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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsKrugman kicking some austerian ass this morning!
3 new posts:
Building A Mystery
Jared Bernstein shakes his head at what he calls weirdness at the Washington Post, citing an editorial and a commentary by Robert Samuelson. I second his views, but Id like to point out something else about Samuelsons piece.
What Samuelson does is to throw up his hands and declare that we just dont understand whats going on in the macroeconomy. How does he know this? He talks to several people who declare themselves deeply puzzled by events notably, Lorenzo Bini Smaghi and Allan Meltzer.
But its no mystery why Bini Smaghi and Meltzer would find it all very puzzling they personally got everything wrong. Bini Smaghi spent years sneering at anyone suggesting that Greece might need to write off some of its debts. Meltzer has been predicting runaway inflation for four years.
Some of us dont find the macro developments puzzling at all; we applied basic IS-LM macro, understood from the beginning that monetary policy would have little traction, warned that austerity policies would have major negative effects. Basic textbook macro has in fact worked fine. And so you might think that Samuelson would ask the people who got it wrong why they got it wrong, and whether it might not be because they had the wrong framework while the Keynesians were closer to the truth.
But no; he acts as if these people are the authorities, and their personal predictive failures demonstrate that nobody can get it right.
Oh, and it goes without saying that these experts have not reconsidered their views at all.
http://krugman.blogs.nytimes.com/2013/04/22/building-a-mystery/
Trap Denial
OK, probably going on too much about this, but I want to return briefly to the issue of puzzled economists, specifically Allan Meltzer.
Four years ago Meltzer and I effectively had a debate about the effects of the rapidly expanding Fed balance sheet. He (and others) warned of inflation ahead; I (and others) said that we were in a liquidity trap, so that the Feds bond purchases would basically just sit there.
So here we are four years later, the huge expansion of the Feds balance sheet has not, in fact, led to inflation. And Meltzer is puzzled by the fact that all those bond purchases just sat there:
Since late 2007, the Fed has pumped more than $2 trillion into the U.S. economy by buying bonds. Economist Allan Meltzer asked:
Why is there such a weak response to such an enormous amount of stimulus, especially monetary stimulus? The answer, he said, is that the obstacles to faster economic growth are not mainly monetary. Instead, they lie mostly with business decisions to invest and hire; these, he argued, are discouraged by the Obama administrations policies to raise taxes or, through Obamacares mandate to buy health insurance for workers, to increase the cost of hiring.
He made a monetary prediction; I made a monetary prediction; his prediction was wrong. Therefore, it must be because of Obamacare!
http://krugman.blogs.nytimes.com/2013/04/23/trap-denial/
A Heartbreaking Work of Staggering Folly
As I have been writing a lot lately, the clean little secret of the global economic crisis is that standard economic theory actually performed pretty well.
Its true that few anticipated the severity of the 2008 crisis but that wasnt a deep failure of theory, it was a failure of observation. We actually had a pretty good understanding of bank runs; we just failed to notice that traditional banks were a much smaller share of the system than before, and that unregulated, unguaranteed shadow banks had become so important. Once that realization hit, as Gary Gorton (pdf) has documented, standard bank-run theory made perfectly good sense of the story.
And the aftermath of the crisis persistent low interest rates despite high deficits, impotence of monetary policy, major negative impacts of fiscal austerity may not have been what most economists or government agencies predicted, but its what they should have predicted; Econ 101 macroeconomics, as I often point out, has worked pretty well.
Even the euro area crisis made and makes a lot of sense in terms of standard optimum currency area theory.
The point is that radical new theories havent been needed at all; off-the-shelf economics, tools we already had, provided plenty of guidance.
more
http://krugman.blogs.nytimes.com/2013/04/23/a-heartbreaking-work-of-staggering-folly/
busterbrown
(8,515 posts)Unfortunately the republicans dont care about answers..they just care about destroying the middle class....
Lindsay
(3,276 posts)They also care A LOT about grabbing everything that's not nailed down, and prying up what is.
CTyankee
(63,912 posts)She was a pistol...
magical thyme
(14,881 posts)busterbrown
(8,515 posts)However they represent the foundation of our economic problems.
Has there ever been a Republican concept or Political Bill which has actually help move our country economically forward.. I mean ever...
hedda_foil
(16,375 posts)Sekhmets Daughter
(7,515 posts)indeed, the entire congress continue to ignore Krugman. It makes no sense to me that they would want to follow a path that will result in the US becoming little more than a third world nation. The 'too bigs' and multinationals be damned!
n2doc
(47,953 posts)They can make money much more easily by bankrupting the country and the 99%.
Sekhmets Daughter
(7,515 posts)Do you think they are all planning on becoming ex-pats? What about their own children and grandchildren?
I find our willingness to just allow them to accomplish whatever it is they are seeking to accomplish, even more depressing.
n2doc
(47,953 posts)Places like eastern Long Island, northern Virginia, the ski areas of Colorado, and so on. They don't interact with 'ordinary people'. They relish the idea that they can live like gods and the rest must suffer. It seems like a problem with human psychology. Happened at the end of the Roman Empire too.
Sekhmets Daughter
(7,515 posts)And, that's what worries me! It took the Roman Empire centuries to collapse completely. Life is much faster paced now... I don't think we have centuries...perhaps not even one full one.
woo me with science
(32,139 posts)*They* won't collapse yet, although we will. They still see huge new markets to exploit overseas as our wages are depressed in line with their serf workers in other countries.
Not to mention that they are shifting the source of their profits here at home. Rather than relying on our conspicuous consumption to enrich themselves, they are building new markets based on imprisoning and surveilling us, exploiting slave labor in private prisons, growing the war machine, and profiting not from our purchase of luxuries, but from exorbitantly charging us for the basic necessities of life.
Sekhmets Daughter
(7,515 posts)What happens when all the world is reduced to serfdom?
woo me with science
(32,139 posts)Sekhmets Daughter
(7,515 posts)unless, like former plutocrats, they join the ranks of the 'dearly departed' as one cycle ends, and the next begins....
Sekhmets Daughter
(7,515 posts)I think there is no precedent for something this large scale.
Katashi_itto
(10,175 posts)French Aristocrats thought they were invulnerable too.
We will quietly move pass the tipping point. Then it will be some innocuous spark to cause blood to flow in the streets. May not happen here first.
Sekhmets Daughter
(7,515 posts)I was thinking of the French when I wrote #16
Katashi_itto
(10,175 posts)truebluegreen
(9,033 posts)*"first against the wall when the revolution comes"
reformist2
(9,841 posts)Sekhmets Daughter
(7,515 posts)it does not explain the why. Or how they think they can continue to rape the world endlessly and continue to survive themselves. It's as though they believe they are immortal, living on Mt.Olympus. All the lessons of history forgotten.
reformist2
(9,841 posts)Caring about posterity is apparently something Ayn Rand's "philosophy" didn't teach them.
Sekhmets Daughter
(7,515 posts)not even caring about their own progeny beyond the current generation.