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Paul Krugman Calls Out Republican Hypocrisy on the "Fiscal Cliff"

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Old
12-07-2012, 04:54 PM
  #26
Ilkka Sinisalo
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how many significant economic downturns have there been since the great depression? I'm thinking they've been a little less frequent than every 5 years.

And $15 trillion in stimulus? lol. The entire US government spent just over $11 trillion from 2010-12. It doesn't seem like you know what you're talking about.

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12-07-2012, 04:58 PM
  #27
Tim Calhoun
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Quote:
Originally Posted by Ilkka Sinisalo View Post
how many significant economic downturns have there been since the great depression? I'm thinking they've been a little less frequent than every 5 years.

And $15 trillion in stimulus? lol. The entire US government spent just over $11 trillion from 2010-12. It doesn't seem like you know what you're talking about.
Including the enormous monetary expansion, the number probably is closer to $15 trillion.

Also, the two biggest recessions in terms of output losses in US history have been the Great Depression and this current crisis, far less than the time when the government didn't relatively little to counteract recessions.

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12-07-2012, 05:04 PM
  #28
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Originally Posted by Tim Calhoun View Post
Including the enormous monetary expansion, the number probably is closer to $15 trillion.

Also, the two biggest recessions in terms of output losses in US history have been the Great Depression and this current crisis, far less than the time when the government didn't relatively little to counteract recessions.
When the US did relatively little to counteract recessions (i.e. before Keynesianism and the New Deal), they had a "panic" about once every 5-10 years.

1792 1796–1797 1819 1825 1837 1847 1857 1866 1873 1884 1890 1893 1896 1901 1907

So, no.

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12-07-2012, 05:06 PM
  #29
Tim Calhoun
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Originally Posted by Sevanston View Post
When the US did relatively little to counteract recessions (i.e. before Keynesianism and the New Deal), they had a "panic" about once every 5-10 years.

1792 17961797 1819 1825 1837 1847 1857 1866 1873 1884 1890 1893 1896 1901 1907

So, no.
Well, the term "panic" isn't really used nowadays. If you look at recessions, the frequency is more or less the same now as it was then.

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12-07-2012, 05:06 PM
  #30
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Originally Posted by Ilkka Sinisalo View Post
how many significant economic downturns have there been since the great depression? I'm thinking they've been a little less frequent than every 5 years.

And $15 trillion in stimulus? lol. The entire US government spent just over $11 trillion from 2010-12. It doesn't seem like you know what you're talking about.
Ever heard of the Federal Reserve?

QE, debt guarantees, spending programs, add it all up. Maybe 15 trillion is a bit of a stretch, but 10 trillion is certainly not.

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12-07-2012, 05:08 PM
  #31
Ilkka Sinisalo
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Originally Posted by Tim Calhoun View Post
Including the enormous monetary expansion, the number probably is closer to $15 trillion.
OK so even if I accept this argument you're making, he's talking about stimulus. So we're saying that every single dollar that the government spends is stimulus. NASA, National Weather Service, payments on the national debt, Social Security, military, that's all stimulus.

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12-07-2012, 05:09 PM
  #32
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Originally Posted by Tim Calhoun View Post
Well, the term "panic" isn't really used nowadays. If you look at recessions, the frequency is more or less the same now as it was then.
I would argue Fed meddling has not only sped up the process, it has exacerbated the effects. The booms are greater, the busts are grander, the cycles shorter.

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12-07-2012, 05:10 PM
  #33
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OK so even if I accept this argument you're making, he's talking about stimulus. So we're saying that every single dollar that the government spends is stimulus. NASA, National Weather Service, payments on the national debt, Social Security, military, that's all stimulus.
No, stimulus is spending above and beyond the typical functions of government.

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12-07-2012, 05:10 PM
  #34
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Well, the term "panic" isn't really used nowadays. If you look at recessions, the frequency is more or less the same now as it was then.
Panic being roughly synonymous with financial crisis, it would include both the Great Depression and the current crisis, which were what you were talking about.

So clearly the US had financial crises far more frequently before Keynesianism than after.

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12-07-2012, 05:12 PM
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Ever heard of the Federal Reserve?
No, I've never heard of the Federal Reserve. Please tell me about it.

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12-07-2012, 05:13 PM
  #36
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No, stimulus is spending above and beyond the typical functions of government.
And the official US government spending was $11.17 trillion. So you're telling me that the typical US government spending over 3 years is $1.17 trillion, and then $10 trillion was above and beyond the normal.


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12-07-2012, 05:16 PM
  #37
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No, I've never heard of the Federal Reserve. Please tell me about it.
That fact that you fail to acknowledge (and perhaps even understand) the Fed's stimulative effects on the economy via it's manipulation of rates and outright purchase of trillions in US debt for the sole purpose of propping up the capital markets suggests a little more research and investigation on your end is in order.

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12-07-2012, 05:22 PM
  #38
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That fact that you fail to acknowledge (and perhaps even understand) the Fed's stimulative effects on the economy via it's manipulation of rates and outright purchase of trillions in US debt for the sole purpose of propping up the capital markets suggests a little more research and investigation on your end is in order.
as opposed to your insistence that essentially the entire federal budget is stimulus, which suggests just a fantastic understanding of everything.

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12-07-2012, 05:25 PM
  #39
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Originally Posted by Ilkka Sinisalo View Post
as opposed to your insistence that essentially the entire federal budget is stimulus, which suggests just a fantastic understanding of everything.

Try this article on for size. It's three years old, so add a few more trillion to the mix. You know, trillion here, trillion there, soon you're talking real money to the Bernank:

http://www.bloomberg.com/apps/news?p...efer=worldwide

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12-07-2012, 05:32 PM
  #40
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Originally Posted by slip View Post
Try this article on for size. It's three years old, so add a few more trillion to the mix. You know, trillion here, trillion there, soon you're talking real money to the Bernank:

http://www.bloomberg.com/apps/news?p...efer=worldwide
That's nice. It contains the same faulty logic that you're applying here, that every outlay by the federal reserve is stimulus.

