Paul Krugman: Myths of Austerity

nytimes.com:

When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.

Read the whole story: nytimes.com

Comments

[olderdem]

12:06 PM on 07/06/2010

Apparently because it’s a positive, the media (huffingtonpost included I’m sorry to say) doesn’t seem to be talking about the enormous amount of money available to those with mortgages that can refinance as historically low rates.



In addition, the low mortgage rates provide an even bigger cost reduction to home buyes than the tax credit that expired in April. If the media was talking about this more, it would help consumer confidence, and jobs, but the media likes to focus on the negative.

[Dangerous Dan]

10:25 AM on 07/05/2010

The liberals think that the stimulus money is like winning the lottery.

Well,they are right, and like 99% of all lottery winners, they send through their winning in less than a year, sure, the initial taxes were paid,
But you bought land, you bought vehicals, and you gave money away.

Now your stash is gone, or nearly so.
You owe property taxes, vehical taxes, and your "Friends" are asking for another loan, to get them by.

You know that the lottery preys against the poor.

[MenloPark]

01:22 PM on 07/05/2010

Money put into the economy does not disappear after the first use....

Say I have $2000 in my checking account - I buy a $1000 T-bill - The government pays $1000 to a construction firm. I now have $1000 in my checking account and $1000 in my savings account(T-bill) and the economy has an extra $1000 that the government created and put into the economy. The T-bill comes due and the money gets put back into my checking account plus a little interest. I now have $2025 and the economy still has the extra $1000 sent to the construction firm.

That $1000 to the construction firm is our national debt, even though the numbers in my savings account(T-bill) were moved back to my checking account.

The national debt is a measure of the net money created(not taken back in taxes) since our country began.

The government could stop issuing treasuries today, settle all those outstanding that come due, and balance the budget, essentially owe no one nothing, and our national "debt" (net money created) would not change by one penny. :)

Technically we would no longer call it debt but it's effect on the economy would be exactly the same regardless.

So the question as far as I can tell is always:
1) are we creating enough new money to support an expansion in the economy or
2) are we destroying enough old money to slow the economy down.

[Dangerous Dan]

10:15 AM on 07/05/2010

When individuals or corporations use their own money in an ostentatious manner, it is called, "Wasteful, self-centered, detremental to society."

When the government uses the tax payers money in a wateful, self-serving, an detremental manner, it is called stimulus.

There has been no "Trickle down."
There has been no benifit outside of big government or "Big Fianance."

All the artificial benifits that were and are claimed, dry up when the government money dries up.

You hail the government for spending others money, that you daily condemn in sucessful capitalists.

The difference, capitalists use their money, the government uses ours.

[fortyfiveseventy]

03:18 AM on 07/05/2010

What Krugman doesn't mention is that many Americans are sick of the empty promise that budgets will be balanced in the future and debts will be paid off. Every administration says it and none do it.

People are fed up with government spending and borrowing, and unfortunately that fed up attitude has come at a really bad time for the economy. Timing isn't always great.

[dawgspiel]

05:02 AM on 07/05/2010

Clinton did it. Then came Bush.

Ever checked the number of jobs created by presidential term, GDP growth, and fiscal responsibility? The Democrats have done a much better job since WWII. Much better. The myth of Republicans handling money better while fostering a higher level of economic growth is just that -- a myth.

[research]

09:28 PM on 07/04/2010

I wish the powers that be were listening to you, Paul.

The world has had overproduction for 100 years or more. That's how we can wage world wars, yet recover withing a few years.

We need to adopt the cradle to grave social safety net that Sweden and the Swiss have.

Everyone should have room board, health care and education paid for for life.

Save money, cut the deficit, employ everyone, cut energy dependence:

Immediately order energy retrofits for all gov buildings.

Rooftop PV Solar, Offshore wind, and Waste Bio char, can supply the worlds energy and fuel needs: cleanly, safely, Forever, within 12 years and cheaper in the long run 2-6 cents now, and 26$ per barrel bio oils.

http://www.ecobusinesslinks.com/solar_panels.htm
about 1$ per Wp solar panels, new.

install solar plants for about $1.30 per watt, compared with an industry average of about $1.75, according to Hardy." http://www.bloomberg.com/apps/news?pid=20602099&sid=a7K1FZoNgJ0w

Wind: “between two and six cents today, depending on location.12 Wind power approaches competitiveness with conventional generation at this price point. “

http://www.repp.org/articles/static/1/binaries/wind%20issue%20brief_FINAL.pdf

http://www.css.cornell.edu/faculty/lehmann/publ/BiofBioproBioref%203,%20547-562,%202009%20Laird.pdf

26$ per barrel bio oil from waste bio char.

