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and leave it to none other than one of the dot.bomb bubble blowers to come up with this one...
but i'll bet krugman is cheering, since hey!
if deficts in the hundreds of billions was The Problem and OUTRAGEOUS the last time around, obviously BLOWING TRILLIONS is just what the doctor ordered, right?
and right on cue, we have pannetta and hilary rattlin the sabres at iran....
and it was cheney they accuse of wanting 'endless war'?
sigh....
i wish i had me one of them 'liberal arts' degrees, maybe i might sleep better at night.
but i'll bet krugman is cheering, since hey!
if deficts in the hundreds of billions was The Problem and OUTRAGEOUS the last time around, obviously BLOWING TRILLIONS is just what the doctor ordered, right?
Well, It Sure Seems Like Keynes Was Right Henry Blodget | Dec. 17, 2011, 10:20 AM
http://www.businessinsider.com/keynes-was-right-2011-12
After the experience of the past five years, it certainly seems like John Maynard Keynes was right, doesn't it? It seems hard to conclude anything else.
I'm not an economist, and I'm not born of a particular economic school that I've bet my life's work on, so I have observed the global economic events of the past five years with a fairly open mind.
I've listened to Keynesians like Paul Krugman argue that the way to fix the mess is to open the government spending spigot and invest like crazy.
And I've listened to Austerians like Niall Ferguson argue that the way to fix the mess is to cut spending radically, balance government budgets, and unleash the private sector.
And I've also looked back at history--namely, Reinhart and Rogoff's analysis of prior financial crises, the Great Depression, Japan, Germany after Weimar, and so forth.
And I have to say, the conclusion I keep coming back to is that Keynes was right.
In the aftermath of a massive debt binge like the one we went on from 1980-2007, when the private sector collapses and then retreats to lick its wounds and deleverage, the best way to help the economy work its way out of its hole is for the government to spend like crazy.
Or, rather, if not the "best way," at least the least-worst way.
Because, obviously, piling up even bigger mountains of debt is not a happy side-effect of such spending.
But let's face it: Austerity doesn't work.
At least, austerity doesn't work to quickly fix the problem.
The reason austerity doesn't work to quickly fix the problem is that, when the economy is already struggling, and you cut government spending, you also further damage the economy. And when you further damage the economy, you further reduce tax revenue, which has already been clobbered by the stumbling economy. And when you further reduce tax revenue, you increase the deficit and create the need for more austerity. And that even further clobbers the economy and tax revenue. And so on.
Basically, austerity puts you into a death spiral in which you keep trying to cut your way to prosperity, but all you end up doing is digging a bigger hole. And in the meantime, tens of millions of people are out of work, the economy is retrenching, and everything is generally miserable. And how about the alternative?
Well, die-hard anti-Keynesians will tell you that the alternative is what we're experiencing now. Obama did the big Keynesian stimulus thing a couple of years ago, and the economy is still lousy and the unemployment rate is still too high. And we have an absolutely massive debt pile that we need to work off.
Ergo, Keynesianism doesn't work.
But isn't that an unfair conclusion?
Most of the debt mountain we've piled up is the result of what we did before the crisis, not after it. In the years leading up to 2007, our absurdly undisciplined leaders took a nice big budget surplus and then squandered it. And they created absurdly loose lending standards and encouraged the whole country to lever up and buy stuff we couldn't afford. And they never said "no" to anything except tax increases, no matter what, and denied all the structural problems that were building up for decades.
And by 2007, they had put us in one hell of a hole.
And, given that, it seems reasonable to think that, as Krugman has long argued, one of the problems with the economy now is that the original stimulus just wasn't big enough.
And it also seems reasonable to conclude that, given the mess we got ourselves into, there is just no quick fix, regardless of what anyone does. And that, in fact, is my real conclusion about our current situation--that, no matter what anyone does, we're going to be licking our wounds for years.
But I will also add this in defense of Keynesianism...
The Austerians love to point at the 1930s as "proof" that Keynes was wrong. Look at the huge "New Deal," they say. Look at all those expensive public works projects. Look at all the spending the government did to try to get us out of the Great Depression, and it never really worked. What got us out of the Depression, the Austerians smugly observe, was World War 2.
But what was World War 2 if not an absolutely gigantic Keynesian stimulus?
Seriously.
