Skip to main content

I need to get these notes down on record before I go on what may later look like an incoherent rant, because I'm so sick and tired of the lying austerian liars and the faux experts who they use as puppets. Forgive the rambling.

Here are some basic facts that are guiding the US economy right now:

1) We are not on the gold standard. The government creates money, people create real resources. Inflation comes about from many ways, usually too much money chasing too few resources, our capacity utilization is low, and unemployment high, so we have too MANY free resources right now.

2) You can't balance the budget while the dollar is the reserve currency (making us run a current account deficit), without sending the private sector into a deficit.

Private Balance = Current Account Balance - Fiscal Balance.

This is law. This is an accounting identity, an equality that is unbroken.

Since we have to supply the world with dollars the Current Account will maintain a deficit, and if we balance the Fiscal position it will send the private sector into a deficit that they may or may not be ready to take on (like the Clinton years).

3) All money is created by being borrowed into the economy
--“ either the Fed prints it and gives it to a bank to lend or the government to spend, or a bank creates loans to businesses or households and covers them with debt.

4) The "national debt" can't be paid off, it's not meant to be paid off, just like bank deposits aren't meant to be all withdrawn. Given the current system of how the Fed conducts monetary policy, this is just a truth. This keeps us interdependent in the economy, working for each other, buying things from each other, and investing in each other.

5) In a time of recession from overleveraging where the private sector won't stimulate the economy, austerity is destructive and only leads to job losses and recessions without improving the fiscal position (the UK is nearing a triple-dip). Outside the UK's disaster, we've seen the failure of austerity in Spain and Italy, and most famously in Greece. The supposed good examples of austerity involve nations who are still well below pre-crisis levels of employment and growth.

6) The government is not a family or a business. It is a government, and that is distinct from either a business or a family. The finances work completely differently for all the reasons listed above. Governments don't have to "live within their means", because they create money to distribute through the banking system or through spending. They don't need to "balance budgets", because doing so is destructive. The mechanics are completely different and this is a false analogy that people need to stop adhering to for their personal economic policy ideas.

How much more damage needs to be done to the British and Japanese people, and now the American people, with sovereign currencies, being told that we are going to run out of money, or that we can't afford to pay for things, before we accept that austerity is wrong and stimulus is the real solution? The austerians are lying to push their agenda of reducing labor costs and forcing the public to borrow from the private banks instead of getting government spent money directly.

We are not Greece, we have our own currency and we have a lot of freedom because of that which others don't. Japan, UK and US are being lied to and pushed into horrible policy based on voodoo and liar economics. How many years are we supposed to go on with austerity before they acknowledge it's a failure? At what point is it our turn to take the wheel?

------------------
This is here just to have on the record in case by some miracle years from now the nation has an epiphany and begins to understand the modern economy and monetary system.  Then I can point to it and say: "see, I told you so!"

Click below to see the anger-induced rant. I initially was naming this thing in my offline document "Mika Brzezinski and Joe Scarborough are Not Economists"  

I've tried my best in the latest entries to stay objective and keep a tone that was accommodating and non-threatening to right-wingers. After all, I used to be a Republican, and I used to be a true believer in the sense that I didn't care about anyone else I just wanted low taxes, a high stock market, and to get as rich as possible. I was also stuck in the bubble, and at times I would literally make up facts to support myself in arguments. The ideology came first, and I would find the facts afterward with statistics (whatever would work for my argument) no matter how misleading or out of context they may have been. So again, I have sympathy for the right-wing, for low-information voters, and for people who really just don't understand the monetary system or the economy.

But I just can't take it anymore. I'm 26 and I feel as if I was part of the end of the generation that had debate clubs, political clubs, and reading clubs. I'm not into "œcable news" (of any variety),  debating in slogans or reading dubious Internet "news" sources with racy headlines that are usually put in question form to avoid civil libel lawsuits.

So when I was checking in on Paul Krugman's latest blog post about his time on Morning Joe, I was venturing into new territory by watching the interview. I was absolutely disgusted by the lack of quality of the debate, not because of Krugman, but because of "Mika" who is supposedly a liberal, and "œJoe" who is allegedly a moderate Republican, and the other guests who were policymakers who grew up in the gold era and seem to think we're still on the gold standard.

When a distinguished economist like Paul Krugman is going out there to teach (and yes, I mean TEACH, because he IS the economist) these so-called "œpundits" about the current economic issues we face, and they respond with nothing but disrespect and scowls, it makes me lose hope in a lot of things in this country.

Imagine, just for a second, that an expert on, say, physics was coming onto a show like "Morning Joe" to explain about some physics issue. Now, think of a group of clowns on a show like Morning Joe insisting that they know more about physics than the physicist and insulting him for making an effort to explain complex perceived paradoxes in the field of physics. How stupid would they look, and why is it that a well-decorated economist is treated with ridicule and arm-chair economists claiming they know more talk over the expert?

Granted, there are a lot of economists who don't know what they are talking about, and consensus is a lot harder to find in social sciences (even a "hard" social science like Economics), but still, this was a disgraceful interview with atrocious behavior from the hosts and guests.

So it was no surprise that this clown Joe Scarborough doubled down by writing an Op/Ed about how Krugman is against the whole world and he can't possibly be right about deficits not mattering in the short-run.

It's amazing that even when we have the examples of Japan's lost decade/perma-stagnation and Europe's failed austerity, the policy elites in DC push failed austerity and warped priorities about paying off debt instead of stimulating jobs.  And the puppets in the media are good little doggies and continue the same old line about "tightening our belt" and "œliving within our means" and using failed analogies of government being like a business or household (all talking points from the era of the gold standard).

Well when I saw this article I just had to read through the comments and see how the general public was reacting to this kind of drivel. I was pleased to see that a lot of liberals, while still expressing fear of the deficit irrationally, were supporting Krugman and knew the priority had to be with jobs. But then I saw the right-wingers hit the comment section, and I lost my cool.

People talking about "œskyrocketing debt that is going to bankrupt us" and "we need to balance the budget" and "œhyperinflation is coming" or "we can't borrow forever" or even "we're stealing from our children" and, my favorite one, "we're running out of money!" All sorts of factually incorrect hyperbole designed only to instill fear in individuals so that they will go along with austerity.

Some of these individuals claim to be MBA's, or seasoned Washington insiders, people you would think should know how the system works, at least the very fact that we print our own money, and that there is no inflation from QE or that rates have improved as debt has gone up. It makes me wonder, how many of these people actually know the facts and just push lies to serve some agenda? How many of them are true believers? Why are all the people who do understand the system not correcting the mass public misconception? This smacks of the same misinformation on the Fiscal Cliff where individuals in the media were referring to it as if it was a debt crisis, rather than the austerity bomb that it was.

I'm forced to conclude there are one of two problems (or both) going on here:

1) The field of economics is in a dark age, with knowledgeable economists apparently forgetting basic tenets like accounting identities or fiat money creation/central banking (this is something Krugman has alluded to before as well),

2) People don't want to take the time to understand the system (or may even lack the capacity to) and they trust the wrong people to tell them how it works.

The entire public is vastly uninformed on key topics in this area, and it could really destroy the economy in the long-run if people don't understand them. The future looks very dim given this problem, if people keep talking about balancing budgets while the dollar is the world reserve currency.

People don't understand government finance, they don't understand business, and they're so used to learning things in slogans and flashy short-attention-span new media that they don't read the details that are required to be delved into in order to understand concepts that aren't superficial. And the most important issues are the ones that ARE NOT solved by screaming matches and sexy maxims and "gotchas."

Or maybe, like in Japan, the elderly population of the US is just irrationally afraid of inflation and won't do anything to risk destroying their nest egg, or doing anything that may help. The irony of course is that the austerity is what would hurt the kids and youth of the nation, not debt, not a risk of inflation, but cutting spending on the education and infrastructure that the youth need, THAT is what is hurting our children

My main fear is that the mismanagement of the fiat system will lead to a collapse in the system, not because a fiat system is bad, but just because so many policymakers don't seem to understand the basic ideas.

As Krugman finished the segment saying "œHow much longer do you have to be wrong, while I am proving to be right, until you actually accept what I'm saying?"

That's the end of my rant. I really hope I'm wrong and that the nation will have a collective epiphany on the system. And I'm not going to watch any cable news unless I've got a lifetime supply of hashish to calm me down from the viceral reaction I have to the display of utter ignorance and stupidity that dopey pundits flaunt.

Originally posted to AusteritySucks on Tue Jan 29, 2013 at 10:23 AM PST.

Also republished by Community Spotlight.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  "Austerian" is double-plus brilliant (17+ / 0-)

    Not for nothing does the Right celebrate Aust(e)rian Economics.

    You know, I sometimes think if I could see, I'd be kicking a lot of ass. -Stevie Wonder at the Glastonbury Festival, 2010

    by Rich in PA on Tue Jan 29, 2013 at 10:32:36 AM PST

  •  The Corporate Media are not incompetent. (33+ / 0-)

    They are doing their job. That job is framing; setting the terms of the debate. They work for those who pay them, i.e. the investor class, and not for their viewers or the country as a whole. The people who appear on TeeVee are there because they are politically reliable. They can be counted upon to parrot whatever framing the ruling elite demand. Squawk ... Weapons of Mass Destruction, Squawk ... Failing Schools, Squawk ...Uncertainty, Squawk ... Fiscal Cliff, Squawk ... Debt Crisis, and so it goes.

