Dr. Paul, I do loves ya -- but you're getting to be a broken record. You've written this same column a few dozen times now...?
14
I wouldn't bash Germany for refusing to bail out Greece. I suspect many of those who keep bashing wouldn't help their relatives (let alone neighbors) who squandered their wealth to gambling... Southern Europe had a choice: austerity or leaving euro zone. We know what was chosen; let's get over it.
9
The biggest problem with Republicans is that they lack empathy. If they ever had to be on the receiving end as a "taker" just as if one of their loved ones had to face a serious problem being pregnant and had to face abortion, they would have a whole different perspective.
37
Dear Mr Friedman, when is a dollar of govt spending stimulative, vs not? Total spend in 09 of about 3 trillion is all stimulative? If not all, what spending should be diverted to stimulus? If stimulative only when is a deficit spend, then cutting taxes and increasing the deficit is stimulative?
3
Gerald: The recent strength of the US dollar against the euro, Japanese yen, and Chinese yuan may belie much of your initial argument, at least in the short term. Also, the recent plummet in the fiscal deficit to around $480 billion also seems to refute a portion of your argument. The recent drop in fuel prices should increase US consumers' discretionary incomes by a significant amount. [In her Sunday Times column (01/18), Ms. Gretchen Morgenson estimated this gain at a $250 billion annual windfall for US consumers in this column.] Much of this gain may be funneled overseas to Asian exporters thus diluting some of its later rippling magnifier effects throughout the US economy. This same argument was made for much of the global stimulus money injected after The Great Recession, i.e.; that China captured and accumulated much of this diffusely directed stimulus. A stronger dollar means more expensive US exports and cheaper imports entering the US, via currency translations. As foreign profits repatriated to US parent corporations are reduced, and US profits repatriated to overseas parents are increased by these translations, equilibrium will be restored in the longer run. China, India, and other strong exporters often lack a stable safety net for employees in re.: retirement benefits, health insurance, a social security program, and other perks. So, without these legacy costs, their prices in the shorter term are very competitive. [{JJL} 01/23 2:20 p Greenville NC] cc
4
The vast right wing conspiracy is international in scope and ideology.
So, electing a Democrat in 2008 is the ONLY thing that saved us from economic destruction, just like when FDR was elected.
Why the Democrats can't get that fact, that truth out into the nation and world is mindboggling.
So, electing a Democrat in 2008 is the ONLY thing that saved us from economic destruction, just like when FDR was elected.
Why the Democrats can't get that fact, that truth out into the nation and world is mindboggling.
155
Isn't it so that europe is really paying for our self indulgence for decades to come? Didn't the u.s. create the world financial crisis? Say it isn't so.
16
Despite the U. S. frailties and foibles: its astute Business perspicacity, including its philanthropic works, makes it a great and prosperous Nation!
5
Reading these comments leads me to one inescapable conclusion: America is filled with amateur economists, but I wager almost none of them know anything beyond what has been fed to them by the leaders of their political affiliations. Seriously, raise your hand if you are a professor of economics let alone have won a Nobel Prize in Economics.
People are quick to draw correlations and cite figures, but there's not enough serious analysis to fill a thimble. Paul Krugman writes a column for general consumption, but if pressed, my guess is that he could follow up these words with real economic data and analysis -- even though it might take some time. I would be shocked if any one of the commenters -- myself included -- had the skills and knowledge to do the same.
People are quick to draw correlations and cite figures, but there's not enough serious analysis to fill a thimble. Paul Krugman writes a column for general consumption, but if pressed, my guess is that he could follow up these words with real economic data and analysis -- even though it might take some time. I would be shocked if any one of the commenters -- myself included -- had the skills and knowledge to do the same.
70
Sorry, Dr. K....
You keep talking but, sadly, a lot of folks in power on both sides of the Pond are not listening.
I swear, courses on International Relations, History, and Economics should be required of everyone seeking roles of national leadership these days.
Ideologues and Reality Deniers need not apply.
You keep talking but, sadly, a lot of folks in power on both sides of the Pond are not listening.
I swear, courses on International Relations, History, and Economics should be required of everyone seeking roles of national leadership these days.
Ideologues and Reality Deniers need not apply.
29
Austerity, budget restraint, etc. was a good way to bail out Deutschebank.
6
That's true, USA and Europe have a lot in common.
Basically both are not able to make coherent economical politics, USA because the permanent boycotting to the President's programs, EU because the permanent opposition of Germany to all the Mr Draghi initiatives, being the EU not a Nation but an aggregation of random interests.
In the USA Republicans forgot the depression years in the '30s, in EU Germans forgot that they are rich not only because they are good, but because in 1953 all war debits were canceled world wide, then because in 1989 the EU allowed them to go out of the fixed Stability Parameters, because everybody understood the emergency of the German reunion, but they forgot all this and apply a rigid austerity program to the weak countries. For Germans there are no compensation rules, if they fail it is ok, if somebody else fails must be punished, as in the old times.
In those days Mr Obama, in his State of the Union address, mentioned measures than can be resumed into an “Inclusive Capitalism”, measures which Republicans already announced to boycott; the next day Mr Draghi announced his “quantitative easing program” to fight the persisting inflation which risk to go into deflation and naturally Germany is against and will boycott it.
I believe that until Republicans in the USA will not stay to the constitutional rules, USA cannot make any forward steps.
In the same way, until Germany will dictate their rules at will, EU cannot make any progress.
Basically both are not able to make coherent economical politics, USA because the permanent boycotting to the President's programs, EU because the permanent opposition of Germany to all the Mr Draghi initiatives, being the EU not a Nation but an aggregation of random interests.
In the USA Republicans forgot the depression years in the '30s, in EU Germans forgot that they are rich not only because they are good, but because in 1953 all war debits were canceled world wide, then because in 1989 the EU allowed them to go out of the fixed Stability Parameters, because everybody understood the emergency of the German reunion, but they forgot all this and apply a rigid austerity program to the weak countries. For Germans there are no compensation rules, if they fail it is ok, if somebody else fails must be punished, as in the old times.
In those days Mr Obama, in his State of the Union address, mentioned measures than can be resumed into an “Inclusive Capitalism”, measures which Republicans already announced to boycott; the next day Mr Draghi announced his “quantitative easing program” to fight the persisting inflation which risk to go into deflation and naturally Germany is against and will boycott it.
I believe that until Republicans in the USA will not stay to the constitutional rules, USA cannot make any forward steps.
In the same way, until Germany will dictate their rules at will, EU cannot make any progress.
20
I understand the frustration of the Germans, and their aversion to any risk of inflation after the hideous experience of runaway inflation subsequent to the First World War, a situation that brought in Hitler and the Nazis. They might, however, remember the generosity of the Marshall Plan, though which their ruined economy was restored after the Second World War. It was the victors, the United States, which made the present German prosperity possible.
30
Mr. Krugman apparently shares with Mr. Obama the gift of perceived reality wherein he is able to see the booming economy touted by Mr. Obama as the president's magical handiwork. Mr. Krugman goes even a step farther and sees the fantasy boom as a solid recovery, ignoring the 20 million unemployed and underemployed that we still have struggling to make house and loan payments.
It is easy to believe that economics is a tool box full of adjustable gadgets that can be used to make anyone's outlook fit their predilections, and both Mr. Obama and Mr. Krugman seem to have mistaken their manipulations with the tools as economic reality not visible to the rest of the country's citizens.
It is easy to believe that economics is a tool box full of adjustable gadgets that can be used to make anyone's outlook fit their predilections, and both Mr. Obama and Mr. Krugman seem to have mistaken their manipulations with the tools as economic reality not visible to the rest of the country's citizens.
15
Krugman's rationales, the efforts of the various governments, and the always-interesting diverse commentary that follows suggests to me perhaps a collapse is what the world economy needs and assuming we won't all be reduced to grubbing through piles of rubble, a chance to bring some clarity of thought and purpose might be achieved. Right now, we sound like a bunch of old buzzards arguing around the stove at the back of the general store.
4
rad6016's logic is similar to the idea that dead soldiers make good fertilizer. Surely, with the combined intelligence and lessons from history we should be able to better than by profiting from a pandemic economic collapse.
17
Massive QE from the Fed saves the US economy and the overall recovery has been, based on performance statistic, consistently good. Monetary policy, however, is no substitution for government policies that address income inequality and stagnation, low wages, lack of good jobs, and many other issues that contribute to wealth concentration, rising income inequality in the US. Sadly, the Republicans' rejection of Obama's 'middle class economic' proposed in the State of the Union is a reminder that the last two paragraphs of PK's commentary also apply to them.
29
Government policy should stay out of picking winners and losers and allow the market to move freely, no matter what happens. We need to overcome the liberal indoctrination that passes as education in this country, sadly from K through grad school and accept that the free market that allows some to acquire tremendous wealth will also allow many more to fail disastrously. Such is still better than the failed, centralized, discredited policies hailed by the left.
7
The reason why Europe adopted a different response than the USA to the financial crisis, is because Europe was dominated by conservatives, while the Usa elected a democratic president. The German Merkel is a centrist, the French Sarkozy was a moderate right-winger, the Briton Cameron is a Conservative. Every leader followed his/her own ideology, regardless of the consequences.
17
'The German Merkel is a centrist,'
Fact:
Merkel might be a 'Conservative Christdemokrat' by name -('Centrist' does not apply) but her 'ideology' - if you want to call her policies like that - can be considered to the radical left of every Democratic American President.
And somebody who comments from the UK should be aware of that fact.
Fact:
Merkel might be a 'Conservative Christdemokrat' by name -('Centrist' does not apply) but her 'ideology' - if you want to call her policies like that - can be considered to the radical left of every Democratic American President.
And somebody who comments from the UK should be aware of that fact.
7
Europe's oligarchs chose austerity, not out of misunderstanding of economics, but because it's profitable for them; it gets them more money from tax cuts and lower wages, now and in the future. Any display by them of misunderstanding or unwillingness to admit error is only acting.
27
Creditors always want hard money. Debts are in fixed amount with fixed payment. A reduction in the money supply makes it harder to pay and nicer to receive. That is not Econ 101 but Econ 1893.
9
The oligarchs of Europe must have gotten confused. As noted in the article, they raised taxes, they didn't cut them.
1
In the US, many states, such as New York and California, have been subsidizing other states, such as Alabama and Alaska, for more than a century. And this is no small change. This is not widely known, and perhaps that's a good thing, but it works.
In the EU, Germany is determined not to subsidize Greece at all -- it all has to be paid back. I submit this matter of attitude (or, perhaps, the difference in structure) largely accounts for the huge different in attitude (and result).
In the EU, Germany is determined not to subsidize Greece at all -- it all has to be paid back. I submit this matter of attitude (or, perhaps, the difference in structure) largely accounts for the huge different in attitude (and result).
29
Fact:
2011 The so called Troika -(Germany is only one member) decided to subsidize Greece and supposedly Angela Merkel was instrumental in the decision.
Afterwards she was harshly criticized by all the involved European Banks and Bankers and being told that 'next time the politicians shouldn't make such a decision. But nearly everybody in Europe is aware - that there is no way that Greece ever would be able to pay it's debt and that the Banks of the countries which still have the means -(not only Germany) - will have to bail out Greece.
The amount what Germany will have to pay for Greece will be negotiated when the new Greek government is elected.
And buy the way Greece's economy always was and is subsidized by the EU and Germany pays the highest amount for such regular help.
2011 The so called Troika -(Germany is only one member) decided to subsidize Greece and supposedly Angela Merkel was instrumental in the decision.
Afterwards she was harshly criticized by all the involved European Banks and Bankers and being told that 'next time the politicians shouldn't make such a decision. But nearly everybody in Europe is aware - that there is no way that Greece ever would be able to pay it's debt and that the Banks of the countries which still have the means -(not only Germany) - will have to bail out Greece.
The amount what Germany will have to pay for Greece will be negotiated when the new Greek government is elected.
And buy the way Greece's economy always was and is subsidized by the EU and Germany pays the highest amount for such regular help.
8
The QE in U.S is primarily focused on bailing out the Wall Street, because of the influence of Wall Street on the Capital Hill. So, Wall Street recovered well but the trickle down economics failed. So, the emphasis now is on the middle class economy but a generation of middle class is destroyed. Economic theories do not take into account the effects lobbyists in their predictions.
20
I usually agree with Prof. Krugman. This time though one needs to keep in mind that the majority of EU members have substantial social "safety nets" in place, regardless whether the economy is thriving, or as is the case now faltering. This is not the case in the US.
I agree that urgent action is required, but the timing of that action is not the same for the EU and the US.
Even with 11 % unemployment in Europe, we are not feeling anywhere near the pain the middle class is feeling in the US.
We have worker protections, universal health care, dental, maternity leave, college, daycare. And liveable wages whether you flip burgers or practice medicine.
It's like comparing apples and oranges.
I agree that urgent action is required, but the timing of that action is not the same for the EU and the US.
Even with 11 % unemployment in Europe, we are not feeling anywhere near the pain the middle class is feeling in the US.
We have worker protections, universal health care, dental, maternity leave, college, daycare. And liveable wages whether you flip burgers or practice medicine.
It's like comparing apples and oranges.
42
Joey, while what you say is true the point is that our monetary transfers are federal not state based. For example I live in Connecticut where we get .76 cents in federal spending for every $1 we send the federal gov. Mississippi gets about $1.54 for every dollar. In essence my state subsidizes the poorer states where as Europe tries to loan to the poorer states. The main point is that the poorer states could not maintain a safety without help from the richer states in an economic downturn. So for example Spain or Greece might not be able to afford to keep up the safety net if the federal level can only loan and not give.
14
Another Fact:
The richer European States always 'gave' to the poorer European States - to a certain extent.
And that is the point.
With the collapse of 2008 some European States suddenly needed so much money that without the help of their solvent neighbors they would have been bankrupt.
Which reminds me - Could CT have bailed out Detroit?
The richer European States always 'gave' to the poorer European States - to a certain extent.
And that is the point.
With the collapse of 2008 some European States suddenly needed so much money that without the help of their solvent neighbors they would have been bankrupt.
Which reminds me - Could CT have bailed out Detroit?
3
Are you not aware that the annual EU budget is redistributive? In other words, wealthy nations put in more than they get, and poorer nations put in less than they get. It is on the basis of these structural funds that Spain built up a very high quality transport and urban infrastructure. So, as far as I can tell, you are utterly incorrect when you write that "Europe tries to loan to the poorer states" or "...the federal level can only loan and not give"...
1
President Obama could have and should have been much tougher on the Repugnantans, But the nature of the man is to seek accommodation and consensus , rather than confrontation. That is to his credit.
Having watched the state of the Union address, my own thought was that this was kind of speech he should have been giving for the last six years. he laid the blame for the financial crisis squarely on the Repugnantan's doorstep. And noted the incestuous relationships with the Commercial banks, Wall Street, et al.
For 2016, we need another Democrat, and we must give the new president solid majorities in both houses.
Having watched the state of the Union address, my own thought was that this was kind of speech he should have been giving for the last six years. he laid the blame for the financial crisis squarely on the Repugnantan's doorstep. And noted the incestuous relationships with the Commercial banks, Wall Street, et al.
For 2016, we need another Democrat, and we must give the new president solid majorities in both houses.
42
Good luck with that. No one cares what he has to say. Worst ratings for a SOTU address in 15 years. He's a lame duck, 1 year, 361 days left, and counting!
4
And vet the Democrats to make sure they're REALLY Democrats and not repub-lite.
12
Austerity, but not for the 1%. According to an article by Patricia Cohen
" The richest 1 percent are likely to control more than half of the globe’s total wealth by next year, the charity Oxfam reported in a study released on Monday....The 80 wealthiest people in the world altogether own $1.9 trillion, the report found, nearly the same amount shared by the 3.5 billion people who occupy the bottom half of the world’s income scale.....Winnie Byanyima, the charity’s executive director, noted in a statement that more than a billion people lived on less than $1.25 a day."
I guess there is austerity of the billion people living on $1.25 (not even enough to by Jumbo Jack now, much less curly fries.
I realize it is not the place of journalism to "solve" the world's problems but Please, report the facts as they matter to the average human being.
There is altogether too much blather about whether the moon is made of cheese or not, while people are starving. Stay away from theory, point our the factual stuff, and if the pols can't read, at lest the reading public can, and perhaps will contact their representatives to get something changed. If not, then let's just all of us go shopping (in the immortal [ or immoral] words of our past president)
"
" The richest 1 percent are likely to control more than half of the globe’s total wealth by next year, the charity Oxfam reported in a study released on Monday....The 80 wealthiest people in the world altogether own $1.9 trillion, the report found, nearly the same amount shared by the 3.5 billion people who occupy the bottom half of the world’s income scale.....Winnie Byanyima, the charity’s executive director, noted in a statement that more than a billion people lived on less than $1.25 a day."
I guess there is austerity of the billion people living on $1.25 (not even enough to by Jumbo Jack now, much less curly fries.
I realize it is not the place of journalism to "solve" the world's problems but Please, report the facts as they matter to the average human being.
There is altogether too much blather about whether the moon is made of cheese or not, while people are starving. Stay away from theory, point our the factual stuff, and if the pols can't read, at lest the reading public can, and perhaps will contact their representatives to get something changed. If not, then let's just all of us go shopping (in the immortal [ or immoral] words of our past president)
"
19
I agree with Paul Krugman that Europe OUGHT to have followed the U.S. path of debt and stimulus to get out of the financial crash, but it may be that the REASONS it chose austerity and hardship instead go deeper than just wrong-headedness. Fundamentally, the U.S. is one country, with a strong central government (despite all attempts to weaken it), while the E.U. is a collection of different soveriegn nations with governments marching in different directions. For various historical reasons, some of these nations have very different economic cultures, and the only way to bring them more in line with each other is by visiting varying degrees of economic pain. Germany can use its strong economy to sell goods and lend money to Greece, but if the Greeks have to renege on their debts, then Germany will suffer, too. In essence, the monetary union was the first step in creating a single state out of many separate European states. The next step has to be a POLITICAL union that all will want to join - perhaps not eagerly, but as the better of unpleasant alternatives. This appears to be what is happening now, though even the country with the most to gain, Germany, doesn't like having to give up some of its cherished autonomy and prosperity. To keep Greece in the Union, part of its debt will have to be forgiven, but even if it breaks away, it will stand as a horrible example of what will happen to other weaker states that refuse to submit to economic "reforms" and cultural changes.
6
Germany has a very short memory. I seem to recall that they did quite nicely after they were bailed out more than 65 years ago.
11
Getting most people to grasp the contradictory differences between macro economics of the world and the micro economics of the way we run the finances of our businesses or families is like getting most people to understand quantum mechanics when they live in a Newtonian reality. Just isn't going to happen.
14
The United States and Europe also have much that is NOT in common. Europe is not a country. Even with the common currency, open borders for immigration, and a centralized banking system. It is a group of countries with different cultures, and they don't always get a long.
Germany is doing the best, by far. It is also a country of austerity, as are the German people. They don't go in debt for big ticket items like homes. And they do not force companies to keep non-performing workers. Not true of the rest of Europe.
The main reason Europe as a whole is not doing too well is that they have been engaged in re-distribution of wealth, growing entitlements, and crushing protectionism of 'some' industries through unsustainable subsidies for 40+ years. It worked well when times were good and manufacturing jobs were increasing annually. Sound familiar? Probably not. But I do wish those here would live in Europe, if only for a few months. You might have a bone to pick with Krugman.
BTW, how is it that everyone loves Europe's 'free' college and espouses how smart they all are as a result, but fails to see that hasn't helped. It is true, you can only tax the producers so long. Europe, as a whole, has passed that point. The few that are producing are not too happy about paying for those not producing.
Germany is doing the best, by far. It is also a country of austerity, as are the German people. They don't go in debt for big ticket items like homes. And they do not force companies to keep non-performing workers. Not true of the rest of Europe.
The main reason Europe as a whole is not doing too well is that they have been engaged in re-distribution of wealth, growing entitlements, and crushing protectionism of 'some' industries through unsustainable subsidies for 40+ years. It worked well when times were good and manufacturing jobs were increasing annually. Sound familiar? Probably not. But I do wish those here would live in Europe, if only for a few months. You might have a bone to pick with Krugman.
BTW, how is it that everyone loves Europe's 'free' college and espouses how smart they all are as a result, but fails to see that hasn't helped. It is true, you can only tax the producers so long. Europe, as a whole, has passed that point. The few that are producing are not too happy about paying for those not producing.
7
HAHA, The United States subsidizes a lot of folks, their just the wealthy and military. I have found life to be far superior to that in America.
8
You can't have it both ways. Both you and Dr Krugman agree that Germany is among the strongest economies in the world. They are also one of many developed countries that educates it's young population whether or not these students can pay for it as they learn. Would you have us believe that Germany is becoming a third world economy because of an Ayn Rand fantasy about free education moochers driving out the wealth creators?
9
Mary, so the blue states should cease subsidizing the red states in your view?
9
How will, or could the mess Europe put themselves in, drag us down? I would assume we do plenty of business with such?
There is a fury here directed at someone who has been consistently correct in his observations since I started reading his column in 2008. I think that fury comes from people who have been consistently wrong, are unwilling to admit it and equate running a household to running a country. Now, these same people are taking credit for the recovery they have consistently blocked.
When Obama was elected in 2008, what was the situation in the USA after many years of Republican policies? Compare the situation then to today. If anything, Obama wasn't tough enough. From where I stand, I am grateful for his presidency and for the observations of Paul Krugman.
When Obama was elected in 2008, what was the situation in the USA after many years of Republican policies? Compare the situation then to today. If anything, Obama wasn't tough enough. From where I stand, I am grateful for his presidency and for the observations of Paul Krugman.
47
With no significant investment in R&D or infrastructure it is hard to imagine how our economic growth continues. The officers of the Titanic go about their business thinking we're going forward, talking about the next days activities, while the bow continues to plow deeper into the on-coming waves.
11
The Obama administration's effort certainly contributed to the US recovery from the financial sinkhole of the preceding decade. But there's a lot more to do before we can celebrate. We're on a path to a solid recovery but we're not experiencing it just yet. So I would urge caution before knocking the European response - it may yet turn out to lead to a solid recovery for them. One of the issues that puzzles me and that I have never seen addressed in Paul's otherwise excellent articles, is that of savings rates and safe investment practice for middle income families. If one looks around for information, it is amazing to see the savings rates (for term deposits) offered by banks in Vietnam, South Africa, Indonesia, India - these are upwards of 5%. People are able to save money and have it earn decent interest and build up their nest eggs. Here in our spend it all paradigm, banks offer paltry sub 1% rates. Why? If we want our middle class to prosper, shouldn't we also encourage low-risk moderate-yield accounts? After all, there's plenty of money being thrown around in the high-risk dodgy yield domain....
9
Why did Europe fare so poorly with austerity-focused economics, while Great Britain did just fine? That's something Keynesian economists would rather ignore.
The 'broader deflationary forces" supposedly set in motion by years of wrongheaded policy mainly include aging populations with birth rates below replacement. How did the ECB policies destroy the Continent's willingness to raise children?
The lesson with the United States is that you can do pretty much whatever you wish with your currency in the short run if it is backed by the most powerful military in world and it is commensurately used as the world's reserve currency. And the US is not nearly as old nor as sterile as Europe's native populations have become.
If Mr. Krugman wishes to compare economic systems, he should take full account of all the macro variables affecting them. It should also be pointed out, that he caterwauled for years that stimulus measures in the US were too meager to do any good. Now he heaps praise upon them to show how Europe failed. A bit disingenuous, I'd say.
The 'broader deflationary forces" supposedly set in motion by years of wrongheaded policy mainly include aging populations with birth rates below replacement. How did the ECB policies destroy the Continent's willingness to raise children?
The lesson with the United States is that you can do pretty much whatever you wish with your currency in the short run if it is backed by the most powerful military in world and it is commensurately used as the world's reserve currency. And the US is not nearly as old nor as sterile as Europe's native populations have become.
If Mr. Krugman wishes to compare economic systems, he should take full account of all the macro variables affecting them. It should also be pointed out, that he caterwauled for years that stimulus measures in the US were too meager to do any good. Now he heaps praise upon them to show how Europe failed. A bit disingenuous, I'd say.
4
If you'll go back and reread his columns from back then, he said the stimulus was good, but not big enough. He's never wavered from that.
27
At the beginning of the economic crisis Britain (and Germany) had a more robust economy overall and in the case of Britain, their currency is the Pound not the Euro.
One of the reasons for Germany's relatively healthy economy is that they've kept much of it's manufacturing in-country. They still build stuff that that the world wants, i.e. cars, washing machines, etc. and they're workers are paid high wages. Oh, and they are a fully functioning "welfare state" that provides free higher education, guaranteed paid factions, health care for all, generous pre-natal and post-natal benefits, and guaranteed sick leave.
One of the reasons for Germany's relatively healthy economy is that they've kept much of it's manufacturing in-country. They still build stuff that that the world wants, i.e. cars, washing machines, etc. and they're workers are paid high wages. Oh, and they are a fully functioning "welfare state" that provides free higher education, guaranteed paid factions, health care for all, generous pre-natal and post-natal benefits, and guaranteed sick leave.
16
He said that the stimulus would help, and he was right.
If it had been larger, what he felt needed, he felt that the recovery would have been quicker and more far reaching.
I tend to agree.
If it had been larger, what he felt needed, he felt that the recovery would have been quicker and more far reaching.
I tend to agree.
10
Most Germans rent, even when they are over age 65.
In the USA and Britain, about 65% of households "own" their homes.
Most Germans naturally prefer policies that favor "strong" money that more than holds its value since they need to pay rent until the month they die.
Millions of Britons and Americans heavily in debt to the tune of say 250,000 dollars or 200,000 pounds per household tend to prefer policies that cheat creditors such as mortgage debt holders [1% bank interest by Federal Reserve "easy money" in the face of ~5% store inflation, causing tens of millions of American retirees to be further impoverished by ~4% each year].
The very temporary "deflation" of concern to mainly you (I rather like getting more for my money as any sensible person would if even for only a few months) is caused by oil prices returning to more reasonable levels after massive Federal Reserve funded commodity speculation.
A German politician or banker given the choice of a common Greek household with four people of working age and only three working or millions of Germans unable to pay rent after age 70 will prefer to have the Greeks take a work break and to let the German elderly continue to live in warm apartments in the winter.
German winters are cold. German politicians and money men are being sensible. They know what can happen if the German middle class is made destitute as it was in the early 1920's.
In the USA and Britain, about 65% of households "own" their homes.
Most Germans naturally prefer policies that favor "strong" money that more than holds its value since they need to pay rent until the month they die.
Millions of Britons and Americans heavily in debt to the tune of say 250,000 dollars or 200,000 pounds per household tend to prefer policies that cheat creditors such as mortgage debt holders [1% bank interest by Federal Reserve "easy money" in the face of ~5% store inflation, causing tens of millions of American retirees to be further impoverished by ~4% each year].
The very temporary "deflation" of concern to mainly you (I rather like getting more for my money as any sensible person would if even for only a few months) is caused by oil prices returning to more reasonable levels after massive Federal Reserve funded commodity speculation.
A German politician or banker given the choice of a common Greek household with four people of working age and only three working or millions of Germans unable to pay rent after age 70 will prefer to have the Greeks take a work break and to let the German elderly continue to live in warm apartments in the winter.
German winters are cold. German politicians and money men are being sensible. They know what can happen if the German middle class is made destitute as it was in the early 1920's.
10
If the GOP wants to run government like business, why not limit lobbyists and meetings with reps and staff to regular business hours? with an open agenda and meeting list and full disclosure of all campaign donations and perqs of office. Congress should be home at night with their families, like the rest of us.
16
WHERE IS THE ECONOMIC GROWTH In America---sure the Corps reap it all in to the detriment of We the Americans.
Ask any basic American if they see and feel economic Growth and most will say No. And for proof look at how the retail sales were down during the Holiday Season--thee largest shopping season of the year!
Ask any basic American if they see and feel economic Growth and most will say No. And for proof look at how the retail sales were down during the Holiday Season--thee largest shopping season of the year!
9
the economic recovery is weak and jobless for one reason: both parties have allowed, even fostered the destruction of anti-trust in America, almost every sector of the economy is now dominated by defacto cartels or outright monopolies. Health care, Big Banking, media - all now consist of giants who since the 60s have bought up or crushed their rivals, then used their wealth and clout to go to Washington and neuter the anti-trust laws that restrained them. when you control the market you have no need to expand much when times improve, no new company open to challenge you. the big five banks bought up or crushed the local and regional banks, now get special terms from the Fed window, and are bigger than they were before ""too big to fail". and they just went after the lame attempt to rein them in again. shameful. the last time we acted to make markets fair was the break up of AT&T. the result was a dizzying era of new companies, new wealth, innovation, millions of jobs and lower prices and choice for the consumer. gee.
19
Socialism is what is killing Europe, along with multiculturalism and radical feminism. The US is somewhat more free market oriented. Krugman and the other plagiarizers of marxism love to hold Europe up as an example - and now we see why. Europe is heading for totalitarianism again, which is the goal of every liberal.
6
Radical feminism is responsible for Europe's economic troubles! Listen up, Fox, after your disastrous fabrication relating to "no-go zones," you have a new rant you can use to fill up air time for the next two weeks! (If you haven't already used it.)
14
I couldn't agree with you less. I don't even really know what you're saying. Consider traveling to Europe and exploring the countries of the European Union to fact check the veracity of Krugman's story and come back to us with something beyond the random talking points.
5
The really pitiful misunderstanding is that economics is not about morality. Conservative commentary always relies on the notion that what is moral makes perfect economic sense. Krugman has just presented two opposing alternatives to the same economic crisis. One resulted in a slow recovery, the other to disaster. You will never find anything that more closely approaches a controlled experiment in a "soft" science, than this. But the response from the Right is framed around what is moral not what is pragmatic. And of course there are the predictions of disaster just around the corner. But we're still waiting on the skyrocketing inflation that was predicted six years ago. I'm sure someday something bad will happen, but something terrible is happening in Europe right now, and has been for the last seven years. Naturally that is to be discounted because Europe has taken the moral path. As Asimov said, "Never let your sense of morals prevent you from doing what's right"
33
What Krugman fails to reconcile is how the US recovery has even happened in spite of government restraint in the last 4 years. In fact, the recovery has been inversely correlated with government spending growth. This also happened during the beloved clinton era. Krugman spent the better part of the last 2 years discussing how horrible the US economy was going to be because of government spending restraint (driven by the republican congress). this is now the 2nd time in 20 years that a democratic president saw republicans take over congress and slow spending growth, then take credit for the subsequent expansion.
2
Kind of makes one wonder how much better our recovery could have been had Republicans not worked at sabotaging it.
It's frustrating and irritating.
It's frustrating and irritating.
21
Germany follows a policy of austerity, but it also redistributes wealth more than the US. It has austerity for everyone, not just the poor and middle class. It also has severe penalties for tax evasion. Canada also redistributes wealth more than we do and has now passed us up in per capita income. Republicans are stuck on the idea that government spending = sinking into the Third World. There's no evidence for that.
Also, the US national debt was flat between 1950 and 1980 and has exploded since then. You know who got elected that year.
You mention that there's been restraint of spending in the last several years. If you actually remember the details, Republicans pushed austerity policies because they assumed they'd be able to cut spending without touching defense. When Obama balked at that, they tried to back out of the deal. The cut in spending only went through when they gave up on exempting defense from it.
Also, the US national debt was flat between 1950 and 1980 and has exploded since then. You know who got elected that year.
You mention that there's been restraint of spending in the last several years. If you actually remember the details, Republicans pushed austerity policies because they assumed they'd be able to cut spending without touching defense. When Obama balked at that, they tried to back out of the deal. The cut in spending only went through when they gave up on exempting defense from it.
9
Fiscal policy at the local, state and Federal level have been contractionary. Monetary policy in the US has been expansionary. Fiscal policy-- the Republican's "shut down the government and its okay to default on Treasury bonds" fiscal policy -- slowed the recovery and made it weaker. There would be no recovery at all without the Fed's QE policy. Krugman is drawing the contrast between what the Fed did and what, until now, the ECB didn't do. Fiscal austerity here and abroad remains government policy to the detriment of the global economy, which means to the detriment of all us except the 1%.
16
Dear Mr. Krugman
Europe's Disastrous Post-GFC Policy Settings:
We know the what, the where, the when, the who and the how of Europe's disastrous policy settings in relation to its response to the GFC.
What we do not know is the 'why'.
Until eminent commentators like your good self, I am a fan, go beyond the hindsightful obvious, albeit elegantly presented, we learn nothing from the event and, as such, are ill-prepared for the next time.
Yes, the first 'why' is that they got the wrong policy setting and have refused to budge. Why did they choose the wrong policy settings in the first place? Yes, at the time they thought that they were the correct policy settings. But, they had significant political and economic precedent to indicate that the policy setting they went for had high risk, not to mention many people like yourself telling them that they were courting disaster.
I now it's crude, but maybe we should start the list of underlying 'whys' with the Latin legal phrase: Cui bono?
The first 'beneficiary', sounds so socialistic, would be the financial elites both state, corporate and individual, and the well-paid infrastructure that supports them. Nothing wrong with that I quickly add. The problem is that policies that appear to protect this group's financial interests in the short term do not necessarily protect their interests in the medium to long term. Akin to: Cutting off your nose to spite your face.
More whys please, Paul.
Best regards, John
Europe's Disastrous Post-GFC Policy Settings:
We know the what, the where, the when, the who and the how of Europe's disastrous policy settings in relation to its response to the GFC.
What we do not know is the 'why'.
Until eminent commentators like your good self, I am a fan, go beyond the hindsightful obvious, albeit elegantly presented, we learn nothing from the event and, as such, are ill-prepared for the next time.
Yes, the first 'why' is that they got the wrong policy setting and have refused to budge. Why did they choose the wrong policy settings in the first place? Yes, at the time they thought that they were the correct policy settings. But, they had significant political and economic precedent to indicate that the policy setting they went for had high risk, not to mention many people like yourself telling them that they were courting disaster.
I now it's crude, but maybe we should start the list of underlying 'whys' with the Latin legal phrase: Cui bono?
The first 'beneficiary', sounds so socialistic, would be the financial elites both state, corporate and individual, and the well-paid infrastructure that supports them. Nothing wrong with that I quickly add. The problem is that policies that appear to protect this group's financial interests in the short term do not necessarily protect their interests in the medium to long term. Akin to: Cutting off your nose to spite your face.
More whys please, Paul.
Best regards, John
6
Well, we're some $17 trillion in debt and it's growing every day. I guess, at this point, what difference does it make, right? We make look like we have a great economy, but it's all based on a giant nationwide credit card, just like it's always been.
7
Except nothing slows deficit spending like growth. Nothing stunts growth in a recession like austerity. Our problem is that in the good years, we don't pay down some of the debt. Unfortunately, when Bush got elected, he opted for tax cuts and unpaid for wars... and the surplus evaporated. If the GOP captures the WH in 2016, if history is any guide, the GOP's fixation on reducing the debt will similarly evaporate...
15
No, Krugman, you are wrong again. I bet you can't even balance your own household checkbook. European economies--and governments--have spent too much money on the welfare state. Productivity, length of work weeks, benefits, have made these countries "soft," instead of having to work, innovate, produce, create entrepeneurs to get and keep these economies healthy. When Greece had its "meltdown" a couple years ago, I think a very large percentage of the population was either a government employee (producing nothing) or on the government dole. Can't run a railroad like Greece was doing. Bottom line: more government spending is NOT--I say again, NOT--the answer.
4
Personally, I do not like the comment where a personal pejorative attack on the writer such as "I bet you can't even balance your own household checkbook."
Regarding the article & my respond to Falcon78; I seem to remember Roosevelt stimulating the market with jobs and slowly but surly brought the economy up. There was a democratic calmness to the process. WW-2 had the govt. spending more money on war that had to win. The money went to a pubic army and all the tools needed. It brought the US, finally, out of the depression.
This time we had Clinton, who set all of us up for a fall by getting rid of Glass-Steagall and with Bush following, we went into a useless war and spent the money on private firms like Halliburton, etc. All this allowed the housing bubble to occur and we were all left with this mess and a terrible divvied in income disparity. The fact that companies were able to set up satellite films abroad(to avoid taxes, benefits, etc.) jobs went away and Bush left us with huge deficit. All this while lowering taxes on the wealthy during a time of war,unheard of before.
When someone or some entity experiences trauma, they need support, not austerity. Scandinavia is a great example with the balance of 50% tax on wealthy and govt. programs can afford real disability & programs like S.S. My take is Paul is only reminding us of what path works better.
Regarding the article & my respond to Falcon78; I seem to remember Roosevelt stimulating the market with jobs and slowly but surly brought the economy up. There was a democratic calmness to the process. WW-2 had the govt. spending more money on war that had to win. The money went to a pubic army and all the tools needed. It brought the US, finally, out of the depression.
This time we had Clinton, who set all of us up for a fall by getting rid of Glass-Steagall and with Bush following, we went into a useless war and spent the money on private firms like Halliburton, etc. All this allowed the housing bubble to occur and we were all left with this mess and a terrible divvied in income disparity. The fact that companies were able to set up satellite films abroad(to avoid taxes, benefits, etc.) jobs went away and Bush left us with huge deficit. All this while lowering taxes on the wealthy during a time of war,unheard of before.
When someone or some entity experiences trauma, they need support, not austerity. Scandinavia is a great example with the balance of 50% tax on wealthy and govt. programs can afford real disability & programs like S.S. My take is Paul is only reminding us of what path works better.
14
Well now we know what *you* believe, based, apparently, on faith. Any statistics to back it up?
8
I seem to remember that most of the wealth has been generated by the private sector.
As I've noted for years, it's simply a matter of posing the old question: "cui bono?" Who benefits? And, the answer is...Germany! In case you haven't noticed, the Germans have managed to turn almost every other country in the Eurozone into a pauper, urging, peddling, and demanding the sort of fiscal nonsense that leaves them the "last man standing." They always wanted to own Europe--shortly they will. And not one panzer division needed.
Even Putin played right into their hands.
Even Putin played right into their hands.
17
Germany was forced to give up the mark for the euro as the price for the major European powers approval of German reunification. They have prospered since then due to hard work, honest public servants, and a managerial class not out, as in the U.S., to drain every penny they can from their companies. Why is this cause for criticism? And why should Germany have to bail out countries run by corrupt politicians and wealthy individuals who are tax-dodgers?
6
But once they own it, what will they do with it? Or, more to the point, once the other European economies crater, just who will the Germans have to sell to? As the markets for their products shrivel, Germany too will feel the pinch on their economy.
5
I agree, Elizabeth. Germany'seconomic tyrrany is almoost as bad as its quondam militarism (I said almost; unlike many here, I abhor, hate, despise, and loudly condemn exaggeration). But, as Krugman points out, it's sliding back into recession along with the rest of Europe. Austerity just isn't working, not even for its intended beneficiary, the European - not just the Germa - ruling class.
But I'm not sure the Obama Admin. can take credit for our maddeningly slow
- and, as Krugman notes, incomplete - recovery. How about the Fed's
inflationary "quantitative easing", buying bonds with (Omigawd!) printed
money? Neither Obama in his SOU address or Krugman here gives it credit
for at least helping the recovery. Yes, I'll give Obama credit for good
intentions frustrated by a Republican Congress but that's about all.
As for Putin, how did he "play into their hands"?
But I'm not sure the Obama Admin. can take credit for our maddeningly slow
- and, as Krugman notes, incomplete - recovery. How about the Fed's
inflationary "quantitative easing", buying bonds with (Omigawd!) printed
money? Neither Obama in his SOU address or Krugman here gives it credit
for at least helping the recovery. Yes, I'll give Obama credit for good
intentions frustrated by a Republican Congress but that's about all.
As for Putin, how did he "play into their hands"?
1
When governments live off of borrowed money (actually printing and selling freshly printed paper “Sovereign Treasury Bonds” as Greece, Spain and the USA are doing), rather than having their citizens work and create wealth so that the government can confiscate some of that new wealth to pay for their government activities, government payrolls, government pensions, wars, police, fire protection, etc.
There will come a day when wealth creating foreigners in the industrialized foreign nations will stop loaning back any more wealth (money) to the governments of wealth consuming nations to spend on their wealth consuming government activities.
Academic professors seem to want the US government to continuously borrow more and more US dollars back from the industrialized foreigners and then spend this money on US government activities to stimulate the economy, and not reindustrialize to generate any new wealth that could then be available for confiscation via taxes to pay for these wealth consuming government activities.
The European PIIGS nations provide an undeniable example that Deficit Government Spending on wealth consuming government activities will certainly destroy any economy, any government, and the civilization of any nation.
There will come a day when wealth creating foreigners in the industrialized foreign nations will stop loaning back any more wealth (money) to the governments of wealth consuming nations to spend on their wealth consuming government activities.
Academic professors seem to want the US government to continuously borrow more and more US dollars back from the industrialized foreigners and then spend this money on US government activities to stimulate the economy, and not reindustrialize to generate any new wealth that could then be available for confiscation via taxes to pay for these wealth consuming government activities.
The European PIIGS nations provide an undeniable example that Deficit Government Spending on wealth consuming government activities will certainly destroy any economy, any government, and the civilization of any nation.
6
The US government wants these industrialized nations to spend their newly acquired US dollars to purchase the freshly printed paper US Treasury Bonds at the periodic US Federal Reserve auctions so that the US government can borrow back and spend those US dollars without printing additional US Dollars to pay for US government payrolls, government contracts and other government activities.
These foreign industrial countries are now offering less and less than the face value or present worth of our freshly printed-paper T-Bills, US Treasury Bonds, at the US Treasury auctions as the various newly industrialized nation’s confidence in the USA economic system diminishes.
When the USA runs out of privately owned real estate, businesses and other assets in the USA available for sell to foreigners in return for the wealth (T-Bills, US Treasury Bonds, US Dollars, etc.) that foreigners created by working to manufacture the things that US citizens consumed, these productive foreign industrial nations will then pay less and less US dollars (or maybe only fractions of a US penny on the US dollar) for our freshly printed paper T-Bills, US Treasury Bonds, etc. that the US government wants foreigners to buy so the US government can raise funds to pay for federal government activities.
These foreign industrial countries are now offering less and less than the face value or present worth of our freshly printed-paper T-Bills, US Treasury Bonds, at the US Treasury auctions as the various newly industrialized nation’s confidence in the USA economic system diminishes.
When the USA runs out of privately owned real estate, businesses and other assets in the USA available for sell to foreigners in return for the wealth (T-Bills, US Treasury Bonds, US Dollars, etc.) that foreigners created by working to manufacture the things that US citizens consumed, these productive foreign industrial nations will then pay less and less US dollars (or maybe only fractions of a US penny on the US dollar) for our freshly printed paper T-Bills, US Treasury Bonds, etc. that the US government wants foreigners to buy so the US government can raise funds to pay for federal government activities.
2
Greece and Spain are currency users, they do not control the currency they use. They are analogous to US states that likewise use a currency they don't control. The US government is a currency sovereign in that it deals in a currency it alone controls. The US government is the sole source of US dollars in the world, they do not exist until the US government spends them into existence. The US needs to borrow from no one to spend. Didn't the whole trillion dollar coin episode teach you anything about how the US's finances really function?
9
Of course the growth in the US is a classic example of trickle down. Quantitative easing brought fortunes to the top and some trickled down to the rest. As much as the Republicans hated to let any money trickle down now they have embraced trickle down. The election showed that the Republicans have learned to triangulate the tea party be damned. In Europe now quantitative easing is the new hope for the Euro Zone inflation be damned. In fact some inflation would be good they think now.
6
Dec, 2013 - Unprecedented Austerity (NYT article)
"And amid the punditizing over the latest budget deal, it’s worth considering just how unprecedented US austerity has been. ""
Today we are "Spendthrift, loose-money America"
Which is it?
"And amid the punditizing over the latest budget deal, it’s worth considering just how unprecedented US austerity has been. ""
Today we are "Spendthrift, loose-money America"
Which is it?
2
The single biggest issue of our time and the Republicans got it completely wrong. You don't have to be a rocket scientist to know the Republicans 'dire warnings' against stimulus and "hyper-inflation unseen since Weimar Germany" and "wheelbarrows to carry our money to the grocery to buy bread" and "debasing the US Dollar" all would occur if Bernanke instituted QE2 which he did and which the Republicans were flat wrong. So listen to these fools at our Nation's peril. Where I come from we don't let the people who are always wrong be in charge of anything.
27
You forgot farmers using dollar bills for mulch.
4
Please explain sometime when printing money to save an economy has reached its limit. Expecting the government to pay its debt back when times are good seems naïve and counter to experience. Is there no limit to debt?
4
Jane Heaton, M.D. and P.F.Ryers, M.D.,
All governments in the entire world must limit their expenses by reducing the number and the costs of their tax paid government employees, infrastructure, government contracts, government benefits, government grants that are similar wealth consuming government spending activities including the amount of interest paid on their national debt to less than they collect in taxes.
If the G20’s debtor nations were to continue to borrow money from the BRIC nations and then "invest these borrowed funds" in infrastructure and increased government employee wages, then the national debts of these nations would increase until the economies of these nations evolved into something resembling Greece, then Mexico, and then Somalia when individuals and governments in the industrialized wealth-creating BRIC nations stop lending money to the wealth consuming nation governments (such as the USA) to pay for their wealth consuming and wealth destroying government activities that are in excess of their tax collections!
All governments in the entire world must limit their expenses by reducing the number and the costs of their tax paid government employees, infrastructure, government contracts, government benefits, government grants that are similar wealth consuming government spending activities including the amount of interest paid on their national debt to less than they collect in taxes.
If the G20’s debtor nations were to continue to borrow money from the BRIC nations and then "invest these borrowed funds" in infrastructure and increased government employee wages, then the national debts of these nations would increase until the economies of these nations evolved into something resembling Greece, then Mexico, and then Somalia when individuals and governments in the industrialized wealth-creating BRIC nations stop lending money to the wealth consuming nation governments (such as the USA) to pay for their wealth consuming and wealth destroying government activities that are in excess of their tax collections!
3
"Expecting the government to pay its debt back when times are good seems naïve and counter to experience."
Except when it's not. U.S. debt-to-gdp ratios fell from the end of WWII until the Reagan administration, when tax-cutting sent the debt higher. It began falling again under Clinton. In the 2000 election, candidate George W. Bush proclaimed the surplus and the possibility that the national debt might be paid off (ok, according to some extremely optimistic projections) by 2008 a crisis that needed addressing by reducing revenue through tax cuts. "The American people have been overcharged," the future MBA president asserted. Of course, he said this while arguing at the same time that tax cuts lead to revenue growth. The contradictory notion that revenue could simultaneously be reduced and increased was ignored by the press because candidate Bush was the kind of guy who you wanted to have a beer with. Besides, he said all kinds of financey sounding things and well, since he has a MBA so he must know, aw shucks and all that.
All snark aside, unlike people, governments don't retire or die and hence don't have to plan for reduced income in retirement and repayment of debts at death. Hence, as long as revenue can keep up, more or less, with expenditure, there is no limit to gov't debt.
Except when it's not. U.S. debt-to-gdp ratios fell from the end of WWII until the Reagan administration, when tax-cutting sent the debt higher. It began falling again under Clinton. In the 2000 election, candidate George W. Bush proclaimed the surplus and the possibility that the national debt might be paid off (ok, according to some extremely optimistic projections) by 2008 a crisis that needed addressing by reducing revenue through tax cuts. "The American people have been overcharged," the future MBA president asserted. Of course, he said this while arguing at the same time that tax cuts lead to revenue growth. The contradictory notion that revenue could simultaneously be reduced and increased was ignored by the press because candidate Bush was the kind of guy who you wanted to have a beer with. Besides, he said all kinds of financey sounding things and well, since he has a MBA so he must know, aw shucks and all that.
All snark aside, unlike people, governments don't retire or die and hence don't have to plan for reduced income in retirement and repayment of debts at death. Hence, as long as revenue can keep up, more or less, with expenditure, there is no limit to gov't debt.
