Krugman Austerity Debate

It’s interesting that Paul “print money” Krugman uses medieval medicine as an analogy for austerity when the analogy is more akin to the quack medicine that he prescribes for the economy. The solution to a debt crisis is more debt!? What a moron. Paul Krugman is to economics what a witch doctor is to medicine.

It can’t be much longer before the system collapses and Keynesian economics is consigned to the dustbin of history, where it belongs!
 
I can't help feeling there might be some benefit in attempting to recycle some of the contents of the dustbin of history. I just get a sense an awful lot has been thrown out because it didn't work 'back then', but could usefully be pressed back into service at this time, perhaps with a small tweak or two.

It's impossible to reconstruct the basis from which anything is decided 'not to work' as there are simply too many variables. If you attempted to model and emulate 1925 right now, you couldn't. You don’t know the half (nor does anyone) of what was and what was extant not at that time or the relationships they may or may not have had with that which you do know about.

Rather than binning Keynes, what about having a shot at identifying what does fit within the current framework and what doesn't quite, but could with a bit of re-modelling?
 
I admit my knowledge of economics is rudimentary, but I don't see how austerity on its own can possibly lift us out of recession.

Surely, a pull-out is impossible without a significant increase in basic Demand? Where is that going to come from if wages, employment and confidence continue to decline?

The advocates, as far as I can tell, argue that cuts in public spending will somehow revive the private sector by default. But, since the over-all customer base is getting steadily more impoverished, I still don't see how this can by itself prevent further contraction?
 
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Vorbis said:
I admit my knowledge of economics is rudimentary, but I don't see how austerity on its own can possibly lift us out of recession.
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It can’t. Cutting down on expenses is one way to save money. But if the money coming in is reducing or stopped, then no amount of cutting down or cutting back will help. If the cutting back directly and negatively impacts on the ability to generate income by more than the amount saved, then it’s a recipe for disaster.

Luckily, cutting back on public sector will not impact the ability of the economy (any economy) to expand its GDP as public sector is a net liability on the economy.

What is hampering growth is lack of funding to private sector. This is part nervousness of and capital requirements on banks and part due to lack of enthusiasm to increase debt on the part of private sector generally.

Make it easier (once again) for people & businesses to borrow and growth will follow. We could stick a few controls in place this time to constrict, monitor (no not bloody Dodd-Frank) manage and filter out the more asinine practises of the 2008/9 debacle perhaps.
 
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trendie said:
Don't know if this is appropriate thread, but there was a Radio4 article about the debt crisis.
His (Steve Keens) solution is to give fiat money to "the people", not banks.

BBC iPlayer - Analysis: Steve Keen: Why Economics Is Bunk
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This was an intriguing interview, Keen's ideas made a lot of sense to me. I'm a fan unless someone can point out any logical flaws in his arguments. His predictions at the end are a bit ominous.
 
TheBramble said:
What is hampering growth is lack of funding to private sector. This is part nervousness of and capital requirements on banks and part due to lack of enthusiasm to increase debt on the part of private sector generally.

Make it easier (once again) for people & businesses to borrow and growth will follow.
Click to expand...

But isn't lack of demand still the primary problem? If businesses were struggling to meet a demand they were sure was available I would have thought they would be keener to borrow, confident that they would be over-all profitable and able to comfortably finance their debt (especially with the low IRs).

I must admit though,I have no idea how difficult it is for businesses to borrow currently, have significant obstacles been put in place since 2008?
 
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Not trying to be trite, but demand starts with consumers (at all levels).

Supplying copper to cable firms that have a reduction in demand because fewer premises need infrastructure upgrades because they don't need bigger premises to move into because consumers are not increasing their purchasing has a direct impact on the price of copper.

You skip a mars bar; a copper miner starves to death.
 
It is quite unbelievable that Krugman calls for a doubling of the rate of inflation in economies that are 70% reliant on consumer spending.

There is nothing that will squeeze consumers like rising prices. You think he would have thought of that.
 
new_trader will be horrified, but the more I listen to Krugman, the more convinced I am that he's on to something; Another good article here:

Paul Krugman: 'I'm sick of being Cassandra. I'd like to win for once' | Business | The Guardian

I liked this bit - "His public criticisms of the Obama administration have upset many Democrats in the US, while his more vociferous criticisms of George Bush used to earn him death threats from angry rightwingers."

I am suspicious of any viewpoint that isn't resisted by the majority. (Doesn't necessarily means it's wrong, it just makes me suspicious).

BTW, The biggest star discovered is 265 times larger than our sun -- It's also 8.7 million times brighter and it's blue.
 
Krugman is one of a hundred economists who believe that they know how to cure the world's woes. The only way that will happen is when, all of a sudden, consumers start to buy, the recession is coming to an en end and the new bubble is starting.

Krugman's professional career is based on writing columns and bestsellers. He says what most want to hear and most want to hear what is in their own interests.
 
Krugman....idiot.

All this comes down to is who should be in charge of spending money...and it seems very clear to me that govt's are not the correct ones. As proven, they simply can't be trusted to spend it efficiently nor wisely.
Cut govt and their spending including benefits in half...after the shock the people will realise that they have to get out there and do something and quit relying on govt (tax payer) for their income and existence.

The peoples revolution is a long time in coming...but we will get there in the end.

http://www.trade2win.com/boards/news-current-affairs/151340-government-problem.html
 
Vorbis said:
new_trader will be horrified, but the more I listen to Krugman, the more convinced I am that he's on to something; Another good article here:

Paul Krugman: 'I'm sick of being Cassandra. I'd like to win for once' | Business | The Guardian

I liked this bit - "His public criticisms of the Obama administration have upset many Democrats in the US, while his more vociferous criticisms of George Bush used to earn him death threats from angry rightwingers."

I am suspicious of any viewpoint that isn't resisted by the majority. (Doesn't necessarily means it's wrong, it just makes me suspicious).

BTW, The biggest star discovered is 265 times larger than our sun -- It's also 8.7 million times brighter and it's blue.
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Yes, Krugman = IDIOT
Ron Paul = The GOLD STANDARD in Politics and Economics.

Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis - YouTube
 
Vorbis said:
This was an intriguing interview, Keen's ideas made a lot of sense to me. I'm a fan unless someone can point out any logical flaws in his arguments. His predictions at the end are a bit ominous.
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Notice how he is introduced as a 'radical' and his supporters referred to as a 'cult'! :rolleyes: . I wonder if the plan was to get him nailed by the LSE audience!? Didnt work if so :D.
I like the bit about QE for the public, via fiat (that would be the non debt backed type!) for the payment of existing debt!
If you like Steve Keens views you might like the Positive Money blog. The interview is listed there also.
Positive Money blog

Krugman = Idiot imo.
 
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