When those who would control spending are the extremists, what does it say for our future? Of all things the Tea Party movement stands for, the central issue is spending control. The mainstream media ensures that the Tea Party is continually painted as extremist yet this simple central point is what they want above all else. In other words, not spending more than you have is ‘extreme’?!!
The liberals and incumbent Republicans in the US are out of control. More worried about re-election and who to blaim than what is right. It ain’t a close call folks, we don’t have the money and the spending must stop. Yes they can increase taxes but even the dumbest of the thoughtfully dumb have to realize that when you take ever greater percentages of money out of the economy, eventually you reach a point where you take in less total revenue? The thing businesses understand is that WE THE PEOPLE are way way past the point of positive revenue/tax correlation. Paygo is a trap for this reason. As is a fake balanced budget amendment. Policy must reflect the balance between business and redistribution and in the last 5 years, our liberals have nearly destroyed America. Our company is still seeing customers close their doors at record rates, bills unpaid, companies demanding pennies worth of cost reduction so they can hope to survive. Eleven percent of US houses are empty of inhabitants today. Hope and change folks.
It is stupid beyond belief that the recent budget for the US was signed. Yes it was important as we need to pay our bills, but it was stupid to agree to huge commitments without any true reduction in spending. Deeper and deeper we go, the liberals pushing at our backs, the incumbent Republicans helping it along. We simply don’t have the money for this oversized, bloated, monster of an evil government we have supported. They must be disemployed at the earliest possible convenience.
If the US economy makes it to the next election, that election again will likely be close. It is insane to me that it should be close, but so many idiots are detached from the critical care/life support ward our economy is in that they can’t fathom the obvious solutions. The very thing which made America great, has been distroyed in 3 short years by hope, change and fake wealth redistribution. Sure Bush started the program with his liberal House and Senate, but since Obama took control, the three liberal branches together drove the knife deep home smiling all the way.
When those who only want spending within our means are the extremists, something is horribly wrong and those who don’t see it, deserve what they get. Unfortunately, the leftist politicians in power will take the wiser group down right with them. Unless something dramatic happens in the next election cycle beyond my own imaginiation, the shrill screaming for ever more support of their evil socialist creation during our economic decent will likely echo through the White house walls for decades to come. Intent?
Not spending more than you have is not extreme, it is correct. More tax is not always more revenue. Business is not the problem, the government is. Less regulation, less tax, more free choice, less lawsuits, less enforcement and you get a cleaner world with better health. Sure there is a line where the unbridled free growth will have negative results, but by the naturally expanding nature of government, we aren’t likely to find it in the next hundred years, and most certainly won’t be very close to that line of negative consequence any time soon.
the Air Vent 
I respect the goals of Tea Party Patriots.
In my admittedly biased opinion, bankrupting the United States is part of the plan to bring this nation to its knees and make it subservient to a tyrannical, one-world government.
Communist leaders out-foxed Western leaders in 1972, and agreed to fein defeat of the “Evil Empire” with the stage-managed destruction of the Berlin Wall in exchange for destruction of the Western economy by pinching off the CO2-emitting tail pipe of the Western industries.
That conclusion to my research career is indeed distasteful, but also seems inescapable.
Click to access 20110722_Climategate_Roots.pdf
With kind regards,
Oliver K. Manuel
Former NASA Principal
Investigator for Apollo
http://myprofile.cos.com/manuelo09
Brilliant.
Yet sometimes more taxes is more revenue. Amazing, isn’t it?
Here’s what’s extreme – comments from a featured speaker who received standing ovations at a Tea Party Convention:
Nothing extreme about that, right?
How about this comment?
Move along. Nothing extreme to see here.
Or, you could do yourself a favor and google such noted Tea Party convention speakers such as Roy Moore, Rick Scarborough, and Joseph Farah.
Yeah – those who “only want spending within our means.”
Too freakin’ funny.
Our nation’s is in danger of economic collapse.
Why divert attention to “politically correct” opinions of sexuality?
Maybe you should ask that question of the Tea Partiers who gave standing ovations to religious extremists speaking at their convention, Oliver?
@ Joshua – subject of the post was the Tea Party is considered extreme by liberals because of their fiscal views – not repeat not because of their religious views. (Re)Read it and comment on relevant issues – otherwise you”re just standing on your soapbox to get out of the red herring.
Amazing, though not surprising that you don’t understand basic economics.
Since you can’t address the comment he made, you divert to an unrelated argument. Not only that, but to refer to a religious belief that has been around for much longer than our own society as “extreme” is rather short-sighted. Historically speaking, such beliefs are actually the norm.
Aaaand your point is?
Too freakin’ stupid to know.
Mark
Joshua, why do think pedophilia should go unpunished?
@ Chris –
The Tea Party is considered extremist for more than just their fiscal views.
And even with respect to their fiscal views, it isn’t the simple fact of wanting to spend within our means that causes liberals to view Tea Partiers as extremists. There are a raft of legitimate debates about the best way to achieve fiscal health.
I will point out that over the past six presidential administrations, the ratios of debt to revenue and spending to revenue have been considerably healthier under Democratic administrations than under the Republican administrations that preceded or followed. The role of Congress in that outcome makes simplistic conclusions invalid – but that cuts both ways. Simple demonization of “liberals” does no one any good – least of all those who are seriously concerned about our deficit.
When you take cartoonish simplifications of the ideology of “liberals,” and use them to erect strawmen – then the subject of the post actually becomes cartoonish simplifications used to erect straw men. Not to mention, such facile logical analysis calls into question the validity of ones logic in other contexts such as the climate debate.
Now, if you were speaking of Dick “deficits don’t matter” Cheney, you might have a point about someone who thinks of the notion of spending within our means as extremism.
Jeff.
You have hit the nail on the head, it is painful to see America going the way of the Dodo bird. Thank God for the Tea Party they are the only hope for change. Fiscal responsibility will be rammed down our throats with NO choice just like in Greece, if we don’t do it voluntarily!
Thank you for the reply Joshua,
I think we could narrow this discussion to a quote from your response – “it isn’t the simple fact of wanting to spend within our means that causes liberals to view Tea Partiers as extremists.”
I think that this phrase by you concisely addresses the post.
And staying within the subject, am I correct interpreting the above quote as “liberals (pardon if I demonize) view Tea Partiers as extremists because they wish to spend within our means and other non fiscal related reasons”?
I infer from this that liberals do not care to limit spending with our means – could you expound how this could be ultimately sound economic policy?
Any summations should include studies for support otherwise they are subjective and just a matter of he said, she said.
Thanks and done for the night ( Life of Brian is on )
Make no mistake about it, we are the ones responsible for the out of control spending. We have exactly the government spending that we have demanded. The politicians will continue to satisfy our demands until it is impossible to do so.
Government spending can’t be reduced in any meaningful way. None of us are willing to give up our entitlements (present or future) or jobs.
Anyone can run the numbers and see that the rate of spending is unsustainable for more than ten years, the tipping point was a couple of years ago. The only real question is when exactly is the economic/government collapse going to take place and how will it play out.
My guess is that the country and world will fracture into different economic zones. We live in interesting times.
Everyone I meet agrees with what you are saying and yet there are very few of our elected representatives who get it.