    The free market is not the solution, the free market is the problem.

    by Azazello on Tue Jan 29, 2013 at 11:02:22 AM PST

  •  as long as the moneyed class finances elections (3+ / 0-)

    or, perhaps, as long as a significant faction of the moneyed class determines that austerian policies hurt their bottom line enough that it's worth financing an opposition to those policies.

  •  The field of economics has been "captured" in (10+ / 0-)

    the same way that the media and regulatory agencies have been captured by the entities they are supposed to be monitoring.

    Excellent essay/rant.

    •  That's ridiculous. (2+ / 0-)
      Recommended by:
      Sparhawk, FG

      Too many people disbelieve economics simply because it tells them things they don't want to hear.

      I'm not sure why this is more socially acceptable than say, disbelieving evolution in the "reality based community."

      •  I believe in Krugman's and Stiglitz' economics (6+ / 0-)

        and perhaps the economics of the Galbraiths.

        if necessary for years; if necessary, alone

        by SouthernLiberalinMD on Tue Jan 29, 2013 at 02:36:04 PM PST

        [ Parent ]

        •  Stiglitz gets it more than Krugman (6+ / 0-)

          per, e.g.,

          OMG, Stiglitz is Now an MMTer from Economic Policy Journal on 4/13/12
          which effectively updates
          this from Ralphonomics, 8/23/11
          vs this for Krugman:
          Paul Krugman vs. MMT: The Great Debatefrom John Carney on CNBC, 4/3/12
          Krugman's making steps, but he's not quite there.

          For more search for "stiglitz MMT" and "krugman MMT"

          United We Understand — e MMT unum

          by dorkenergy on Tue Jan 29, 2013 at 04:20:16 PM PST

          [ Parent ]

          •  Actually, Modern Monetary Theory (MMT) is also (11+ / 0-)

            known as "Chartalism" and is a post-Keynesian concept.  A pure Keynesian (of which I am close to one) does not accept that government debt does not matter, as it represents a risk on the future production of the nation.  The Keynesian model is counter-cyclical.  That is, government should pro-actively spend during economic recessions to stimulate economic activity and rein in excessive investment during bull markets by raising taxes to slow down an overheating economy (and pay down the debt to free up needed capital later).

            I have developed an idea that there is a kind of "string theory" to personal consumption spending and budgets, and government spending and budgets.  That is, while households cannot create production, governments can through targeted stimulative spending.  Therefore, having a national economy concern itself with paying off debt, while seemingly intuitive, is actually illogical.

            What I have not gotten from Chartalists is: what force limits the issuance of money?

            •  The "forces" that limit issuance of money (10+ / 0-)

              are REAL resources -- e.g, labor.

              From Stephanie Kelton's interview with Harry Shearer

              HARRY SHEARER: Okay, you did mention the “I” word, which I’m sure some people have been screaming at their radios for some time now. So let’s tackle it head on. If the government doesn’t need to tax and it doesn’t need to borrow in order to spend and it spends willy-nilly, people will say hyperinflation, wheelbarrows full of paper money just to buy a loaf of bread, the familiar images in our heads of the Weimar, which certainly still scares the Germans if nobody else. Inflation is a constraint. You’ve acknowledged that. How great a constraint is it?

              STEPHANIE KELTON: Well, it would be a significant constraint if we didn’t have the excess capacity and the millions and millions of unemployed workers. So you expect price pressures when your markets get tight, when you’re running your factories very near their capacity, when the labor market gets so tight that, you know, you have basically a job opening for every job seeker. Then you know you’re really close to full employment.

              You know, you don’t get hyperinflation by running your economy at full employment. Let’s not forget that under the Clinton years, the so-called Clinton boom, we had full employment in this country. We had as close as what I am comfortable referring to as full employment where we actually had one job vacancy for every job seeker. And that was the first time in 35 years that we’d achieved those kinds of numbers. Our inflation rate was so low, nobody even talked about inflation. Inflation was not even on the radar screen. We had high rates of growth of GDP, our unemployment rate officially was 3.7%. We had high growth, low unemployment, and modest inflation. So we did this before and we did it in the not-so-distant past.

              All I’m saying is that the way we’re running the economy right now, this is not fiscally responsible. This is dysfunctional finance. We’re getting everything wrong. We’ve got all kinds of room to run here and we can safely crank up aggregate demand. We can safely cut taxes on those that we think will be most likely to go out and spend, and that spending leads to the sales that then lead to job creation, and we can safely increase government spending on programs like infrastructure, education and the kinds of things that we believe generate real economic growth and prosperity and leave our children and grandchildren better off than they would be otherwise.

              So, in simple form, you issue money until you achieve full employment. Until that point, the resources are not oversubscribed, and hence, no inflation.

              The "Fear of Inflation" will be stoked by self-servers (or their acolytes and sycophants and other unknowing) who do not understand the modern monetary reality.

              United We Understand — e MMT unum

              by dorkenergy on Tue Jan 29, 2013 at 05:54:48 PM PST

              [ Parent ]

            •  Oh, and (7+ / 0-)

              per Chartalism

              can be viewed as both pre- and post-Keynesian.

              Chartalism is a descriptive economic theory that details the procedures and consequences of using government-issued tokens as the unit of money, i.e., fiat money. The name derives from the Latin charta, in the sense of a token or ticket.[1] The modern theoretical body of work on chartalism is known as Modern Monetary Theory or (MMT).

              MMT aims to describe and analyze modern economies in which the national currency is fiat money, established and created exclusively by the government. In MMT, money enters circulation through government spending; Taxation is employed to establish the fiat money as currency, giving it value by creating demand for it in the form of a private tax obligation that can only be met using the government's currency.[2][3] An ongoing tax obligation, in concert with private confidence and acceptance of the currency, maintains its value. Because the government can issue its own currency at will, MMT maintains that the level of taxation relative to government spending (the government's deficit spending or budget surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government's activities per se.

              The theory was presented by German statistician and economist G. F. Knapp in 1895,[4] with important contributions also by Alfred Mitchell-Innes. It was referenced in the 1930 Treatise on Money of John Maynard Keynes,[5] which cited Knapp and "Chartalism" in its opening pages.[6] Chartalism experienced a revival under Keynes and Abba P. Lerner,[7] and has a number of modern proponents.

              Also re households v governments, see the above Kelton interview for her phrasing.

              United We Understand — e MMT unum

              by dorkenergy on Tue Jan 29, 2013 at 06:25:58 PM PST

              [ Parent ]

            •  How do you save up infinity? the gov is never (3+ / 0-)
              Recommended by:
              aguadito, dorkenergy, DBunn

              richer, poorer, or saving.  It is dealing with the infinite numerical system.

              Save numbers in case the numerical system needs some help maintaining infinity?  :)

      •  Misplaced comment? (1+ / 0-)
        Recommended by:
        Judge Moonbox

        Saying that economics has become a propaganda tool of the oligarchy is not saying that one does not "believe" in economics.

      •  Poppycock. Evolution is based on certain facts. (2+ / 0-)
        Recommended by:
        dorkenergy, hubcap

        A fossil here, a fossil there.

        Economics is based on theory.

        Name one economist that is as accepted as Darwin.

        As for telling me things I don't want to hear, I merely have find the right economist to fix that.

        Physics is bulls**t. Don't let them fool you. Fire IS magic.

        by Pescadero Bill on Wed Jan 30, 2013 at 07:38:39 AM PST

        [ Parent ]

      •  This is not the problem: (3+ / 0-)
        Recommended by:
        DBunn, hubcap, ozsea1
        Too many people disbelieve economics simply because it tells them things they don't want to hear.
        The problem is:
        Too many people believe what "economics" has been taught in college as "scientific truth" when it has been completely disproven by evidence.
        The fix the deficit carousel is a lie.

        United We Understand — e MMT unum

        by dorkenergy on Wed Jan 30, 2013 at 08:38:15 AM PST

        [ Parent ]

  •  Question Mark and the Austerians? (10+ / 0-)

    [Couldn't resist the pun sorry]

  •  money is a human-created resource (17+ / 0-)

    unlike fossil fuels or rare earth metals, we cannot possibly run out of money. We can print as much as we like. There will never be such a thing as true scarcity of money, the way there could be a scarcity of potable water.

    The hard-money system has given way to a tiered fiat system--one where money is readily available in plenty to the top tier of banking and finance (for instance, in the form of quantitative easing), and kept artificially scarce for the lower tier, in the form of austerity--that is, saying that the government doesn't have enough money to provide public services.

    HVPCS was not a "magic trick". It was really a fundamental debate about who has the power to create money: the government, or the banks?

    Article I of the Constitution guarantees the power of money creation to Congress, in order to serve the public good. The banks are saying that that isn't allowed--that only the banks can create money, through fractional reserve banking and QE--both of which, of course, are powers Congress gave the banks in the first place.

    Who runs the show here? The people's government, or the banks? That is the question here.

    "In America, the law is king." --Thomas Paine

    by limpidglass on Tue Jan 29, 2013 at 11:38:53 AM PST

    •  Excellent comment (9+ / 0-)

      Great way to hammer home the point.

