China Bashing: Junk Economics (Hudson)

[Munger]

Re: China Bashing: Junk Economics (Hudson)

Lord. I lack the time or energy to address this in its entirety. A few of the major logical errors I saw from scanning your comments.

Yes, let's look at Krugman's specific policy critiques starting with Bush TARP bailout: So Krugman in fact agreed that Bush TARP bailout was acceptable. So in fact his talk about Sweden didn't get in the way of his getting on the TARP train in 2008.

Krugman advocated Swedish style takovers rather than a no-consequences bailout, but stated that the TARP bailout was better than doing nothing. I fail to see how this is shocking, or proves anything.

So where's the precise Krugman plan? All he says is there is a $2T hole, and that the $819B ARRA isn't enough to fill it.

So does that mean the bailout should be $2T? $3$? $1.5T?

...

So - he recommended $1.8T in spending in 2009. 2009 saw a $1.4T deficit (http://www.nationalreview.com/corner.../john-j-miller) - another $1T in spending would have yielded a $2.4T deficit. Almost halfway to being Belgium.

You are getting incoherent here. Makes it hard to respond.

He also then says $600B in infrastructure spending over 3 years; we should build bridges. Yet this is in direct contradiction to his previous work on Japan - they've been building bridges and highways everywhere for a decade - and it doesn't seem to have worked yet.

His previous work shows that Japan's stimulus was too little, too late. Just as he was predicting for the U.S., which seems to have been correct.

Krugman using other people's work to disprove Rogoff and Reinhart - boiling down to: I can show one example where the correlation is false. Therefore the entire list of examples and the empirical conclusion itself must be false. Useless. Even if the assertion is correct - a single outlier does not itself invalidate the premise.

When you base your work on a correlation between debt and growth, showing that most of the examples are incorrect or materially different is damning evidence.

Especially as we know full well how the US post WWII had a uniquely powerful economic advantage over the rest of the developed world: most of the gold and most of the factories.

So you think blowing up the rest of the whole world is the way to make a country prosperous. A completely bunk idea.

His position is exactly that of any other pundit: it is either too big, or too small, or its not my fault. In this case he chose too big even though his own words contradict his policy prescription - as well as his own conclusions on Japan's liquidity trap.

Again, he said the stimulus was too small, just as with Japan. Show me otherwise.

[Starving Steve]

Re: China Bashing: Junk Economics (Hudson)

As usual, I am lost: Why do we need more inflation? Why do dead-beats need to consume more? Why do we need more stimulus, especially when the stimulus-spending did absolutely nothing except make banksters rich? Why would the U.S. need to preserve a failed-bank or a failed-company? Why do I have to spend more money when I don't have income coming in thanks to zero interest rates?

Kids: Walk-out of your economics classes and organize protests. These professors in universities are maroooooooons. Maybe if they ran a business, they would have a clue about how the real world of economics works.

[ThePythonicCow]

Re: China Bashing: Junk Economics (Hudson)

Why do dead-beats need to consume more?

So that the corporations owned by the criminal oligarchs will have customers <grin>.

[Chris Coles]

Re: China Bashing: Junk Economics (Hudson)

What has occurred, over the last five decades, is the removal of what I call "Hidden" prosperity. To put it another way, the underlying means to be able to pay to do..... anything that requires a financial input.

Now turn to what Starving Steve says: "Why do I have to spend more money when I don't have income coming in thanks to zero interest rates? "

What we have today is a financial system that subsumes all the prosperity of the nation, right down to weekly and monthly salaries, into a banking system that pays interest on that money. The whole idea of savings invested back into new, local, free enterprise, small and medium enterprises ..... that pays a dividend; rather than interest ..... has vanished. PERIOD!

So, try as hard as anyone might; the money, prosperity, call it what you will, is simply not there to enable the creation of those replacement local jobs. Particularly, prosperous new jobs.

The end result is that try as hard as you like, unless you address the lack of hidden prosperity, nothing works. For the very simple reason; no one can afford to buy the products because all their spare cash in already inside the banks.

THAT is the problem.

Trying to pass the parcel back to the banking system with additional funding to the banks does NOTHING; other than adding to the debt of the nation.

Building bridges and the like has some benefit, but is a very narrow road due to the simple logistics. You pay for manual labour navvies to build something out in the countryside, but the problem is in the inner cities where the population is most dense.

That is why I have proposed the idea of taking a new class of bond, I call Vanishing Bonds, to use as direct equity capital investment back into new local job creation. That the ONLY way forward, (all the other ways have been found wanting, surely no argument about that today), is to get back to a dividend income model from equity investment into new jobs, right at the grass roots in those inner cities where the loss of that "hidden" prosperity is most obvious.

