key to becoming Debt Free." When I get broke, I stop buying things I don't need, try to find areas in my bank statement that can be reduced. Things get must get paid, get paid. The rest gets put off. The same should be true for a government who was created to exist for few, very limited purposes (protect American's rights, deliver our mail). Instead, we pay for hundreds of military bases in hundreds of countries, pay for millions of lazy folk in the hood who don't work because they can just get a "check." Instead we pay millions and bazillions on government bureaucracy programs which are failing (Dept of Education, social security) etc etc.. Not much in the mood to get into numbers tonight, but they are irrelevant anyways. The point is, Republicans and Democrats alike have succeeded in brainwashing the country and some of the world that IT (the strong central government) is doing its job right, one way or another...While failing at everything else. While everyone else is trying to buy things with money they don't have when they hit a bind, I'm going to keep doing things the way I have, since it actually works... BTW being broke is something I am seeing less and less of, even in a struggling economy. Imagine that...
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| Wednesday, November 3, 2010 - 04:50 am You must live in a nice upper middle class neighborhood.
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| Wednesday, November 3, 2010 - 05:26 am I'm sorry about that Laguna. Sometimes I get carried away. :/
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| Wednesday, November 3, 2010 - 06:25 am Mental note to self: [no more box cutters in Laguna's threads]
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| Wednesday, November 3, 2010 - 08:23 am The ultimate problem is that the answer is somewhere in the middle...but that isn't politically powerful...better off calling one side fascists or nazists or dictators or communists and the other side doing the same. I'm listening to the massive idiot Sharron Angle who almost became a member of the Senate talk about 'American Exceptionalism', we really are an ignorant people...it makes me sad. We elect people to national public office that constantly talk about the Constitution but don't even know what is in it yet constantly proclaim how we are so 'exceptional'. There are too few intelligent conversations about actual issues and too many idiotic debates about issues based on religious beliefs which are supposed to be left out of our government. Although I believe that both parties are ultimately corrupt in their own ways and that neither actually has the answers necessary to solve problems because the real answers lie somewhere in between; I'll continue to vote on the Democratic side until the BS about denying the LGBT community their equal rights stops or well...you know the rest. This country is ruled by xenophobia which is why the stupid conspiracy theories are so frustrating, they're just a repeat of the same xenophobia but instead of it being focused on race, creed, color or sexuality, it's focused on 'they'...either way it's just a bunch of people scapegoating one group or another for their own problems. Americans need to step the f*ck up, learn about the issues, spend more time focused on their own futures than they do on watching Jersey Shore and then get their *sses out to vote. Then maybe we can start having logical conversations about issues instead of time wasting conversations about whether or not intelligent design should be taught in schools as a competing or superior theory to evolution.
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Wednesday, November 3, 2010 - 01:07 pm
We economists joke a bit and say Keynes advocated the digging and filling of holes to increase output. While he did say this was better than nothing, he also remarked it was still unreasonable. It is unreasonable, because there are far better alternatives (public investment) and because all of these measures aren't permanent. They are to be used temporarily to put the economy on track. Here is the quote:
Fortunately for us, we are facing a (negative) shock on demand, and not on supply or a retraction of the natural rate of unemployment. It is something we can deal with, if there is political will. Unfortunately for us, we are on a liquidity trap and the acknowledgement of this whole situation hasn't sunk in. Or maybe it is beginning to... "In the framework of the new globalisation, the first priority is employment, the second priority is employment and the third priority is employment."
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| Wednesday, November 3, 2010 - 03:07 pm Laguna, can you lead the Presidential Economic Team? I am forwarding your resume to Congress.org and to President Barack Obama himself. Once again the stimulus, like the last is going to be too small, have minimal effect, temporarily benefit Wall Street only, then get painted as another Phail. Dammnit Replace Tim and Ben, America wins. LG for Presi.... err Economic Czar
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| Wednesday, November 3, 2010 - 05:33 pm It is a joke, Which American didn't think Allen Greenspan was a mega economic guru? He wrote books too. Turns out to be only a smooth talking Federal Reserve theif working for the money masters. I came across this while looking to see what books Greenspan had written. I found the title appropriate. Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts. by: Hunter Lewis How much do you want to bet this guy Keynes isn't for real, I'm betting he's only there to convince the masses that more and more debt and enslavement of future generations to pay that debt is the right thing to do. Right up their alley. Maybe not but I wouldn't be a bit suprised. I haven't investigated. Here's the thing about conspearacy theories: Everyone is entitled to their own oppinion. Nobody is entitled to their own facts.