      Balancing the budget gives all the power to private banks to create the money and send us into debt.

      Running deficits is a the people's way of distribution of money for the public good.

      I'm shocked that people in the media and DC punditry don't see this for exactly what it is, a balance between the government distribution of money directly through spending and the creation of money by banks.

      In my opinion, we should run the show by committing to healthy levels of government spending, then regulating wall street and the banking system so that it produces socially optimal outcomes that financial mediation can provide.

    •  Money is NOT a resource. At all. (4+ / 0-)
      Recommended by:
      katiec, Sparhawk, mrkvica, DBunn

      Go, eat some money.

      Money is not a resource. Money is a mutually agreed placeholder for resources. Its worth rests not in itself, it rests in that mutual agreement. That means it follows fundamentally different  rules and mechanisms.

      You can not print food.  

      You actually have to work to create food.  

      Get used to it.

      ______
      "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

      by cris0000 on Tue Jan 29, 2013 at 03:24:11 PM PST

      [ Parent ]

      •  Corollary to this (1+ / 0-)
        Recommended by:
        mrkvica

        No amount of printing or pushing paper around by the government or central banks creates one iota of value.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Tue Jan 29, 2013 at 05:20:30 PM PST

        [ Parent ]

      •  *sigh* (1+ / 0-)
        Recommended by:
        mrkvica

        Okay. But you can talk about money as a resource, in the same way you can talk about, say, educated workers as a resource, even though they're, you know, people and not resources. It's a metaphor. And if you read his comment you'd see that he agreed with you about everything important.

        Save your obviously vast quantities of bile for people who actually disagree with you, huh?

        •  No (1+ / 0-)
          Recommended by:
          Sparhawk

          because to GET educated workers you have to invest real resources - education, quality of life, whatever.

          Again - money is just a stand in. It has no substance in itself.  If your country is piss-poor and can not feed its children, printing money won't change a bit.  

          That is a fundamental difference. The ability to print money is not an ability to create a resource - it means only that a government can unilaterally manipulate the consensus about money's worth, and thus easily redistribute  wealth from some citizens to others, and to itself.  With quite obvious implications.

          ______
          "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

          by cris0000 on Tue Jan 29, 2013 at 08:12:54 PM PST

          [ Parent ]

          •  when money can be loaned at interest, (0+ / 0-)

            i.e. can be used to make money, it becomes a resource, a commodity - this is in addition to its use as a medium of exchange, & in some ways negates its utility as such (as for instance when high interest rates or ultra high profits devalue it/inflate it)

            recall that the definition of "profit" is - money got for giving nothing of value

            "Never let your sense of morals get in the way of doing what's right." - Isaac Asimov

            by greenotron on Wed Jan 30, 2013 at 07:05:27 PM PST

            [ Parent ]

    •  The whole thing is about "who runs the show." (9+ / 0-)

      Liberals and reasoned moderates keep being dumbfounded by the blatant irrationality of governments' persisting in Austerian policies in the face of their obvious pervasive failure.  But seeing the promotion of Austerity by the Western elites as irrational assumes that they share the almost universal goal of liberals, moderates, and most economists -- I.e., an economy with healthy growth and something close to full employment.

           Of course, the fly in the ointment for elites in that widely-desired situation is that THEY LOSE POWER when growth is good and unemployment is high, relative to what they have in the current situation.  It never ceases to amaze me that it's not a universally-accepted truism that the real powers among Republicans vastly prefer moderately high unemployment to near-full employment even at the cost of slower growth.  

          Of course, this preference also stems in part from the negative pressure on wages -- and thus upward boosting on profits -- created by high unemployment.  But I think an even more influential motivation is the extra POWER over workers that high unemployment gives employers and managers; and I think the way that relationship operates are pretty obvious.  Finally, increases in power also create increased differences in perceived status, which is determined much more by relative than absolute levels of wealth and power.

      Evidence for my hypothesis:  Stories today that the powers that be in Davos are celebrating the end of the world financial crisis and don't seem to be the least concerned with the astronomical unemployment rates in Greece, Italy, and Spain, much less the more moderate but still high ones in the UK and US.  Seriously -- could their "let them eat cake" attitudes have been any more blatant but offhand?

    •  This sounds like you are saying we will never run (4+ / 0-)
      Recommended by:
      limpidglass, hmi, FG, melo

      out of money as long as we do not run out of numbers.  However, money needs to have some connection to a country's production to remain stable.  Now, production, unlike the Austrian school and Ron Paul-types, does not have to be tied to the production of gold or some other metal or basket of commodities, but it needs to have some connection to the total productivity of a country.  The Austrian school adherents discount the value that labor has as an asset.  This is their failing (and it is tied to their general disdain for labor in general; and their continual push to reduce labor compensation of all kinds, not just wages).

      As an example, look at which industries seek to reduce labor costs the most: extraction industries.

      These two schools -- the Austrian school and the Keynesian school -- are the crux of the political divide that represent the two visions of the kind of economy we will have in the future.

      •  Fiat utilizes infinity. It is backed by the (0+ / 0-)

        health of the real economy and society in general.

        But yes, infinity is infinity.

        •  the real goldmine (0+ / 0-)

          is the energy millions of citizens wake up with every morning to commit to work.

          that's what they're counting on to pay off debt and fill coffers.

          what this system tries to ignore is the inherent social pact between the lines of this agreement, namely that people believe their work will be valued enough for them to do it.

          money has reflected value, just as social approval does, or the joy of doing what you love to do.

          it has become out of whack, where people will do even what will be socially disapproved to make money.

          eg it doesn't matter if my skills as engineer are used to make bombs, because the money is good enough to compensate for that nagging doubt as to my real usefulness.

          this illusion is being stripped away, yet a still sizable part of the population is still trapped in this paradigm, and as the unease grows, the salaries don't, so the only way to keep people doing unsavory jobs is to put the fear of poverty into them, hard, deep and repeatedly.

          this is why high unemployment is a feature, not a bug to our gracious overlords. ditto debt, as it is a little-known fact that the poorer you are, the more honest about paying off your debts. indeed if you are rich enough, you can buy senators and congressmen to make laws so you can offload your debt onto the public in the best of all worlds, ultimate affirmation that you are a god amongst mere men. summum optimum.

          the levels of mystification used to veil this heist are impressive, as they need to be to stop open revolt. as the 800lb gorilla continues to lurch closer to the center of the room, we can expect the media pinicchio's olfactory organ to grow to unheard of lengths to prolong the agony for the rubes, and the ecstasy of the 'savvy ones'.

          extend and pretend.... consumer confidence is leaving town, so it's the markets we need to 'stay calm and carry on' for now.

          dem fillies are nervous...

          why? just kos..... *just cause*

          by melo on Wed Jan 30, 2013 at 05:47:04 PM PST

          [ Parent ]

      •  Our fiat money is tied to our economy (3+ / 0-)
        Recommended by:
        OkieLawyer, MKinTN, ozsea1

        The only time money is "printed" in the traditional sense is when the Federal Reserve Bank buys bonds as part of its open market operations designed to control the floor of inter-bank interest rates.  All the other money in our economy, including the money the government deficit spends, is "temporary."  

        When you deposit money in a bank, that bank deposits your deposit, along with a bunch of other people's, with their Federal Reserve Branch bank.  This gives them the right to loan out 90% of what they have deposited with their bank.  This 90% is "new money" but it's only temporary.  It's created when it's borrowed, and destroyed when it's paid back.  It's not your money being lent out, because in principle, you and everybody else could go and get their deposits back out, up to the FDIC insured amount, without the immediate recall of all that lent out money.

        So most money is automatically tied to the economy through being created by lending and being destroyed by being paid back.  But when you pay back your loan, you always pay back more than you borrowed in the form of interest.  Does this mean more money than you borrowed is being destroyed?  Not at all.  That interest creates a demand for more money, created either by more borrowing by others, which leads to a more interdependent economy with higher interest rates and greater indebetedness, or more bond-buying by the Fed, in order to lower the floor for inter-bank interest rates, in the hope those trickle down to consumer and investment lending.

        As long as the "printing" of our fiat money is done through intervening in the secondary (read:NOT primary) bond markets, we can be assured that the value of the newly created money is tied to the value of economic output.  That said, interest rates are so low the government would be fools not to borrow as much as they can and lock those rates in before rates start to go back up.  The Fed is printing all the money banks are demanding.  The problem is government (read:House Republicans) is reluctant to borrow any more even though banks and investors would prefer to lend to the government rather than to the private sector, and they're reluctant to spend any more because they can't agree on what to spend on.  Well, that and the biggest banks subverting the entire process to their own benefit.

        Private investment banking is looking for leadership, both to help clean up their acts and to point the way to the future of private investment.  Government has to lead the way, but we've got Republicans who absolutely refuse to let the government lead in any way, and Democrats who don't know which way to go.  Though some Democrats are better than others with that.

        From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

        by Nellebracht on Tue Jan 29, 2013 at 09:52:36 PM PST

        [ Parent ]

        •  Then again, the Tsy could mint a high value coin (0+ / 0-)

          out of thin air, and pay off bonds as they come due, as well as pay for future spending.

          Why do we need a market to tell us that the cost of fiat is $0, and the risk of making a computer key stroke is pretty much 0%?

