Krugman: We are in a depression, and it could be a long one

[Ad Orientem]

Spend any time around monetary officials and one word you’ll hear a lot is “normalization.”? Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.

But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?

Read the rest here...
http://www.nytimes.com/2013/11/18/opini ... .html?_r=1&

[Benko]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

[Ad Orientem]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

Krugman is human and therefor fallible. But I will say that he is not your typical talking head on CNBC. Which is to say that he is a pretty sharp guy. I guess you could say that while I have reservations about some of his views, I take him a lot more seriously than someone like Peter Schiff.

[moda0306]

He is quite liberal in terms of where is economic preferences lie, and he's become increasingly condescending towards people he disagrees with, but there is some extremely valuable stuff in his writings.

[Kshartle]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

Krugman is human and therefor fallible. But I will say that he is not your typical talking head on CNBC. Which is to say that he is a pretty sharp guy. I guess you could say that while I have reservations about some of his views, I take him a lot more seriously than someone like Peter Schiff.

Schiff supports lower taxes, less regulation preventing economic transactions and business growth as well as a stable money supply and a smaller government. While I disagree with him on the government and gold standard.....to compare him to Krugman....wow. It would be an entertaining debate lets just say that much. I know Schiff has challenged him a number of times. Krugman has at least been smart enough to refuse.

Krugram supports the government running printing presses like crazy, a centrally planned economy, the trillion dollar coin and having the government possibly fake an alien invasion to "stimulate" the economy.

Why do you take Krugman more seriously? Is it the beard? Have you read his book "End this Depression Now"? I've tried on three separate occasions to read it but it's impossible for me. It's such a missmash of unsupported nonsensical religious ideas I can never get more that 15-20 pages in before I have to stop.

I say religious because his economic theories are entirley faith-based. A certain handful of people can print trillions of slips of paper, force everyone at gunpoint to accept them in exchange for things of real value, this group can then use them to buy whatever they want from the rest of us, and the result will be an improved economy. Ohhh yeah, businesses and people who are bankrupt should be bailed out. Every economic resource-wasting mistake should be forgiven so there is no incentive to actually do things that create value. Its good enough if everyone just runs around doing stuff, the stuff doesn't have to be valuable. Dig pits and fill them back in, get paid to do it, spend money, borrow money.

There is no way Krugman can actaully beleive the stuff he says. He must be an actor, no one can come up with the dumb ideas he does without trying to think of the dumbest economic ideas possible.

I might be wrong but I thought he was a deficit hawk when Bush Jr. was president. I suspect he is just a political pundit trying to pass himself off as an economist.

My opinion certainly doesn't make anything a fact. I would encourage everyone to read Krugman if they can, if nothing else it's good for a laugh.

[flyingpylon]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

If Krugman told me that 2+2=4 I would treat it with suspicion.  That said, I do occasionally read his columns because I am willing to listen to a variety of viewpoints.

[Kshartle]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

If Krugman told me that 2+2=4 I would treat it with suspicion.  That said, I do occasionally read his columns because I am willing to listen to a variety of viewpoints.

If Krugman was quoted as saying 2+2=4 I would question whether he was missquoted.

[moda0306]

How many here have faith in the judgement of Mr. Krugman? (Haven't read the link yet, just askin).

If Krugman told me that 2+2=4 I would treat it with suspicion.  That said, I do occasionally read his columns because I am willing to listen to a variety of viewpoints.

If Krugman was quoted as saying 2+2=4 I would question whether he was missquoted.

If an Austrian was quoted with having a well-thought-out and well-evidenced counter-point to most of Krugman's claims that wasn't built with hyperbole, moralizing, and straw-men, then it would be easier to laugh at these funny comments.



Kshartle,

Your post is so littered with ridiculous straw-men that I can barely even respond to it.

- The alien invasion was a silly example of how spending can aid a depressed economy, even if it's on wasteful things... and since that's one of the few things that could actually cause a hyperinflation in the U.S., I'm surprised Austrians aren't more for it . 

- His theories are based on history, observations and social interaction theories, most of which have played out in Japan for decades.  Not to mention all your descriptions are a bit asinine of his positions.

- He was a deficit hawk when Bush was president because 1) he too misunderstood our banking system, and 2) Bush was using tax-cuts to solve a problem that he deemed to be much more efficiently solved with stimulus.  He has a reason for thinking this, and that is because recessions are a DEMAND problem, not a supply problem.

We can both pontificate about Krugman's opinions, but it's hard to argue that he's been phenomenally more correct on economic predictions than the Austrians have been, and with some flaws, he lays out a pretty sound reason why we don't have 1) recovery, 2) high inflation, or 3) high interest rates.

Taxing ANYTHING could reduce the will to engage in that activity.  Why punish labor more than investment?  We know you'd call for abolishing government, but if we're going to have one, let's at least not give capital a significant tax-advantage over labor. 