The funny thing is, there is probably a logical conservative argument that the stimulus has not been as effective as it should have been, but instead you've decided to go off the deep end and say that the government has spent $15 trillion on stimulus in the past 3 years.

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12-07-2012, 05:51 PM
  #41
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Of course I'm no nobel prize winning economist but I don't get how Krugman reconciles more government stimulus with the out of control debt the US government has.
Because the higher the unemployment rate, the more difficult it is to balance the budget (insufficient tax revenues, higher unemployment benefit spending, more food stamps, etc.).


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He actually claims that the reason the 1 trillion 2009 blowout stimulus failed was cuz it was too small!
And he is correct (except for your use of the word "failed", which is 100 percent wrong and has been disproven many times). The economy was contracting by 9 percent when Obama took office. It has been growing modestly (very modestly) since the stimulus was implemented. So no, the stimulus didn't fail, but yes, it was too small to trigger faster growth.

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12-07-2012, 05:58 PM
  #42
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Isn't Keynesian economics sort of based on the notion that government can afford to stimulate the economy?

I mean, the national debt before the New Deal was around 30% of the GDP... now it's at or near 100% depending on the numbers you use. Big difference there.

How do you get past the conundrum of spending money you don't have, without accumulating more debt?

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12-07-2012, 06:02 PM
  #43
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Isn't Keynesian economics sort of based on the notion that government can afford to stimulate the economy?

I mean, the national debt before the New Deal was around 30% of the GDP... now it's at or near 100% depending on the numbers you use. Big difference there.

How do you get past the conundrum of spending money you don't have, without accumulating more debt?

Or as Krugman calls it, "the silly little details."

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12-07-2012, 09:00 PM
  #44
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Originally Posted by Sevanston View Post
Panic being roughly synonymous with financial crisis, it would include both the Great Depression and the current crisis, which were what you were talking about.

So clearly the US had financial crises far more frequently before Keynesianism than after.
I think there's a bit of confusion with the term "panic". No one uses that term for recent crises, which should also include the Savings and Loans crisis of the early 90s, Black Monday, several oil crises in the 70s, etc.

It's better to just look at recessions, which there is some data for:


http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.2.23

So yes, there were more recessions back then, but they weren't as bad on average, especially if you consider that the current downturn's output loss is at 455 and still growing, according to Krugman:

Quote:
By my estimate, the current number using industrial production data is 455; it will get a bit bigger but not much if the recovery continues.
http://krugman.blogs.nytimes.com/201...re-fed-panics/

So three of the four biggest recessions have been "after Keynesianism", and that only other one is the Depression of 1920 which was a consequence of World War I. If you consider that the Federal Reserve was founded in 1913 in order to help contain recessions, then you have 4 of the worst recessions have been under the government intervening in business cycles!

So you have basically a trade off of worse recessions in exchange for less recessions. But consider that most of the less frequent recessions are due to The Great Moderation of from 1980 to 2007, which wasn't exactly a good time in terms of genuine economic growth, especially for people who aren't millionaires.

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12-07-2012, 09:02 PM
  #45
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Originally Posted by Ilkka Sinisalo View Post
That's nice. It contains the same faulty logic that you're applying here, that every outlay by the federal reserve is stimulus.
Is it not? The Federal Reserve has a dual mandate: to promote low unemployment and to maintain price stability. Every time the Fed prints money it obviously isn't to maintain price stability, so logically every outlay has to be to promote low unemployment (which in other words, is stimulus).

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12-07-2012, 09:09 PM
  #46
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Originally Posted by Tim Calhoun View Post
Is it not? The Federal Reserve has a dual mandate: to promote low unemployment and to maintain price stability. Every time the Fed prints money it obviously isn't to maintain price stability, so logically every outlay has to be to promote low unemployment (which in other words, is stimulus).
Tim, I think that's too narrow a definition of "stimulus." I would argue any attempt by the fed to use monetary policy to affect the economy is a kind of stimulus.

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12-07-2012, 09:16 PM
  #47
Ilkka Sinisalo
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Originally Posted by Tim Calhoun View Post
Is it not? The Federal Reserve has a dual mandate: to promote low unemployment and to maintain price stability. Every time the Fed prints money it obviously isn't to maintain price stability, so logically every outlay has to be to promote low unemployment (which in other words, is stimulus).
That is not the mandate of the federal reserve.

http://en.wikipedia.org/wiki/Federal...ve_Act#The_Act

Quote:
An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.
http://en.wikipedia.org/wiki/Federal...System#Purpose

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12-07-2012, 09:18 PM
  #48
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During the 1970s, the Federal Reserve Act was amended to require the Board and the FOMC "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."[18]

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12-08-2012, 12:07 AM
  #49
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The Fed fundamentally shifted their focus from keynesianism to monetarism in the 70s. They went from covering stability and unemployment to solely focusing on money supply and inflation.

I thought this was pretty much common knowledge.

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12-08-2012, 12:59 AM
  #50
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Quote:
Originally Posted by Tim Calhoun View Post
I think there's a bit of confusion with the term "panic". No one uses that term for recent crises, which should also include the Savings and Loans crisis of the early 90s, Black Monday, several oil crises in the 70s, etc.

It's better to just look at recessions, which there is some data for:


http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.13.2.23
Robert Sobel Panic on Wall Street: A Classic History of America's Financial Disasters-With a New Exploration of the Crash of 1987 (E P Dutton; Reprint edition, May 1988) ISBN 0-525-48404-3.

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