          Our money would still be tied to the health of the real economy.

          What's a dollar worth if there's nothing to buy?

        •  In response (and perhaps in support of) your (4+ / 0-)
          Recommended by:
          katiec, MKinTN, ozsea1, melo

          statement:

          The problem is government (read:House Republicans) is reluctant to borrow any more even though banks and investors would prefer to lend to the government rather than to the private sector, and they're reluctant to spend any more because they can't agree on what to spend on.  Well, that and the biggest banks subverting the entire process to their own benefit.
          I have come to theorize that Austrian economics creates a "bi-polar" economy (think "bi-polar disorder"), in which there are certain financial interests who are somewhat dependent on a "boom and bust" business cycle (again, to reiterate another point I made somewhere else, it is related to those in the extraction industries, who make money from booms and busts).  However, Keynesianism seeks to "smooth out" these booms and busts by creating a "steady Freddy" economic cycle.

          So yes, in support of your statement, I think that the same economic interests who support the Republicans benefit from the "boom and bust" economy that the Austrian school creates.

          •  And MMT understand that you can't actually save (2+ / 0-)
            Recommended by:
            Calamity Jean, hubcap

            up infinity, so smooths out even more.

            And since it leads to the inevitable conclusion that borrowing infinity makes no sense, then bonds, including speculating in them makes no sense.

            Personal savings accounts?  Why not just pay interest on checking accounts?

            SS?  Why not just mark up the accounts of seniors once a week at an agreed upon amount?

            What if nimble robots and AI create a lot of leisure?  Just mark up everyone's account in accordance to the level of robot production.

            In other words, rather than correcting boom and bust cycles, why not try to not have them in the first place?

            •  Makes too much sense. (1+ / 0-)
              Recommended by:
              katiec
              In other words, rather than correcting boom and bust cycles, why not try to not have them in the first place?

              Renewable energy brings national global security.     

              by Calamity Jean on Wed Jan 30, 2013 at 09:25:41 AM PST

              [ Parent ]

            •  Actually, you make a point about one of my pet (2+ / 0-)
              Recommended by:
              ozsea1, katiec

              peeves:

              What if nimble robots and AI create a lot of leisure?  Just mark up everyone's account in accordance to the level of robot production.
              The U.S. is the only western democratic market economy that does not have mandated vacation time (the same applies for sick leave, maternity leave and retirement guarantees).  In the 1960's, increased automation and technology ("robot production," if you like) was supposed to lead to more leisure time for workers.  Instead, it has led to less, because the benefits of automation was not shared with all of society.
  •  Point 2 is rather absurd. (1+ / 0-)
    Recommended by:
    Sparhawk

    Why precisely do we want the private sector to run a surplus?  High private savings don't correlate well with times of prosperity.

    •  It only seems absurd to those (3+ / 0-)
      Recommended by:
      aguadito, katiec, limpidglass

      who don't understand macroeconomics. Do yourself a favor, look up Twin Deficit Hypothesis or Sectoral Balance or read The Predator State by James Galbraith. Here's a quote from Galbraith:

            There is a basic relationship in macroeconomics, as fundamental as it is poorly understood, that links the internal and the international financial position of any country. A country's internal deficit, that is, its "public" deficit and its "private" deficit - the annual borrowing by companies and households - will together equal its international deficit.

      The free market is not the solution, the free market is the problem.

      by Azazello on Tue Jan 29, 2013 at 02:01:53 PM PST

      [ Parent ]

      •  Nice try. (1+ / 0-)
        Recommended by:
        Sparhawk

        There's more than two terms in the equation unless you're completely discounting international trade.

        •  What ? (2+ / 0-)
          Recommended by:
          aguadito, dorkenergy

          You still didn't get it. I don't have time to explain it to you now, but I wrote a diary on this two years ago. ☛ The Federal Budget Can't Be Balanced

          The free market is not the solution, the free market is the problem.

          by Azazello on Tue Jan 29, 2013 at 02:45:09 PM PST

          [ Parent ]

          •  Even that formulation is three terms... (1+ / 0-)
            Recommended by:
            Sparhawk

            ...and really depends on a constant and immutable "value" to get three basic terms.

            Historically, we've had balanced federal budgets for large parts of our national history.

            •  Sheesh, I give up. Good luck. (1+ / 0-)
              Recommended by:
              aguadito

              The free market is not the solution, the free market is the problem.

              by Azazello on Tue Jan 29, 2013 at 03:04:38 PM PST

              [ Parent ]

              •  why don't you go back to the basics, occasionally? (2+ / 0-)
                Recommended by:
                Sparhawk, hmi

                In the end, it's not about money.

                The whole thing is about goods and services the US goverment either wishes to consume itself or to distribute to others.

                If those goods and services would be created entirely by its own citizens, while those citizens also create enough for themselves to have a cumulatively satisfactory propserity, that would be called a balanced budget.

                But that's not the case - the us government keeps consuming more goods and services than its citizens are willing to give to it in form of taxes, and privately those citizens do the same.

                The difference is made up by those net exporters, places like, say, China or Germany.

                Dou you really think Chinese and German people wish (and are going) to work their butts off for your prosperity for all eternity?

                ______
                "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                by cris0000 on Tue Jan 29, 2013 at 03:18:36 PM PST

                [ Parent ]

                •  I can't "go back to basics" because (4+ / 0-)
                  Recommended by:
                  limpidglass, dorkenergy, aguadito, mrkvica

                  it's not basic. We are no longer on a gold standard and are likely to run foreign trade deficits for many years to come. That is why, absent lots of private sector borrowing, the Federal budget can't be balanced. We can't Fix the Debt.

                  The free market is not the solution, the free market is the problem.

                  by Azazello on Tue Jan 29, 2013 at 03:28:40 PM PST

                  [ Parent ]

                  •  So does that mean... (2+ / 0-)
                    Recommended by:
                    Sparhawk, hmi

                    .. to take up my last question, does that mean that you DO expect Chinese and Germans and other such ###### to supply goods and services for American's prosperity without compensation for all eternity?

                    ______
                    "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                    by cris0000 on Tue Jan 29, 2013 at 03:44:27 PM PST

                    [ Parent ]

                    •  No, that's not at all what I mean. (3+ / 0-)
                      Recommended by:
                      aguadito, mrkvica, katiec

                      I would looove for the US to have more domestic manufacturing. What I am trying to say, and what the diarist is trying to say, is that the deficit hawks are being disingenuous. They know damned well that the budget can't be balanced right now. They just want to gut what little is left of our social safety net and the corporate media are helping them. And, by the way, what is this prosperity of which you speak ?

                      The free market is not the solution, the free market is the problem.

                      by Azazello on Tue Jan 29, 2013 at 03:52:21 PM PST

                      [ Parent ]

                      •  So, in other words, yes (0+ / 0-)

                        For the foreseeable future, at least, you expect net exporters like Germany and China to continue to ship us goods and services without compensation.

                        (-5.50,-6.67): Left Libertarian
                        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                        by Sparhawk on Tue Jan 29, 2013 at 05:24:50 PM PST

                        [ Parent ]

                •  as long as their economies remain export-based, (4+ / 0-)
                  Recommended by:
                  aguadito, whoknu, mrkvica, Azazello

                  they have a big incentive to "keep working their butts off."

                  Sure, we couldn't afford to immediately stop buying their exports and produce our own. But neither can they afford to stop selling immediately, either.

                  If they do, there won't be enough domestic domand to soak up domestic production, and their economy would soon go into crisis because they wouldn't have a market for their goods. Production would fall, companies would close down and lay off workers. People wouldn't have enough income to spend, and it would cause a depression.

                  Far from the picture you paint, sometimes the exporter nations have resorted to extreme measures to open markets. The Opium Wars (a part of Anglo-Chinese history that is often not taught in America) were about just that--forcing a importer nation to buy in order to sustain the exporter nation's economic growth.

                  The trade deficit has to do with the fact that we don't nurture domestic industries that make the best use of our resource. We could rectify this with an intelligent national industrial policy, which our politicians, weaned on free-market non-interventionism, instinctively shy away from. To implement it would require deficit spending on the part of the government. Balancing the budget would stop us from doing that.

                  You seem to be implicitly calling for autarky here:

                  those goods and services would be created entirely by its own citizens, while those citizens also create enough for themselves to have a cumulatively satisfactory propserity, that would be called a balanced budget.
                  That's not possible, it's too inefficient in this day and age. America certainly couldn't do it. Other nations might try it, but it would be so expensive in terms of resources, and would require massive government intervention to force domestic demand to equal domestic production.

                  What's really needed is a globally coordinated trade policy to manage these problems. Otherwise, we can expect more trade wars--worse than the Opium Wars--and market shocks that result from importer nations developing into exporter nations, and vice-versa.

                  Balancing the domestic budget doesn't address any of these issues.

                  "In America, the law is king." --Thomas Paine

                  by limpidglass on Tue Jan 29, 2013 at 04:06:39 PM PST

                  [ Parent ]

                  •  given the monetary involvement (0+ / 0-)

                    I was not arguing for autarky but for balance.