The junior senator from Florida is Marco Rubio. What he says gibes very well with your views. Here is his statement on August 2:
“I cannot support this plan because it fails to actually solve our debt problem, fails to diminish the risk of a credit rating downgrade and is not a long-term solution to avert a debt crisis. This plan still adds at least $7 trillion to our debt over 10 years. It fails to immediately start downsizing government, leaving 98 percent of deficit reduction until after the 2012 election. By not addressing the biggest driver of our debt, health care spending, this plan ensures Medicare’s looming bankruptcy, while protecting ObamaCare’s $2.6 trillion blank check. It contains no real structural reforms to spending, such as a Constitutional balanced budget amendment. It fails to reduce spending by what credit rating agencies say is at least $4 trillion to avert a downgrade. Worst of all is that at a time of 9.2 percent unemployment, this plan fails to include pro-growth measures to help get people back to work and create new taxpayers to help us pay down the debt. In fact, I fear that the new ‘Supercommittee’ in this bill could lead to expedited consideration of big tax hikes on our struggling economy. And if Congress rejects new taxes, then up to $850 billion of devastating automatic defense spending cuts would be triggered at a time when the world is as dangerous as it’s ever been.
Americans are looking at Washington with anger, disgust and concern that maybe America’s problems are just too big for our leaders to solve. As I outlined in The Wall Street Journal in March, keeping America exceptional will require spending cuts and caps, saving Medicare and Social Security from bankruptcy, a Constitutional balanced budget amendment, tax reform and regulatory reform. Above all, it will require courage.”
Given that Marco’s views are widely held among the general population one would expect that there would be many senators like him but sadly that is not the case.
Back in March Rubio set out his position in more detail in the Wall Street Journal:
http://online.wsj.com/article/SB10001424052748704425804576220670543010068.html
This sounds like leadership to me; something that presidents need but Obama is not displaying.
Actually, we need to let Social Security go as it is a pyramid scheme destined to failure no matter how hard we try. The best we can do is push off the date of its death.
Joshua seems confused since he keeps comparing liberals to Republicans as if they have opposing ideals. They do not, at least not in any way relevant to this thread. They both spend other peoples’ money with relative ease, the only differences are minor in the grand scheme.
Also, for the record, the best spending/saving administrations weren’t just when a Democrat was in office, but when a Democrat was in office with a Republican House and Senate (or just one with a large enough majority.) In every instance in which one party controlled all three, spending was out of control. This has nothing to do with opposing ideals, rather, politics and pandering to their respective constituencies. If Republicans regain control of all three (again,) we likely will not see the spending cuts the Tea Partiers are pushing for (and our economy so desparately needs.)
Mark
I think the debt is a symptom, not the problem. The problem is the ‘new aristocracy’ that has populated our government. Career politicians, most of them, who have voted that the bills they pass do not apply to them, who have NEVER voted tor actually reduce spending (every ‘budget cut’ in history has been a reduction in the ‘growth’ of the budget, not an actual reduction in spending), who voted themselves a nice comfy pension and health plan, who are even as we argue about this on a 5 week ‘recess’ when our country is plunging into the arena of the Greek debt tragedy.
And the few people that are crying out for fiscal sanity, are labeled ‘terrorists’? Yes, the recent actions by those that were elected with ‘tea party’ support could have caused problems for the US, but what do you think they were elected for? If all of our elected officials actually held to their campaign promises, we probably wouldn’t be in this situation.
I believe we desperately need term limits to flush out those ‘career politicians’ who are up there… Government OF the people, not the select few. The people up there have demonstrated over and over that they are simply incapable of controlling spending. Who trumpet a ‘budget deal with $2T in cuts’ that actually increases the debt over that period by many Trillions of dollars….
No, we must regain control of our spending. We must replace those idiots that are up there now.
But I am not optimistic.
Bought a bunch of ammunition recently when Bass Pro had a big sale, so I’ll be ready when they come for me…. 🙂
http://www.foxnews.com/politics/2011/08/04/us-debt-reaches-100-percent-countrys-gdp/
That hurts. It will be great fun living in a third world country.
There are a couple of things correct with JeffID’s post and some things are incorrect. One of the interesting tidbits is that in the past 30 year or so, 17 studies, bipartisan, independent, professional, or combo have essentially said the same thing. It is close to what the Tea Party and Jeff have stated but has more practical advice. One such is that due to the penetration of the government into the job market, cutting government employees is not the correct solution, but replacing them with business that does the same job, and others jobs as well resulting in economic independence from government, is. Regulations need to be streamlined, not eliminated. In other words the results agree with what appears to be a rabid statement of Jeff and the Tea Party, regulators need to be mission oriented to help business achieve, not prohibit business activity. This is not the same as no regulations, no enforcement. There is a profound economic difference in the two approaches. Another that has been agreed, almost since inception, is that we can afford soicial security or medicare, but not both. It also has been agreed that it would be political suicide to scrap Social Security. Obamacare only makes the choices and the situation much worse. Over the years, a basic assumption has changed. At first it was thought that manufacturing would continue to fuel the American tax purse with increasing wealth, then it was the service and knowledge industry, now it is being considered that we will have to face economic slower growth and even loss of real wealth. If this is the case, only the most draconian of the plans will have a chance to work. Our options are clear, the American people want a government and a life that only wealth can provide, this needs to set our priorities. I agree with it from a self-centered point of veiw, only the rich and free can or will afford good environmental results. History has shown autocratic dictatorships and the poor do not, or cannot.
“but replacing them with business that does the same job, and others jobs as well resulting in economic independence from government, is.”
That’s where we disagree. If the public is capable of providing a business which does the same job, it is clear that the government is not required. WE don’t have to do anything. It will happen automatically as so many things do when there is money to be made.
The discussion of better regulations is a misinterpretation of the problem. The government is incented to regulations of the type they impose. You can’t say – oh we’ll just streamline the tax code – because the messy code begets favors for those in power. You can’t say, we’ll just streamline employment law, because whole massive clumps of society depend on enforcing these anti-business regulations. If you eliminate the insane department of energy regulations, the world won’t end, energy will again be cheap and abundent right to the levels we actually need rather than a little less and a lot more expensive than we need. If you eliminate whole sections of government at the federal level, states will absolutely take over. The disparity between liberal and conservative states will grow dramatically. Liberals tend to imagine anarchy is the result of regulation elimination (unless we’re discussing sex and drugs), yet there is strong evidence to the contrary and we are a very very long way from anarchy.
Just checked the weather – no tornados (you have to read my comment in the “Ludicrous” post to understand)..
Anyway, I don’t have much to say except for on comment to Joshua, who posted comment #3:
You really ought to provide references for the quotes you attribute to the Tea Party.
The libs are mad at the Tea Party because they (the libs) have irresponsibly spent our country into the ground and are now waking up the fact that their economic “stimulus” has been a colossal failure. Let’s see the unemployment numbers tomorrow – how many jobs did we get for those trillions of dollars?? Fortunately, most of the Democrat libs (and their Republican sympathizers) will be gone in 2012…
JeffID I don’t think our positions are that far apart. Government has it practical uses and will be here for quite awhile I dare conjecture. The problem is having work that could be done by private companies done by government and also the insidous nature of having a business dependent on the government; both should be avoided. But today, both are encouraged. It makes for an ineffeciency in the economy.
