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Debt As Wealth; The Caution of Unfit Past Experience
Debt As Wealth; The Caution of Unfit Past Experience
With the G-20 recoiling itself back into the same kinds of mistakes made in the 1960’s, leading directly to the Great Inflation, we will have to take into account the other end of that, namely other forms of “stimulus.” With the global economy sinking, and worries about it beginning to resound beyond just inconvenient bears, there is growing official consensus on central banks taking a clearer approach but also that governments need to face up to “austerity.”
Paul Krugman has been leading the critique against what he sees is a disastrous and ignorant deformation against debt. In times like these, which he “predicted” based on too little government spending, Krugman derides fiscal sense as “cold-hearted.”
This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least…
People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!
The above quoted passage was taken from a column he wrote back on New Year’s Day 2012. While it has aged three years, given the global slowdown that was about to take place and the ineffectiveness of monetarism alone to dispel it, his words are being taken increasingly as both prescient and prescriptive. However, the logic behind his anti-austerity agenda is more of a sleight of hand than actual argument.
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We’ll Meet Again, Don’t Know Where, Don’t Know When
We’ll Meet Again, Don’t Know Where, Don’t Know When
I was having a post-Departmental Colloquium dinner with a small group of colleagues from the Harvard Chemistry Department in the Spring of 2008 when the subject turned to the then-recent shudderings of the stock market – a topic which at the time was of greater concern than usual but about which none of us actually knew anything at all. One of my colleagues (in fact our host) was an elderly professor with wisps of white hair and mildly expressed yet utterly inflexible opinions—a legitimately brilliant scientist whose certainty, alas, seemed to extended beyond his expertise. He was, in my mind, a model of the reflexively liberal, raised-on-the-Gospel-of-Saint-Krugman scientist that abounds at Harvard and in academia in general. And, despite a recent drop in the Dow Jones Industrial Average on the order of 10%, the professor dismissed any serious worry, suggesting that the ups and downs of the market were just meaningless tides of funny money.
“Rob” I said (not his real name), “I am sympathetic about that. And I too get the feeling that all these billions of created and lost dollars don’t seem to actually make a difference in our lives. But the Wall Street people are sounding a little more frantic than usual these days. They’re talking as though this time it’s really going to matter.”
Of course, the Wall Street people, as it turns out, were quite right, as the market dropped another 20% over the course of a few days in June and then (just to show they weren’t kidding) another 20% or so over the ensuing half year—taking with it down the rabbit hole around $11 billion of Harvard’s endowment. And, just to be explicit, because Harvard ran a substantial portion of its operation on interest from the endowment, that meant that building and hiring freezes, salary cuts, early retirement, and various other features of austerity weighed heavily on the Ivory Tower for quite a while. These days, I understand that Harvard has gone back to burying their money in an environmentally friendly tin can in the back yard, which might be about the only place that it is going to be safe this year.
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Nobel Prize Winning Economists, Federal Reserve Chair and Other Top Experts: War Is BAD for the Economy Washington’s Blog
Debunking the Stubborn Myth that War Is Good for the Economy
About.com notes:
One of the more enduring myths in Western society is that wars are somehow good for the economy.
It is vital for policy-makers, economists and the public to have access to a definitive analysis to determine once and for all whether war is good or bad for the economy.
That analysis is below.
Top Economists Say War Is Bad for the Economy
Nobel prize winning economist Paul Krugman notes:
If you’re a modern, wealthy nation, however, war — even easy, victorious war — doesn’t pay. And this has been true for a long time. In his famous 1910 book “The Great Illusion,” the British journalist Norman Angell argued that “military power is socially and economically futile.” As he pointed out, in an interdependent world (which already existed in the age of steamships, railroads, and the telegraph), war would necessarily inflict severe economic harm even on the victor. Furthermore, it’s very hard to extract golden eggs from sophisticated economies without killing the goose in the process.
We might add that modern war is very, very expensive. For example, by any estimate the eventual costs (including things like veterans’ care) of the Iraq war will end up being well over $1 trillion, that is, many times Iraq’s entire G.D.P.
So the thesis of “The Great Illusion” was right: Modern nations can’t enrich themselves by waging war.
Nobel-prize winning economist Joseph Stiglitz agrees that war is bad for the economy:
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Keynesian Hit Men On The Road—–Krugman And Rogoff Peddling Toxic Advice | David Stockman’s Contra Corner
Here are a couple of reasons why Keynesian economists are truly a menace in today’s bubble ridden and debt-impaled world. It seems that both Harvard’s Kenneth Rogoff and Princeton’s Paul Krugman are on the global advice circuit, peddling what amounts to sheer snake oil to desperate politicians and policy-makers who have already buried themselves—-so far to no avail—-in unprecedented waves of fiscal and monetary “stimulus”.
But never mind. The professors have a three part solution, and its more, more……and moar! To make room for more monetary stimulus after six-years at the zero bound, therefore, Professor Rogoff has a truly juvenile solution. Namely, to abolish cash. That’s right, this Harvard windbag proposes to confiscate your kids’ piggy bank and any green stuff that may be left in your wallet.