Your logic on taxes is a bit ridiculous... If I, as an accountant, were to be given a 1% income tax rate by government with no payroll tax liability, would you not say that my profession was "tax-advantaged?"

Funny how "anarcho-capitalists" want flat taxes for all income, but some income should be "more flat" than others.

[Kshartle]

Kshartle,

Your post is so littered with ridiculous straw-men that I can barely even respond to it.

- The alien invasion was a silly example of how spending can aid a depressed economy, even if it's on wasteful things...

Wait are you agreeing with me or with Krugman? Is the alien invasion helpful or silly/wasteful? It can't be both so which one is it?

[Kshartle]

Your logic on taxes is a bit ridiculous... If I, as an accountant, were to be given a 1% income tax rate by government with no payroll tax liability, would you not say that my profession was "tax-advantaged?"

Funny how "anarcho-capitalists" want flat taxes for all income, but some income should be "more flat" than others.

How does taxing something give it an advantage? You're imagining that the natural state of all property or earnings is that it belongs to the masters and whatever scraps we are left to keep is an "advantage". You think a 1% tax rate is some kind of generosity when the reality is it's a tax. Now....it might be less "tax-disadvantaged" than something else.

What "anarcho-capitalist" advocates taxes? Anarchy means no rulers, therefore....no taxes. No one has the right to take what they did not earn or trade for voluntarily or have simply given to them. Taxes are none of those thngs.

[moda0306]

Kshartle,

If in a world of high taxes, low taxes aren't a "preference," then let's just look at taxation as punishment.  Laborers and interest-income earners (non-muni) are being punished by government far more than stock-holders.

Better?

[Kshartle]

- He was a deficit hawk when Bush was president because 1) he too misunderstood our banking system, and 2) Bush was using tax-cuts to solve a problem that he deemed to be much more efficiently solved with stimulus.  He has a reason for thinking this, and that is because recessions are a DEMAND problem, not a supply problem.

He misunderstood more than the banking system.

Recessions are the restructuring of the economy away from economically unproductive activity. People stop doing what they were doing because it's not valued. Prices for certain goods or labor rose too high which encouraged over investment and over production/supply. When the prices were shown to be unsustainable the crash occurs and people and businesses that misscalculated are exposed. Look at the housing bubble. I am in central florida. If you went into a Denny's in 2006 and yelled out "Are their any real estate agents here?", 50 hands would have went up.

Everyone was banking on housing prices going up up up. Prices had been driven up by low rates and government-backed mortgages as well as some other factors. Cabinent makers, construction workers, real estate agents, mortgage brokers, the list goes on and on.......The economy here was transformed into an unsustainable bubble. What do you think would have prevented it? Printing more money to keep the prices going up? Should the FED have just started to print money and buy houses directly? How could they ever stop without crashing it?

Recessions aren't caused by lacking demand. They are caused by unsustainble economic activity forming a bubble as a result of prices being bid up far beyond what can be supported by fundamentals. Trying to prevent them by blowing more air in the bubble or recovering by re-inflating only makes the recession longer and worse.

[Kshartle]

Kshartle,

If in a world of high taxes, low taxes aren't a "preference," then let's just look at taxation as punishment.  Laborers and interest-income earners (non-muni) are being punished by government far more than stock-holders.

Better?

A little better.....but the alternative to labor is not stock ownership. You don't choose to own stocks rather than work. You choose to own stocks rather than own cash, gold, bonds, real estate, bitcoin, anything else.

The alternative to work is not working. One major benefit of not working is that it's tax-free. Actually.....you can even get paid to not work so now we are really talking about something that's "tax-advantaged" in the literal sense!

[Kshartle]

Kshartle,

Your post is so littered with ridiculous straw-men that I can barely even respond to it.

- The alien invasion was a silly example of how spending can aid a depressed economy, even if it's on wasteful things...

Wait are you agreeing with me or with Krugman? Is the alien invasion helpful or silly/wasteful? It can't be both so which one is it?

Anyone care to venture an answer to my question? Did Krugman advocate the possiblity of faking an alien invasion to help the economy? Is my saying that a strawman argument?

[moda0306]

Kshartle,

Your post is so littered with ridiculous straw-men that I can barely even respond to it.

- The alien invasion was a silly example of how spending can aid a depressed economy, even if it's on wasteful things...

Wait are you agreeing with me or with Krugman? Is the alien invasion helpful or silly/wasteful? It can't be both so which one is it?

Anyone care to venture an answer to my question? Did Krugman advocate the possiblity of faking an alien invasion to help the economy? Is my saying that a strawman argument?

He probably would have preferred it to muddling along in an endless depression, as it is spending, so as soon as we'd reach full employment (and our balance sheets are repaired), he'd quit the ruse.... but he's said many times that there is plenty of productive investment we have in front of us, and we should do that, and there's no need to talk about make-work jobs because there are productive things we can do.