                    ______
                    "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                    by cris0000 on Tue Jan 29, 2013 at 04:29:21 PM PST

                    [ Parent ]

                    •  sorry, I don't see what you're getting at (3+ / 0-)
                      Recommended by:
                      mrkvica, aguadito, Reston history guy

                      Perhaps I'm mistaken (I am far from an expert), but I thought that the trade balance was measured by taking the value of total domestic production and subtracting the value of total imports.

                      What does that have to do with balancing the government's budget? Will cutting government spending in and of itself cause domestic production to increase, or imports to decrease?

                      "In America, the law is king." --Thomas Paine

                      by limpidglass on Tue Jan 29, 2013 at 05:22:54 PM PST

                      [ Parent ]

                      •  I'm afraid you are in error here. (2+ / 0-)
                        Recommended by:
                        katiec, Azazello

                        The trade balance  is the difference between the monetary value of exports and imports. The current accounts balance also factors in unilateral cash transfers (e.g local workers sending money abroad to their families) and capital income.

                        The argument with the balanced budget is that with a negative current accounts balance foreign debt is rising. So somebody has to take hat debt - either the state (then you have a budget deficit) or the private sector.  The diarist's assumption is that since the private sector will not be able to asorb much more debt, it is necessarily the public sector (the state) who will have to maintain a budget deficit for the foreseeable future.

                        ______
                        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

                        by cris0000 on Wed Jan 30, 2013 at 12:03:08 PM PST

                        [ Parent ]

                        •  In application... (1+ / 0-)
                          Recommended by:
                          limpidglass

                          ....for all intents and purposes you can just say trade deficit = current account deficit,  at least in the US.

                          So rhetorically you are right to distinguish them, but in a policy discussion (magnitude and effects on balance of other figures) it makes no real difference.

              •  With some people, you just gotta make the effort (2+ / 0-)
                Recommended by:
                Azazello, katiec

                And then if they just won't get it, you gotta give up and let them go.

                Don't think of it as giving up.

                Think of it as the intellectual equivalent of shooting a wounded horse to put it out of its misery.

                Letting him bask in his ignorance keeps him sane and thinking he's got the system understood to avoid the depressing reality.

            •  not true, it has just been done seven times (8+ / 0-)

              in the entire history of the US, and each time, a depression followed soon after, as Michael Hudson points out:

              Government budget deficits pump money into the economy. Conversely, running a budget surplus retires the public debt or currency outstanding. This deflationary effect occurred in the late 19th-century, causing monetary deflation that plunged the U.S. economy into depression. Likewise when President Bill Clinton ran a budget surplus late in his administration, the economy relied on commercial banks to supply credit to use as the means of payment, charging interest for this service.

              As Stephanie Kelton summarizes this historical experience:
              The federal government has achieved fiscal balance (even surpluses) in just seven periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, 1920-30 and 1998-2001. We have also experienced six depressions. They began in 1819, 1837, 1857, 1873, 1893 and 1929.

              Do you see the correlation? The one exception to this pattern occurred in the late 1990s and early 2000s, when the dot-com and housing bubbles fueled a consumption binge that delayed the harmful effects of the Clinton surpluses until the Great Recession of 2007-09.

              Remember also that FDR gave in to the deficit hawks in 1937 and tried to balance the budget and cut back on New Deal spending. It led to a recession, and he soon reversed himself and asked Congress for more spending.

              "In America, the law is king." --Thomas Paine

              by limpidglass on Tue Jan 29, 2013 at 03:04:48 PM PST

              [ Parent ]

            •  6 Times, each followed by a recession. (3+ / 0-)
              Recommended by:
              dorkenergy, aguadito, mrkvica
            •  Where did you get this from? (2+ / 0-)
              Recommended by:
              aguadito, Azazello
              we've had balanced federal budgets for large parts of our national history.
              See federal "deficit" from 1900-2016 from usgovernmentdebt.us.

              Evidence for your assertion?

              United We Understand — e MMT unum

              by dorkenergy on Tue Jan 29, 2013 at 08:08:46 PM PST

              [ Parent ]

      •  the absurd part is ... (1+ / 0-)
        Recommended by:
        Sparhawk

        ... the claim that a current accounts deficit is unavoidable, or forced by the fact that the US$ is the world's reserve currency.  It's neither .

        Now an argument could be made that both kinds of current accounts imbalance are unsustainable in the long run.  But that doesn't make the US's position any better, it only shines a light at the fact the China's or Germany's positions (high current accounts surplus) aren't that enviable either.

        ______
        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

        by cris0000 on Tue Jan 29, 2013 at 03:03:49 PM PST

        [ Parent ]

    •  If we were to balance the budget... (3+ / 0-)
      Recommended by:
      dorkenergy, mrkvica, Azazello

      ...while maintaining the reserve currency status, it mathematically necessitates a perpetual private sector deficit. Are you willing to say that is optimal?

      Balancing the budget is what is absurd when you consider the consequences.

      •  No, it doesn't. (1+ / 0-)
        Recommended by:
        Sparhawk

        As I posted above, there's multiple terms in the equation.

        Even the graph at the top shows three sectors, which I guess is how most MMT quacks prefer to organize things in an attempt to completely write inflation, monetary policy, and trade deficits out of the picture.

      •  can you cite ANY kind of rational explanation ... (1+ / 0-)
        Recommended by:
        Sparhawk

        ... for that?

        Why is a current accounts deficit unavoidable?

        ______
        "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

        by cris0000 on Tue Jan 29, 2013 at 03:05:04 PM PST

        [ Parent ]

        •  It's unavoidable in the current policy structure (2+ / 0-)
          Recommended by:
          mrkvica, Azazello

          of the system. Until we develop the SDR system or other alternative methods, it will live on.

          I won't explain myself beyond that, because you're a hostile individual (I saw your other rude comment), so I'll point you to some sources so you can choose to educate yourself:

          Low-brow (Reuters):

          Global imbalances and the Triffin dilemma

          http://blogs.reuters.com/...

          High-brow, detailed (National Bank of Belgium);

          On the origins of the Triffin dilemma :
          Empirical business cycle analysis and
          imperfect competition theory

          www.nbb.be/doc/oc/repec/reswpp/wp240En.pdf

          Enjoy and best of luck on your quest for the truth.

          •  Godly (1+ / 0-)
            Recommended by:
            Sparhawk

            the Reuters article is pretty frank and supports my point of view. To quote

            The United States has run larger budget and current account deficits than most other countries simply because as the issuer of the principal reserve currency it can.
            That's exactly what I've been noting in my "hostile" comments. The fatal policy of current accounts/trade deficits is not a necessity, it is a choice. And it's a choice that can only end in disaster.

            Bute Keynsians, for all their merits, are less bothered by that. "In the long run,", their spiritus rector once noted, "we are all dead".

            ______
            "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

            by cris0000 on Tue Jan 29, 2013 at 03:39:13 PM PST

            [ Parent ]

  •  They will keep going until the utterly detsroy us (4+ / 0-)

    And then they will go even beyond to make sure the destruction is total and irreversible.

  •  Often wrong but never in doubt (14+ / 0-)

    These people learn nothing and forget nothing. This is the bubble in action - beliefs trump facts and logic every time. They repeat this nonsense all the time because it justifies what they really want to do.

    To summarize from Krugman,
    • First, they've cried wolf too many times in the past - admitting their errors would trash the credibility they don't deserve.
    • Second, the deficits are already starting to decline as the economy picks up and other measures kick in.
    • Third, they've failed on the evidence - austerity measures in a depressed economy have only made things worse
    • Fourth, it has become obvious that austerity is just an excuse for their real agenda - dismantling the social safety net, crippling government, etc. etc.

    They keep touting the danger of deficits and the virtues of austerity for one main reason: tell a lie loudly enough and often enough, and it can displace the truth. For a while.

    "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

    by xaxnar on Tue Jan 29, 2013 at 02:05:20 PM PST

  •  Exactly. Have they ever ONCE (2+ / 0-)
    Recommended by:
    xaxnar, fumie

    been right about anything?  I can't think of the occasion.  

    The "invisible hand" doesn't regulate the market - it wanks it. -- SantaFeMarie

    by Dinclusin on Tue Jan 29, 2013 at 02:18:46 PM PST

  •  How long (2+ / 0-)
    Recommended by:
    Azazello, fumie

    How long have the Republicans been pushing their "cutting taxes creates jobs" BS?  There will always be a segment of a society that will believe anything even when there's a mountain of evidence against it.  

  •  That someone your age KNOWS the (9+ / 0-)

    economic facts despite the tidal wave of misinformation and disinformation filling global media gives me--a near to retirement teacher of political economy--hope.  We've been off the gold standard over 40 years, and still economic "theory" is filled with errors based on bygone practices and concepts.  An excellent diary, and keep posting them.   Not only the media, but many academics and economists have been bought out by corporate interests who do not, under any circumstances, want the common folk to understand what you have written here.  Krugman is treated as a crank, despite the fact that he's a lot closer to understanding and explaining how the economy actually works than not just these idiots in Washington and the media, but also most of his academic peers.  

