The Paul Krugman Thread

Says fucking who? What is this intellectual swamp you speak of and how can you be so conceited to think that you and the Austrians are not in the swamp but everyone else is?

What if youre wrong? Your argument seems to boil down to the basic argument that every other belief system in macro economic theory is wrong except the one you believe in. But you offer no evidence for this. All you are doing is asking us to consider the possiblity that Keynesiasm is fundamentally flawed because, well, I dont know why. Give us a plausibly narrative instead of increasingly shrill doomsday predictions! In the meantime, can we just maintain some intellectual rigour by sticking to facts not and try not and confuse matters with what we want to be true based on our political biases.

Fact 1: The Keynsian macro economic model, as Krugman pointed out the other day and which I posted on the Ron Paul and which btw, you Ron Paul fan boys refuse to debate on that thread for some reason ( Afraid it will takefrom the rabid electioneering that that thread has become?) has been a pretty damn good predictor of the macroeconomic climate these past 3 years.

Fact 2: The Austrian model predicted in accordance with its model ( but Im starting to believe that the Austrians are far right political evangelists first and observers of macro second) that QE and stimulus would lead to inflation if not hyperinflation. They also predicted that American debt levels, for one, would lead to the US bond spread shooting up unless the defecit was immediately adressed.

Now you can argue that the Austrians might still be right. But at least admit that, to date, based on their own predictions they are wrong. Dead wrong.

they are all wrong
its all about timing
Lets have a look at Krugman seeing as he and the Keynesians are so right … s-in-asia/

clearly China is set for a hard landing
Property prices are in bubble territory in Korea, HK and Singapore. Who would have thought that stimulus would just delay the inevitable.

a good article is by Philip Mirowski … art-i.html … ef=opinion

My opinion of Keynesian policy is that it (saving in the good times) is all well and good, but as politicians are more interested in getting re-elected than balancing the books, the theory is never implemented.

Thus, all we are left with is more and more debt.

I agree. Keynes stated that government intervention would be neutral over a business cycle.

however he gave responsibility for implementing this idea to the politicians. National debts (the accumulation of defict spending) have risen during good times and bad.

I don’t recall any Krugman articles calling for tax increases during any of the booms.

Wasting my breath here I know, but a quick google search brings up such as

2004 - Krugman calls on Bush to reign in the red.

Or, from 2003: **2003 - The Tax-Cut Con

Spot on. Said this a while back on this thread.

But roc thats the achilles heel of the theory.
No politician is going to stand up for election and state ‘we’re spending too much’ especially if they are running a neutral budget or budget surplus.

The theory is all well and good, but history proves time and time again that, as it cannot be successfully implemented, it simply doesn’t work !

If we’re going to base our economics on an open market system it *has *to work. There is no alternative. Surely it is not beyond the bounds of some system of checks and balances. Or, indeed perhaps our inability to make it work gives ample reason for our current political system of ‘buying’ political power with such promises to be re-visited… My own view would be that all citizens should be properly educated for public life - to understand what that is, and be able to stand up and speak in its environment… and decide the country’s political representatives by lot, as was originally done.

Education is a start, but it’s by no means the magic bullet or even close to it.
And unfortunately, you cannot educate those who don’t want to be.

The best alternative I can find is to not allow governments borrow at all, or failing that, cap borrowings at no more than 25% of GDP.

If the electorate know that there is a small borrowing threshold, you may be able to focus their minds on wheather or not ‘now’ is a good time to do so.

Allowing unrestricted government borrowing ***never ***ends well.

That would be all well and fine if they had absorbed sufficient reserves during the boom so that they didn’t need to borrow during the slump.

But, they thought there would never be a pay-back day, notwithstanding the couple of centuries of experience in the matter.

So, they fucked up during the boom. BUT, that is no reason to compound the error during the slump by not stepping in and making up for the fall off in ‘animal-spirits’ of the slump.

  • Tax heavily during the boom, spend in the slump. See, simple. For sure, private enterprise got way too powerful during the boom and subverted what should have happened. But that is no reason to allow them to do the same during the slump. To cliche, two wrongs don’t make a right. We HAVE to borrow and print now, because we fucked up in the boom. Just get it done, we have no choice. The mistake was made last decade. Let’s not compound it witrh more ignorance and myopic self-interest of private wealth.

