Krugman's very very simple solution to end this depression

[DSGE]

No, when wages failed to keep pace with inflation, forcing women into the workforce.
Bet you weren't around then.

Because of supply shocks. Supply shocks (from the relative price of oil increasing) cause income to fall and prices to rise; demand shocks (because of monetary policy) cause both prices and incomes to rise. This is simple shit.

Germany did not experience the inflation we did in the 1970s, despite being even more dependent on foreign oil than we were.

They absolutely experienced inflation spikes:

The absolute value of inflation was lower than in the US because they ran demand-side inflation a lot lower (money growth); but they experienced inflation from oil shocks.

Inflation is always and everywhere a monetary phenomenon.

That doesn't mean that inflation only happens because of monetary growth. Inflation happens when goods become more scarce relative to money. If we print more money, money is less scarce relative to goods, so the price level rises. If there's a negative supply shock, we can't produce as many goods as before; the same quantity of money becomes less scarce relative to goods, so the price level rises. That's what "is always a monetary phenomenon" means.

And obviously above your head.

You can insult me all you like, but you've clearly demonstrated that your knowledge of economics is extremely cursory.

 

[The Rabbi]

You've clearly demonstrated you are a moron.
I wrote Germany did not experience the inflation we did. That stands as a true statement.
Despite your fantasies, inflation is a monetary phenomenon.

 

[ilia25]

The truth is boring and repetitive sometimes.

But you could easily make your case by pointing to a case where a government economic stimulus solved a recession.

Stimulus is not for solving recessions. It is only needed in a depressed economy when central bank is unwilling to help. This depression is the first one since 30s. Then WWII provided big enough stimulus to end the depression. This time there was no meaningful stimulus, so we are still in depression.

A trillion dollars is not meaningful?

What trillion dollars? Here is the total government spending:

A slight uptick in 2009 followed by 3 years of stagnation.

And Japan shows you are wrong.

Japan never had high unemployment, so it is debatable whether its economy was really depressed.

 

[DSGE]

You've clearly demonstrated you are a moron.
I wrote Germany did not experience the inflation we did. That stands as a true statement.
Despite your fantasies, inflation is a monetary phenomenon.

You failed to actually respond to any of the points raised. It's all too clear who the real moron is.

 

[The Rabbi]

Stimulus is not for solving recessions. It is only needed in a depressed economy when central bank is unwilling to help. This depression is the first one since 30s. Then WWII provided big enough stimulus to end the depression. This time there was no meaningful stimulus, so we are still in depression.

A trillion dollars is not meaningful?

What trillion dollars? Here is the total government spending:

A slight uptick in 2009 followed by 3 years of stagnation.

And Japan shows you are wrong.

Japan never had high unemployment, so it is debatable whether its economy was really depressed.

OK, with that comment you show you are fucking clueless and a waste of time.
Join your pals on iggy.

 

[ilia25]

Despite your fantasies, inflation is a monetary phenomenon.

Wages not keeping up with commodity prices is NOT a monetary phenomenon. Inflation is a monetary phenomenon only to the extent that it is driven by rising wages -- and that is why monetary inflation is never a problem (as long as inflation does not become too high, i.e. remains below, say, 10%).

 

[The Rabbi]

You've clearly demonstrated you are a moron.
I wrote Germany did not experience the inflation we did. That stands as a true statement.
Despite your fantasies, inflation is a monetary phenomenon.

You failed to actually respond to any of the points raised. It's all too clear who the real moron is.

The points you've raised have been responded to and refuted. You have not raised any additional points. You merely repeat your error over and over.
Inflation is too many dollars chasing too few goods. That is a monetary phenomenon.

 

[DSGE]

You've clearly demonstrated you are a moron.
I wrote Germany did not experience the inflation we did. That stands as a true statement.
Despite your fantasies, inflation is a monetary phenomenon.

You failed to actually respond to any of the points raised. It's all too clear who the real moron is.

The points you've raised have been responded to and refuted. You have not raised any additional points. You merely repeat your error over and over.

I haven't seen you respond about the important distinction between supply inflation and demand inflation.

Inflation is too many dollars chasing too few goods. That is a monetary phenomenon.

