Liberal Super Hero Paul Krugman of Nobel fame continues to lead the Keynesian chorus for more deficit spending by the Federal Government. (I would like to point out that Krugman's Nobel prize was awarded for the study of historical economic data - not forecasting/predicting the future, something he is likely no better at than a relatively intelligent investor with commons sense and having his own money at stake. Well... perhaps not quite that good.) Deficit spending always feels good in the short term, but let's look at this another way. As truly thinking people should.
Right now, the Federal Budget is financed 2/3 by taxes and 1/3 by deficit spending. The Krugman/Keynesian argument seems to me to be that we should spend whatever is necessary to keep The People from feeling any discomfort economically. Never mind that that is not a measurable outcome. My question is this: If we can finance the Federal Budget with 1/3 deficit financing for an extended period of time,
(which might turn out to be the case! If the last couple of years has taught us anything it is that Credit Deflation had some really unforeseen outcomes. The Inflationistas can argue all they like about inflation... but the 2 big inputs - wage and housing - have experienced disinflation or outright deflation for years and without the Government's "help" would have gone into a deflationary nose dive (which I think might have been a good thing in the medium and long term - certainly it would have been a good thing for the "99%" not receiving social program benefits because it would have forced a reset on that silly system - but nobody asked me). Massive deficits and Fed interventions did not result in much inflation)
why can't we finance the Federal Budget with 3/3 deficit spending? Why do we even need a Department of the Treasury and a Federal Income Tax and and Internal Revenue Service? If 1/3 deficit spending has no deleterious effects on our currency, wouldn't 3/3 deficit spending be just 3X more deleterious? Doesn't 3 X 0 = 0?
Look, I am being only 1/3 tongue-in-cheek here. If the U.S. used my 3/3 deficit financing proposal, we would gain all of the productivity lost by collecting documents and filing taxes. We would free up all of those data reporting people at the banks, your company payroll department, those nice people at the IRS, some of our "best and brightest" wasting away at CPA services, and a bunch of other folks to do productive work with lepers/burn victims/lost puppies. Right?
Gotta be. If 1/3 (deficit spending) is good, why isn't 2/3 (deficit spending) better and 3/3 (deficit spending) perfect?
See. That's the problem with those close minded Keynesians. They just can't seem to take it to the next level.
If you know a Keynesian that can explain succinctly to me how 1/3 is good, and that we need to be able to spend whatever it takes (which presumably includes 3/3), but 0/3 is "bad" - and make that presentation consistent with C02/environmental socialized costs as well as our ferkakta wealth distribution - I would very much like to have a conversation with that individual.
- To Be Continued
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36 comments:
Friedman proved that inflation was caused by money supply. Spend more than you take in and you get fiscal inflation. And if you add $1 trillion + to the economy every year via Federal spending for the last five years, and what will be the next 10 years till the baby boomers peak at age 65 (In 2024), you have to believe that SOMETHING is gonna start happening if it hasn't already. But if you craft your CPI using only low numbers and ignore everywhere else costs are rising (govt fines and fees, utility bills, education, heath care, underground economy), hell, you just might fool all the people all of the time.
You know the answers better than most of us Greg. Talking to a Liberal who buys into Krugman-style spending will do nothing but make your head hurt.
The real question to all this is not why the various groups who benefit from all this spending keep pushing for more of it but why do the foreign powers keep allowing this madhouse to continue?
The only conclusion I can come to is a bunch of Chinese, Russian and Saudi rich and powerful leaders sitting around figuring that financing this madness is cheaper than fighting the US and will net the same end results.
They are just giving their enemy enough rope to hang himself.
I remember reading that the most effective disinformation ratio was 2 parts truth to one part lie: more BS makes us reject the whole thing. Could it pertain to economics as well?
Everybody that owns a bond wants the system to continue. A reset, where the cash runs out and all those bond holders are forced to take a severe haircut to bring the value of the debt back in line with the value of the underlying assets hurts the 0.001% A LOT! It also hurts retirees, pensioners, and anybody with a bank account in a very visible. The FDIC is no way funded enough to survive a systemic crisis. Even the smallest depositors are likely to be affected.
So, the system is floated by creating public debt to replace private debt as private debt collapses. What TPTB want really is to create inflation, and reduce the value of the debt by shrinking the dollar. In a credit collapse, it is easy to blame those that caused it, and the preceding bubble, namely those in charge of monetary policy. In the case of inflation it is very easy to blame private business and speculators for driving up prices through greed, thus deflecting the blame from the those that caused it, namely those in charge of monetary policy. Thus, the central planners are insulated, and the 0.001% continue to accumulate the debt, albeit in shrunken dollars, while those busting their hind ends to create value take the heat.
