Excellent op-ed by Krugman last week. Good comments too.
Should Government Try To Extend Booms Indefinitely? - William L. Anderson -> lewrockwell.com/anderson/anderson362.html
From the very first sentence, that is fair misrepresentation. Sets the tone for the rest of the piece.
What is actually represented is this: Keynes said the source of the trouble was that there was insufficient demand.
But what is now understood very well post Keynes (and he did not really get this) is that insufficient demand is largely as a result of insufficient money.
The empirical (and theoretical) evidence is overwhelming.
I don’t understand the term “insufficient demand” - could you expand on that a little? Your statement seems like a truism to me: demand increases as wealth increases.
The following replies are put in a ‘debate’ fashion, for the purposes of clarification, not because I take issue with positions or posters but because I still dont understand the whole shebang.
Well a fairly logical corollary to “insufficient demand is largely as a result of insufficient money” is that increased demand results from increased money, is it not?
- The assumption being made is that QE was enacted to increase demand but I dont buy that. I’m more convinced that QE was introduced to reduce the debt burden. Looked at that way, QE is, or at least will be, inflationary at some point. (This incidentally is why I dont believe Krugman or the left in general)
- What are we to make of the ‘Cypriot Solution’? Surely removing money via taxation is deflationary or demand-reducing? Doesnt this give the lie to various methods being employed to stimulate spending rather than reduce debt?
I read this article recently and found it interesting.
How does QE reduce the debt burden, it’s functionally an asset swap?
QE wasn’t and isn’t inflationary in its current guise. See: Japan. If anything it’s deflationary … as is proved by the repatriation of Central Bank monies to the Treasury by both the Fed and the BoE – monies that would be interest income to the private sector if they hadn’t been swapped out of Treasuries/Gilts and into (almost) zero interest bearing reserves.
Alfred Nobel specifically requested that there never be a Nobel prize for Economics - because of this exact problem. He didn’t want economists to be able to bully their inferiors into accepting their arguments because they were laureates. There is no “Nobel prize for economics”. The award that Krugman won is a prize awarded by the Swedish central bank in honour of Alfred Nobel. Basically the Swedish central bank hijacked the awards ceremony decades after it started - against the express wishes of Nobel and his family. It is a disgrace that the New York Times still advertises Krugman as a winner of a Nobel prize when he most certainly is not.
Is Keynesian thinking now suggesting the economy is in a supressed state of staglation because of a shortage of money? After years of monsterous QE and current deficit spending?
If so, is this a piss take at this stage?
The simple fact for most of western Europe and the US is there is too much money. Nothing gets fixed until the money supply starts to get supressed. Of course that sort of home truth doesn’t suit millions of Goverment dependents and politicians, so it’s not even under starters orders in the debate.
There is no real recovery without it.
Seriously that is pathetic level of argument.
I can’t do this any more. Last post on the pin bar one. BR’s zombies just keep coming. They don’t fucking die. Then these zombies are generally applauded on here… I have done this too many times. Fucking Say’s law… Yes. The whole basis of the Austrian school essentially.
I’ll leave it to the man himself, Nobel Laureate Krugman to have his say on Say’s law. -
It was refuted more than 75 years ago actually. By many of Say’s era. Here’s one of those refutations - another brilliant mind who people tend to dismiss out of hand because they don’t like his conclusions. Really, read it. It’s excellent. -
@emigrant: You see ‘general glut’ there? That is another way of saying insufficient demand. And in fact, Marx all that time ago, is seeing through to the insight of it being due to insufficient money, as above.
Anyway, I’m sure Say’s law will prevail on the 'pin.
Adios from me.
Sorry your not going to post here again. Having read a fraction of your posts has changed my outlook for the better. I’m sure your posts will be of use to others who don’t have a closed mind.
I think youre being a bit disingenuous here; “QE wasn’t and isn’t inflationary in its current guise.”
I’d counter that QE wasn’t and isn’t inflationary at its current level or at this current time.
I would have thought that The Japan Example was not a timely one, being that they’ve (belatedly?) decided to mash the accelerator through the floor this very week. It ignores the fact that their QE over the last 25-odd years was designed to counter a ‘deflation’ far more vicious that that of the 1930s.