Yes. That's what I said. It's about the relative scarcity of goods to money. Money can be made less scarce by either 1) increasing the quantity of money (which increases income as well as prices); 2) decreasing the quantity of goods (which decreases income and raises prices).

So you can't just look at "inflation" and say "incomes aren't keeping up with it". Inflation comes from two places; one increases income, one doesn't. You have not addressed that point.

 

[The Rabbi]

You failed to actually respond to any of the points raised. It's all too clear who the real moron is.

The points you've raised have been responded to and refuted. You have not raised any additional points. You merely repeat your error over and over.

I haven't seen you respond about the important distinction between supply inflation and demand inflation.

Inflation is too many dollars chasing too few goods. That is a monetary phenomenon.

Yes. That's what I said. It's about the relative scarcity of goods to money. Money can be made less scarce by either 1) increasing the quantity of money (which increases income as well as prices); 2) decreasing the quantity of goods (which decreases income and raises prices).

So you can't just look at "inflation" and say "incomes aren't keeping up with it". Inflation comes from two places; one increases income, one doesn't. You have not addressed that point.

There is no point.
If prices increase 10% and income increases 8% that is a net loss for wage earners.

 

[DSGE]

The points you've raised have been responded to and refuted. You have not raised any additional points. You merely repeat your error over and over.

I haven't seen you respond about the important distinction between supply inflation and demand inflation.

Inflation is too many dollars chasing too few goods. That is a monetary phenomenon.

Yes. That's what I said. It's about the relative scarcity of goods to money. Money can be made less scarce by either 1) increasing the quantity of money (which increases income as well as prices); 2) decreasing the quantity of goods (which decreases income and raises prices).

So you can't just look at "inflation" and say "incomes aren't keeping up with it". Inflation comes from two places; one increases income, one doesn't. You have not addressed that point.

There is no point.

Look a little harder.

If prices increase 10% and income increases 8% that is a net loss for wage earners.

Of course. How is this hard to understand? Some inflation comes from money growth, which raises nominal incomes. Some inflation comes from supply shocks (like the oil shocks of the 70s), and raises prices without raising income.

Here's why it should be super obvious to you: if inflation through excessive money growth could raise prices without a corresponding raise in wages, then monetary policy can permanently change the real wage. There's your first hint, since it violates the classical dichotomy. Your second hint is that this results in a permanent Phillips curve trade-off. Through setting the rate of inflation at an appropriate level the central bank can permanently affect the real wage such that no unemployment happens. They can permanently keep the economy at full employment by accepting more inflation. This was the theory that 70s stagflation disproved.

To summarize, this is what you need to address: 1) Monetary inflation must necessarily raise incomes in the same proportion as prices otherwise the Phillips curve holds. 2) Wages will not keep up with "inflation" when that inflation comes from supply shocks rather than demand shocks.

 

[geauxtohell]

He says very very clearly in his book that the government should spend money exactly like it did when WW II started to end this current depression the way it ended the Great Depression.

Does any liberal dare to think that by producing about 100 million planes tanks ships heavy weapons and tanks that it would help rather than hurt our economy??

Certainly you don't think he meant actually building weapons, do you?

Yes. Yes, he does.

 

[The Rabbi]

I haven't seen you respond about the important distinction between supply inflation and demand inflation.



Yes. That's what I said. It's about the relative scarcity of goods to money. Money can be made less scarce by either 1) increasing the quantity of money (which increases income as well as prices); 2) decreasing the quantity of goods (which decreases income and raises prices).

So you can't just look at "inflation" and say "incomes aren't keeping up with it". Inflation comes from two places; one increases income, one doesn't. You have not addressed that point.

There is no point.

Look a little harder.

If prices increase 10% and income increases 8% that is a net loss for wage earners.

Of course. How is this hard to understand? Some inflation comes from money growth, which raises nominal incomes. Some inflation comes from supply shocks (like the oil shocks of the 70s), and raises prices without raising income.

Here's why it should be super obvious to you: if inflation through excessive money growth could raise prices without a corresponding raise in wages, then monetary policy can permanently change the real wage. There's your first hint, since it violates the classical dichotomy. Your second hint is that this results in a permanent Phillips curve trade-off. Through setting the rate of inflation at an appropriate level the central bank can permanently affect the real wage such that no unemployment happens. They can permanently keep the economy at full employment by accepting more inflation. This was the theory that 70s stagflation disproved.