And now some math about CO2 accumulation. CO2, in the atmosphere, above the natural equilibrium level of about 290ppm has a half life of about 40 years. This means that if the concentration is 390ppm, or 100ppm above equilibrium. If all fossil fuel burning stops, by 2053 the level would drop by 50ppm to 340ppm, and by 2093 it would drop by 25ppm to 315ppm, etc. This is an example decaying exponential, where the rate of loss of CO2 is proportional to its concentration above equilibrium.
Back in 2009, or 2010, when the concentration was at 370ppm, about 40% of the CO2 introduced into the atmosphere was absorbed by the earth and oceans. That means that in order to maintain the 2010 level of CO2, fossil fuel consumption must be cut by 60%. What are the chances of that happening by political means?
The flip side of this, though, is given that we seem to have reached peak oil, coal, etc. the highest level CO2 is likely to reach is:
370 + (370 - 290)/0.4 = 570ppm
What consequences derive from 570ppm CO2, I cannot guess.
Regards,
Coal Guy
Hmmm. Somewhere between 30 to 40% of CO2 ends up in the oceans. I wonder how much that contributes to ice loss at the north pole? Seltzer water has a lower freeze point than water. Given the latent heat of fusion that is currently being overcame at the north pole, it will likely be dramatic as we approach zero bound. Sort of like a big ole glass of ice water. It stays near freezing until the ice melts then the temprature stsrts to rise,
Best,
Dan
And now for the good news from the Financial Times: http://www.ft.com/intl/cms/s/0/9594f870-b113-11e2-9f24-00144feabdc0.html#axzz2RySB06My
The budget deficit in the US is starting to shrink as the US treasury will pay off $35 billion in debt in the second quarter, as tax increases, lower spending and increases in tax revenues are contributing to a reduction in deficits.
As far as criticizing Paul Krugman: Dude you could argue or debate with him until you are both dead with no clear winner. Economics is a theoretical science. there are no right and wrong answers, only theories. But there is a reason why Krugman has millions of readers, the attention of governments and central banks around the world and a salary of hundreds of thousands a year to publish his work. Can anyone on this blogsite say the same?
Anon:
Krugman and his ilk hold sway because they tell the politicians exactly what they want to hear. SPEND! Those that preach fiscal responsibility are kicked to the curb. This will continue to work until it doesn't.
Regards,
Coal Guy
You're getting closer and closer to the MMT heresy. And the 3/3 doesn't even have to be borrowed from bond traders and banks. It can simply be printed into existence and taxed out of existence to cool any inflation.
Fiat currency. Sovereign issuer.
You came around on the climate, you can do this, dude. Although if we don't fix the climate, the money is meaningless.
Cheers, MMT Fan
Krugman's God of the Marketplace holds sway for now, but the Gods of the Copyright Headings are coming up. I can hear the distinctive sound of their limp.
Hello Tweel,
I think that's Gods of the Copybook Headings. Great poem. Kipling rocks.
Regards,
Coal Guy
Aack! That was dumb! Gods of the Copybook Headings is right.
I need to Kipple more.
MMT fan,
MMT must be a purely academic theory developed by economists isolated in capsules hidden in the rings of Saturn. It doesn't take human foibles into account. Even the politicians realize that they can't handle that kind of power. Only academics can be more clueless.
Politicians created the quasi-independent central banks in the hopes that an independent organization, isolated from politics, might be able to provide responsible monetary governance. The fact the the Fed has lasted for 100 years provides some evidence that the idea of separation of monetary governance from politics is correct. I don't think they've done a great job, but we haven't lost everything... yet.
The only thing that constrains government spending now is the that any money that they borrow must be paid back. If they default, half the world will be pissed off and the bums would be removed from office. They really, really wouldn't like that. Remove that incentive to be somewhat responsible, and they'll destroy all confidence the dollar within a decade. The U.S. Congress, as much as they have been beat up, hasn't created money out of thin air. They could wipe out all Federal debt today, But, even that bunch of corrupt greedy bastards know how things would turn out. MMT is worthless other than as an interesting intellectual exercise.
Regards,
Coal Guy
The anti-Keynesians might want to notice what is happening in the US economy versus what is happening in the EU economy, as the two continental superpowers were both in roughly the same condition five years ago with unemployment at 9%. America took the loose monetary policy pro-growth Keynesian strategy, which most of Europe was forced to entire punishing austerity measures aimed at reducing debt and recapitalizing the banking system.