13
These two M.D.s are right on. We should cut all spending on public health infrastructure. Get rid of the CDC and the FDA. We can buy cheap pharm from India and China. We should stop building sewage treatment and sanitation infrastructure and rely on open defecation like they do in India. Vaccination programs or requirements? Cut 'em out. Medicare, Medicaid and the horrifying "Obamacare"? Slash and burn! Fire everyone at the NIH and make them work for Goldman Sachs or Vladimir Putin, if they are really needed. Oh yeah, no help for Med students with anything connected to the Government, either. It's all wasteful spending by that bad, bad government that destroys wealth and strangles the aspirations of the populace. Once that is all off the table we will all walk the sunshine of a new glorious era.
8
I am not a big fan of Prof Rogoff but he got it right by combining the IMF Director Christine Lagarde's and Dr. Larry Summers's positions that you need a multifacet approach to handle the European stalemate. Neither the tightfisted German approach nor the spendthrift Greek habit will break the logjam. Now that ECB President Draghi has stopped talking and started doing, the QE will buy EU some time to do what is necessary. The rich are still sailing the Mediterranean and some civil servants still get to retire at 45 while the disenfranchised are being squeezed. Everyone needs to pull some weight.
2
The US might have weathered the financial storm better than Europe but with the Republican control of both houses isn’t going to infuse much money back into our stagnate economy. Interest rates have dropped down again for mortgages because the slow housing market. The US needs to drop the austerity mantra and put more liquidity back into the middle class so it can grow to stimulate the economy, because trickle down doesn’t benefit anyone but the wealthiest in the nation.
15
Interest rates have been close to zero for 7 years. Urged by our President, and backed by the Dems. Isn't it time that we stop penalizing the retirees, the savers, and those that live responsibly? I guess you don't think so.
3
"Much Too Responsible"
God, I love Keynesian economics. It's like cocaine as a vegetable.
Do what feels good and it's good for you.
Spend, borrow, print, forgive debt... prosperity here we come.
Working, studying, saving, producing anything of value, reforming backwards elements of one's economy, etc. are SOOO tedious.
Hallelujah!
God, I love Keynesian economics. It's like cocaine as a vegetable.
Do what feels good and it's good for you.
Spend, borrow, print, forgive debt... prosperity here we come.
Working, studying, saving, producing anything of value, reforming backwards elements of one's economy, etc. are SOOO tedious.
Hallelujah!
10
Why is it that every time it is demonstrated that Keynesanism works, the deniers squirm out of their holes to denounce it? As for "working, studying, saving, and producing," thanks to the Republicans' fanatic devotion to the twisted logic of Milton Friedman:
Millions were cast out of work
Studying will get you as job flipping burgers
One's savings will earn less than 1% interest
Americans who do have jobs are more productive yet earn less
Millions were cast out of work
Studying will get you as job flipping burgers
One's savings will earn less than 1% interest
Americans who do have jobs are more productive yet earn less
20
A "liberal parade?" Surely you jest! It's just that the liberals borrow and spend for things you don't like. Conservatives borrow and spend just as much.
13
What I love is its "tails I win, heads you lose" mindset. Stimulate like mad and the economy falters - as in Japan for decades - and the stimulus "just wasn't enough". If the economy recovers, Keynesians take credit, despite the impossibility of knowing the outcome without the stimulus.
1
Archon: "A high official, a ruler; an authoritative figure, a leader." At first I thought Archons were from the Foundation Trilogy, or Star Wars, or Flash Gordon, but actually they're from ancient Athens. As is hubris.
2
The quadrillions of dollars in gambling debts built up by Wall Street and its European partners is unpayable, and is headed for a near-term crash. Mario Draghi of the ECB recently announced a 1.1-trillion-euro hyper inflationary bailout of Europe's bankrupt financial institutions, aka "too big to fail and jail". Draghi's efforts to paper over that unavoidable bankruptcy of those gambling debts, through the latest hyper inflationary central bank swindle, will only accelerate the collapse of the real economy of the trans-Atlantic region—and feed the desperate drive for war against Russia and China.
As Draghi was making his announcement Thursday afternoon, both Russia and China were issuing strongly worded statements attacking President Obama's Tuesday night State of the Union address, which was nothing short of a declaration of war against Moscow and Beijing. Russian officials have made clear that they understand the US and NATO policy is "regime change against Putin." The Chinese got the message loud and clear that Obama insisted that he will prevent China from shaping any new trade system in the Asia-Pacific region.
The Wall Street and the European mega banks, is a financial oligarchy that is driving the world towards war against Russia and China as the only means of retaining political power, as the banking system goes into its final disintegration.
As Draghi was making his announcement Thursday afternoon, both Russia and China were issuing strongly worded statements attacking President Obama's Tuesday night State of the Union address, which was nothing short of a declaration of war against Moscow and Beijing. Russian officials have made clear that they understand the US and NATO policy is "regime change against Putin." The Chinese got the message loud and clear that Obama insisted that he will prevent China from shaping any new trade system in the Asia-Pacific region.
The Wall Street and the European mega banks, is a financial oligarchy that is driving the world towards war against Russia and China as the only means of retaining political power, as the banking system goes into its final disintegration.
5
And the Chinese banks? The Russian banks? Could you speak a bit to them?
Russian and Chinese banks have created the New Development Bank which is an alternative to the Wall Street and European run IMF and World Bank. Russia and China have set up the BRICS, a coalition of nations whose banks support investment in the real economy as opposed to massive speculation and gambling by Wall Street.
1
Our economy can never be strong as long as it is driven by greed. A great many people are essentially left out of the economy as they are paid slave wages, leaving them unable to afford food, shelter, and healthcare - basic human needs
Our economy rewards those who have with more and then, even more.
Greed is a very destructive force, one that we have been warned about in religion and philosophy throughout history.
Wage stagnation is a decision, a decision based on greed. It is strangling our economy.
If we are waiting for the rich to tell the American people when they finally have enough, I would guess that we have a long, long wait.
Our economy rewards those who have with more and then, even more.
Greed is a very destructive force, one that we have been warned about in religion and philosophy throughout history.
Wage stagnation is a decision, a decision based on greed. It is strangling our economy.
If we are waiting for the rich to tell the American people when they finally have enough, I would guess that we have a long, long wait.
15
Prof. Krugman, as European investor to the U. S. (E- 2 - investor visa), I am quite familiar with the American economy on a day - to - day basis. Americans are from Venus, Europeans are from Mars as for their economic and societal understanding. For instance, I can't share your view Europe's economy being depressed. Rather, it's economic resources have been mismanaged and frequently frittered away. Where was controlling to give alarm, timely? What I consider to be Europe's societal medicine in common, is of immaterial nature. Europeans are to reflect in all frankness on their economies shortcomings AND help each other to correct the latter. That is specifically, WE the citizens of Europe are in charge of the continents prosperity - not that much the policymakers and other high representatives, such as Mr. Draghi. WE the citizens remain called upon for assistance in loyalty.
Economic measures will always remain subject to controversial debates. There is no -once size - fits - all - solution for such an extremely complex project as the Euro. Keeping the European continent together is a tremendous challenge for generations to come.
Economic measures will always remain subject to controversial debates. There is no -once size - fits - all - solution for such an extremely complex project as the Euro. Keeping the European continent together is a tremendous challenge for generations to come.
3
In my simplistic mind I've always equated what's going on in Europe to loan sharks calling in the loans of guys with no money and threatening to break their legs. All you're going to get is a bunch of guys with broken legs. Which describes an economically hobbled Europe.
17
At what point does the shark stop making the loans?
1
Professor Krugman,
I think that all US citizens should all learn and understand that economics, the US trade deficit, the federal government spending deficit, jobs for Americans, and the buying power or value of the US dollar are all interrelated, very simple, very easily understood, and directly affects each US citizen’s life.
Each of these principles generally affects each of the others, and each is very important.
These subjects need to be understood by the general public.
Economics is not that complicated.
These economic principals are interlocked with simple and easily understandable cause-and-effect principals of various economic action options that can be totally understood by almost any high school graduate, and/or most high school dropouts.
Only a very simple understanding of high school mathematics is needed to learn economics. No science is required either.
Most government activities only consume the wealth in the form of taxes that was previously confiscated from their working citizens and these government activities do not leave any (taxable) national wealth behind after the government spends that money on wars, police, firemen, infrastructure, environmental cleanups, etc.
Government activities do not ever generate or create any wealth, except under the socialist and communist forms of government, and those governments have not ever been successful for very long!
I think that all US citizens should all learn and understand that economics, the US trade deficit, the federal government spending deficit, jobs for Americans, and the buying power or value of the US dollar are all interrelated, very simple, very easily understood, and directly affects each US citizen’s life.
Each of these principles generally affects each of the others, and each is very important.
These subjects need to be understood by the general public.
Economics is not that complicated.
These economic principals are interlocked with simple and easily understandable cause-and-effect principals of various economic action options that can be totally understood by almost any high school graduate, and/or most high school dropouts.
Only a very simple understanding of high school mathematics is needed to learn economics. No science is required either.
Most government activities only consume the wealth in the form of taxes that was previously confiscated from their working citizens and these government activities do not leave any (taxable) national wealth behind after the government spends that money on wars, police, firemen, infrastructure, environmental cleanups, etc.
Government activities do not ever generate or create any wealth, except under the socialist and communist forms of government, and those governments have not ever been successful for very long!
4
I agree that all Americans should aspire to having a solid grasp of basic economics. I also think you should be the first to enroll in a class, because everything else you wrote is completely wrong.
23
CORRECTION-Government funded research for space exploration and the military has spawned an enormous # of spin off products and services which stimulated economic development over the last 70 years.
11
"Government activities do not ever generate or create any wealth, except under the socialist and communist forms of government, and those governments have not ever been successful for very long!"
The Internet?
The Internet?
6
"Still, when you compare the performance of the American economy over the past two years with all those Republican predictions of doom, you can see why Mr. Obama is strutting a bit."
- Family Median Income is down 9% since 2007
- If the labor force participation rate returned to the long-term average
of 65.8%, the official unemployment rate would be 11.5%
- 2% fewer of all working age Americans have a job since President Obama took office
- In November 2007, there were 121.9 million full-time workers in the United States. Today, there are only 116.9 million full-time workers in the United States.
- The average duration of unemployment is now 37 weeks. It was 20 weeks when President Obama took office
- Total consumer credit is up 22% in the last 3-4 years alone
- There are roughly 47 million Americans on food stamps. There were roughly 32 million when President Obama took office
Do some research, people, & stop believing everything St. Paul tells you. And instead of asking me for citations on the data, go look for yourself. The data are out there.
- Family Median Income is down 9% since 2007
- If the labor force participation rate returned to the long-term average
of 65.8%, the official unemployment rate would be 11.5%
- 2% fewer of all working age Americans have a job since President Obama took office
- In November 2007, there were 121.9 million full-time workers in the United States. Today, there are only 116.9 million full-time workers in the United States.
- The average duration of unemployment is now 37 weeks. It was 20 weeks when President Obama took office
- Total consumer credit is up 22% in the last 3-4 years alone
- There are roughly 47 million Americans on food stamps. There were roughly 32 million when President Obama took office
Do some research, people, & stop believing everything St. Paul tells you. And instead of asking me for citations on the data, go look for yourself. The data are out there.
8
I would tend to agree, in many ways the so-called economic growth in the U.S. is somewhat of a mirage. Paul Krugman talks about "Europe', however, despite the common currency, the European union is made up of a number of countries with different cultures, languages and often different agendas which makes the comparison to the U.S.(one country)overly simplistic. The European countries as with many other Western industrialized nations in these discussions about their economies also deal with quality of life issues and their people in general.
Clearly, whatever turnaround that has recently taken place in the U.S. no such discussions exist and it has been done firmly on the back of the middle class.
Clearly, whatever turnaround that has recently taken place in the U.S. no such discussions exist and it has been done firmly on the back of the middle class.
2
If not for GOP austerity, that would all be a lot different. It's the GOP State of Nature economy. Nothing else.
4
I love when some fool tries to tell us the recovery isn't fast enough. Cry me a river. Did the last(ever) GOP administration win your heart with their growing wages and their lack of people on food stamps? Were you sitting around lamenting rising consumer credit when W.Bush and Cheney were driving the entire economy into the toilet? You might well remember that as the baby boomers retire, which began last year, the number of workers in the work force will decline so what exactly does the number of people in the work force have to do with the price of tea in China. I ask if somebody drops out of the work force because they are lazy do they deserve your sympathy because I bet your not sympathetic to them? Shouldn't have listen to all the fools who said to buy gold.
8
Ironically Germany, despite the predations of its banksters, has done the best in Europe because due to worker representation on Corporate boards, they never laid off people but instead reduced their hours and made up part of the lost pay from unemployment insurance. Also Germany is continuing with the Green transition begun by the Green Party going full steam ahead to sustainable solar and wind energy, passivhaus, captured methane from farming and Green Transit rather than just Auto Addiction.
The only reason the US has not collapsed worse in the face of Peak Oil is the injection of toxic fracked shale oil and gas and tar sands oil to keep US Wars consuming 6% of our oil and Auto Addiction consuming another 70% going.
And the US economy is getting a temporary fix from cheap oil prices promptly spurring increased gas guzzling SUV and pickup truck sales. But ironically the low oil prices are sending shale oil producers into bankruptcy which will lead to a drop in US oil in 18 to 24 months.
Krugman never seems to acknowledge that we live on a finite Earth and we cannot have infinite material growth.
And "Monetary Keynesianism" - ie central banks just printing money to give out to their bankster and hedge funds is no stimulus at all to the real economy. As expected giving money to the rich stock and bond holders rather than taxing them has resulted in the biggest increase in income and wealth for the 1% in history under Obama. The US has less EMPLOYED than ever!
The only reason the US has not collapsed worse in the face of Peak Oil is the injection of toxic fracked shale oil and gas and tar sands oil to keep US Wars consuming 6% of our oil and Auto Addiction consuming another 70% going.
And the US economy is getting a temporary fix from cheap oil prices promptly spurring increased gas guzzling SUV and pickup truck sales. But ironically the low oil prices are sending shale oil producers into bankruptcy which will lead to a drop in US oil in 18 to 24 months.
Krugman never seems to acknowledge that we live on a finite Earth and we cannot have infinite material growth.
And "Monetary Keynesianism" - ie central banks just printing money to give out to their bankster and hedge funds is no stimulus at all to the real economy. As expected giving money to the rich stock and bond holders rather than taxing them has resulted in the biggest increase in income and wealth for the 1% in history under Obama. The US has less EMPLOYED than ever!
2
Dear Paul.I hope that you can explain something that I just don´t understand. In normal recessions the Fed can stimulate the economy by reducing the interest rate. If the recession is too deep, however, and you can´t kick-start the economy even if the Fed lower the interest rate to zero, the two main alternatives that are discussed are:
1. Austerity, i.e. everybody saves. Eventually the balance sheets are repaired, confidence is restored and after many years you can start to grow the economy again and the Fed regains traction. However you will have lost a lot of potential capacity (newly graduates flipping hamburgers instead of constructing new products, long term unemployed who never will be able to return to the market etc etc). The costs will be born by everybody, but destroying the ”victims” of the austerity
2. Increased public spending, financed with increased public debt. Will get you out of the mess quicker, but it obviously is a rather blunt instrument, since it of course will take some time to get new projects through the pipeline and also it will be diffucult to reduce the spending quickly once the Fed regains traction. The people who will ultimatly foot the bill for this strategy will of course be the future tax payers
The obvious solution in my eyes, however, surely would be for the Fed to just send a check to all Americans once a months, equal to their estimate of the size of the hole, and to keep on doing this until it regain traction? What am I missing?
1. Austerity, i.e. everybody saves. Eventually the balance sheets are repaired, confidence is restored and after many years you can start to grow the economy again and the Fed regains traction. However you will have lost a lot of potential capacity (newly graduates flipping hamburgers instead of constructing new products, long term unemployed who never will be able to return to the market etc etc). The costs will be born by everybody, but destroying the ”victims” of the austerity
2. Increased public spending, financed with increased public debt. Will get you out of the mess quicker, but it obviously is a rather blunt instrument, since it of course will take some time to get new projects through the pipeline and also it will be diffucult to reduce the spending quickly once the Fed regains traction. The people who will ultimatly foot the bill for this strategy will of course be the future tax payers
The obvious solution in my eyes, however, surely would be for the Fed to just send a check to all Americans once a months, equal to their estimate of the size of the hole, and to keep on doing this until it regain traction? What am I missing?
3
I wish I could share Paul Krugman's optimism regarding american exceptionalism.
The absence of significant american inflation after years of stimulus can only be explained if there is a relatively strong and concurrent deflationary current running through our economy. And where might we see evidence of this current ? For one consider years of stagnant wages, consider the resurgence of home foreclosures , consider the absent consumer during the holidays who in spite of wide spread discounting was no where to be seen, consider the collapse of commodity prices representing signs of a collapsing demand.
After years of manipulating the american currency downwards we are now faced with upward pressure on the dollar which can result in making us non competitive unless we enter into price competition …a deflationary stance if there ever was one.
I am very afraid that recovery here is not at all a recovery but rather only the illusion of recovery and the next shoe to drop will require far more stimulus than Washington is willing to tell the american public.
The absence of significant american inflation after years of stimulus can only be explained if there is a relatively strong and concurrent deflationary current running through our economy. And where might we see evidence of this current ? For one consider years of stagnant wages, consider the resurgence of home foreclosures , consider the absent consumer during the holidays who in spite of wide spread discounting was no where to be seen, consider the collapse of commodity prices representing signs of a collapsing demand.
After years of manipulating the american currency downwards we are now faced with upward pressure on the dollar which can result in making us non competitive unless we enter into price competition …a deflationary stance if there ever was one.
I am very afraid that recovery here is not at all a recovery but rather only the illusion of recovery and the next shoe to drop will require far more stimulus than Washington is willing to tell the american public.
7
The Fed made the housing crisis significantly worse with bad monetary policy. In 2008, rather than worrying about rising unemployment and bank failures, in Sept they were peevishly focused on inflation. Keep in mind, they cut rates from 2% in Sept to 0% less than 4 weeks after the Sept meeting. They were very slow to see the looming recession.
Since then they have treated 2% inflation as a ceiling, not an average. Even now, in the face of a lack of wage gains, they are looking to hike rates even though their own forecasts call for sub 2% inflation for 2+years.
The Fed does not seem to realize that if inflation ever gets to 3%, they can raise rates to 65% to chock it off and create mass unemployment.
Fortunately, the Fed was much more willing to reverse unemployment (partly because by statute they have an employment mandate).
Since then they have treated 2% inflation as a ceiling, not an average. Even now, in the face of a lack of wage gains, they are looking to hike rates even though their own forecasts call for sub 2% inflation for 2+years.
The Fed does not seem to realize that if inflation ever gets to 3%, they can raise rates to 65% to chock it off and create mass unemployment.
Fortunately, the Fed was much more willing to reverse unemployment (partly because by statute they have an employment mandate).
2
In conclusion Europe is far too diverse for simplistic generalization.
And - yes - there are areas and countries, where policies are much too responsible - but at the same time you find enough countries where it is exact the opposite.
There might be Europeans in Germany, who worry too much about inflation and at the same time in Italy they don't. And the fact that such a group of diverse countries has the same currency doesn't make them 'one entity' like the US.
You also don't find the type of US duoplay in Europe. Alone in Germany there are four parties in the ruling Bundestag and there are other European nations where even more parties decide economic policies.
Such a European reality has to be understood and considered by any journalist or commenter who judges Europe.
And - yes - there are areas and countries, where policies are much too responsible - but at the same time you find enough countries where it is exact the opposite.
There might be Europeans in Germany, who worry too much about inflation and at the same time in Italy they don't. And the fact that such a group of diverse countries has the same currency doesn't make them 'one entity' like the US.
You also don't find the type of US duoplay in Europe. Alone in Germany there are four parties in the ruling Bundestag and there are other European nations where even more parties decide economic policies.
Such a European reality has to be understood and considered by any journalist or commenter who judges Europe.
2
"Alone in Germany there are four parties in the ruling Bundestag and there are other European nations where even more parties decide economic policies." And this is Europe's core problem: No centralized political union for monetary policy. You've got too many cooks mucking about with the soup.
1
Dr. Krugman does the old saw about economists "They'll give you a number or they will give you a date, but never the two together" one better. In his case, it is "If it didn't work, I was against it, if it did work I endorsed it"
5
"The terrible thing is that Europe’s economy was wrecked in the name of responsibility." Conservatives generally are guilty of this sin.
7
If Republicans are really concerned about the national debt, you would think they would not cripple the IRS's ability to collect taxes and go after tax cheats. That was Greece's problem, people thought tax evasion was OK.
11
Who thinks tax evasion is okay in the US? I seem to recall a few articles over the years about politicians evading taxes. Al Sharpton comes to mind. Guess Sharpton is a Rep. Who knew?!
Yikes, Doc -- how many different ways are you going to write the same column? Everyone who doesn't have a vested interest in the status-quo Gets It.
A Horace Mann tribute column that frames the debate on extending free education through the community college level would be welcomed, for instance.
A Horace Mann tribute column that frames the debate on extending free education through the community college level would be welcomed, for instance.
4
This has begun under Schroeder. There is a systematic economic policy designed to weaken other economies to achieve the Deutschland über alles dream. Look at the results. And as usual, Deutschland will, after wrecking damage upon neighbors, go down as well. Look at the projections for 2030. I suppose the teutonic mind is a little sclerotic.
3
Germany has been parasitizing the EU through the Euro since the beginning, The lauded corrupt Schroeder introduced labor and economic measures that simply destroyed the German social net helping his friends to undercut the rest of the EU. Merkel the puppet is just following suit.
'There is a systematic economic policy designed to weaken other economies to achieve the Deutschland über alles dream.'
And talking about simplistic generalizations.
The above stereotypical point has now been repeated so often on Paul Krugmans blog posts and poor Angela Merkel has been accused so often to be a terrible German of the past that it reminds me on the Obama Derangement syndrom a lot of Americans are suffering from.
And isn't there a commenting policy where constant repetitions should be avoided?
And talking about simplistic generalizations.
The above stereotypical point has now been repeated so often on Paul Krugmans blog posts and poor Angela Merkel has been accused so often to be a terrible German of the past that it reminds me on the Obama Derangement syndrom a lot of Americans are suffering from.
And isn't there a commenting policy where constant repetitions should be avoided?
2
What a totally asinine article. Europe did not turn to austerity. It ran out of money. Germany would not foot the bill anymore. Running out of other peoples money is not austerity. Its poverty. What a joke. I mean Greece, Italy, Portugal, Ireland and others would gladly and willingly spend every dime they could get their hands on. No problemo. Ecstatic to borrow and spend. France would have zero problem either. Hey, lets have a huge party and spend Germany's money. Only thing stopping their binge is .... well, connect the dots yourself.
5
There are no dots to connect here - it's done with mathematical modeling. The economic results here and in the EU are following Keynesian models quite well. No need to distract with irrelevant, 0.1-percenter foisted dots.
3
Money really isn't a "thing" you can run out of, absent a gold-standard or other finite resource, is it? Isn't it just an accounting mechanism for exchanging goods and services, a way to make and keep promises? When you have high unemployment and low economic growth, the question becomes what changes can you make to the system of economic exchange to increase growth, jobs, etc. It's not a moral question about "using up" some finite thing.
3
@John Kelly:
What a totally asinine post. Sovereign states cannot run out of money as long as they have printing presses. If Germany would allow it, the Europeans would be out of their slump in the blink of an eye. Aggressive monetary and fiscal policies designed to counter an economic slump have always worked.
Mr. Kelly, what you don't know about macroeconomics has filled volumes. I suggest you get one of them and read it before posting again.
What a totally asinine post. Sovereign states cannot run out of money as long as they have printing presses. If Germany would allow it, the Europeans would be out of their slump in the blink of an eye. Aggressive monetary and fiscal policies designed to counter an economic slump have always worked.
Mr. Kelly, what you don't know about macroeconomics has filled volumes. I suggest you get one of them and read it before posting again.
6
This brings to mind the far to many examples recently of pilot error while flying through severe weather storms. After the fact we seem to learn the pilot error was trying to climb, the natural reaction, out of the storm, while data and experience seems to mandate that the nose be lowered pointing the plane down, mostly to avoid stalling out. This analogy seems to apply to the EU and the Republican party's strategy when the economy fly into the storm. Pull back pull back, whereby stalling out the economy.
3
Most severe thunderstorms have an updraft or a downdraft of greater magnitude than the wings are designed to withstand without falling off!
Avoid large thunderstorms without exception, and plan ahead or change course and/or altitude.
Private Pilot since 1970 - An Old Guy
Avoid large thunderstorms without exception, and plan ahead or change course and/or altitude.
Private Pilot since 1970 - An Old Guy
3
The austerians in the U.S. are only austere when they have a democrat in the White House. 70% off all U.S. debt was incurred by Reagan, Bush I and bush ii.
Deficit spending for wars and giveaways to those who don't need the help is part of the republican dogma while doing anything for the American citizen is not possible because we can't afford it.
These facts need to be repeated ad nauseum until the American people get over their enchantment with the false narrative of the republicans.
Imagine that the entire developed world put enough resources together to put every young man and woman in the world to work. All the young Arabs and North Africans who have nothing to do with their time but dream up ways to kill their "enemies" would be put to work building infrastructure for their countries. They would have neither the time nor the energy for jihad.
Same with all the disaffected young people in the U.S. and Europe. Put them to work. We have many things we have to build if we want to see a less dangerous world.
Wouldn't it be cheaper than the vast military industrial complexes that syphon off so much of our wealth? And the bosses would still find ways to exploit people and resources, so they wouldn't suffer, either.
Deficit spending for wars and giveaways to those who don't need the help is part of the republican dogma while doing anything for the American citizen is not possible because we can't afford it.
These facts need to be repeated ad nauseum until the American people get over their enchantment with the false narrative of the republicans.
Imagine that the entire developed world put enough resources together to put every young man and woman in the world to work. All the young Arabs and North Africans who have nothing to do with their time but dream up ways to kill their "enemies" would be put to work building infrastructure for their countries. They would have neither the time nor the energy for jihad.
Same with all the disaffected young people in the U.S. and Europe. Put them to work. We have many things we have to build if we want to see a less dangerous world.
Wouldn't it be cheaper than the vast military industrial complexes that syphon off so much of our wealth? And the bosses would still find ways to exploit people and resources, so they wouldn't suffer, either.
36
The national debt increased from $10T to $18 Trillion under Obama. That gives Obama 80% of the present debt. How do the get credit for 70%?
1
That debt belongs to the policies that made it necessary. So it belongs to failed conservative economic ideas and policies.
6
Oh, for crying out loud.
OK, let's ignore the minor technical detail that it's absurd to blame Obama for what the debt grew to in 2008 and 2009, or the silly little picayune reality that he didn't run up the bills with massive tax cuts to the wealthiest, Medicare Part D, and $2 trillion and counting worth of wars.
Let's just buy into your silliness. OK. Bush almost precisely doubled the national debt. Obama only increased it by about 70%. Therefore, Obama is a 30% better President.
By the way...might want to find out what debt/GDP ratio is.
OK, let's ignore the minor technical detail that it's absurd to blame Obama for what the debt grew to in 2008 and 2009, or the silly little picayune reality that he didn't run up the bills with massive tax cuts to the wealthiest, Medicare Part D, and $2 trillion and counting worth of wars.
Let's just buy into your silliness. OK. Bush almost precisely doubled the national debt. Obama only increased it by about 70%. Therefore, Obama is a 30% better President.
By the way...might want to find out what debt/GDP ratio is.
4
Some comments have alluded to the German “cultural memory” of runaway inflation as the reason for Angela Merkel’s actions or inaction in dealing with European recession and incipient deflation. The events of 90 years ago in Germany may be unfamiliar to some readers.
Germany had borrowed to finance World War I, rather than use taxes. The ensuing high inflation of the Weimar republic in the early 1920’s was manageable, even with the reparations imposed at Versailles. The western powers then insisted upon payment in gold or foreign currency, hyperinflation occurred, and the Mark became worthless.
Ultimately, ten years later, Hitler used the recent memory of that financial crisis as one of the arguments to get his foot in the door and to enlist support from respected, high-profile Germans. They thought they could manipulate Hitler for the sake of stability and to avoid the lure of the communists. Those prominent, upper-class Germans, including top military officers, foolishly thought they could quickly cast the crazy Austrian aside, after he had served their purposes.
Those events occurred before Angela Merkel’s parents were born or when they were small children, but it definitely is a cultural memory in Germany. One is hesitant, however, to mention that memory as a basis for German austerity in 2009 to 2015, because it carries a stigma of bad motives. The German response to recession under the leadership of Chancellor Merkel has been well-intentioned, albeit unhelpful.
Germany had borrowed to finance World War I, rather than use taxes. The ensuing high inflation of the Weimar republic in the early 1920’s was manageable, even with the reparations imposed at Versailles. The western powers then insisted upon payment in gold or foreign currency, hyperinflation occurred, and the Mark became worthless.
Ultimately, ten years later, Hitler used the recent memory of that financial crisis as one of the arguments to get his foot in the door and to enlist support from respected, high-profile Germans. They thought they could manipulate Hitler for the sake of stability and to avoid the lure of the communists. Those prominent, upper-class Germans, including top military officers, foolishly thought they could quickly cast the crazy Austrian aside, after he had served their purposes.
Those events occurred before Angela Merkel’s parents were born or when they were small children, but it definitely is a cultural memory in Germany. One is hesitant, however, to mention that memory as a basis for German austerity in 2009 to 2015, because it carries a stigma of bad motives. The German response to recession under the leadership of Chancellor Merkel has been well-intentioned, albeit unhelpful.
7
"Germany had borrowed to finance World War I, rather than use taxes. The ensuing high inflation of the Weimar republic in the early 1920’s was manageable, even with the reparations imposed at Versailles. The western powers then insisted upon payment in gold or foreign currency, hyperinflation occurred, and the Mark became worthless."
Not true and very damaging in mis-interpretation for the main lesson of history is lost.
There was never anyway for Germany to comply with Versailles in its own currency - period, and end of discussion. Ask yourself how any island of people sealed off from the world can survive let alone pay reparations of any amount while restricted from international trade. It can only be done if the island is big enough to effectively no longer be an island. The western powers might as well asked to be paid in ivory, coffee beans, bananas or other resource mined outside of Germany. It has nothing to due with the atomic properties of Gold but with the fact that Gold mines do not exist in Germany. The subsequent facts are simply ratios of the weight of paper to its combustable heat content. Today, no paper would exist, just zeros on spreadsheets.
Not true and very damaging in mis-interpretation for the main lesson of history is lost.
There was never anyway for Germany to comply with Versailles in its own currency - period, and end of discussion. Ask yourself how any island of people sealed off from the world can survive let alone pay reparations of any amount while restricted from international trade. It can only be done if the island is big enough to effectively no longer be an island. The western powers might as well asked to be paid in ivory, coffee beans, bananas or other resource mined outside of Germany. It has nothing to due with the atomic properties of Gold but with the fact that Gold mines do not exist in Germany. The subsequent facts are simply ratios of the weight of paper to its combustable heat content. Today, no paper would exist, just zeros on spreadsheets.
4
About 40 years ago a German customer once told me he'd rather have another dictator than go through the inflation after WW1 again.
The brief recitation of history you find offensive is merely a snippet, but it’s very accurate, Steve.
There was no trade embargo imposed on post-war Germany. They temporarily could not be a buyer, because of the dwindling value of the Mark, but they could be a seller and could barter. Germany had a very marketable commodity: coal. The allies, goaded by the French, seized the Ruhr mines in 1923, but by then Germany had reformed its currency. Two years later the Ruhr was returned.
During the entire period, Germany had an intact manufacturing base and could sell or trade manufactured goods. And, the Germans were never “an island of people sealed off from the world”. Indeed, they had a free hand in Eastern Europe.
The notion that Germany was rendered powerless by the reparations burden is largely a myth, except for a very brief difficult period, the memory of which Hitler and others used to justify a power grab.
There was no trade embargo imposed on post-war Germany. They temporarily could not be a buyer, because of the dwindling value of the Mark, but they could be a seller and could barter. Germany had a very marketable commodity: coal. The allies, goaded by the French, seized the Ruhr mines in 1923, but by then Germany had reformed its currency. Two years later the Ruhr was returned.
During the entire period, Germany had an intact manufacturing base and could sell or trade manufactured goods. And, the Germans were never “an island of people sealed off from the world”. Indeed, they had a free hand in Eastern Europe.
The notion that Germany was rendered powerless by the reparations burden is largely a myth, except for a very brief difficult period, the memory of which Hitler and others used to justify a power grab.
1
Backstopping a QE monetary policy by the ECB ultimately will be Germany and other fiscally strong euro countries. Given Germany's war experiences with the devastation caused by hyperinflation, it is understandable in cost/benefit decision criteria, that its leaders will err on the side of a more cautionary monetary policy for the euro. And, although the US economy composes about 22% of global GDP, dollars are exchanged in about 81% of global trade transactions. Thus, the pool of dollars would seem to dwarf the pool of euros. For the US to have engaged in more stimulatory monetary and fiscal policies, compared to the euro-zone nations, is unsurprising, given the smaller marginal impact of these policies on this larger pool of dollars. Also, dollars were sought by corporations as a safe-haven currency to protect against other devalued currencies; even though the causes of the Great Recession could be traced back to the US. Thus, even as the Fed increased the supply of dollars to enact stimulatory policies, demand for the dollar as a safe-haven currency was growing. The IMF has suggested that stimulatory policies should be individualized to the specific economic strengths and weaknesses of nations. With a relatively much smaller euro currency pool, printing euros, increasing their supply, simultaneous with reduced demand for the euro due to a flight to the safer dollar, may have been contraindicated, at the time, because of its potential for inflation. [{JJL} 01/23 Fri 11:22 p]
2
John Joseph Laffiteau MS in Econ,
Foreigners in the Industrialized Wealth Creating BRIC Nations do not hold the freshly printed paper US dollars, US Treasury Bonds, and other US securities that they purchased by competitive bidding at discounts from PW very long because these items are decreasing in buying power every day that they do not sell them.
Foreigners convert their constant stream of US security instruments (at discounts) for title to USA located businesses, farms, hotels, casinos and other assets as fast as they can to minimize the loss of the buying power of the US Dollar denominated security instruments in their possession.
Foreigners in the Industrialized Nations earned those US Dollars by producing and creating enough products to support the needs of their populations plus selling the excess products to US Consumers to earn additional currency, gold, commodities, and other permanent wealth from the USA in exchange for the US Dollars that they earned by manufacturing and exporting additional products that they created and sold to US consumers.
US citizens cannot expect foreigners to work in factories and make the things that US citizens consume for free. (Well, maybe US citizens do expect that!)
To ignore the US government spending deficit will destroy purchasing power of the US dollar.
When industrial nations stop buying the freshly printed US Treasury Bonds, the USA will evolve into something resembling Somalia!
Foreigners in the Industrialized Wealth Creating BRIC Nations do not hold the freshly printed paper US dollars, US Treasury Bonds, and other US securities that they purchased by competitive bidding at discounts from PW very long because these items are decreasing in buying power every day that they do not sell them.
Foreigners convert their constant stream of US security instruments (at discounts) for title to USA located businesses, farms, hotels, casinos and other assets as fast as they can to minimize the loss of the buying power of the US Dollar denominated security instruments in their possession.
Foreigners in the Industrialized Nations earned those US Dollars by producing and creating enough products to support the needs of their populations plus selling the excess products to US Consumers to earn additional currency, gold, commodities, and other permanent wealth from the USA in exchange for the US Dollars that they earned by manufacturing and exporting additional products that they created and sold to US consumers.
US citizens cannot expect foreigners to work in factories and make the things that US citizens consume for free. (Well, maybe US citizens do expect that!)
To ignore the US government spending deficit will destroy purchasing power of the US dollar.
When industrial nations stop buying the freshly printed US Treasury Bonds, the USA will evolve into something resembling Somalia!
1
Gerald: The recent strength of the US dollar against the euro, Japanese yen, and Chinese yuan may belie much of your initial argument, at least in the short term. Also, the recent plummet in the fiscal deficit to around $480 billion also seems to refute a portion of your argument. The recent drop in fuel prices should increase US consumers' discretionary incomes by a significant amount. [In her Sunday Times column (01/18), Ms. Gretchen Morgenson estimated this gain at a $250 billion annual windfall for US consumers in this column.] Much of this gain may be funneled overseas to Asian exporters thus diluting some of its later rippling magnifier effects throughout the US economy. This same argument was made for much of the global stimulus money injected after The Great Recession, i.e.; that China captured and accumulated much of this diffusely directed stimulus. A stronger dollar means more expensive US exports and cheaper imports entering the US, via currency translations. As foreign profits repatriated to US parent corporations are reduced, and US profits repatriated to overseas parents are increased by these translations, equilibrium will be restored in the longer run. China, India, and other strong exporters often lack a stable safety net for employees in re.: retirement benefits, health insurance, a social security program, and other perks. So, without these legacy costs, their prices in the shorter term are very competitive. [{JJL} 01/23 2:20 p Greenville NC]
Most of economic talk is abstract. It's difficult to translate talk of government spending, taxes, deficits, etc. into real life effects. This is perhaps nowhere clearer than in the question, "Where will the money come from?" For the ordinary individual, it come from work, form selling services and/or stuff. Not so for banks and governments.
The money the bank lends you for your $300K mortgage comes from nowhere. When you borrow that money, you get a credit in your bank account so you can pay the vendor or builder. Then your account is debited every month until the accumulated debits equal the credit + accumulated interest.
The bank did not have $300K in its vaults. At currently permitted deposit-to-lending ratios, it had about $1500 "on deposit" to back your loan. In the lingo used by haters of government debt, the bank "printed" the mortgage money by creating the credit in your account. If a private bank can do this, then so can a government bank.
The money the bank lends you for your $300K mortgage comes from nowhere. When you borrow that money, you get a credit in your bank account so you can pay the vendor or builder. Then your account is debited every month until the accumulated debits equal the credit + accumulated interest.
The bank did not have $300K in its vaults. At currently permitted deposit-to-lending ratios, it had about $1500 "on deposit" to back your loan. In the lingo used by haters of government debt, the bank "printed" the mortgage money by creating the credit in your account. If a private bank can do this, then so can a government bank.
2
Banks originating mortgages collect fees from borrowers and additional fees from Wall Street firms that buy the loans to synthesize various kinds of debt securities that are ultimately sold to private investors. Banks also buy these securities and hedge their interest rate and default risks with derivatives.
1
The freshly printed paper US Dollar and other US currencies/securities including the freshly printed paper US “Sovereign Issued” US Treasury Bonds that the USA periodically prints on paper and then sells at public auction to raise funds to pay for various government activities have absolutely NO VALUE at all!
These freshly printed paper US currencies and securities (T-Bills) are however easily and quickly redeemed by foreigners for (when they purchase) title to privately owned businesses, movie houses, factories, casinos, hotels, farms, land, ports, refineries, forests, ports, breweries, distilleries, and other privately owned national wealth and other assets located in the USA that do have value and were created by previous productive US generations prior to the USA de-industrializing (instead of Gold from Ft. Knox or the NYC federal reserve bank). If this was not allowed, then our US Dollars would not be honored by anyone anywhere for any purchase.
After the USA has sold all of the privately owned national wealth and other assets located in the USA to mortgage and/or redeem our US currency and our freshly printed paper “Sovereign Issued” US Treasury Bonds, foreigners will then stop buying any of our freshly printed paper US Treasury Bonds, and then the value of the US Dollar will approach the value of monopoly money, toilet paper and/or Bitcoins.
These freshly printed paper US currencies and securities (T-Bills) are however easily and quickly redeemed by foreigners for (when they purchase) title to privately owned businesses, movie houses, factories, casinos, hotels, farms, land, ports, refineries, forests, ports, breweries, distilleries, and other privately owned national wealth and other assets located in the USA that do have value and were created by previous productive US generations prior to the USA de-industrializing (instead of Gold from Ft. Knox or the NYC federal reserve bank). If this was not allowed, then our US Dollars would not be honored by anyone anywhere for any purchase.
After the USA has sold all of the privately owned national wealth and other assets located in the USA to mortgage and/or redeem our US currency and our freshly printed paper “Sovereign Issued” US Treasury Bonds, foreigners will then stop buying any of our freshly printed paper US Treasury Bonds, and then the value of the US Dollar will approach the value of monopoly money, toilet paper and/or Bitcoins.
3
But you forget the reality... that most of those freshly minted no value US treasury bonds are owned mostly by Americans and American interests. And those 'debts' owned by foreigners at the present time will buy less than 10% of US capital. You should also add to your world view the fact that a lot of Americans and American interests also hold a sizeable amount of foreign freshly minted bonds which can also potentially buy real capital in those countries. For all practical purposes these things net to zero.
4
Mr. Krugman states: "America is experiencing a solid recovery". Mr. Krugman needs to get out of offices in the Bos-Wash. corridor more, and stop using the flawed, misleading data(unemployment numbers, for example) produced by the US government . Economists have lost touch with the reality of ordinary American's lives.
7
The members of any family, tribe, city, state, or nation can reflect the amount of their real taxable national wealth and financial security as a total of their net positive accumulation of privately owned grain, gold, cattle, jewels, land, buildings, hotels, casinos, factories, commodities, and/or other marketable products that is available for government confiscation via taxes to pay for government activities.
These assets are then available to be used for economic security for reserve use in times of emergency, to raise the standard of living for the members of that family to pay for military defense, police, firemen, and teachers, to take care of those family members that cannot take care of themselves, to construct infrastructure, and etc.
This wealth is then also becomes available as collateral (products, commodities, and/or title to locally in-country located real estate assets) to redeem any printed paper currency that they might care to issue.
This privately owned wealth is then also available as “mortgage” collateral for any paper Treasury Bonds that they might care to print and sell or exchange, since if that government does not repay the bond, the bondholders can sell those bonds to a bank and buy US located National Wealth assets with that money.
That national wealth is then "as good as gold" for making their currency and then the freshly printed paper bonds and to make that government's freshly printed paper currency have purchasing value.
These assets are then available to be used for economic security for reserve use in times of emergency, to raise the standard of living for the members of that family to pay for military defense, police, firemen, and teachers, to take care of those family members that cannot take care of themselves, to construct infrastructure, and etc.
This wealth is then also becomes available as collateral (products, commodities, and/or title to locally in-country located real estate assets) to redeem any printed paper currency that they might care to issue.
This privately owned wealth is then also available as “mortgage” collateral for any paper Treasury Bonds that they might care to print and sell or exchange, since if that government does not repay the bond, the bondholders can sell those bonds to a bank and buy US located National Wealth assets with that money.
That national wealth is then "as good as gold" for making their currency and then the freshly printed paper bonds and to make that government's freshly printed paper currency have purchasing value.
2
A vigorous jobs program such as FDR instituted would have gone a long way to put the U.S. in an even better position that it is now. The country needed more stimulus than was made available. Providing people with jobs would have injected more taxes at all levels, spread economic growth, and kept many off welfare. The old adage"you have to spend money to make money" holds true for a government as well. A jobs program coupled with making Community College education free at the same time, would have moved this country forward in a positive direction aimed at keeping people off welfare and preparing others for future employment.
15
Diana,
Why cannot each and every US citizen get their income from some government agency payroll or government contract, at maybe double the minimum wage scale to create income equality?
Where does all of that "Free Government Money" come from?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
Government Contracts to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers and do not create national wealth, but those activities just consume national wealth that was created by other citizens who created new national wealth that was confiscated to pay for those government activities!
Why cannot each and every US citizen get their income from some government agency payroll or government contract, at maybe double the minimum wage scale to create income equality?
Where does all of that "Free Government Money" come from?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
Government Contracts to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers and do not create national wealth, but those activities just consume national wealth that was created by other citizens who created new national wealth that was confiscated to pay for those government activities!
1
Where does all the money come from for War? The money spent on failed Middle East policies would have gone a very long way to pay for dreaded "social" programs.
2
Gerald, government also creates wealth, and in fact is a big driver of it. Some examples: Alexander Hamilton, our first treasury secretary, his program was for PUBLIC credit, not private, that is money from the government controlled National Bank being directed into the real economy.
Lincoln had the greenback system, which bypassed Wall Street'd private control of the money, and directed FEDERAL credit into the real economy, which went into building railroads and financing the Union army to fight the Confederacy.
FDR: Used the Reconstruction Finance Corporation to finance the Tennessee Valley Authority which built up the underdeveloped and impoverished south with water and power projects and helped create millions of jobs which stimulated the economy.
Lincoln had the greenback system, which bypassed Wall Street'd private control of the money, and directed FEDERAL credit into the real economy, which went into building railroads and financing the Union army to fight the Confederacy.
FDR: Used the Reconstruction Finance Corporation to finance the Tennessee Valley Authority which built up the underdeveloped and impoverished south with water and power projects and helped create millions of jobs which stimulated the economy.
6
I agree with this assessment. I may add that the Germany was the key to not help (or help if they wanted to) Southern European members of Eurozone in a more decisive manner for the same reasons we have not helped home owners who found themselves under water in 2009 and 2010. It was for the German public unimaginable to give money to those who they view as corrupt and irresponsible, even if that actually meant hurting themselves. They may though be more receptive to do so now concluding that Greeks and others have been punished enough.....
3
PK say EU & US have a lot in common. But the differences in wealth gaps and democracy are crucial. He’s admitted the wealth distribution is more balanced in successful EU countries. Yet this is ignored in his columns to focus on EU austerity—despite big variations in EU countries.
Now, after Obama’s speech focusing on the middle class and entrenched inequality after the ‘recovery’, it’s time to discuss how other nations from Japan to Australia to EU to Scandinavia, etc differ from the US.
Start with how they fund elections -- the basis for representing all the people, not just the top few. From that alone flows many things---that most of our laws are passed per the wishes of the top campaign donors, say studies. Our poverty rates are much higher. Dozens of nations can find funds for true h/c for all, not yet reached here, and for college without big debt—which we once had.
If liberals ignore crucial differences, US voters stay unaware and confused, with little basis to judge our party’s narrow platforms compared to those abroad. The election costs here soar, abetted by billionaire donors paying for huge media ad fees. Nations with publicly paid elections don't equate money with free speech. Different funding philosophies have huge consequences.
Our best liberal columnists should not be adding to confusion, in order to keep scolding the EU’s anti Keynesian current ideology of spending cuts.
Now, after Obama’s speech focusing on the middle class and entrenched inequality after the ‘recovery’, it’s time to discuss how other nations from Japan to Australia to EU to Scandinavia, etc differ from the US.
Start with how they fund elections -- the basis for representing all the people, not just the top few. From that alone flows many things---that most of our laws are passed per the wishes of the top campaign donors, say studies. Our poverty rates are much higher. Dozens of nations can find funds for true h/c for all, not yet reached here, and for college without big debt—which we once had.
If liberals ignore crucial differences, US voters stay unaware and confused, with little basis to judge our party’s narrow platforms compared to those abroad. The election costs here soar, abetted by billionaire donors paying for huge media ad fees. Nations with publicly paid elections don't equate money with free speech. Different funding philosophies have huge consequences.
Our best liberal columnists should not be adding to confusion, in order to keep scolding the EU’s anti Keynesian current ideology of spending cuts.
4
All those "freebies" are paid for by huge taxes taken from the workers pay checks. Why did you not acknowledge that in your comments? Because you know that Americans would never tolerate such theft of their labors.
1
" In free-market capitalism, capital generates income for the owners of the capital which in turn is used to create additional capital. This is very good. Sometimes, it can be actually too good. As capital continues to accumulate, its owners find it more and more difficult to deploy it efficiently. The business sector generally must interact with the household sector by selling goods and services or lending to them. When capital accumulates too rapidly, the productive capacity of the business sector can outpace the ability of the household sector to absorb the increasing production.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich and onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers…”
http://seekingalpha.com/article/1543642
Since 1969 there has been a tremendous shift in the tax burdens away from the rich and onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers…”
http://seekingalpha.com/article/1543642
6
Lance, doesn't payroll tax pay for Medicare and Social Security? Do you want to cut those? Just asking.