The Federal deficit in World War 2 was massive--much bigger than any time during the Great Depression. And we built up a huge Federal debt load. And... we set the stage for two decades of amazing prosperity, in which we worked off those debts.
Our current debt and deficit situation scares the bejeezus out of me. We absolutely have to get our long-term budget problems under control, and doing so will involve both cutting spending and raising taxes. If we don't do that, we really will collapse, as Niall Ferguson et al have long been arguing.
and more/the rest of this at: http://www.businessinsider.com/keynes-was-right-2011-12
http://www.businessinsider.com/keynes-was-right-2011-12
After the experience of the past five years, it certainly seems like John Maynard Keynes was right, doesn't it? It seems hard to conclude anything else.
I'm not an economist, and I'm not born of a particular economic school that I've bet my life's work on, so I have observed the global economic events of the past five years with a fairly open mind.
I've listened to Keynesians like Paul Krugman argue that the way to fix the mess is to open the government spending spigot and invest like crazy.
And I've listened to Austerians like Niall Ferguson argue that the way to fix the mess is to cut spending radically, balance government budgets, and unleash the private sector.
And I've also looked back at history--namely, Reinhart and Rogoff's analysis of prior financial crises, the Great Depression, Japan, Germany after Weimar, and so forth.
And I have to say, the conclusion I keep coming back to is that Keynes was right.
In the aftermath of a massive debt binge like the one we went on from 1980-2007, when the private sector collapses and then retreats to lick its wounds and deleverage, the best way to help the economy work its way out of its hole is for the government to spend like crazy.
Or, rather, if not the "best way," at least the least-worst way.
Because, obviously, piling up even bigger mountains of debt is not a happy side-effect of such spending.
But let's face it: Austerity doesn't work.
At least, austerity doesn't work to quickly fix the problem.
The reason austerity doesn't work to quickly fix the problem is that, when the economy is already struggling, and you cut government spending, you also further damage the economy. And when you further damage the economy, you further reduce tax revenue, which has already been clobbered by the stumbling economy. And when you further reduce tax revenue, you increase the deficit and create the need for more austerity. And that even further clobbers the economy and tax revenue. And so on.
Basically, austerity puts you into a death spiral in which you keep trying to cut your way to prosperity, but all you end up doing is digging a bigger hole. And in the meantime, tens of millions of people are out of work, the economy is retrenching, and everything is generally miserable. And how about the alternative?
Well, die-hard anti-Keynesians will tell you that the alternative is what we're experiencing now. Obama did the big Keynesian stimulus thing a couple of years ago, and the economy is still lousy and the unemployment rate is still too high. And we have an absolutely massive debt pile that we need to work off.
Ergo, Keynesianism doesn't work.
But isn't that an unfair conclusion?
Most of the debt mountain we've piled up is the result of what we did before the crisis, not after it. In the years leading up to 2007, our absurdly undisciplined leaders took a nice big budget surplus and then squandered it. And they created absurdly loose lending standards and encouraged the whole country to lever up and buy stuff we couldn't afford. And they never said "no" to anything except tax increases, no matter what, and denied all the structural problems that were building up for decades.
And by 2007, they had put us in one hell of a hole.
And, given that, it seems reasonable to think that, as Krugman has long argued, one of the problems with the economy now is that the original stimulus just wasn't big enough.
But I will also add this in defense of Keynesianism...
The Austerians love to point at the 1930s as "proof" that Keynes was wrong. Look at the huge "New Deal," they say. Look at all those expensive public works projects. Look at all the spending the government did to try to get us out of the Great Depression, and it never really worked. What got us out of the Depression, the Austerians smugly observe, was World War 2.
But what was World War 2 if not an absolutely gigantic Keynesian stimulus?
Seriously.
The Federal deficit in World War 2 was massive--much bigger than any time during the Great Depression. And we built up a huge Federal debt load. And... we set the stage for two decades of amazing prosperity, in which we worked off those debts.
Our current debt and deficit situation scares the bejeezus out of me. We absolutely have to get our long-term budget problems under control, and doing so will involve both cutting spending and raising taxes. If we don't do that, we really will collapse, as Niall Ferguson et al have long been arguing.
and more/the rest of this at: http://www.businessinsider.com/keynes-was-right-2011-12
and it was cheney they accuse of wanting 'endless war'?
sigh....
i wish i had me one of them 'liberal arts' degrees, maybe i might sleep better at night.
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