Today, the US economy is growing
at roughly 2.5% annually, unemployment has dropped to 7.5%, over 5 million jobs have been created in the last four years, and the US is already making inroads at paying off the federal debt. The debt to GDP ratio has dropped as the economy has grown and moderate tax increases combined with spending cuts increase the amount of money into the treasury.
the EU on the other hand has an unemployment rate which has growth from 9% to over 12% in the last few years, and some smaller countries have an unemployment rate over 20% which shows no signs of changing. Europe is in a punishing economic contraction, and some of the peripheral nations have slipped from a recession to a deep depression from which they may not recover in decades.
Granted, the situation is much more complex than can be summarized in a few paragraphs. The US is becoming an energy exporter while the EU is still dependent on imports. The countries which use the euro are not fully integrated, into a fiscal union yet, and have had vastly different abilities to repay debt which was borrowed at roughly the same interest rate.
However, it is clear that the Keynesian economy theory has a lot of pull when it comes to comparing the economic situations in the two continents. The US economy is getting a little better, and the EU economy has gotten much, much worse.
UHmmm. That's complete BS. The U6 unemployment rate is up, the only way unemployment can be passed off as going down is by creative accounting and simply refusing to count people. The work force participation rate is at it's lowest in decades and reported growth is simply transactional government spending NOT actual growth. The US has not created enough jobs to keep up with population growth so claims of unemployment dropping is nothing more than propaganda and wishful thinking.
Ratio of Global Net Exports of oil (GNE) to Chindia's Net Imports (CNI) Vs. Total Global Public Debt (Economist Magazine data):
http://i1095.photobucket.com/albums/i475/westexas/Slide5-3_zps9a533a56.jpg
For more info, search for ASPO + Net Export Capacity
Pioneer Preppy
If you only want to converse with people who agree with you 100% of the time and see things from your narrow minded perspective then you should consider a career masturbating.
Anon - I am sorry someone stating facts lessens the pleasure of your reach around party.
You'll get over it I imagine.
Some people will always see the glass as half empty even when its half full and filling up. Some people are so naturally cynical or mad at the world they can never see the optimistic side of anything. PP you should post something intelligent or cheerful every once in a while or you will sound more and more like a grumpy and irrelevant old curmudgeon
Another meaningless attempt at insults anon?
Talk about narrow minded. What you cannot grasp is I am not grumpy and none of those who agree with me are either because we are watching the end of your Liberal/Feminist fantasy world.
This party is just getting started.
"Liberal feminist fantasy world?" not at all. In the short run its a little easier to get a job in the United States. In the long run the human race is doomed to go the way of the dinosaurs and every other species which became overpopulated. Read The Sixth Mass Extinction article about a 62 mile high space elevator designed to remove humans from the planet which will self destruct. Im looking forward to it - less people like you in space.http://www.thedailybeast.com/newsweek/2013/05/06/the-sixth-mass-extinction-is-upon-us-can-humans-survive.html
As we here in the Mid-West go through the coldest Spring in almost a century your climate change wealth transfer scam is exposed even more.
Your author of that piece should also try and not kick start his or her extinction forecast by presenting an example and not all the facts that pertain to it.
Of course that is the modern day Liberal way of presenting issues so it isn't surprising.
Honey Bee CCD is almost exclusively an issue that effects hives managed in a certain way. Migratory hives where all the honey is harvested from the hive and then fed sugar (which is cheaper) as a food substitute. It changes the entire PH balance of the hive and leaves them open to other diseases.
Do we have environment issues? Certainly, but they will never be solved by using the modern day liberal social engineering schemes and oppression that types like you love so much. Attitudes like yours are simply too expensive for society now.
That's your space elevator in action.
"types like you " love? How do you know what I love from reading one or two paragraphs on a blog site? I think social security age should be pushed up to 70 and eventually eliminated. Social Security was never meant to be a public pension system. It was meant to be an insurance policy against the poorest old people in society starving to death. That's all it should be. Unfortunately, the baby boom generation is likely to destroy it so their kids won't have any insurance policy.
If you are really interested in an intellectual debate on the issue of Keynesian macro economic policy last Sunday's NY Times magazine had an article interviewing Larry Summers and Glenn Hubbard, both Harvard trained economists, very well respected in their field and both influential government figures who see things from a different perspective. They both make interesting points and they both have blind spots, as most people do.
