Krugman's very very simple solution to end this depression

[TakeAStepBack]

So the government should borrow another 800 billion dollars from China to pay people to dig holes and fill them back in? Is this what the left calls sound economic activity?

Yes, it is. When economy is depressed virtue become vice. Everyone tightening their belts will only make things worse.

And this is not such a difficult concept to understand, yet you DO have to possess some brain matter in order to achieve that understanding. The problem with people like you is that you can't think beyond bumper sticker slogans.

And that is the ultimate reason we have this depression.

It will make things worse until people are out of hock. Thats life. If you borrow more money to pay for things that you can not afford (in this case you're suggesting the federal govt. borrow money from China to pay employees) you eventually come right back around to the same problem; lack of actual savings/wealth and an overwhelming debt burden. There are no two ways around this, LOLberal.

You can not spend your way out of debt and into wealth. Only a complete fucking fool believes that.

 

[The Rabbi]

Yes, building weapons will help a depressed economy to recover:
* Economy is depressed because everyone in private sector tries to save, thus lowering everyone's incomes
* Rising government spending will encourage private sector to increase spending as well -- that is how multiplier works.

Why is this concept so hard to understand?

Because there is no multiplier.

I just showed you that there is.

As for some idiot's calculations, they cannot be precise -- GDP is affected by many things, not just the government spending.

No it is not. No you did not.
Robert Barro is a Harvard economist. He is hardly an idiot.
What are you qualifications in econ?
Barro on Taxes and Multipliers | Stan Collender's Capital Gains and Games

 

[itfitzme]

... two years of trillions of dollars in new spending and record deficits is what Krugboy calls "drastic cuts in spending" and a "sever and rigid economy".

Did you adjust for population growth and inflation?

Not sure if you're making a joke here. I mean, as if what Krugboy said would be different depending on population and inflation...

No joke. You said, "record deficits". I asked, did you adjust for population and inflation. Every year, population goes up, inflation goes up. Every year, everything else being the same, it is always a record.

 

[itfitzme]

Deflation is natural, while inflation is not.

Deflation is negative inflation. Both are a function of the the money supply. The money supply is man made. The entire economy is man made. Man made is the opposite of "natural".

 

[TakeAStepBack]

So deflation (an apparent negative) is bad and inflation (increased supply of money - translating into increased prices) is good. I'll bet we can spend our way into wealth also.

 

[DSGE]

So deflation (an apparent negative) is bad and inflation (increased supply of money - translating into increased prices) is good. I'll bet we can spend our way into wealth also.

Are you seriously saying this shit? Come on dude.

First thing is first, we want to separate demand and supply side inflation/deflation (that's why it's better to just talk about NGDP). Supply side deflation, falling prices which come from increasing productivity, is good. Supply side inflation, prices rising due to increased scarcity due to a negative supply shock, is also good.

Unexpected demand side inflation (from the supply of money outpacing demand for it), it bad. It redistributes wealth from creditors to debtors.

Unexpected demand side deflation is also bad. It redistributes wealth from debtors to creditors, and due to downward nominal wage rigidity can create severe recessions.

 

[expat_panama]

...two years of trillions of dollars in new spending and record deficits is what Krugboy calls "drastic cuts in spending" and a "sever and rigid economy".

Did you adjust for population growth and inflation?

...Every year, everything else being the same, it is always a record.

No it isn't.

Sometimes we have a surplus, sometimes a deficit. Sometimes (like several years following the '03 tax-cuts) we have a shrinking deficit. Any way we cut it, current deficits are extraordinary and Krugboy calling it 'austerity' is crazy.

 

[ilia25]

If you're paying down debt, then your income is lower.

No it is not, please stop writing nonsense. There is no connection between your income and your dept payments -- they can rise and fall independently. Putting it the way you understand it -- a person can get a promotion and and a nice rise and so he will increase his mortgage payments. Therefore both his income and his debt payments have increased.