There are those who believe we need to stop Obama.
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| Wednesday, November 3, 2010 - 07:59 pm If government spending led to prosperity, the US and other leading industrial nations would have booming economies. Obviously, this is not the current situation. One could argue that higher levels of government spending ( percentage of GDP ) actually slow economic growth. If you examine the performance of the US economy in the 80's and 90's, you would notice a decent growth rate (4-5%). In the 2000's, our level of govt spending increased and our growth rate dropped. Also, when you add rapidly increasing debt levels, more of the spending goes toward servicing the debt, which doesn't impact the total demand of the economy.
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| Wednesday, November 3, 2010 - 10:32 pm One thing is certain, the govt burning money and printing it to fight pointless wars based on lies and percieved fears perpetuated by the Governement, is less constructive than economic stimulus. At least some benefits arise from stimulus. When we burn mprinted money to fight wars, people die, and we create a buttload of collateral damage... on our own soil. Therefore, spend spend spend ON AMERICA, not bullets bombs and death. Homeless vets who return home and can't get a job, or worse come home with Gulf War Syndrome, or PTSD, or some other mental condition. We pay for that, but I am sure you'll find a reason to justify the financing of death instead of injecting cash into our own economy. It's all fake money who cares anyway. The system was just as flawed and doomed to fail when we had a fraction of the deficit we currently carry now. Spend the fake money for Gawd's sake.
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| Wednesday, November 3, 2010 - 11:09 pm mmm... almonds
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| Thursday, November 4, 2010 - 04:22 am Keynes was a successful investor: he viewed the stock market as like a beauty contest where people vote not according to their own preferences, but for who they think other people will vote for. He also made the famous purchase and perusal of Newton's trunk of papers, concluding that the great Newton was not the first of the age of reason, but the last of the magicians. Keynes was a smart guy. Nevertheless, he wrote his great economic works in a certain place and time. The assumptions that the person digging (and filling?) the hole would otherwise have been doing nothing useful, and that the money the person earned and intended to spend would a) not have been otherwise spent by those who were paying him, and b) not have been spent anyway by the digger, are less self-evident today than in the 1930s.
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| Thursday, November 4, 2010 - 05:52 am Now this is turning into some reasonable debate. I like it Solomon - Many were on to Greenspan a LONG time ago. Check out 'Bailout Nation' by Barry Ritholtz, it's a great book written from a very moderate perspective. He talks much more about the real issues in the American economy which have much more to do with monetary policy and sustaining asset prices than they do with tax rates, marginal or corporate. Danny - It's true that debt can slow the economy long term, I don't think anyone denies that, not even very liberal economists. The issue is whether short term deficit spending designed to stimulate demand is effective. Then of course the other issue is the timing of government's actions and even more importantly, the fact that once governments reach a certain budget level they can't seem to ever decrease it, even when the economy is performing very well. As far as GDP growth in the 80's and 90's, we were running sizable deficits then as well, it wasn't until the late 90's that we had a balanced budget. Take a look: http://www.cbo.gov/ftpdocs/108xx/doc10871/AppendixF.shtml Other than 98-01 we've had a deficit every year since the 60's and it was tax cuts in 01, 04 that were supposed to pay for themselves (which they didn't, wouldn't it be great if people understood that we have no idea what the Laffer curve actually looks like nor does it mean that tax cuts always pay for themselves...they rarely do) and then Medicare part D that messed it up. Which by the way all happened under Republican control of the Presidency, the House and the Senate...which is why I find their claims of fiscal responsibility today so hilarious. Jojo - Good points, I'd say though that today, with 10% unemployment, the digger isn't doing anything useful. As far as being spent otherwise, it's possible but businesses aren't spending much money today, instead it's being stashed away in savings/investments which will *eventually* help the economy (or even worse invested on government debt which is the best argument in my mind against deficits), but the digger would spend them today. The digger spending the money anyway would assume that he was going into debt to spend said money, which is how Americans have been maintaining their standard of life for about 20 years now as income gains in the lower three quintiles has been non-existent, but today the credit markets are still dried up for consumers...so the digger can't do that either. Oh and Windy, just to feed your conspiracy theory hunger, check out 'Confessions of an Economic Hitman' by John Perkins, true stories that you wish were a conspiracy.