Though you think we should abolish regulations it appears, history shows that regulations did come about because of excesses, blindness, and other human frailities that caused economic ineffeciency and loss of freedom. The economic slaves of the Robber Barons in the mill towns they ran are the classic case. Regulations were able to improve economic effeciency and freedom.
The problems you cite for taxes and other regulatory mechanisms are human problems. That is different from saying regulations themselves are the problem, nor does it address the benefits that history has shown that proper regulations provide. The point where we should agree is that improper regulations get ditched. The concern of the over reaching bureaucracies is legitimate. The concern that persons who should not make the codes complex to their advantge is legitimate. But regulations and codes themselves have been shown to be desirous and effective at increasing wealth and freedom. That they have some cost is not the point. It is the cost/benefit ration that should be considered.
#21, I don’t disagree with that but where some see a hatchet version of cutbacks as extreme, it is the only mechanism by which a proper reset can be obtained. We are a long way away from under regulation.
Someone said ” A little revolution once in awhile is good.” Perhaps that should be what the liberals you speak of should consider. In a revolution it has been shown that excesses lead to excesses. If the liberals don’t wnat a conservative revolution with its excesses, perhaps they should curtail their own.
No kidding… How many pages are in the federal register?
Mark
Jeff ID says “Not spending more than you have is not extreme, it is correct. More tax is not always more revenue. Business is not the problem, the government is.”
Private debt in the US is much worse than public debt. But none of that matters, its the whole monetary system thats broken and this result was inevitable.
#25, TTTM
Just how do you figure that the private debt is worse than the public debt? Give numbers.
Last year, Freidrich Hayek’s book, ‘ The Road to Serfdom’ had 10 reprints.Trouble is the people who should read it, the servants of the people, won’t read it.
#26, TTTM points to the delevering at the heart of the crisis in light of which the policy measures have to be viewed, and there are various, some debatable, charts for which recent data can be found here . Meanwhile, while the patriots wail about fixing the deficit to fix the economy, bond market vigilantes push the ten-year treasury yields down to 2.5%. Its Liberty League time all over again.
The decision to sacrifice the integrity of government science to avoid mutual nuclear destruction and unite the world under one world government was apparently made in 1971, when Henry Kissinger secretly visited China.
Later on 5 Jan 1972, President Richard Nixon announced:
“I have decided today that the United States should proceed at once with the development of an entirely new type of space transportation system designed to help transform the space frontier of the 1970s into familiar territory, easily accessible for human endeavour in the 1980s and 1990s.”
See:
1. “No More Dreams, Mr. President”
http://claudelafleur.qc.ca/Nomoredreams.html
2. Throttle Down: How Florida’s Space Coast is bracing for the end of the space shuttle program.
http://www.airspacemag.com/space-exploration/Throttle-Down.html
3. Excerpts from “Richard Nixon”:
http://en.wikipedia.org/wiki/Richard_Nixon
“Nixon, however, was unwilling to keep funding for the National Aeronautics and Space Administration (NASA) at the high level seen through the 1960s as NASA prepared to send men to the moon. NASA Administrator Thomas O. Paine drew up ambitious plans for the establishment of a permanent base on the moon by the end of the 1970s and the launch of a manned expedition to Mars as early as 1981. Nixon, however, rejected both proposals.”
On May 24, 1972: “Nixon approved a five-year cooperative program between NASA and the Soviet space program, culminating in the Apollo-Soyuz Test Project, a joint-mission of an American Apollo and a Soviet Soyuz spacecraft in 1975.”
On September 8, 1974: Ford granted Nixon a “full, free, and absolute pardon”
Libs do not like personal accountability period. This is because it takes away their power. 50% of the people in this country did not have money handed to them by liberal politicians and have those same people tell them they deserve it and the rich they took it from are the problem. That is nothing but flat out buying votes. Everyone who makes a paycheck should pay something in taxes and if you are getting a handout from the rest of us you should be required to do community service type work for that handout.
We have become the land of the wimps and the home of the gimmees.
Good parents raise their children to be self reliant should not good citizens demand others to be self reliant as well.
Jeff,
The source of this entire problem that US is presently operating on an economic theory dictated by banks and worse, a central bank, something the founders generally detested the very idea of. The “lending/interest” process is inherently inflationary and inevitably leads to boom-bust economic cycles. The constitutional framers assumed that the US government would coin via the US mint – not through a bank – sufficient money to service commercial activity and lending within the economy. That is, the money supply would be gauged to the national productivity on a simple demand basis – capitalism as it ought to work. Of course, that approach saw boom/bust cycles as well, e.g. the 1830s, but the basic cause then was an inadequate (cash) money supply and private banks issuing notes that were only as good as the bank’s reputation. Government mint production slowed as banks “loaned” money not on deposit. Oops.
There is no inherent economic or constitutional reason that the government should tax us at all to pay for goods or services it provides. Remember the government is us, and that money represents our work. The country is easily productive enough to afford “fiat” payments by the government. A road or a rocket is just as socially and economically valuable if paid for by fiat as it is, if paid for by a loan, and a useless middleman (banker) is eliminated as a cost. It might mean some bankers would actually have to go out and actually work for a living – landscaping would keep them fit, while the superwealthy would have to actually spend serious money – putting it into circulation buying goods and services in order to maintain its value (reduces the demand for government-printed money), which converts static, effectively useless cash hoards to private sector work (goods and services: houses, yachts, food, house keeping and grounds keeping jobs, etc.) and thus reduces inflationary trends. also reducing the need for the issuance of new currency. The economy is an entropic flow and local over-cooling or heating leads to turbulence (boom and bust).
Those who advocate a level of public debt as being “good” ought to ask themselves why historians generally demarcate the point at which the US became the foremost world power at the point at which we became the world’s creditor, that is, immeadiately after WWI, when other countries owed us money not the other way around. Besides that, a debt to GDP ratio approach or in excess of one is surely a threshold beyond which if debt is not already too large, it becomes so. Currently the ratio for the US is very close to unity.
RE: #32 – Right on!
It’s a simplistic idea, I know, but any idiot can tell you that expanding debt leads to ruin.
I don’t care what JMKeynes has to say about it.
Thanks for listening to an artist with a decent backgroiund in science!
Eleven months later [after 5 Jan 1972], I was sad when I heard that Nixon had told Apollo 17 astronauts:
“This may be the last time in this century that men will walk on the Moon” [1].
The corruption of space sciences and the birth of man-made global climate changes apparently all began with Henry Kissinger’s secret visit to China in 1971.
That secret deal was not finalized until the week of 21-28 Feb 1972 when Richard Nixon travelled to China to meet the Chinese leaders himself [2].