3
Mr. Krugman, you ask, "Why did they get it so wrong?" They didn't get it wrong. It's all working out very well for the top 1% global financial elite money masters who have been engineering this worldwide financial coup since they enthroned Ronald Reagan and Margaret Thatcher. The question is why wasn't anyone watching the hen house?
16
Lastly, remind me who is responsible for the purse? Who approves the budget? Congress. The President cannot spend one cent that isn't approved by Congress so who is really responsible for accumulating debt?
The national debt is made out to be the boogeyman from whom we will suffer a slow, horrible death. Except that's not true. While our founders abhorred debt they understood that providing for the people is foremost. However trillion dollar wars that solve nothing and only make things worse is not providing for the people. If we want Congress to not waste our taxes, then we have to make sure they don't. So the next time someone wants to bomb Iran or invade Syria, say NO and say it forcefully. These are not the things that will further our goals or improve the nation or the planet. Those trillions could do some real good used in the right way and in the right places. Let's use the amazing computer we have on our shoulders and do some good, instead of spreading death and destruction.
The national debt is made out to be the boogeyman from whom we will suffer a slow, horrible death. Except that's not true. While our founders abhorred debt they understood that providing for the people is foremost. However trillion dollar wars that solve nothing and only make things worse is not providing for the people. If we want Congress to not waste our taxes, then we have to make sure they don't. So the next time someone wants to bomb Iran or invade Syria, say NO and say it forcefully. These are not the things that will further our goals or improve the nation or the planet. Those trillions could do some real good used in the right way and in the right places. Let's use the amazing computer we have on our shoulders and do some good, instead of spreading death and destruction.
11
Unfortunately, the majority of Congress is owned by Wall Street's money, as well as the president. Much of the debt is toxic Wall Street gambling, it's not a legitimate debt.
2
It is discouraging that Dr. Krugman continues to promote massive accommodative monetary policies - QE and ZIRP- when they serve to further exacerbate inequality, create huge asset bubbles and compel middle class savers into highly risky investment. It's unconscionable to argue that these policies have "worked" in the US when wage stagnation is now the norm and middle class families are languishing. These policies are presented as seeking to spur wage inflation when in fact they have helped suppress wages and benefits. Have you seen the dramatic expansion of the various Dollar stores franchises Dr. Krugman? Perhaps not in your zip code but out here on Main Street they are popping up everywhere.
5
Walmart and Dollar Stores are the direct result of the hollowing out of the middle class that has resulted from automation and outsourcing. At the same time, it has driven the wealth accumulation of those who benefit from automation and outsourcing (corporations and the "owners" of capital). The 'trickle down' in that has been 'cheap prices', but the down side of 'cheap prices' is wage deflation and deflation, in general.
In short, we have, as we have in the past, suffered under some of the major flaws in "free market" capitalism, that is, monopoly, wealth disparity, and technological undermining of the value of the working classes.
The obvious answer is to find ways to redeploy our wealth to serve the interests of ALL people rather than to increase the intensity of the wealth spiral that always accompanies lax policy that has been driven by arrogance and complacency.
In short, we have, as we have in the past, suffered under some of the major flaws in "free market" capitalism, that is, monopoly, wealth disparity, and technological undermining of the value of the working classes.
The obvious answer is to find ways to redeploy our wealth to serve the interests of ALL people rather than to increase the intensity of the wealth spiral that always accompanies lax policy that has been driven by arrogance and complacency.
1
Thanks to Obama, the Republican clowns control the House. In contrast to real leaders such as FDR who was strong and got the support of many politicians in both parties, Obama has brought the party down because of his weak leadership, as he's been owned by Wall Street from day 1 of his administration. From the beginning he should have come out for Glass-Steagall, national banking, and investment in the real physical economy, but instead surrounded himself with Wall Street insiders like Geithner, and Summers. The "stimulus" and Dodd-Frank were Wall Street approved policies, to bypass the real reform: Glass-Steagall. Wall Street much rather would have Dodd-Frank with it's thousands of pages of complex regulations and loopholes, all the better for the banking lobbyists to undermine and get around it. What little teeth Dodd-Frank did have was eventually pulled in the Omnibus bill with Obama's support.
What's going on in Europe is similar to America but even worse, thanks to trillions of gambling and speculation by the too big to fail and jail banks. Krugman doesn't advocate any real solutions to stop the bleeding and get a real economic recovery going, he just says "more stimulus!", aka more virtual money creation that doesn't go into the real economy, but instead goes to propping up the house of cards of a casino style financial system.
What's going on in Europe is similar to America but even worse, thanks to trillions of gambling and speculation by the too big to fail and jail banks. Krugman doesn't advocate any real solutions to stop the bleeding and get a real economic recovery going, he just says "more stimulus!", aka more virtual money creation that doesn't go into the real economy, but instead goes to propping up the house of cards of a casino style financial system.
5
You know, one sometimes wonders whether corporations and the Right do more damage than this kind of mindless recitation of pseudo-Left talking points--pseudo-left, because the REAL Left doesn't blithely gloss over realities.
Certainly, this kind of dopery contributed a good deal to cementing Republican control of Congress and state legislatires in the last election. it's also precisely the kind of discouragement that, if I were the Kochs, I'd adore.
Oh, and one other thing: when we rant like this, we pass over anything like a real critique of the President's administration.
Certainly, this kind of dopery contributed a good deal to cementing Republican control of Congress and state legislatires in the last election. it's also precisely the kind of discouragement that, if I were the Kochs, I'd adore.
Oh, and one other thing: when we rant like this, we pass over anything like a real critique of the President's administration.
2
Yes, Obama and the Democrats should have done more to tame Wall Street and the big banks. Dodd-Frank, however, is not as weak as described. Obama pushed fiscal stimulus, and investment in public projects, etc., and probably got as much as could be gotten from Congress. Krugman was correct to push for "more stimulus", which would have been spent on exactly the kind of projects leading to "a real economic recovery". As for "real solutions", I can't think of anything implied in this note (re-enacting Glass-Steagall, big federal spending on public works, increased aid to state and local govts., increasing high-end marginal tax rates, providing a healthcare "public option", etc. ) that Krugman didn't advocate. Why so hostile to Krugman?
As for comparing Obama to FDR, who was indeed a strong president, and complaining that Obama didn't get the support of opposition politicians, you're dreaming. The Democrats, throughout practically the entire time of FDR's unprecedented four terms, had majorities in Congress. The opposition hated FDR, however, just as they hate Obama. With one difference -- Obama is black. Republican hatred of him has the odor of racism. Of course, in FDR's case, it had the odor of class betrayal. Even so, Obama did what even FDR didn't try to do -- create a national health insurance program -- a huge step in the right direction.
As for comparing Obama to FDR, who was indeed a strong president, and complaining that Obama didn't get the support of opposition politicians, you're dreaming. The Democrats, throughout practically the entire time of FDR's unprecedented four terms, had majorities in Congress. The opposition hated FDR, however, just as they hate Obama. With one difference -- Obama is black. Republican hatred of him has the odor of racism. Of course, in FDR's case, it had the odor of class betrayal. Even so, Obama did what even FDR didn't try to do -- create a national health insurance program -- a huge step in the right direction.
2
The real left doesn't support Obama's Wall Street anti-FDR/JFK fascist programs. The real left does not compromise the country away. In public Obama acts like he's an "opponent" of Boehner and the Republicans, but behind closed doors he holds their hands, compromises and works with them to dismantle the country for the 1 percent.
1
No one cared squat about the national debt until Obama was elected. What he did (he actually hasn't done anything. These things are outside of any one person's control) was just like what every other President has done. Look at what Reagan contributed to the debt and see that no one was worrying about it then. At least not in DC. What dismays me is that so many people have bought into the lie. Now everyone is worried about the debt ceiling. If a Republican president is elected just see how fast talk of national debt disappears. Some other distraction will be presented and the masses will buy into that lie also and completely forget about the coming apocalypse of national debt.
12
The difference between Republicans and Democrats is not about how much we spend, but it is about 'who gets to benefit from the spending'.
Unfortunately, humans prioritize short term interests over longer term interests, and this favors those who sell short term lies for long term personal gains.
Republican puppet masters seem to have realized that children have a fascination with tearing down the towers that they build, and that they also get a thrill from throwing their toys out of the crib. They've capitalized on that seemingly natural human thrill for destruction and focused on that as a way to get votes.
We need more builders.
Unfortunately, humans prioritize short term interests over longer term interests, and this favors those who sell short term lies for long term personal gains.
Republican puppet masters seem to have realized that children have a fascination with tearing down the towers that they build, and that they also get a thrill from throwing their toys out of the crib. They've capitalized on that seemingly natural human thrill for destruction and focused on that as a way to get votes.
We need more builders.
2
When Federal Reserve Chairman Ben Bernanke on Jan 14, 2013 compared "refusal to raise the debt ceiling to a family refusing to pay its credit-card bill," he was totally correct.
Raising the debt ceiling is similar or almost identical to getting the credit limit raised on your personal credit card, and is absolutely not similar to a family paying off their "credit-card bill."
We need to replace all those unqualified government bureaucrats with some people that know something about economics and finance.
More borrowed money (loans or the proceeds from freshly printed paper US Treasury Bond Sales) to the US Government is like giving a recovering alcoholic more booze on credit by increasing his credit limit at his favorite Liquor store charge account.
Raising the debt ceiling is similar or almost identical to getting the credit limit raised on your personal credit card, and is absolutely not similar to a family paying off their "credit-card bill."
We need to replace all those unqualified government bureaucrats with some people that know something about economics and finance.
More borrowed money (loans or the proceeds from freshly printed paper US Treasury Bond Sales) to the US Government is like giving a recovering alcoholic more booze on credit by increasing his credit limit at his favorite Liquor store charge account.
3
A government is not a family, it is a collection of families, and it is subject to the fact that at any given time some of those families will be fine and stable and others won't.
No economic system provides a 'perfect' mechanism designed to distribute wealth fairly, because neither nature nor life is "fair".
Humans learned long ago that families, then clans, then religions, and then secular governments provided a means to harness a power that is greater than either the individual or any one of these 'restricted membership' groups. We also learned that compromises are necessary in order to maintain unity across disparate individual humans and groups.
Money represents our value as a nation, and our collective productivity. People learned long ago that human potential extends across generations (it's part of the optimism of being alive). Therefore, unlike 'family debt', national debt allows us, as a society, to invest in things like highways, and buildings, defense, health care, food production, and progress across generations.
Like the family that takes the calculated 'liberal chance' that they will be able to repay the loan for their home or their car, we, as a nation, take the calculated 'liberal chance' that providing help care or highways to invest in people or infrastructure will improve our productivity and wealth as a society.
We got here because we aren't a family, or a clan, or an ideological group, but a nation. Next step: federation of nations!
No economic system provides a 'perfect' mechanism designed to distribute wealth fairly, because neither nature nor life is "fair".
Humans learned long ago that families, then clans, then religions, and then secular governments provided a means to harness a power that is greater than either the individual or any one of these 'restricted membership' groups. We also learned that compromises are necessary in order to maintain unity across disparate individual humans and groups.
Money represents our value as a nation, and our collective productivity. People learned long ago that human potential extends across generations (it's part of the optimism of being alive). Therefore, unlike 'family debt', national debt allows us, as a society, to invest in things like highways, and buildings, defense, health care, food production, and progress across generations.
Like the family that takes the calculated 'liberal chance' that they will be able to repay the loan for their home or their car, we, as a nation, take the calculated 'liberal chance' that providing help care or highways to invest in people or infrastructure will improve our productivity and wealth as a society.
We got here because we aren't a family, or a clan, or an ideological group, but a nation. Next step: federation of nations!
1
Europe has better infrastructure, better child care, better health are, better retirement . But we have n more bombs tanks, guns and soldiers. We have more poverty, more obesity and more people in prisons. We have more income inequality and religion in our politics. We spend more on education and are lower rated then most of Europe (except Romania). We don't give paid leave for child care and they do.
So, what is our income good for?
So, what is our income good for?
19
A minor technical detail, which one had thought everybody knew at this point: the national debt limit has to do with paying the bills on what we've already spent, not taking out more credit.
Not raising it is analogous to buying a house and then telling your mortgage broker, "Nope, I've paid as much as I'm willing to pay on what I owe you. Sorry."
You want less debt, a smaller deficit? Nifty. tell the Republicans to, oh, back off on expanding military spending (especially on weapons the military doesn't want!), let's take away those oil subsidies, enough with the pass on capital gains, and nope, Mitt Romney can't stash tens of millions in IRAs to dodge taxes any more.
good luck, tiger.
Not raising it is analogous to buying a house and then telling your mortgage broker, "Nope, I've paid as much as I'm willing to pay on what I owe you. Sorry."
You want less debt, a smaller deficit? Nifty. tell the Republicans to, oh, back off on expanding military spending (especially on weapons the military doesn't want!), let's take away those oil subsidies, enough with the pass on capital gains, and nope, Mitt Romney can't stash tens of millions in IRAs to dodge taxes any more.
good luck, tiger.
4
Let me see now: invest in humans or invest in stuff? It's such a hard choice for those with a cynical view of humans.
To be fair the cynicism is tempered with the certainty that stuff can be engineered to be the best that it can be, humans can't!...........and under that thinking, we can all be forgiven for rejecting the uncertainty and variability associated with 'uncontrolled, thinking humans'.
Rules are good, but the rules need to change along with the underlying fabric of the times.
To be fair the cynicism is tempered with the certainty that stuff can be engineered to be the best that it can be, humans can't!...........and under that thinking, we can all be forgiven for rejecting the uncertainty and variability associated with 'uncontrolled, thinking humans'.
Rules are good, but the rules need to change along with the underlying fabric of the times.
When Europe starts paying for its own defense maybe we can do some of those things too.
Professor Krugman, plus most of the other modern “popular” economists, usually believe the USA should continue to borrow a lot of money back from individuals in the industrialized wealth creating BRIC nations and then spend that money on more US wealth consuming government contracts, pork barrel infrastructure contracts, more US government employees, more US infrastructure improvements, more entitlements, and more of other similar US government activities to temporarily lower the unemployment rate.
This action will only increase the national debt.
If your family (or your nation) makes widgets, then your family must make and then sell enough widgets to others outside of your family so that your family can accumulate enough profit and wealth to enable them to buy other things that your family needs from others that produce those other things.
Then hopefully you will then have enough left over to accumulate more wealth for any future emergencies.
Or you can live on credit cards until the lenders of real wealth stop increasing your credit limit.
Or a nation can print and sell sovereign treasury bonds and spend the proceeds on government activities.
Nations can obligate future generations to repay their national debts (Sovereign Treasury Bonds) after current citizens have their federal government spend all of this "borrowed money" on themselves.
This action will only increase the national debt.
If your family (or your nation) makes widgets, then your family must make and then sell enough widgets to others outside of your family so that your family can accumulate enough profit and wealth to enable them to buy other things that your family needs from others that produce those other things.
Then hopefully you will then have enough left over to accumulate more wealth for any future emergencies.
Or you can live on credit cards until the lenders of real wealth stop increasing your credit limit.
Or a nation can print and sell sovereign treasury bonds and spend the proceeds on government activities.
Nations can obligate future generations to repay their national debts (Sovereign Treasury Bonds) after current citizens have their federal government spend all of this "borrowed money" on themselves.
2
for the last time, household and business budgets are not remotely similar to how a national economy works.
2
So, no amount of recovery in the US or recession in Europe will change your opinion concerning economic policy? It is austerity all the way until both economies are in recession.
Suicide by economic theory.
Suicide by economic theory.
5
PGeorge,
Winston Churchill once stated, “I contend that for a nation to try to tax (and spend) itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
I am still hungry. May I have another piece of the economic pie for lunch? Is it all gone, or is there any still left?
Austerity means that the government only spends the amount that they collect (confiscate) in taxes, and then stop charging government expenses to the "US Government Credit Card" (the National Debt) that our children will be responsible for re-paying.
Austerity means that US citizens will have to start working to grow, manufacture, and construct the food, clothing and housing that US citizens consume.
Greece, and other similar European “Nanny State” nations, have destroyed their own nation’s economies by living off of borrowed money to pay their government salaries and government benefits instead of working at jobs that would create products that can be sold to create national privately owned wealth that could be taxed to pay for government activities.
Winston Churchill once stated, “I contend that for a nation to try to tax (and spend) itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
I am still hungry. May I have another piece of the economic pie for lunch? Is it all gone, or is there any still left?
Austerity means that the government only spends the amount that they collect (confiscate) in taxes, and then stop charging government expenses to the "US Government Credit Card" (the National Debt) that our children will be responsible for re-paying.
Austerity means that US citizens will have to start working to grow, manufacture, and construct the food, clothing and housing that US citizens consume.
Greece, and other similar European “Nanny State” nations, have destroyed their own nation’s economies by living off of borrowed money to pay their government salaries and government benefits instead of working at jobs that would create products that can be sold to create national privately owned wealth that could be taxed to pay for government activities.
1
All quantitative easement is not the same. It is one thing for a central bank to buy government bonds, another to buy collateralized private debt obligations. The ECB proposes to do the former, while the Fed has done the latter.
It seems to me that the ECB should apply its quantitative easement to purchase private debt, since the excess of private, not public, debt is the problem as it is explained by Dr. Krugman.
It seems to me that the ECB should apply its quantitative easement to purchase private debt, since the excess of private, not public, debt is the problem as it is explained by Dr. Krugman.
9
Nice distinction, one that taught me something. Thanks.
3
Krugmans "Obama recovery" is a pretty small hill to be taking a victory lap around. Must be rather difficult for even the good Doctor to make such hard left turns!
Obviously it helps if he keeps his eyes firmly shut.
Obviously it helps if he keeps his eyes firmly shut.
4
Yea, resetting the 'Bush years' and the Republican drag that kicked in during the last Clinton years, is a big mistake. We should just stay in 'bubblicious' wealth disparity land, and ignore the fact that 50 years of technological, and productivity advances have completely changed the playing field for the majority of the world's population.
I want to stick with those 'good ole' Republican ideas to keep our heads down and relive the past until we flatten ourselves against an impenetrable wall.
I'm like bulking up to push all of those in front of me against the wall as we speak. I may even get myself a hummer to improve my flattening ability.
I want to stick with those 'good ole' Republican ideas to keep our heads down and relive the past until we flatten ourselves against an impenetrable wall.
I'm like bulking up to push all of those in front of me against the wall as we speak. I may even get myself a hummer to improve my flattening ability.
3
Spending more than a nation collects in taxes adds to each nation’s national debt, and this will destroy their economies and then cause their nations to evolve into something resembling Greece, then Mexico, and then Somalia when individuals and governments in the industrialized wealth-creating BRIC nations stop lending the USA money to pay for our wealth consuming and wealth destroying government activities that are in excess of our tax collections!
Each nation in the entire world risks the destruction of their economy and their nation if their nation’s businesses stop creating sufficient new wealth (profits/money) so that a part of that wealth is then available to be confiscated as taxes to pay for their government activities.
Some nations like the USA just start living off borrowed money using wealth created by previous generations as collateral for loans to pay for their current government activities.
Each nation in the entire world risks the destruction of their economy and their nation if their nation’s businesses stop creating sufficient new wealth (profits/money) so that a part of that wealth is then available to be confiscated as taxes to pay for their government activities.
Some nations like the USA just start living off borrowed money using wealth created by previous generations as collateral for loans to pay for their current government activities.
2
Prior to January 21 2009 did you even think about the national debt?
2
Gerald, we had balanced budget in 2001. Could you please evaluate, legislation by legislation, what we have passed since than that produced 18 trillion debt by now? Be honest, and rank those policies by how much they contributed to debt.
After you do that then we may discuss what to do to improve the fiscal situation.....
After you do that then we may discuss what to do to improve the fiscal situation.....
2
It's actually pretty simple: country's borrow against the future productivity of their society in order to finance the 'infrastructructure and human investments' that make the future possible.
I like the idea that the guy next store has access to medical care and stands a better chance of getting his ebola detected before I get it. And I like the idea that when the rest of the world was struggling for consumers, the 'old folks' in our society on Social Security and Medicare kept spending and supporting our corporations and our economy. I like the idea that people who become unemployed due to the 'creative destruction' of capitalism don't just get pushed into the meat grinder of 'compassionate conservatism'.
In my mind, it's all about the humans and their journey, not about the stuff that they make and accumulate along the way.
It would be great if the conservative idea of 'absolute, never ending, perfection' was possible...........but its not. We live in a changing society, on a changing continent, floating on a changing planet, traveling at a sum total of millions of miles an hour on the obscure tippy end of a galactic spiral arm in a changing galaxy that's rocketing toward collision with another galaxy (alpha centauri) sometime in the changing future as we, and all of that continuously change and morph as we momentarily transition between being particles of energy and particles of matter.
For all of their flaws, it's all about the humans.
I like the idea that the guy next store has access to medical care and stands a better chance of getting his ebola detected before I get it. And I like the idea that when the rest of the world was struggling for consumers, the 'old folks' in our society on Social Security and Medicare kept spending and supporting our corporations and our economy. I like the idea that people who become unemployed due to the 'creative destruction' of capitalism don't just get pushed into the meat grinder of 'compassionate conservatism'.
In my mind, it's all about the humans and their journey, not about the stuff that they make and accumulate along the way.
It would be great if the conservative idea of 'absolute, never ending, perfection' was possible...........but its not. We live in a changing society, on a changing continent, floating on a changing planet, traveling at a sum total of millions of miles an hour on the obscure tippy end of a galactic spiral arm in a changing galaxy that's rocketing toward collision with another galaxy (alpha centauri) sometime in the changing future as we, and all of that continuously change and morph as we momentarily transition between being particles of energy and particles of matter.
For all of their flaws, it's all about the humans.
I don't think we know all of the repurcussions of the Federal Reserve's loose monetary policy, yet. Also, if printing our way out of a deflation is the way to go can Dr. Krugman explain what is going on in Japan? Abenomics has been all about loose monetary policy. I see he left that country's economic plight out of his article. I am sure it was an honest oversight.
2
We don't "Print Money". We borrow it from ourselves and pay the loans back. We have printed money to finance war. Google United States Notes. These notes printed during the Civil War circulated until the 1970s. I had one in the 60's.
1
The USA might also just print a bunch of fresh trillion dollar bills and repay those existing US Treasury bonds with that newly printed paper “monopoly” money Trillion dollar bills. That monopoly money is formally called Fiat Money.
Some examples of printing (Fiat money) Sovereign paper currency money (actually US Treasury Bonds) to pay for their government activities (such as the USA’s Quantative Easing) are the Zimbabwe Dollar (ZWD), West African CFA (XOF), Tanzanian Shilling (TZS), Sierra Leonean Leone (SLL), Somali Shilling (SOS), Viet Nam Dong (VND), Rwandan Franc (RWF), Nigerian Naira (NGN), Liberian Dollar (LRD), Franc Congolais (CDF), Belarusian Ruble (BYR), Burundian Franc (BIF), Ugandan Shilling (PGX) and of course the Mexican Peso!
Of course these freshly printed paper sovereign nation currencies have absolutely no value, except as novelties, or toilet paper.
Some examples of printing (Fiat money) Sovereign paper currency money (actually US Treasury Bonds) to pay for their government activities (such as the USA’s Quantative Easing) are the Zimbabwe Dollar (ZWD), West African CFA (XOF), Tanzanian Shilling (TZS), Sierra Leonean Leone (SLL), Somali Shilling (SOS), Viet Nam Dong (VND), Rwandan Franc (RWF), Nigerian Naira (NGN), Liberian Dollar (LRD), Franc Congolais (CDF), Belarusian Ruble (BYR), Burundian Franc (BIF), Ugandan Shilling (PGX) and of course the Mexican Peso!
Of course these freshly printed paper sovereign nation currencies have absolutely no value, except as novelties, or toilet paper.
1
Contrary to conservative wishful thinking, we, as humans, have not mastered the art of 100% perfection, nor have we become so perfect that we don't make mistakes, cheat, steal, lie, or murder.
If we accept our status as humans, we can seek perfection, but it is unlikely that we will ever achieve it, or even know how to achieve it.
Conservatives seem to believe that if only we could obey the rules (their rules) life would be much more perfect. Liberals believe that rules (and yes even morality) evolve along with knowledge, learning, and human progress........that life is a quest, largely with unknown conclusions, and completely dependent on the collective efforts of the species (including both the almost-perfect, and the imperfect among us).
I can't argue that IF we ever synthesize the rules of perfection, perfection would be a giant leap forward. However, conservative 'beliefs' are not rules and generally their quests for perfection come across as deeply self-serving, and completely subject to the erosion of time. It seems that we must bear the cross of the imperfect knowing that their imperfection may be more about happenstance than rules or morality, and there but for the grace of nature go we).
If we accept our status as humans, we can seek perfection, but it is unlikely that we will ever achieve it, or even know how to achieve it.
Conservatives seem to believe that if only we could obey the rules (their rules) life would be much more perfect. Liberals believe that rules (and yes even morality) evolve along with knowledge, learning, and human progress........that life is a quest, largely with unknown conclusions, and completely dependent on the collective efforts of the species (including both the almost-perfect, and the imperfect among us).
I can't argue that IF we ever synthesize the rules of perfection, perfection would be a giant leap forward. However, conservative 'beliefs' are not rules and generally their quests for perfection come across as deeply self-serving, and completely subject to the erosion of time. It seems that we must bear the cross of the imperfect knowing that their imperfection may be more about happenstance than rules or morality, and there but for the grace of nature go we).
My concern is with the U.S. government debt levels now with a larger Republican voice. I heard John Boehner recently speak to the U.S. debt accumulated during President Obama's time in office as being greater than that of all prior U.S. Presidents. That is a simple, very easily understood statement which sticks with many voters.
It may be that the debt service on U.S. government debt today is far lower than say at the end of the Bush II administration or other prior points in time, given the low rate of interest paid on that debt. Perhaps a metric which cites the annual debt service relative to annual government receipts (tax and other sources of revenue) is a more accurate representation of the ability of the U.S. government to maintain the debt load.
When purchasing a home with a mortgage, the lender simply looks to see if you can service the debt, even if it is a 30 year obligation. What is needed is a simple sound bite which accurately states the U.S. debt situation as not being the burly problem that is painted by the Republicans, because in truth it is not.
It may be that the debt service on U.S. government debt today is far lower than say at the end of the Bush II administration or other prior points in time, given the low rate of interest paid on that debt. Perhaps a metric which cites the annual debt service relative to annual government receipts (tax and other sources of revenue) is a more accurate representation of the ability of the U.S. government to maintain the debt load.
When purchasing a home with a mortgage, the lender simply looks to see if you can service the debt, even if it is a 30 year obligation. What is needed is a simple sound bite which accurately states the U.S. debt situation as not being the burly problem that is painted by the Republicans, because in truth it is not.
8
All governments in the entire world must limit their expenses by reducing the number and the costs of their tax paid government employees, infrastructure, government contracts, government benefits, government grants that are similar wealth consuming government spending activities including the amount of interest paid on their national debt to less than they collect in taxes.
If the G20’s debtor nations were to continue to borrow money from the BRIC nations and then "invest these borrowed funds" in infrastructure and increased government employee wages, then the national debts of these nations would increase until the economies of these nations evolved into something resembling Greece, then Mexico, and then Somalia when individuals and governments in the industrialized wealth-creating BRIC nations stop lending money to the wealth consuming nation governments (such as the USA) to pay for their wealth consuming and wealth destroying government activities that are in excess of their tax collections!
If the G20’s debtor nations were to continue to borrow money from the BRIC nations and then "invest these borrowed funds" in infrastructure and increased government employee wages, then the national debts of these nations would increase until the economies of these nations evolved into something resembling Greece, then Mexico, and then Somalia when individuals and governments in the industrialized wealth-creating BRIC nations stop lending money to the wealth consuming nation governments (such as the USA) to pay for their wealth consuming and wealth destroying government activities that are in excess of their tax collections!
2
Except it's a lie. The debt accumulated under Obama is NOT more than all other presidents combined. That someone would take such a statement at face value shows the primary problem with the American voter; they are lazy and uninterested in getting the facts themselves, they just wait for their party to feed them the lines. Do your own research and you will find out what a load that is.
4
The national debt was $10T before Obama was elected. It is now $18T. It took from the Jackson administration to Obama to make it $18T. Under Jackson the nation's debt was paid off and the Second Bank of The United States, a predecessor to the Federal Reserve was shut down. Obama has created 40% of the national debt all by himself.
And yet most European countries have better social safety nets than the United States. They don't abandon their citizens the way we do. They educate their young, keep their citizens and residents healthy with almost universal access to health care, etc. Europe may not be a paradise to live in and it does have economic problems but for those who don't make 6 figures it's not a bad place to live. In America, if you aren't wealthy, you can be bankrupted by any number of events: medical illness or need, prolonged unemployment, the need for housing, an accident, inability to pay back student loans due to unemployment.
In America we have CEOs making hundreds of times more than the average employee. That outrageous compensation eats into job creation. Our crumbling infrastructure is hurting us. American lawmakers believe that cutting taxes helps people when it doesn't. Americans don't understand that government, when properly funded, can do things that families cannot. Most of the recovery has helped big businesses and the 1%. The rest of us are still waiting. Indeed, many of us will wind up poor because of how America is being mismanaged by the people we elected to serve us, not big business or the rich. I don't think we can brag just yet.
In America we have CEOs making hundreds of times more than the average employee. That outrageous compensation eats into job creation. Our crumbling infrastructure is hurting us. American lawmakers believe that cutting taxes helps people when it doesn't. Americans don't understand that government, when properly funded, can do things that families cannot. Most of the recovery has helped big businesses and the 1%. The rest of us are still waiting. Indeed, many of us will wind up poor because of how America is being mismanaged by the people we elected to serve us, not big business or the rich. I don't think we can brag just yet.
19
A simple GOP response to your claim is that the social safety nets are actually causing the problems in Europe.
I'm sure the Heritage Foundation take on this is that Europeans have become complacent after decades of coddling by their socialist overlords, and are incapable of achieving any meaningful economic recovery. And of course high taxes are yet another cause of the problem in Europe.
The U.S. on the other hand can still remember Reagan, and despite Obama's sinister plans to lull us to sleep, know that only hard work on the threat of being put out on the street can make an economy thrive.
I'm sure the Heritage Foundation take on this is that Europeans have become complacent after decades of coddling by their socialist overlords, and are incapable of achieving any meaningful economic recovery. And of course high taxes are yet another cause of the problem in Europe.
The U.S. on the other hand can still remember Reagan, and despite Obama's sinister plans to lull us to sleep, know that only hard work on the threat of being put out on the street can make an economy thrive.
If ever there were an artificial scarcity, CEOs have created one for the record books.
2
Reagan tripled the national debt and it took bill Clinton's 1993 tax increase to start the process of paying it down as Allan Greenspan pointed out in in his memoir.
2
Dr. Krugman is spot on. I would add that the in addition, the ECB is lowering the interest rates it charges on loans to commercial banks so long as the banks commit to lending the money. This carrot and stick approach should make the interest rate reduction more effective, lead to more money injected into the economy, and hopefully a quicker, more robust recovery. This Fed style quantitative easing is just what the Eurozone needs, and may surprise everyone--including Kr. Krugman--at how effective it will be.
2
If people continue to expect deflation, and are charged by banks to keep custody of their money, they will probably put the currency they get from the central bank for government bonds in their own safes.
1
That is always a risk in a deflationary economy. Japan experienced something like that when it lowered interest rates to below zero in around 2008. The Swiss are trying that now, too. There are just so many levers available, but the quantitative easing has proven the most effective.
As with many divisive, self-serving, and destructive trends, conservatives have effectively spread messages that just happen to deter recovery. That's because, for those in the know, there is opportunity in faux hate, fear, greed, jealousy, and bigotry. There's gold in them thar confusion tactics.
Regarding the comment from Andy of MA, Mr. Krugman has pointed out for many years the flaw in having a common euro currency without a parallel, sufficiently powerful financing entity to back it up.
As to the question of fiat money sustainability, the predicted apocalypse has been postponed so many times that it has itself become an unsustainable myth. Okay, Repent! But don't do it because the end is near.
As to the question of fiat money sustainability, the predicted apocalypse has been postponed so many times that it has itself become an unsustainable myth. Okay, Repent! But don't do it because the end is near.
3
The Europeans didn't leave out the 'central bank' for no reason. It was just too tough to get the consensus from entrenched wealth to take the extra step of putting the currency in the service of democracy...........a gamble, that was at the time, and may still be preferable for those capable of weathering the storm.
The lesson for us, is don't give conservatives the 'keys to the car'. Oh, never mind! I see we've already moved into the proverbial ditch.
The lesson for us, is don't give conservatives the 'keys to the car'. Oh, never mind! I see we've already moved into the proverbial ditch.
I really like Krugman’s macroeconomics. He wrote a test book about it.
But he continues to ignore the transmission mechanisms, the business models, that are flawed to the point where improved macro data isn’t and can’t be transmitted to 90% of Americans because corporation are totally focused on top managers and stockholder income and wealth.
Until those business models change, increases in aggregate GDP factors is nothing more than pouring more resources into a leaky bucket for working Americans
But he continues to ignore the transmission mechanisms, the business models, that are flawed to the point where improved macro data isn’t and can’t be transmitted to 90% of Americans because corporation are totally focused on top managers and stockholder income and wealth.
Until those business models change, increases in aggregate GDP factors is nothing more than pouring more resources into a leaky bucket for working Americans
2
Louis Howe,
I do not know why you, or anyone else, could refer to the Gross National Domestic Product (GDP) of any nation as any indication of that nation’s economic strength, unless the expense and the economic activity of spending borrowed money on wealth-consuming government activities such as infrastructure improvements, wars, law enforcement, water and sewers, streets and bridges, fire protection, welfare, government employee payrolls, social security and other similar wealth consuming activities paid for with tax collections are not included into that GDP.
A nation's GDP has nothing to do with that nation’s economic strength or the ability of that nation to repay their national debt, especially that part of the GDP activity that was government borrowing money from wealth-producing entities in the industrial wealth-creating nations and then spends that borrowed money to pay for wealth consuming bureaucratic government payrolls, infrastructure, unemployment benefits, education, welfare, retirement pensions, high speed rail, free medical services, housing, wars, social services, pork barrel projects and other tax-funded bureaucratic jobs that do not produce any new national wealth that the nation could tax to collect money to pay for their government activities?
With US federal and local government tax paid wealth consuming activities at more than 42 percent of the GDP and then included or added into the GDP, the GDP number is now almost meaningless!
I do not know why you, or anyone else, could refer to the Gross National Domestic Product (GDP) of any nation as any indication of that nation’s economic strength, unless the expense and the economic activity of spending borrowed money on wealth-consuming government activities such as infrastructure improvements, wars, law enforcement, water and sewers, streets and bridges, fire protection, welfare, government employee payrolls, social security and other similar wealth consuming activities paid for with tax collections are not included into that GDP.
A nation's GDP has nothing to do with that nation’s economic strength or the ability of that nation to repay their national debt, especially that part of the GDP activity that was government borrowing money from wealth-producing entities in the industrial wealth-creating nations and then spends that borrowed money to pay for wealth consuming bureaucratic government payrolls, infrastructure, unemployment benefits, education, welfare, retirement pensions, high speed rail, free medical services, housing, wars, social services, pork barrel projects and other tax-funded bureaucratic jobs that do not produce any new national wealth that the nation could tax to collect money to pay for their government activities?
With US federal and local government tax paid wealth consuming activities at more than 42 percent of the GDP and then included or added into the GDP, the GDP number is now almost meaningless!
1
I am sorry, but I don't understand what you are talking about. GDP is consumer spending + investment + government spending + net of exports - imports. Recessions are when GDP declines for two consecutive quarters.
What I am saying is that consumer spending and investment can increase for a very narrow few with large incomes increasing GDP but not reflect the well-being of 90% of Americans because the actual business models generating the consumer spending and investment distribute the benefits to the narrow few, not the many.
What I am saying is that consumer spending and investment can increase for a very narrow few with large incomes increasing GDP but not reflect the well-being of 90% of Americans because the actual business models generating the consumer spending and investment distribute the benefits to the narrow few, not the many.
Somehow, not being an expert, I like to imagine that we are only a few political clicks, regulations, and campaign reforms away from putting the 'corporate gorgon' back into the bubble of regulation that creates broad-based wealth and opportunity.
Sometimes, I feel that I might be better off running with the 'hog castrators', but then again, being a designated hog, I come to my senses and vote for human progress (tempered, of course, with a solid, humane business environment, and a political system that is driven by human ideals rather than the animal ideal of survival of the fittest........we are animals, but slowly, but surely we have advanced by overcoming our beastial instincts. That leads me to believe that, over the long term, the 'fittest' is the species, not the mortal individuals within it).
Sometimes, I feel that I might be better off running with the 'hog castrators', but then again, being a designated hog, I come to my senses and vote for human progress (tempered, of course, with a solid, humane business environment, and a political system that is driven by human ideals rather than the animal ideal of survival of the fittest........we are animals, but slowly, but surely we have advanced by overcoming our beastial instincts. That leads me to believe that, over the long term, the 'fittest' is the species, not the mortal individuals within it).
Almost every article about the European economy that appears in the NYT, as well as in some other major print media, overemphasizes the potential impact of monetary policy and fiscal stimulus. These same articles understate other types of policies that have proven successful for reversing negative macroeconomic trends in some European economies. Countries such as Sweden and Germany reversed downward trends with an innovative combination of macroeconomic policies, labor reforms, and entitlement reforms. There was no simple emphasis on easy money or large fiscal deficits. In the process of reform both of those countries had high rates of domestic investment that created high-paying jobs while their multinational corporations became more competitive, as indicated by their International Competiveness rankings. Policies primarily consisting of low interest rates, easy credit, and a large fiscal deficit are not the answer for what many European economies, and a number of states in the USA. A reform package that will stimulate investment that creates higher paying jobs while slowing the rate of entitlement growth is much likelier to reverse the downward economic trend plaguing many European countries.
30
Could we start by doing away with the tax benefit for shipping capital equipment (our jobs) overseas? If it's profitable to do so it's profitable. No need to weigh the scales against ourselves by making it profitable when it might not otherwise be so.
2
" A reform package that will stimulate investment that creates higher paying jobs while slowing the rate of entitlement growth is much likelier to reverse the downward economic trend plaguing many European countries." How to translate this slogan, it sounds so familiar? Oh yes, now I remember: "Tax relief for the job creators coupled with reductions in entitlement programs!" A time tested success formula in Republican fantasy-land.
3
And why not? After all, it's worked every time it's been tried before.
2
It's far too early, maybe by 5 years, to gloat over the claimed superiority of the U.S. response to the '08/'09 crisis. When I detect a plausible exit strategy from the ZIRP without crashing the current equities bubble and without demolishing the purchasing power of cash-equivalent assets, boast all you want. We in Canada were stunned 2 days ago when our central bank further lowered interest rates ... this mess-up of our financial systems ain't over yet by a long shot!
1
It's a fallacy which Krugman persists in that the recovery is to Obama's credit. In fact, all his tax increase (where are the Keynesians?) has delayed and weakened the rebound. And now, in his State of The Union Address, he has gone further along this destructive path.
His base proposal to essentially kill the 529 college savings program is treason itself; and Obama has shot himself in the foot with this proposal. It couldn't be clearer to the public that the president is bitten with the concept of income distribution. Not only Republicans but middle to higher income liberals - and their parent's parents (grandparents to the future college students) - will recoil at the prospect of losing the benefit of saving via 529's.
Obama might as well have proposed to do likewise to Roth IRA's because both make use of after tax contributions; and then allow tax free withdrawals. If Obama could effectively kill the reason for parents to use 529's he could just as well kill Roth's. Under Obama no government promise is forever or sacred.
His base proposal to essentially kill the 529 college savings program is treason itself; and Obama has shot himself in the foot with this proposal. It couldn't be clearer to the public that the president is bitten with the concept of income distribution. Not only Republicans but middle to higher income liberals - and their parent's parents (grandparents to the future college students) - will recoil at the prospect of losing the benefit of saving via 529's.
Obama might as well have proposed to do likewise to Roth IRA's because both make use of after tax contributions; and then allow tax free withdrawals. If Obama could effectively kill the reason for parents to use 529's he could just as well kill Roth's. Under Obama no government promise is forever or sacred.
4
529 college savings programs allow up to $400,000 and up to be entirely tax free and can be directed towards any kid going to college. This tax deduction maintains that privileged status of the rich since only a small percentage of the population can afford to attend a college that requires $400k in tuition. The benefits of attending such a pricey school is that they rub noses with other wealthy students and their families thus ensuring their job prospects once they graduate. This tax deduction is being defended by the uber wealthy while free community college is considered Robin Hood policies by the very same people. The entire argument makes me nauseous about the gross indifference of the wealthy towards the systemic unfairness of the status quo.
16
So without Obama's stimulus and resistance to Republicans' calls for greater austerity measured you believe the economy would have bounced back faster?
4
Please spare us this kind of nonsense. President Obama perpetuated the Bush tax cuts. He could have just let them lapse.
2
Had the GOP and their handlers had their way, we would be in the same boat with Europe. Like their counterparts in Germany, they also are happy to inflict pain of others while smugly decrying excess and never admitting they were wrong. A pox on them all.
16
Funny how Ireland and the United Kingdom, who Krugman excoriated for their "austerity" programs, are two of the top performing economies and Europe and therefore are never mentioned by Krugman anymore.
http://www.economist.com/blogs/graphicdetail/2014/12/european-economy-guide
http://www.economist.com/blogs/graphicdetail/2014/12/european-economy-guide
6
Please define clearly the state of those economies relative to 2008. If you are going to make a point then make it.
Maybe start with unemployment rates?
Maybe start with unemployment rates?
2
Dr. Krugman always uses Ireland and the UK as evidence of a foolhardy austerity plan. It well might be that their economies have a small upward tick, but of course, after the politicians in those countries unnecessarily forced austerity on their citizens, any uptick looks like a win. As Dr. Krugman points out often - when you stop banging your head against a wall you feel a lot better...
4
Actually the UK is in so much trouble that the government has already been forced to realign and may fall.
2
Ah yes, "see, I was right all along".
PK has his theory of the recovery, which is consistent with the policies he has advocated in the past, of course.
There is every bit as much reason to think that the recovery in the US is due to the actions of the gritty Republican congressman and governors who held the line on spending and fought to get budgets under control and allowed wages to fall to give businesses a chance to regroup and operate at a profit.
It is a fallacy to think that working people can be protected in a downturn as severe as followed the financial crisis. And it is a fallacy to think that government spending can singlehandedly dig out from such a downturn. If the phoenix is to rise from the ashes, there must first be ashes.
And before this is over (and it is far from over), it will be clear that the artificial lowering of rates by central banks around the world has gone on too long, and has created asset bubbles and debt levels which will plague the world economy for many, many years to come.
PK has his theory of the recovery, which is consistent with the policies he has advocated in the past, of course.
There is every bit as much reason to think that the recovery in the US is due to the actions of the gritty Republican congressman and governors who held the line on spending and fought to get budgets under control and allowed wages to fall to give businesses a chance to regroup and operate at a profit.
It is a fallacy to think that working people can be protected in a downturn as severe as followed the financial crisis. And it is a fallacy to think that government spending can singlehandedly dig out from such a downturn. If the phoenix is to rise from the ashes, there must first be ashes.
And before this is over (and it is far from over), it will be clear that the artificial lowering of rates by central banks around the world has gone on too long, and has created asset bubbles and debt levels which will plague the world economy for many, many years to come.
4
The problem with your alternative theory, as PK would surely point out, is that the "archons of austerity" in Europe were far gritty than the grittiest Republican in the US. And the result of their "grit" was economic catastrophe.
1
As long as we're into advocating ashes, I suppose Obama should have let the auto industry (now powering the economic upswing in the US) go under, like the Tea Party zealots were calling for in the depths of the crisis. Judging by your comments, I guess Canada has its own contingent of stimulus deniers and scorched earthers.
5
No, I think saving the auto industry was the right thing to do.
And I also think the limited fiscal policy responses, stimulus programs, mortgage relief programs etc which the US adopted were also OK, as were the unemployment insurance and support programs which cut in to help people through the worst of it.
But the US response to the situation was not the response that PK advocated - he would have had more stimulus, more borrowing, more protection form workers, more of all the things that would have softened the pain of the slump but would also left a bigger hole to recover from and slowed the return to a self sustain economic recovery.
The US response was a product of many inputs, from both sides of the political spectrum, and because of that it worked out well, I would say.
.
And I also think the limited fiscal policy responses, stimulus programs, mortgage relief programs etc which the US adopted were also OK, as were the unemployment insurance and support programs which cut in to help people through the worst of it.
But the US response to the situation was not the response that PK advocated - he would have had more stimulus, more borrowing, more protection form workers, more of all the things that would have softened the pain of the slump but would also left a bigger hole to recover from and slowed the return to a self sustain economic recovery.
The US response was a product of many inputs, from both sides of the political spectrum, and because of that it worked out well, I would say.
.
The key line is "nor was this an innocent mistake." There needs to be an honest accounting for the way conservatives parties in Europe and the European political and economic establishment used a crisis to attack the welfare state systematically. Until there's clearer recognition of that, there will be no consensus around the kinds of changes in labor laws, social services, and pension arrangements that might win consensus and strengthen, rather than further weaken, the labor market and the safety net. There's a sense, rightly, among unions, pensioners, and the young that these efforts are designed to lower their standard of living and support a more and more unequal society. We also need to confront honestly the issue of globalization: the unspoken assumption driving so-called reforms is often that the citizens of Western industrialized countries need to settle for some sort of standard of living halfway between what they now enjoy and what laborers in Honduras or Bangladesh now endure. That's a false assumption in an era when some are awash in the profits of globalization. I certainly hope that Mr. Tsipras scores a decisive victory on Sunday -- some of Greece's problems are specific to Greece, but this will send a strong message of populist discontent to Brussels and Berlin, and it's a message that, thankfully, doesn't come wrapped in the hate and xenophobia that other "populist" movements in Europe display.
8
Same old mythology.
In the real world, every single progressive nation in the OECD (including the US under Obama) is at some stage of population, economic and fiscal implosion. The difference between the US and the EU is the we are in an economic depression (a recession without a recovery) while the EU is in a recession within a depression.
The EU is not practicing "austerity" where governments voluntarily lower their taxes and spending as a matter of policy. That actually works rather well at creating economic growth. (See the US during the 1920s, the late 1940s and 1982-2000.) Rather, lenders have simply refused to continue giving money to a growing number of massively indebted progressive nations. They have run out of other people's money to spend and are stuck paying the interest on the debts they already incurred.
Krugman's solution is to simply have the EU central bank print monopoly money and lend it to these deadbeat nations to maintain government spending. To see how well that works, see Argentina and Zimbabwe.
In the real world, every single progressive nation in the OECD (including the US under Obama) is at some stage of population, economic and fiscal implosion. The difference between the US and the EU is the we are in an economic depression (a recession without a recovery) while the EU is in a recession within a depression.
The EU is not practicing "austerity" where governments voluntarily lower their taxes and spending as a matter of policy. That actually works rather well at creating economic growth. (See the US during the 1920s, the late 1940s and 1982-2000.) Rather, lenders have simply refused to continue giving money to a growing number of massively indebted progressive nations. They have run out of other people's money to spend and are stuck paying the interest on the debts they already incurred.
Krugman's solution is to simply have the EU central bank print monopoly money and lend it to these deadbeat nations to maintain government spending. To see how well that works, see Argentina and Zimbabwe.
5
Bart DePalma,
For any city, state, or nation (or family) to sustain a Republic, Democracy, Theocracy, Capitalism, Communism, Fascism, Dictatorship, Kingdom, Principality or any other form of government that they select and/or is imposed upon them, that nation still has to have their privately owned businesses continuously create sufficient new national wealth (and jobs) in their nation so that there is enough wealth for the taxing authority to confiscate a portion of that new national wealth and/or profit that was created by their private sector businesses, plus an additional amount taken through income taxes, sales taxes, property taxes, tariffs, etc., and other taxes by the government tax collectors to pay for their government activities.