I doubt you are really interested in an intellectual debate. It sounds like you want to rant against the government, women and everyone else who is not a carbon copy of yourself. That is not the way to make friends and influence people.
Let's see. When called on your false numbers you immediately respond with insults and no facts only an opinion article on another subject.
As most liberal/Feminist/Greenies/whatever you then fire back with yet more insults and attempt to switch the focus from the numbers you first cited to macro economic voodoo discussions.
You simply follow the same tired old predictable playbook every wealth grabbing liberal has tried before.
Pay no attention to information that goes against your biased view. Continuously throw out insults and accuse others of being narrow minded, bigoted, racist, all of the above etc.
Rinse and repeat until the other party gets bored and stops replying.
Ultimately whether you wish to follow Keynesian, Austrian or hunter gatherer economic theory the end result is they all rely on truth and honesty by those who control the system to work. Until such a large segment of the population stops lying to themselves you will never get the honesty needed, however eventually nature always reasserts herself.
Anon,
Why do you think that government, the largest monopoly of all, has your interest at heart? Why is it better than any other enormous organization?
Why is it that the ultra-rich and largest corporations support the Democrats? They contribute hundreds of billions of dollars, even though the Democrats claim to hate them. (Hint: These people are not stupid.)
How does exponentially increasing government power create greater freedom and personal liberty?
If you can answer these, you might be worth debating. I haven't heard a rational answer yet.
Regards,
Coal Guy
You say "the government" but that is a category which involved federal, state and local levels of government and you have made no attempt to distinguish between these entities, and they are very different. In the vast majority of cases the federal government is the only protection you have from the extortion, corruption and thievery of property which occurs at the lower levels. A friend of mine recently had her car seized by the parking authority in the city where I live and could not get it back until she paid $800 for fraudulently issued parking tickets. This ruling was reversed only after a federal prosecutor intervened on her behalf by suing the parking authority in federal court. There are many other examples like this.
Ultra rich corporations and individuals support both parties because they know for the foreseeable future we will have a two party system.
We do not have "exponentially increasing " government power in this country at least at the federal level. And for the most party the few rights granted to citizens by the federal government is all the protection the individuals and workers have from the exploitation, abuse and slavery of american corporations.
I will add that none of the major scientific achievements of the last century would have occurred without sponsorship of the federal government. This includes the development of the airplane (the Wright brothers brought their invention to the government), the sequencing of the human genome and the development of the internet thanks to the scientists and engineers as NASA. Tell some death row inmate freed by DNA testing that the governments work is useless and destructive. Private industry alone can't make these advances without some sponsorship of the government.
And the real theory behind Keynesian economics is not to keep spending in perpetuity. It is to engage in deficit spending as a way to jump start a weak economy so when the economy revs up and gets moving the tax revenues will be sufficient to cover the former deficit. Sometimes it works and sometimes it doesn't. Economics is a theoretical science. You can't prove that Keynesian theory works or that it doesn't because there are too many other factors which come into play. Economists debate and disagree as a course of business, that is the nature of the business.
Anon,
The basic rights and limits on government power are enumerated in the Constitution and Bill of Rights. They have been and are being eroded every day. Ever read "Congress shall make no Law...?" Congress does not grant rights, it is supposed to uphold the rights and limits defined in the Constitution through law. The courts are supposed to protect us from laws contrary to the limits of government defined in the Constitution. The executive is supposed to operate within the law. Take a civics class. Oh well. I guess that the rights you talk about are the few that Congress has not yet limited or eliminated.
When the Bush administration proposed and Congress passed the Patriot Act, the libs were appalled. Yet, per the request of the Obama Administration, Congress, as part of defense appropriations, passed something far worse. As of Jan 1, 2012, the government has the right to detain anybody indefinitely on suspicion of being a terrorist. No trial, no habeas corpus, no nothing. Every internet transaction (including this one) is snooped by the NSA. Military intelligence is now required to snoop US citizens. No one will deny the possible use of drones to zap US citizens on US soil. And believe me, I'm all for getting terrorists. I live near Boston and we need no repeat of the disaster at the Marathon. However, this does seem to me to be overreach and all under a "liberal" administration that is supposed to be interested is civil liberties. Where is the outrage? Where are the f'ing journalists?
That is not to mention the huge growth of government spending. Look at that curve. Money is power and this is exponential. When will it consume 100% of everything? What color sunglasses are you wearing? I want a pair.
Regards,
Coal Guy
Claiming government involvement in the invention of the airplane is a bit of a stretch but whatever. Of course what you are claiming as government involvement is simply wealth redistribution that the Federal government has managed to apply into every aspect of life since 1913.
