Keynesian Economics vindicated... again

[_cinepro]

Please be more specific. Which entitlement programs would you like to see cut, and by how much? And how on earth does that in any way boost the economy?

The US Government obligations for Social Security, Medicare and Medicaid need to be drastically rethought. It's not just a matter of "cutting" them; the nature and depth of the government's involvement needs to be changed.

I don't believe the government can "boost" the economy, so it shouldn't try.

Why don't you check the history books for your answer. Our economy prospered for more than fifty years after WWII because it did precisely the things you're warning us about now. Go figure.

The prosperity following WWII wasn't because of the government's involvement. The federal government did a lot of great things in that time period, but to give it credit for the prosperity of the country over the course of decades seems a little much.

And that prosperity certainly wasn't because the government was hiring people or borrowing, printing or redistributing money.

It proves he believed it did when he asked for it, especially when he stipulated in his letter that it was desperately needed for job growth.

I agreed that Ryan was a hypocrite when he asked for it, but that is the demand we place on representatives. When the government offers to redistribute money, even the best of us can become hypocrites.

Your repeating disproved myth. Again, virtually all studies have already proved the stimulus worked.

You say "worked" as if it were something in the past. All it did was kick the can down the road. We still haven't had a recovery, we're still screwed, and we're still pumping more and more money down that bottomless hole trying to hold off judgement day. The economy is still on life support, with a weak pulse, and everyone's dancing around like we're fully recovered.

Again, this is Glenn Beck nonsense. Inflation isn't happening, let alone "hyperinflation" as you folks have been predicting.

So, do you feel like your dollars are increasing in value, staying the same, or decreasing in value? The value of the dollar is decreasing by any standard. This will happen at an accelerating rate if the current monetary policies are continued. This will be bad for people who save money, and great for people who owe money. If you can show otherwise, there's a nobel prize with your name on it waiting for you.



Also, you should totally write up your ideas and send them to Greece, Spain, Italy and Ireland, since they've got the same problem we do, only they're further down the road and they can't print money to try and delay the inevitable.

But it has worked, and is working still. Take some time off from reading the National Review, and then spend a little time out in the real world.

I've never read the National Review or listened to Glen Beck. Sorry.

[_Kevin Graham]

The US Government obligations for Social Security, Medicare and Medicaid need to be drastically rethought.

Why? As I explained previously, this concern over entitlement spending is much ado about nothing. We could cut our military spending in half and use that money to feed and shelter every needy American. But hey, helping Americans in need , well that isn't nearly as important as watching smart bombs blowing crap up in Muslim countries, is it?You folks have your priorities really screwed up. The fact that you constantly bring up entitlements, as if that is the reason we have so much debt, is telling.

It's not just a matter of "cutting" them; the nature and depth of the government's involvement needs to be changed.

Why is that? You think the government shouldn't be providing a safety net at all? Your candidate disagrees... at least when the cameras are in his face.

I don't believe the government can "boost" the economy, so it shouldn't try.

Well then, we'll just let that be your little secret.

The prosperity following WWII wasn't because of the government's involvement.

Of course it was.

The federal government did a lot of great things in that time period, but to give it credit for the prosperity of the country over the course of decades seems a little much.

Economists disagree. Besides, given the Right Wing philosophy, what the Government did do should have driven us to bankruptcy as a nation. It did all the same things Obama has been trying to do, with varying degrees of success.

And that prosperity certainly wasn't because the government was hiring people or borrowing, printing or redistributing money.

It is called deficit spending. It dumped billions into the economy in the form of public services such as building bridges, damns, railroads, etc.

You say "worked" as if it were something in the past. All it did was kick the can down the road.

It has worked. Most economic studies have concluded this. The kicked can is obviously in reference to the deficit, but the stimulus was never designed to rid us of the deficit. So you don't seem to understand the purpose of the stimulus.