Hopefully this can be done by each government without borrowing wealth from other nations to pay for their various wealth consuming government activities including any distribution of wealth confiscated from the wealth creators and then handed to other tax supported citizens.
Our President Obama seems to want to just continue borrowing more and more money from individuals in the industrialized BRIC nations by printing and selling more and more US Treasury Bonds to spend on more and more wealth-consuming government jobs and other wealth consuming government activities (in order to buy more votes) just like the European "Nanny States" are doing.
For any city, state, or nation (or family) to sustain a Republic, Democracy, Theocracy, Capitalism, Communism, Fascism, Dictatorship, Kingdom, Principality or any other form of government that they select and/or is imposed upon them, that nation still has to have their privately owned businesses continuously create sufficient new national wealth (and jobs) in their nation so that there is enough wealth for the taxing authority to confiscate a portion of that new national wealth and/or profit that was created by their private sector businesses, plus an additional amount taken through income taxes, sales taxes, property taxes, tariffs, etc., and other taxes by the government tax collectors to pay for their government activities.
Hopefully this can be done by each government without borrowing wealth from other nations to pay for their various wealth consuming government activities including any distribution of wealth confiscated from the wealth creators and then handed to other tax supported citizens.
Our President Obama seems to want to just continue borrowing more and more money from individuals in the industrialized BRIC nations by printing and selling more and more US Treasury Bonds to spend on more and more wealth-consuming government jobs and other wealth consuming government activities (in order to buy more votes) just like the European "Nanny States" are doing.
1
Another expertly crafted missive from the professor illustrating the perils of austerity in the throes of a recession awash in private debt. Point remade again. I was a bit taken, however, by Krugman's channeling of Spiro Agnew at the end - with those "archons of austerity" and "doyens of deflation".
1
Maybe he was hooking into the spirit of Mohammed Ali.
The leaders in Europe.."demanding the sacrifice by others".... sounds a whole lot like the democrat creed of "taking from someone else ("rich") and giving to someone else (poor, etc.).
Government almost always gets it wrong when they are trying to pick winners and losers.
Government almost always gets it wrong when they are trying to pick winners and losers.
4
The the capacity to play the rules of the game determine winners and losers, any honest winner will tell you.
1
Yup they are comforting the comfortable and afflicting the afflicted. Nothing to see here, move along folks.
Increasingly I think that economic policy should be viewed as a big pizza pie. Who gets how many slices and will the pie be bigger next year.
Republican policies result in a few getting more pizza pie slices Their policies do not create "growth" in the size of pie but in redistribution of the wealth creating machine to the few at the top. The growth in the pie that does occur for whatever reason benefits them.
They pay a lower effective tax rate than I do because they write the tax policy that benefits them. They get tax breaks for their jets and yachts which are classified as second homes.
Inequality sounds as if it is a consequence of merit and work rather than inheritance, the ability to influence tax policy and where you send your children to school. Yes there are a few entrepreneurs. Steve Jobs created a lot of millionaires in China who have factories who make Macs and I Phones while paying their workers a dollar and hour. WoooooWoooooo
Those who bought Apple stock got rich.
Then what?
Republican policies result in a few getting more pizza pie slices Their policies do not create "growth" in the size of pie but in redistribution of the wealth creating machine to the few at the top. The growth in the pie that does occur for whatever reason benefits them.
They pay a lower effective tax rate than I do because they write the tax policy that benefits them. They get tax breaks for their jets and yachts which are classified as second homes.
Inequality sounds as if it is a consequence of merit and work rather than inheritance, the ability to influence tax policy and where you send your children to school. Yes there are a few entrepreneurs. Steve Jobs created a lot of millionaires in China who have factories who make Macs and I Phones while paying their workers a dollar and hour. WoooooWoooooo
Those who bought Apple stock got rich.
Then what?
9
Michael,
US (and European) citizens should demand re-industrialization because only that will create a bigger economic pie, instead of US citizens demanding a larger and larger piece of the existing ever-shrinking economic pie that is left over.
Selling or mortgaging our remaining existing privately owned assets to foreigners in order to raise funds to pay for our federal government payrolls and other wealth consuming government activities will consume the wealth created by previous US generations.
A return of the higher paying manufacturing jobs to the USA is needed to re-achieve the economic opportunities for all working class people that were destroyed by the "FREE TRADE LEGISLATION" created in the last 20 years!
The USA was a great nation when we created wealth in the USA by making things and selling those things to other people in other nations who paid us for those things with their gold, silver, jewels, grain, oil, and other things of commercial value.
High paying manual labor jobs in manufacturing was once regarded as dignified, jobs were worth doing well and with pride, until the US government created all of these "Free Trade Agreements" and also until the US government granted "Most Favored Nation" trade status to several third world nations that economically required that US businesses relocate their jobs to third world nations when US citizens refuse to compete with third world pay scales!
US (and European) citizens should demand re-industrialization because only that will create a bigger economic pie, instead of US citizens demanding a larger and larger piece of the existing ever-shrinking economic pie that is left over.
Selling or mortgaging our remaining existing privately owned assets to foreigners in order to raise funds to pay for our federal government payrolls and other wealth consuming government activities will consume the wealth created by previous US generations.
A return of the higher paying manufacturing jobs to the USA is needed to re-achieve the economic opportunities for all working class people that were destroyed by the "FREE TRADE LEGISLATION" created in the last 20 years!
The USA was a great nation when we created wealth in the USA by making things and selling those things to other people in other nations who paid us for those things with their gold, silver, jewels, grain, oil, and other things of commercial value.
High paying manual labor jobs in manufacturing was once regarded as dignified, jobs were worth doing well and with pride, until the US government created all of these "Free Trade Agreements" and also until the US government granted "Most Favored Nation" trade status to several third world nations that economically required that US businesses relocate their jobs to third world nations when US citizens refuse to compete with third world pay scales!
2
It isn't difficult to draw a link between the austerity policies of Europe and the much too responsible theme on government spending reflected by the Republicans. The GOP tenets are a smaller and leaner federal spending policy which encourages personal enterprise and business. As your column points out, Mr. Krugman, this stingy spending policy only serves to keep money tied up in investments and savings instead of invested in the people of the country. The social safety net programs like SNAP, Social Security, Obamacare and Medicare are put directly into the pockets of consumers. This spending by the federal government ends up being circulated into the local economies which encourages wealthy creation by local businesses. This is why President Obama's "middle class" policies will only spur on a better economy by redirecting money that is stashed away by the extremely wealthy in stocks and tax shelters and putting it into real life people investments like community colleges and child care. This is a real jobs program which will only effect the wealthy in a minor way although helping the working class and the overall economy in a magnanimous way. It's clear that the Democrats have a superior economic plan for growth and prosperity for the U.S.
9
To those who would accuse PK as always beating the same drum, it should be pointed out that a mindset that is held in error, verging on the cliff of insanity, will only be helped by the constant assertion of what just is the case, in theoretical and empirical domains. Keep on keeping on PK!
10
Are these the same people who complain of PK's inconsistency when he changes his policy recommendations due to changing circumstances?
1
Economically speaking, bad news for Europe & China generally means good news for the United States.
When people equate deficits with irresponsibility, and austerity with responsibility, they might be missing an important factor which is often left out of the discussion: How the money is spent.
Another reader has pointed out that growth is often preceded by deficits, and recessions preceded by balanced budgets.
Why? Because investment in productive infrastructure (highways, airports, education, science and technology, ...) leads to growth and curtailing these things leads to stagnation.
However, running a deficit to fund current expenses (ie. Greece) is a path to failure.
The analogy to family finance would be that you borrow (a reasonable amount of) money to buy a house or start a business, but don't borrow money to pay for expensive restaurants or your cell phone bill.
Any discussion regarding government budgets must distinguish between these two types of expenditure.
Another reader has pointed out that growth is often preceded by deficits, and recessions preceded by balanced budgets.
Why? Because investment in productive infrastructure (highways, airports, education, science and technology, ...) leads to growth and curtailing these things leads to stagnation.
However, running a deficit to fund current expenses (ie. Greece) is a path to failure.
The analogy to family finance would be that you borrow (a reasonable amount of) money to buy a house or start a business, but don't borrow money to pay for expensive restaurants or your cell phone bill.
Any discussion regarding government budgets must distinguish between these two types of expenditure.
102
A good point Krugman intentionally ignores as the Obama stimulus was almost all made up of spending upon current expenses with little in the way of infrastructure, a point made repeatedly by Republicans at the time.
This is a huge issue. and I thank Brian for pointing this out. I grow blue in the face trying to get people to understand the distinction between between spending and investment.
You write that "family incomes remain well below their pre-crisis level." Not just below but "well below."
So what are middle-class people to think? Where is this recovery in which we don't participate? Obama offers himself as a champion of the middle class but I have read (in the news) that middle-class incomes have been stagnant or slowly sinking through his six years in office. Puzzling.
So what are middle-class people to think? Where is this recovery in which we don't participate? Obama offers himself as a champion of the middle class but I have read (in the news) that middle-class incomes have been stagnant or slowly sinking through his six years in office. Puzzling.
2
This is really just a further exacerbation of a problem that has been brewing for decades. The rich seized power over the economy during the late 1970s and early 1980s and the previous connection between productivity and wage growth came undone. They have become increasingly disconnected. This is not a problem of the last 6 years, or the last ten years, but of the last four decades. This is class warfare and the rich are winning.
4
A: Congress
5
You are very short sighted if you see only 6 years of stagnation on wages and income. The reality is most of the population has seen little or no rise in buying ability for decades.
4
i am sometimes troubled with the "save the middle class" rhetoric. it seems as though we are defining a class of people that are not rich but vote in sufficient numbers to be worthy of attention. fair enough, i am all for a system that works for people that will bother to get out and vote, but this approach leaves out a lot of people and more narrowly defines the type of people that deserve the benefits of a civil society. in my book that is a win for the paul ryans and mitt romneys of the world and a blow against society as a whole.
5
Pyrrhic victories of course.
2
It's simple. Civilization progresses when ALL of the people participate, and regresses when a small, self-serving minority controls the game. There's thousands of years of history (and human misery wrought at the hands of so-called "conservatives") to demonstrate the point.
Conservatism and 'right wing' thinking dominates the column that records the negative lessons of human history.
We build wealth TOGETHER, and the major lesson of history is that we ALL need to share in it in order to insure both progress and the survival of the species.
It's not just rational, its fair. The rare person that is worth 2, 3, 10, or even 400 times the economic value of another is a product of happenstance. And while happenstance dominates the physics of our universe, humans working together is the only known force in the universe that has any possibility of walking the gauntlet of the challenges that we ultimately face. Somehow, God or not, we have the tools, if not the will to beat the odds.
Conservatism and 'right wing' thinking dominates the column that records the negative lessons of human history.
We build wealth TOGETHER, and the major lesson of history is that we ALL need to share in it in order to insure both progress and the survival of the species.
It's not just rational, its fair. The rare person that is worth 2, 3, 10, or even 400 times the economic value of another is a product of happenstance. And while happenstance dominates the physics of our universe, humans working together is the only known force in the universe that has any possibility of walking the gauntlet of the challenges that we ultimately face. Somehow, God or not, we have the tools, if not the will to beat the odds.
2
To which I would only add that we name regimes by what they do not how they name themselves. My analysis indicates for instance that the two major so-called "Communist" regimes were actually bureaucratic oligarchies that used some variation of the "Leader of the Pack" principle to determine succession. Personally for example, I consider myself a constitutional conservative. In line with that I almost always vote for the Democrat. I await the shelling on that apparent contradiction.
1
Krugman overlooks the power of cultural memory; in Germany’s case, the wheelbarrows of Deutsch Marks required for a trip to the grocery store; they being a consequence of the disastrous Versailles treaty. None of us reading this actually remember the wheelbarrows, but the image is seared into the consciousness of all who have paid the least bit of attention to the rise of the Third Reich, and into the cultural memory of all German decision makers.
That doesn’t mean that Team Merkle is right. They are wrong, and the recent US experience proves it.
What’s important is to recognize the power of cultural memory, and the necessity of dealing with it. Until the Germans deal with theirs, the European economic crisis will not pass. Closer to home, the cultural memory – slightly older and much stronger – is the practice of chattel slavery impressed on African captives and their heirs. We are nowhere near finished paying for that debacle.
That doesn’t mean that Team Merkle is right. They are wrong, and the recent US experience proves it.
What’s important is to recognize the power of cultural memory, and the necessity of dealing with it. Until the Germans deal with theirs, the European economic crisis will not pass. Closer to home, the cultural memory – slightly older and much stronger – is the practice of chattel slavery impressed on African captives and their heirs. We are nowhere near finished paying for that debacle.
16
Ms. Merkel lived under East German communism in her formative years. Americans who were children during the Great Depression developed similar attitudes about money.
5
The 'Third Reich' was a reactionary, conservative, 'right wing' regime that leverage an opportunity provided by other conservative, 'right wing' regimes that created economic repression in order to 'spank' Germany for WWI.
So, the Reich was actually the result of a dominant (and typically anal, short sighted, emotional driven, and self-serving) 'right wing' solution to a complex human problem.
Conservatives like business because business produces certainty by operating under a fixed set of rules that isolates it from reality (at least for the reality of the human condition, but only for a period of time).
Contrary to the attempts (by religion) to make all of life certain, there is no current answer to the random walk of the physics of our universe. If there is ever to be an answer, it will require ALL of us working together ad infinitum to find that answer. The possession of furs, diamonds, cars, gadgets, yachts, private jets, and multiple houses around the world aren't part of the answer, rather they are just the product of random bubbles of excess and overreach that naturally result when society (as a whole) is on a binge of progress.
Sadly, that excess and overreach always seems to end in an anal frenzy to protect the stuff rather, and the over valued minority than the species as a whole. Only further evolution can take care of that current defect in our approach to survival.
So, the Reich was actually the result of a dominant (and typically anal, short sighted, emotional driven, and self-serving) 'right wing' solution to a complex human problem.
Conservatives like business because business produces certainty by operating under a fixed set of rules that isolates it from reality (at least for the reality of the human condition, but only for a period of time).
Contrary to the attempts (by religion) to make all of life certain, there is no current answer to the random walk of the physics of our universe. If there is ever to be an answer, it will require ALL of us working together ad infinitum to find that answer. The possession of furs, diamonds, cars, gadgets, yachts, private jets, and multiple houses around the world aren't part of the answer, rather they are just the product of random bubbles of excess and overreach that naturally result when society (as a whole) is on a binge of progress.
Sadly, that excess and overreach always seems to end in an anal frenzy to protect the stuff rather, and the over valued minority than the species as a whole. Only further evolution can take care of that current defect in our approach to survival.
i'd just mention two things: first, that Europe's economies are heavily entwined with our own, whether they ir we like it or not.
second, a lot of folks seem to think that Europe is all leftist and socialistic. This is about forty miles and a steel door from reality: Germany's gov isn't even close to that, Berlusconi was far right, and so on.
second, a lot of folks seem to think that Europe is all leftist and socialistic. This is about forty miles and a steel door from reality: Germany's gov isn't even close to that, Berlusconi was far right, and so on.
3
It is now, more than ever a global economy, And the world wide outbreak of 'right wing' fear and frenzy is a direct result of the fact that great change is upon us (probably greater than the changes wrought by the industrial revolution).
Conservatives don't like change...........and it doesn't matter if they're Christians, Muslims, or Pagans. Change and the potential that their carefully constructed, rule-based, personal delusion of tranquility will be disrupted drives them nuts!
Ranting helps them to vent and adjust to the reality that the sky is not falling, but, historically, there is always the potential that they will go off the rails and drive the world to one conflagration or other in order to extract pay-back whenever history requires them to get off their arses, reexamine their rule-base, and progress!
Conservatives don't like change...........and it doesn't matter if they're Christians, Muslims, or Pagans. Change and the potential that their carefully constructed, rule-based, personal delusion of tranquility will be disrupted drives them nuts!
Ranting helps them to vent and adjust to the reality that the sky is not falling, but, historically, there is always the potential that they will go off the rails and drive the world to one conflagration or other in order to extract pay-back whenever history requires them to get off their arses, reexamine their rule-base, and progress!
... and the hard times in Europe will, sadly but inevitably, lead to the scapegoating of minority groups. To quote Chris Rock, "that train is never late."
5
Only Paul Krugman wood call food stamps a success story. I suppose the Roman Emperors who threw bread to the crowds felt the same way. Now about those deflated footballs....
I should also mention that the Clinton prosperity occurred after the GOP swept both house of Congress in 1994 and Hillarycare was shelved (until 2009).
I should also mention that the Clinton prosperity occurred after the GOP swept both house of Congress in 1994 and Hillarycare was shelved (until 2009).
7
Rational economists attribute the Clinton expansion to the transfer of internet technology from the government to the private sector via enabling legislation sponsored by Al Gore. That is what gave you the capacity to post here.
7
Two points: 1) food stamps have been a great success, if you measure success by the number of hungry people who are fed - who do not starve to death and 2) the Western Roman Empire lasted over 400 years in part by giving out food to the masses. I'd call a run like that a huge success. How long has the U.S. been around? 238 years through 2014. Heck, the U.S. should consider itself lucky if it does as well as Rome when its time is up.
By the way, what policies, besides closing down the government, did the GOP controlled congress of 1994 initiate that could possibly be credited with sparking the Clinton boom? I really 'wood' like to know.
By the way, what policies, besides closing down the government, did the GOP controlled congress of 1994 initiate that could possibly be credited with sparking the Clinton boom? I really 'wood' like to know.
5
U r staying with yr story I see. Well, I remember Reagan n power and seeing the aircraft co. company I worked for going from a robust 20,000 down to a funereal 5,000 within months (to make sure inflation was reduced). Not sure what science says on this but I have my story too.
5
There is another systemic difference in the EU that Krugman is silent on - the fact that there are national governments, budgets and tax authorities but one currency. So the EU is not entirely comparable, particularly considering that most of the national governments are running deficits above agreed upon limits, and the problems within the nations are different and tax policies different.
I also note how inherent Krugman's short run thinking is on excessive monetary policy and deficit spending. I'm not convinced that with a national debt of 100% of GDP, excessive regulation strangling business startups (more business were shut down last year than started), a monetary policy that rewards those who have capital to invest at the expense of those who don't (laborers), a squeezed middle class, is something to emulate.
In the long run, I can guarantee that the current situation is unsustainable. The problem with his thinking is that one day we're going to need to rein in the spending and i don't see any evidence that there will ever be a political consensus to do that given the incentives for politicians to spend the taxpayers money. So the alternatives is to inflate, thereby destroying savings and further eroding the standard of living of the little guy who's wages won't keep up. In other words, we're making progress until we don't. At which point it will be too late.
I also note how inherent Krugman's short run thinking is on excessive monetary policy and deficit spending. I'm not convinced that with a national debt of 100% of GDP, excessive regulation strangling business startups (more business were shut down last year than started), a monetary policy that rewards those who have capital to invest at the expense of those who don't (laborers), a squeezed middle class, is something to emulate.
In the long run, I can guarantee that the current situation is unsustainable. The problem with his thinking is that one day we're going to need to rein in the spending and i don't see any evidence that there will ever be a political consensus to do that given the incentives for politicians to spend the taxpayers money. So the alternatives is to inflate, thereby destroying savings and further eroding the standard of living of the little guy who's wages won't keep up. In other words, we're making progress until we don't. At which point it will be too late.
5
Remember what JMK said about the long run?
2
Little guys have no savings.
1
It is notable that Republicans would have us become more like the EU, by killing the Federal Reserve, along with the necessary and rational management of monetary policy.
It is also notable that ALL of the repressed world economies are driven by the conservative ideal of "free market" driven corrupt local and regional governments that are dominated across generations by a privileged few. It always works for that privileged few, but not for the country's or for the majority of their population.
Throughout history, conservatives have always loved the "certainty" that will result when they are King. That would be OK, if they also realized that the "free market" in Kingdoms only works if ALL of the subjects of the Kingdom have the means to compete with the King (they, of course, hate that, and do everything that they can to suppress that idea).
It is also notable that ALL of the repressed world economies are driven by the conservative ideal of "free market" driven corrupt local and regional governments that are dominated across generations by a privileged few. It always works for that privileged few, but not for the country's or for the majority of their population.
Throughout history, conservatives have always loved the "certainty" that will result when they are King. That would be OK, if they also realized that the "free market" in Kingdoms only works if ALL of the subjects of the Kingdom have the means to compete with the King (they, of course, hate that, and do everything that they can to suppress that idea).
If nothing else, this column paints a terrible picture of Republican economic policies and for the next two years at least, we are back in the same no win situation. If we have ever been shown an excuse to change back to Democratic leadership, this is it, and we will have a two year warning period to see. The first step is to be rid of Citizens United and then find some way to undo the wealthy-rule SCOTUS pronouncements.
Europe has its own set of problems and we badly need to avoid the same traps.
Europe has its own set of problems and we badly need to avoid the same traps.
8
I think you're just right to point out the 2 year warning time limit. But then again the last election would have had a different outcome with a higher voter turnout. Fortunately the 2016 will draw a much larger percentage of the progressive and liberal vote. It's really time to give the liberals the credit they are due: the economy ALWAYS does better with Democrats in charge, particularly in a UNITED effort. It's this last part that didn't happen in the '14 midterm.
1
Obama should probably watch his strutting. He's just heading into 2 years of a republican Congress that's just itching to dive into the austerity pool to chum with the Eurozone folks and extoll the virtues of drowning. What's really funny is that Grover Norquist is waiting in the pool waving them in, to do the actual drowning.
I'm really hoping for 2 years of dysfunction that will keep the GOP from taking the whole country for a swim.
I'm really hoping for 2 years of dysfunction that will keep the GOP from taking the whole country for a swim.
7
Europe obviously doesn't have a makework system for funding health care through multiple private insurance companies. Maybe that is the crucial difference.
8
European countries have different means to provide health insurance. Germany for instance has multiple insurance companies plus private insurance for those that want it.
Is there a health care system in the world that spends what the US does on executive pay?
4
Professor,
I have been saying for years that you have been calling this economic situation right for years. If the government had listened to you and spent more money on stimulus, we would be better off now in this country. If the Europeans had listened to you, they would be much better off.
I wonder when these governments are going to wise up and listen to your wise counsel.
I have been saying for years that you have been calling this economic situation right for years. If the government had listened to you and spent more money on stimulus, we would be better off now in this country. If the Europeans had listened to you, they would be much better off.
I wonder when these governments are going to wise up and listen to your wise counsel.
21
i agree. three cheers for professor krugman who has been accurately predicting economic outcomes for the past 10 years. a genius!!!
1
Dr. Krugman hasn't addressed (at all) the impact of exogenous variables on the US economy: massive increase of oil production. And what about outsourcing how much has it hurt us and how much has it slowed, easing the pain. I don't understand the US had Social Security business. Spain has its own version of Social Security, so does Greece.
1
The point is that federal programs meant that states severely impacted by the housing bust, and the poorest states, were not having to slash their state budgets in order to prevent their own inhabitants from falling into penury and not receiving medical care (most states did, of course, slash their budgets, but since the largest social welfare programs are federal, they were not affected). In contrast, wealthy countries like Germany were and are not paying into a federal European social security system that benefits poor elderly people in Spain and Greece. Thus, Spain and Greece had to slash their pension and health care systems, while Florida's citizens still benefited from federal outlays.
5
Yes they do but when a country gets in rough waters from a fiscal standpoint like Greece did, their means to finance these social welfare systems is compromised and, when that happens, unlike in the US, there are no mechanisms in the EU to transfer funds from one region of the union to another.
3
The republicans, the one percent, and probably the top 10% of income earners in the US dwell in the same comfort category as their European counterparts, and much like their European brethren believe the “others” should bare the brunt of the sacrifices resulting from the 2008 financial meltdown.
Obviously, the best evidence for pushing the fiscal “pain” down to those least able to shoulder the burden was the elimination of long-term unemployment insurance, and cuts in SNAP benefits. Ironically, with all the calls for European austerity, most Europeans still have a much broader safety net than the average American.
Additionally, the republicans demonstrated their disdain for lower wage earners when they would only agree to a one-year extension of the 2011 payroll tax cut if Obama kept the 2003 Bush tax cuts in place.
Moreover, the continued dominance of the republicans at the state level, and the resulting unwillingness to expand Medicaid for low wage earners in many “Red” states is indicative of a public mindset that even those who make up Romney’s 47% of “takers,” do not believe he was referring to them when he made this statement. Inexplicably these same individuals will vote for an increase in the minimum wage, yet continue to elect politicians opposed to this measure, which, if nothing else, demonstrates the cognitive dissonance of the American electorate.
Obviously, the best evidence for pushing the fiscal “pain” down to those least able to shoulder the burden was the elimination of long-term unemployment insurance, and cuts in SNAP benefits. Ironically, with all the calls for European austerity, most Europeans still have a much broader safety net than the average American.
Additionally, the republicans demonstrated their disdain for lower wage earners when they would only agree to a one-year extension of the 2011 payroll tax cut if Obama kept the 2003 Bush tax cuts in place.
Moreover, the continued dominance of the republicans at the state level, and the resulting unwillingness to expand Medicaid for low wage earners in many “Red” states is indicative of a public mindset that even those who make up Romney’s 47% of “takers,” do not believe he was referring to them when he made this statement. Inexplicably these same individuals will vote for an increase in the minimum wage, yet continue to elect politicians opposed to this measure, which, if nothing else, demonstrates the cognitive dissonance of the American electorate.
15
Something similar to what happened in Europe also happened in the U.S. When the economy headed into the tank, state and local governments cut back drastically. Required, by "virtuous" laws and, in some cases, state constitutions to balance their budgets, the states helped to send the nation into a deep recession. Thousands of teachers and other government employees were laid off at once. Cities curtailed spending, too.
So, Obama came into office dragging the ugly duckling of the G.W. Bush recession and proposing to prevent further damage by pumping up spending by the federal govt. Oh, no! This was the evil debt threat. Republicans lost their lunch, and their composure. In this case, it was debt well taken on, because the failure to do so would have cost multiple times what was being put on the books. Otherwise, failure to boost spending might have cost us and the world trillions of dollars.
Recessions, in some major degree, are mysterious things. It is sort of like when cars start slowing down on the Interstate absent any obstruction: all the other cars must slow down, too, and the next thing you know there is a 20 mile back-up of slow moving cars. When people stop spending, other people have less to spend and everyone gets scared. Keynes was entirely right when he said the government is the only institution with enough power, and the ability to make a positive decision, to have any impact. The rest of us run around like live chickens at a chicken cookout.
Doug Terry
So, Obama came into office dragging the ugly duckling of the G.W. Bush recession and proposing to prevent further damage by pumping up spending by the federal govt. Oh, no! This was the evil debt threat. Republicans lost their lunch, and their composure. In this case, it was debt well taken on, because the failure to do so would have cost multiple times what was being put on the books. Otherwise, failure to boost spending might have cost us and the world trillions of dollars.
Recessions, in some major degree, are mysterious things. It is sort of like when cars start slowing down on the Interstate absent any obstruction: all the other cars must slow down, too, and the next thing you know there is a 20 mile back-up of slow moving cars. When people stop spending, other people have less to spend and everyone gets scared. Keynes was entirely right when he said the government is the only institution with enough power, and the ability to make a positive decision, to have any impact. The rest of us run around like live chickens at a chicken cookout.
Doug Terry
7
Democratic Party: Two Years
Republican Party: Six Years.
Republican Party: Six Years.
3
Europe and America are actually hugely different and the solution for one is like pushing on a piece of string for the other. The US (where roughly 25% of the economy is Government spending) needs more Government spending in hard times not austerity. Europe where half the economy is Government spending needs to reduce that number in hard times and inject money into the economy through (initially) unfunded tax cuts (then they need to cut spending as the economy improves).
This of course ignores the problem that Europe asking for a loan to fight of a recession or indeed depression is like your neighbor who has a mortgage, credit card debt, student debt, alimony payments to three ex wives and kids in private school asking the bank for a personal loan to start a new business. Risky...
This of course ignores the problem that Europe asking for a loan to fight of a recession or indeed depression is like your neighbor who has a mortgage, credit card debt, student debt, alimony payments to three ex wives and kids in private school asking the bank for a personal loan to start a new business. Risky...
1
ANyone who compares sovereign government finances to family finances has no understanding of how the system works.
5
Adam,
Federal government spending is 25% of the GDP, but if you add state and local government spending the total is around 42%.
What would happen if government spending was 90% of the GDP?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
Federal government spending is 25% of the GDP, but if you add state and local government spending the total is around 42%.
What would happen if government spending was 90% of the GDP?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
1
How's about some economic bubble gum for all! That way we can have someone step on it unbeknownst to them. Not to sound cheesy but we can wash it out into the sea eventually if only we were allowed. Ecology first please!
People complain that Krugman has persisted like a prophetic voice from the wilderness warning a stiff-necked world about how those who sew austerity will reap deflation and hard times. Yet every week as his predictions come true the same people bring up all sorts of ideas about the gold standard and printing money and how Europe's situation is different. But the facts bely a very simple Keynesian idea: governments should increase spending rather than cut spending during a depression, and the sooner they do it the sooner they recover. The remarkable thing is that after 5-6 years so many people still listen but don't see it.
23
DeltaBrain
All nations need to increase their non-government taxpayer funded GDP to improve their credit ratings by creating wealth, not by spending existing wealth on government activities that consume existing national wealth, so that their government can confiscate some of that newly created wealth to pay for more infrastructure, wars, police, firemen, etc., without borrowing money.
Nations like the USA that increased their GDP by their government borrowing money and spending that same money on government activities did not create any additional new taxable wealth in that nation.
Austerity will then be forced onto all US citizens when the federal government deficit spending destroys the US economy with their US federal government deficit spending, then all the government jobs, government services, and other government programs at every level will disappear, and this nation will then evolve into something resembling Somalia.
All nations need to increase their non-government taxpayer funded GDP to improve their credit ratings by creating wealth, not by spending existing wealth on government activities that consume existing national wealth, so that their government can confiscate some of that newly created wealth to pay for more infrastructure, wars, police, firemen, etc., without borrowing money.
Nations like the USA that increased their GDP by their government borrowing money and spending that same money on government activities did not create any additional new taxable wealth in that nation.
Austerity will then be forced onto all US citizens when the federal government deficit spending destroys the US economy with their US federal government deficit spending, then all the government jobs, government services, and other government programs at every level will disappear, and this nation will then evolve into something resembling Somalia.
1
Thankfully that's not what has happened. I agree with much of what you say in theory, except that government stimulus can and does create new taxable wealth. That's Krugman's point: your kind of virtue shrinks the economy.
'the Obama stimulus of 2009-10 helped limit the damage from the financial crisis, but it was too small and faded away far too fast.'
--and Obama has done nothing since.
--and Obama has done nothing since.
2
In the US, government power is divided between the branches of government, and in 2011, Republicans regained control of the House of Representatives. Maybe you've heard of this?
And then Republicans refused to cooperate with any measures that would help the economy recover in hopes that voters would blame the poor economy on Obama and vote him out of office in 2012. Fortunately, voters were smarter than that.
And then Republicans refused to cooperate with any measures that would help the economy recover in hopes that voters would blame the poor economy on Obama and vote him out of office in 2012. Fortunately, voters were smarter than that.
7
Not that he hasn't tried!!!!!
6
Dear Ichigo, read your history book again.
Obama proposes additional stimulus, the House disposes: the effort to pass additional stimulus would take valuable time which was better spent by Boehner and his cohorts on repealing Obamacare, and repealing Obamacare, …….
Obama proposes additional stimulus, the House disposes: the effort to pass additional stimulus would take valuable time which was better spent by Boehner and his cohorts on repealing Obamacare, and repealing Obamacare, …….
3
Krugman has successfully made the following point: The Europeans disregarded mainstream macroeconomic thinking while their American counterparts did not fully embrace it, which explains both the stagnation there and delayed recovery here.
Unfortunately, politicians who do not necessarily find powerful logic and evidence persuasive. It is the tragedy of unpersuasive power.
Unfortunately, politicians who do not necessarily find powerful logic and evidence persuasive. It is the tragedy of unpersuasive power.
17
Agreed that he has successfully made that case -- and he's made it about 20 times over the past year or so. We all get it, Dr. K. The U.S. went "too small" and Europe screwed up entirely and no one now seems to want to pay attention to the facts.
How about a politically realistic suggestion for the way forward?
How about a politically realistic suggestion for the way forward?
There is none, unless Republicans vote to increase spending AND cut taxes, as Reagan did.
1
Sen. Mike Lee now predicts that the price of a gallon of gasoline will be 46 cents on January 20, 2018.
I am amazed that Europe who is usually more intelligent, more socialist, less dogmatic followed the US right wing policy?
9
It is my belief that Europe followed this policy because, above all else, Europe is about the business of protecting the established wealth of those who have established wealth. If one looks at what goes on in Europe in this light, many other things become clear.
Even the socialist policies were aimed at this objective: with the threat of communism rising in the east and "the masses" upset by the losses and hardships of two massive wars in the 20th century, the powers that be decided to buy off the "common folk". So, in Europe one is born into a certain economic level, indeed class, and paid to stay there with reasonable wages, long vacations and thick retirement benefits+health care. Our system is more disruptive of individual comfort and collective peace (by a long shot), but the right in America wants to do essentially the same thing here: protect the established interests. Recessions are not necessarily seen as bad things, as long as they don't last too long or go too deep.
Doug Terry
Even the socialist policies were aimed at this objective: with the threat of communism rising in the east and "the masses" upset by the losses and hardships of two massive wars in the 20th century, the powers that be decided to buy off the "common folk". So, in Europe one is born into a certain economic level, indeed class, and paid to stay there with reasonable wages, long vacations and thick retirement benefits+health care. Our system is more disruptive of individual comfort and collective peace (by a long shot), but the right in America wants to do essentially the same thing here: protect the established interests. Recessions are not necessarily seen as bad things, as long as they don't last too long or go too deep.
Doug Terry
4
Don't be amazed. They did not follow austerity in any meaningful way.
http://www.zerohedge.com/news/2014-10-23/somone-really-needs-explain-eur...
http://www.zerohedge.com/news/2014-10-23/somone-really-needs-explain-eur...
2
In Europe the German's played the role of rich Republicans because they were doing fine. They weren't thinking about what was best for Europe in the long term but what was best for Germany in the short term.
1
In 15 minutes, four smart people can figure out a thriving economic plan as long as none of them is a politician. But when one's livelihood relies on the success of some at the expense of others, that person is likely to make self-serving choices. If there is any science to economics, half our government will deny it.
14
I'm wondering if the lack of runaway inflation (a good thing) is due to the depressed wages and lack of labor's bargaining power (bad things). Have European wages remained as depressed as ours? Can anyone comment?
3
Funny how people with savings fear inflation.
6
It's hard for some of us to see this austerity dichotomy between Europe and the United States that Dr. Krugman sees.
Medicare Advantage will be cut. Food Stamps were cut. NASA has been cut to the bone with Earth observing funds, funds for astrophysics, Planetary Science and education cut approximately 186 million. There have been cuts to Defense (yeah!), the infrastructure has been starved for funds for decades as it rots, funds for research have been cut. The Federal work force has been cut so deeply that morale is at an all time low. Funds for our National Parks have been cut, personnel for our National Parks cut and more public acres opened to privatization than ever.
The list goes on and on.
Republicans have had Americans thinking for decades that they were bankrupt and couldn't afford to pay for anything except, of course, a bloated, corrupt and inefficient Defense Department. And tax cuts.
It's hard to see how European austerity was any worse than what we here in the US have suffered.
Medicare Advantage will be cut. Food Stamps were cut. NASA has been cut to the bone with Earth observing funds, funds for astrophysics, Planetary Science and education cut approximately 186 million. There have been cuts to Defense (yeah!), the infrastructure has been starved for funds for decades as it rots, funds for research have been cut. The Federal work force has been cut so deeply that morale is at an all time low. Funds for our National Parks have been cut, personnel for our National Parks cut and more public acres opened to privatization than ever.
The list goes on and on.
Republicans have had Americans thinking for decades that they were bankrupt and couldn't afford to pay for anything except, of course, a bloated, corrupt and inefficient Defense Department. And tax cuts.
It's hard to see how European austerity was any worse than what we here in the US have suffered.
19
You may wish to read about Spain, Greece, and England at least, and rethink this. Track the GDPs and unemployment rates, as well as their debts.
1
"Food Stamps were cut" The $80B in 2012 was a record, and probably double the amount from 5 yrs earlier. And doesn't "bloated, corrupt and inefficient" describe just about every federal institution? How 'bout the EPA? oops, not your 'ox'?
1
Many commenters misunderstand (perhaps some purposefully) the point Krugman is trying to make. The contrast between Europe and the US is not that the US has been following a wonderful economic policy compared to Europe but simply that it has not done as many wrong things as Europe. The push for government budget deficit reduction was as wrong headed here as in Europe, but the US did have an inadequate fiscal stimulus at the beginning of the crisis and Europe had none. And the actions by the Federal Reserve kept deflation at bay while the actions by European central bank were far too timid. The biggest mistake by European policy makers was to conflate the Greek problem (which was government spending out of control) with the problems in the rest of the Euro zone (which was too much private debt).
21
I think most people got all that. It's just that the gap between the respective stupidities and irresponsible behavior between American and European responses were not great enough to warrant the emphasis Krugman gave it. It was simply a bad choice on his behalf. I hope not to see it again.
Both the United States and Europe are large collections of people who have less in common all the time. They both have tried to buttress decline by enacting a plethora of social programs that now work in countless ways to cancel themselves out. Why is there now 51 percent of public school students on free lunch programs in America after 50 years of The War on Poverty? There is no recovery in the United States and the middle-class knows it, even though they are told differently by the politicians who have no reason to level with them. In Europe we are seeing the death of the EU right in front of our eyes from a thousand cuts not their unwillingness to print money as fast as some economists would hope. We shall see how things work out in the next few years and if dishonesty really can be the catalyst to recovery. If dishonesty was money the central planning bankers on both sides of the pond would be rolling in it. Oh, but they are, it's just the little people who are suffering.
7
Central bankers should be worried that their jobs could be eliminated by computer algorithms too.
3
Could it be that the more the govt spends to help the disadvantaged,
the less the private sector pays those same people for their labors,
because they can get away with it?
How do we rebalance this without unions?
Lester Lipsky
the less the private sector pays those same people for their labors,
because they can get away with it?
How do we rebalance this without unions?
Lester Lipsky
1
How hard was it for President Obama to not drop the mic and "moon walk" off the stage at the STOU? How hard must it have been for the Republican to sit there and take all of those successes?
23
If you believe half of what was said in the SOTU, you need to up your game in critical thinking and fact checking.
I have a couple of neighbors similarly situated. Both facing downturns, one tightened their belt and no new car, not eating out as much, no new furniture and no cruise this year.
The other is living high on the hog - new car, vacation to Spain, eating out as much as before. Asked me for a loan he other day and I asked why he didn't go to the bank. He said he had way too many bank loans now and no interest there anymore. What about credit cards? Nope, all maxed out. But I said nah. But he must have found somebody because I saw Mary coming home with full shopping bags.
I'm obviously not a Krugman genius because I'm thinking there is something real ugly on the horizon for that family. Or for a country that doubles its debt every 10 years, for that matter.
But as a similar genius once said: "What me worry?"
The other is living high on the hog - new car, vacation to Spain, eating out as much as before. Asked me for a loan he other day and I asked why he didn't go to the bank. He said he had way too many bank loans now and no interest there anymore. What about credit cards? Nope, all maxed out. But I said nah. But he must have found somebody because I saw Mary coming home with full shopping bags.
I'm obviously not a Krugman genius because I'm thinking there is something real ugly on the horizon for that family. Or for a country that doubles its debt every 10 years, for that matter.
But as a similar genius once said: "What me worry?"
19
People who cannot tell the difference between the finances of a huge country, that lasts a very long time, that can print as much money as it needs, & whose debt is in that currency and the finances of their neighbors should do a little research and stop opening their mouth and putting their foot far down their throat.
Here are some questions you might look at, Bob:
As a percentage of GDP, the debt after WWII was about 40% larger than today's. When did we pay that off or even down?
What has happened every time we eliminated deficits for more than 3 years and significantly paid down the debt?
When in all of our history has too much debt negatively impacted our economy?
As the economy grows, the private sector needs more and more money to function. Where does this new money come from?
Here are some questions you might look at, Bob:
As a percentage of GDP, the debt after WWII was about 40% larger than today's. When did we pay that off or even down?
What has happened every time we eliminated deficits for more than 3 years and significantly paid down the debt?
When in all of our history has too much debt negatively impacted our economy?
As the economy grows, the private sector needs more and more money to function. Where does this new money come from?
39
It's a fallacy to think that household budgeting is equivalent to national budgeting. Government, through deficit spending, is the only entity that can spare the brunt of a depression from households.
23
There are several educational institutions in and near Atlanta. I strongly recommend taking Econ 101 in your local university or community college in order to understand the difference between individual and national/public debt, spending and savings, and, more fundamentally, why they are not comparable.
22
Economics seems to be so dismal a science because its practicioners are incapable of performing a basic separation of variables familiar to students of higher mathematics.
They literally refuse to apply Ohm's Law to the flow of money.
They literally refuse to apply Ohm's Law to the flow of money.
3
Thats why you aren't a economist. ohms law? yeah, electricity is much like money.
2
Let's think about this analogy. I=V/R. Current is the economy. Resistance is government regulation. Voltage is what? Capital? I don't think Ohm was much of an economist.
1
Right, Steve.
http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-...
and
http://www.slideshare.net/MitchGreen/its-what-you-know-for-sure-that-jus...
give a nice graphical explanation.
http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-...
and
http://www.slideshare.net/MitchGreen/its-what-you-know-for-sure-that-jus...
give a nice graphical explanation.
2
Much luv to you Paul, sincerely, but you always seem to go a speck too far in your opinionizing. Still, can't help but agree with your trajectory.
2
I would like to make another argument against the current theory that the people need more money, higher wages, more jobs, in order to get the economy to recover better. Business sentiment today says industry doesn't care for getting more sales than it is getting now. It is saying there is already a glut of goods being produced and sold.
It is not saying it wouldn't welcome any increase in demand, and if there were a way to get more money to the people in the middle or lower income brackets, that would increase demand, and business would welcome that.
But current ideas of how to get that money for those income brackets has amounted to gross interference with any well-functioning economy.
Socialist micromanagement and income redistribution are not compatible with a profit-based economy. And without actually making the economy somewhat like they had in the U.S.S.R., they couldn't do that.
So the price of saving the economy would be tyranny. The only other thing to do however, the government is not letting happen. Government allows no alternative to tyrannical answers, and that is motivated by more and more collusion of government with business, wherever they can make that happen. And that's been destroying the very freedoms we used to have and cared about in America
Business sentiment says it doesn't care to sell more. It could if it were to lower prices. What causes it not to do that, except more of the same government control that hasn't helped?
It is not saying it wouldn't welcome any increase in demand, and if there were a way to get more money to the people in the middle or lower income brackets, that would increase demand, and business would welcome that.
But current ideas of how to get that money for those income brackets has amounted to gross interference with any well-functioning economy.
Socialist micromanagement and income redistribution are not compatible with a profit-based economy. And without actually making the economy somewhat like they had in the U.S.S.R., they couldn't do that.
So the price of saving the economy would be tyranny. The only other thing to do however, the government is not letting happen. Government allows no alternative to tyrannical answers, and that is motivated by more and more collusion of government with business, wherever they can make that happen. And that's been destroying the very freedoms we used to have and cared about in America
Business sentiment says it doesn't care to sell more. It could if it were to lower prices. What causes it not to do that, except more of the same government control that hasn't helped?
3
Monetarist economic policy is the antithesis of socialist policy with its huge bureaucracies and it was brought into prominence by Milton Friedman; a very conservative economist whose ideas are now widely accepted (see the QE's used throughout the industrial world. Even Krugman's notions are basically monetarist.
Yup. As with Roosevelt, question for the Obamas and the Roosevelts (Teddy, too, by the way) is always this: how do we save capitalism from the consequences of capitalism?
It's an inherently unbalanced and destructive economic system; people who approve of it simply describe the unbalance and destructiveness as "innovative energy," and "progress," and "the business cycle."
Myself, I'd rather have socialism. The only minor technical detail is that a) I hven't the foggiest how to get there from here delibrately, and b) with some notable exceptions such as Norway, pushing socialism don't seem to turn out so good.
It's an inherently unbalanced and destructive economic system; people who approve of it simply describe the unbalance and destructiveness as "innovative energy," and "progress," and "the business cycle."
Myself, I'd rather have socialism. The only minor technical detail is that a) I hven't the foggiest how to get there from here delibrately, and b) with some notable exceptions such as Norway, pushing socialism don't seem to turn out so good.
2
Balderdash! Just look at 1946 - 1973. Deficit spending which increased the already large debt 75% in that period provided money for the masses without tyranny.
3
More of the same from Paul Krugman: The Government should be spending your money for you, because it does it better. Because a group of people who are great at winning popularity contests and not much else clearly know much better than the average American how that average American's income should be spent, and therefore is entitled to take wealth they did not create, and spend it on their preferred "winners", thus making everyone else a "loser".
The end result? Over the last 100 years of this typical policy, the dollar has declined 95% in its value. All because Paul Krugman believes that inflation is good, and deflation is bad.
Here's an example of the "bad": Computers and cell phones cost less now than they did 20 years ago. Paul, why have you not gotten on your soapbox and decried that computers and cell phones should cost more?
The end result? Over the last 100 years of this typical policy, the dollar has declined 95% in its value. All because Paul Krugman believes that inflation is good, and deflation is bad.
Here's an example of the "bad": Computers and cell phones cost less now than they did 20 years ago. Paul, why have you not gotten on your soapbox and decried that computers and cell phones should cost more?
4
Karlos: You forgot that digital computers were initially funded by the US government, as was the internet. No private firm would take the chance of investing in these at the start of their development. A further investment is infrastructure. This is the responsibility of government. A power grid to take advantage of localized power sources is needed to free the US from the tyranny of oil. Only the government can initiate this.
9
It strikes one as odd that if the dollar has actually lost 95% of its value, the dollar somehow manages to buy so very much more by way of computers and the like than ever before.
1
Computers, cell phones & other consumer electronics cost less for the same reasons other imported goods cost less. That is of course the reduced labor & environmental cost transfer to countries like China with its terrible working conditions, rising environmental degradation & one party tyranny. The wealthy & big business did this deliberately since it wasn't possible anymore to easily get away with slave labor & poisoned air, water & land. This so called globalization is responsible for middle class decline while income inequality grows world wide. We've traded a living wage for many of our citizens so wealthy people can get even more wealthy & we can have a "new" cell phone every 6 months while trading away affordable housing, pensions & working infrastructure.
Today, Paul Krugman says Europe is in a downward spiral. A few months ago, he was touting the resiliency and superiority of European welfare states.
http://www.nytimes.com/2014/05/26/opinion/krugman-europes-secret-success...
If Krugman is going to take different sides of the argument to support whatever political point he is trying to make on a particular day, then of what value are his opinions?
http://www.nytimes.com/2014/05/26/opinion/krugman-europes-secret-success...
If Krugman is going to take different sides of the argument to support whatever political point he is trying to make on a particular day, then of what value are his opinions?
4
Apparently, you are unable to grasp the difference between unemployment--which was the focus of the previous piece--and economic growth. Moreover, the earlier article never said that Europe was doing better than the United States--apart from employment, that is. Rather, it said that American fantasies of European--particularly French--devastation because of social welfare policies simply do not hold up to scrutiny. That does not change the fact that European monetary and tax policy have been wrong-headed in the recession.
Read more carefully, and you will see that there is no contradiction between the two.
Read more carefully, and you will see that there is no contradiction between the two.