[TheCrimeDog]

11:14 AM on 07/04/2010

Obama is the smartest President we have ever had ... what are you worried about?

I didn't say smart ... I said the smartest.

[yeswecanjane]

11:13 AM on 07/04/2010

Paul Krugman did a great job explaining why America needs a second stimulas ,,,both on Fareed Zakari and This Week! I hope Americans wake up!

[LunaPark]

02:36 PM on 07/04/2010

The problem is we never hear an opposing view. Vernon Smith, James Buchanan, and Edward Prescott all nobel prize winners in economics and all believe the stimulus is making things worse. But we never hear there argument. People should wake up... and learn how to critically think.

[yeswecanjane]

09:30 PM on 07/04/2010

yawn

[timm0]

11:29 AM on 07/05/2010

I hear an opposing point of view with no other opposing point of view on the radio news station. Every 30 minutes, the "financial report" airs and tells us how the deficit has to be reigned in or market will crash, nation will implode, etc. The "guest reporters" are from merril lynch and other brokerage firms.

Given the volume of past and recent history, the opposing view you want is more like a search for someone to argue that 1 and 1 makes 3 while Krugman argues the sum is 2.

[J5on]

02:39 PM on 07/04/2010

I don't think people are going to wake up. We don't have rational governance because we don't have rational people. We are prisoner to the less among us. Saying the people should wake up is just laughable. My point is, we need leadership, something of real focus, the people out to lunch.

[yeswecanjane]

09:31 PM on 07/04/2010

yawn

[guveqzero]

09:54 AM on 07/04/2010

Without money supply growth, there is only the taking of wealth from one person to another. If you like that kind of wealth accumulation, you are twisted. Printing money is the best way to stabilize the proportion of money that the poor have and the amount the rich are hoarding. Or, do you think we should take from the rich and give to the poor like Robin Hood? I don't think you like either scenario.

[yeswecanjane]

11:09 AM on 07/04/2010

The gangsters of Rich Hoods stole from the middle and low wage workers by stagnating the wages under the Republican controlled time and shipped the middle class jobs with benefits overseas without having jobs to replace them! Rich Hoods are Traitors to America! But no one is saying those words! It's "don't stop them! It's the lazy Americans fault!" And don't get me started on the theft of the hard working Americans 401K! "We didn't know?"

[illusionofchoice]

01:36 PM on 07/05/2010

What creates wealth is actual production and invention. Only in fantasy land does the mere printing of money somehow result in actual wealth.

[ChrisDWard]

04:22 PM on 07/05/2010

Yes, and with factories moved offshore where and how will we regain our manufacturing prowess? Does the US even manufacture one TV in this country anymore? When there's no factory infrastructure in the US, what happens to the workers who would have worked there? The govt needs to set policies that encourage corps to remain within our borders and employ US workers. This process is sacking the middle class in this country, and soon there will be few people able to buy the products being manufactured overseas! Short-term, the benefit has been to reduce costs and satisfy shareholder ROI, but long-term it is destroying the middle class in this country. What is the end game here?

[rak6748]

05:29 AM on 07/04/2010

Downhill spiral ever since Nixon abandoned the gold standard in 1971. Read why:

http://www.24hgold.com/english/news-gold-silver-the-gold-standard-generator--protector-of-jobs.aspx?article=2957948282G10020&redirect=false&contributor=Hugo+Salinas+Price

[vippy]

10:52 AM on 07/04/2010

Most people's thinking is baded on a convertible fixed rate currency such as the gold standard.
This all changed completely when Nixon abandoned the gold standard on Aug 15, 1971, and the world shifted to nonconvertible flexible rate currencies (fiat)! The way that government finance actually works changed at this moment and people have not caught up. Read L Randall Wray, Understanding Modern Money (1998). It is written by an economics professor for non-economists.
It presents a clear exposition of how government finances work, not based on our obsolete gold standard rules that no longer apply to the monetary system; all ado about nothing! That was done because the USA no longer could keep up with the free markets of others.

[dawgspiel]

05:06 AM on 07/05/2010

Ron Paulism at work again. It's foolish thinking. There's not enough gold in the world to represent the size of the U.S. economy, much less the rest of the world. A commission looked at going back on the gold standard in the 1980s and rejected the idea, all of them except one member -- Ron Paul. Juvenile economics at its worst.

[vippy]

10:52 AM on 07/04/2010

Most people's thinkiong is based on a ....

[Alexandra Mandelis]

09:53 PM on 07/03/2010

These elites who argue for fiscal austerity need not look further than the mirror to see why cutting spending further discourages a slumping economy... Less money for the corporate teat means fewer jobs for the working and middle class, as the elite sit on and earn interest off their investments.