    America needs a UNION NEWS channel. We (unions) have the money, we have the talent. Don't buy 30 second time slots on corporate media, union leaders; fund your own cable news channel and tell the real story 24/7/365

    by monkeybrainpolitics on Tue Jan 29, 2013 at 02:43:31 PM PST

  •  make-believe math (2+ / 0-)
    Recommended by:
    Sparhawk, FG

    you write:

    "You can't balance the budget while the dollar is the reserve currency (making us run a current account deficit), without sending the private sector into a deficit."
    Nonsensical non-sequitur. The US$ already is the global reserve currency, there is enough US$ out for that, and then some. The United States shamelessly exploits the fact that the big US$ owner countries dare not let its price fall too low for that reason and racks up foreign debt like there's no tomorrow. Basically, it relies on being too big to fail.

    The US imports an incredible amount of goods and services, much more than it exports, basically on IOUs.  This is unsustainable in the long run and will erode the Dollar's function as reserve currency as well.

    I'd even go so far and note that a serious part of whatever is left of the United Sates' citizen's prosperity is borrowed from abroad.  If the US was held to the same rules everybody else are held by the capital markets, you would see riots on the streets.

    You can not create goods and services by wishful thinking.

    ______
    "Und wer nicht tanzen will am Schluss - weiß noch nicht dass er tanzen muss", Rammstein, "Amerika"

    by cris0000 on Tue Jan 29, 2013 at 02:56:48 PM PST

    •  Imports and IOUs (5+ / 0-)

          You are arguing that the U.S. imports much more than it exports---let's accept that as given for the sake of argument. Let's assume that China exchanges actual goods for "IOUs" (dollars).  So the goods are priced at a certain figure in Chinese yuan which is converted into dollars at a certain exchange rate. Let's say a TV is priced at 1000 yuan and the exchange rate is 1000 yuan to the dollar. OK. So the Chinese send us a TV and we send them a dollar (IOU), which they can either hold in a banking facility or convert back into yuan.
           Now suppose that the Chinese no longer wish to accept dollars in exchange. First of all, as noted by several commenters above, this would be as disastrous for Chinese TV makers (including workers) as for American TV buyers. Second, a complex set of actions would take place in which the exchange rate of the yuan vs the dollar changed radically. Chinese-made TVs would suddenly become much more expensive in dollars, probably to the point that no one would buy them. Then what? Either TV manufacturers would increase American exports from factories in places like Thailand, or even perhaps shift to making televisions in the US again (since the Chinese wishing to buy an American-made TV would discover that they were now quite cheap).
           So I don't see the problem. You seem to feel that the imbalance of trade is leading toward a cataclysm of some sort. As far as I can tell, at some point in the future things will be different than they are now, as things in the future have always been different from what they were in the past. If you want to worry about something, worry about climate change, not the balance of trade deficit.

      "Something has gone very wrong with America, not just its economy, but its ability to function as a democratic nation. And it’s hard to see when or how that wrongness will get fixed." Paul Krugman and Robin Wells

      by Reston history guy on Tue Jan 29, 2013 at 04:33:16 PM PST

      [ Parent ]

      •  the balance of trade has to do (3+ / 0-)

        with things like the relative cost of labor, availability of natural resources and capital, and divers other sources of overhead and/or competitive advantage. I don't see any direct and simple connection between balance of trade and government budgets.

        We're a market. Companies will sell to us because they need to sell. As you say, if companies who manufacture in China won't sell to us, companies who manufacture elsewhere will. Or domestic companies will supply us.

        I never heard of a national market that stayed unsupplied with goods for very long. Someone, somewhere, will service us. Unless there's some kind of real scarcity--scarcity of natural resources, for instance, there will be no problems.

        All buying/selling is is exchanging goods or services for pieces of paper which we call "currency."

        If China stops taking our pieces of paper ("dollars", or "Treasury securities", which are really the same thing) they will be taking someone else's pieces of paper. Europe's, India's, wherever. And those pieces of paper will be backed by nothing more than the full faith and credit of Europe or India or wherever, just as the pieces of paper we call "dollars" are backed by nothing more than the full faith and credit of the US.

        Economics is full of these atavistic myths--the virtuous saver vs. the immoral debtor, or the idea that a nation running a trade surplus over another nation is dominating it. This is just some kind of mental block.

        The reality is, for every "virtuous" saver to have saved, someone spent an equal amount of money--i.e., "immorally" increased their debt. For every nation that runs a trade surplus, some other nation must run an equal trade deficit.

        This is how it is and has always been. And the world hasn't ended yet.

        "In America, the law is king." --Thomas Paine

        by limpidglass on Tue Jan 29, 2013 at 05:52:41 PM PST

        [ Parent ]

        •  Re (0+ / 0-)
          This is how it is and has always been. And the world hasn't ended yet.
          No, but many nations have gotten themselves into economic crisis and melted down because of trade/government imbalance problems.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Wed Jan 30, 2013 at 03:00:10 AM PST

          [ Parent ]

          •  "many nations" (3+ / 0-)
            Recommended by:
            katiec, aguadito, hubcap

               This claim is without evidence because there isn't any. Yes, plenty of ancient empires like Rome fell, and yes they had economic problems, but our understanding of how the ancient and medieval world economies worked is so extremely poor that no hard and fast conclusions can be reached. Given that the Industrial Revolution represents the most significant economic change since the invention of agriculture in the Neolithic Age, no example from before, say about 1870, is relevant. And as I recall, you made a similar claim some weeks ago, and when challenged to produce examples---"many nations"---could come up with only Weimar, which did indeed collapse because of economic problems, but not either balance of trade or governmental deficits. The whole idea of exchanging ideas on this blog is to learn something....simply repeating the same discredited talking points over and over is a waste of perfectly good electrons.

            "Something has gone very wrong with America, not just its economy, but its ability to function as a democratic nation. And it’s hard to see when or how that wrongness will get fixed." Paul Krugman and Robin Wells

            by Reston history guy on Wed Jan 30, 2013 at 12:21:22 PM PST

            [ Parent ]

    •  The US is not racking up foreign debt (0+ / 0-)

      Remarkable ignorance of how the system functions.

  •  What's worse about austerity in the US (7+ / 0-)

    is that it only applies to the poor and middle class: There are no commensurate tax increases on the wealthy.  So, in fact, it's not real austerity, just class war against the 99%.

    Pour yourself into the future.

    by Troubadour on Tue Jan 29, 2013 at 03:24:29 PM PST

  •  not about deficit (3+ / 0-)
    Recommended by:
    dorkenergy, fumie, Calamity Jean

    If it were these bungholes would have been all up in arms at what Dumbya did.

    It all about Pres Blackenstein and who has the "right" to rule.

    -9.00, -5.85
    Quite an experience to live in fear, isn't it? That's what it is to be a slave.

    by Wintermute on Tue Jan 29, 2013 at 04:01:56 PM PST

  •  we don't live in an age of epiphanies (5+ / 0-)

    we live in an age of dogma.

    As to the question your title poses...they can go on until they get mugged.  Not rhetorically, but actually.  

    Oregon: Sure...it's cold. But it's a damp cold.

    by Keith930 on Tue Jan 29, 2013 at 04:20:11 PM PST

  •  It's difficult to get a pundit to understand (4+ / 0-)

    something when his/her employer's ad revenues depend on not understanding it.  

    Austerians don't have to be right; they just have to keep claiming to be right, over & over, to their friendly media hosts/on their own shows.

    When was the last time an Austerian was held accountable for being wrong?  That's how long they can keep doing it: until they are humiliated & shamed on major TV for their positions.  Until they start LOSING rather than GAINING money.

    Before elections have their consequences, Activism has consequences for elections.

    by Leftcandid on Tue Jan 29, 2013 at 04:43:54 PM PST

  •  Paradox of thrift n/t (0+ / 0-)

    Do not become intoxicated with the excessive exuberance of your own inexhaustible verbosities...

    by SoonerG on Tue Jan 29, 2013 at 04:57:51 PM PST

  •  Very true, but (3+ / 0-)
    Recommended by:
    hmi, mrkvica, Sparhawk
    All money is created by being borrowed into the economy
    I have no argument with this statement except to say that this is unsustainable in the long term.
       You can't simply borrow money forever, not when you factor in interest. Eventually the debt load will crush the economy.
      It's the Iron Law of Compounding Interest.

       What was supposed to happen in 2008 was a massive wave of defaults that followed over-borrowing and mal-investments based on artificially low interest rates.

      That didn't happen. The wealthy lenders were made whole, despite making bad loans, by the working class. The burden of the bad debt was shifted onto the shoulders of people who could least afford to pay it.

      We will one day have that massive wave of defaults. Probably not too far into the future.

    ¡Cállate o despertarás la izquierda! - protest sign in Spain

    by gjohnsit on Tue Jan 29, 2013 at 05:39:21 PM PST

    •  That's why we print (0+ / 0-)

      That's why the federal reserve bank prints money when it buys bonds as a means to control interest rates as part of its normal open market operations.

      From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

      by Nellebracht on Tue Jan 29, 2013 at 09:54:47 PM PST

      [ Parent ]

      •  Interest rates are at all-time lows (0+ / 0-)

        Besides the fact that abnormally low interest rates encourages bad investments (i.e. doing what got us into this mess is not what is going to get us out), central banks have already pushed rates down as far as they can go (i.e. they are almost out of bullets).

        ¡Cállate o despertarás la izquierda! - protest sign in Spain

        by gjohnsit on Wed Jan 30, 2013 at 05:12:32 AM PST

        [ Parent ]

  •  Let's say you're right,who on the Economic Counsel (0+ / 0-)

    agrees with you? Obviously if your perspective is correct, there must be someone on the NEC who shares your wisdom and is advising the President about your plan.