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| Thursday, November 4, 2010 - 07:24 am *Yaaawns* Old dry reading/listening. Concentrate on your studies... you aren't schooling me uni_boy.
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| Thursday, November 4, 2010 - 07:27 am How do you bail out the banks though? That's borrowing money to give it to the failing instituiton that shouldn't have the money to loan you, to give back to them, because they are failing. I mean we do have a central bank, it's all one. If the bank you bank at runs out of money the same central bank that supplies my bank supplies yours (in America). looks like a heist. ...and it's so astronomical! How many Trillions? FYI: 1 trillion seconds ago was 33,000 BC. ~that's how astronomical. Can you say "hyper-inflation"? (confessions of an economic hitman is great it's a book, but you can catch his comentary online)
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| Thursday, November 4, 2010 - 07:31 am Hey, Honey did you get my message I sent? Oh, and NO! don't spend any more 'fake' money. It ='s labor and my great-great-great-great grandchildren can't afford any more taxes!
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| Thursday, November 4, 2010 - 07:36 pm Yes Solomon, I'm just digesting the content.
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| Friday, November 5, 2010 - 01:12 am For too long the US has been the biggest consumers of goods in the world. It's like the world produces so we can consume and get fatter(literally and figuratively. And of late the differential between the very rich and the middle class has been widening. We want lower taxes, more jobs and more of more. And we don't want our "freedom" taken away. And btw, don't cut my SS or Medicare. Already today there was a discussion on a noted business channel about imposing a "fat tax" on fat and sugar, like the tax on tobacco, to help Americans watch their weight and also to raise a Trillion dollars in revenue. Keynes and free markets can only work for a little while but in the last analysis we have to self police ourselves to consume less, work harder, learn/teach more, and work together to solve the issues at hand. Solutions don't happen over night. And older people both in the US and in countries where the pop is aging are either going to have to get less or worker longer so the young won't be burdened with all us old farts. "Death panels"? they're already here folks.
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| Friday, November 5, 2010 - 05:24 am Cool... do it like "The Fly"! Vomit all over it and suck it back up through a straw! Haha! Nah take your time lol
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Friday, November 5, 2010 - 09:41 pm There are at least three problems with stimulating the economy with government spending. 1) There are no shovel ready projects ( as Obama now admits), so the impact of the spending is delayed which negates its intended effect. Usually, the money is spent 18/24 months later after the economy has already started recovering. 2) The jobs created by the spending are either temporary, non existent, or too costly per job. In contrast, tax cuts can take effect very quickly, and the jobs created by the private sector are usually less costly per job. 3) If the funds are borrowed, that can have a negative effect on interest rates, private borrowing, and (if debt levels are high enough) consumer confidence. Any government spending projects must create long term employment or have some positive long term effect. So, I think we need some government projects that would lead to more longer term employment or greater efficiency. Such as building more nuclear power plants and/or upgrading the power grid. Projects like these would create more energy and promote lower production costs. Projects such as repaving roads or building new government office building should be scrapped. Most of our efforts should be toward cutting taxes on employment, and giving business flexibility in what health benefits they offer. I think income tax rates should be frozen at current levels, health care reform delayed or scrapped, financial reform delayed or scrapped, and carbon taxes permanently delayed. Also, no new regulations. These all lead to uncertainty or higher costs, which discourages investment.