Historical information on President Nixon is available here [3]
1. “No More Dreams, Mr. President”
http://claudelafleur.qc.ca/Nomoredreams.html
2. “Deep Roots of Climategate”
Click to access 20110722_Climategate_Roots.pdf
3. Videos on President Richard Nixon
http://www.history.com/topics/richard-m-nixon/audio
#32, who said anything about public debt being “good”? The debt to GDP ratio is large, it is a long-run problem, but a ratio above one is not unprecedented and can and has been worked through over time. While the thoughtlessly clever think it is better to ”Liquidate labor, liquidate stocks,. liquidate the farmers, liquidate real estate . . . purge the rottenness …, the idea that short-run cuts in an environment of the “Great Deleveraging” are counter-productive is a robust one and puts forward the notion that one must focus on the economy/employment first. I know people here have a closed mind on this, so perhaps I should have stopped yesterday,
35-“who said anything about public debt being “good”?” “economists” according to this morning’s local newspaper.
“a ratio above one is not unprecedented and can and has been worked through over time.”
I didn’t say it had never happened before, nor that it would be irreversible if such a thing occur. Only that it is more painful and prolonged a problem to “work through” the higher the debt climbs.
“While the thoughtlessly clever think it is better to” And then a bunch of stuff that I have zero clue where you get it from. Nobody is talking about liquidating anything or anyone. What I here people talking about is getting spending by the federal government on a sustainable course. Presently it isn’t on one.
“the idea that short-run cuts in an environment of the “Great Deleveraging” are counter-productive is a robust one and puts forward the notion that one must focus on the economy/employment first.”
On the contrary this view is not at all “robust” it is based on the faith that the planners no better how to grow the economy than do the people who actually compose it’s transactions, and that such planning requires injection of capital from one area to another (redistribution) at the point of a gun (implicitly or explicitly) and without this process the economy is helpless. Bullsh*t. There is nothing counterproductive about stopping the government from throwing money around. In point of fact it is the spending of money by the government which is counterproductive. Focusing on the economy and unemployment means getting out of the way, trying to run the whole thing.
“I know people here have a closed mind on this”
Years and years of hearing the same leftist religious gospel about how their ideas supposedly work is not going to be well recieved. It has nothing to do with having closed minds. My mind is about as close to this nonsense as it is to the idea that the Earth is flat. It just isn’t so.
#36, those were some famous historical quotes in there, sorry it slipped by you. I see you resorted to the usual conservative gospel about central planning without addressing the issue posed by the deleveraging issue evident here and here . At least, there are some conservatives who liken austerity now to the economic equivalent of the medieval practice of bleeding to cure any ailment, including anemia.
RB,
I don’t think that having a fixed opinion on something which should be rock in the head obvious is something which should be disparaged. When our interest is as great as our social security program, there is an obvious problem. Taxation and regulation are already too high on business here. Where the left goes so horribly wrong is comparing this current debt situation to that of WWII where the social programs weren’t the problem and the spending actually was reduced. We are spending at near 2X our income. This cannot continue no matter how people wish to spin it. It ain’t about liquidation or revaluing markets, although that is part of what is happening, it is about not making any unnecessary expendetures at all.
When it all falls apart, will the leftists stop lecturing us that crazy overspending is simply ok?
Despite the hopes of the leftist press, this is the central issue which holds the Tea Party movement together — stop spending more than you have because we have nothing left to give you.
Simple.
I agree, Jeff.
I have updated the historical review to show that global unification and economic collapse probably result from secret agreements that Henry Kissinger reached with Chinese leaders in 1971, before taking Richard Nixon along to make it official in 1972:
Click to access 20110722_Climategate_Roots.pdf
http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc
RB, you are being pretty ridiculous. It is leftists like you who have blind faith in your failed economic theories. You quote “conservatives” that take your blind liberal line about how spending by the government props up the economy. It’s just not true. Anyone who believes this is entirely reliant on faith, there is no real world evidence, indeed, all the real world evidence pointing in the opposite direction is handwaved away (“well it would have been worse”). Government planning as a means to optimize the economy has failed, yet again, and if you can’t see it, that’s too bad.
A rather dramatic example of the failure of spending cuts (real cuts, not baseline growth reduction) to destroy the economy would be 1946 (spending reduced 55%). Combined with a massive influx of labor supply, surely the economy crashed? Hm, it didn’t. Must not have been enough “deleveraging” or some bullsh*t.
The US government debt is not good for the US or for the rest of the world. I class it as inter-generational theft. It is theft inside the US but also outside those borders. When the US runs into problems almost everyone else suffers as a consequence and sometimes to a greater degree. I am speaking as a Kiwi who gets irritated by the various financial crises that are mostly directly or indirectly/accidentally precipitated in the USA.
While I agree that borrowing to fund private business can be a good idea (as there is usually some discipline involved) I am certain this does not apply to most government spending. If you borrow to prop up a bloated government system, then later on down the road somebody has to pay back the loan. If the paydown of the loan happens 10 to 20 years in the future then we are asking a complete new generation of taxpayers to pay for our current exesses. Why should we expect our kids and those as yet unborn to pay for current profligeracy?
If the current generation (us and those who came just before us) stuffed up, then it is we who should shoulder the burden of putting things right, and we should start now and do so in earnest. Then there might be some hope for the next generation.
#41, thanks for proving my point, you are talking about the dramatic spending during WWII which helped the private sector to deleverage and build up healthy balance sheets again – the first link that popped up was this . This is exactly how it is supposed to work this time around too . It would help if you bring something more substantial to the table than your feelings.
Jeff, at least one libertarian has come to the conclusion that the populist conservative opinion regarding in this case, the actions of the Fed though not the treasury, has not led to the feared events, proving that this environment is a very different beast from 1970s America and simplistic opinions may not be correct. To quote
Another likely factor is that American conservatism is a fundamentally populist movement, and the inflation hawks’ position has a simplicity that makes it intuitively appealing, especially to a movement that tends to see all policy issues in terms of virtue. Rhetoric about “printing money,” “debasing the currency,” and so forth are not only intuitively appealing, they also dovetail nicely with broader conservative themes of thrift and self-control. The arguments of inflation doves are more subtle and lack the same kind intuitive appeal.
This is nothing intrinsic to the American conservative of the 2000’s since something similar also led to the failed Hashimoto and Koizumi reforms. Having said that the Fed is desperately trying hard to create inflation which will eventually succeed when the economy is on a healthy track. There is nothing sacrosanct about revenues vs spending on an annual basis except whether there are those willing to lend the money. At a 2.5% interest rate, the bond market doesn’t seem terribly concerned.
#43, Ya can’t spend 2X your income without consequence, and I don’t care which libertarian has confused you. The issue I describe is far too simple for semantics of economic theory.
Try it personally and let us know how it turns out.
43-More nonsense. I specifically noted: The spending from WWII came to an abrupt end. Where was the economic crash? You decide to focus on the fact that before it suddenly and rapidly dropped, it was very high. Like right now. Then it was cut back. According to you and every other Keynesian nutcase, there should have been economic Armageddon.
Now what actually happened when the war ended? According to The Economic Report of the President, page 1, issued by Harry Truman on January 8, 1947:
Doesn’t get much more damning than that. Spending suddenly fell. “short-run cuts” “the economic equivalent of the medieval practice of bleeding to cure any ailment, including anemia.” Those would be how you would describe what happened. And again, this did NOT destroy the economy! You are full of crap.
Hi Everyone,
I’ve enjoyed this thread.
I want to make one extended comment:
We live in a period of subliminal philosophical nihilism, largely propagated by today’s intellectual elites. This latest round started, I suppose, in the sixties, when kids (and some politicians) decided that it was prudent to destroy every established societal structure of their contempoary worlds.