Prior to the 60's this government purse string tyranny was fairly beneficial but once it began operating in the social justice arena things began to change. What some like the "anon' poster would claim are rights are little more than perceived victim switching.
As for the Federal government protecting rights they certainly can as long as those rights fit the Federal agenda. By far the Federal government infringes on more property rights, self defense rights and others through their own regulations and legislation. They also extend their money supply into areas it has no legal claim to such as education.
The government can detail anyone on suspicion of being a terrorist but so far who have they detained? Not even one. So the government can read this blog site. Who cares? In this day and age we all have zero privacy. Get over it.
The issue of government power vs individual liberty is as old as the government itself, I doubt that issue will be resolved on a blogsite such as this.
The Right is willing to compromise on every issue except one and that is gun control. The NRA is probably the most powerful lobby in the United states, and that is not likely to change in the next 20 to 30 years. What that means is that anyone can get a gun and since there are a lot of deranged people out there a lot of deranged people can get guns. IN my opinion this means that more surveillance by the authorities is probably a good thing. I would not object to having surveillance cameras on every street corner of every city in this country. Perhaps if that were true the three women kidnapped in Ohio would not have been held for ten years. Personally I could not care less if the feds want to follow me around but if I am going to be kidnapped or shot at a marathon I want the perpetrators caught.
Government spending is not increasing, since the sequester it has actually been decreasing. And Pioneer Preppy the Wright brothers brought their first airplane to the government, without which the entire industry is unlikely to have developed.
The NRA isn't even ranked in the top 20 of the most well financed lobby groups. I also believe it is not within the top 5 as representing the most actual number of people. The teachers organizations take each of those awards I believe. The NRA has the most members in several districts though.
If only the Federal Government had limited itself to gun rights. Property rights violations and ridiculous EPA regulations are epidemic. Making most people criminals several times over each day.
And selling an airplane to military applications is not the same thing as inventing it.
Guns are tools. People can get cars more easily (buy them in private sales even, OMG!) and cars kill many more than guns. A deranged person with a car could make Newton look minor in comparison.
Also, I do not think you know the definition of compromise. It means that both sides give something. You take and we give is not compromise!
Surveillance cameras provide data, period. They don't stop crimes, and you still have to have people to analyze the information. All the cameras that the British have put in haven't helped them with their crime rate (the actual crime rate, not the faked numbers). Police were called to that Ohio residence more than once during that ten years, but didn't go further.
Yep, we're actually spending less! Woohoo! Let me explain this with an analogy I use for my grandkids. If I make $40k a year and spend $60k a year, I'm borrowing $20k. The bank is getting unhappy with my constant requests for more credit, so I make a deal - I'll only spend $59k this year! In ten years I'll be only spending $50k (and still only making $40k). Austerity and hardship budgets! Replace me with USA, change amounts to $4 and 6 trillion, and the bank is the rest of the world. Things that can't go on forever, won't.
AMerican household debt as a percentage of income declined by 20% in the last five years, from 130% of income to 105% of income. This was reported by the Financial Times and the IMF so you can't claim the numbers were distorted by the liberal press. The US Fed reported that total household debt has declined over $1 trillion in the last five years. Of course most Americans still have too much debt. But the trend is going in the right direction for a change. And European debt to income ratio has gone in the opposite direction in the same time period, probably because people are so desperate they have no choice except to borrow. Score another point for the Keynesians
http://www.ft.com/intl/cms/s/0/fca4054c-b8b6-11e2-869f-00144feabdc0.html#axzz2StvpMRLu
Dude you can go ahead and buy all the guns you want. That's not going to change in this country for a long time, probably never. Personally I am a lot more concerned about violence from my fellow citizens than the loss of civil rights as a result of excessive government power. That is my opinion and I am entitled to it . But there is no question that your opinion has validity.
Ooh, moving goalposts. Now it's private debt instead of public debt.
This incredible drop in private debt is due to the real estate bubble bursting. Lots of folks lost their houses as they were foreclosed on. That's why we have less private debt.
Congratulations, Anonymous, for proclaiming how wonderful it is for folks (predominately lower income minorities, by the way) to lose their homes. How progressive of you.
Tweel,
I just read in the paper about the IRS giving special attention to Tea Party members. Imagine that. Nixon sicced the IRS on his political foes, too. Our mmt guy doesn't think that the Federal government might abuse its powers. I'm done with him. Some people crave the jackboot on their throat.
Regards,
Coal Guy
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