14
The comparison you attempt to draw is false one. The other Krugman article cited deals specifically with a single area of European economy, that being employment rates for those in the prime working age of 25-54. This article addresses the general monetary policy in the EU. Failure in one does not negate success in another.
Either you're being disingenuous, or haven't bothered reading both editorials thoroughly.
Either you're being disingenuous, or haven't bothered reading both editorials thoroughly.
5
Apparently, you are unable to grasp that Krugman assigns any good European economic news to their superior system (I will leave it to you to explain how an 11.5% European unemployment rate supports his good-system contention), while any bad news must be due to austerity measures (with glossed-over mentions of the tax increases).
Paul Krugman's column today is healing therapy after the yesterday's Glenn Hubbard's piece of same old rhetoric.
Paul is trying to tell us since 2008, the issue is not correcting the finances only, Yes New QE program in EU will show effect in a couple of months. Finance's eventually will be fixed one way or another.
However , Millions in EU during this period become jobless, demotivated, the damage inflicted upon some nations psyche is not easy to overcome. Germany's austerity policy reshaped EU political and financial atmosphere.
Pre 2010 EU is gone, In Europe everybody turned back the pre WWI mind set. Is this a union or another era of power politics which is led by Britain and Germany.
Unfortunately what Europe achieved post WWII was severely damaged after 2010 crisis.
Many Europeans particularly in south believing that this is again a powerful nations game. That killed the spirit of EU.
Paul is trying to tell us since 2008, the issue is not correcting the finances only, Yes New QE program in EU will show effect in a couple of months. Finance's eventually will be fixed one way or another.
However , Millions in EU during this period become jobless, demotivated, the damage inflicted upon some nations psyche is not easy to overcome. Germany's austerity policy reshaped EU political and financial atmosphere.
Pre 2010 EU is gone, In Europe everybody turned back the pre WWI mind set. Is this a union or another era of power politics which is led by Britain and Germany.
Unfortunately what Europe achieved post WWII was severely damaged after 2010 crisis.
Many Europeans particularly in south believing that this is again a powerful nations game. That killed the spirit of EU.
2
Living proof that economics is not a science can be found in the comments. Any number of readers propose any number of reasons why PK is "wrong" - merrily cherry-picking facts as they go.
Economics as political Rorschach test - that's my theory and I'm sticking to it...
Economics as political Rorschach test - that's my theory and I'm sticking to it...
10
That's not down to the sciencelessness of economics, any more than the guys who deny global warming or hawk perpetual motion machines prove that science has no science to it.
the problem's that the economics is too often getting done by professionals who get paid by the very organizations they're "objectively studying," that politicians (typically right-wing these days, but not always) stick their snoots into the work, that groups like FOX promulgate the draziest possible theories and "facts," and that too many plain folks think they understand complex fields of study without education or time in the library.
the problem's that the economics is too often getting done by professionals who get paid by the very organizations they're "objectively studying," that politicians (typically right-wing these days, but not always) stick their snoots into the work, that groups like FOX promulgate the draziest possible theories and "facts," and that too many plain folks think they understand complex fields of study without education or time in the library.
Obviously, the US made better monetary decisions than the EU. However, though the US national monetary decisions may make sense and were rational on the national level, internationally it may not make sense and be rational. It kept an unjust, unsustainable, and therefore, unstable international monetary system in place maintaining a world (dis)order that enriches the few, impoverishes the many and imperils people, species and planet.
We have to start a more fundamental conversation than the present one that is going on in preparation of the UN Conference on sustainable development in September in New York and the UN Conference on Climate Change in December in Paris both of which would set the post 2015 agenda for decades to come.
I have proposed a transformative approach to present world disorder by using a carbon-based international monetary system as the lever. The conceptual, institutional, ethical and strategic dimensions of the Tierra monetary system are presented in my 2012 book “The Tierra Solution: Resolving the climate crisis through monetary transformation” and updated at www.timun.net.
We have to start a more fundamental conversation than the present one that is going on in preparation of the UN Conference on sustainable development in September in New York and the UN Conference on Climate Change in December in Paris both of which would set the post 2015 agenda for decades to come.
I have proposed a transformative approach to present world disorder by using a carbon-based international monetary system as the lever. The conceptual, institutional, ethical and strategic dimensions of the Tierra monetary system are presented in my 2012 book “The Tierra Solution: Resolving the climate crisis through monetary transformation” and updated at www.timun.net.
2
It's a pity Krugman persists in these grotesque over simplifications. Yes the US has recovered far more rapidly from the depression than Europe but Europe is not a unitary state with a single administration and central bank setting fiscal and monetary policy. Parts of Europe never experienced a recession as serious as ours while others like Greece overwhelmed by debts and a bloated public sector compounded by dodgy accounting have sunk.
32
But they do have a common currency, so in that sense they are (for the time being), a unitary state.
2
Actually, Krugman has touched on that here: http://krugman.blogs.nytimes.com/2013/04/15/europe-in-brief/, as well as at other times. He's aware of the difference and argues that, even given these differences, the response to economic woes is where the EU has/is failing.
4
I'm not sure why, but just about everyone, including Prof. Krugman, ignores the large amounts of stimulus provided by Obama administration, enacted through compromises reached with congressional Republican leadership, beyond the 2009 American Recovery and Reinvestment Act (ARRA). The two big components of this stimulus were the cuts to the employee portion of Social Security taxes, in 2011 and '12 and the extensions of emergency unemployment benefits in 2011, '12, and '13. The tax cuts added more than $210 billion in the take-home pay of Americans and because wages and salaries subject to the tax are capped most of that money went to the poor and middle class. I could not find figures for the actual amount spent on emergency unemployment benefits, but the CBO estimates of outlays at the time the four extensions were enacted exceeded $120 billion. Unemployment benefits also go overwhelming to the poor and middle class. According to the CBO, unemployment benefit spending has the greatest impact, dollar for dollar, on GDP and employment of any type of stimulus.
The ARRA provided about $820 billion in stimulus. The payroll tax holiday and extended emergency unemployment added about $340 billion to that.
The ARRA provided about $820 billion in stimulus. The payroll tax holiday and extended emergency unemployment added about $340 billion to that.
3
Those who say they oppose increasing government debt appear to be the first in line to buy it.
3
Not really the way that worked, but even if one just adds all the numbers that you gave up, they total about half the stimulus that Krigman et al insist was necessary.
particularly absent was an infrastrudture bank, blocked by simple far-right crazy.
It would also be my personal, amateur theory that we shoved a trillion or so out of the economy at precisely the wrong time with the unbudgeted, ill-planned, and unnecessary war in Iraq.
particularly absent was an infrastrudture bank, blocked by simple far-right crazy.
It would also be my personal, amateur theory that we shoved a trillion or so out of the economy at precisely the wrong time with the unbudgeted, ill-planned, and unnecessary war in Iraq.
The underlying assumption (as demonstrated by the opening) is the Europe and USA are "the same" (or close enough for the comparison). I actually think at this stage - since we have read this same column many times before - it would be more useful to take a different tack and start this analysis from how Europe and America are different.
Greece is not to Germany as Florida is to New York. So, maybe understanding better some of that will provide better insights into for example, why German politicians are unwilling/unable to open the Bundesbank (surely, they opened the Bundesbank very wide when it came to East German unification, immediately sending untold billions that way irrespective of whether the East Germans "deserved" it of not, so the issue isn't that Germans are so ideologically straitjacketed that they can't spend like banshees when the mood is right).
So, I think the subject we confront is "political economy", of a very particular type that needs to be treated more thoroughly, not "economics", perhaps The EU is just badly designed with parts that are not similar enough (thank Allah, they jettisoned that Turkey thing, imagine ....) and needs radical operations to dismember/restructure/shrink/streamline.
Greece is not to Germany as Florida is to New York. So, maybe understanding better some of that will provide better insights into for example, why German politicians are unwilling/unable to open the Bundesbank (surely, they opened the Bundesbank very wide when it came to East German unification, immediately sending untold billions that way irrespective of whether the East Germans "deserved" it of not, so the issue isn't that Germans are so ideologically straitjacketed that they can't spend like banshees when the mood is right).
So, I think the subject we confront is "political economy", of a very particular type that needs to be treated more thoroughly, not "economics", perhaps The EU is just badly designed with parts that are not similar enough (thank Allah, they jettisoned that Turkey thing, imagine ....) and needs radical operations to dismember/restructure/shrink/streamline.
2
Anti-stimulous logic is illogical. During the Great Depression, things began to hum along New Deal-wise until 1937 when the Republicans pulled back on government spending. Nobody complained though when starting in the 1940s government expenditures sky-rocketed because of the war in Europe. Such spending of course pulled the US out of the Depression. Also, I don't understand the popularity of Reaganomics. Reagan cut taxes on the wealthy and raised taxes on the middle class by doing away with income averaging and deductions for student loan interest (in double digits during the 1980s) while at the same time increasing government spending with the result that the unemployment rate in 1984 was over 10%. History shows that in down times if governments follow the adage that "when the going gets tough, the tough go shopping" ups are soon to follow. Will the Republicans ever learn or will they continue to follow lock-step the mantra of budget balancing above all else including common sense?
8
Is it possible the these "doyens" didn't want to take responsibility for their carelessness in allowing the bubble to inflate in the first place? When crises occur, there is usually one of two reactions. One is to think clearly and find a solution.
The other is to freeze and find someone to blame.
In Europe, the scapegoat was the Greeks. Right or wrong in fiscal policy, the Greek economy didn't wreck the world economy.
Wall Street and deregulation were the primary causes.
There's plenty of blame to go around but the small people were left out of the solution and those who were saved are the ones that should be criticized.
The other is to freeze and find someone to blame.
In Europe, the scapegoat was the Greeks. Right or wrong in fiscal policy, the Greek economy didn't wreck the world economy.
Wall Street and deregulation were the primary causes.
There's plenty of blame to go around but the small people were left out of the solution and those who were saved are the ones that should be criticized.
6
It was a bad idea for Paul Krugman to make this column as a contrast between American and Europe fiscal and monetary policies. Of course, the monetary policies were different and that is because the American states aren't completely sovereign. But the difference between Europe's austerity and America's austerity isn't enough to crow about. Nor did Obama do anything which gives him any license to strut. He did nothing. When Republicans said "NO!" he offered the sequester, further exacerbating his political decisions to not ask and demand more stimulus in the first place. He offered "Grand Bargains" just to get a deal with Republicans. Almost any deal was good enough for the One-Sided Compromiser. Just wait till we see the first budget coming out of the fully GOP-controlled Congress.
This column comes much too close to letting the irresponsible, stupid, wrong-headed Republicans and jello-spined Obama/Democrats off the hook for their idiotic behavior.
The column should have just focused on European obeisance to their own plutocracy and inability to learn from 80 years ago. America was engaging in its cockroaches that always come out of the woodwork in tough times.
This column comes much too close to letting the irresponsible, stupid, wrong-headed Republicans and jello-spined Obama/Democrats off the hook for their idiotic behavior.
The column should have just focused on European obeisance to their own plutocracy and inability to learn from 80 years ago. America was engaging in its cockroaches that always come out of the woodwork in tough times.
6
GOP opposed stimulus, opposed auto bailouts and generally opposed anything that might be helpful lest Obama get credit for an improved economy. The economy improved without any GOP support so he deserves to strut.
3
Nonsense. When the political going got tough in 2011, Obama was all too willing to make things worse. One word: sequester. That's his. He owns it. He was willing to cut SS, Medicare, too.
The recent (chimera of an) uptick, if you want to call it that, is pretty pathetic, regardless of these numbers (which don't tell the story very well). The good news is for the plutocrats, not for anybody else unless you count bad jobs as something to cheer about.
Stop being a cheerleader.
The recent (chimera of an) uptick, if you want to call it that, is pretty pathetic, regardless of these numbers (which don't tell the story very well). The good news is for the plutocrats, not for anybody else unless you count bad jobs as something to cheer about.
Stop being a cheerleader.
Not being a cheerleader. You were criticizing his strutting. 6 years in things have stabilized and our economy is getting stronger. I wish he had done things differently but Presidents get the credit and blame. This time he deserves the credit.
1
Professor, how about an article comparing performance of states within the U.S.? What are the differences between the Eurozone and the U.S. that allow some states in the U.S. to do all the wrong things - low state taxes, under investment in infrastructure, low spending on education, trashing the environment, etc. - and (with the exception of Kansas) seem to get away with it?
4
So, should we be gloating with an alliterative victory venom over the economic missteps of our European allies? As a major trading partner, isn't there the risk that the deflationary depression that faces them may spill over across the pond. Right now we may be enjoying the bubble created as money rushes from there to here, but without a true higher-wage, jobs-based recovery this may prove to be the brilliant flash of light before the sun sets here at home. Especially, with our own "archons of austerity" and "doyens of deflation" now in charge of Congress we all may soon be eating the crow that crassly cackled at Europe.
8
I don't find it to be gloating as much as a lesson in the right and wrong things to do. Dr. Krugman for years opposed the austerity Europe followed and his arguments have been right. He is just pointing that out.
2
The EU put this on themselves when they decided to share a currency. Each country is not the same in their needs for recovery. Not being able to manage your money supply and only your fiscal side of issues is a huge burden.
We continue to see why the EU is a giant social experiment gone wrong.
We continue to see why the EU is a giant social experiment gone wrong.
1
Er...the EU is not the Eurozone.
1
I agree with Prof. Krugman that a timely dose of government stimuli, especially in infrastructure or energy projects, is necessary in a recession.
However if the stimulus goes to the same governments and financial institutions and even individuals who were reckless with their investments it sends the wrong message to the rest of us. Why be cautious with our money when we can get a government bailout if all goes wrong?
The challenge is to find the correct amount of support to the economy while not encouraging risky behavior by taking away the "risk" side of the risk-reward equation.
However if the stimulus goes to the same governments and financial institutions and even individuals who were reckless with their investments it sends the wrong message to the rest of us. Why be cautious with our money when we can get a government bailout if all goes wrong?
The challenge is to find the correct amount of support to the economy while not encouraging risky behavior by taking away the "risk" side of the risk-reward equation.
1
Because stimulis not only goes to those that were irresponsible, but to those that did nothing wrong. Suppose you bought a house (overly inflated from stated income loans) and put down 30% and fully qualified for the loan.
When the bubble burst, you were upside down, just the same as your neighbor, who was irresponsible and took a subprime loan with no money down.
The same goes for the manufacturer. When credit markets freeze and capital becomes impossible to access, it does not matter if your balance sheet was good or bad, you are all frozen out and unable to access money for cash flow needs.
Most of the trouble was caused by housing credit bubble, fed by stated income loans (and the credit derivatives Wall Street used to make money) from their terrible loans. If that was eliminated, most of the bubble would have never happened. So we only have to look one place to solve the problem - the lenders. Make all loans fully documented and only responsible people can get loans. This would also reveal just how weak the lower strata of our economy is and would hasten political change to boot.
Of course Dodd Frank tries to do this very thing, hence the rage against it. Remember, the financial lobbyists control Congress and our political system.
When the bubble burst, you were upside down, just the same as your neighbor, who was irresponsible and took a subprime loan with no money down.
The same goes for the manufacturer. When credit markets freeze and capital becomes impossible to access, it does not matter if your balance sheet was good or bad, you are all frozen out and unable to access money for cash flow needs.
Most of the trouble was caused by housing credit bubble, fed by stated income loans (and the credit derivatives Wall Street used to make money) from their terrible loans. If that was eliminated, most of the bubble would have never happened. So we only have to look one place to solve the problem - the lenders. Make all loans fully documented and only responsible people can get loans. This would also reveal just how weak the lower strata of our economy is and would hasten political change to boot.
Of course Dodd Frank tries to do this very thing, hence the rage against it. Remember, the financial lobbyists control Congress and our political system.
3
Here we sit in an era when narrative and fantasy trump facts, data and evidence, where contrary evidence is ignored or rejected, where blame is placed where it doesn't belong, and where a situation is stagnating or deteriorating because of actions taken on the basis of a faulty narrative.
The problem is less economics than psychology. Perhaps Europe, and to some extent the U.S., provide a study in what happens when economic policy is based on some self-serving narrative, and where adjustments are not made when the narrative proves not to work to change the situation as promised?
Way back when I was taking my first introductory psychology class, one question was whether memory is reproductive or productive? To no surprise, the weight of the research tilted toward the memory as productive—meaning we do not necessarily see things as they are, or remember them accurately. The research shows we may cling to some narrative that better fits with our past experiences, motivations, self-interest, and the perceptions & interpretations of our valued groups.
So we may make up stuff & believe it to be accurate, after which it becomes very difficult to change what has been stored in the productive brain.
Thus, we are faced with a flawed narrative & serious attitude problem that serves the interests of a few at the expense of the many.
So how do we get attitudes to change, especially when things are going well for a group that has constructed a favorable narrative for itself?
The problem is less economics than psychology. Perhaps Europe, and to some extent the U.S., provide a study in what happens when economic policy is based on some self-serving narrative, and where adjustments are not made when the narrative proves not to work to change the situation as promised?
Way back when I was taking my first introductory psychology class, one question was whether memory is reproductive or productive? To no surprise, the weight of the research tilted toward the memory as productive—meaning we do not necessarily see things as they are, or remember them accurately. The research shows we may cling to some narrative that better fits with our past experiences, motivations, self-interest, and the perceptions & interpretations of our valued groups.
So we may make up stuff & believe it to be accurate, after which it becomes very difficult to change what has been stored in the productive brain.
Thus, we are faced with a flawed narrative & serious attitude problem that serves the interests of a few at the expense of the many.
So how do we get attitudes to change, especially when things are going well for a group that has constructed a favorable narrative for itself?
10
Because of near socialist policies that you favor!
4
I thought Europe were the socialist?
1
You might be wise to consider that people will become enthusiastic socialists before they allow their children to starve.
3
Agreed, with one minor edit: ".... socialist policies for the affluent...."
3
German and conservative American misunderstanding of capitalism lies at the root of these policy differences. Quite literally, they are stuck with the outdated, incorrect "Austrian School" theories from the late 19th Century. It's a body of theory rooted in graphs and sliding curves where everything can adjust to change automatically. Their policies reflect that expectation.
In modern economics the "Austrian" flaw was identified early on: the system does not include the effects of contracts. And contracts for real estate, borrowing, long-term leases do not move to adjust with deflation. Every prediction of "Austrian" systems is bogus for balance sheet recessions. Dr. Richard Koo proved this with a national accounts database that measured every transaction for every economic entity in a complete advanced economy -- since proved for the large Balance Sheet Recessions in every case.
Plausibly: today's Germans don't read ??? We knew the global warming deniers don't read. But the Germans? O-M-G.
In modern economics the "Austrian" flaw was identified early on: the system does not include the effects of contracts. And contracts for real estate, borrowing, long-term leases do not move to adjust with deflation. Every prediction of "Austrian" systems is bogus for balance sheet recessions. Dr. Richard Koo proved this with a national accounts database that measured every transaction for every economic entity in a complete advanced economy -- since proved for the large Balance Sheet Recessions in every case.
Plausibly: today's Germans don't read ??? We knew the global warming deniers don't read. But the Germans? O-M-G.
16
As Austerity Burns.
Whether it be France or Germany it doesn't work, time to start spending money. More jobs more business activity more brain power.
Whether it be France or Germany it doesn't work, time to start spending money. More jobs more business activity more brain power.
7
What kool-aid are you drinking, Dr. Krugman?
Even I, a 73 year old with no training in economics, can easily understand that Americ is declining into a banana republic as the top1% gets more and more of everything.
The economy of any nation is more than just impersonal numbers. It should also be about how the populace as a whole is benefiting or suffering because of those numbers.
You used to be my favorite NYTimes columnist but over the last 2-3 years you have slipped. Now I wonder if the American Darth Vader, banks and wall street, have been successful in luring you to the dark side.
Even I, a 73 year old with no training in economics, can easily understand that Americ is declining into a banana republic as the top1% gets more and more of everything.
The economy of any nation is more than just impersonal numbers. It should also be about how the populace as a whole is benefiting or suffering because of those numbers.
You used to be my favorite NYTimes columnist but over the last 2-3 years you have slipped. Now I wonder if the American Darth Vader, banks and wall street, have been successful in luring you to the dark side.
6
You're right; Krugman has slipped. He seems to be angling for a spot in any Clinton Administration, should that come to pass.
4
6 yrs ago Republicans were praising Europe's austerity measures and demonizing the FED's QE measures for here at home. Our economies are indeed different, but I'm sure glad the Republicans didn't have their way in letting the US States and their citizens having to figure out all their own individual economic issues after the Great Recession. In regards to the health of the economy - Democrats in general, with all their short comings looked at the BIG PICTURE in remembering - " . . .divided We fall".
14
Think that 2009 was tough? Just wait until the race to the bottom of the currencies ( fiat) ends. There will be a world wide depression. Then who will save the "lifeguards." Good night and good luck.
1
>
If the U.S. is doing so well why don't they raise interest rates? Or when will they?
It has always been economists that say Americans do not save enough, but if you save via a safe savings account or U.S. Treasuries instead of risky stocks you obtain little or no return. So the economy is forcing people to risk and potentially lose in stocks or obtain little returns in treasuries or a savings accounts.
This does not sound like a healthy economy to me.
When the FED cranks-up the interest rates then I'll believe we have turned a corner, but the slightest hint of a hike sends the market south.
If the U.S. is doing so well why don't they raise interest rates? Or when will they?
It has always been economists that say Americans do not save enough, but if you save via a safe savings account or U.S. Treasuries instead of risky stocks you obtain little or no return. So the economy is forcing people to risk and potentially lose in stocks or obtain little returns in treasuries or a savings accounts.
This does not sound like a healthy economy to me.
When the FED cranks-up the interest rates then I'll believe we have turned a corner, but the slightest hint of a hike sends the market south.
52
Higher interest rates are believed to put the brakes on growth. The Fed believes lower rates will reduce unemployment and benefit those in the labor market. It thereby abandons those like yourself who are more dependent on your savings. The Fed would say that, because inflation remains low, your low interest earnings are acceptable even though that is clearly not true.
2
Reading comprehension much? "No, it’s not morning in America."
There are investments other than a savings account, bonds, or stocks. i.e. gold or paying down your mortgage early or buying real estate and renting it out.
There are investments other than a savings account, bonds, or stocks. i.e. gold or paying down your mortgage early or buying real estate and renting it out.
Four things are clear (or, at least, as clear as these issues ever get):
1) Austerity measures typically aggravate a recession,
2) Stimulus measures which result in low interest rates over a lengthy period do harm those individuals who depend upon CDs for monthly income,
3) The key interest rate in trying to escape a financial crisis is the rate the central bank charges commercial banks for money,
4) Germany took a long time to understand that the cause of the crisis was recklessness in the private sector, rather than in the deficits being run in countries like Greece
1) Austerity measures typically aggravate a recession,
2) Stimulus measures which result in low interest rates over a lengthy period do harm those individuals who depend upon CDs for monthly income,
3) The key interest rate in trying to escape a financial crisis is the rate the central bank charges commercial banks for money,
4) Germany took a long time to understand that the cause of the crisis was recklessness in the private sector, rather than in the deficits being run in countries like Greece
1
Prof. Krugman, you showed us all that this was coming a long time ago.
You have our total attention !
Tell us where to go next, don't dwell on the same old themes of what the Republicans are doing wrong.
The purpose of knowledge is correct/better prediction.
Tell us where we should go next. Too much Republican bashing doesn't do us any more good. We're beating around the same bush !
How can the middle-classes become stronger ? How can American skills be better directed and more improved ? How can again America stand for what it used to ?
You have our total attention !
Tell us where to go next, don't dwell on the same old themes of what the Republicans are doing wrong.
The purpose of knowledge is correct/better prediction.
Tell us where we should go next. Too much Republican bashing doesn't do us any more good. We're beating around the same bush !
How can the middle-classes become stronger ? How can American skills be better directed and more improved ? How can again America stand for what it used to ?
6
You have that predictions too.
What future brings us? not very good news.
In job side of the Economics , unfortunately future is not bright. All spectrum of the job sector will be severely affected from the incoming scientific developments. Artificial intelligence. This new thing is not stopped while we were busy with 2008 crisis.
Artificial Intelligence will almost equally change the atmosphere about the entire job spectrum. janitors to lawyers, nurses to CEO's pilots to drivers. all jobs will change hands slowly.
So jobless human being will be a common thing in 2030 and beyond.
What future brings us? not very good news.
In job side of the Economics , unfortunately future is not bright. All spectrum of the job sector will be severely affected from the incoming scientific developments. Artificial intelligence. This new thing is not stopped while we were busy with 2008 crisis.
Artificial Intelligence will almost equally change the atmosphere about the entire job spectrum. janitors to lawyers, nurses to CEO's pilots to drivers. all jobs will change hands slowly.
So jobless human being will be a common thing in 2030 and beyond.
6
Well, lets see. If the Republicans want austerity and that's bad, then what we should be doing is fiscal stimulus. Massive investments in productivity improving infrastructure; free college educations; that sort of thing.
To strengthen the middle class: a higher minimum wage is good. Let's not complain that the recovery is creating low-paying jobs. Let's require that corporations be responsible and pay their own way instead of having government subsidize their workforce by having the corporation pay a living wage.
Secondarily, we need higher marginal tax rates on high incomes, including capital gains incomes.
To strengthen the middle class: a higher minimum wage is good. Let's not complain that the recovery is creating low-paying jobs. Let's require that corporations be responsible and pay their own way instead of having government subsidize their workforce by having the corporation pay a living wage.
Secondarily, we need higher marginal tax rates on high incomes, including capital gains incomes.
2
Krugman is only interested in increasing federal intrusion and power. A few notes about the economy: Real income for the middle class is falling. Welfare roles are at an all-time high, Medicare enrollment- all time high, Food stamps- all time high, people who stopped looking for a job- all time high, $7T added to deficit and one day the bill will come due. The world is falling apart with ISEL more powerful than ever, Yemen falling into terrorist hands, Iran completely snookering Obama about nuclear weapons and delivery systems, while Putin runs over Obama like a bug in the road. The US corporate tax rate is the highest in the world, and remember when Obama had the last tax increase on the highest earners? Well, he wants more now instead of creating jobs as though the government taking money relates in any fashion to boosting the economy. Krugman should be looking forward and stop this myth of big government. He needs to act like an economist instead of the rooting section for the DNC.
1
If Europe is on life support, and it is, then the US is still in intensive care. US prosperity, such as it is, is very narrow, an inch wide and a mile deep. Yes, the middle class drives shiny new cars, but mostly leased, and again lives in big new McMansions (subject to mortgage debt), many furnished in cheap chic, often also leased. Meanwhile the kids attend increasingly mediocre schools, and if fortunate enough to go to college (usually a state college that is also increasingly mediocre) emerge under a mountain of debt. As Henry Ford knew, the engine of capitalism is a healthy middle class, one filled with hope for a brighter future. Today's oligarchs are simply not that acute, and have succeeded in milking the system they long since bought, and for all it's worth. It is most definitely Midnight in Paris (or Athens), but it is also Twilight on the Potomac. In the long run, if the people of the world are to share in the prosperity they are capable of creating, we're going to have to recognize and accept that mankind still has not developed the ideal system. We've made strides, but it's often two steps forward and one back. In the last decade we took a giant step back, and nearly fell into the abyss. Here's hoping we learned something, but the evidence is not encouraging.
81
Perhaps you could provide links to peer-reviewed literature to quantify the percentage of cars that are leased vs owned? Or how tall the mountain of debt is that college students have? Otherwise it just looks like you are making up your own facts.
A vibrant middle class is key. Quantitate easing would work better here if, as in the recent ECB action, it came with a requirement that the banks actually lend the money. One of the problems with the TARP program is that there was no requirement that the funds the banks received would be used, and what happened, not surprisingly, was that the banks simply hoarded the money. The funds must get into the system, and the best way is through spending by middle class consumers.
I would say that modern economics is no more a balanced argument between Keynesians and Chicagoans than modern biology is a balanced argument between Darwinists and Creationists. Somewhere in the past 100 years or so, science crept into the tidy economics schools of -ists and -isms. You will notice that Krugman spends a lot of time comparing the predictions of hypotheses and models with actual data. He is also careful to say that any suggestions he makes are in response to current conditions, not fixed dogmas for all time.
6
Krugman avoided the real issue.
European economic growth will remain much weaker due to the immense web of regulations which hurt European productivity.
The only reason US & European growth rates would converge is if the US implements additional regulations which hurt productivity.
European economic growth will remain much weaker due to the immense web of regulations which hurt European productivity.
The only reason US & European growth rates would converge is if the US implements additional regulations which hurt productivity.
3
Occasionally a commenter will raise this issue and actually cite a regulation or two that they find problematic; however, that is the exception not the rule. I would find your argument much more compelling if you would give specific examples. In the mean time, I will continue to appreciate those regulations, weak as they are (don't drink the water in the Yellowstone river!) and support additional regulations/protections that ensure clean water, air and soil and provide a modicum of equity in our access to the "commons" we all share. There are generations to follow us, wouldn't it be nice if we left something good for them, as our forefathers left us? The earth rapists seem to think it is all "ours." Regulate that!
4
oh yes, it is the Clinton morning in America. 28 year olds with a website are again commanding billion dollar valuations in the silicon valley and the luxury home market there is exploding, while any other home market is no longer accessible to anyone but the "brilliant" web programmers who work for the brilliant websites (which incidentally produce no profit and hardly any income). Trouble is, this morning is sitting on top of the detritus of all the previous mornings, so the largesse is no longer spilling to the main street which is so weighed down by debt, nothing can help no more.
2
A year ago, Republicans pointed to Germany, believing its fleeting economic success showed that Republican-style austerity as practiced by the Germans, vindicated their own austerity policies in the wake of the Great Recession. Now it is clear that American policy, supported solely by Democrats, has led to the greatest economic success story in the West. That would seem to be a trigger for Republican rethinking of their economic principles. But that has not happened. Instead, the Republicans adhere to their same old beliefs which they are repackaging in a slightly more palatable form. For them, the Great Recession was a lost opportunity to learn from experience.
10
Dear Mr. Krugman,
Thank you for telling us, much like the movie of the same name, "what just happened".
Now, what will be happening in the future, economy-wise?
If this is a nation that has "recovered" then I can only assume you speak of the people who already have the money and the Stock Market which is climbing to new territories because...?
Please write a column devoid of political leanings and give a bare bones, no holds bared, prediction of the country's finances for, let's make it easy, this year. So far, it seems the wealthier are becoming more wealthy while those on the back end of the bell shaped curve of wealth distribution are sliding further down the tail end of that same, precipitous slope. The only predictions I have seen are that at the current rate, the upper 1% of the world (The almost invisible OTHER end of the curve) will own better than 50% of, well, everything.
If that's what is a "recovery" then I must have missed something in between.
What I can guess, based on history, is that when this current bubble on Wall Street bursts, it will be a lot messier and much more devastating then the 2008 debacle (The fines slowly being leveled on the miscreants that brought that collapse about probably won't even have paid these fines before the next ballyhoo and collapse).
Banks are still too big to fail and the taxpayer is still there to bail them out again and again and again.
But, by voter turnout, the electorate, it seems, is quite happy with this!
Thank you for telling us, much like the movie of the same name, "what just happened".
Now, what will be happening in the future, economy-wise?
If this is a nation that has "recovered" then I can only assume you speak of the people who already have the money and the Stock Market which is climbing to new territories because...?
Please write a column devoid of political leanings and give a bare bones, no holds bared, prediction of the country's finances for, let's make it easy, this year. So far, it seems the wealthier are becoming more wealthy while those on the back end of the bell shaped curve of wealth distribution are sliding further down the tail end of that same, precipitous slope. The only predictions I have seen are that at the current rate, the upper 1% of the world (The almost invisible OTHER end of the curve) will own better than 50% of, well, everything.
If that's what is a "recovery" then I must have missed something in between.
What I can guess, based on history, is that when this current bubble on Wall Street bursts, it will be a lot messier and much more devastating then the 2008 debacle (The fines slowly being leveled on the miscreants that brought that collapse about probably won't even have paid these fines before the next ballyhoo and collapse).
Banks are still too big to fail and the taxpayer is still there to bail them out again and again and again.
But, by voter turnout, the electorate, it seems, is quite happy with this!
9
Professor Krugman might contemplate the long-term implications of his assertion, "the world needs more spending."
Then, on some slow news day, he can explain to his readers why this idea is any more sophisticated than former President Bush's admonition to citizens in the wake of 9/11: "go shopping."
Growth for what end, Professor? And, tell us, once again, why higher prices are better than lower ones?
Then, on some slow news day, he can explain to his readers why this idea is any more sophisticated than former President Bush's admonition to citizens in the wake of 9/11: "go shopping."
Growth for what end, Professor? And, tell us, once again, why higher prices are better than lower ones?
5
If you don't understand the difference between public and private spending and public and private debt, then perhaps you need a remedial Economics course. And in no way has this article endorsed increased governmental spending always, it specifically states there are times for it and a recession is one.
2
If you have no debt or are a creditor, lower prices are fine. But in a highly leveraged world, where assets (houses, stocks, bonds) are widely used as collateral for loans (for up to 99% of the debt, in some cases), deflation in the value or price of the collateral can kick off a chain reaction of default and bankruptcy.
I do understand the difference between public and private sectors. My point is that economic growth is not always in our best interest. Moreover, when has Professor Krugman not called for more spending?
All debts are eventually paid, either by the borrower or the lender.
All debts are eventually paid, either by the borrower or the lender.
The answer is simple. In spite of Obama, Harry Reid and Nancy Pelosi we still have lower income tax rates then Europe and we have energy independence through fracking.
1
What does it mean when I paid far more in health insurance than I paid in taxes. Europe just has a different system for both health care and energy production, a system based on a different set of interests. I know one thing health care and energy in the USA. are now just a side effect of limitless profit.
1
Europe's response to the economic crisis that started in 2008 sounds eerily similar to Britain's response to the economic decline in Ireland in the mid 19th century during the so called potato famine. In a very short hand form, Britain's response was to, in effect, punish the victim's of the decline thereby only making matters worse. And yes, Britain's ill advised and, well, cruel actions towards the Irish at that time not only had an impact for decades but can be still felt today. So for Europe's actions today, some thing never change. But here I agree with the so called conservatives and hope America does not become more like Europe.
5
"And Europe will be paying the price for their self-indulgence for years, perhaps decades, to come."
Our "paying the price" will come as interest on our debt consumes 25% of the Federal budget and deep deficits resume. Of course, Krugman won't suggest cutting spending at any time - thriving economy or not. His prescription for every economic ill? Well, more spending, of course.
Our "paying the price" will come as interest on our debt consumes 25% of the Federal budget and deep deficits resume. Of course, Krugman won't suggest cutting spending at any time - thriving economy or not. His prescription for every economic ill? Well, more spending, of course.
3
Reinhart and Rogoff were debunked by the NYT, and Colbert and Stewart, yet the still influence the policies of Europe. Why? Planning bias?
How long will the European strategists cling to the false beliefs (the policies have surrendered their objectivity and embraced faith) that austerity is the only way? Sadly, it could persist for the next 20 years unless something wakens them from the delusion. That something may come in the form of the Saudi power vacuum and the collapse of Yemen.
It has been the goal of Al Qaeda and ISIS to control Mecca. How Europe and America pursue an orderly transfer of power in Saudi monarchy or recognize the utter bankruptcy of that government and move toward supporting democracy will hinge on identifying long term goals that end hydrocarbon addiction and act quickly to support renewables "as if our lives depend on it".
Only Russia will benefit from our continued alliance with the Saudi monarchy as it alone can produce the oil needed should chaos grip Saudi Arabia.
The Europeans have demonstrated a willingness to march off the cliff before and they cling to the bad math of Rogoff and Reinhart like a baby clinging to an empty bottle.
At home, we need to see that there is some responsible leadership among the Republicans that can end their racist tantrum and get America growing with an infrastructure program that will rival the defense industry and include renewable energy as our strategic military thinkers have advised.
How long will the European strategists cling to the false beliefs (the policies have surrendered their objectivity and embraced faith) that austerity is the only way? Sadly, it could persist for the next 20 years unless something wakens them from the delusion. That something may come in the form of the Saudi power vacuum and the collapse of Yemen.
It has been the goal of Al Qaeda and ISIS to control Mecca. How Europe and America pursue an orderly transfer of power in Saudi monarchy or recognize the utter bankruptcy of that government and move toward supporting democracy will hinge on identifying long term goals that end hydrocarbon addiction and act quickly to support renewables "as if our lives depend on it".
Only Russia will benefit from our continued alliance with the Saudi monarchy as it alone can produce the oil needed should chaos grip Saudi Arabia.
The Europeans have demonstrated a willingness to march off the cliff before and they cling to the bad math of Rogoff and Reinhart like a baby clinging to an empty bottle.
At home, we need to see that there is some responsible leadership among the Republicans that can end their racist tantrum and get America growing with an infrastructure program that will rival the defense industry and include renewable energy as our strategic military thinkers have advised.
4
Europe is still pushing Reaganomics and most of those leaders are conservative.
9
Europe and the United States began to diverge years ago. Up until the 1970's Europe and the US were even more similar in terms of things like hours worked, GDP growth, unemployment. Actually in many of those areas Europe especially its leading economies were actually surpassing the US. Then Europe began to raise taxes, make worker more expensive and make not working more beneficial. So, it was not just that the Fed has upped its balance sheet by some 1T that explains the better performance of the US economy. It is also at that micro level that explains what has happened and what will continue to happen in Europe. European countries like France have over 50% of GDP devoted to government spending. US is in the high 30's . SO this bond purchasing by the ECB will not have the dramatic impact that is hoped. Even in the US it has taken over four years of this to have much of an impact. The real reason for the US recent improvement is the decline in the price of oil and gas. Which can be traced to the fracking revolution . Which both Obama and Krugman probably would have stopped if they could.
2
Mr. Krugman seems ignorant of the fact that the nascent recovery here in the US coincides with the recent rally in the value of the US dollar (as well as a solid reduction in the fiscal "stimulus" of a large and growing budget deficit). So it seems that perhaps a "balanced budget fetish and hard money obsession" is not so much the economic policy folly that he suggests?
1
Actually, you are confusing cause and effect here, Lukey. The dollar is strong because the U.S. economy strengthened far more quickly than Europe thanks to the stimulus and the steady hand of Bernanke and Yellen in running QE despite wails of objection from the right and freshwater types. We are growing, we may see rate hikes meaning better returns for investors and more demand for dollars.
10
It's the other way around. The 'nascent' - if you can call a five-year-old recovery 'nascent' - recovery is producing the strong dollar and the drop in the size of the annual deficit.
1
You are correct that cause and effect have been confused but your analysis backwards. The dollar is strong because everyone holding Euros is running for the door, look only to the Swiss for Example #1. Wit the Europeans trying to follow PK's foolish advice, the Euro is collapsing.
There seems to be an interdependence between the US and Europe in just about every way imaginable. We both are the leading democratic societies around the globe. Our militaries have been codependent since the end of the 2nd World War. We enjoy a great friendship together from tourism to common goals in setting the dominant agenda for what constitutes world peace. We both CRASHED OUR ECONOMIES at the same time.
As professor Krugman rightly points out time and again we diverged in how we managed our recoveries. He is correct in his evaluation of what went wrong, how the better way forward should have been taken, and in his overall conclusions as to why the US is doing better than Europe at this point in time.
It's startling how many comment here on "how wrong Dr. Krugman is" on "nearly everything" since the beginning of the '07-'08 financial crash. Yet year after year his projections are proved to be correct, nearly at full 100% of the time. Funny though, that the biggest difference lies in the leadership of both continents. President Obama, Angela Merkel, and David Cameron. One progressive, two conservatives. It's almost as if the progressive was never intended to lead in the first place. Not enough room to speculate but there's more to analyze for sure.
As professor Krugman rightly points out time and again we diverged in how we managed our recoveries. He is correct in his evaluation of what went wrong, how the better way forward should have been taken, and in his overall conclusions as to why the US is doing better than Europe at this point in time.
It's startling how many comment here on "how wrong Dr. Krugman is" on "nearly everything" since the beginning of the '07-'08 financial crash. Yet year after year his projections are proved to be correct, nearly at full 100% of the time. Funny though, that the biggest difference lies in the leadership of both continents. President Obama, Angela Merkel, and David Cameron. One progressive, two conservatives. It's almost as if the progressive was never intended to lead in the first place. Not enough room to speculate but there's more to analyze for sure.
9
The U.S. policy was based on Keynesian economic theory, championed by Democrats. Republicans adhered to the Chicago school, which would have imposed European style austerity. There was virtually no Republican support for the stimulus and long after its success was apparent, the matter was disputed by Republicans. Today, Republicans continue to complain that Democratic policy has stunted growth. Nobody can say for sure where Republican policy would have led us. But the European example strongly suggests that austerity in the manner of the Chicago school would have led to a no growth economy and economic stagnation.
26
"In a depressed economy, however, a balanced-budget fetish and a hard-money obsession are deeply irresponsible. Not only do they hurt the economy in the short run, they can — and in Europe, have — inflict long-run harm, damaging the economy’s potential and driving it into a deflationary trap that’s very hard to escape."
This paragraph nicely sums up the situation, the positions between two diametrically opposed positions: the balanced-budget gurus and the responsible economists who believe that stimulus is the way to go.
This paragraph nicely sums up the situation, the positions between two diametrically opposed positions: the balanced-budget gurus and the responsible economists who believe that stimulus is the way to go.
10
The contrast with Europe is interesting but not so much. I guess my real question is did the Republican Party believe its own dogma about debt or was it just interested in crippling the economy and Obama in the specific? There is no doubt that their efforts, or lack there of, were aimed at crippling and starving government, but apparently they were unable or unwilling to see just how much of a significant role government plays in keeping our economy pumped. Much of the Obama stimulus was aimed at keeping state goverments afloat, particularly in terms of maintaining the educational systems, which were at great risk and in this regard was quite meaningful. Eventually, though, many of them were dismantled by Republicans administrations, anyway, by cutting school budgets, for whatever reasons; balancing the budget, privatization, teacher demons, etc..
This has been stated before but the bond buying by Bernanke was an important factor in preventing our economy from tanking further, so it is not hard to see why Europe would be turning to that now.
The oddest thing, though, is that even in retrospect it is exactly the same as it was at the time, when we were going through it. It was never an either/or. It was always the need to develop a long term plan to address the debt and to create some stimulus to revitalize our economy. The Republicans made it worse than it need have been and continue to do so.
This has been stated before but the bond buying by Bernanke was an important factor in preventing our economy from tanking further, so it is not hard to see why Europe would be turning to that now.
The oddest thing, though, is that even in retrospect it is exactly the same as it was at the time, when we were going through it. It was never an either/or. It was always the need to develop a long term plan to address the debt and to create some stimulus to revitalize our economy. The Republicans made it worse than it need have been and continue to do so.
34
The one thing that is sorely needed in the U.S. is a revolution - preferavly a peaceful one, but if necessary, a violent revolution. One that causes rivers of blood of Wall Street bankers to flow through the streets of the cities.
4
Bill, perhaps you need to dial it down a few notches, no?
I'd settle for every able bodied, informed, citizen voting in each election. Change comes each day, it may not be large, or swift, or (as some propose) violent, but it surely comes each day.
I'd settle for every able bodied, informed, citizen voting in each election. Change comes each day, it may not be large, or swift, or (as some propose) violent, but it surely comes each day.
4
Mr. Krugman ignores that France, Italy, Greece and others still haven't implemented the needed structural economic reforms to promote growth and permit hiring. Austerity alone was never intended and yet that is what occurred. Germany successfully restructured more than decade ago. Recent examples from the Baltic nations also worked!
3
How will Greece restructure under a ton of debt with its national budget collapsed and unemployment running at 25.8%, from 7.3% in 2008? The Euro community and the IMF agreed to support Greece with 10 billion in Euro-denominated loans; what else can be done for an economy the size of Ft. Worth?
France, on the other hand, is one of the world's top ten economies, but has surrendered its currency, making it difficult to solve its issues of debt and growth in the context of the Euro community.
Italy has regional and corruption issues; those will not be addressed by restructuring.
Beyond these specific issues and distinct problems, the overarching trend by the umbrella of the Euro community through its Central Bank and its delegations demanding national reviews is to focus too much on the pieces, as implied above, and not enough on the problems shared in common, as Paul points out.
France, on the other hand, is one of the world's top ten economies, but has surrendered its currency, making it difficult to solve its issues of debt and growth in the context of the Euro community.
Italy has regional and corruption issues; those will not be addressed by restructuring.
Beyond these specific issues and distinct problems, the overarching trend by the umbrella of the Euro community through its Central Bank and its delegations demanding national reviews is to focus too much on the pieces, as implied above, and not enough on the problems shared in common, as Paul points out.
11
Changing labor laws in France that kick in with 50 employees, or collecting swimming pool taxes in Greece as not related to those nations debt/ They do reflect a lack of political will to confront special interest groups. Those are only the start of many examples that prevent growth!
How is it that workers--99% of the population--are a "special interest" group to right-wingers?
I have studied the matter and have an alternate solution for the liquidity trap. One that will save tens of billions of taxpayer dollars each year.
In concert with breaking up the 5 largest banks - end the Fed.
That's right, instead of the US government having to borrow currency from a cartel of private banks [owned, most likely, by wealthy European banking dynasties], or selling IOUs from the taxpayer through megabank middlemen on the "open market" it could print the currency itself.
Rather than a dollar which is loaned into existence by the banks, the issuing power could, and should, be restored to We, The People - to whom it properly belongs.
In concert with breaking up the 5 largest banks - end the Fed.
That's right, instead of the US government having to borrow currency from a cartel of private banks [owned, most likely, by wealthy European banking dynasties], or selling IOUs from the taxpayer through megabank middlemen on the "open market" it could print the currency itself.
Rather than a dollar which is loaned into existence by the banks, the issuing power could, and should, be restored to We, The People - to whom it properly belongs.
5
So monetary policy could be manipulated by Congress, depending on the political whim of the time?
Forgive me if I don't see your study as complete.
Forgive me if I don't see your study as complete.
2
"Who controls the issuance of money controls the government!" - Nathan Meyer Rothschild
3
Congress can direct the Treasury Department to order the Bureau of Engraving and Printing and/or US Mint to print any amount of currency and/or coin any time it wants to.
Congress can regulate banks or any other interstate commerce any time it wants to.
The Federal Reserve is simply the bank at which the Treasury Department deposits its money.
All Federal reserve profits from its Open Market operations (http://www.federalreserve.gov/monetarypolicy/fomc.htm) above administrative costs goes into Treasury's checking account.
Stop reading anti-Semitic claptrap and start yelling at your elected representatives.
Congress can regulate banks or any other interstate commerce any time it wants to.
The Federal Reserve is simply the bank at which the Treasury Department deposits its money.
All Federal reserve profits from its Open Market operations (http://www.federalreserve.gov/monetarypolicy/fomc.htm) above administrative costs goes into Treasury's checking account.
Stop reading anti-Semitic claptrap and start yelling at your elected representatives.
2
The demand shortfall in Germany has been such that, according to IMF data, over the six years ending in 2014, Germany's current account surplus of $1366 bn was greater than China's $1201 bn. Unless this shortfall is reduced, it is hard to see how growth will recover in the Eurozone
3
Germany is simply blind to the idea that economies are dynamic, and all that money needs to circulate to have any effect. Instead, they take the static position, and back it with Protestant dogma: in essence, the hard-working prosper while the lazy fail.
For a nation that prides itself on technical achievement, it's bizarre that they never take the time to analyze what their beliefs tell them is right.
For a nation that prides itself on technical achievement, it's bizarre that they never take the time to analyze what their beliefs tell them is right.
2
The fall of the oil prices could be a factor of deflation in the USA. The Draghi duckt syndrome is also happening at the Fed, so we are not immune to a economic depression. The Obama's SOTU was much too optimistic and far unrealistic.