At times, such destruction is necessary – Dr. Martin Luther King addressed such an issue…….successfully, and to the benefit of all Americans.
I don’t think Dr. King wanted to utterly destroy western culture; he just wanted his people included in “the american dream” and treated fairly as citizens equal to the rest of their fellow Americans..
So much has changed since then.
I’m recovering from major surgery so I have to break this off at this point. More later if anyone is interested.
Take care all of you.
P
TTCA,
The concept of deleveraging hasn’t seeped in for you – there will be an equivalent day similar to post-WW2 America for the private sector here again. Good luck with your voyage of self-discovery.
Re: timetochooseagain (Aug 4 22:36),
It’s worse than that. He’s shoveling it, and trying to force-feed it to everyone else. Starting with the economy.
#44,
In line with my earlier posts, there are more recent indications that there is a demand issue . Sure there will be consequences to the bust emanating from the private sector running up a mountain of wasteful debt, which is a separate issue from what the govt should do in the aftermath. Lastly, the federal balance sheet is nothing like a household’s. I should really have stopped yesterday, so I shall.
RB,
Aw, come on. If you’re going to defend spending at an insane rate by claiming there is a ‘demand issue’ you should at least stick around to explian it. Your last link ticked me right off so i have a little steam to let loose again.
“But here’s an alternative view of the principal cause: A range of observers report that, in many cases, small businesses don’t want loans. Their sales are so weak they can’t justify taking on debt to expand operations. ”
Small businesses that are growing and DO want loans simply can’t get them. I’ve talked to dozens of them myself about their efforts to scour bank after bank to find a loan completely without sucess. The banks simply won’t loan right now unless the owners personally put up several times the collateral even with very healthy books. Apparently, you are far removed from the problem if you link to an article like this. We are currently afraid to move forward with our own plans because of the industry conditions. People don’t understand just how sudden and violent the last market shift was for small business.
And yes of course there is a ‘demand’ issue. American industries have been completely destroyed in the last 3 years. Talk to an RV, trailer or Boat manufacturer. Talk to a semi truck manufacturer. Of course you need access to the CEO’s, but ‘demand issue’ is code for DEAD/DYING ECONOMY. Sorry to break it to you, but the regulation and taxation have absolutely decimated huge sectors of American business. When you have to resort to overcomplicated explanations to maintain a pet theory, maybe you should question your theory.
You are on target Jeff.
A lot of folks in the seats of power are sleeping badly today as stock markets in the “Free West” collapse and the illusion of H-filled stars and CO2-induced global warming vanish.
An addendum (page 9) [1] suggests that Henry Kissinger himself made the agreement in 1971 with leaders of the Communist Block of nations to end the US Apollo Missions, “the space race”, and to unite nations against a “common enemy” (Man-Made Global Climate Change) in order to avoid the possibility that the entire world might be vaporized like Hiroshima was on 6 Aug 1945.
President Richard Nixon was selected to be the “fall guy” for this decision [2], but Nixon started to implement the decision on 5 Jan 1972 [3] before arriving in China with Henry Kissinger on 21 Feb 1972 to “officially” make the agreement.
1. http://dl.dropbox…oots.pdf
2. http://www.history.com/t…on/audio
3. http://claudelafl…ams.html
There are so few Democrats who have any experience in legitimate small business that they simply don’t understand anything about the economy except theories generated by academics. For those of us who are small business people and deal with others all day, the fear and uncertainty that Obama has created is so thick you could slice it with a knife. The govt can’t run roughshod over the rule of law time after time (GM, Chrysler, TARP, Gulf spill, NLRB, EPA, et al), jam ridiculous cash giveways to cronies down our throats, pass massive changes in the middle of the night to healthcare (that affect every person and business in the nation), and threaten extraordinary taxes and regulation via climate crap without shaking the very foundation of the nation’s economic engine.
Just because GE and other big businesses are thrilled to see Obama provide ways for them to exploit the public teat doesn’t mean that the other 99.9% of business people who actually grow the economy aren’t scared out of their wits. Psychology plays an enormous role in economics. Someone ought to tell the White House.
“While the thoughtlessly clever think it is better to ”Liquidate labor, liquidate stocks,. liquidate the farmers, liquidate real estate . . . purge the rottenness …, the idea that short-run cuts in an environment of the “Great Deleveraging” are counter-productive is a robust one and puts forward the notion that one must focus on the economy/employment first. I know people here have a closed mind on this, so perhaps I should have stopped yesterday,”
RB has probably gone, but it would appear that he has some disagreements here with the Austrian school of economists. Those economists would say that the central bank, our Federal Reserve, has much to do with the business cycle and in this case the recent bursting housing market bubble and the resulting financial crisis and malaise. The general solution is that these mal investments have to be allowed to be worked out of the system. The real and sustainable savings for investments get miscalculated by those investing when, in the US, the Federal Reserve artificially provides low interest rates and creates money out of thin air. The Austrians would note that attempts to alleviate the pains of readjustment will only prolong the agony and make it worse.
I suspect that most of the intelligentsia in the US is very much closed minded about what the Austrians prescribe, since Keynesian economics is pretty much their Bible. Keynes, of course, was not one to look very far ahead with his policy recommendations and his answer to some of his critics was that “in the long run we all dead”. RB is much more in tune with the intelligentsia in the US and they became a little upset when people begin questioning the prevailing economic orthodoxy. It is not so much that groups and people like the Tea Party have an intellectual counter against the prevailing view (the Austrians do) but rather that the Tea Party type populism gets in the way of their grand fixes.
I would say that if the economy does not recover soon you will start hearing the intelligentsia talking about needing more government funds for “recovery measures” and perhaps QE3 and 4 from the Federal Reserve. That it does not detrimentally affect the long term debt will be sold by their claiming that government programs will make the economy recover faster and thus provide more revenues in the long run. After all, as Keynes has prompted, in the long run those politicians will no longer have to stand for election and it will be someone else’s problem.
53-“It is not so much that groups and people like the Tea Party have an intellectual counter against the prevailing view (the Austrians do) but rather that the Tea Party type populism gets in the way of their grand fixes.”
I don’t know, I suspect many in the Tea Party know instinctively what Mises determined praxeologically. It’s not that I think many of us/them are actually determining things about economics in an intellectual way…it’s just that if you ask us what our sense of the answer to a question is, at least 70% of the time it will be the same based on nothing but our gut instincts, as one would determine from a step by step logical deduction from first principles. A bit like how we all do trignometry in our heads to judge distances, not with formal equations, but with the system our brains developed in nature, because mathematical laws apply to nature, too.
Kenneth,
It is true that my view is based on the “prevailing economic orthodoxy” of U.S. intelligentsia and not based on theories based on bogus facts such as “Obama raised taxes and created a surge in regulations that decimated the economy” or the equivalent.