We still haven't had a recovery, we're still screwed, and we're still pumping more and more money down that bottomless hole trying to hold off judgement day.

Nonsense. Economic factors are clearly on the upswing in virtually every category. The recovery is only going slow because that is a natural reaction to severe economic crises. But we're still in recovery mode whether you like it or not. What would help teh economy more is another injection of stimulus.

The economy is still on life support, with a weak pulse, and everyone's dancing around like we're fully recovered.

Who is dancing around? What planet are you on anyway?

So, do you feel like your dollars are increasing in value, staying the same, or decreasing in value? The value of the dollar is decreasing by any standard.

Yes, but with inflation comes increased income.

This will happen at an accelerating rate if the current monetary policies are continued.

Your Right Wing priests have been predicting hyperinflation for years now. It isn't happening.

This will be bad for people who save money, and great for people who owe money.

Yes, and since most people owe money, it is great for most Americans. Hello? Inflation is not necessarily bad, and in fact it can be good for the economy as it encourages consumer spending.

Also, you should totally write up your ideas and send them to Greece, Spain, Italy and Ireland, since they've got the same problem we do, only they're further down the road and they can't print money to try and delay the inevitable.

You insinuate we're in the same situation as Greec but in the next breath explain why we're not, though you obviously don't understand why. The fact that we issue our own currency makes our situation very different from Greece and Spain.

[_cinepro]

You insinuate we're in the same situation as Greece but in the next breath explain why we're not, though you obviously don't understand why. The fact that we issue our own currency makes our situation very different from Greece and Spain.

I obviously disagree with your view of the government's role in the economy, and I'll add that I'm not opposed to "safety nets" being provided by the government if they can be done with fiscal responsibility. I've also consistently stated my support for cutting spending on defense.

But I'm most intrigued by your perception that our situation is different than Greece's when it comes to government obligations. Specifically, do you think Greece's problems would be better or worse if they could print their own drachmas again, and how so?

Suppose Greece were given the ability to "print" Euros, with no limitations on how many they could create. What would happen to the Euro economy?

[_Kevin Graham]

I obviously disagree with your view of the government's role in the economy, and I'll add that I'm not opposed to "safety nets" being provided by the government if they can be done with fiscal responsibility. I've also consistently stated my support for cutting spending on defense.

That rings hollow when you're supporting a guy who would never in a million years cut defense spending. He is actually proposing to increase spending beyond what the Pentagon has requested.

But I'm most intrigued by your perception that our situation is different than Greece's when it comes to government obligations. Specifically, do you think Greece's problems would be better or worse if they could print their own drachmas again, and how so?

I'm with Cullen Roche (at Pragmatic Capitalism) on this one:

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Can you explain why you don’t think the USA is going to have a Greek style debt crisis?

Good question! This is one of those things that really confuse people because they understand how their own lives and businesses work as revenue constrained entities. But the autonomous currency issuer to household or business analogy doesn’t hold true. The reasoning is actually quite simple.

The USA has an institutional arrangement in which it is a currency issuer. That is, while the Treasury is an operational currency user (meaning it must always have funds in its account at the Fed before it can spend those funds) it is always able to harness the banks to procure funds. This is achieved through bond auctions in which the dealers are required to bid. The NY Fed explains:

Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account-holders.

So there’s never a concern about auctions failing in the USA. That is, the Treasury is a currency user, but the government as a whole can be seen as a currency issuer by institutional design because of this implicit funding guarantee. And even in a worst case scenario (let’s say a hyperinflation in which the dealers boycott auctions as bond prices collapse) the Treasury can always use the Fed as funding agent (but don’t mistake the current cases of QE as “debt monetization”!). So the key here is that there’s no solvency constraint as in, “running out of money”. Greece doesn’t have this arrangement. In fact, since the ECB is essentially a foreign central bank there is a real solvency constraint. So banks and private investors have become hesitant to buy Greek bonds because of this flawed institutional arrangement and the lack of an implicit guarantee. It’s apples and oranges compared to the USA.

