Krugman: When everyone spends less or deleverages you have depression...

Discussion in 'Economy' started by EdwardBaiamonte, Jul 29, 2012.

  1. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    because one man's spending is another man's income.

    Krugmans solution is for government stimulus spending to make up the lost spending.

    Everyone laughs knowing that artifical government spending will only create another artificial housing type bubble that eventually bursts causing even more need to deleverage and even more depression.
     
  2. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    Correct. But then after a few years you have recovery.

    What we have now is The Fed delaying the inevitable and making the recovery hole deeper by printing money.

    It's like this: Do you want it Bad now or Worse later?
     
  3. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    why would you have recovery rather than depression??????
     
  4. Joe Steel
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    Joe Steel Class Warrior

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    Of course, Krugman is right. Krugman always is right. An economy is spending. When the private sector doesn't, the public sector must.
     
  5. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    won't that just create another bubble that will burst and cause a depression like the current one????
     
  6. Joe Steel
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    Joe Steel Class Warrior

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    No. It will create economic activity and that will create more economic activity and so on until the economy booms...providing the stimulus is big enough. The problem with the stimulus of a few year ago is, it wasn't.
     
  7. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    yes but why isn't the activity a bubble destined to burst when the government spending stops? Do you know what a bubble is?? Please answer directly without evasion or admit as a liberal you lack the IQ to do so. Thanks
     
    Last edited: Jul 30, 2012
  8. Widdekind
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    Widdekind Member

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    A recession is less bad, than blindly borrowing money, and spending the same on pointless & unprofitable projects. For example, borrowing billions of dollars, to pay people to watch grass grow, would not be a good "Fiscal stimulus". Public borrowings are not "automatically good". Public borrowings, on "huge Public projects", should be even more carefully considered, than private sector borrowings, by individual businesses, for merely "big private projects".
     
  9. ShackledNation
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    ShackledNation Libertarian

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    Well what do you mean by not spending? Do you mean hoarding cash? Because few people do that. Even if they did, it would not affect production in any negative way.

    If you don't spend, money is invested or saved in a bank. Both instances provide businesses more revenue options to expand.

    If you put your money under a mattress, you are increasing the demand for money. This will increase the purchasing power of each dollar being spent, allowing it to obtain more. Prices will fall, including costs of production. So the level of production is not effected, it is just accomplished with fewer dollars of a higher purchasing power.

    So if an economy is not producing, it has to do with a misallocation of resources that prevent successful production from taking place. Often this misallocation, if economy wide, is a result of monetary policy, such as price controls keeping the interest rate artificially low and massive money pumping into the economy. It completely distors the structure of capital, which is often ignored by Keynesian economists. That misallocation of resources was in housing with regards to the current problem.
     
    Last edited: Jul 30, 2012
  10. Rshermr
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    Rshermr VIP Member

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    Of course, you can document that, right, ed. Of course you can not. Just more con dogma, from ed the tea party clown. Remember, ed, stimulus spending worked for Reagan.
    Its just that you always, always, always spread the tea party dogma, that tax cuts and decreasing gov spending are the solution. But you can not point to a single case where that has worked in a bad economy.
     

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