1
Despite Republican Reactionaries' dug-in opposition, a sane Obama and a sane Federal Reserve managed to save the U.S. from a 2nd Great Depression. That saved everyone severe pain.
Sadly, because Ronald Reagan, the Republican saint, destroyed workers' unions, slashed taxes for the wealthy, shifted the tax burden to the middle-class, and mesmerized everyone into thinking wealth is to be worshiped, the recovery in America has done extremely little for workers.
And even sadder: America's workers, demoralized since the 80's, remain mesmerized by the Reagan lie and continue to vote in Republican Reactionaries to implement policies that oppress workers.
Sadly, because Ronald Reagan, the Republican saint, destroyed workers' unions, slashed taxes for the wealthy, shifted the tax burden to the middle-class, and mesmerized everyone into thinking wealth is to be worshiped, the recovery in America has done extremely little for workers.
And even sadder: America's workers, demoralized since the 80's, remain mesmerized by the Reagan lie and continue to vote in Republican Reactionaries to implement policies that oppress workers.
104
Ahem, America's workers were not demoralized during the Clinton years, you know the other democrat. While true that income inequality continued during that period it was slowed down due to his tax hikes, the more important factor was that more of the middle and lower classes had incomes high enough to fuel our consumerism. We also had gotten out of the debt spiral, and for the first time in decades had surpluses. Remember the Al Gore "lock box"? Too bad that the wrong guy won the 2000 election: by Supreme Court appointment. We might now be in a verydifferent world right now.
5
C. Coffey: Good points. I was focusing on how worker income adjusted for inflation has stagnated at the late 70's level and workers' job security was turned into job insecurity.
3
Obama and the criminally operated Fed did NOTHING to save "everyone severe pain". The only benefactors from the actions of Obama and the Fed are the bankers and some corporations.
2
Come now. The difference between the two economies is more one of phase than of underlying character. Both suffer from the same underlying problem: dysfunctional capital markets that can't separate productive investments from the rest. And that is not going to change until capital gains tax rates are normalized to reflect (and counter) real interest rate movements. Until that's done, all episodes of QE are just gifts to the already rich that inflate the value of non-productive investments and set the stage for the next financial crisis.
What's needed now -- on both sides of the Atlantic -- is not new net public expenditures, but a dose of tax policy to change incentives. Taxes on capital income should be raised, starting with taxes on capital gains; taxes on earned income and consumption should be cut. Then we may get a little more work and a little less speculation on real interest rate movements.
What's needed now -- on both sides of the Atlantic -- is not new net public expenditures, but a dose of tax policy to change incentives. Taxes on capital income should be raised, starting with taxes on capital gains; taxes on earned income and consumption should be cut. Then we may get a little more work and a little less speculation on real interest rate movements.
32
Mr Krugman, you need to stop comparing Europe and the US economoically. Due to demographic differences, 1% growth in Europe is equivalent to 3% growth in the US, on a per capita basis. The real deflationary problem is with Mediterranean Europe, much of northern Europe is doing just fine. Ireland, which has implemented a tough austerity program, now has 5% growth. Funny how you don't mention Ireland in your columns anymore...
4
ireland is really an outlier. it never had the bloated public sector that places like Italy or Greece did. nor did it have entrenched interests (like pensioners). Ireland also takes tremendous advantage of its folks being native English speakers and the strong ties to America.
13
Let's also not forget that Ireland has had the benefit of being the recipient of a large amount of profits of US comapnies so they can avoid paying the tax in them in the US.
What does your reply even mean? The problem with Europe is what you say regarding bloated public sectors and overrich pensions, it has nothing to do with what Krugman writes.
The real drama of the Eurozone (19 coutries including Lithuania since Jan 1, 2015, might be again 18 after Jan 25 general elections in Greece, but nevermind) is that while it has an (almost) fully fledged central bank - ECB, it has nothing of the sort of the US Trasury or a MoF, if you prefer. Thus, the macroeconomic policy in the Eurozone (even if you are not an Austerian but a Keynesian fundamentalist) would be like an attempt of a one-legged man to dance waltz...
3
US voodoo economics
Mr. Krugman very clearvoyantly saw the housing bubble. But now I am not so sure. Do we need more money? Where does it go - mainly straight into new bubbles, enriching only a few. Is the US economy really so strong? Many have jobs, but cannot live from them. The US get richer, but how many individuals? The "deflationary spiral" is a theoretical idea from ivory-tower economists. Industry in Europe does not invest because the well-off citizenry shrinks because of demography. Poor and unqualified immigrants who do not intend to fit in will not make up for the economic decrease. And the banks are forcedto reduce their lendings thanks to -US sponsored- higher equity ratio targets.
Mr. Krugman very clearvoyantly saw the housing bubble. But now I am not so sure. Do we need more money? Where does it go - mainly straight into new bubbles, enriching only a few. Is the US economy really so strong? Many have jobs, but cannot live from them. The US get richer, but how many individuals? The "deflationary spiral" is a theoretical idea from ivory-tower economists. Industry in Europe does not invest because the well-off citizenry shrinks because of demography. Poor and unqualified immigrants who do not intend to fit in will not make up for the economic decrease. And the banks are forcedto reduce their lendings thanks to -US sponsored- higher equity ratio targets.
3
Krugman doesn't tell you that Europe and America's economy are hopelessly, irreversibly bankrupt due to trillions in speculation of complex financial instruments known as derivatives. That the toxic derivatives debt on the governments' books dwarfs that of their GDP! That America's "stimulus", and quantitative easing, aka virtual money printing, has only temporarily propped up the big zombie casino banks that continue bankrupting Europe and America. That's why the Swiss recently left the sinking ship by removing its peg to the Euro!
Why does Krugman get it so wrong? Well, if he told the truth and pushed for real solutions such as Glass-Steagall he wouldn't be writing for the Wall Street controlled NY Times.
Why does Krugman get it so wrong? Well, if he told the truth and pushed for real solutions such as Glass-Steagall he wouldn't be writing for the Wall Street controlled NY Times.
6
It is broadly accurate to say that Europe did almost everything wrong in 2009-2010 in response to the financial crisis and that the United States -- thanks to Barack Obama, Ben Bernanke, Nancy Pelosi and others -- did almost everything right.
A finer accuracy is to say that Germany – and, specifically, Angela Merkel – screwed up badly. Germany was and is the economic engine of Europe. Heroes like Mario Draghi could do little without Germany’s willing involvement in fashioning a recovery.
We can excuse the initial missteps, but Chancellor Merkel and her colleagues were so obsessed with flogging Greece, they continued for years to be blind to the big picture. Frankly, listening to her remarks, it appears that Merkel still doesn’t get it.
Whether because of a strong puritanical bias against debtors or a scientific background that demands tidy answers or growing into adulthood in the micro-managed atmosphere of East Germany, Merkel still doesn’t get it. Hopefully, the stimulus announced yesterday will render the Chancellor’s views less important and less harmful.
A finer accuracy is to say that Germany – and, specifically, Angela Merkel – screwed up badly. Germany was and is the economic engine of Europe. Heroes like Mario Draghi could do little without Germany’s willing involvement in fashioning a recovery.
We can excuse the initial missteps, but Chancellor Merkel and her colleagues were so obsessed with flogging Greece, they continued for years to be blind to the big picture. Frankly, listening to her remarks, it appears that Merkel still doesn’t get it.
Whether because of a strong puritanical bias against debtors or a scientific background that demands tidy answers or growing into adulthood in the micro-managed atmosphere of East Germany, Merkel still doesn’t get it. Hopefully, the stimulus announced yesterday will render the Chancellor’s views less important and less harmful.
16
Don't agree that Merkel "doesn't get it". she is leader of a democracy. Her people will not tolerate giving the ultra-corrupt Greeks a bailout while paying taxes. There is nothing wrong with Greece or Spain that pruning the public sector and reducing onerous red tape could not cure over the long run.
1
"Nor was this an innocent mistake. The thing that strikes me about Europe’s archons of austerity, its doyens of deflation, is their self-indulgence. They felt comfortable, emotionally and politically, demanding sacrifice (from other people) at a time when the world needed more spending. They were all too eager to ignore the evidence that they were wrong.
And Europe will be paying the price for their self-indulgence for years, perhaps decades, to come."
And look at the powerless in the comments here still mouthing these mistakes that cause great torment
And Europe will be paying the price for their self-indulgence for years, perhaps decades, to come."
And look at the powerless in the comments here still mouthing these mistakes that cause great torment
5
The sad thing about the austerity measures in Europe was that rich people with nice houses and plenty of money chose austerity for the middle class and poor.
It is much easier to stay the course when you yourself are not unemployed or suffering much.
It is much easier to stay the course when you yourself are not unemployed or suffering much.
450
'Much too Responsible'
And the problem of this statement is: It onla works if you take Germany completely out of the equation.
If you pretend that Germany is not a part of Europe at all - some island of resonsibility which is all by it's own.
But you can't do that. The German success is mainly built on responsibility - and that might be an annoying fact.
And it also might be annoying that people who know very little about economy might come to the same conclusion, when they vote for Germany as the most admired country above the US.
And that actually is a celebration of responsibility - while there might be a despearte lack of it and NOT too much?
And the problem of this statement is: It onla works if you take Germany completely out of the equation.
If you pretend that Germany is not a part of Europe at all - some island of resonsibility which is all by it's own.
But you can't do that. The German success is mainly built on responsibility - and that might be an annoying fact.
And it also might be annoying that people who know very little about economy might come to the same conclusion, when they vote for Germany as the most admired country above the US.
And that actually is a celebration of responsibility - while there might be a despearte lack of it and NOT too much?
3
I'm not so sure. The Germans spent like drunken sailors when the task was to integrate the east. That they cannot see the benefits of doing the same now is a tragedy.
1
That is linear thinking and you're right.
But, when you're a part of a profligate family in which members are extravagant, you are bound to either understand that you must rescue them and build their strength before becoming similarly responsible, or you let them wither while understanding that your common bloodline becomes weak.
If you did not have a common bloodline - viz., the Euro, you could let them wither.
You're right, but not beyond a point. Because you don't include the common destiny of the currency based on what it is tied to.
A weak(er) Euro is broadly good for Germany, but again, not beyond a point.
But, when you're a part of a profligate family in which members are extravagant, you are bound to either understand that you must rescue them and build their strength before becoming similarly responsible, or you let them wither while understanding that your common bloodline becomes weak.
If you did not have a common bloodline - viz., the Euro, you could let them wither.
You're right, but not beyond a point. Because you don't include the common destiny of the currency based on what it is tied to.
A weak(er) Euro is broadly good for Germany, but again, not beyond a point.
1
Would Germany still be considered responsible if the Euro didn't exist, and the Deutschmark was as strong as the Swiss Franc? Since Germany is only interested in export, how would that work? A German car that costs 50,000 USD will not sell nearly as well if it needs to be priced at 75,000 USD.
Germany is beggaring its neighbors, pure and simple. They should thank the rest of the Eurozone for keeping German prices low, rather than lecturing them on how they too can be good Germans.
Germany is beggaring its neighbors, pure and simple. They should thank the rest of the Eurozone for keeping German prices low, rather than lecturing them on how they too can be good Germans.
Paul,
Economic stimulus, Quantitative Easing, comes in two forms:
1. FIRST QE FORM: The IRS issues non-taxable cash grant checks directly to every taxpayer by Social Security Number.
(This saved the US economy in 2001, and 2008, then QE was switched out of the hands of the US Citizen and into the hands of the Bankers.)
2. SECOND QE FORM: The Federal Reserve issues grants to banks, who place the money in the stock-market (as “investment” banking which was illegal from 1934 –1999 by the Glass-Stiegel Law stating that banks must loan money to individuals, and cannot act on the bank’s owners behalf and invest money in the stock market. When the law was repealed, QE #1 saved the US economy in 2001. Then again in 2008 when the US economy crashed, QE 1 again was issued to all US taxpayers, and that saved the US economy, stopped the contraction, and stabilized GDP.
Then, after stabilizing using QE 1 cash grants to all citizens, the sleight of hand (leger de main) shifted the small QE 1 stimulus of $100 Billion into QE 2, a huge and bogus stimulus of $3.1 Trillion that went from the FED to the BANKS, and then into the STOCK MARKET. At this point the 1% got richer and the 99% of Americans got poorer.
And it is still going on. I intend to stop it. I'm running for President to give back the $3.1 Trillion as a QE 1 non-taxable cash grant divided equally among all Social Security Numbers.
[email protected]
Economic stimulus, Quantitative Easing, comes in two forms:
1. FIRST QE FORM: The IRS issues non-taxable cash grant checks directly to every taxpayer by Social Security Number.
(This saved the US economy in 2001, and 2008, then QE was switched out of the hands of the US Citizen and into the hands of the Bankers.)
2. SECOND QE FORM: The Federal Reserve issues grants to banks, who place the money in the stock-market (as “investment” banking which was illegal from 1934 –1999 by the Glass-Stiegel Law stating that banks must loan money to individuals, and cannot act on the bank’s owners behalf and invest money in the stock market. When the law was repealed, QE #1 saved the US economy in 2001. Then again in 2008 when the US economy crashed, QE 1 again was issued to all US taxpayers, and that saved the US economy, stopped the contraction, and stabilized GDP.
Then, after stabilizing using QE 1 cash grants to all citizens, the sleight of hand (leger de main) shifted the small QE 1 stimulus of $100 Billion into QE 2, a huge and bogus stimulus of $3.1 Trillion that went from the FED to the BANKS, and then into the STOCK MARKET. At this point the 1% got richer and the 99% of Americans got poorer.
And it is still going on. I intend to stop it. I'm running for President to give back the $3.1 Trillion as a QE 1 non-taxable cash grant divided equally among all Social Security Numbers.
[email protected]
6
You are so right and why so few people talk about it, I don't understand.
In Europe, perhaps the money is concentrated less at the top, as it is in the US. Because of social safety nets, more generally relied on in Europe, renewable energy and more up to date communications and mass transportation, even while undergoing "austerity", Europe might be actually in a better position to come out well in the long run compared to the US. We have not spent nearly enough on our infrastructure. We are behind in all of these areas mentioned while Europe soars ahead of us. The money is more fairly distributed. Greece and Spain suffered because of investments encouraged by northern neighbors to enhance development for trade under the EU. Arms sales to Greece were mandatory from France and Germany, as part of "austerity". These sales were especially unnecessary for Greece who no longer had any need to protect themselves from Turkey. But banks, arms dealers, etc had their way. Great swaths of people lost everything both here and in the US because of money spent on wars and oil. At least countries in Europe were able to read the writing on the wall and move themselves as quickly as possible away from dependence on oil, especially Germany. Because of this, Europe will fare much better than the US in the long run is a good possibility.
5
The experiment in a single currency has failed and it is time to reverse it. When the euro was implemented it was the best solution for broader international integration and trade. This is no longer the case. Computers and software can now do for individuals using sovereign currencies what the euro was supposed to do. At the same time, returning to sovereign currencies would enable the inflation mechanism that is so needed at the national level. The Europeans are never going to agree to forming a true political amalgamation and the halfway step of a currency is a disaster. Time to start a conversation about decommissioning the euro.
8
I would hit the Recommend button several times if the NYT permitted it. No one wants to absorb the costs involved in doing this, but I don't see how it can be avoided. Now may be the best time, when some of the benefits gained by triggering a Southern European recovery might offset some of the losses elsewhere.
I agree to a large extent with what Paul Krugman writes, but I think he has bashed the Europe “austerity” too hard. Krugman is on surer footing when he writes about the US, and he is mostly dead-on target there. However, in Europe there are other factors that Krugman has neglected, and they have driven much of the debate over here. For a start, there is the problem of tax collection in southern European countries. To a large extent this has been abysmal – some efforts have been made over the last 5 years to correct this, but it is still a serious problem. Lax tax collection has gone along with corruption, or at least strong protectionism by vested interests. To take the case of Greece, it is well known that vast amounts of Greek money are now in Switzerland – in fact I have heard it said that there is more Greek money in Swiss Banks than in Greek banks. Of course, a lot of money has gone to Switzerland (which is why the CH is so strong) but the proportion of Greek money is certainly the highest. And who would blame them as the Greeks seriously discuss leaving the Eurozone? So yes, Mario Draghi has done the right thing, but maybe he had to wait until at least some the reforms discussed above had taken place. Otherwise it is just good money after bad.
2
Isn't Capitalism grand! The wealth of the U.S. and Europe is posssible because of it. The standards of living in these countries is derived from it. It brings out the best in people in so many areas. Innovation, education, philanthropy and many other desirable ways.
Professor should now admit that the policies of tax and spend will not lift anyone up in a meaningful way.
If it did, there would be no people living under the poverty line. Be honest, at least with your readers. For the last 50 years this country has been engaged in social policies that are not working. Isn't that the definition of insanity?
Can we admit they are failed policies and attack the problem using 21st century policies? Please for everyone's sake but especially those at the bottom of the economic ladder
Professor should now admit that the policies of tax and spend will not lift anyone up in a meaningful way.
If it did, there would be no people living under the poverty line. Be honest, at least with your readers. For the last 50 years this country has been engaged in social policies that are not working. Isn't that the definition of insanity?
Can we admit they are failed policies and attack the problem using 21st century policies? Please for everyone's sake but especially those at the bottom of the economic ladder
2
JJS should now admit that spending $600 billion dollars for defense, more than three times what the next country spends, will not protect us in any meaningful way.
If it did, there would be no one attacking us. Be honest, for the last 50 years this country has been engaged in military policies that are not working. Isn't that the definition of insanity? Can we admit that they are failed policies and attack the problem using 21st century policies? Please, for everyone's sake but especially for those at the bottom of the economic ladder.
If it did, there would be no one attacking us. Be honest, for the last 50 years this country has been engaged in military policies that are not working. Isn't that the definition of insanity? Can we admit that they are failed policies and attack the problem using 21st century policies? Please, for everyone's sake but especially for those at the bottom of the economic ladder.
8
Actually, I think the history is that starting 34 years ago this country pivoted strongly away from taxing and spending with reductions in taxes from the postwar prosperity levels to much lower rates, especially for the wealthy and especially for non-salary income (capital gains). Basic welfare programs also underwent a number of reforms.
So I think that the data shows that the social policy that is not working is the idea of redistributing (compared to the postwar period of prosperity) income to the wealthy under the premise that they would invest that money and stimulate the economy for all. No, the data now shows, that the rising tide did not lift all boats - that has been the failed policy.
So I think that the data shows that the social policy that is not working is the idea of redistributing (compared to the postwar period of prosperity) income to the wealthy under the premise that they would invest that money and stimulate the economy for all. No, the data now shows, that the rising tide did not lift all boats - that has been the failed policy.
15
There are some who believe that capitalism, unregulated and left to itself, would produce better outcomes than the managed capitalism we now have. The 2008 banking crisis argues strongly against that view.
The first lesson of 2008 is that capitalism, left to its own devices, can destroy wealth as easily as it creates it. Those who argue that government only gets in the way would do well to remember that in 2008-2009 government was the only institution capable of stabilizing a banking system that was locked up and headed for meltdown.
The second lesson is that getting fiscal and monetary policies right can make an enormous difference in how an economy performs after a crisis. This, in turn, can make an enormous difference in the lives of individuals -- literally the difference between keeping or losing a house, marriage or divorce, stability or suicide.
The third lesson is that regulation of the banking industry is an ongoing need. America enjoyed decades of financial stability in the Glass-Steagall era. But when those regulations were weakened, we got a bubble and a horrific crash, from which many American and European families have still not recovered.
Yes, capitalism is a fine economic system. But it is not self-regulating. Like any other system, it needs to be managed intelligently. That's the lesson of 2008.
The first lesson of 2008 is that capitalism, left to its own devices, can destroy wealth as easily as it creates it. Those who argue that government only gets in the way would do well to remember that in 2008-2009 government was the only institution capable of stabilizing a banking system that was locked up and headed for meltdown.
The second lesson is that getting fiscal and monetary policies right can make an enormous difference in how an economy performs after a crisis. This, in turn, can make an enormous difference in the lives of individuals -- literally the difference between keeping or losing a house, marriage or divorce, stability or suicide.
The third lesson is that regulation of the banking industry is an ongoing need. America enjoyed decades of financial stability in the Glass-Steagall era. But when those regulations were weakened, we got a bubble and a horrific crash, from which many American and European families have still not recovered.
Yes, capitalism is a fine economic system. But it is not self-regulating. Like any other system, it needs to be managed intelligently. That's the lesson of 2008.
4
Professor Krugman has dealt with the aftermath of the American and Eurozone credit-housing bubble burst several times. His conclusion is always the same. Public spending-ultra loose monetary policy is good, austerity is bad.
The question is why Europeans (i.e., Germans) cannot see the light of Professor Krugman's brand of new Keynesianism? The answer is simple. The eurozone is an incomplete integration area.
The euro was adopted without a fiscal/political integration. In other words, market forces determine the interest rate levels to be paid to finance public and private debt in each member country.
The ECB faces a policy conundrum. That is, to guarantee stability of prices, integrity of the financial system and maintain full employment at the 18 member country economies. Mission impossible without fiscal and political integration.
Given the fiscal and political constraints mentioned before, the proposed quantitative easing by the ECB may not have the same impact as the FED in the US.
Bottomline: As long as the eurozone continues to be an asymmetric integration process, the financial system will be subject to endogenous shocks such as the one detonated by Greece's public debt.
The question is why Europeans (i.e., Germans) cannot see the light of Professor Krugman's brand of new Keynesianism? The answer is simple. The eurozone is an incomplete integration area.
The euro was adopted without a fiscal/political integration. In other words, market forces determine the interest rate levels to be paid to finance public and private debt in each member country.
The ECB faces a policy conundrum. That is, to guarantee stability of prices, integrity of the financial system and maintain full employment at the 18 member country economies. Mission impossible without fiscal and political integration.
Given the fiscal and political constraints mentioned before, the proposed quantitative easing by the ECB may not have the same impact as the FED in the US.
Bottomline: As long as the eurozone continues to be an asymmetric integration process, the financial system will be subject to endogenous shocks such as the one detonated by Greece's public debt.
5
We have to look at poverty, inequality, inequity and the grotesque centralization of income, wealth, property and power. These crimes are everywhere. Yes, we are bad off but they are worse off. Or, are they. Don't we have higher poverty rates, child poverty rates, incarceration rates, inequality rates? We're far too complacent here about the chasm of wealth. This continues to grow. This is Occupy, the 99% folks and All Lives Matter. It won't stop there. European workers are more used to 'fighting' for their rights as true citizens of a place. We're used to the Super Bowl and soda. But, times are changing. More folks are feeling desperate, losing homes, losing hope in the corrupted system. I read on the front page that Yemen and Albany are in 'chaos', for different reasons. Well, go to a ghetto in the US or a place of working people in a declining quality of life. Deflation is terrible, but, due to low wages, terrible inequity and a cheap social-safety net, what we have is truly no better.
8
I wonder what role patrician scorn plays in Eurozone macro decisions. Here in the United States, aristocrat manque Joe Schmo and his ilk have quashed proposed statutes (such as single-payer healthcare) intended to help every American and other legislation (such as healthcare for poor children) due to fear and loathing of "those" people.
On some level, the schadenfreude that must be felt in some European cigar-smoke-filled rooms as half of Spanish youth roam the streets in search of work and Greeks get a little pain to go with their fabulous scenery just might be worth the damage that those who should know better are doing to their shared economy. As you point out, Paul, there is no Federal spending in the Euro area that rivals, say, Social Security and Medicare payments that prop up some of the most ungrateful American states--see how it easy it is to wish a little harm on one's country's whiniest?
As for the Usual Suspects taking responsibility, yours will be a long wait. These are people who hope either to keep their current jobs or be hired at some time in the future. Admitting that you blew it big time in the face of contrary evidence is not an attractive line on a resume.
Yet, is it possible that those in charge of the Euro are cruel rather than clueless? A humming economy and a grinding economy are not that different for those with fat trust funds and sinecures. In fact, deflation helps every Euro buy more, which favors those who have Euros over those who don't.
On some level, the schadenfreude that must be felt in some European cigar-smoke-filled rooms as half of Spanish youth roam the streets in search of work and Greeks get a little pain to go with their fabulous scenery just might be worth the damage that those who should know better are doing to their shared economy. As you point out, Paul, there is no Federal spending in the Euro area that rivals, say, Social Security and Medicare payments that prop up some of the most ungrateful American states--see how it easy it is to wish a little harm on one's country's whiniest?
As for the Usual Suspects taking responsibility, yours will be a long wait. These are people who hope either to keep their current jobs or be hired at some time in the future. Admitting that you blew it big time in the face of contrary evidence is not an attractive line on a resume.
Yet, is it possible that those in charge of the Euro are cruel rather than clueless? A humming economy and a grinding economy are not that different for those with fat trust funds and sinecures. In fact, deflation helps every Euro buy more, which favors those who have Euros over those who don't.
6
If the republicans ever rule, with their present proposals, it would be even worse here.
21
Archons of Austerity indeed. Good one. To think we could be having a booming economy right now. What might have been if saner minds had prevailed.
12
Ever since the Supreme Court reaffirmed that corporations are people, I've been pondering why they don't have to pay taxes the same way people have to do. Corporations have a much lower tax rate than wage owners. Is that fair?
27
“Europe, on the other hand — or more precisely the eurozone, the 18 countries sharing a common currency — did almost everything wrong.”
Maybe a common currency that is controlled by a central monetary policy that affects 18 or more different European economies, which follow their own, sometimes contradictory, fiscal policies, is the reason almost everything went wrong. When Italian and Spanish bond yields are skyrocketing, while German bond yields are tanking, what’s the ECB to make of inflation in one language zone and deflation in another language zone?
But I think the ECB got fooled by that old classic harbinger of inflation expectations – the price of gold, which went on a tear from ~$1000 an ounce at the end of the Great Recession in mid-2009 to ~$1900 an ounce by mid-2011, when the ECB hastily raised interest rates. Now, with gold back under $1300 an ounce and crude oil prices plunging by more than half in less than three months, deflation is very much on the ECB’s mind. Only time will tell, if the ECB’s version of QE is too little, too late.
Maybe a common currency that is controlled by a central monetary policy that affects 18 or more different European economies, which follow their own, sometimes contradictory, fiscal policies, is the reason almost everything went wrong. When Italian and Spanish bond yields are skyrocketing, while German bond yields are tanking, what’s the ECB to make of inflation in one language zone and deflation in another language zone?
But I think the ECB got fooled by that old classic harbinger of inflation expectations – the price of gold, which went on a tear from ~$1000 an ounce at the end of the Great Recession in mid-2009 to ~$1900 an ounce by mid-2011, when the ECB hastily raised interest rates. Now, with gold back under $1300 an ounce and crude oil prices plunging by more than half in less than three months, deflation is very much on the ECB’s mind. Only time will tell, if the ECB’s version of QE is too little, too late.
21
What do Mario Draghi and Roger Goodell have in common? Their biggest headache is a deflationary spiral.
5
The joke IMHO would have been better if you had asked: "What do Mario Draghi and Tom Brady have in common?"
1
Dr. Krugman has a knack for peeling away the facade, and exposing maneuvers for what they are: in this case, "self-indulgence" is the keyword, even though the Austerians no doubt consider themselves the protectors of fiscal and moral rectitude. And, a lesson for us here in the United States: look to see who is demanding our sacrifice, and why.
18
And may I stress this point again.
There is no doubt - absolutely no doubt about the fact, that the worlds economies sufffer from the lack of responsibility - and NOT the other way around.
There is no doubt - absolutely no doubt about the fact, that the worlds economies sufffer from the lack of responsibility - and NOT the other way around.
Let's look a some history on the debt.
After WWI, we had 10 years of balanced budgets. Here are the debt figures:
07/01/1920 $25,952,456,406.16
06/30/1930 $16,185,309,831.43
In 1929, the debt was only 16% of GDP
AND THEN WHAT HAPPENED?
BTW History shows us that every time we embraced austerity and balanced the budget for a while, we got a depression and every major depression followed a period of surpluses.
After WWII we had even more debt as a percent of GDP, but we had mostly deficits for 27 years,
Here are the debt figures:
06/28/1946 $269,422,099,173.26
06/30/1973 $458,141,605,312.09
As you can see, the debt almost doubled, but we got the interstate highway system, Medicare. a median real household income that was 74% larger, and GDP growth averaged 3.8%.
BTW the public debt was 109% of GDP in 1946 and the gross debt was 121%. Those figures are about 73% and 100% today.
Please explain why we ever have to pay off or even pay down the debt. Debt service is running at 0.8% of GDP, the lowest in about 60 years.
When did we pay off the debt from WWII? When did too much debt EVER negatively impact the economy? Many times (e.g. 1929) too little debt sure did.
The definition of insanity is doing the same thing over and over and expecting a different result.
http://www.whitehouse.gov/omb/budget/Historicals
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm
After WWI, we had 10 years of balanced budgets. Here are the debt figures:
07/01/1920 $25,952,456,406.16
06/30/1930 $16,185,309,831.43
In 1929, the debt was only 16% of GDP
AND THEN WHAT HAPPENED?
BTW History shows us that every time we embraced austerity and balanced the budget for a while, we got a depression and every major depression followed a period of surpluses.
After WWII we had even more debt as a percent of GDP, but we had mostly deficits for 27 years,
Here are the debt figures:
06/28/1946 $269,422,099,173.26
06/30/1973 $458,141,605,312.09
As you can see, the debt almost doubled, but we got the interstate highway system, Medicare. a median real household income that was 74% larger, and GDP growth averaged 3.8%.
BTW the public debt was 109% of GDP in 1946 and the gross debt was 121%. Those figures are about 73% and 100% today.
Please explain why we ever have to pay off or even pay down the debt. Debt service is running at 0.8% of GDP, the lowest in about 60 years.
When did we pay off the debt from WWII? When did too much debt EVER negatively impact the economy? Many times (e.g. 1929) too little debt sure did.
The definition of insanity is doing the same thing over and over and expecting a different result.
http://www.whitehouse.gov/omb/budget/Historicals
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm
195
Well let's carry that a little further and see how that's working out.
06/30/1973 $458,141,605,312.09
Total US debt as of 1.21.15 :$18,083,464,106,854.21. Lets see that's only 40 times the debt we had 41 years ago, so we must, by your logic, be in economic paradise with not a care in the world.
Hurrah for the curative powers of massive debt!
06/30/1973 $458,141,605,312.09
Total US debt as of 1.21.15 :$18,083,464,106,854.21. Lets see that's only 40 times the debt we had 41 years ago, so we must, by your logic, be in economic paradise with not a care in the world.
Hurrah for the curative powers of massive debt!
Steve, you need to learn the difference between necessary and sufficient. My analysis showed that deficits are necessary for prosperity and that we CAN have prosperity with massive debt. Yours showed they are not sufficient and that massive debt alone will not guarantee prosperity. which I never claimed.
The obvious point is that we didn't get today's massive debt without deficits so the very thing you champion, massive deficits, has led to the very thing you descry, massive stagnation! If 1.2 TRILLION a year is not "sufficient" then I very much doubt any amount would be.
Paul,
If Europe is very similar to the US then why would there be any reason to raise taxes and expand the government here in the United States
If Europe is very similar to the US then why would there be any reason to raise taxes and expand the government here in the United States
This bears much repeating:
"In a depressed economy, however, a balanced-budget fetish and a hard-money obsession are deeply irresponsible."
"In a depressed economy, however, a balanced-budget fetish and a hard-money obsession are deeply irresponsible."
26
Only someone who is so out of touch, such as liberals like Mr. Krugman would think ours is a "solid recovery" and that our economy benefited from a "spendthrift, loose-money" monetary policies.
While monetary policies have had a positive impact on the stock market, this "benefit" has not filtered down to those who really need it - working class America.
Companies are still sitting on enormous amounts of cash, refusing to hire workers or even reinvest in their companies.
Likewise, our "spendthrift, loose-money" monetary policy has done nothing to stop the conversation assault of what feeble safety nets we have.
Granted the Eurozone has its problems, but if you are an ordinary citizen at the lower end of the economic spectrum you still doing a heck of a lot better than anyone in this country.
But, don't tell any of that to ivory tower liberals like Paul Krugman who think monetary policies have a real impact on ordinary folks, because clearly they do not.
While monetary policies have had a positive impact on the stock market, this "benefit" has not filtered down to those who really need it - working class America.
Companies are still sitting on enormous amounts of cash, refusing to hire workers or even reinvest in their companies.
Likewise, our "spendthrift, loose-money" monetary policy has done nothing to stop the conversation assault of what feeble safety nets we have.
Granted the Eurozone has its problems, but if you are an ordinary citizen at the lower end of the economic spectrum you still doing a heck of a lot better than anyone in this country.
But, don't tell any of that to ivory tower liberals like Paul Krugman who think monetary policies have a real impact on ordinary folks, because clearly they do not.
5
As long as liquidity or spending are confined to shuffling and maintaining asset prices, noting is going to change for people who need good jobs to live successful lives.
Obama said this week that "middle class economics works". But in the past six years, he has let the plutocrats take over. And they believe in a different sort of economics, one for themselves and a different sort for everyone else in which the middle class continues to eviscerated.
Obama said this week that "middle class economics works". But in the past six years, he has let the plutocrats take over. And they believe in a different sort of economics, one for themselves and a different sort for everyone else in which the middle class continues to eviscerated.
6
What’s left out and puzzling: Why these austere EU nations still have not repealed their universal health care? Why don’t their conservative parties vow to destroy their complete versions of ‘Obamacare’, in place for decades? Why don’t they ‘save money’ by turning their health care over to profit making insurance co’s, hospitals? Why not let drug co’s charge inflated prices, and doctors get wealthy? Like the US?
Why do they waste spending on guaranteed child care leave, sick leave and vacations—don’t these cost business’s also? Please explain.
The Gop threatens the US spending on basic survival SS/medicare/food stamps. food stamps and UI after layoffs varies greatly per local whims, making 2nd class citizens.
How can our states be compared to independent EU nations? Our governors are not as powerful as their elected presidents. That’s a confusing comparison.
Why don’t they cut federal budgets by stopping their subsidies of university and med school tuition? They could make self reliant, ambitious students go into life time debt for higher degrees, like US grads do.
Why not cut spending on their publicly funded elections? Let their billionaire donors pay for those bills, for ROI? Just think of the govt money that would save!
I know, they tax more. So? What would Boehner advise?
Even France’s rw Marine Le Pen—boo, hiss--- favors govt spending for their social benefits, instead of turning h/c, education, retirement etc and social services into profit centers.
Why do they waste spending on guaranteed child care leave, sick leave and vacations—don’t these cost business’s also? Please explain.
The Gop threatens the US spending on basic survival SS/medicare/food stamps. food stamps and UI after layoffs varies greatly per local whims, making 2nd class citizens.
How can our states be compared to independent EU nations? Our governors are not as powerful as their elected presidents. That’s a confusing comparison.
Why don’t they cut federal budgets by stopping their subsidies of university and med school tuition? They could make self reliant, ambitious students go into life time debt for higher degrees, like US grads do.
Why not cut spending on their publicly funded elections? Let their billionaire donors pay for those bills, for ROI? Just think of the govt money that would save!
I know, they tax more. So? What would Boehner advise?
Even France’s rw Marine Le Pen—boo, hiss--- favors govt spending for their social benefits, instead of turning h/c, education, retirement etc and social services into profit centers.
18
In The Netherlands we are well underway in demolishing healthcare and now college tuition. All for the sake of austerity and an unconditional believe in markets
1
Hein, I did meet people from Holland who said their retirement age is also being lowered. Do their opposition parties have any strength to fight this, and what do polls show? How far can this go?
The Obama stimulus (read: wasted amount of a trillion dollars) had as much to do with the US so called recovery as Obama had to do with the rise in the equity market, and as much as the rooster had to with the sun rise.
How about Nadal won the Australian open mens singles in January 2009, his first slam win on a hard court, and which kick started the stock market?
But Obama is all about taking credit when none is due, and passing the buck when its his responsibility, and hence it is not surprising that he and his media acolytes like Krugman are giddy with taking credit.
How about Nadal won the Australian open mens singles in January 2009, his first slam win on a hard court, and which kick started the stock market?
But Obama is all about taking credit when none is due, and passing the buck when its his responsibility, and hence it is not surprising that he and his media acolytes like Krugman are giddy with taking credit.
2
So we should have emulated those wise Europeans, right? And where would we be now? Let's see, where are the Europeans now?
1
I seem to remember all sorts of claims that Obama's policies would fail, and Romney promising the achievements we have now by 2016. Are you asking us to believe you and your ilk would not be blaming Obama if the economy were still poor, or giving Romney credit if he had won, and in 4 years he had managed what Obama has done in 2? I suppose that George W was also a rooster in the sunrise with responsibility for the crisis, in spite of tax cuts, wars and loosened regulations.
2
Although I like Mr. Krugman, I strongly disagree with most of his 'Basic" Premises.
FIRST, he is completely correct that we need lots of stimulus
Unfortunately any such stimulus has to come through the political process; and as such, can be assured to be slanted overwhelmingly in favor of the 1% & the financial industry
But where Mr. Krugman goes massively wrong (always) is revealed in the first paragraph of this article when he states that the US is "immensely wealthy"
REALITY-CHECK= The US is not wealthy and hasn't been since the 50s & 60s
Back in the early 1970s when I started college as an ECON major, was the turning point when the US went from being a Creditor-Nation to the largest Debtor-Nation in the history of the known universe
By the lunacy accounting standards of the federal government we are less than $20 Trillion in debt. Lunacy-Accounting-Standards=ie OFF-Budget debts and expenditure, Black-Budgets, and who knows what else. By any REAL accounting we are probably somewhere between $50-100 Trillion in debt
AND we have NO intention of ever paying that money back, and that's no secret
It is unknowable how long it will be before people stop purchasing our debt, & start clearing out their holdings of US Dollars- but the time horizon is not infinite
We can repudiate our debt, devalue our currency, go on a massive inflation binge
We need productive stimulus AND an 20yr plan to pay off our debt, plus a block to prevent future pols from taking us back in debt again
FIRST, he is completely correct that we need lots of stimulus
Unfortunately any such stimulus has to come through the political process; and as such, can be assured to be slanted overwhelmingly in favor of the 1% & the financial industry
But where Mr. Krugman goes massively wrong (always) is revealed in the first paragraph of this article when he states that the US is "immensely wealthy"
REALITY-CHECK= The US is not wealthy and hasn't been since the 50s & 60s
Back in the early 1970s when I started college as an ECON major, was the turning point when the US went from being a Creditor-Nation to the largest Debtor-Nation in the history of the known universe
By the lunacy accounting standards of the federal government we are less than $20 Trillion in debt. Lunacy-Accounting-Standards=ie OFF-Budget debts and expenditure, Black-Budgets, and who knows what else. By any REAL accounting we are probably somewhere between $50-100 Trillion in debt
AND we have NO intention of ever paying that money back, and that's no secret
It is unknowable how long it will be before people stop purchasing our debt, & start clearing out their holdings of US Dollars- but the time horizon is not infinite
We can repudiate our debt, devalue our currency, go on a massive inflation binge
We need productive stimulus AND an 20yr plan to pay off our debt, plus a block to prevent future pols from taking us back in debt again
3
Here are some reasons why the US is different that Europe.
1. Interest rates have been close to zero since 2007. When large companies can borrow at .5% and speculate or lend out at 14-16%, they are going to recoup their losses.
2. Corporate taxes remain low or non-existent for billion dollar companies. During the recession they laid off people and only recently started hiring them back at a lower wage. The tax code hasn’t changed much n 8 years thanks to our "Do Nothing" Congress. Existing loopholes and tax heavens haven't closed.
3. The US is the largest economy in the world so we have demand for our products and services. Global companies mitigated losses during the recession with units overseas.
4. Although Congress has been inept and MIA the last 6 years, they did pass Austerity to pay for the sins of the past while blocking long-term Unemployment insurance and gutting domestic programs. Despite their dereliction of duty and the transgressions from the GOP, people have been paying down their debt and living within their means. On the other hand, a massive wealth transfer is taking place with the top .1% who are reliving the 2nd Gilded Age.
5. Lastly, while some sectors are still in the doldrums, other sectors have taken off. Companies are beginning to hire and demand has picked up.
Time has healed old wounds. As long as we have a responsible grownup (Federal Reserve), our nation is on the right track. Unfortunately, Europe seems to be missing that leadership…
1. Interest rates have been close to zero since 2007. When large companies can borrow at .5% and speculate or lend out at 14-16%, they are going to recoup their losses.
2. Corporate taxes remain low or non-existent for billion dollar companies. During the recession they laid off people and only recently started hiring them back at a lower wage. The tax code hasn’t changed much n 8 years thanks to our "Do Nothing" Congress. Existing loopholes and tax heavens haven't closed.
3. The US is the largest economy in the world so we have demand for our products and services. Global companies mitigated losses during the recession with units overseas.
4. Although Congress has been inept and MIA the last 6 years, they did pass Austerity to pay for the sins of the past while blocking long-term Unemployment insurance and gutting domestic programs. Despite their dereliction of duty and the transgressions from the GOP, people have been paying down their debt and living within their means. On the other hand, a massive wealth transfer is taking place with the top .1% who are reliving the 2nd Gilded Age.
5. Lastly, while some sectors are still in the doldrums, other sectors have taken off. Companies are beginning to hire and demand has picked up.
Time has healed old wounds. As long as we have a responsible grownup (Federal Reserve), our nation is on the right track. Unfortunately, Europe seems to be missing that leadership…
4
Things really have turned around since Ronald Reagan, in the early 1980s, was lambasting John Maynard Keynes and his ideas about fiscal policy. I guess we need a good recession, every now and then, to remind us just how correct Keynes was in "The General Theory."
7
What strikes me is how everyone in the media keeps saying "we have the most Republican Congress since the 1920s" but no one seems to remember or at least admit what happened after that.
I fear that no matter what happens in the White House, Congress will now try to send the nation down that same 1920s path. It could still be that we ain't seen nothing yet.
I fear that no matter what happens in the White House, Congress will now try to send the nation down that same 1920s path. It could still be that we ain't seen nothing yet.
15
No matter what you call it or how you try to disguise it, the underlying reason for pushing "austerity" is always to protect the elite at the expense of the masses.
12
Sacrifice by others...
1
How much should the people suffer for the sins of bankers? I say they have suffered too much, Germany says "Not enough yet."
4
One reason Europe will pay for decades to come is the demographic problem of its population's age pyramid. Failing to reproduce at rates sufficient to keep their nations full of indigenous citizens, the Europeans have had to reckon with aliens from other continents and cultures in order to keep their economies viable. The labor input of these non-Europeans has been indispensible to the EC's eocnomic viability and whatever growth has occurred within Europe depended upon their input. Permitting or in some cases suffering huge numbers of people to pile in from outside Europe has turned into the largest threat to its existence, along with the troublesome question of defining who is a European of whatever country.
2
The US economy prospers not because of central planners like Krugman, Obama, and our "progressives" but despite them.
2
There was nothing like the US housing bubble in the Eurozone, which is why a number of European banks were conned into investing in US mortgage backed securities.
3
Self indulgence isn't a trait confined to those preaching austerity in Europe. How about Dick Cheney saying "deficits don't matter", (when there is a war to be sold and Halliburton stood to benefit)? How about all of the former members of Congress that are now on the gravy train as paid lobbyists and pitchmen? What of the billionaire C.E.O.'s of healthcare companies raising costs for what in Europe is regarded as a basic right? How many decades will we in the United States be paying for wrong and unnecessary military conflicts, environmental irresponsibility, governmental incompetence, and out of control corporate greed?
If we could stave off deflation by harnessing our energies and talents in a way that builds something of value rather than wastes and destroys life and habitat, then we would at least be headed in a better direction than we are now, one where the price to be paid would be far less than that caused by continually being irresponsibly reckless in our preparations for the future.
If we could stave off deflation by harnessing our energies and talents in a way that builds something of value rather than wastes and destroys life and habitat, then we would at least be headed in a better direction than we are now, one where the price to be paid would be far less than that caused by continually being irresponsibly reckless in our preparations for the future.
8
Dr. Krugman,
I respectfully ask that you please clarify your use of the phrase, "solid recovery", when referring to the American economy.
I respectfully ask that you please clarify your use of the phrase, "solid recovery", when referring to the American economy.
2
Drumsing, How about the Dow tripling and job growth in six figures?
1
Very serious people gotta do what very serious people gotta do.
2
Good for the Germans.
They work hard and save their money and refuse to give it away to those who are irresponsible.
Even better.
They ignore Paul Krugman and refuse to print money.
They work hard and save their money and refuse to give it away to those who are irresponsible.
Even better.
They ignore Paul Krugman and refuse to print money.
4
It's not a matter of refusal on the part of the Germans. They cannot print money as they do not have their own currency.
You said nothing to contradict the reasons given by the professor about why the EU is in experiencing poor economic conditions while we are doing better than we have in over 10 years.
Don't let little things like facts stand in the way of your ideology.
You said nothing to contradict the reasons given by the professor about why the EU is in experiencing poor economic conditions while we are doing better than we have in over 10 years.
Don't let little things like facts stand in the way of your ideology.
6
The Collapse of Creditanstalt Bank in 1931
“There are two kinds of people at present: those who know in a vague way that the 1930s was a bad time and those who have studied the detail and understand the economics of why it went bad.
“The latter are now getting publicly terrified because they can see, very clearly, the danger of doing it all again.” Brian Trumbore
http://www.buyandhold.com/bh/en/education/history/2012/collapse.html
“There are two kinds of people at present: those who know in a vague way that the 1930s was a bad time and those who have studied the detail and understand the economics of why it went bad.
“The latter are now getting publicly terrified because they can see, very clearly, the danger of doing it all again.” Brian Trumbore
http://www.buyandhold.com/bh/en/education/history/2012/collapse.html
2
I agree with pretty much all of Paul's positions. But why does it seem like he's said the same things in pretty much every column? Trying to persuade by repetition?
2
So what does Obama have to 'strut' about? A basically jobless 'recovery' that mainly benefited Wall Street and neatly bypassed Main Street? Oh, but now there are more jobs of a sort - the kind that pay low wages, carry basically no benefits, and are about as stable as the Pompeii metropolitan area proved to be on 24 August 79. As in 'Sure, there are more jobs. And I'm barely making ends meet on two of them. Before the tax penalty for not buying the health insurance I can't afford, that is.' Calling America's current economy 'in recovery' is rather like claiming that a long-comatose stroke patient is getting better because he's starting to thrash about in bed, never mind that being due to seizures.
5
Finally, the Germans get revenge on Europe for the Treaty of Versailles. I'm guessing that the schadenfreude is palpable.
1
The GOP are prescribing for America exactly what Europe has now decided doesn't work for them and are slowly walking away from. The monotonous drone from the GOP is that the generous social safety net is killing Europe but nothing can be farther from the truth.
The GOP still scream for a balanced national budget. There is no threat to a country's economic health than to have ideological amateurs try to impose their failed policies despite the fact that we have solid evidence, on both sides of the Pond, that it just doesn't work.
I would welcome this news as sure evidence that can be demonstrated to our fellow Americans that what the Repubs want is destructive for us. Of course my hesitation is that the media, our vaunted Fourth Estate (gag,gag), won't explain, can't explain, don't want to explain because it is too tough to understand and that the real message gets lost in a flurry about Euro social safety net garbage.
The GOP still scream for a balanced national budget. There is no threat to a country's economic health than to have ideological amateurs try to impose their failed policies despite the fact that we have solid evidence, on both sides of the Pond, that it just doesn't work.
I would welcome this news as sure evidence that can be demonstrated to our fellow Americans that what the Repubs want is destructive for us. Of course my hesitation is that the media, our vaunted Fourth Estate (gag,gag), won't explain, can't explain, don't want to explain because it is too tough to understand and that the real message gets lost in a flurry about Euro social safety net garbage.
203
It's time to call their bluff, loudly, vociferously and unashamedly.
But being careful that we are right, every time.
But being careful that we are right, every time.
1
We can't say this often enough, the "Propaganda Channel" (tm continues to propagate the alternative Economic Theories that have demonstrably FAILED since the mis-rule of Ronald Reagan.