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| Saturday, November 6, 2010 - 03:27 am I forget macroeconomics clashes with the experience people gather from their own personal finances and business. I don't even know why I'm bothering to reply, but let it be what it may. It is obvious that government spending, in this context, will clearly improve your economic situation a lot. The aggregate demand of your economic took a serious blow in the stomach: private spending/consumption has and will continue stagnated, investment retracted, government spending didn't increase nowhere as much as you think - look at the numbers above - and your exports still aren't at the same level of 2008. If your government doesn't fulfill its purpose, I don't know why you have one and you will stay in the crapper for a long, long time. If there is a lesson to be drawn from the Great Depression is that an economy can stay below its potential output for longs and prolonged periods of time. That's to say, market mechanisms act slowly, even when your economy is bleeding to death. Well, since your output (GDP) is clearly below potential output, here's what's happening: the rate of your inflation will continue to drop (disinflation), and, more likely than not, drop down to deflation. As that continues, it becomes increasingly more attractive to just hold on to your money, rather than investing it, even though interest rates are at the zero bound. Actually, if you pay the smallest amount of attention, you'll notice that's what's happening now. The FED has been buying and will buy more government bonds/debt, in other words, it has been injecting liquidity (money) into the system. The stock market has been rising at a very nice pace and profits have been marvelous. However, the story is another for unemployment. Only in October did unemployment finally go down, after five months of going up, but the rate hasn't been very far from 9.6% for over a year. That's because, from one side, small businesses can't hire, because they have trouble selling (remember, demand shock); from another, enterprises don't want to invest, because the long term expectations for inflation are very low (or negative), so they are better off not investing. And if unemployment doesn't go down one way or another, yes, your decade is a lost one. Naturally, it comes that the most efficient way to save your economy's arse - that's all your arses - is to stuff its body with some vitamin G; since vitamins X, C and I - especially I - aren't working. Taking your points now: 1) If you search your desk, I'm sure you'll find "shovel ready projects". If can't find them, do me a favour, and stop cancelling more of those. 2) Most of the jobs created directly are temporary. Those connected to public investment obviously create permanent jobs given they require maintenance. Jobs created indirectly, tend to stick around and find their way into the market as they were. Plus, there's more regarding expectations and investment. Tax cuts are a failed policy in a liquidity trap. Allowing agents to keep money they won't use sure sounds productive. 3) You are worried about that? What news channel do you follow? Fox? What chance is there of a crowding out? In all likelihood, there'll be crowding in. If, for some incredible reason there's crowding out, it'll be compensated by the FED's quantitative easing. How the money is best spent... I'm not all that interested. I do know that it needs to be spent. I can go with the no more roads policy, though. That only reflects lack of imagination. Try reaching Mars by 2015. Reduce the average payment time; that will push some liquidity into businesses.
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| Saturday, November 6, 2010 - 04:11 am Nice response L, good points on #3. The fed's easing will positively affect crowding, and I'm not concerned that much about private loan demand in the short term. However, the high debt levels along with all the recent legislation are creating a very uncertain environment, which discourages investment. I am expecting an inflationary environment here in the US next year especially food and oil, not a deflationary one, so we differ on that. It will be interesting to see how things pan out.
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| Saturday, November 6, 2010 - 06:49 am I can't believe you guys aren't talkin' train wreck lol Surly with all this knowledge you are aware that the markets on Wall St. are artifically inflated.
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| Saturday, November 6, 2010 - 04:09 pm I can think of several train wrecks to discuss. Take your pick: 1) Fannie Mae / Congress 2) Federal Reserve policy 3) Government employee unions / pensions BTW - turn on your spell check
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| Saturday, November 6, 2010 - 07:21 pm We have spell check??? YES!! Now how to turn it on... It's the flouride I'm sure. I waz a bitter spiller in therd grad. I really was, third grader reading at college level and the spelling was there as a kid too... it's been lost to "better life through chemistry". I see it now, 'artificially' right? That's a typo Thank you
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| Saturday, November 6, 2010 - 07:24 pm Wait... where is it?