It is also true that Austrian economics doesn’t have any role in policy-making circles today because of their diagnosis of the cause of business cycles as you describe. I’m not sure it is entirely an intellectual counter to Keynesian economics. Bryan Caplan identifies points of overlap and departure with neoclassical economics. Krugman asks why in a downturn, unemployment spreads across the system in aggregate and not just in the bloated sector, and concludes that the Austrian theory of employment/unemployment is a form of backdoor-Keynesianism. Arnold Kling who is partial to Austrian economics sounds more Minsky-like (“stability breeds instability”) – a different kind of monetary phenomenon – in his dismissal of the attribution of every financial distortion to Fed behavior. Minsky was a Keynesian who believed in the stabilizing role of the central bank and the government. When it comes to the Fed, after all, there were long depressions several times in the 19th century before the Fed came into being. And the Fed after all came into being because, if there wasn’t one, the country would be hostage to the J.P.Morgan of the day (Panic of 1907).
You say “RB is much more in tune with the intelligentsia in the US and they became a little upset when people begin questioning the prevailing economic orthodoxy. ” To my knowledge, there appear to be reasons why the economic orthodoxy hasn’t strayed from their 75 years of an intellectual framework. With regards to why Austrian economics doesn’t have much traction in policy, I’d point back to Mellon’s quote in my post #35, and end with this piece from an interview with Milton Friedman :
EPSTEIN You were acquainted with the Austrian economist Friedrich Hayek and also are familiar with the work of Ludwig von Mises and his American disciple, Murray Rothbard. When you were talking about bad investments, you were alluding to Austrian business-cycle theory. A certain concept that has pretty much gone into our parlance and understanding fits in with what you said about what happened in Asia. There can be times and conditions in which the stage can be set for malinvestment that leads to recession.
FRIEDMAN That is a very general statement that has very little content. I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.
Jeff,
I added a comment that went into moderation.
I am beginning to get an idea how RB operates: cherry picking out of context comments from “conservative” economists (some of which, are, indeed, conservative/libertarian) proceed to misunderstand them more than even them being out of context can account for, and finally to not spend any more time reading the blogs from which he snaps gotcha bits, than is absolutely necessary to support his Keynesian faith.
Here is an idea, let’s let RB right up his point of view of the economy, and then get, say, Russ Roberts or Don Boudreaux to write their own. I think I can predict what we will see. 😉
More seriously, RB should perhaps read the Econlog more attentively or he wouldn’t get truly bizarre ideas like Arnold Kling being a closet Keynesian. If that’s the impression he gets I can imagine him finding ways to quote me to make me appear to be a Keynesian. Of course, given that I am pretty much as diametrically opposed to that, more so everyday, I can hardly see that making any sense. Perhaps he’d quote from my naive young days or something. Nah, more likely he’d pick a post somewhere out of context and completely misunderstand the point I was making. And then construe it to mean the opposite of what I am saying.
Like, I said, RB, the current economic orthodoxy is closed minded when it comes to the Austrian school.
Milton Friedman, while having it right on some things had it wrong on the causes of the Great Depression and on his prescriptions for recovery from recessions. What makes the orthodoxy so edgy and grumpy these days is that the Keynesian monetary and fiscal prescriptions are not working. Their only retort is more of the same, i.e. QE3 and another “recovery” expenditure from the federal government. Their reasons given for failure are that we needed more government action in the monetary and fiscal arenas. They also resort to an untestable claim that the economy would have been much worse without the government interventions.
The longest economic downturn occurred when the Federal Reserve was empowered and it is certainly empowered during the current lengthy one. Before the Federal Reserve was established we had recessions but none the length of the Great Depression and, in fact, recovers were rather fast. While we did not have a Federal Reserve before 1913, we did have fractional reserve banking that could and did change the money supply and thus contribute to the extremes of the business cycles. There has been a “relationship” between the governments and the banks for sometime in the US that predated the Federal Reserve. Government bodies needed a conduit for their bonds and banks needed occasional forgiveness for specie payment and easy money policies to make their enterprises more successful, but better, less susceptible to failure. For a hiistory of banking in the US, see, for example, The Mystery of Banking by Murray Rothbard.
After his policies failed to help the economic situation surrounding the Great Depression, didn’t Keynes deny that the interpretation of his concepts were what he intended? In other words, didn’t Keynes deny that he believed in Keynesian economic theory? Interesting, btw, that Time declared Keynes as the savior of capitalism yet under Keynesian economics for the past 60+ years, we haven’t had anything remotely close to actual capitalism. Every time we implement his theories things get worse. It’s as if nobody noticed that socialism died…
Mark
Kenneth,
The Panic of 1873 was a pretty severe downturn lasting from 1873-1879 which is now seen as part of two decades of stagnation in the Long Depression of 1873-96 . I’m not sure what the similarities were to the post-Fed era, but that seems to have been a pretty long depression which involved a debt unwind. In fact some think that that period is a better comparison to today’s conditions than the Depression of the 1930s.
Economic historian Scott Reynolds Nelson believes we may have the wrong decade—the appropriate comparison should be the panic of 1873. The parallels are striking—it started with a housing bubble which popped and generated a mortgage crisis. Financial markets fell apart when investors, relying on complex financial instruments, did not consider counter-party risk.
59-One of the remarkable things about Keynes was his ability to be impossible to pin down when challenged. Before the “General Theory” Hayek had, on more than one occasion, challenged Keynes on things he had previously said that were clearly wrong. Inevitably Keynes would say “Oh, I no longer believe that”. It wouldn’t surprise me if he remained resistant to all attempts to show him he was wrong.
On pre-Fed crashes:
http://cafehayek.com/2009/08/abolish-the-fed.html
“What’s more, the frequent downturns before 1914 were due, not to the lack of a central bank, but to foolish government regulations. Topping the list were bans on branch banking, initiated by state governments and then incorporated into federal banking law. The bans propped up thousands of undercapitalized and under-diversified banks – banks unfit to survive major local shocks, let alone macroeconomics ones. They also caused bank notes – competitively supplied counterparts of today’s Federal Reserve notes – to trade at discounts whenever they traveled far from the solitary offices of banks that issued them.
During the Civil War, state bank notes were taxed out of existence to make way for those of new national banks. Because national banks had to accept one another’s notes at full value, their currency was uniform. But national bank notes had to be backed by government bonds.
That requirement, designed to bolster the Union’s finances while the war raged on, proved disastrous afterward, when government surpluses led to a halving of the federal debt, and to a corresponding shortage of bonds for securing bank notes. The resulting currency panics – in 1873, 1884, 1893, and 1907 – prompted the Fed’s establishment.”
In other words, we’ve had a destructive government run or connected banking system for some time. The Fed, however, is the most extensively destructive such system.
I heard from someone once that the one thing Keynes was not was a good expositor of his own views. Your statement seems to agree with that sentiment albeit indirectly: I think he simply refused to actually commit because he was so often wrong.
Interesting, Friedman won his Nobel for proving why Keynes was wrong.
Yet so many mental midgets use the past as an indictment of capitalism never fully realizing that the same things causing problems now caused problems then. When will they open their eyes? As George Reisman said (IIRC,) if you tie Michael Phelps up in chains, strap weights to him, toss him in the water and watch him drown, do you blame swimming?
Mark
RB, from Rothbard’s book we learn:
Of course, during the Civil War the US government printed “greenbacks” and suspended specie payment to finance the early part of the war. The government also ran up huge debts to finance the war effort. Whole sale prices during the Civil War increased at a rate of 22.2 percent per year.