An important part of our political process is controlled by a faction that fails to acknowledge that tax cuts will NOT "pay for themselves" (Proven over and over again), and the top 1% of our income spectrum and corporations are paying historically LOW taxes, a major factor in our budgetary problems.
Until our governments are willing to claim a more historical share of the income of the 1% (Especially the .01%) and corporations, it is disingenuous (that's "Lies" for you republicans) of them to talk about "Tax Reform".
The American Right wing don't really plan any real tax reforms, they just want to pump more money uphill to their patrons who already have plenty.
An important part of our political process is controlled by a faction that fails to acknowledge that tax cuts will NOT "pay for themselves" (Proven over and over again), and the top 1% of our income spectrum and corporations are paying historically LOW taxes, a major factor in our budgetary problems.
Until our governments are willing to claim a more historical share of the income of the 1% (Especially the .01%) and corporations, it is disingenuous (that's "Lies" for you republicans) of them to talk about "Tax Reform".
The American Right wing don't really plan any real tax reforms, they just want to pump more money uphill to their patrons who already have plenty.
The United States has a fundamentally sound economy with a robust tax collection system, vast amounts of research, many major corporations, a very high GDP, generally honest and effective commercial legal system, good demographics, vast natural resources and a long history of economic success. Countries like Germany, the UK, Denmark, Norway, Switzerland, Austria and others likewise sport very positive and robust economic advantages in different areas, which are a confluence of many factors. The US did hit a serious economic downturn, but at the end of the day, it was a case of a generally healthy patient getting ill. In contrast, Greece, Spain, Portugal, and many recent EU nations, were already structurally and economically sick long before the economic downturn. While they may have had positive growth, the underlying economic fundamentals, were very bad. No one in Greece pays taxes. It produces very little of value to the rest of the world. It has no robust education system, nor is it a nation of good government. It was always doomed absent vast support from outside or economic one offs like Spain's real estate boom. It might make sense to have a looser spending policy where the economy is fundamentally sound (the US), but it makes no sense to continue to throw money at a sick patient (Greece) without curing the underling disease. Germany (and other Northern countries) want a cure not a band aid and have the leverage to get it by forcing the patient to rehab.
35
Our tax collection system is being as hampered as possible, short of just killing it off completely. This tax season will be very, very good for cheats, which does not include the vast majority of wage earners whose taxes are paid from wages. Guess who wins in this case? Correct! Those who don't think they should have to pay taxes in the first place.
2
Nora01, the federal government has RECORD tax revenues.
You are only partially right. Spain has an excellent central federal government and sound national banks but Spain is also highly decentralised with many regional and sub-regional administrations and they are the underlying cause of the building boom - not all of what was built was apartments - there was a lot of infrastructure as well, for example many (now superfluous) airports were built. In partnership with private investors these deals between a developer and a local local administration kicked off a simply massive building spree. It was funded by local thrift type banks borrowing big in a world wide scale and with these banks all too often controlled directly by local politicians.
It's all well and good to print money and run budget deficits in the short run in order to "stimulate" the economy and prevent or shorten recessions. At some point though, the deficits and money printing need to stop. The United States has been printing money and borrowing even more for a long time, with no end in sight. We have "green shoots" that pop up from time to time, but nothing longstanding. Paul Krugman has little to say about the long term affects of endless money printing and deficit spending. Does he believe that there are no serious negative consequences to currency debasement and $18-$20 trillion dollar government debt?
11
You need to read Len Charlap's comment above. It would be a great response to your question.
2
Why are you only focused on one side of the balance sheet? That government debt you're so afraid of is a private sector asset. Why do you want to take my money away from me?
1
What is this currency debasement? Consistent under 2% inflation and soaring value of US dollar vs euro and yen?
1
I think PK's point is that if we had reacted to the 2007/8 crisis the way the European's did, with tightened belts and austerity, things would have been worse for us. I buy that.
But if we had reacted to the crisis by breaking up the too-big-to-fail banks, making the financial sector less monopolistic and more competitive, and by making the income from investment be taxed taxed at the same rate (or at a higher rate) as income from labor, things would have been different. And I bet they would have been better.
Obama is to be lauded for pulling us out of an acute crisis at a time when most other western economies went the wrong way. But the chronic crisis of wealth/income inequality persists. It's time to act.
But if we had reacted to the crisis by breaking up the too-big-to-fail banks, making the financial sector less monopolistic and more competitive, and by making the income from investment be taxed taxed at the same rate (or at a higher rate) as income from labor, things would have been different. And I bet they would have been better.
Obama is to be lauded for pulling us out of an acute crisis at a time when most other western economies went the wrong way. But the chronic crisis of wealth/income inequality persists. It's time to act.
269
Perhaps if Obama had been in charge he would have taken stronger measures and the recovery would have been more robust and the negative effect on thr population lessened. But he didn't have free reighn. As Dr. Krugman repeatedly notes, he, Obama, was constrained by a party comitted to a unrealistic interpretation of the effects of austerity.
It's a shame that the Democrats were so inept in convincing the voting public that the Obama approach had been the right course and needed to be affirmed lest the minions of austerity gain control and send us back.
It's a shame that the Democrats were so inept in convincing the voting public that the Obama approach had been the right course and needed to be affirmed lest the minions of austerity gain control and send us back.
2
I think he would agree, that we needed to go farther in our approach, and our limited response was helpful but still not sufficient. Better than Europe's response but still under effective. At least that's what I perceive from reading his columns over time.
1
Krugman, and others like him, view the economy, U.S., Europe, Asia as a "monetary issue". Hence, he argues, impliedly, the Greece and France need only Q stimulus and their economies will improve.
Hence the joke of monetarism: the liberal flooding of liquidy will enable the BANKS to get credit cheap and they will loan it out, and everything will be fine.
Our own experience proves this theory wrong: Banks will and and here have not lent all the credit available to them. So the stimulus helps banks, but not business and does nothing with employment.
The problem lies with the corruption in the economy, labor unions too strong stiffle business, etc.
Hence the joke of monetarism: the liberal flooding of liquidy will enable the BANKS to get credit cheap and they will loan it out, and everything will be fine.
Our own experience proves this theory wrong: Banks will and and here have not lent all the credit available to them. So the stimulus helps banks, but not business and does nothing with employment.
The problem lies with the corruption in the economy, labor unions too strong stiffle business, etc.
12
Your comments have no continuity. QE was the only way the Administration could act because Congress wouldn't do much to stimulate the economy by directly investing in projects that would have put people to work. Obama tried and the Republicans said "no". So the Fed did what they could to help - QE. It has helped but nowhere near as much as a real stimulus plan would.
Then you just to describing our economy as corrupt. I'd say that requires a little bit of evidence to support. And, as an example, you bring up unions. How about the major banks, credit agencies, mortgage companies - it was the excesses designed by and facilitated through these institutions that were the primary cause of our housing crisis and the crash in 2008. I think I would look for corruption in these industries before worrying about unions. I also think you might want to think about corruption in Congress as the Right tries to dismantle what little preventive legislation/regulation of the above industries that was put in place after the crash.
Then you just to describing our economy as corrupt. I'd say that requires a little bit of evidence to support. And, as an example, you bring up unions. How about the major banks, credit agencies, mortgage companies - it was the excesses designed by and facilitated through these institutions that were the primary cause of our housing crisis and the crash in 2008. I think I would look for corruption in these industries before worrying about unions. I also think you might want to think about corruption in Congress as the Right tries to dismantle what little preventive legislation/regulation of the above industries that was put in place after the crash.
7
No, they proposed massive govt works projects as a means to get people employed and increase demand in economy. We only resorted to central bank measures in USA because repubs refused anything else.
3
Mr Adams, In all professions, conclusions made on the basis of how do you present the problem.
Your presentation of the problem is wrong and you know very well.
You are saying that stimulus and cheap FED reserve loans doesn't help business and jobless issue. how ever you are presenting the issue like in non crisis environment. Yes that is true , there is no crisis this measures will be very little use.
But 2008 , US banks stop lending, and economy start loosing 700.000 job per month.
Fed Res Intervention brought the economy on its feet and today you are gaining 300.000 solid jobs per month.
We are not discussing QE non crisis conditions, it is a very specific time frame and conditions apply here.
So again you are presenting the problem wrong and reaching a very irrelevant conclusion.
Your presentation of the problem is wrong and you know very well.
You are saying that stimulus and cheap FED reserve loans doesn't help business and jobless issue. how ever you are presenting the issue like in non crisis environment. Yes that is true , there is no crisis this measures will be very little use.
But 2008 , US banks stop lending, and economy start loosing 700.000 job per month.
Fed Res Intervention brought the economy on its feet and today you are gaining 300.000 solid jobs per month.
We are not discussing QE non crisis conditions, it is a very specific time frame and conditions apply here.
So again you are presenting the problem wrong and reaching a very irrelevant conclusion.
1
it's an old story.
definition - expert: washed up drip under pressure.
definition - expert: washed up drip under pressure.
The US just has to deal with two profoundly dysfunctional parties: the Republican and Democratic Parties. The EU has to deal with more.
And we can't just blame the politicians. Take the "housing bubble" in your thesis. British punters, en masse, bought houses on the Spanish Costa del Sol. Russian oligarchs bought most of London.
A bit more complicated.
And we can't just blame the politicians. Take the "housing bubble" in your thesis. British punters, en masse, bought houses on the Spanish Costa del Sol. Russian oligarchs bought most of London.
A bit more complicated.
why are you afraid to blame germany?
1
The Puritan ethic lives on and it is so difficult to recognize and admit when you are "wrong".
2
The origins of the mantra "Austerity" and the impeding of economic activity lie in the Republican Congress. It is they who originally touted the term Austerity which went viral throughout the English speaking countries through the remarkable influence of mass media. I remember well the Speaker, John Boehner reciting publicially, before the cameras, the need to cut spending and the importance of Austerity. If Europe were wise, they would see those origins as incompetent political talking heads devoid of expertise and wisdom, only touting public policy to reinforce their own standing and power and that of their benefactors. At this point back here in America, I have seen the results of a vastly uneducated American puppet public and the effects of a wall to wall electronic existence and I am shocked that a majority of American voters gave the Congress to the Republicans against their own best interests and welfare.
Education for all should be a paramount goal of everyone and I am especially pleased at the idea of free community college for all. There is a real personal dynamic in the leap from High School to college. Those levels of education result in vastly different thoughtless and thoughtful people. College is an inspiration, an awakening of life, a self responsible and life inspiring time. Spare no expense and reap the rewards throughout society.
Education for all should be a paramount goal of everyone and I am especially pleased at the idea of free community college for all. There is a real personal dynamic in the leap from High School to college. Those levels of education result in vastly different thoughtless and thoughtful people. College is an inspiration, an awakening of life, a self responsible and life inspiring time. Spare no expense and reap the rewards throughout society.
4
The "imaginary menace of inflation" is a very useful boogyman which Rightists on both sides of the Atlantic trot out whenever their financial interests are threatened by things like higher wages and employment levels or by temporary increases in safety net expenditures following, say, the worst economic collapse since the Great Depression. The cynicism, some would call it sadism, behind this manipulation of public opinion, is mind-boggling, to say the least. There is never a reason, in an economy operating at far below capacity, to make things worse with additional layoffs to please Wall Street and the predator/creditor class. Neither here, nor in Europe.
The Right never learns, because they don't want to learn. They refused to learn the lessons of the Great Depression, just as they refused to learn the lessons of the 2007-8 Financial Crisis. Instead, they rewrite history, and prepare to further concentrate wealth and income in the hands of the same predators who caused the crisis in the first place. And today, the entire sorry process has been globalized.
The Right never learns, because they don't want to learn. They refused to learn the lessons of the Great Depression, just as they refused to learn the lessons of the 2007-8 Financial Crisis. Instead, they rewrite history, and prepare to further concentrate wealth and income in the hands of the same predators who caused the crisis in the first place. And today, the entire sorry process has been globalized.
11
The austerity hawks are not done yet. Even here in peaceful Switzerland, following the dramatic rise in value of the Swiss Franc (20% in the past week against the Euro, and 14% against the Dollar), the finance minister has publicly stated that "Swiss workers must take big wage cuts or lose their jobs". This said from a 62-year old career politician who makes 500,000 USD per year.
Usually the Swiss are very restrained and refrain from public confrontation, but these callous remarks have immediately triggered a flood of venomous responses on various newspapers. Most people are saying "sure, we'll take a pay cut, but only if the cost of life (Switzerland has very high private health care costs and some of the highest real estate and rental costs in the world) is also cut by an equal amount". Besides, as Europe has shown, one-way austerity massively depresses demand and leads to more businesses going bankrupt and reduced tax revenues, in a death spiral from which it's hard to get out.
But why isn't anyone proposing the simplest solution - print more money! The Swiss economy is in deflation, the Swiss Franc is too expensive, the obvious solution would be to flood the market with new money - this is economics 101. But no. The obtuse narrow-mindedness of the "austerity police", judging the common populace from their ivory towers, prevents this sort of debate from even being discussed.
Usually the Swiss are very restrained and refrain from public confrontation, but these callous remarks have immediately triggered a flood of venomous responses on various newspapers. Most people are saying "sure, we'll take a pay cut, but only if the cost of life (Switzerland has very high private health care costs and some of the highest real estate and rental costs in the world) is also cut by an equal amount". Besides, as Europe has shown, one-way austerity massively depresses demand and leads to more businesses going bankrupt and reduced tax revenues, in a death spiral from which it's hard to get out.
But why isn't anyone proposing the simplest solution - print more money! The Swiss economy is in deflation, the Swiss Franc is too expensive, the obvious solution would be to flood the market with new money - this is economics 101. But no. The obtuse narrow-mindedness of the "austerity police", judging the common populace from their ivory towers, prevents this sort of debate from even being discussed.
4
Once again, great. Keep it up. Some people are listening. Lets hope some of them are the wrong headed Republicans. Make them admit they were and are wrong. You can do it!!
5
And the problem for the US is that the EU and US economies are linked. They comprise a very complex dynamical system. We are free to control our destiny ...to a point... Even our improving economy will be sunk if, as you say, the EU efforts are not enough.
4
you got to say one thing for EU big thinkers.
They willing to beat their people until moral improves. That take dedication.
They willing to beat their people until moral improves. That take dedication.
2
I find Paul Krugman's analysis quite apt & I am startled by the animosity he triggers in some readers. Austerity in Europe contributes to the unravelling of society and makes the terrorist temptation stronger (although the attacks in Paris had other causes too, of course) and the far right also gets stronger. With European QE we might move away from German obsessions. The euro is dropping & oil is cheaper but who knows how long it will last? Ms Merkel needs a refresher course in (Keynesian) economics.
17
Since 2008 the US has held down the value of the dollar versus the euro.. In doing so it exported its own unemployment to Europe. Now that the Europeans are returning kind in kind, the euro is finally reaching its fair value vs the dollar, and with luck will overshoot on the downside. So the European economies will now be able to export as always should have been the case. The Europeans economies will do fine here on in, compared to the US. With luck, the Europeans will remember the knife in the back that the Americans have stabbed them with, and disentangle themselves from an American alliance that brings only grief.
4
Dr. Krugman says he is concerned of an irreversible downturn in any economy, if deflation were to set in. I never heard of it there being long periods of stagnation caused by deflation. Economies can soon recover if left alone and not meddled with. Japan suffered such a period, but even while there was less economic growth during an interval of a decade or more, but did it not recover from it? Is Dr. Krugman afraid that, unlike Japan, the U.S. wouldn't be able to recover? What will be said about this if with continued near-zero interest rates and even continuing stimulus,and even with borrowing hundreds of $ Billions per year, the U.S. still doesn't recover? Maybe they'll say deflation should not have been fought against like has been happening. Maybe they'll say that economists like Dr. Krugman suffered from deflation-phobia.
1
Japan recovered? In which universe?
6
MUCH TOO IRRESPONSIBLE
Krugman is in denial. Not about global warming---he excoriates Republicans for denying that---but he denies the cause of global warming which is unrestrained population growth.
And although Americans in general are in denial about population growth, that irresponsible position is not shared by ALL of the world's people.
China's leaders recognized that high birth rates were one of the reasons for famines in the time of Mao, so they instituted a one-child policy which is partially responsible for the Chinese miracle that makes China now the largest economy in the world.
And if you talk to Chinese in the growing "middle class" you will find acceptance of the necessity to limit fertility.
Japan also has chosen to limit population growth, and now arguably enjoys higher living standards than in the US. Higher quality of life is underscored by lower incarceration rates, about 1/13 th the US rate.
Germany has achieved zero population growth. And like many of the European countries it offers near-universal health care, free higher education. Most Europeans don't suffer from the scourge of America's middle class, the specter of medical bankruptcy in the case of an unfortunate diagnosis.
Yet Krugman thinks the US is doing "better" than Europe.
Only economists, who use the highly flawed GDP as a measure of progress, could regard the US economy as healthy.
The doctrine of "eternal growth" is destroying the planet. It is time to stop denying that.
Krugman is in denial. Not about global warming---he excoriates Republicans for denying that---but he denies the cause of global warming which is unrestrained population growth.
And although Americans in general are in denial about population growth, that irresponsible position is not shared by ALL of the world's people.
China's leaders recognized that high birth rates were one of the reasons for famines in the time of Mao, so they instituted a one-child policy which is partially responsible for the Chinese miracle that makes China now the largest economy in the world.
And if you talk to Chinese in the growing "middle class" you will find acceptance of the necessity to limit fertility.
Japan also has chosen to limit population growth, and now arguably enjoys higher living standards than in the US. Higher quality of life is underscored by lower incarceration rates, about 1/13 th the US rate.
Germany has achieved zero population growth. And like many of the European countries it offers near-universal health care, free higher education. Most Europeans don't suffer from the scourge of America's middle class, the specter of medical bankruptcy in the case of an unfortunate diagnosis.
Yet Krugman thinks the US is doing "better" than Europe.
Only economists, who use the highly flawed GDP as a measure of progress, could regard the US economy as healthy.
The doctrine of "eternal growth" is destroying the planet. It is time to stop denying that.
21
Did I miss something? Isn't this sort of off-topic? I understand the connection, I personally even agree with your call for ZPG, I've tried to follow that pwrsonally (have you?), but until Dr. Krugman's opinion on population are part of the argument, you're not making sense, much less making any point.
4
Except for immigration US population is flat or slightly declining. What planet are you from? What policy would you see in the US to further drop the birth rate?
6
Just to keep the record straight, Europe did not suffer a giant housing and credit bubble like the US. Only Spain and Ireland did, which alone are not Europe. Only in those countries was the private sector heavily leveraged at the outset of the crisis and only in those countries was private debt the problem. France, Italy and Greece are more akin to Detroit with a major public debt problem, which should surprise no one given, for example, that the average retirement age in France is 58. These countries have to clean up their act and that requires austerity and consolidation since no European country is willing to finance the fiscal excesses of another. Or were any attempts made to refinance the underfunded pension fund of Detroit? Michigan wasn't willing and that's even the same state. Instead, Detroit was forced to face the music and that was austerity.
9
Europe and the EU in particular have had their own economic crisis since 2008 even if the details have varied somewhat from country to country. The immediate result was that more and more households in all of these countries found themselves unable to afford the kind of expenditures that they would ordinarily make.
Broadly speaking, the great masses of people across Europe stopped spending as much on goods and services because they could no longer afford to do so. Businesses therefore lacked new orders for their goods and services. They therefore stopped hiring, laid off employees (so far as possible under restrictive labor laws), and shut down plants and operations.
This led to less consumer spending, which in turn starved more and more businesses. It has been a dismal, self-reinforcing cycle.
It was in this economic environment that Frau Merkel and her fellow austerians demanded that governments across the Continent severely cut public spending, lay off public employees, raise taxes, and concentrate all of their efforts on paying down public debt and stopping annual deficits.
Such practices are prudent and salutary during ordinary times, but are catastrophically misguided during a recession. When businesses are failing because households lack jobs or valuable assets and cannot spend, the only remedy is massive public spending, preferably on public works that will improve society and promote long-term prosperity.
Broadly speaking, the great masses of people across Europe stopped spending as much on goods and services because they could no longer afford to do so. Businesses therefore lacked new orders for their goods and services. They therefore stopped hiring, laid off employees (so far as possible under restrictive labor laws), and shut down plants and operations.
This led to less consumer spending, which in turn starved more and more businesses. It has been a dismal, self-reinforcing cycle.
It was in this economic environment that Frau Merkel and her fellow austerians demanded that governments across the Continent severely cut public spending, lay off public employees, raise taxes, and concentrate all of their efforts on paying down public debt and stopping annual deficits.
Such practices are prudent and salutary during ordinary times, but are catastrophically misguided during a recession. When businesses are failing because households lack jobs or valuable assets and cannot spend, the only remedy is massive public spending, preferably on public works that will improve society and promote long-term prosperity.
5
The austerity imposed upon these countries is what caused their recessions. Not the other way around. See the Maastricht criteria. Before the Euro was introduced, Italy, Spain, Portugal and Greece historically had high unemployment rates due to their lack of competitiveness and had to pay high interest rates on their national debt to compensate for the risk of depreciation their lack of competitiveness necessitated. After the introduction of the Euro, however, national interest rates converged to the German Bund rate because the depreciation risk vanished. The historically low interest rates in turn led the fiscally indulged governments to load up on even more debt. But when Lehman failed, bondholders became more attune to risk and suddenly realized that the depreciation risk of pre-Euro times had (under a common currency) morphed into a default risk. As a result the old interest rate differential reappeared putting the Euro countries back on square one, except that the weak countries now had even higher levels of debt. The ECB has tried to eliminate the interest rate differential by promising to do anything to support the Euro and now flushing the market with liquidity, but that won't eliminate the underlying competitive disparity between the Euro countries causing the problem, the same way QE didn't save Detroit. It is not, as Paul Krugman will have us believe and to paraphrase Yogi Berra, Heinrich Bruenig all over again.
2
Enjoy your deflation, you asked for it.
2
It is worth noting, though usually it isn't [as political worldview often leads to actual anger, then dismissal, of inconvenient truths] that the average Social Security and Medicaid recipient take out more than they ever put in. And of course, since the government spends the cash designated for both, replacing the case with Taxpayer IOUs [which is all treasuries are].
In essence Dr. Krugman is here averring that programs which don't cover their costs, the shortfalls of which are taken from taxes on labor, and which are kept in Potemkin solvency by saddling taxpayers with yet more debt for the next 30 years - these are good for the economy.
I'm sorry, but this is absolute rubbish, and there is a difference between printing trillions in new cash and getting equity and bond bubbles, and a genuine recovery.
Look at the amount of people receiving some form of government benefit or entitlement - we're at over half. Look at labor participation, wages - real inflation as to the cost of bread milk and cereal. Look at continued off-shoring as undocumented Democrats continue to flood in, also costing southern states and big cities hundreds of millions of dollars in benefits they are apparently entitled to because the Left decides which US law should be ignored.
Reasonable, tactical deficits are one thing, but that's not what we have, and I BEG commenters to seek evidence that the economy has *not* improved.
http://www.zerohedge.com/news/2015-01-22/monetary-stimulus-illusion
In essence Dr. Krugman is here averring that programs which don't cover their costs, the shortfalls of which are taken from taxes on labor, and which are kept in Potemkin solvency by saddling taxpayers with yet more debt for the next 30 years - these are good for the economy.
I'm sorry, but this is absolute rubbish, and there is a difference between printing trillions in new cash and getting equity and bond bubbles, and a genuine recovery.
Look at the amount of people receiving some form of government benefit or entitlement - we're at over half. Look at labor participation, wages - real inflation as to the cost of bread milk and cereal. Look at continued off-shoring as undocumented Democrats continue to flood in, also costing southern states and big cities hundreds of millions of dollars in benefits they are apparently entitled to because the Left decides which US law should be ignored.
Reasonable, tactical deficits are one thing, but that's not what we have, and I BEG commenters to seek evidence that the economy has *not* improved.
http://www.zerohedge.com/news/2015-01-22/monetary-stimulus-illusion
8
'undocumented Democrats'?? The veil slips...
3
The foolishness of European (read German) policies is particularly evident in Greece. Whether correct or not, austerity was the road chosen to cure the ills generated by an inefficient and wasteful public sector.
But, the Troika (IMF, European Commission and European Central Bank) did practically nothing to ensure that the necessary reforms get implemented. Instead, they allowed the corrupt political parties to preserve the client-state, while decimating the middle class and the private sector with astronomical increases in taxes, cuts in pensions and the like.
What they should have done is simple: so much money for this reform that reduces the waste and corruption, and so on.
The result is that, come Monday, Greece will have a communist government, in 2015!
Bravo Mrs Merkel, bravo Troika.
But, the Troika (IMF, European Commission and European Central Bank) did practically nothing to ensure that the necessary reforms get implemented. Instead, they allowed the corrupt political parties to preserve the client-state, while decimating the middle class and the private sector with astronomical increases in taxes, cuts in pensions and the like.
What they should have done is simple: so much money for this reform that reduces the waste and corruption, and so on.
The result is that, come Monday, Greece will have a communist government, in 2015!
Bravo Mrs Merkel, bravo Troika.
4
We are not your government, we just can tell you that you have reached your credit line.
We made several thousand suggestions, like liberalizing transportation, it's on your government to implement those suggestions, and not to water them down.
We sended you a list of tax dogders (Lagarde-list), but it's on you to persecute those dodgers.
Just stop the blame game and show some attitude, the greek government has skrewed it up from day one, when they cooked the books to get into the club.
This sunday you got the chance to but it to an end, vote for syriza, and you will be freed.
We made several thousand suggestions, like liberalizing transportation, it's on your government to implement those suggestions, and not to water them down.
We sended you a list of tax dogders (Lagarde-list), but it's on you to persecute those dodgers.
Just stop the blame game and show some attitude, the greek government has skrewed it up from day one, when they cooked the books to get into the club.
This sunday you got the chance to but it to an end, vote for syriza, and you will be freed.
3
The real problem has not been Greek corruption, but misguided, ruinous auserity that has been imposed at the very time when the opposite was required: A new Marshall Plan backed by European bonds to fund massive public works across the Continent. You slash deficits and pay down public debt only after there is a self-reinforcing recovery that is fully underway. The effort to do so during a full-fledged recession has been ruinous, and not only for Greece, but for all of Europe, including Germany.
Of course, it shouldn't be necessary to repeat this point ad infinitum. It all happened before during the Great Depression. This is how we learned that during such a period it is the government that must act as the investor of last resort, spurring economic activity that alone can turn everything around. It is best under the circumstances to make wise public investments in infrastructure and education that will benefit all of society for generations. The belt-tightening must be done, but only later, when it makes sense to do so.
Of course, it shouldn't be necessary to repeat this point ad infinitum. It all happened before during the Great Depression. This is how we learned that during such a period it is the government that must act as the investor of last resort, spurring economic activity that alone can turn everything around. It is best under the circumstances to make wise public investments in infrastructure and education that will benefit all of society for generations. The belt-tightening must be done, but only later, when it makes sense to do so.
4
I think that somebody believes in magic fairies. Democracies do not do well with masses of their people starving in the streets. Greece was beyond any acceptable self help gestures with the resources it had/has. That Germany, like Britain in its time, which wanted the Irish potato famine to thin an unwanted population out of sight to rich neighbors, was not to happen.
1
Thank you Professor Krugman, once again, for a concise and enlightening critique of Keynesianphobia. European economic policy makers did willingly deprive their unemployed citizens of the relief that better managed pulic spending could have achieved. One factor you are too kind to mention, but I think likely played a role in the eurozone policymakers' reluctance to ramp up public spending, was a longing to weaken rights of workers and enforce divisions of social class, kick 'em when their down.
17
"Keynesianphobia"
I believe that is defined as the fear of watching policy makers do the same things over and over expecting different results.
I believe that is defined as the fear of watching policy makers do the same things over and over expecting different results.
2
No. Keynesianphobia is the irrational fear of deploying stimulative public spending that will increase wages thereby spurring consumer spending and economic recovery because Republican class bias prevents programs that may help the working class. You labor under the delusion that we've tried this in the United States in a meaningful way since Reagan introduced trickledown, supplyside, voodoonomics and that is delusional. Don't say we've tried it. We haven't had meaningful domestic stimulus since FDR.
3
Slightly troubled I am by Krugman using the term 'European economy'. Such an economy does not exist Mr Krugman and measures taken in 'Europe' do not have single effects. Each EU member after centuries of history is a different institutional and economic cosmos. The euro is an implant in an area that has some historical but few economic shared characteristics. In my non expert eyes it is impossible to expect in Europe comparabilty with US federal integration. Krugman speaks about 'the two economies' Europe and the Unitd States, as if these terms have a meaning at all. This is a very serious mistake and makes his analysis rather useless.
10
Tell us what part of the analysis useless. EU nations may be separate political entities but their economies ARE integrated. That is why they have a common currency and the policies of the European Central Bank have an immediate impact on all EU countries -- regardless of their separate political situations. PK's analysis is based on this common economic framework and is therefore highly relevant.
16
Mr Yul you are right saying that ECB measures have impact on all EU countries, but what impact? Since national economies in the EU are vastly different in productivity and added value creation it is a myth to think that 'impact' from ECB has some general or common characteristic. I was not speaking about the political situation of EU members but about their economic structure and position in the global economy. They are so differemt in key parameters that no ECB measure can be seen as 'general' in its impact.
6
Dr. Krugman wrote: "In one great economy (U.S.), officials have shown a stern commitment to fiscal and monetary virtue, making strenuous efforts to balance budgets while remaining vigilant against inflation." So he is saying in Europe they aren't making those efforts, and are more vigilant as to inflation.
Well, Europe, better than the U.S., can afford to be.
Dr. Krugman seems to be against any vigilance as to inflation, often writing that we need more of it. But trying to give the U.S. credit for caring at all about it, and at same time wanting credit for caring not at all about it, ... makes no sense.
Various nations like closer to the Mediterranean Sea, are doing less well, and supposedly need monetary support of some kind. Dr. Krugman says so, and says the other countries will be punished for decades for being so self-satisfied. Why such disdain?
Just because Dr. Krugman thinks nations shouldn't behave with any concern for having a good economy, they are supposed to give that up for the sake of countries where people can't earn as much per hour?
If those countries, with their lower standards of living, are suffering economically, maybe it's more than sharing the Euro that causes this.
By sharing the Euro they are getting a challenge they need. It should motivate them to improve their productivity.
To do that they may need loans, like from the IMF. But there is no good reason to blame this on Germanic 'austerity'.
Spare the rod, and spoil the child!
Well, Europe, better than the U.S., can afford to be.
Dr. Krugman seems to be against any vigilance as to inflation, often writing that we need more of it. But trying to give the U.S. credit for caring at all about it, and at same time wanting credit for caring not at all about it, ... makes no sense.
Various nations like closer to the Mediterranean Sea, are doing less well, and supposedly need monetary support of some kind. Dr. Krugman says so, and says the other countries will be punished for decades for being so self-satisfied. Why such disdain?
Just because Dr. Krugman thinks nations shouldn't behave with any concern for having a good economy, they are supposed to give that up for the sake of countries where people can't earn as much per hour?
If those countries, with their lower standards of living, are suffering economically, maybe it's more than sharing the Euro that causes this.
By sharing the Euro they are getting a challenge they need. It should motivate them to improve their productivity.
To do that they may need loans, like from the IMF. But there is no good reason to blame this on Germanic 'austerity'.
Spare the rod, and spoil the child!
3
Productivity is no a problem. Demand is the problem. Distribution of wealth is a problem.
One hundred and seventy years ago over one million Irish perished from the effects of starvation while just the beef exports alone were more than enough to feed all those that perished. Meanwhile those in power refused to allow grain into Ireland saying feeding the hungry would weaken them morally.
La plus ca change.
One hundred and seventy years ago over one million Irish perished from the effects of starvation while just the beef exports alone were more than enough to feed all those that perished. Meanwhile those in power refused to allow grain into Ireland saying feeding the hungry would weaken them morally.
La plus ca change.
25
To Montreal Moe:
You have different problems in different countries, and so can't apply same solutions in all. Productivity isn't problem in U.S., but is in Spain or Greece. Wastefulness is the problem in the U.S. Except for the waste, the U.S. does produce enough for the people, and we wouldn't need to import anything. Demand isn't the problem in any country, and we need the supply-side, not distribution to equalize wealth. Doing that already made the rich class mad at the poor who feed at the government trough, using THEIR money. It is shameful, not anything to be proud of and demanding of help, being like that. And it IS their own fault. No one should have to be his 'bother's' keeper, and that's why the rich get ever more stingy just because of big government, which can't, absolutely can't, do any good for the poor, and only do wrong to everyone, rich and poor alike, but in opposite ways.
You have different problems in different countries, and so can't apply same solutions in all. Productivity isn't problem in U.S., but is in Spain or Greece. Wastefulness is the problem in the U.S. Except for the waste, the U.S. does produce enough for the people, and we wouldn't need to import anything. Demand isn't the problem in any country, and we need the supply-side, not distribution to equalize wealth. Doing that already made the rich class mad at the poor who feed at the government trough, using THEIR money. It is shameful, not anything to be proud of and demanding of help, being like that. And it IS their own fault. No one should have to be his 'bother's' keeper, and that's why the rich get ever more stingy just because of big government, which can't, absolutely can't, do any good for the poor, and only do wrong to everyone, rich and poor alike, but in opposite ways.
1
Karch,
Give me a break. How many PhDs does the USA have that are working as barristas and how desperate are many areas for education? How many people are desperate for healthcare and dental services? How many people are in need of childcare services? How many teachers need teaching assistants? How many infrastructures need repair?
What do Spain and Greece need in the way of production? They don't need stuff. They need good jobs for their young people and security just like we need here.
We are slaves to an economic system that serves the needs of the landlords. We are but a commodity whose value like that of oil changes at the whim of the wealthy and powerful, as Mr Romney told us recently we are worthless we are just takers. The rich are no stingier now than anytime before. The need for human labor decreases every day and soon we will all be disposable burdens on the economy as were the millions of landless, illiterate who disappeared from Ireland in the 19th century.
I am my brother's keeper and I am responsible to make sure he is fed, educated, housed and safe. I make no demands on the possessors of great wealth until my brother's security is jeopardized by the greed of the few.
Nobody is looking for a free lunch but for many there is no lunch and soon there will be no breakfast or dinner. That is the story of Irish millions forced to starve while Irish meat, cheese and grained graced to tables of the finest homes in Europe and the Americas.
Give me a break. How many PhDs does the USA have that are working as barristas and how desperate are many areas for education? How many people are desperate for healthcare and dental services? How many people are in need of childcare services? How many teachers need teaching assistants? How many infrastructures need repair?
What do Spain and Greece need in the way of production? They don't need stuff. They need good jobs for their young people and security just like we need here.
We are slaves to an economic system that serves the needs of the landlords. We are but a commodity whose value like that of oil changes at the whim of the wealthy and powerful, as Mr Romney told us recently we are worthless we are just takers. The rich are no stingier now than anytime before. The need for human labor decreases every day and soon we will all be disposable burdens on the economy as were the millions of landless, illiterate who disappeared from Ireland in the 19th century.
I am my brother's keeper and I am responsible to make sure he is fed, educated, housed and safe. I make no demands on the possessors of great wealth until my brother's security is jeopardized by the greed of the few.
Nobody is looking for a free lunch but for many there is no lunch and soon there will be no breakfast or dinner. That is the story of Irish millions forced to starve while Irish meat, cheese and grained graced to tables of the finest homes in Europe and the Americas.
4
Yesterday on an international economic news program of the national German TV, DW, an "expert" explained at length to the audience the folly of QE by the ECB. His argument was that a family that spends more than it earns is on an unsustainable path, headed for a great fall. The image on half the screen was an empty wallet, inverted, on the other half a hand putting coins in a piggy bank to make the point. That is the simple image that is hard to combat with rational debate. It will take a lot more suffering to discredit the power of the empty wallet vs. the piggy bank imagery. Obviously this applies to the US as well.
4
You discriped 'responsible' behavior.
No value judgement attached - just the fact as you mentioned - that nearly everybody understands the concept - and most people try to emulate it.
The other fact - that in economics there are ways to work around this concept - and that there are all kind of possibilities to be 'irresponsible' -(and getting away with it) - doesn't make the idea of spending more than you earn more appealing or changes the definition of being 'responsible'.
No value judgement attached - just the fact as you mentioned - that nearly everybody understands the concept - and most people try to emulate it.
The other fact - that in economics there are ways to work around this concept - and that there are all kind of possibilities to be 'irresponsible' -(and getting away with it) - doesn't make the idea of spending more than you earn more appealing or changes the definition of being 'responsible'.
1
All in all this arguments turns reality completely on it's head.
The fact; The most responsible European Countries are more successful than even the US - while the most irresponsible countries are in crisis.
The fact; The most responsible European Countries are more successful than even the US - while the most irresponsible countries are in crisis.
8
The most irresponsible country in Europe, and possibly the World, was Germany, plunging the European continent in 5 wars in the past two centuries. Yet, the US and its allies helped Germany recover after WW2, and forgave most of its accumulated loans in 1953 (if I am not mistaken). German memory is so short...
7
'The most irresponsible country in Europe, and possibly the World, was Germany,'
That is true: 'Was'.
But in history there were so many countries and nations which were irresponsible that I'm very glad that at least Europe learned from it's past mistakes and that I highly doubt it - that Germany -(or any other western European country) - will plunge into any kind of war again.
That is true: 'Was'.
But in history there were so many countries and nations which were irresponsible that I'm very glad that at least Europe learned from it's past mistakes and that I highly doubt it - that Germany -(or any other western European country) - will plunge into any kind of war again.
4
The problem is that those who push these wrongheaded policies never suffer personally from them. The elite will still have their caviar and champagne while the victims eat beans. That holds in both the US and Europe. To extend what Obama said in his State of the Union: I wish these economic elites would personally have to live out the consequences of their policies; it is the rest of us who have to suffer the consequences.
35
The US is one economic block, if they hit the monetary accelerator, the dynamics will be everywhere equivalent.
In europe it is likely that the wealth and production gap will get bigger. The common currency emphasizes efficiency. And it is likely that we will run into a doom loop, where profitable economies have to back the sagging economies. But this transfer will be always to small for the recipients to recover, but always to big for the donor to make them angry.
So, the QE is ok for my country and me, because i guess we will gain most. But i will ensure that my safety-belt is in order, because i expect europe to gradually disintegrate while speeding up.
In europe it is likely that the wealth and production gap will get bigger. The common currency emphasizes efficiency. And it is likely that we will run into a doom loop, where profitable economies have to back the sagging economies. But this transfer will be always to small for the recipients to recover, but always to big for the donor to make them angry.
So, the QE is ok for my country and me, because i guess we will gain most. But i will ensure that my safety-belt is in order, because i expect europe to gradually disintegrate while speeding up.
4
The optics distort the underlying reality here. The European situation is one with lots of predictable durable elements for instance, rigid liberal structures warrant that pension systems remain steady. Whereas America has much sneak room for innovation & financial instrumentation based on financial engineering without much regard for human capital or product supply, rather, broad effects are focused on to the presentable & the palatable for social cohesion & so rapid mobility is broadly conceivable. Aside from that the elite view is a democratic one in the States, a rather uninclusive shared body in the public forum with a national debate about it subsequently. The latest report from Europe that Swiss bonds are yielding negative returns may sound shocking to stakeholders but the gravity of the downward trending is more passive than worrisome. The EU has a central bank system apart from the Swiss charter & it is opening vast quantities of space for easing in. That's a whole lot of sod to graze on & something that like takes 4 stomachs to digest.
1
Can we have more non-Greenspan speak here?
I thought going from PIMCO to Janus on betting against Paul Krugman would change the style....though I will not forget to say loved Gross's money management.
(We do want to live in a world where Bill Gross takes Krugman treatment seriously.)
I thought going from PIMCO to Janus on betting against Paul Krugman would change the style....though I will not forget to say loved Gross's money management.
(We do want to live in a world where Bill Gross takes Krugman treatment seriously.)
Their Mama told them so and she was wrong. Reminds me of some other things that were important that mom got wrong but we won't talk about that. She got a lot of things right and so do the Europeans except for false equivalencies. Mega systems are not personal morality structures akin to household budgets. That's not hard to understand. Why do so many get it so wrong unless there are deeper layers having to do with old rivalries and cultural prejudices? C.S. Pierce got it right. You need a clear Foundation consonant with your structure and it's size. You need clear theories that are both functional and testable apart from "mama emotion." You need methodologies of sound structure and systemic integrity that have been tested and not just tossed to the masses for approval and finally you need the Courage to Apply all of that to the world and plan to be wrong and to cost more than you thought. Then you have a shot at success at governing. The Market can't do it, it's not it's job. Religion can't do it, same thing. Science can't do it, also same thing. Education can't do it, same turf, different purpose. Aesthetics can't do it, good perceptivity but again the wrong purpose. Only real government can fit all four of Pierce's criteria for a functioning political system. To do that takes intelligence, tenacity, courage and good will. Something we have a real problem with. Ray Evans Harrell, Performing Arts Teacher, NYCity
9
The column lumps together all of Europe. It misses the opportunity to exam Europe as a laboratory of very different Nations, with different approaches, to see what approaches work.
Here is a report from the The NY Times, Published: May 10, 2013
"THE recovery from the Great Recession has been slow, or even nonexistent, in most of the developed world.
But not in Germany.
In Germany, alone among the 27 members of the European Union, unemployment rates for both older and younger workers are now lower than they were when the United States slipped into a recession at the end of 2007. "
What got Germany out of the great Depression, faster than the US, was a that it made the necessary reforms.
It is was and is the unwillingness to reform that dooms much of Europe. As the New York Times noted, 5 days ago, regarding Greece " the government still unable to perform basic tasks like tax collection,"
The US, compared to Europe, has ruthless economy, where people are fired as soon as the economy turns sour.
Europe does not. Somehow, Germany found a way to both have a social safety superior to the US, and to be internationally more competitive more competitive (it is a larger exporter than either the US or China)
It would be interesting to learn how it accomplished this.
Here is a report from the The NY Times, Published: May 10, 2013
"THE recovery from the Great Recession has been slow, or even nonexistent, in most of the developed world.
But not in Germany.
In Germany, alone among the 27 members of the European Union, unemployment rates for both older and younger workers are now lower than they were when the United States slipped into a recession at the end of 2007. "
What got Germany out of the great Depression, faster than the US, was a that it made the necessary reforms.
It is was and is the unwillingness to reform that dooms much of Europe. As the New York Times noted, 5 days ago, regarding Greece " the government still unable to perform basic tasks like tax collection,"
The US, compared to Europe, has ruthless economy, where people are fired as soon as the economy turns sour.
Europe does not. Somehow, Germany found a way to both have a social safety superior to the US, and to be internationally more competitive more competitive (it is a larger exporter than either the US or China)
It would be interesting to learn how it accomplished this.
14
Germany produces its present economic state by having an export economy, with more exports than imports. This is great except that every country cannot do it at the same time.
5
'Germany produces its present economic state by having an export economy, with more exports than imports.'
Besides that Germany is probably the most responsible country in Europe.
Besides that Germany is probably the most responsible country in Europe.
4
Exactly because they have an export economy. Unfortunately, the trade agreement TPP will cause the U.S. to further increase our trade deficit...it's in the trillions with China and that last trade agreement with Korea was in the billions last month. None of our politicians talk about our trade deficits and the connection to those trade deals.
2
If everyone making $15 dollars an hour or less walked off the job I bet 1/3 of the economy would just collapse. Every fast food, office supply, oil changing, garment idustry and retailer chain would fold. The reality is that underpaid people are used to working hard for less. Imagine what the economy would look like with all that additional income going into the economy instead of sitting in the very wealthy trust funds-where it just breeds contempt? Happy employees, lower absentism, stronger marriages, happier children-who wouldn't want that kind of State of the Union?
138
Those who are barely scraping by are the ones least able to afford to "just walk off the job."
1
Good point, Charles D; isn't that the whole point of having an economy?
The wealthy, that's who. They did not get rich caring about others, especially the poor or even the middle class, greed and more for them is all that matters.
3
Krugman keeps crowing about a recovery that is not palpable for the rest of us.
Part of the reason is that business owners and executives (derisively referred to as "our job creators") are plundering corporate wealth.
Corporations have gone from reinvesting about 90% of their profits into their business in the 1970s, to about 10% today, William Lazonick wrote in a recent Harvard Business Review article.
Profits are instead being used to pay dividends to investors and to buy back stock to boost its price, benefiting the company’s executives.
We need tax reform that provides incentives for corporations to reinvest profits and create well-paying jobs.
The Harvard Business Review article can be reached at this URL:
http://hbr.org/2014/09/profits-without-prosperity/ar/1
Part of the reason is that business owners and executives (derisively referred to as "our job creators") are plundering corporate wealth.
Corporations have gone from reinvesting about 90% of their profits into their business in the 1970s, to about 10% today, William Lazonick wrote in a recent Harvard Business Review article.
Profits are instead being used to pay dividends to investors and to buy back stock to boost its price, benefiting the company’s executives.
We need tax reform that provides incentives for corporations to reinvest profits and create well-paying jobs.
The Harvard Business Review article can be reached at this URL:
http://hbr.org/2014/09/profits-without-prosperity/ar/1
51
Why do we need tax reform when you've just explained the problem? Why do corporations think what they're doing is sustainable? Why don't they reinvest their profits and create well-paying jobs? In fact, why don't they create well-paying jobs (by giving their employees raises with all those profits) to create the consumer demand that will give them reason to reinvest their profits? Why do they spend so much of their energy avoiding the payment of taxes?
Either we need civics lessons, kindness lessons or something in the water that neutralizes greed.
Either we need civics lessons, kindness lessons or something in the water that neutralizes greed.
3
Perhaps a common currency is Europe's worst problem. Individual countries in Europe have considerable differences in natural resources and productivity per worker. The Euro as a common currency prevents compensation for these factors by limiting a natural adjustment in the costs of labor and goods, and the not inconsiderable effect on tourism. Perhaps Europe' economic problems will not be alleviated until there is a return to individual currencies for individual nations which can fluctuate freely as the Swiss currency is now doing.
3
'The terrible thing is that Europe’s economy was wrecked in the name of responsibility.'
And this is possibly the most twisted view if before, there is the aknowledgement that the irresponsibility of the housing bubble wrecked not only the American - but also the European economy.
And then some Europeans came to conclusion - that we have to change our irrresponsible economical policies.
And that is not easy - as the oppositiosn of many Europeans who enriched themselves on the back of their own people showed. And it is a real tragedy if good meaning American economists (unwillingly?) support such Oligarchs.
By writing, that it is the fault of too much responsibility and not the fault of corruption and the need to reform.
And this is possibly the most twisted view if before, there is the aknowledgement that the irresponsibility of the housing bubble wrecked not only the American - but also the European economy.
And then some Europeans came to conclusion - that we have to change our irrresponsible economical policies.
And that is not easy - as the oppositiosn of many Europeans who enriched themselves on the back of their own people showed. And it is a real tragedy if good meaning American economists (unwillingly?) support such Oligarchs.
By writing, that it is the fault of too much responsibility and not the fault of corruption and the need to reform.
10
If the U.S. recovery was in response to running up huge deficits and wasteful government spending, how come Japan, which makes the U.S. look like a piker when running up deficits, is still in recession.
I think our recovery has primarily been driven by the large number of jobs created in our becoming energy independent. Obama had nothing to do with this effort, he tried his best to slow the progress, but fortunately his effort failed.
I think our recovery has primarily been driven by the large number of jobs created in our becoming energy independent. Obama had nothing to do with this effort, he tried his best to slow the progress, but fortunately his effort failed.
6
So the European elite saw nothing that what was going on. It did not see the more than 100 billion of tax dodging by USA corporations, through Luxembourg alone, each year. It did not want to see it, so it did not see it.
The European elite did not see the Euro was too high, way too high, maybe twice the vale it deserved against the dollar.