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| Sunday, November 7, 2010 - 12:47 am I don't have such confidence in the predictive power of macroeconomics, based on past performance. It's a complex system and there are important factors that are difficult to quantify, and always new factors arising. I'm wary of the suggestion that it is obvious to anyone that additional government spending, in the US at present, will improve the economy. One can list examples of situations where additional government spending clearly did not help a country's economy. One could then argue how those situations differed in important ways from our current one. If one gives examples of successful stimuli, one could still argue that those situations differed in important ways from the current one. In fact, the situation is always different.
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| Saturday, May 7, 2011 - 05:11 am Team Keynes vs Team Hayek http://econstories.tv/2011/04/28/fight-of-the-century-music-video/
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| Saturday, May 7, 2011 - 09:55 am The real problem: Economists are knuckle dragging morons.
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| Saturday, May 7, 2011 - 06:18 pm Keynes won. \o/ Actually, I'm waiting to see if this Great Recession of ours will be a replay of the political episode of the Great Depression. /me kicks Hymy in the gonads
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Saturday, May 7, 2011 - 08:40 pm
So, much for your worry about deflation Laguna. All prices are going up here in the US, except housing prices.
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| Saturday, May 7, 2011 - 09:54 pm Okay. I confess, saying deflation is a bit over the top. Perhaps saying increases below their historical trends fits better, as some prices have a very strong downward rigidity. And that's what I'm seeing on core inflation. Core inflation excludes the energy and food categories precisely because these goods have extremely volatile prices. Some of the increase in the price of oil is justified, because of the drop it had in the bloom of the Great Recession, motivated by low prospects of demand - you consume less energy in a recession. As recovery settled in... you get the picture. But recovery is stronger in the emerging markets. As the economy cools over there, so will the pressure they are making on commodities and therefore inflation as well. Plus, this all looks like a temporary surge in inflation.
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| Monday, May 9, 2011 - 12:43 am Laguna, you make a wonderful argument my friend. The points that I am not seeing in this discussion to date are regarding Capital Flight and Declining Real Wages. The second, first. Since the early 70's, real wages in the US have been consistently trending lower than rate of economic growth. There were several factors, initially, including the Baby Boomers and more women enterring the work force en masse, increasing competition for jobs and depressing aggregate wage levels, as well as the European and Japanese economies finally hitting their Post-War stride and claiming their competitive share of markets. However, consumer spending was encouraged and relentlessly driven by both public and private entities regardless of consequence or reality. The explosion of private consumer debt began with home equity financing and has progressed through unsecured credit card debt as Americans' have increasingly mortaged their lives for increased consumption depite decling purchasing power. All with the complete blessing and support of their government and financial institutions. The ability of American's to service this private debt, however, much less reduce the principal and establish and actual positive net worth has continued to decline. And this brings us to the point you made earlier. The US market is contracting. Consumer spending is suffering from more than a crisis of consumer confidence. Americans are simply earning less and spending less. Real wages can only decrease so far before the effects ripple throughout the rest of the economy. An artificially high "standard of living" through cheap imports can only continue for so long until the mass loss of decently paying jobs reaches the point where aggregate spending decreases. America's GDP has only been maintained for this long from reckless consumer lending and that particular well has run dry. However heretical it may sound to virtually every economic school of thought, unrestricted free trade is suicidal for developed economies. Declining wages are eventually consumed by necessities, leaving little room for additional consumer spending. The aggregate demand curve shifts leftward and we have recession. This should be patently obvious. The argument for Absolute and Comparative Advantage for free trade have limitations. Never before have developed economies exported their manufacturing bases wholesale to other economies. We do not have one world economy. That has always been a facile term. While many economies are similar and roughly equivalent in terms of price/wage levels and regulation, most are not. Therefore, Laguna, what I believe we are going to see in the future will be Stagflation within the American economy. You may be underestimating the effects of rising global energy costs on price levels. Inflationary pressures have only been temporarily checked by reduced demand and employment anxiety. Eventually, workers will be forced to demand higher wages to compensate for escalating food and energy prices. Those demand curves are fairly inelastic. Anyone who believes we can transfer the tradtional engines of wealth creation to the Third World within the space of a generation without destroying our economies is either willfully stupid or clinically deranged.
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