To summarize, this is what you need to address: 1) Monetary inflation must necessarily raise incomes in the same proportion as prices otherwise the Phillips curve holds. 2) Wages will not keep up with "inflation" when that inflation comes from supply shocks rather than demand shocks.

1) That is a non sequitur. Inflation affects different wages and different prices differently. There is nothng uniform about it.
2) The source of the "shock" is irrelevant as the source of inflation is monetary. If the money supply is constant then a rise in the price of one input will be off set by a fall in demand. That is supposed to be what happens.

 

[DSGE]

There is no point.

Look a little harder.

If prices increase 10% and income increases 8% that is a net loss for wage earners.

Of course. How is this hard to understand? Some inflation comes from money growth, which raises nominal incomes. Some inflation comes from supply shocks (like the oil shocks of the 70s), and raises prices without raising income.

Here's why it should be super obvious to you: if inflation through excessive money growth could raise prices without a corresponding raise in wages, then monetary policy can permanently change the real wage. There's your first hint, since it violates the classical dichotomy. Your second hint is that this results in a permanent Phillips curve trade-off. Through setting the rate of inflation at an appropriate level the central bank can permanently affect the real wage such that no unemployment happens. They can permanently keep the economy at full employment by accepting more inflation. This was the theory that 70s stagflation disproved.

To summarize, this is what you need to address: 1) Monetary inflation must necessarily raise incomes in the same proportion as prices otherwise the Phillips curve holds. 2) Wages will not keep up with "inflation" when that inflation comes from supply shocks rather than demand shocks.

1) That is a non sequitur. Inflation affects different wages and different prices differently. There is nothng uniform about it.

Well no, because again that violates the classical dichotomy. Even so, it's still not non-sequitur. If prices can increase from monetary inflation without wages increases, then monetary policy can permanently change the real wage. It follows that the Phillips curve must hold.

2) The source of the "shock" is irrelevant as the source of inflation is monetary. If the money supply is constant then a rise in the price of one input will be off set by a fall in demand. That is supposed to be what happens.

You think following a price rise, demand falls and brings the price back to normal? Is that what you're saying? Because that's ridiculous. The quantity demanded, distinct from the demand schedule, will fall endogenously, but the price will still be higher.

Say the supply of money is constant. If there is a supply shock, a shock that reduces the quantity of output we can produce, prices must rise as the natural reaction to increased scarcity. The quantity of money is the same, output has fallen, so output is now more scarce relative to money than before.

Seriously, just think about the quantity theory of money for half a second. MV = PY, V = constant. If we set M constant, MV is constant. PY isn't constant though. Y, real output, isn't constant. If Y grows, P must fall. If Y falls, P must rise.

 

[expat_panama]

...Spain cut spending this year, they immediately went into a recession. Greece cut spending twice, both times, they went into a recession...

--and over the past 70 years the US has cut spending nine times and not once did it cause a recession. Must not be spending cuts that cause recessions.

Then again Spain, Greece, and the US elected socialist governments and all three have crippled economies. Must be socialism.

 

[bripat9643]

So, ed, in relation to why gov spending works, let me discuss one of your heroes, Reagan. .

too stupid why change the subject to Reagan?? Krugman didn't do that; he said, buy weapons to end this depression.

Why can't the idiot liberal explain why that most basic principle of liberalism will work!!

Ed,

Apparently you can not understand the queens english. I did not change the subject. The subject was deficit spending. And that is EXACTLY what Reagan did.

One of your many problems, ed, is that you can not admit that your hero used deficit spending to get his economic problems resolved. He did, though, ed. It is a historical fact, should you care about facts. And the economy, ed, is totally impartial. It does not care if deficit spending is on war or paying unemployment. Or infrastructure. It simply feeds off of increased demand. Though it does depend on what you spend on. There is this thing called the multiplier effect. But I know you will not understand that.

Wrong. Reagan cut taxes, cut regulation, and he restrained the growth of government. Keynesism was prove wrong by the record of the Carter Administration. If deficit spending is so great for the economy, then why isn't it booming right now?

