Kurt_and_Hunter
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Tue Nov-09-10 11:18 AM
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Deficits are bad, sometimes |
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Economics must not be a religion, yet it is an unusually religious, dogma-driven, "my self-worth comes from what I believe and how inflexibly I believe it", pick sides blindly discipline.
What folks like Krugman have been pushing so hard for so long is that a thing is bad only insofar as it does something bad.
What do deficits do?
In a booming economy they may or may not squeeze out private investment--raising rates by competing for a finite amount of investment capital.
In this economy they do not squeeze out anything. The total amount of borrowing in America is down so there is no shortage of investment capital on the sidelines. The government is competing for funds less today than it was when the deficit was half the size.
In a booming economy they may lead to higher interest rates and higher inflation.
In this economy we have the biggest deficits ever but have the lowest nominal interest rates and lowest inflation most of us have ever seen.
Deficits can reduce the value of the currency. A weaker dollar may be undesirable sometimes but the President of the United States made a speech yesterday about how we are going to export our way out of our economic woes so it is far from obvious that a weak dollar is undesirable today.
When deficits add an undue premium to interest rates they can depress economic growth. In this economy, however, every bit of GDP growth over 2% we have seen for the last year or two was the infusion of deficit spending into the economy. (We got a couple of okay quarters out of the stimulus package before dropping back to our new-normal.)
The point here is that deficits are not good or evil. They are an aspect of an economic environment and everything we can say about them has to be in the context of that environment.
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DJ13
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Tue Nov-09-10 11:22 AM
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Anyone now talking about deficits is admitting they expect the current economic malaise to be a permanent situation, with no potential for growth in our economy.
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Kurt_and_Hunter
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Tue Nov-09-10 11:28 AM
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2. Yes, the hunker down and wait view is deeply pessimistic at heart |
Jackpine Radical
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Tue Nov-09-10 11:35 AM
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3. Under Republicorp policies, |
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that is an accurate reflection of the future.
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Kurt_and_Hunter
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Tue Nov-09-10 02:41 PM
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Thu May 02nd 2024, 12:48 PM
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