Posted on 06/06/2010 8:50:18 AM PDT by blam
Paul Krugman: Lost Decade, Here We Come
Henry Blodget
Jun. 6, 2010, 9:49 AM
Paul Krugman continues to argue that a return to "austerity"--an effort by world governments to reduce the massive deficits that have followed the financial crisis--will bury the global economy.
Just as bad, Krugman says, austerity will cause deficits and debt to balloon even more, because tax receipts will plummet.
Thus, Krugman views the G20's new focus on reducing deficits as a disaster:
The deficit hawks have taken over the G20:
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”.
These words were in marked contrast to the G20’s previous communiqué from late April, which called for fiscal support to “be maintained until the recovery is firmly driven by the private sector and becomes more entrenched”.
It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.
But don’t we need to worry about government debt? Yes — but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts...
[snip]
In short, we think the pain is unavoidable. It's just a question of what form it comes in and when.
[snip]
(Excerpt) Read more at businessinsider.com ...
Big govt socialism always fails. ALWAYS.
Krugman is a dolt!
Those that advocated this as a liquidity crisis should be boiled in oil.
Krugman sticks to Kenyanesian doctrine.
G20: The Time For Stimulus Is Over, Long Live Fiscal Austerity>
Just as the Austrian school has been saying for decades. Glad to see Krugman has finally grasped the rudiments of macro-economics even at this late date.
Krugman is a progressive elitist liberal..all you need to know. He cannot and will not let conservative thinking take place, ala this article, “Lost Decade, Here We Come”. Tax cuts, the free market, conservative works everytime it is tried.
Do Deficit Hawks Think Market Signals Are Totally Meaningless?
Joe Weisenthal
Jun. 6, 2010, 9:44 AM
Paul Krugman is now totally convinced that we're headed for (another?) lost decade, as he's particularly bummed by the G20's call for greater austerity in a time of continued economic weakness.
The last line of his latest post is important:
Yet the conventional wisdom now is that these countries must nonetheless cut — not because the markets are currently demanding it, not because it will make any noticeable difference to their long-run fiscal prospects, but because we think that the markets might demand it (even though they shouldn’t) sometime in the future.
Whether you think Krugman's "spend, spend, spend" philosophy is right or not, you have to acknowledge this much to be true: The market is giving zero indication that it's concerned about US spending. The dollar is strengthening and yields are falling.
The hawks may say "sure, but look at Greece," to which the non-hawks can say "sure, but look at Japan" and of its decades of rising bonds and a stronger currency, amidst the backdrop of more and more debt.
But apart form the theoretical, is it reasonable to say that deficit hawks -- usually so obsessed with market signals -- have decided this is a big one we can freely ignore, since it doesn't align with ideology?
Hey Paul... We’re already experiencing an economic disaster thanks to the fact that these same governments took your advice and ignored their debt.
Well, I agree we are entering a lost decade...hell, maybe a dark ages...but that’s about the limit of my agreement with Krugman. His prescription is ludicrous, and practically impossible at this point anyway.
That childless old queen is dead, but we are not, and we are now trapped in his inevitable end game.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig Von Mises
Spending our way into prosperity? It’s been tried.
He’s a true keynsian believer, unto death. As in, “In the long run, we’re all dead.”
And for him to try to completely ignore what is going on in Europe and pretend that he knows what they need more than they do is laughable.
In the history of the world, no nation has ever spent or taxed itself into prosperity.
Agree. Tax cuts would starve big government. That is why progressive elitist liberals are loathe to cut them.
Lost and long as in “Kondratieff”. Not necessarily that Kondratieff is 100% correct. Just that we due for austerity after decades of expansion via credit beyond all rationality
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