Jay Cooke was able to convinced congress in 1862 to grant the House of Cook a monopoly for underwriting public debt. Cooke was also able to influence congress to pass the National Banking Acts that centralized banking in the US and later paved the way for the Federal Reserve System. Resumption of specie payments did not occur until 1879. Expansion was directly tied to the banks’ purchases of government bonds. The system had a fractional reserve which varied by type of bank, be it a city or reserve city or country bank. Reserves could be either specie or greenbacks. Many other restrictions were placed on the banking system through these Bank Acts. National banks were favored over state banks and the number of state banks declined dramatically and only survived by subordination to the national banks.
From Rothbard’s book The Mystery of Banking we also have a quote from Joe Klein on page 229:
“The financial panics of 1873,1884,1893 and 1907 were in large part an outgrowth of… reserve pyramiding and excessive deposit creation by reserve city and central reserve city banks. These panics were triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up
And also:
“The major effect of the Panic of 1873 was to cause bankruptcies among overinflated banks and in railroads that had ridden the tide of vast government subsidy and bank speculation. In particular, we may note the poetic justice meted out to the extraordinarily powerful Jay Cooke.”
Some historians of the economic history of the US want their readers to believe that, prior to the advent of the Federal Reserve System, the government had little influence on the banking system and the business cycles. That view might better fit their political leanings, but on further research does not hold up.
In 1869 Jay Cooke said:
“should this Grand and Glorious country be stunted and dwarfed — its activities chilled and its very life blood curdled by these miserable “hard coin” theories — the musty theories of a bygone age. These men who are urging on premature resumption know nothing of the great and growing west which would grow twice as fast if it was not cramped for the means…”
In 1837 Cooke’s overbuilt Northern Railroad went bankrupt and his government bond operation collapsed. Does any of this sound familiar?
Sorry, that second to last sentence should be in 1873 and not 1837.
Kenneth,
Starting with the depressions of the 1780s and Panic of 1797 along with the six-year depression during the Panic of 1819 and the six-year depression during the Panic of 1837 , it is apparent that depressions and govt-influenced banking have been around as long as America has been around, not just during the time of a Keynes-inspired Democrat government. I don’t know what this means but it shows that America of the time of the Founding Fathers faced similar issues as today, and not just that they in fact had more frequent recessions and depressions , in light of which statements often made on this blog about how the core of this country is being ruined by modern-day liberals might be viewed. But I think you seem to be advocating for a form of government/banking system that we haven’t had more or less throughout the existence of this country.
BTW, the NBER recognizes the Panic of 1873 as the longest contraction (they do not have start/end dates for earlier depressions and hence they don’t count) – but it is incorrect to say that the post-Fed depression of the 1930s was the longest economic downturn.
Keynes merely attempted to make government practices from years before, that were condemned by the economists then, a legitimate pursuit of government. A number of those criticizing his economic theories at the time he first propounded them noted that what he proposed in the end was not new, but rather that he was attempting to give old government policies and practices economic credence. Clipping coins and devaluing species with base metals was an old practice. The Federal Reserve does basically the same by creating money out of thin air and can actually debase money more readily than monarchies of the past could. Far be it for me to say that modern-day liberals are attempting new ideas. In fact it is rather obvious that they are wedded to the past. Keynesian economics was relished by government officials and intellectuals because it gave them cover for their grand schemes – and in fact does to this day.
I think we could agree that the Great Depression was the deepest economic down turn to date.
The post Civil War U.S. economy is commonly characterized as protectionist. The South, particularly, was suffering the aftermaths of the war and its defeat. That included government generated inflation required to finace the war.
RB, I am wondering what metric(s) were used to classify the post 1873 Panic as a 20 year down turn. GDP was not measured then and I do not see it readily estimated. Do those metrics separate the old Confederacy from the Union?
68-RB is going by this, apparently:
http://www.nber.org/cycles/cyclesmain.html
Curiously, they explicitly say they don’t define by RGDP…But then they really don’t say how they ~do~ determine the periods of recession and not.
More details of the intriguing, sordid history of events that ended NASA’s Apollo program and produced the current Economic Crisis and Chimategate were updated (back to the April 1967 Bilderberg Conference) and renamed – “The Bilderberg Sun, Climategate & Economic Crisis.” It is available at these same links:
http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc
or
Click to access 20110722_Climategate_Roots.pdf
Comments would be appreciated.
With kind regards,
Oliver K. Manuel
Kenneth,
If it was a science, you wouldn’t need a committee.
http://www.nber.org/cycles/recessions.html
I don’t think we know whether the post-1930s depression was the deepest, Scott Nelson describes the Panic of 1873 as producing 25% unemployment in New York city etc.
Also, I think you are rather excessively stuck on Keynes when the truth is that economics like all other human activities have been continuously changing, and hopefully like everything else, progressing. The new Keynesian paradigm is now the standard approach to business cycle analysis. And, as explained here some of Friedman’s views overlapped with Keynes and in many ways, he extended and complemented his work and has had a significant impact on policy.
Let us look at what the NBER uses to maintain a chronology of business cycles. That is pretty much a joke as far as using objective metrics goes and I guess could explain why they could see the Great Depression as 2 cycles from 1929 to1933 and 1937 to 1938. Most people see it lasting nearly 10 years and ending due to the WW II which conscripted for the military and put people to work supplying the war effort. I think one could define away any long economic down turn if one made the effort. Look at the GDP and unemployment estimates for that period in the following link and then determine how the NBER made its judgments. Obviously their categorization means nothing in terms of severity of an economic downturn.
http://en.wikipedia.org/wiki/Great_Depression
“The NBER’s Business Cycle Dating Committee maintains a chronology of the U.S. business cycle. The chronology comprises alternating dates of peaks and troughs in economic activity. A recession is a period between a peak and a trough, and an expansion is a period between a trough and a peak. During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year. Similarly, during an expansion, economic activity rises substantially, spreads across the economy, and usually lasts for several years.
In both recessions and expansions, brief reversals in economic activity may occur-a recession may include a short period of expansion followed by further decline; an expansion may include a short period of contraction followed by further growth. The Committee applies its judgment based on the above definitions of recessions and expansions and has no fixed rule to determine whether a contraction is only a short interruption of an expansion, or an expansion is only a short interruption of a contraction. The most recent example of such a judgment that was less than obvious was in 1980-1982, when the Committee determined that the contraction that began in 1981 was not a continuation of the one that began in 1980, but rather a separate full recession.
The Committee does not have a fixed definition of economic activity. It examines and compares the behavior of various measures of broad activity: real GDP measured on the product and income sides, economy-wide employment, and real income. The Committee also may consider indicators that do not cover the entire economy, such as real sales and the Federal Reserve’s index of industrial production (IP). The Committee’s use of these indicators in conjunction with the broad measures recognizes the issue of double-counting of sectors included in both those indicators and the broad measures. Still, a well-defined peak or trough in real sales or IP might help to determine the overall peak or trough dates, particularly if the economy-wide indicators are in conflict or do not have well-defined peaks or troughs.”
I don’t think there’s much to learn about how modern economics function by considering how pre-20th century economies, which have little to do with our modern system is run.
RB:
Which explains all of the committees I’ve served on…. or I guess it doesn’t. I think the IPCC was created by a committee too.