It was blowing into a bust balloon to give the impression of a controlled implosion; as it is now in the UK.
It has indirectly caused asset prices to inflate by denuding the host currency and reduced the debt burden on those holding 2007 assets by propping up the ‘value’ of those assets in nominal terms at least.
Had this been done in ‘normal’ times are you saying the effect would not have been inflationary?
We are all agreed that every action has an equal and opposite reaction, so can we assume that inflation and deflation are opposites?
If so, whatever is done to counter deflation is, by definition, inflationary.
As a keen follower and contributor to this thread I share Roc’s exasperation.
How many times do the loons at the Von Mises institute have to be wrong, and found to be wrong, before people ignore them?
Or put another way, that the fuck have they got right?
If this were a football match it would be Krugman 6 Austrians 0.
Well some of us remember the 1970’s, the last time the ersatz Keynesians ran amok. That did not work out too well either. It was the Friedmanites who ended that particular caper and rerighted the ship before it sank with all hands.
Meanwhile here in the state that has followed pure Krugmaite polices since the election cycle of 1996 the economy is still bust and the state is still bankrupt. More of the same you say. We’ll see how that works out once the current zirp induced easy credit boomlet plays out. I’m not optimistic. So far its been Groundhog Day. Where every year looks like 1993.
You mean his urging of a pure free market with minimal intervention? It may have fixed the problem back then but his solution became the problem we are now faced with. Friedman clearly used “keynesian language and apparatus” rather than the historical disproven framework that is in contention above. Yes he railed against “naive keynesian” thought as he called it. But Krugman does not propose naive keynesian thought either. Rather it is keynesian thought evolved and developed since the time of Keynes. Friedman called it “new keynesian” and he promoted this as can be seen for example from his saying that a steady, small expansion of the money supply was the only wise policy. Mind that was in a very different environment to what we are faced with now. If he was alive today I’m sure he would be much more on the side of Krugman than on the side of the Christian fundamentalists down at the von Mises institutes who think this crisis is some sort of a morality play.
EDIT - Oh yeah, FF and the PD’s in government were not all about free markets, deregulation, privatisation, and the hero worshipping of big business?
The fundamental dishonesty in this debate, that you are also representing above is in conflating cause and effect and the remedies that fit certain phases of the economic cycle.
Youre wasting your time Banjo.
JMC’s dislike of Krugman is entirely unencumbered by the burden of having regard to the facts.
And he is not the only one.
This is exactly the type of mendacious, knee-jerk characterisation that I’d expect of a Krugman fanboi.
I stand wholly against this attempt to present speculative, blustering quasi-scientific rhetoric as some sort of brilliant ideology that will save the world if only I wasnt too fucking dumb to understand it.
The facts are that the Keynesian approach that has gotten us to this point. There can be no disputing that… or can there?
I’m sure we’ll hear now that ‘They did it wrong, so its not really Keynesianism’ from the gallery but in the end, there it is and here we are.
The problem is now they’ve ‘run out of other peoples money to spend’.
The magic money fountain has failed and the man behind the curtain is revealed for what he is; a social engineer.
We’ve now had almost 6 years of globalized Keynesian solutions and we are little further out of the shite than we were at the beginning.
Also, am I the only one who finds the idea of ‘economic cycles’ very bizarre from the Krugman types when the whole thrust of their policies it to prevent the completion of an economic cycle?
Indeed, one must ask of these policies ‘cui bono’? It certainly isnt the poor or the working man now, is it?
Naturally, we’ll be told (yawn, again) that we’re doing it wrong because we dont have enough money printing/asset swapping.
(‘Assets’ being vital to this as they are the preserve of the wealthy, you’ll note).
So for the Krugman-ites heres a simple question - how much ‘stimulation’/asset-swapping/QE/inflation/whatever-you-call-it-this-week will actually be needed?
I mean, you people are the experts, so will Japan doubling the monetary base be enough? Should it be tripled? Quadrupled?
You have your chance now, in advance, to predict the outcome of these policies, and that shouldnt be too hard for you because its all established and proven theory. Right?
So let us know - how much is needed?
As an aside, its important to remember that these modern soft-left Keynesians are the product of the hard-right, utilitarian, eugenicist movements that emerged in Europe in the 1920s; the fabians and the like.
We would do well to remember that.