    "If the past sits in judgment on the present, the future will be lost." Winston Churchill

    by Kvetchnrelease on Tue Jan 29, 2013 at 05:53:31 PM PST

    •  And who agreed the earth was round ... (2+ / 0-)
      Recommended by:
      katiec, MKinTN

      in 1491?  You ever heard of visionaries?

      Just as with climate science, there is a very well organized effort to keep Chartalism/MMT in the shadows and off the front pages.  From this and past comments, looks to me like you are part of it, whether knowingly or not.  

      The foundations of MMT were laid almost 100 years ago.  It was essentially pure theory until the world went off the gold standard.  Unfortunately, only the small community of Chartalists/MMTers truly understand how fundamental that change was.  They're out there, you just have to be open-minded enough to seek them out and study their arguments.

      As someone upthread reminded us, "It's hard to get a person to understand something when his job depends upon not understanding it."  That applies to virtually everyone with any official capacity inside the DC beltway and in the "lamestream media" (maybe Sarah got one thing right?).

      •  Re (1+ / 0-)
        Recommended by:
        Kvetchnrelease
        in 1491?  You ever heard of visionaries?

        Just as with climate science, there is a very well organized effort to keep Chartalism/MMT in the shadows and off the front pages.  From this and past comments, looks to me like you are part of it, whether knowingly or not.  

        "They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown." -Carl Sagan

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Wed Jan 30, 2013 at 03:02:48 AM PST

        [ Parent ]

      •  Chartalism is more like pre-Copernican in its view (1+ / 0-)
        Recommended by:
        FG

        of independent banking system and which is foundation of our free society.

        "If the past sits in judgment on the present, the future will be lost." Winston Churchill

        by Kvetchnrelease on Wed Jan 30, 2013 at 05:22:21 AM PST

        [ Parent ]

        •  Private BANKING is a free society's foundation!? (4+ / 0-)

          Thanks for clarifying where you're coming from.

          I'd agree that lately the US and Europe seem to be converging on that principle, which I'd characterize as "one dollar, one vote."  However, that's not the society I want to live in.  I kinda prefer the more traditional "one person, one vote."

          An "independent" banking system is only independent of democratic control.  It reflects the wishes of economic technocrats who are anything but independent.  Though they may clothe their policies in elegant (but patently oversimplified) theory, they are merely hired guns who quite effectively promote the interests of the kleptocrats whose money they're hired to protect.  How can such a system possibly reflect the interests of the broader society -- unless, of course, you believe that only the wealthy have legitimate economic interests?

          PS 1: I speak as a retired professional who is dependent upon the long-term value my savings and investments, so you can bet your bottom dollar I'm keenly aware of the danger of inflation.  But I'm also aware of the danger of a large class of fellow citizens who have no security, no future, and nothing to lose.  The US got lucky last time with FDR; depression didn't work out quite so well for Germany, and it might not for us this time, either.

          PS 2: Despite our essentially religious disagreement, I've always been amused by your username.  Thanks for the chuckles.

    •  Alan Greenspan actually got it, but he didn't (1+ / 0-)
      Recommended by:
      limpidglass

      believe in government's role of serving public purpose.

      So he believed that the wonders of fiat should only serve banks.

    •  Google: Galbraith Clinton's surplus. He (0+ / 0-)

      testified that Clinton's surplus would be followed by a recession.  It wasn't his fault that he was literally laughed at.

  •  Physics v. economics (1+ / 0-)
    Recommended by:
    FG

    Overall, physics and the other natural sciences provide definite answers to questions by way of controlled experiments with replicable results (at least in principle). Economics cannot, on the whole, perform controlled experiment, let alone replicable one. As it exists today, it is as much an expression of and discussion about perspectives, and the choice of these perspectives has less to do with value-neutral natural science than with various philosophical stances.

    And that is why Mr. Krugman is not safe from ridicule or disagreement. Just to illustrate the issue obliquely—Krugman won a Nobel prize for economics, but so did Milton Friedman and Friedrich Hayek. I'm sure all three would have a great time in a discussion (and I'd like to be a fly on that wall), but there is little chance that any of them will leave that meeting having persuaded the other two to crown him as King of the Economists.

    •  I think that's a cop-out (1+ / 0-)
      Recommended by:
      katiec

      There are certain economic truths, and they have to be established, so that the charlatans who push falsified ideas are marginalized.

      as i had written as well, social sciences, even hard ones like Economics, are harder to establish consensus on some issues than the raw hard sciences like physics, but there are universal truths in economics, you can't just shrug it off as if it's purely a matter of ideological difference, that's just wrong.

      the point is, at what point do we say "okay, we know austerity doesn't work. let's check that one off the list" under the current conditions that we can establish?

      it's not an opinion that should be respected any less than someone's blind faith in creationism should be respected.

      •  Universal truths (0+ / 0-)

        Immediate problem: in order to meet your test, you would have to define "austerity" according to value-neutral criteria. I submit that this is, at best, no going to be an easy thing to do. To be honest, I think it is impossible. But in any case, I know of no generally-accepted definition of such a thing that all "mainstream" economists would sign on to.

        Intermediate problem: the things claimed to be universal truths in economics are often either obvious, trivial, or value preferences disguised and smuggled in under pretense of neutrality. Alternatively, there are always abundant counter-examples in need of explanation (or to be explained away).

        Larger problem: the fact that economics deal often with numbers does not, in fact, make it "hard" or somehow more scientific. The mere fact that one can amass numerical data and manipulate it statistically says very little about the quality of the data. E.g., economists often need to ask people their opinions, which are then quantified. Among other issues, sometimes people lie, or are mistaken. Again, contemporary economics depends on various indices, all of which are subject to somebody's decisions as to what counts or what belongs in the index—these matters are fought over. Economics has never even managed to erect uncontroversial criteria of what it is studying. Homo economicus? The rational consumer? A free market? The money supply? All are contested entities.

        To sum up—there may be all sorts of economists with whom we disagree, but we might wish to hold off on denouncing them as charlatans. Economics is not, and never will be, anything like a natural science, and it is simply not the case that, say, Hayek or Friedman was deliberately and fraudulently purveying demonstrably false analysis.

        Below, just three areas where, as you can read, there is plenty of disagreement about what, in fact, is being studied. This sort of basic issue is not generally a problem in chemistry or biology.

        http://en.wikipedia.org/...
        http://en.wikipedia.org/...
        http://en.wikipedia.org/...

        •  That's why I like MMT. It begins with merely (1+ / 0-)
          Recommended by:
          dorkenergy

          describing our current national accounting practices.

        •  Austerity was ... (1+ / 0-)
          Recommended by:
          melo

          ... only one example of many. but since we're on that, I'm hard-pressed to find any model that justifies austerity, or any empirical data that would support that kind of thing.

          Maybe it's a "value preference" to insist on full employment and stable growth as optimal outcomes, but it breaks down to semantics. However, even I'm old enough to have studied the field in a time when those were value-neutral metrics...

          Accounting balances (sectoral, production,income) are not up for discussion. Supply and demand effects are not up for discussion.  Theoretical physicists have extreme differences that are often impossible to reconcile, but every field has their strong points and their flimsy ares.

          Your larger problem seems a bit more pedantic than constructive in its criticism. Of course economics is a much harder and scientific social science because it has numbers. This leaves all theories open to falsifiability, which is central to "scienceness". But again, this is just getting silly.  

          And i hate to break it to you, Hayek and the Austrians (no, Friedman was not an Austrian)  are no longer considered credible because they essentially refused to embrace empirics or the hard analysis that subjects it to the standards to which other harder sciences are held.

          Hey I can play that game too, here's a handful of physical topics that are under debate where there's plenty of disagreement even about what is being studied:

          http://en.wikipedia.org/...
          http://en.wikipedia.org/...
          http://en.wikipedia.org/...

          It's completely unproductive to try and go on a mission to discredit a field that has made serious progress in the past century, but because of the political implications of economic theory it's fair game to hijack it in the interest of political charlatans to confuse the progress we have made.

          The goal of the Austrian (Austerian) is to confuse the empirical advancements in order to destroy the discussion so that it becomes one of semantics and that it is brought down to the philosophication that they are limited to in their own subfield.

          •  Short summary (0+ / 0-)

            I think you've arrived at a very strange set of views. However one responds to Hayek or Friedman, to say that they "refused to embrace empirics or ... hard analysis" is just plain peculiar. The work for which Friedman was cited by the Nobel committee was basically statistical. Hayek produced reams of work in microeconomics.

            Beyond that, in the social sciences, in economics, there is and has long been a very active discussion over the extent to which the natural sciences can provide a model for social sciences. You seem to imagine that there has been a consensus opinion arrived at; there has not. In economics, the profession continues to discuss the question of what processes are amenable to mathematical treatment—again, not settled issues. Even more oddly, you apparently believe that to even raise these issues is to attempt to discredit the field entirely.