Liberals never have an answer for that.

 

[bripat9643]

Despite your fantasies, inflation is a monetary phenomenon.

Wages not keeping up with commodity prices is NOT a monetary phenomenon. Inflation is a monetary phenomenon only to the extent that it is driven by rising wages -- and that is why monetary inflation is never a problem (as long as inflation does not become too high, i.e. remains below, say, 10%).

You don't even understand the term "monetary," let alone "inflation." If inflation was "driven by rising wages," then it wouldn't be a monetary phenomenon. However, then you'll have to explain why wages are rising.

If "monetary inflation" is never a problem, then you must believe the economy of Zimbabwe is the ideal. What makes 10% the magic cutoff point? What's the scientific principle for that determination?

Your understanding of economics is entirely voo-doo and hocus-pocus.

 

[bripat9643]

You've clearly demonstrated you are a moron.
I wrote Germany did not experience the inflation we did. That stands as a true statement.
Despite your fantasies, inflation is a monetary phenomenon.

You failed to actually respond to any of the points raised. It's all too clear who the real moron is.

The points you've raised have been responded to and refuted. You have not raised any additional points. You merely repeat your error over and over.
Inflation is too many dollars chasing too few goods. That is a monetary phenomenon.

Exactly. Libturds will never admit that because they love inflation.

 

[expat_panama]

...Last 2 years were pretty drastic...

...2% spending cut is simply too small to draw any conclusion.

We call the latest numbers "drastic" when we want it to fit the description of severe austerity, and we say it's "simply too small" when we see the deficit shrink. The inconsistency makes the story unacceptable.

It's a lot easier to go with the two facts --first that we have not just had two years of austerity, and second that spending cuts see deficit cuts even during a recession.

 

[Widdekind]

What trillion dollars? Here is the total government spending:

Fiscal stimulus means running a huge budget deficit, between government expenditures (G), and tax revenues (T), such that (G >> T). Your plot only looks at the spending side (G), but a Fiscal stimulus requires a big deficit (G-T >> 0), not merely big spending (G >> 0).

...Spain cut spending this year, they immediately went into a recession. Greece cut spending twice, both times, they went into a recession...

--and over the past 70 years the US has cut spending nine times and not once did it cause a recession. Must not be spending cuts that cause recessions

again, Fiscal stimulus requires running deficits, the difference between spending & taxing. If spending falls, whilst taxes fall more, then the deficit actually increases. Reducing spending is not predicted to cause recessions (by itself); instead reducing deficits can cause recessions.

...If deficit spending is so great for the economy, then why isn't it booming right now?

spending by itself does no good, only spending in excess of taxing. And, even then, government can mis-spend money, which ruins the Fiscal stimulus.

 

[The Rabbi]

Look a little harder.



Of course. How is this hard to understand? Some inflation comes from money growth, which raises nominal incomes. Some inflation comes from supply shocks (like the oil shocks of the 70s), and raises prices without raising income.

Here's why it should be super obvious to you: if inflation through excessive money growth could raise prices without a corresponding raise in wages, then monetary policy can permanently change the real wage. There's your first hint, since it violates the classical dichotomy. Your second hint is that this results in a permanent Phillips curve trade-off. Through setting the rate of inflation at an appropriate level the central bank can permanently affect the real wage such that no unemployment happens. They can permanently keep the economy at full employment by accepting more inflation. This was the theory that 70s stagflation disproved.

To summarize, this is what you need to address: 1) Monetary inflation must necessarily raise incomes in the same proportion as prices otherwise the Phillips curve holds. 2) Wages will not keep up with "inflation" when that inflation comes from supply shocks rather than demand shocks.

1) That is a non sequitur. Inflation affects different wages and different prices differently. There is nothng uniform about it.

Well no, because again that violates the classical dichotomy. Even so, it's still not non-sequitur. If prices can increase from monetary inflation without wages increases, then monetary policy can permanently change the real wage. It follows that the Phillips curve must hold.

.

No, that is both an invalid argument and an unsound one. It is invalid because the idea that monetary policy can change real wages does not come logically from prices increasing.
It is unsound because in monetary inflation wages will increase somewhat as well. A definition of inflation is a "general rise in prices." That would include wages, but not all wages equally.