What you are directly affecting by increasing your debt payment is somebody else's income. That is why it is so hard for people to make a connection between them trying to save and losing their jobs as result.

 

[The Rabbi]

So deflation (an apparent negative) is bad and inflation (increased supply of money - translating into increased prices) is good. I'll bet we can spend our way into wealth also.

He's actually right on this one. Inflation/deflation are monetary phenomenon. And having seen some of both, I'll take a mild inflation over a mild deflation.

 

[The Rabbi]

If you're paying down debt, then your income is lower.

No it is not, please stop writing nonsense. There is no connection between your income and your dept payments -- they can rise and fall independently. Putting it the way you understand it -- a person can get a promotion and and a nice rise and so he will increase his mortgage payments. Therefore both his income and his debt payments have increased.

What you are directly affecting by increasing your debt payment is somebody else's income. That is why it is so hard for people to make a connection between them trying to save and losing their jobs as result.

He possibly means "disposable income" which would be a true statement.

 

[ilia25]

Because there is no multiplier.

I just showed you that there is.

As for some idiot's calculations, they cannot be precise -- GDP is affected by many things, not just the government spending.

No it is not. No you did not.
Robert Barro is a Harvard economist. He is hardly an idiot.

And Paul Krugman is a Nobel-prize winner. But one of them must be talking nonsense. And it is pretty obvious who. It is very easy to explain how the multiplier works.

But it try to explain to me how the hell one can separate the effect of govt. sending on GDP form all other factors that can make GDP go up (or down)?

Barro points to the falling private spending during WWII. Now tell how he is not an idiot? Doesn't he know that private sector was being affected not just by the government spending, but by other things? Little things like the world war happening at the same time, with rationing of consumption goods and millions able men getting conscripted?

 

[The Rabbi]

I just showed you that there is.

As for some idiot's calculations, they cannot be precise -- GDP is affected by many things, not just the government spending.

No it is not. No you did not.
Robert Barro is a Harvard economist. He is hardly an idiot.

And Paul Krugman is a Nobel-prize winner. But one of them must be talking nonsense. And it is pretty obvious who. It is very easy to explain how the multiplier works.

But it try to explain to me how the hell one can separate the effect of govt. sending on GDP form all other factors that can make GDP go up (or down)?

Barro points to the falling private spending during WWII. Now tell how he is not an idiot? Doesn't he know that private sector was being affected not just by the government spending, but by other things? Little things like the world war happening at the same time, with rationing of consumption goods and millions able men getting conscripted?

You cannot explain how the multiplier works. Because it doesn't.

 

[ilia25]

If you're paying down debt, then your income is lower.

No it is not, please stop writing nonsense. There is no connection between your income and your dept payments -- they can rise and fall independently. Putting it the way you understand it -- a person can get a promotion and and a nice rise and so he will increase his mortgage payments. Therefore both his income and his debt payments have increased.

What you are directly affecting by increasing your debt payment is somebody else's income. That is why it is so hard for people to make a connection between them trying to save and losing their jobs as result.

He possibly means "disposable income" which would be a true statement.

True, but also completely irrelevant. The key point in understanding depression is that paying off you debt lower not just your disposable income (duh!), but indirectly reduces your gross income as well. Thus making your debt problems worse, not better.

 

[The Rabbi]

No it is not, please stop writing nonsense. There is no connection between your income and your dept payments -- they can rise and fall independently. Putting it the way you understand it -- a person can get a promotion and and a nice rise and so he will increase his mortgage payments. Therefore both his income and his debt payments have increased.

What you are directly affecting by increasing your debt payment is somebody else's income. That is why it is so hard for people to make a connection between them trying to save and losing their jobs as result.

He possibly means "disposable income" which would be a true statement.

True, but also completely irrelevant. The key point in understanding depression is that paying off you debt lower not just your disposable income (duh!), but indirectly reduces your gross income as well. Thus making your debt problems worse, not better.

Could I get that in English?

 

[ilia25]

No it is not. No you did not.
Robert Barro is a Harvard economist. He is hardly an idiot.