Meanwhile, Krugman has made a quick circuit through Tokyo, where he apparently was instrumental in convincing Japan’s prime minister to cancel the next installment of the consumption tax increase—a move that was utterly necessary in order to stem the nation’s massive flow of red ink. But why not spend a few more years adding to Japan’s staggering debt burden, which is already at 230% of GDP and rising inexorably in a nation that is fast becoming the world’s foremost retirement colony? After all, Professor Rogoff has now perfected a scheme which will allow central banks to monetize all the debt that even the most profligate government can possibly issue.
So start with Professor Rogoff ‘s incredible assault on the peoples’ cash and coins—a necessary prelude to even more fantastic rates of central bank monetary expansion. Here is exactly what he recently advocated at a “prestigious” international policy forum:
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And The Person Responsible For Japan’s Economic Endgame Is… Paul Krugman | Zero Hedge
And The Person Responsible For Japan’s Economic Endgame Is… Paul Krugman | Zero Hedge.
There are two words that should strike fear in the hearts of any rational-thinking citizen of the world – Paul Krugman. Wondering why? As Alhambra’s Jeff Snider notes, we already know of at least one respect where Krugman (as a stand-in at least for the Keynesian perspective that is somehow still widely shared, especially in the orthodox economist class) has impacted ‘stimulus’ activity, Sweden. And now his appearance in Japan enabled what Japanese economists call a “historic meeting,” as Bloomberg reportsthat Abe met with the Nobel-prize winner for 40 minutes who “helped the prime minister make up his mind,” that delaying the fiscally-responsible tax-hikes was the right thing to do (and increasing QQE) or Japan “wouldn’t escape deflation.”Mission Accomplished… and if it fails, moar will be needed and ‘capitalism’ will be blamed.
As Bloomberg reports, with a December deadline approaching, Prime Minister Shinzo Abe was considering whether to go ahead with a 2015 boost to the consumption levy. Evidence was mounting that the world’s third-largest economy was struggling to shake off the blow from raising the rate in April, which had triggered Japan’s deepest quarterly contraction since the global credit crisis…
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Sufficient Liberal Stories–The Krugman Function Part 4 – Transition Milwaukee
Sufficient Liberal Stories–The Krugman Function Part 4 – Transition Milwaukee.
On the face of it, Paul Krugman appears entirely confident in the future of the American way of life and the growth of a globally inclusive economy. He is similarly confident in our ability to address climate change by running that economy on renewable energy.
This needs two significant qualifications. First, it is unclear whether this is what Krugman hopes, or what he expects; whether he is rallying us in an inspirational mode, or lecturing in an analytic one. In contemporary political culture the roles of coach and analyst are becoming increasingly indistinct and it may not be possible to separate the two. Second, Krugman’s optimism is clearly dependent on the ability of political liberals to get wrong-headed, fuzzy-thinking conservatives out of the way; it is only by becoming lost in the enthusiasm of a pre-game pep-rally that one could feel all that confident about liberal prospects in upcoming political contests. A good deal of commentary these days seems to be busy staking out terrain from which the commentator can say, when things have gone very badly indeed one day, “don’t look at me, I told you this would happen if you didn’t listen to me”
Setting aside the various undercurrents that pull at any person putting ink to paper or fingers to keyboard, Krugman’s narrative, itself, is very optimistic, and for reasons that form the major subplot of that same narrative. As we began to show in our last installment, political efficacy, easy choices, as well as the ever-popular free lunch, are built into the narrative as the ultimate driver of action. All narratives contain within them a “theory” of cause and effect, whether it is the fate, history, chance, and interconnection we see in Thomas Hardy, or the exercise of individual virtues Jane Austen deploys, to mention two very different narrative theories of cause. In history, Karl Marx argued that history was driven by class conflict, while in Darwin history is moved by the act of survival and ability to procreate. Enlightenment philosophers viewed historical change as the conquest of myth by reason. Krugman is most similar to the latter. In his story the action is moved by practical insight, the courage to accept its conclusions, and the determination to act upon it.
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The Krugman Function Part 2–Whole System Thinking – Transition Milwaukee
The Krugman Function Part 2–Whole System Thinking – Transition Milwaukee.
Whole System Thinking
Anyone who has spent much time thinking about ecology, peak oil and the economy, or global carbon emissions with any degree of complexity understands the importance of whole-system thinking. Whole-system thinking reminds us that our economy cannot be intelligently assessed without an understanding of resources and energy. Whole-system thinking tells the ecologist that the loss of one species or a slight change in precipitation patterns will upset a far broader equilibrium whose boundaries are often impossible to predict. Whole-system thinking tries to remind the smug Prius driver that the embedded energy in the car’s battery-system may outweigh many of the gains in operating efficiency, or the gullible voter that lowering U.S. emissions by offshoring our heavy industry to China in our quest for a “knowledge economy” is of no practical import to global warming.
Whole-system thinkers are in constant conflict with a very strong tendency to see things in isolation or according to smaller isolated systems—like the economist who believes that the economic system has its own rules independent of geology and thermodynamics, the people who do not imagine how the loss of a bird or fish species might actually have any impact on them, and of course the smug Prius drivers who believe they have made “a difference” without bothering to follow the chains of cause and effect, flows and feedback, which would reveal what these differences are. Among the many lessons of whole-system thinking is the interconnected nature of everything and the inevitability of all sorts of unintended consequences, including many that are impossible to anticipate with any precision. Changing one thing on planet Earth, at any rate, changes many things—in some cases “everything.”
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