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Professor James Galbriath echoed these same sentiments in a interview with his college newspaper:

The Alcalde: What’s the most common misconception about the economy?

Galbraith: The fear that we will go bankrupt. The concept of bankruptcy doesn’t apply to a country like us; the U.S. is going to be just fine, long-term. Europe is another story, because the coordinating mechanisms between countries there are dreadful. The U.S. is more resilient than it may look.

My message is the financial position of the U.S. government is far stronger than a great many people think it is. Recently we’ve been seeing this notion that we’re heading toward some unprecedented, apocalyptic territory. You saw that with the panic over the debt-ceiling issue last summer. But the people who were actually buying and selling treasury bonds weren’t flustered in the least. In fact, bond rates went down.
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And of course the folks on the Right understand this as well, but insist on using whatever fear-mongering technique that is at their disposal. For years the Republicans jacked up our deficits with no concern for the debt. Cheney was frank enough to just come right out and say it: "Deficits don't matter."

But then suddenly when Obama took office, they decided to use this to scare the American people. Suddenly they appear concerned, even terrified, that we're engaged in deficit spending.

[_cinepro]

That rings hollow when you're supporting a guy who would never in a million years cut defense spending. He is actually proposing to increase spending beyond what the Pentagon has requested.

Well, I've got four choices. Vote for Obama, vote for Romney, vote for a third party, or don't vote.

Given those choices, I'm taking Romney as the best choice. But not the perfect one.

I'm with Cullen Roche (at Pragmatic Capitalism) on this one:

So, if I understand your references, are you saying that you think Greece would be in a better situation if they could print their own Euros? Would there be any negative effects to such a situation?

[_Kevin Graham]

So, if I understand your references, are you saying that you think Greece would be in a better situation if they could print their own Euros? Would there be any negative effects to such a situation?

Not Euros, but rather their own currency. Look, I don't know how you guys can keep fear mongering about this by pointing to Greece when Japan's debt is infinitely higher, even more than double what our debt is, and yet their inflation rate was .3% last year. Now how do you explain that given your certitude that any more debt on our part would depress our economy, cause hyperinflation, create a currency crisis, etc? The difference between Greece and Japan is that Japan produces its own currency, as does the USA.

As I said to EA in the other thread, there is no hard evidence to point to causation. It is just a bunch of economic theory that tries to blame certain economic factors on debt. And you guys keep using this faulty analogy as if the Federal budget can be compared to a household budget. It can't.

You really need to take a look at this quick interview with Mike Norman who explains why much of this debt nonsense is a myth, and why we're not experiencing hyperinflation as the Austrian priests have been foretelling. This whole business about "borrowing" is really a misnomer, as the government doesn't really borrow in the traditional sense. It sells treasury bonds, which buyers gladly purchase. Norman explains that the only real problem with this is the possibility of inflation but inflation isn't happening because, ""the only way inflation is going to happen is when and if the government spends beyond the capacity of the economy to produce. Or in other words, when every single person in this country is able to work is working and when all our resources are used up and you spend beyond that, that's when you have a sustainable inflation."

Here is another take on this situation and notice the journalists are asking the same kinds of questions you and EA are asking. This one gets interesting after 3 minutes:

http://www.youtube.com/watch?v=r2uKt_gT ... ure=fvwrel

[_cinepro]

Not Euros, but rather their own currency.

Greece uses Euros, and their debt is in Euros, so I'm asking what would be wrong with Greece paying off their debt by being given the authority to print more Euros? Or for the ECB to print the Euros and give them to Greece and Greece could use them to pay off their debt.

It's not a theoretical question.


As for inflation in the USA, we are already seeing what I consider to be unacceptable levels of inflation. Bernanke and the Fed may disagree, but I don't think we have the same goals for the US economy and the status of the US Dollar.