When is a boom a boom ?

You had economists et al who were completely blind to the biggest bubble in the history of this country.
So how do you expect to tax heavily in a boom when the majority of commentators cannot decide when you are experiencing one ?

Also, just try and stand for election with the platform ‘We need to tax heavily now’ !
Not a hope in hell.

The problem goes back to my first point - the implementation is impossible, so the best option is to limit the damage politicians (and the electorate) can do.

As for printing cash, the only way that is going to happen is if we have our own currency.
Now imagine what interest rates would be if we established the punt nua and then initiated a printing press frenzy.

Who was blind? - No independent economist. Many were calling it as it was. - Only those economists in the pay of private business interests, and the government for the most part, who came strongly under the influence of private business interests as the boom progressed, said that all was fine.

Anyway, it is clear there are two separate problems.

First, you have the economics problem - the answer is straight forward - cut public spending and raise taxes during the boom, boost public spending and ease monetary policy etc. during the slump. - This is what is needed to manage the business and associated cycles.

The second, political problem is more thorny. - During the boom, government fell increasingly under the sway of private business interests and their message of cut taxes, and sacrifice the public spirit to the commercial spirit. On the other side, during the slump, when the chickens come home to roost, these same interests now say they want to cut every aspect of public spending not in their interest so that they can hold onto their profit.

What a joke. We have in no way a democracy or government or any way a wise and benign rule that is in the best interest of the people. No, it is ‘government by the private business interests, for the private business interests, of the private business interests’.

Surely by now, people can see this system for the charade that it is - the lowest common denominator electoral sound-bites, appeal to base self-interest, carpet bombing PR and media campaigns, and all the rest.

The problem is not economics. It is political. - We have no politics, we only have a system of manipulation and control by private business interests in pursuit of profit.

Yet, the consensus seems to be that we need more of this problem as the solution!

I’d guess a majority of university economists also got it wrong - though more out of stupidity than out of their job depending on it. Look at Brian Lucey, for example.

During the boom they also fell under the sway of the public sector unions - and paid them ever greater amounts of money, paid off the unions with gifts and paying their costs, and never sought to rationalise or improve service.
Also - the cutting taxes was for the benefit of lower paid people (most of the voting populace), coupled with the other buying off of ever increasing social welfare payments.

Look at the stats, the tax take from the state has held up (at 2002 levels or so) - it is spending that is out of control.

The boom itself was reward enough for the more inner circle friends of the government - coupled with capital gains tax which allowed them to cream it off and tax breaks. It was however only by buying off the electorate and unions that they were able to get the smaller amount to these however.

Looking from it after the fact, the winners were those who got to keep their gains from the boom - a couple of developers and the unions.

Even don corleone would tell you that the best way to keep the wheels of business running smooth is to buy everyone off. No one is disputing that the government and public sector were not wined and dined and dancing girls laid on, and they want it to continue. But there is a difference between just wanting a piece of the action and being the spirit and force behind the whole paradigm. Ie. The pursuit of profit with zero regard to cost to human substance of society.

And who are these all knowing business interests- why assign such power and knowledge to them? It was the government and dept. Of finance who were in control and the government who most profited from the continuation of the ancien regime.
As far as I am concerned the business interests - I.e. The banks, developers, estate agents - carry as much responsibility as the unions and the media- and no more.

The only fucntion of the government is to allow for rent seeking and special interests to profit off the backs of the rest of us.

We need to scale down the government to a shell of what it is now. The sooner we realise this the better.

Do you mean governments in general or our Government?

Well it boils down to which sectors of society you feel government should withdraw from then, doesn’t it? For me, government needs to provide food, shelter, education & health as primary objectives. Secondary interests necessary to ensure delivery of the primary objectives include energy security, transport, communications and infrastructure.

I’m pretty sure we could live without HRI or Bórd na gCon, but really, I don’t see hollowing out government to a shell of what it is now as desirable or even tolerable. What would you cut?

Just ours.

I would start from the top. Cut the number of politicians and councillours. Get rid of the Seanad and predisency. Privatise third level education. Closed down, merge and/or privatised most quangos. Cut funding to NGO’s, ‘‘charities’’ and foreign aid.

Yeah, because that ideology has been working so well for us.