And Paul Krugman is a Nobel-prize winner. But one of them must be talking nonsense. And it is pretty obvious who. It is very easy to explain how the multiplier works.

But it try to explain to me how the hell one can separate the effect of govt. sending on GDP form all other factors that can make GDP go up (or down)?

Barro points to the falling private spending during WWII. Now tell how he is not an idiot? Doesn't he know that private sector was being affected not just by the government spending, but by other things? Little things like the world war happening at the same time, with rationing of consumption goods and millions able men getting conscripted?

You cannot explain how the multiplier works. Because it doesn't.

I had explained how multiple works several times in this thread alone. You can't explain how it could not work. All you can is repeating that is doesn't.

 

[ilia25]

He possibly means "disposable income" which would be a true statement.

True, but also completely irrelevant. The key point in understanding depression is that paying off you debt lower not just your disposable income (duh!), but indirectly reduces your gross income as well. Thus making your debt problems worse, not better.

Could I get that in English?

Everyone's money income is someone else's spending. When everyone is cutting his spending, everyone is getting less income.

Simple enough?

 

[The Rabbi]

And Paul Krugman is a Nobel-prize winner. But one of them must be talking nonsense. And it is pretty obvious who. It is very easy to explain how the multiplier works.

But it try to explain to me how the hell one can separate the effect of govt. sending on GDP form all other factors that can make GDP go up (or down)?

Barro points to the falling private spending during WWII. Now tell how he is not an idiot? Doesn't he know that private sector was being affected not just by the government spending, but by other things? Little things like the world war happening at the same time, with rationing of consumption goods and millions able men getting conscripted?

You cannot explain how the multiplier works. Because it doesn't.

I had explained how multiple works several times in this thread alone. You can't explain how it could not work. All you can is repeating that is doesn't.

It doesn't work because Gov't doesn't have money in the bank to spend on projects. It must coerce that money from somewhere. So for every person who benefits there is another somewhere else who suffers.
It is Hazlett's Broken Window theory.
And the proof that it doesn't work is the stimulus, which has failed.

 

[ilia25]

Did you adjust for population growth and inflation?

...Every year, everything else being the same, it is always a record.

No it isn't.

Sometimes we have a surplus, sometimes a deficit. Sometimes (like several years following the '03 tax-cuts) we have a shrinking deficit. Any way we cut it, current deficits are extraordinary and Krugboy calling it 'austerity' is crazy.

Look at your own chart. The reason for current deficits is low government income (low, because the economy is depressed). Austerity will reduce the government receipts further, thus increasing the deficits. We can watch this happening in Europe.

 

[The Rabbi]

True, but also completely irrelevant. The key point in understanding depression is that paying off you debt lower not just your disposable income (duh!), but indirectly reduces your gross income as well. Thus making your debt problems worse, not better.

Could I get that in English?

Everyone's money income is someone else's spending. When everyone is cutting his spending, everyone is getting less income.

Simple enough?

Only in a gross aggregate sense that doesn't have much to do with the real world, I guess.
Because when people pay debt, someone is collecting the money.

 

[DSGE]

True, but also completely irrelevant. The key point in understanding depression is that paying off you debt lower not just your disposable income (duh!), but indirectly reduces your gross income as well. Thus making your debt problems worse, not better.

Could I get that in English?

Everyone's money income is someone else's spending. When everyone is cutting his spending, everyone is getting less income.

Simple enough?

You're completely ignoring monetary policy though. These kinds of arguments only apply when the central bank is fixing the size of the monetary base. If you want to talk about fiscal multipliers, you need to talk about why the central bank isn't offsetting demand shocks (such as from fiscal policy) as it usually does. Krugman brings up the liquidity trap - though that's ridiculous, and we can get into why if you're familiar with it- and without the liquidity trap argument we're back in the normal world where the fiscal multiplier is roughly zero. The only way fiscal policy is justifiable (and Krugman understands this) is if monetary policy can't do anything.