[LunaPark]

10:42 PM on 07/03/2010

There are elites on both sides, and Krugman is one. Real growth comes from savings that people spend and invest, not from going into debt. You can't solve a debt crisis with more debt.

[procrustes13]

11:25 PM on 07/03/2010

If people cut back and saved then the economy would crash. The US savings rate is just about the same as it always was, just that now it's only the top 10% that saves because the rest have been squeezed.

[jimmyjimmy07]

05:46 AM on 07/04/2010

So i guess you think FDR and the New Deal didnt work? It would be nice if you read just a little history. Just a little.

[GerryS]

09:49 PM on 07/03/2010

Paul looks almost happy in the photo,

the mood elevators must be working---

[jhinds]

03:51 PM on 07/03/2010

The world would be better served if the NY times fired Klugman and he was sent to live on an island with no connection to the outspde world. Klugman has come to embody the Keynsian theology with Obama's socialist agenda and would have it that the bond buyers be compelled to purchase our worthless debt? How uncapitalistic and sociopathic.

[CosmicIrony]

04:24 PM on 07/03/2010

You lost your credibility when you cited "Obama's socialist agenda"; further, you failed to understand Krugman: "Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. "

This is not compelling bond buyers to purchase our debt, it is observing that even with our huge debt, the US is still seen as the best place to invest.

[LCDTV]

05:28 PM on 07/03/2010

The world would be better served if you and rethugs were not in it.

[procrustes13]

12:55 PM on 07/03/2010

One very disturbing phenomenon here is that which features an economic experiment that by every measure that has any meaning to ordinary people has been a catastrophe, yet the elites and the media cheer it on, and demand that it be replicated elsewhere. The Rogernomics experiment in New Zealand in 1984 that was launched out of nowhere on an unsuspecting population is such a case. It was done allegedly because of a debt problem but even by that metric it was a failure, debt was worse. It caused a massive increase in unemployment, negative economic growth, the suicide rate doubled, the crime rate shot up, every single meaningful metric of quality of life showed a decline. Despite this the media convinced people that there was no alternative, the world media applauded it, the Rogernomics ringleaders were shuttled around the world to advise others on how to double their countries' suicide rates, people were saying why can't other countries murder their own people in this way. This shows that these elites are enemies - as simple as that. They hate us.

[HMDMSR]

01:17 PM on 07/03/2010

They are enemies, and the future will be one of choosing sides, with all the harshness of the old way of doing politics.

[WASanford]

01:42 PM on 07/03/2010

This sounds like something from Naomi Klien's "The Shock Doctrine." This has been done all around the world and it has failed to work for the benefit of any society in which it has been tried.

You'd think we'd learn that this is just another way of taking unfair advantage through the destruction of our communities and even our society. But no, we here in America are beset with unworkable crap such as "supply side economics," Libertarianism, which only works for the benefit of the rich, and hypocritical politicians who claim to be conservative until they're placed in office, when they then sell out to the highest bidder. And a significant number of our citizenry is falling for it!

[procrustes13]

11:28 PM on 07/03/2010

I believe it was mentioned - it was certainly a model for Canada. Roger Douglas completely engineered a phony currency crisis and he was in the Labour Party. The voters thought they got socialists into power, they never suspected that they'd get what they got. Douglas demanded that the changes be implemented with lightning-like speed to disorient everyone and because he thought that this was his only chance.

[Dogma]

12:30 PM on 07/03/2010

I don't remember who, but Huffpo just recently headlined an NYT economist warning of the cliched double-dip recession.

I agree with Krugman.

It seems as though everyone wants to be the hyper-vigilant super hero so that they can say "I TOLD YOU SO!" if the economy goes south. It's like they are over-compensating for being blind-sided by the recently crash.

I'm no economist, but I imagine modest growth is better than ridiculously exuberant growth.

[tonygumbrell]

12:26 PM on 07/03/2010

It took a while, but, by 1960 we were all Keynesians (well not quite). It seemed that capitalism was saved, John Maynard Keynes had discoverd the mechanisms of the cycles of boom and bust of capitalism, and the remedies of fiscal and monetary regulation of the money supply were now understood. Then in the space 10 or 20 years we forgot, because we were all going to get rich by forgetting Comes the bust, but the amnesia has propelled us all the way back to the days before Keynes, the common sense (the predjudices learned before the age of 17) era before there even was such a thing as "money supply". Back to the days of Ricardo and Malthus, back to the future, whoppi. America has libbido for the dumb, as well as the ugly!