Make that “IPCC reports”
Keynesian, New and Classical versions, differ not at all on policy, but rather on subtle issues like the stickiness of wages. Politicians and their intellectual defenders still hearken back to Keynes in attempts to rationalize what might be considered otherwise short sighted and irresponsible behavior.
The only meeting of minds of Friedman and Keynes would be on monetary policy and then only on Friedman showing the Keynesians that monetary policy was more important than Keynes initially acknowledged. Friedman advocated that the rate of monetary expansion be legislated at around 4% (to evidently keep price levels steady) and that would not require the fine tuning of a Federal Reserve System.
Friedman, of course, blamed the Federal Reserve for intensifying the Great Depression by not attempting with more rigor to increase the money supply and in fact for deflating the money supply. The Austrians actually predicted the depression in the US and saw it as the Federal Reserve putting too much money into the system prior to the onset on the depression.
Bernanke is now in somewhat the same situation in that he wants to see inflation in order to encourage spending (our way out of recession) with his actions having somewhat the effects that the Federal Reserve saw back in the depression era. It amounts in my view in attempting to move an object with a rope but by pushing on the rope. The Austrians see these actions – if successful – as only prolonging the recovery and the agony that goes with it. The intellectuals have given Bernanke pretty much an open economic laboratory to try out his theories which involve the Federal Reserve finding ways to create inflation. Remember also that Bernanke has stated previously that he judges that the Fed has all the power and tools to do that and has even used the imagery of a helicopter dropping (freshly printed) money to the masses.
“I don’t think there’s much to learn about how modern economics function by considering how pre-20th century economies, which have little to do with our modern system is run.”
I could not disagree more. I do not see modern economics overturning the forces that were evident in the past.
I have never gone to a tea party rally, but from the hatred poured on the tea party by posters here and elsewhere who are proven extremists and liars, I think I will check out the next tea party rally in my area.
72-“Most people see it lasting nearly 10 years and ending due to the WW II which conscripted for the military and put people to work supplying the war effort.”
I shouldn’t have to be telling a libertarian that wars don’t produce economic growth…
Although in some sense I think it would be fair to say that the US left the Depression in some sense because of WW II, the war effort had an ethereal effect on the economy. It’s the broken window fallacy. Sure you put people to work…doing things that are ultimately not productive, and in many ways ultimately, globally destructive. Don’t get me wrong, WW II was a war of necessity (although it was paradoxically “The Unnecessary War” as Churchill said, because it could have been avoided, if only foresight was as good as hindsight…) but ultimately it set back Europe economically probably a generation, and the US spent four years building guns instead of being able to create consumer goods and build capital. It is a testament to the resiliency of an economy which is at least mostly free that after the war, our economy took off instead of languishing for a long time. A big difference was probably European economies remained centrally planned, but most of the war time planning was phased out in the US.
TTCA, you make a good point about WWII improving employment through conscription for military and in effect conscription for the domestic part of the effort. It does have a definite bearing on the Keynesian thoughts on government spending to alleviate a financial downturn and that it is merely the spending that counts and not whether that spending adds to the quality of life. Unfortunately it is rather easy to see that involuntary servitude could potentially alleviate unemployment but that the end result would not be what those enslaved considered a good life. Herein lies a big difference in how Keynesians and Austrians view economics. The Austrians start with the individuals and their subjective preferences while the Keynesians look at aggregates that the government can manipulate.
Seems like that is why the classes are called micro- and macroeconomics. I don’t remember which one I took as an undergrad, but I do remember the supply and demand curve. I also remember spending the past 15 years on the web reading and wondering why the hell anyone ever listened to Keynesian economists given all the harm they have done to the world over the years. Then it dawned on me: there are always those with enough foresight, intelligence, and charisma to use such ideas as a means for enriching themselves while enslaving everyone else. Half the voting population has a below median level of intelligence, as we all know (j/k, since they don’t all buy into the nonsense either.)
Mark
79-It’s not just that war time conscription doesn’t really result in people pleased with their service (many people probably will be, in fact, more than happy to “serve their country” even if they didn’t have a choice in the matter). The real problem, if you ask me, is that like everything the government does it provides at best temporary relief for the economy. Keynes like to total neglect the long term because we are “all dead”. The next generation would tend to disagree, I think, if they understood that their parents and grandparents were prepared to forsake having an economy with meaningful, lasting production for quick fixes for economic troubles. When one is going into a war with an evil, megalomaniacal force bent on conquering the world, they might understand. If one deliberately, however, goes for similar approaches with no such justification, it’s hard to believe they could be so forgiving.
Carrick #73:
I meant that there is some expert judgement involved, but I think you already knew that. There is a fairly widespread belief that there needs to be two successive quarters of negative GDP for a pronounced downturn to be called a recession, but it is actually not necessary.
RB, I was just quipping (“cracking wise” if you want). Of course what defines a recession, depends on who is making the call. Two negative quarters is a nice objective standard. Perhaps we need another term for economies that are growing, but just not very fast? We already have “jobless recovery” when jobs don’t come back when things pick up…
83-“Perhaps we need another term for economies that are growing, but just not very fast?”
I suggest Zombie Economy, as they are not quite living, but back from the dead. Hehe…
I thought of Zombie Economy too. XD
More parsimoniously, Zombconomy.
;p
At Mises Daily there are excerpts from John T. Flynn’s book on FDR, the Great Depression and WWII that inform some of the discussion in this thread.
http://mises.org/daily/5517/Out-Out-Damn-Depression-FDR-in-1938
As an aside and on further thought, I think the NBER classifications of recessions and recoveries speaks to the nature of the Keynesian business cycle that allows such views of the Great Depression to show a recovery in the middle of the depression and a much shorter time duration for the total of the NBER divided depression. The Keynesian policies of government spending and “pump priming” prolong the recovery process and do not allow the market to adjust to the mal investments that caused the downturn in the first place. That spending can signal a false recovery for a short period of time and postpone the markets reactions to mal investment and can cause further mal investment that only makes the original problem worse in the next recovery period. On paper, per the NBER’s definitions, the situation does not look all that bad in historical perspective and does not point the essence of the problem.
And as noted before Keynesian policies predate Keynes’ writings on economic theory. He simply gave these policies the seeming legitimacy of economic theory.
Kenneth,
The problem with overly broad descriptions is that one ends up concluding that there are no new ideas – one could also say the role of government versus laissez faire also is apparently at least as old as the Han dynasty in China more than 2000 years ago. Krugman’s criticism of Austrian economics i.e., why in downturns all industries are affected is very relevant in the context of whether there are structural issues facing the economy today that it just has to work through over time. Christina Romer makes a very good point here regarding how the unemployment issue is limited not just to construction and finance but to all sectors. Even this issue about a mismatch between skills and jobs or excessive investment in one sector, at the expense of another, (or the hangover theory ) is also at least as old as Malthus and Say two hundred years ago, and it looks like Say came around to Malthus’ view eventually.
In the end, it boils down to lack of demand due to over-indebtedness in the private sector. There is probably a way to accelerate the recovery with minimal government spending – which is unpalatable to most – but it involves debt forgiveness and making the creditors take some losses to pay for their lack of discipline in lending.