Arguing who said what, when; when none has come up with a acceptable solution, is surely like fighting over who has the right to jump first while standing on the deck of the sinking Titanic.

The problem is a very simple one, a lack of sufficient prosperity to permit the purchase of the products created by the new jobs we all need. Such prosperity has to be replenished and the only recognised method is the investment of equity capital into new jobs. So, why not?

[c1ue]

Re: China Bashing: Junk Economics (Hudson)

Krugman advocated Swedish style takovers rather than a no-consequences bailout, but stated that the TARP bailout was better than doing nothing. I fail to see how this is shocking, or proves anything.

It proves that Krugman ultimately has no strong beliefs, merely is willing to go along as opposed to stand behind his economic views.

You are getting incoherent here. Makes it hard to respond.

Hardly incoherent to those who actually read what is posted.

Krugman said the deficit doesn't matter because Belgium has a larger relative deficit and hasn't had any problems (except for the imminent secession of a large chunk of the nation), and that the US could increase its deficit up to $6T to attain the Belgium level without having problems.

Therefore an additional $1T in initial stimulus would have, in 2009, filled in half of this so-called Belgian leeway.

His previous work shows that Japan's stimulus was too little, too late. Just as he was predicting for the U.S., which seems to have been correct.

Again, I've posted numerous examples clearly delineating what he said. And again, you post a 2 sentence rejoinder with zero background or proof.

Japan has a 200% debt to GDP ratio - and yet stimulus was too little, too late?

These contradictions are for you to reconcile - they all fall from the mythical multiplier effect which no one has ever been able to demonstrate. And an effect which has yet to materialize with even the last decade's worth of stimulus behaviors.

When you base your work on a correlation between debt and growth, showing that most of the examples are incorrect or materially different is damning evidence.

When your single example has a massive external contradiction: i.e. the US economy being subsidized via both a extraordinary capital accumulation and an extraordinary growth avenue in the form of rebuilding the infrastructure for both Europe and Japan - literally the rest of the 1st world - it behooves a greater explanation than said situation being an outlier.

Thus this 'material example' is demonstrably different than the others.

And thus again Krugman subsumes inconvenient external details in order to promote his own agenda.

So you think blowing up the rest of the whole world is the way to make a country prosperous. A completely bunk idea.

I have no idea what you are talking about. The facts mentioned in the previous post and well as above are purely descriptive of Krugman's 'exception' supposedly disproving the rule.

Its like saying 10 homeless people have no homes, but that this empirical observation is false because 1 of these unfortunates is actually a drunk banker sleeping off a bender.

Again, he said the stimulus was too small, just as with Japan. Show me otherwise.

And again, in the absence of material proof FOR Krugman's assertion, this statement is nonsensical.

It is as illuminating to assert that reining in the FIRE economy would have saved the economy, or that sacrificing 2 goats and a chicken would have fixed everything.

Merely desiring a path not taken doesn't automatically equate to getting to a desired destination.

Krugman himself said that there has never yet been an instance where fiscal stimulus has been proven to work and that the premise for this type of action is at best speculative.

Of course now that he's a political commentator, his view seems to have diverged.

But you've still failed to reconcile the discrepancies I've pointed out:

1) Krugman says the US can accumulate more debt, to the tune of $6T based on a nation which is both disintegrating as a unified entity as well as one which is heavily subsidized through being the EU administrative capital

2) Krugman said that a $2T stimulus, plus a nationalization of the banks, would have been enough to "save" the economy.

Yet effectively the banks have been nationalized - between the Fed literally gifting money via paying interest on excess deposits, the Fed easy money carry trade into Treasuries, and the recapitalization via taxpayer expense of AIG, GM Financial, Citibank, etc.

Has the banking problem been fixed? I think not.

Nationalization is just a name. It was the liquidation of bad debt which 'fixed' the Sweden banking crisis - and not via selling to the Swedish Fed.

Similarly the $819B ARRA hasn't broken the US out of its recession except by relative terms.

Retail sales, etc are clearly at secular lows despite additional subsidies.

Unemployment is equally not improving.

And the ARRA hasn't even been able to spend on schedule despite the dusting off of every boondoggle and highway to nowhere in every mini-empire building bureaucrat in the entire nation.

So exactly how would the $600B per year for 3 years which Krugman advocated going to occur?

This isn't the 1930's where there were thousands of opportunities to build useful infrastructure were lying around - there are no Hoover dams, Tennessee Valley Authorities, Golden Gate Bridges which await WPA warm bodies.

And WPA jobs won't cover the massive mortgages owed, the student debt, or the lack of living wage jobs in a nation which is more urban than rural today, as opposed to more rural and urban 80 years ago.