            That aside, you entirely miss the point of the thought that there is disagreement over what is being studied. No one in physics disagrees about the existence of matter, energy, atoms, electrons, fields, or how to measure the speed of light or the energies released in a particle accelerator. All scientists understand what is meant by a molecule, an element, a bond, etc. The links you provide are not about basics, but about high-end theories of possible ways to account for some mathematical anomalies. But there are any number of physicists who will inform you that string theory and dark matter are so far little more than speculative hypotheses, and that a unified theory is something worth seeking, but whose existence is also as yet undemonstrated.

            No economist denies that markets exist or that populations of human beings make choices which can then be interpreted. However, those are what I called trivial or obvious truths, right on up there the inverse relation between supply and demand. It does turn out, though that there is much ink spilled over what qualifies as a market and what could be valid measures of those choices, whether the humans doing the choosing should be understood as rational, etc. The ramification of these difficulties is that economics is perpetually in need of justifying and explaining the particular assumptions of any given economic explanation—with the broadest claims in need of the greatest amount of explanation. In the end, for all its nifty mathematical apparatus, economics is and will likely remain more art than mathematical science.

            You, of course, are welcome to believe otherwise—much as with any faith. And I suppose that to any True Believer, the beliefs of other sects must be denounced as the opinions of dastardly charlatans. I can only suggest that you might wish to rethink this narrow, ideological stance.

            •  One last thing (0+ / 0-)

              Just as an exercise, you might try to tell us exactly what is "austerity," and how it can be scientifically recognized, let alone differentiated from prudent expenditure.

              •  Here's a simple exercise in the math (0+ / 0-)

                http://online.wsj.com/...

                The economy reversed from a 3.1% pace of growth in the third quarter to a 0.1% drop largely because federal government spending fell by 15%....
                Austerity is the drop in gov spending perpetuating lower GDP in a time of already sluggish growth.

                Solution? Spend gov money, higher gdp.

                Simple.

                You can masturbate around that all you want, but that's a mathematical reality.

                The politicians can comei n and say "NO WE CANT SPEND THE MONEY " but that really doesn't matter, because if they spent the money, the GDP would have been positive, if not, it wasn't.

                Simple, mathematical.

                •  Needs more work (0+ / 0-)

                  Lower government spending (in time of slow growth) is how you define austerity? Great! We'll ramp up crop subsidies and grain export credits, then offer to help the French out with more troops and equipment for Mali, as well as increase the pay for execs at AIG and Fannie and Freddie. Bam! No more austerity—watch that GDP soar (leaving side various issues as to how GDP reflects or does not reflect government spending—the kind of thing that, sadly, there is no scientific principle to solve).

                  The above is not entirely fanciful, as the article you link to claims that the 15% decline in federal spending comes largely from declining defense expenditure. Now, why is it that I don't think that the choices above are what you had in mind?

                  Enjoy your mathematical masturbation. And if you can get around to it, someday you can try to figure out a "scientific" definition of austerity. But this ain't it.

                  •  Funny... (0+ / 0-)

                    ...out of all the times I've discussed austerity, never has anyone been so hopelessly pedantic.

                    The fact is whether that money was spent on export credits or wasted on whatever you have a personal preference for, as long as cash was spent on government spending as accounted for in the GDP identity, then higher-than-reported gov spending of any sort would have prevented recession if it was to offset the decline.

                    Go philosophize on that, von Misses.

                    •  I never met (0+ / 0-)

                      the von Misses. Are they related to Ludwig von Mises? But never mind—I can see that getting things right, asking for clarity is too pedantic for you. Given that you came in with grandiose claims about a variety of technical issues, crying "pedantry" seems more than a litte disingenuous, however.

                      Among the other pedantic little things you don't want to know about are the technicalities of how govnment expenditure is accounted for in GDP. But hey, like Casey Stengel said, you could look it up.

                      Meantime, your so-called "definition" of austerity as any decline in government spending on anything during a recession does nothing more than open various cans of worms, including the question of why call this "austerity," as opposed to, say, prudential budgeting. Try answering a direct question: if during time of recession government cuts back on defense spending and agricultural supports, throwing all those savings into social welfare programs, are you still going to refer to this as austerity? I'm going to bet that you would not. But that will mean that your definition of austerity, as I said, needs work.

                      Something else that needs work (besides your manners), is your limited view of the world, in which anyone who opposes you must be of some evil faction of charlatans. In fact, I have no particular brief for Mises or Hayek—they were just examples. If you could read beyond your own ire, you might have noticed that I said nothing in support of their theories, only that they were serious people taking on serious problems. Would that you were more like them in this regard.

            •  You have not progressed the discussion (0+ / 0-)

              You're playing a game of rhetoric.

              Just as in physics there are theoretical aspects that are in contention, so too in economics do they participate in the same circle jerk.

              But both fields have mathematical certainties, identities, and laws, which you ignore in order to divert any economic discussion into a session of philosophical masturbation.

              You also are being dishonest by purposely misinterpreting what I wrote (when I clearly excluded Friedman from the bunch, since he's not an Austrian schooler and has embraced empirics that's why he is  respected and I excluded him):

              "And i hate to break it to you, Hayek and the Austrians (no, Friedman was not an Austrian) "

              But you have to lie in orer to push your agenda, to begin your comment with such a false premise strengthens the perceived strength of the rest of what you spew.

              I used to read Mises forum stuff, i'm very familiar with the semantic games you guys play, that's why I called you on it right away before you overtly stated as much.

  •  Ouch! (0+ / 0-)

    The truth hurts!

  •  I'm 53. Decades of DLC Turd Way LOTE LOTE (0+ / 0-)

    as the guiding "principles" of the Democratic Party have led to this bullshit MORE than the f'king lies of the right wing liars,

    in my NOT humble opinion.

    Roger Ailes of FOX was Ronnie Ray-Gun's messaging guru back in the early 80's - many or most of our current Democratic "leaders" have been around since at least the 90's if not the 80's.

    WHY can't they hire people to defeat the right wing lies of f'king right wing thieving liars? ESPECIALLY when those lies completely fuck over the bottom 90% of us?

    Because if they're NOT rich pig ass kissing social climbing sell out scum, they're politically incompetent, or, a mix of both.

    I voted Dim from '78 to '08 (with a few exceptions in primaries to mess things up) and I'm DONE with LOTE LOTE LOTE and I'm done giving nickels or dimes or seconds of time to the current crop of lying fucks in the Democratic Party.

    WHERE will YOU be in 26 years?

    good luck.

    rmm

    Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

    by seabos84 on Wed Jan 30, 2013 at 05:43:06 AM PST

  •  Excellent rant. (2+ / 0-)
    Recommended by:
    MKinTN, dorkenergy

    One thing that stuck out is your mention of the public being misinformed.  I don't know if it's on purpose or by total accident, commercialism ruling the day, but the public has been misinformed for a very long time (and the rightwing tv and radio shows are doing a more incredible job than I ever thought possible).

    Another thing that strikes me is that austerity is only for those who can least afford it, but not for the rich nor for our politicians themselves.  What's up with that?  And how can the American public even begin to buy into that nonsense?

    "They love the founding fathers so much they will destroy everything they created and remake it in Rush Limbaughs image." MinistryofTruth, 9/29/11

    by AnnieR on Wed Jan 30, 2013 at 07:00:34 AM PST

  •  The amazing thing is that Krugman is not (4+ / 0-)
    Recommended by:
    DBunn, MKinTN, melo, dorkenergy

    saying anything controversial, really. His arguments (except for the eurozone/optimal currency area thing) are straight out of an Econ 101 textbook. And it shows: Something like 84% of economists think, like Krugman, that the stimulus has been expansionary (and, by implication, that austerity is contractionary).

    However, I think that the austerians will be able to carry on as they have for a while longer, not because they are correct, but because austerity in the face of economic troubles has a deep-seated cultural bias in its favour: For most of human history, a recession was a supply-side problem (a poor harvest), and not a demand-side failure. Because of this, people are biased towards exactly the wrong policies.

    Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae 1, 3

    by Dauphin on Wed Jan 30, 2013 at 07:01:34 AM PST

  •  Austerity (3+ / 0-)
    Recommended by:
    chantedor, melo, dorkenergy

    Has any one but me read the book, "The First Hundred Days of Franklin Roosevelt"?
    If you need a blueprint of how to get out of this mess just look at that presidents' actions.

    I remember an OP ED by Hubert Humphrey back in the 70's
    in which he pointed out the very things you mention above. Debt, he said, was a very good thing for this society. I think he indicated that debt actually motivates people to be creative and inteligent in how they live their lives and plan their future

  •  Yet they can't seem to connect the dots: (6+ / 0-)

    http://online.wsj.com/...

    The economy reversed from a 3.1% pace of growth in the third quarter largely because federal government spending fell by 15% and private business, likely fearing slack in demand, let inventories dwindle.
    The decline in federal spending last quarter was the largest drop since 1973. Spending at all levels of government fell 6.6% in the period.

    That drop was the primary culprit for the economy contracting, said Alan Krueger, chairman of the White House's Council of Economic Advisers.

  •  Great diary! But to answer your question.... (1+ / 0-)
    Recommended by:
    chantedor

    judging from history apparently forever. They have been at it for over a century and don't seem to be weakening.

    If... the machine of government... is of such a nature that it requires you to be the agent of injustice to another, then, I say, break the law. ~Henry David Thoreau, On the Duty of Civil Disobediance, 1849

    by shigeru on Wed Jan 30, 2013 at 11:40:32 AM PST

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site