But him and I disagree a bit.  I think it's more of a balance-sheet issue, while he thinks it's more of a spending issue.  I think we need balance sheet repair to generate full employment, and he thinks government needs to actually consume/invest.

However, we both realize that this is a DEMAND problem, not a supply problem.  We have inadquate demand against our productive capacity, so what will truly help investments is not low tax on capital (or labor, really), or low regulations, or any other supply-side leg-stroking, isn't going to really do anything meaningful. You need adequate demand, and the nominal assets on our balance-sheet aren't going to give us that.  Period.

[Pointedstick]

Kshartle,

If in a world of high taxes, low taxes aren't a "preference," then let's just look at taxation as punishment.  Laborers and interest-income earners (non-muni) are being punished by government far more than stock-holders.

Better?

A little better.....but the alternative to labor is not stock ownership. You don't choose to own stocks rather than work.

It is for ERE folks!

[Kshartle]

Wait are you agreeing with me or with Krugman? Is the alien invasion helpful or silly/wasteful? It can't be both so which one is it?

Anyone care to venture an answer to my question? Did Krugman advocate the possiblity of faking an alien invasion to help the economy? Is my saying that a strawman argument?

He probably would have preferred it to muddling along in an endless depression, as it is spending, so as soon as we'd reach full employment (and our balance sheets are repaired), he'd quit the ruse.... but he's said many times that there is plenty of productive investment we have in front of us, and we should do that, and there's no need to talk about make-work jobs because there are productive things we can do.

What happens to the alien economy when the ruse is ended?

If productive work is preferable to non-productive work....what is the best way to determine what that work is?

Should we:

A) let politicians figure it out and order people to do it by spending government money to bid for resources and labor?

B) let people instead spend their own justly earned money in ways that signal to the market what services and products are desired?

Obviously we can just make the moral choice but I'm ok talking about the economics.

[moda0306]

Kshartle,

People can't just "figure it out" if the financial tools on their balance sheet is inadequate and barter is too inefficient.

I'm all for getting the infrastructure work done while it can, but in the end even that isn't necessary.  Slash the payroll tax and/or add money to every American's checking account every year until we have full employment, then stop.  It's not that difficult.

And let's not forget... these things may be non-productive, but often it does teach people some valuable skills that they're not earning while on the couch.  I don't prefer preparing against an alien invasion, or any make-work, but resources are being wasted no matter what, and it's important we realize that.

[Kshartle]

Kshartle,

People can't just "figure it out" if the financial tools on their balance sheet is inadequate and barter is too inefficient.

I'm all for getting the infrastructure work done while it can, but in the end even that isn't necessary.  Slash the payroll tax and/or add money to every American's checking account every year until we have full employment, then stop.  It's not that difficult.

And let's not forget... these things may be non-productive, but often it does teach people some valuable skills that they're not earning while on the couch.  I don't prefer preparing against an alien invasion, or any make-work, but resources are being wasted no matter what, and it's important we realize that.

They might not be getting used right now.....but using them to prepare for the war of the worlds would be the waste, not the idleness.

How does adding to the money-supply create productive labor?

[moda0306]

Kshartle,

It doesn't create productive labor, it creates the nominal economic environment that will end this economic Mexcan Standoff we're in.

I've said it 100 times and it's like you don't even acknowledge it.  Unemployment (beyond seasonal and maybe some structural) wouldn't happen in a barter society.  It's a function of tying all our contracts to a single economic unit.  In a barter society, if I malinvested, I could pay it off simply by working harder or renegotiating the debt.  It wasn't a "free lunch."  People just had to work harder.

A monetary-based debt means we have to go collect dollars to repay people, rather than work actually being the debt.  This creates the problem of unemployment, where the entire economy doesn't have enough nominal resources to both service debt AND demand full production from itself.

Melveyr explains this better than I can, and he's like 12 .

But do you see what I'm explaining.  A monetary architecture creates tons of efficiencies, but is structurally designed to "accidentally" create unemployment when malinvestment manifests itself, rather than just adjust by having people who made the mistakes work a bit harder to pay them off.

[Kshartle]

I'll reply to your post....I'm just spent. The bitcoin dissection took something out of me.

[moda0306]

Ha.

Don't worry about it.  I actually like it when others get tired because I am usually also there, but my ego gets the best of me  .

[Libertarian666]

This is probably the only time I've agreed with Krugman about anything.
Only about the diagnosis, of course; his prescription for fixing the problem is completely wrong, as usual.

[moda0306]

tech,

So an economy that's perpetually depressed below its productive economic capacity aligns with your thoughts?

How is this an environment that is supply-constrained, conducive to a high interest rate, or one that will prove to be inflationary as we "print money?"

[Ad Orientem]