The European elite did not see the cutting of the science budget in Greece by 75%, and the like. The European elite did not see the young people deprived of education, of jobs, of future, of money…
The European elite did not want to see European discoveries exploited in Silicon Valley and coming back as tax dodging monopolies. The European elite did not want to see that European energy became twice more expensive than it is in China, or the USA.
All what the European elite has been doing, for 35 years, is to please plutocrats. They are based in the most powerful nation.
Thus Europe is paying the price of not being master of its own destiny. Elite politicians go to serve the richest masters, with the biggest army. They are based in the USA.
The USA got the best policy, not because Americans are the smartest, but because they are the masters. The Europeans are “much too responsible”, because they have been fundamentally, servants. Servants have to be responsible.
Will Europe revolt?
France, with her welfare state, under attack, may remember who created Al Qaeda. She just shot down deficit limits, and the Euro cult. Hope.
The European elite did not see the Euro was too high, way too high, maybe twice the vale it deserved against the dollar.
The European elite did not see the cutting of the science budget in Greece by 75%, and the like. The European elite did not see the young people deprived of education, of jobs, of future, of money…
The European elite did not want to see European discoveries exploited in Silicon Valley and coming back as tax dodging monopolies. The European elite did not want to see that European energy became twice more expensive than it is in China, or the USA.
All what the European elite has been doing, for 35 years, is to please plutocrats. They are based in the most powerful nation.
Thus Europe is paying the price of not being master of its own destiny. Elite politicians go to serve the richest masters, with the biggest army. They are based in the USA.
The USA got the best policy, not because Americans are the smartest, but because they are the masters. The Europeans are “much too responsible”, because they have been fundamentally, servants. Servants have to be responsible.
Will Europe revolt?
France, with her welfare state, under attack, may remember who created Al Qaeda. She just shot down deficit limits, and the Euro cult. Hope.
3
I think this is one of the most irresponsible editorials from Mr. Krugman. Printing money on QE scale only works for U.S. because every terrorists and every international criminals and corrupt officials in the world accept dollars transaction only besides most global trade are conducted in dollars. The Greenback also happen to be backed up by the strongest military power in the world. So Uncle Sam can print all the money he wishes without suffering the consequence for decades. However, grandchildren of the Americans will have to pay for the sins of their grandfathers and grandmothers.
But the responsible Europeans, especially the Germans, know how best to learn from the History. Europeans had five hundred years of rich history to learn their lessons, while Americans still pursue their kicking-the-can-down-the-road expansionist policy which ultimately can only result in ruins.
But the responsible Europeans, especially the Germans, know how best to learn from the History. Europeans had five hundred years of rich history to learn their lessons, while Americans still pursue their kicking-the-can-down-the-road expansionist policy which ultimately can only result in ruins.
7
Mr. Chen,
This comment is not thought out at all. You would be surprised at how many corrupt officials accept Euros all over the world.
This comment is not thought out at all. You would be surprised at how many corrupt officials accept Euros all over the world.
5
Must say, I'm impressed by the moderation with which the Professor celebrates this utter cave by Europe on "pump ... you up!" economics; and his vicarious victory of artificial stimulus. While Janet Yellen is biting her nails trying to figure out how to unwind the immense balance sheet we've loaded with our own QE excursions over years without blowing up the world, Mr. Draghi's Europe is preparing to wind up its own.
Yet, after all the immense efforts to get some European nations in the Eurozone to become more globally competitive by cutting the percentages of their workforces tied up in the public sector, this bond-buying-spree will merely allow them to return to old and evil ways. Sooner or later if they're to survive in a far harsher global competitive climate, they'll need to return to slashing that public sector, it's never an easy time to do this and it's always tempting to kick the can down the road. They've done it yet again.
Of course, that assumes that 'la Merkel will allow this all to take place. After all, it's not Italy or France (in their own current economic messes) that will be paying the price of failure: it will be the Boches who do.
But there's been so little cause for so long for the Professor to dance a little jig that I'm hesitant to point out the fact that the music is so off-key. Congratulations for now, Professor, and let's hope that Draghi doesn't blow up the planet.
Yet, after all the immense efforts to get some European nations in the Eurozone to become more globally competitive by cutting the percentages of their workforces tied up in the public sector, this bond-buying-spree will merely allow them to return to old and evil ways. Sooner or later if they're to survive in a far harsher global competitive climate, they'll need to return to slashing that public sector, it's never an easy time to do this and it's always tempting to kick the can down the road. They've done it yet again.
Of course, that assumes that 'la Merkel will allow this all to take place. After all, it's not Italy or France (in their own current economic messes) that will be paying the price of failure: it will be the Boches who do.
But there's been so little cause for so long for the Professor to dance a little jig that I'm hesitant to point out the fact that the music is so off-key. Congratulations for now, Professor, and let's hope that Draghi doesn't blow up the planet.
2
The middle class during our 2008 down turn suffered a double whammy. Besides the stagnation of wages and huge job losses the market value of our houses deflated enormously. Borrowing on the value of houses became impossible and selling them led to huge losses. It was deflation on a huge scale which we have barely recovered from. Stimulus to counter act this deflation directly to home owners and indirectly through our economy would have shortened our recession immensely. Instead the value of homes has only slowly recovered and home owners still walk away from their homes when this housing deflation is too much of a burden. This is a direct example of how deflation can cripple an economy and why austerity and the lack of stimulus will not fix our economic problems caused by deflation. We can never fill a hole by digging it deeper. But Republicans continue to in their crazy way of digging that deflationary hole when they should be helping to repair the damage. The rich have full pockets so republicans fail to acknowledge the empty pockets of the rest of us
After all the rich are flush with their wealth so that must mean everything is hunky dory. Right?
After all the rich are flush with their wealth so that must mean everything is hunky dory. Right?
8
And after so many Europeans and Americans had the insight, that the irresponsibility to let a few enrich themselves on the back of so many' -
why is it too much responsibility to change countries with corrupt Oligarchies?
And if even now the leaders of European countries, who suffered under such irresponsibility and they finally want to change does America have such a hrad time to understand?
why is it too much responsibility to change countries with corrupt Oligarchies?
And if even now the leaders of European countries, who suffered under such irresponsibility and they finally want to change does America have such a hrad time to understand?
4
In Florida, programs like food stamps, Social Security, Medicaid for children (however inadequate), and Medicare did a great deal to keep the state from the sort of catastrophe that befell Spain.
Meanwhile the state and local governments were slashing spending. Any number of road projects, new schools, new courthouses, whatever, were cancelled. The state refused funds for Tampa to Orlando high speed rail, notwithstanding that Interstate 4 had been rebuilt to accommodate the tracks. Orlando's economy benefitted from the deep pockets behind Disney, Universal, and a local hotel chain, Rosen. They all saw the recession as an opportunity to build cheaply.
Meanwhile the state and local governments were slashing spending. Any number of road projects, new schools, new courthouses, whatever, were cancelled. The state refused funds for Tampa to Orlando high speed rail, notwithstanding that Interstate 4 had been rebuilt to accommodate the tracks. Orlando's economy benefitted from the deep pockets behind Disney, Universal, and a local hotel chain, Rosen. They all saw the recession as an opportunity to build cheaply.
7
A politician is a professional. She, or he, is like a bookmaker, somebody who takes bets. In this case, the bets are on those policies who will benefit those who have the money, that is, the power.
The most powerful nation, the USA, ruthlessly led by its plutocracy. The bubble of 2008 transferred massive winnings from bets by some plutocrats against their peers and against giant money center banks which were public in two ways: on the stock exchanges, and, more importantly, as the organizations in charge of creating most of the money (through the extension of credit).
The bubbles popped. The financial system, throughout the world, was bankrupt. To fix it, the Central Banks enabled the creation of massive new credit (=money), by lowering interest rates to zero. The money center banks were then free to re-enact their previous act, and re-invest massively in financial derivatives, same as before, but now even more.
True, Obama dispersed a few hundred billions of “stimulus”. Much more money went from the Fed to the money center banks, trillions of dollars of it. One started, just as before.
A lot of the wealth of the USA comes from fracking (a gift from god), Wall Street conspiracies, and worldwide tax dodging by giant USA monopolies, all of this with the complicity of the world’s most powerful capitals, Washington and New York.
Is the European elite culprit? Sure. It was bought into the mood, and money, coming from the USA. So it saw nothing, it wanted to see nothing.
The most powerful nation, the USA, ruthlessly led by its plutocracy. The bubble of 2008 transferred massive winnings from bets by some plutocrats against their peers and against giant money center banks which were public in two ways: on the stock exchanges, and, more importantly, as the organizations in charge of creating most of the money (through the extension of credit).
The bubbles popped. The financial system, throughout the world, was bankrupt. To fix it, the Central Banks enabled the creation of massive new credit (=money), by lowering interest rates to zero. The money center banks were then free to re-enact their previous act, and re-invest massively in financial derivatives, same as before, but now even more.
True, Obama dispersed a few hundred billions of “stimulus”. Much more money went from the Fed to the money center banks, trillions of dollars of it. One started, just as before.
A lot of the wealth of the USA comes from fracking (a gift from god), Wall Street conspiracies, and worldwide tax dodging by giant USA monopolies, all of this with the complicity of the world’s most powerful capitals, Washington and New York.
Is the European elite culprit? Sure. It was bought into the mood, and money, coming from the USA. So it saw nothing, it wanted to see nothing.
7
When I hear the economic analysts looking for answers to fixing an economy that no longer works I am reminded of the Irish Starvation. Robert Peel the Conservative Prime Minister at the outset of the potato blight was bound and determined to send food to the Irish who were starving. Peel's Conservatives were divided those devoted to Adam Smith and the invisible hand left Peel Conservatives. John Russell a Whig became Prime Minister and proceeded to send copies of Adam Smith's The Wealth of Nations to the starving illiterate unpropertied peasants of Ireland.
The Economist reported that Adam Smith's economic philosophy was the economic religion of Britain and so it was that between 1 and half and two and a half million Irish peasants perished from starvation, pestilence and abuse in Ireland. Ireland a country that during the starvation exported enough cattle to Europe and the Americas to easily feed all that perished in the Potato "famine."
When Rand Paul or Paul Ryan present their economic doctrine based on Smith's economic philosophy I am reminded of the National Film Board of Canada's 2012 documentary The Coffin Ship Hanna and how the descendants of survivors were unable to deal with the guilt from what really happened for 150 years. Will our descendants for the next 150 years have to live with the guilt of our failing to jettison an economic philosophy that shows us a promise of inflicting nothing but pain, suffering and death? We need a people first economy.
The Economist reported that Adam Smith's economic philosophy was the economic religion of Britain and so it was that between 1 and half and two and a half million Irish peasants perished from starvation, pestilence and abuse in Ireland. Ireland a country that during the starvation exported enough cattle to Europe and the Americas to easily feed all that perished in the Potato "famine."
When Rand Paul or Paul Ryan present their economic doctrine based on Smith's economic philosophy I am reminded of the National Film Board of Canada's 2012 documentary The Coffin Ship Hanna and how the descendants of survivors were unable to deal with the guilt from what really happened for 150 years. Will our descendants for the next 150 years have to live with the guilt of our failing to jettison an economic philosophy that shows us a promise of inflicting nothing but pain, suffering and death? We need a people first economy.
92
The faults of European policy makers cited in this excellent column are also the faults of austerity hawks in the United States, particularly Tea Party Republicans. Much as Europe is fortunate to have the ECB's Mario Draghi, the U.S. has been fortunate to have had Ben Bernanke and now Janet Yellen at the helm of the Fed. Monetary expansion has served as an economic safety net in the U.S., and Europe would benefit from a similar approach.
Even more important is the need for fiscal policy expansion. Monetary policy can do only so much. Additional spending is needed to drive jobs and economic growth in the U.S, as well as in the EU. After more than 6 years of misery, you'd think that policy makers and voters would catch on.
Even more important is the need for fiscal policy expansion. Monetary policy can do only so much. Additional spending is needed to drive jobs and economic growth in the U.S, as well as in the EU. After more than 6 years of misery, you'd think that policy makers and voters would catch on.
28
'And Europe will be paying the price for their self-indulgence for years, perhaps decades, to come.'
As America always payed the price for it's irresponsibility - and for years, perhaps decades to come.
And that is not the same moralistic lecture as Prof. Krugman tries to deliver to Europe - because Europe never will ruin the worlds economy with irresponsibility.
And if the main lesson the US and Prof. Krugman takes from the near collapse of 2008 is - to consume more - his and the US irresponsibility knows no end.
As America always payed the price for it's irresponsibility - and for years, perhaps decades to come.
And that is not the same moralistic lecture as Prof. Krugman tries to deliver to Europe - because Europe never will ruin the worlds economy with irresponsibility.
And if the main lesson the US and Prof. Krugman takes from the near collapse of 2008 is - to consume more - his and the US irresponsibility knows no end.
7
Dr. K,
The US and Europe have much in common and they b elieve that we are one and interdependent. In puzzling over your question. I think it can be explained by the policy response to the financial blow out and the following recession. Our response was weak and the rhetoric leading up to the 2010, if I rccall was debt and deficit. The rhetorivc was from some very serous people including a former Fed Chairman. Then the newly elected T-Party sunk their teeth into the issue including the "gangs of X" and Bowles Simpson. They even had me believe that we were going to do a double-dip recession. So Europeans were not going to lead with monetary or fiscal stimulus, unless they were nuts. Many of your commenters are saying that the US has not really recovered. The Fed actions really just recovered the losses off those that had some skin in the market. It brought up our averages but was brutal toward those who lost their job and was too old to reclaim employment. As a result the concentratinn of income and stagnant wages has hollowed out America's sttrength. We will probably be very slow ourselves in recovering.
We should be rebuilding while money is cheap but we are not so I don't think Europe really knows the best policy.
The US and Europe have much in common and they b elieve that we are one and interdependent. In puzzling over your question. I think it can be explained by the policy response to the financial blow out and the following recession. Our response was weak and the rhetoric leading up to the 2010, if I rccall was debt and deficit. The rhetorivc was from some very serous people including a former Fed Chairman. Then the newly elected T-Party sunk their teeth into the issue including the "gangs of X" and Bowles Simpson. They even had me believe that we were going to do a double-dip recession. So Europeans were not going to lead with monetary or fiscal stimulus, unless they were nuts. Many of your commenters are saying that the US has not really recovered. The Fed actions really just recovered the losses off those that had some skin in the market. It brought up our averages but was brutal toward those who lost their job and was too old to reclaim employment. As a result the concentratinn of income and stagnant wages has hollowed out America's sttrength. We will probably be very slow ourselves in recovering.
We should be rebuilding while money is cheap but we are not so I don't think Europe really knows the best policy.
2
Btw, our fiscal deficits improved because our private sector is much stronger, and even with the draconian regulation that keeps coming down like Dodd Frank, our companies a re bit more free relatively compared to crazy Europe where no one can be fired and hence no company wants to hire either, and of course because in 2011 thanks to the fiscal cliff, sequestration kicked in and some spending cuts happened, which tamed the runaway government wastage to a small extent and which kick started the US private sector.
But liberals like to ignore the sequestration and the resulting impact in deficits and like to think that deficits were controlled because Obama wasted just one trillion, and think how fantastic it would have been if he had wasted two trillion.
Perhaps if he had stimulated (wasted) a thousand trillion, our economy would be in surplus for the next ten generations?
But liberals like to ignore the sequestration and the resulting impact in deficits and like to think that deficits were controlled because Obama wasted just one trillion, and think how fantastic it would have been if he had wasted two trillion.
Perhaps if he had stimulated (wasted) a thousand trillion, our economy would be in surplus for the next ten generations?
3
"Btw, our fiscal deficits improved because our private sector is much stronger"
The financial sector is stronger. There are a few more crumbs falling off the table, but the majority of us are simply learning to live with miserable wages,
Maybe that was the plan all along.
Injecting fluid capital into the market would have stepped up demand, increasing the amount of growing businesses and recouping the stimulus funds in increasing tax revenues. It's worked before and it will work again if the ideologues will just do a little reading and grow out of their rut.
The financial sector is stronger. There are a few more crumbs falling off the table, but the majority of us are simply learning to live with miserable wages,
Maybe that was the plan all along.
Injecting fluid capital into the market would have stepped up demand, increasing the amount of growing businesses and recouping the stimulus funds in increasing tax revenues. It's worked before and it will work again if the ideologues will just do a little reading and grow out of their rut.
15
Your last sentence voids all credibility from your comment. Contrary to your "beliefs" are facts and analysis from a large majority of economists who agree that the stimulus helped. Your parties fiscal cliff and subsequent shutdown cost our economy billions. That was definitely a reckless waste that should have never happened. There is no data showing that sequestered cuts "tamed runaway government wastage to any extent". What most of the cuts did was take money from consumers who would have immediately injected that money back into the economy. Low interest rates from the fed are what kick started the private sector. Facts beat ideology anytime!
10
Why are sensible people celebrating the fact that under Obama the deficit has been cut in half? This is exactly the opposite of what we should be doing. As a percent of GDP, debt service is the lowest in 60 years. We can lock in ultra low interest rates to get money to invest in worthwhile projects like infrastructure repair, education, research, a new power grid, etc. which would put people back to work now besides the obvious long term benefits.
Heck, since there is absolutely no sign of inflation, we could even print the money the private sector needs to provide good jobs.
Once we get the economy growing again the debt would fade in insignificance as the larger debt (as a percent of GDP) after WWII did.
Or we can keep cutting the deficit until we get surpluses as we did after WWI when we got the large war debt down to 16% of GDP in October of 1929. And how did that work out?
In fact, The federal government has balanced the budget, eliminated deficits for more than three years in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Surpluses are like bleeding a patient; they suck money out of the provate sector. They are deadly.
Heck, since there is absolutely no sign of inflation, we could even print the money the private sector needs to provide good jobs.
Once we get the economy growing again the debt would fade in insignificance as the larger debt (as a percent of GDP) after WWII did.
Or we can keep cutting the deficit until we get surpluses as we did after WWI when we got the large war debt down to 16% of GDP in October of 1929. And how did that work out?
In fact, The federal government has balanced the budget, eliminated deficits for more than three years in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Surpluses are like bleeding a patient; they suck money out of the provate sector. They are deadly.
9
I now know that can be on the right track to an economy designed to strengthen America’s middle class and it isn’t austerity. We have an under taxed class of-millionaires and billionaires and an under paid work force. The president outlined a practical policy in his State of the Union speech. The middle class need a tax break, there are too many loop holes for the rich and they need to pay their fair share. We need to create jobs that pay a living wage and we need to rebuild our infrastructure.
Republican obstruction has fostered and accelerated inequality, kept wages low, destroyed collective bargaining and rewarded the exportation of jobs, let alone having materially destroyed our democracy undermined our economy. .
But now a path to greater social justice and prosperity has been laid out by the president and the polls show that a vast majority of listeners to the State of the Union speech agree with the president. His popularity had risen to near 50% favorable before the speech (because the president is going things that they agree with) and went up by 17% after the speech.
How can the Republicans say that the president’s agenda is not what the people want. I am sure that if the voters let their representatives in Congress know that they agree with the president, I am reasonably certain that they will join with the president in creating widespread prosperity, unless a few billionaires object and remind then who owns them.
Republican obstruction has fostered and accelerated inequality, kept wages low, destroyed collective bargaining and rewarded the exportation of jobs, let alone having materially destroyed our democracy undermined our economy. .
But now a path to greater social justice and prosperity has been laid out by the president and the polls show that a vast majority of listeners to the State of the Union speech agree with the president. His popularity had risen to near 50% favorable before the speech (because the president is going things that they agree with) and went up by 17% after the speech.
How can the Republicans say that the president’s agenda is not what the people want. I am sure that if the voters let their representatives in Congress know that they agree with the president, I am reasonably certain that they will join with the president in creating widespread prosperity, unless a few billionaires object and remind then who owns them.
9
The Good Professor Krugman says that under Obama, the American economy has been having a robust recovery... even though he knows that all the robustness has been going to the Top 1%, while the rest of the Hoi Polloi have been languishing, with our young being unemployed or underemployed with No Hope for Change in sight.
Europe continues to deteriorate. China and Asia have been backsliding at an increasing rate. Russia is on the verge of collapse. So the whole world is on the eve of destruction.
There's Lots we can do about this. First among them, it is clear, is Stop the Wars and Killing, which is draining away precious Lives And Resources. This is something Obama can do all by his lonesome, since he is the Commander-in-Chief and for the past 6 years, he has been the Chief-War-Monger in the world.
Europe continues to deteriorate. China and Asia have been backsliding at an increasing rate. Russia is on the verge of collapse. So the whole world is on the eve of destruction.
There's Lots we can do about this. First among them, it is clear, is Stop the Wars and Killing, which is draining away precious Lives And Resources. This is something Obama can do all by his lonesome, since he is the Commander-in-Chief and for the past 6 years, he has been the Chief-War-Monger in the world.
12
Gosh, lighten up. I know a few folks who have been doing better than when payrolls were losing 800,000 jobs a month when President Obama took office and they aren't just the 1%.
My nephews graduated from college and have great jobs. One is starting graduate school.
China is in Asia and they are just slowing as they grow their economy, which is quite normal.
In Wayne, PA it might be sight worse, but don't generalize your own misery to the whole planet.
My nephews graduated from college and have great jobs. One is starting graduate school.
China is in Asia and they are just slowing as they grow their economy, which is quite normal.
In Wayne, PA it might be sight worse, but don't generalize your own misery to the whole planet.
1
One strong belief I have about Europe, having resided there for a couple of extensive periods, is that it is a fixed game. The powers that be want to preserve their position above all other objectives. What accommodations there are to new enterprises, inventive contributions by young people and other challenges to the business order come slowly and are met with, at minimum, careful and measured resistance. Europe is not about rocking the boat, it is about making certain that the wealthy classes of three or four generations previous remain the wealthy classes of today.
Yes, it is more of a fixed game than America, even given what was a long standing, virtual inheritance in this country of the right prep schools, followed by the right colleges, followed by business and political leadership positions (we have had preppy boys running for president on both sides of the nominating tickets and no one even took notice).
Austerity must, perforce, serve the needs of the ruling classes in Europe. It must be a way of holding on to the status quo for the upper 10% while the lower 60%, in economic terms, pay the piper. Scared times have a way of benefiting those who already have money, so they fear them less, even while they ravage the working class dependent on paychecks. That's why Europe shot itself in the foot: its leaders wanted the benefits for their clients, the wealthy. There is hardly any other explanation that makes sense.
Doug Terry
Yes, it is more of a fixed game than America, even given what was a long standing, virtual inheritance in this country of the right prep schools, followed by the right colleges, followed by business and political leadership positions (we have had preppy boys running for president on both sides of the nominating tickets and no one even took notice).
Austerity must, perforce, serve the needs of the ruling classes in Europe. It must be a way of holding on to the status quo for the upper 10% while the lower 60%, in economic terms, pay the piper. Scared times have a way of benefiting those who already have money, so they fear them less, even while they ravage the working class dependent on paychecks. That's why Europe shot itself in the foot: its leaders wanted the benefits for their clients, the wealthy. There is hardly any other explanation that makes sense.
Doug Terry
3
Both continents largely adopted austerity measures after the major stimulus package in the US was enacted.
In fact, the turnaround in the US federal fiscal deficit from 10.1% of GDP in 2009 to 2.8% of GDP in 2014 was the sharpest fiscal contraction in 47 years.
The major difference was the extraordinary monetary stimulus adopted by the Fed.
Market partipants understood the ECB was not capable of producing like conditions in the EU given structural impediments and political concerns.
Missing from your analysis is the role of central banks in providing confidence to capital markets.
Long before monetary transmission mechanisms work, central banks can stabilize asset prices and capital markets by the promise of predictable and sensible policy actions.
Mario Draghi has done extraordinary things within the limitations of his purview.
Here we are largely at full employment and have roughly price stability, though we can thread the needle to hit an arbitrary 2% inflation target.
Negative real interest rates in the US are no longer needed or appropriate.
The US can help to send a key signal of confidence to the markets by deliberately and slowly normalizing short rates.
In so doing, it elevates global confidence.
It takes the pressure off of central banks to depreciate their currencies through negative nominal rates that destabilize confidence.
Only fools don't understand the role of confidence on markets articulated by Adam Smith in the "Wealth of Nations" in 1776.
In fact, the turnaround in the US federal fiscal deficit from 10.1% of GDP in 2009 to 2.8% of GDP in 2014 was the sharpest fiscal contraction in 47 years.
The major difference was the extraordinary monetary stimulus adopted by the Fed.
Market partipants understood the ECB was not capable of producing like conditions in the EU given structural impediments and political concerns.
Missing from your analysis is the role of central banks in providing confidence to capital markets.
Long before monetary transmission mechanisms work, central banks can stabilize asset prices and capital markets by the promise of predictable and sensible policy actions.
Mario Draghi has done extraordinary things within the limitations of his purview.
Here we are largely at full employment and have roughly price stability, though we can thread the needle to hit an arbitrary 2% inflation target.
Negative real interest rates in the US are no longer needed or appropriate.
The US can help to send a key signal of confidence to the markets by deliberately and slowly normalizing short rates.
In so doing, it elevates global confidence.
It takes the pressure off of central banks to depreciate their currencies through negative nominal rates that destabilize confidence.
Only fools don't understand the role of confidence on markets articulated by Adam Smith in the "Wealth of Nations" in 1776.
2
No Europe is NOT 'kaput' as another commenter here wrote.
And for the criticism at the same time - that Prof. Krugman once writes: "Oh look, how glorious it is over there, we too can tax our evil rich at 75% as France did and does, we too can work 32 hour weeks, we too can give million dollar retirement benefits' and the Prof. Krugman implies that Europe indeed is 'kaput'.
This shizophrenic view of Europe Americans have to work out by themselves - why Europe stays a continent with some of the least kaput economies one can experience in the world and some who are in trouble because they copied the US in irresponsibilty -(aka housing bubbles)
Germany never had a housing bubble and hardly ever will show the irresponsibility to create money out of nothing.
That's why the country is as much - or even in better shape than the US and with an early retirement, and with hight taxes for the rich, and with 'Oh look, how glorious this is'.
And still there is very little 'morning' here - only worry about a complete irresponsible world.
And for the criticism at the same time - that Prof. Krugman once writes: "Oh look, how glorious it is over there, we too can tax our evil rich at 75% as France did and does, we too can work 32 hour weeks, we too can give million dollar retirement benefits' and the Prof. Krugman implies that Europe indeed is 'kaput'.
This shizophrenic view of Europe Americans have to work out by themselves - why Europe stays a continent with some of the least kaput economies one can experience in the world and some who are in trouble because they copied the US in irresponsibilty -(aka housing bubbles)
Germany never had a housing bubble and hardly ever will show the irresponsibility to create money out of nothing.
That's why the country is as much - or even in better shape than the US and with an early retirement, and with hight taxes for the rich, and with 'Oh look, how glorious this is'.
And still there is very little 'morning' here - only worry about a complete irresponsible world.
5
@ Hansfritz in Germany....
I would like to know the difference between the US and advanced EU nations re the housing bubble, the toxic mortgages bundled into investment frauds, credit default swaps, the number of citizens losing their homes, or with under water mtgs.
Or with ruined retirement accounts ono the eve of retirement.
And comparison in prosecutions of criminal banksters?
Any info on this?
I know Canada did not even have a financial crisis in 08 since they had not dismantled their bank regulations or merged with US banks.
I would like to know the difference between the US and advanced EU nations re the housing bubble, the toxic mortgages bundled into investment frauds, credit default swaps, the number of citizens losing their homes, or with under water mtgs.
Or with ruined retirement accounts ono the eve of retirement.
And comparison in prosecutions of criminal banksters?
Any info on this?
I know Canada did not even have a financial crisis in 08 since they had not dismantled their bank regulations or merged with US banks.
6
Germany contributed to Spain's (and others) housing bubble by irresponsibly lending money to Spanish banks. And then when that gamble failed. they still insisted on getting all their money back making things even worse..
6
'I would like to know the difference between the US and advanced EU nations re the housing bubble'
It must have been a lack of Bank regulations in the US - as in Germany it always was impossible to finance a house the adventurous US way. And I can't speak for the rest of Europe but in Germany it always also was a different cultural approach about NOT being a 'irresponsible' gambler with one of the most fundamental need of the people.
It must have been a lack of Bank regulations in the US - as in Germany it always was impossible to finance a house the adventurous US way. And I can't speak for the rest of Europe but in Germany it always also was a different cultural approach about NOT being a 'irresponsible' gambler with one of the most fundamental need of the people.
2
First, thank you for agreeing on the impact of Social Security and Medicare. Not so sure about the food stamps as they aren't taxed. Florida did an increase of the sales tax which puts a huge tax on the use of social security money and medicare and the health costs. Love how Scott treats seniors with the double taxing. Yes he did lower benefits for the poor and middle class and lower taxes for the rich with these gains and plans to continue down the path. You would almost think the corporate front for people means they don't use the state infrastructure, state citizens or the state and federal laws to give themselves added protection. Oh well.
3
Europe was also politically weak at a time when greater centralization could have been of value. There is a great suspicion reflected in low voter turnout in EU elections that national sovereignty outweighs European unity, kind of like the U.S. during the Articles of Confederation.
If you will recall for a time early in the first term, President Obama was at least expressing concerns about the deficit even if he didn't believe it and fortunately for the country he avoided the austerity programs like we see in Europe. but you are right, he didn't do enough to launch infrastructure programs, provide jobs and attempt dramatically increase demand. Still, I would take him in a second over any leader in Europe.
If you will recall for a time early in the first term, President Obama was at least expressing concerns about the deficit even if he didn't believe it and fortunately for the country he avoided the austerity programs like we see in Europe. but you are right, he didn't do enough to launch infrastructure programs, provide jobs and attempt dramatically increase demand. Still, I would take him in a second over any leader in Europe.
5
The problem is that Krugman and his fellow liberal I'll have built up Europe as their nirvana, the utopia, the ideal we should all aspire to. "Oh look, how glorious it is over there, we too can tax our evil rich at 75% as France did and does, we too can work 32 hour weeks, we too can give million dollar retirement benefits to all and sundry and let them retire at 50 as Greece does, we too can have a tax base where only 40% of the people pay any taxes" Yadda Yadda.
And now Europe is kaput. Bankrupt. Hmm. Is that poking in the yes of liberals? Isn't this the paradise, where free trade can be blocked, endless giveaways lead to more prosperity, and exceptionally punitive taxes lead to more growth?
Oh yes, now we must find new blames. Yes, let us take credit for the better US economy and claim it all happened because of the trillion dollars Obama wasted, er stimulus. Let us claim Europe went backwards because they were not profligate enough.
Yes, let us revise history.
And now Europe is kaput. Bankrupt. Hmm. Is that poking in the yes of liberals? Isn't this the paradise, where free trade can be blocked, endless giveaways lead to more prosperity, and exceptionally punitive taxes lead to more growth?
Oh yes, now we must find new blames. Yes, let us take credit for the better US economy and claim it all happened because of the trillion dollars Obama wasted, er stimulus. Let us claim Europe went backwards because they were not profligate enough.
Yes, let us revise history.
5
Apples and oranges, absolutely. Even the best of nations that have humane social policies and high standards of living can make economic errors, especially when they are being dominated by austerity scolds. Case in point: Sweden. The nation almost went bankrupt some years ago, but it was because of mistakes in fiscal management, not because they gave away too many goodies to their citizens.
Somehow in the U.S. the Calvinist Republicans keep equating fiscal responsibility with keeping the nation in poverty, except for the 1% of course. The little people have to suffer, they think, so the rich can reap the rewards of their "virtuous" wealth.
Somehow in the U.S. the Calvinist Republicans keep equating fiscal responsibility with keeping the nation in poverty, except for the 1% of course. The little people have to suffer, they think, so the rich can reap the rewards of their "virtuous" wealth.
43
Being jealous of the more successful is a virtue for progressives. How quaint
47% of the country pays no taxes! and most of the taxes are paid by a small sliver of the population! and yet the liberal creed says our tax system favors the evil rich.
France tried the 75% taxes. If Obama likes it, he could have proposed it in his sotu. Unfortunately, he is only proposing that we should dunk the 529 plans into the ocean.
I saw some one post a comment here yesterday that we should tax the evil rich at 150%. Such is the wisdom that is coming from progressives these days. One of these days, these guys will propose that we should guillotine all people making a hundred grand and the rest of them sing hallelujah
47% of the country pays no taxes! and most of the taxes are paid by a small sliver of the population! and yet the liberal creed says our tax system favors the evil rich.
France tried the 75% taxes. If Obama likes it, he could have proposed it in his sotu. Unfortunately, he is only proposing that we should dunk the 529 plans into the ocean.
I saw some one post a comment here yesterday that we should tax the evil rich at 150%. Such is the wisdom that is coming from progressives these days. One of these days, these guys will propose that we should guillotine all people making a hundred grand and the rest of them sing hallelujah
2
Did you even read the article, Desi? Other than Greece, whose actions and circumstances were very different, no country is "bankrupt". Their private-sector economies are slow because of lack of demand. And, their social spending is, if anything, helping their economies. Just imagine if citizens had the healthcare costs we do. Repeating a trite mantra you hear on talk radio is no substitute for learning the facts.
7
A few thoughts:
First, a spendthrift United States? I thought the party line is that the US never had any fiscal stimulus. The cuts to state budgets in 2009-11 dwarfed the ARRA. The more precise/consistent narrative is that at least our destabilizing cyclical budget cuts at the state level were partially balanced by stabilizing transfers and some counter-cyclical stimulus. That's partly why we didn't do as bad as Europe. (We still enacted pretty bad fiscal policy.) The other part is the more-or-less consistent monetary stimulus after 2008.
Second, Europe's political class is failing in a way that we don't see in the United States. The US has structural problems with its democracy because many of us have figured out that there's no political risk to not compromising. We've hit an impasse, but at least the irreconcilable views in the US political scene largely (if not always proportionally) reflect the views of voters. In Europe, the major political parties have a huge disconnect with voters in general. In the US, the lack of a credible left means that conservatives who refuse to compromise aren't checked. In Europe, the lack of a credible left (outside of Greece, apparently) means that many alienated voters drift toward right-wing populism, which often means racist or nativist parties. Meanwhile, the European centrist parties putter along without a plan, assuming extremists still aren't credible enough to win elections. They will soon be surprised.
First, a spendthrift United States? I thought the party line is that the US never had any fiscal stimulus. The cuts to state budgets in 2009-11 dwarfed the ARRA. The more precise/consistent narrative is that at least our destabilizing cyclical budget cuts at the state level were partially balanced by stabilizing transfers and some counter-cyclical stimulus. That's partly why we didn't do as bad as Europe. (We still enacted pretty bad fiscal policy.) The other part is the more-or-less consistent monetary stimulus after 2008.
Second, Europe's political class is failing in a way that we don't see in the United States. The US has structural problems with its democracy because many of us have figured out that there's no political risk to not compromising. We've hit an impasse, but at least the irreconcilable views in the US political scene largely (if not always proportionally) reflect the views of voters. In Europe, the major political parties have a huge disconnect with voters in general. In the US, the lack of a credible left means that conservatives who refuse to compromise aren't checked. In Europe, the lack of a credible left (outside of Greece, apparently) means that many alienated voters drift toward right-wing populism, which often means racist or nativist parties. Meanwhile, the European centrist parties putter along without a plan, assuming extremists still aren't credible enough to win elections. They will soon be surprised.
2
If our policies reflect the views of voters, tell me why Congress's approval rating is so low, on both sides of the aisle.
1
I don't think America is as far along as it should be. If we had taken advantage of low interest rates, we could have catapulted our economy with heavy infrastructure spending. But I also think the greatest contributing factor toward American growth has been peace. Although many will argue the opposite, I am of the belief that war consumes wealth. Unless you are the big winner both politically and economically, which is seldom the case, the bill always comes home to roost. How many political crisis have passed in the past six years that could have resulted in war. If a Republican was in the White House is there any doubt we would be at war. I think that is the principle point which should come up in the next Presidential election. It is critical we elect someone who views war as a last resort. If we do, I think America has a good chance to transform its society in very positive ways, and consequently Europe will cash in on that dividend. Although the world seems chaotic, fortress America feels somewhat secure, and that is what is driving the world economy more than monetary policy.
8
We can thank our stars that a sensible Democrat was in office after the disastrous economic policies of the Bush Era. To be sure, the stimulus was not enough. But President Obama was opposed at every turn when trying to do such "irresponsible" things as spending money for infrastructure and the jobs they would bring, or extending unemployment, an important stimulus for the economy, since the money is spent immediately and spent completely.
But the Republicans don't give up. They are still lying about the deficit, about spending stimulus, about the drop in unemployment. In fact there is barely anything related to the economy that they are not lying about. If Mitt Romney or John McCain had won we would be in worse shape than Europe.
But the Republicans don't give up. They are still lying about the deficit, about spending stimulus, about the drop in unemployment. In fact there is barely anything related to the economy that they are not lying about. If Mitt Romney or John McCain had won we would be in worse shape than Europe.
217
Unfortuantely many Democrats rans away from Obama in the mid terms instead of touting the good news. I still wonder why the Dems threw this election.
7
"If Mitt Romney or John McCain had won we would be in worse shape than Europe."
Not necessarily. A good portion of the GOP's opposition to anything that would improve the economy was to sink Obama. Damaging the economy in order to sink Obama was OK.
When Republicans are in power, they spend like drunken sailors.
Not necessarily. A good portion of the GOP's opposition to anything that would improve the economy was to sink Obama. Damaging the economy in order to sink Obama was OK.
When Republicans are in power, they spend like drunken sailors.
5
The infrastructure aspect is particularly galling given the poor shape ours is in, and the considerably lower cost, direct and indirect, of doing this kind of necessary work during a recession--don't forget all the unemployment payment savings to construction workers.
2
"America is experiencing a solid recovery"
No, we are not. We are doing better on a macro level than is Europe, but that is better than a self inflicted foolish disaster.
If we were experiencing a solid recovery, more Americans would be part of it. Now, a tiny elite at the top is having a spectacular recovery, and everyone else has yet to share any of it. That isn't "solid."
Republicans would do worse, mean to do worse, deliberately want this failing to continue. This is not to prefer them over Obama.
Still, reality matters. This "recovery" does not include almost all Americans. The overwhelming majority of Americans are still in a Depression, not a recession.
One day, looking back, this will be seen as one of the worst times in American economic history, and done to us deliberately by the sabotage of our own wealthy elite buying our politics and betraying us.
No, we are not. We are doing better on a macro level than is Europe, but that is better than a self inflicted foolish disaster.
If we were experiencing a solid recovery, more Americans would be part of it. Now, a tiny elite at the top is having a spectacular recovery, and everyone else has yet to share any of it. That isn't "solid."
Republicans would do worse, mean to do worse, deliberately want this failing to continue. This is not to prefer them over Obama.
Still, reality matters. This "recovery" does not include almost all Americans. The overwhelming majority of Americans are still in a Depression, not a recession.
One day, looking back, this will be seen as one of the worst times in American economic history, and done to us deliberately by the sabotage of our own wealthy elite buying our politics and betraying us.
125
Mark,
The U.S. recession began in December 2007 and ended in June 2009, and thus extended over 18 months. We are in a solid recovery but the only problem is that wages are stagnet. This has to do with employers reaping huge profits while cutting the workforce.
Some companies purposely hired part-time workers to avoid giving them benefits and sometimes keeping wages low b/c there are desperate people out their that are wilingly to work for little or nothing.
That's why I think your theory is wrong.
The U.S. recession began in December 2007 and ended in June 2009, and thus extended over 18 months. We are in a solid recovery but the only problem is that wages are stagnet. This has to do with employers reaping huge profits while cutting the workforce.
Some companies purposely hired part-time workers to avoid giving them benefits and sometimes keeping wages low b/c there are desperate people out their that are wilingly to work for little or nothing.
That's why I think your theory is wrong.
1
Taking only the macro numbers for the nation as a whole, the US recession ended in 2009.
Taking the numbers for the lower 90% of the US population, the recession has never ended, and qualifies as a true depression.
"The only problem" is that the recovery did not include the US population, only our elite, which recovered itself at the expense of everyone else, and now has left us mired in it. They don't even care. They call this "success" because it is good for them, but them only.
Taking the numbers for the lower 90% of the US population, the recession has never ended, and qualifies as a true depression.
"The only problem" is that the recovery did not include the US population, only our elite, which recovered itself at the expense of everyone else, and now has left us mired in it. They don't even care. They call this "success" because it is good for them, but them only.
4
For a brief, but terrifying moment in 2008, good judgment among those in charge prevailed in the US, while Europe's central bankers and policy makers, having failed to internalize respected economic theory about doing everything needed to increase liquidity and spur demand, invited the dysfunction that exists today in Europe.
When economies collapse--not just contract--and markets and banking systems waver, people lose jobs in massive numbers, demand nosedives, businesses implode, and investment and spending evaporate. In such circumstances, history teaches that flooding the system with liquidity and inciting some inflation to fend off deflationary forces are the most reasonable means of restoring stability. To those promoting clean balance sheets, it seems counterintuitive, but is nonetheless true, that inflation is a sign of success.
Thankfully, the high- pitched malarkey promoted by some economists and numbskull ideologues was ignored by those in charge in the US. The Europeans sided with high-sounding, but vacuous language about balance sheet purity, reducing debt and contracting deficits, ignoring the genuine pain their negligent actions were destined to inflict on workers and businesses trying to navigate an unprecedented credit and economic disaster.
Somehow, for a brief but terrifying moment, US leaders displayed signs of sanity and respect for lessons learned from 19th and 20th century economic history.
When economies collapse--not just contract--and markets and banking systems waver, people lose jobs in massive numbers, demand nosedives, businesses implode, and investment and spending evaporate. In such circumstances, history teaches that flooding the system with liquidity and inciting some inflation to fend off deflationary forces are the most reasonable means of restoring stability. To those promoting clean balance sheets, it seems counterintuitive, but is nonetheless true, that inflation is a sign of success.
Thankfully, the high- pitched malarkey promoted by some economists and numbskull ideologues was ignored by those in charge in the US. The Europeans sided with high-sounding, but vacuous language about balance sheet purity, reducing debt and contracting deficits, ignoring the genuine pain their negligent actions were destined to inflict on workers and businesses trying to navigate an unprecedented credit and economic disaster.
Somehow, for a brief but terrifying moment, US leaders displayed signs of sanity and respect for lessons learned from 19th and 20th century economic history.
7
Here's the problem as I see it.
The European economies are much more Liberal socially and more conservative, with a small "c" economically.
The LIberal aspect of European life has long been there in both Germany and France since before World War I. The conservative attitude of European bankers, their approach to fiscal and monetary policies have also been there. But, the post-Reagan emphasis on tight economic policy, low taxes, corporate and financial regulatory freedom has crossed the ocean, and enhanced those natural tendencies.
The result is that much of Europe's financial sector is influenced by Chicago style, austere, to-hell-with-social-consequences economics. That's where they are--in my opinion. And that's why they soaked themselves in basically fraudulent, too-good-to-be-true financial instruments that helped to bankrupt them.
Yes, there were other mistakes. Greece went crazy with government wages and Spain overbuilt condominiums.
But basically, the Europeans bought into phony, false-ideological economics, paid one price and now, still unwilling to admit their mistakes, are going to pay again.
It's too bad. Most Europeans, the average Jaques, Jean or Hans, are a dozen times better than we are. We have all kinds of prejudices and stupidities (see populistdaily.com) but we have more space both literally and figuratively.
I think that in the long run, they'll recover. And they already focus on the right things....people.
The European economies are much more Liberal socially and more conservative, with a small "c" economically.
The LIberal aspect of European life has long been there in both Germany and France since before World War I. The conservative attitude of European bankers, their approach to fiscal and monetary policies have also been there. But, the post-Reagan emphasis on tight economic policy, low taxes, corporate and financial regulatory freedom has crossed the ocean, and enhanced those natural tendencies.
The result is that much of Europe's financial sector is influenced by Chicago style, austere, to-hell-with-social-consequences economics. That's where they are--in my opinion. And that's why they soaked themselves in basically fraudulent, too-good-to-be-true financial instruments that helped to bankrupt them.
Yes, there were other mistakes. Greece went crazy with government wages and Spain overbuilt condominiums.
But basically, the Europeans bought into phony, false-ideological economics, paid one price and now, still unwilling to admit their mistakes, are going to pay again.
It's too bad. Most Europeans, the average Jaques, Jean or Hans, are a dozen times better than we are. We have all kinds of prejudices and stupidities (see populistdaily.com) but we have more space both literally and figuratively.
I think that in the long run, they'll recover. And they already focus on the right things....people.
41
Austerity and recession also kill, as suicide rates, unemployment and illness soar during the period of economic suffocation.
David Stuckler and Sanjay Basu, authors of “The Body Economic: Why Austerity Kills" tell the murderous story....in case there was any doubt about modern day sadomonetarism.
People looking for work are twice as likely to end their lives as those who have jobs.
In the USA, the suicide rate jumped during and after the 2007 - 2009 recession.
Rates of suicides were significantly greater in states that experienced the greatest job losses.
If suicides were just an unavoidable consequence of economic downturns, that would be one thing, but it turns out that countries (and states) that slashed health and social protection budgets, like Greece, Italy and Spain (and GOP Death Panel states), have starkly worse health outcomes than nations like Germany, Iceland and Sweden (and blue states) that maintained social safety nets and opted for stimulus and safety nets over austerity.
In 1997 Thailand and Indonesia had harsh austerity plans imposed by the IMF and experienced mass hunger and sharp increases in deaths from infectious disease, while Malaysia rejected the IMF’s advice and maintained the health of its citizens.
In 2012, the IMF formally apologized for its catastrophic handling of the Asian financial crisis.
Austerity and 'sequestration'- severe, immediate, indiscriminate cuts to social and health spending - is self-defeating, fatal economics.
David Stuckler and Sanjay Basu, authors of “The Body Economic: Why Austerity Kills" tell the murderous story....in case there was any doubt about modern day sadomonetarism.
People looking for work are twice as likely to end their lives as those who have jobs.
In the USA, the suicide rate jumped during and after the 2007 - 2009 recession.
Rates of suicides were significantly greater in states that experienced the greatest job losses.
If suicides were just an unavoidable consequence of economic downturns, that would be one thing, but it turns out that countries (and states) that slashed health and social protection budgets, like Greece, Italy and Spain (and GOP Death Panel states), have starkly worse health outcomes than nations like Germany, Iceland and Sweden (and blue states) that maintained social safety nets and opted for stimulus and safety nets over austerity.
In 1997 Thailand and Indonesia had harsh austerity plans imposed by the IMF and experienced mass hunger and sharp increases in deaths from infectious disease, while Malaysia rejected the IMF’s advice and maintained the health of its citizens.
In 2012, the IMF formally apologized for its catastrophic handling of the Asian financial crisis.
Austerity and 'sequestration'- severe, immediate, indiscriminate cuts to social and health spending - is self-defeating, fatal economics.
338
You make it sound as if suicide rates peaked in 2007--2009 and now they are falling. They are not. The suicide rate in the US continues to rise.
1
Until recently the IMF always insisted on austerity measures as a condition for its loans, and it was the American banking industry, which has the largest voting share of all IMF member nations, who led the austerity charge.
It did not work in Asia during the 90's and it failed miserably during the 70's and 80's Latin America debt crisis.
The bottom line is that "austerity is as American as apple pie."
It did not work in Asia during the 90's and it failed miserably during the 70's and 80's Latin America debt crisis.
The bottom line is that "austerity is as American as apple pie."
44
It is hard to accept that nearly all the responsible leaders of Europe were courting austerity for nefarious reasons. It is equally hard to accept that they were all being fooled in a comparable manner.
Surely there were powerful legislative bodies in Europe just as liberal as America's 111th Congress. As well there were bodies just as reactionary and disfunctional as our 112th Congress.
So if there was a divergence (and we are likely to agree there has been) then it would be illuminating to find a rational explanation. It cannot be that leaders in Europe are worse then in America. That makes no sense, for they are all bad.
The search goes on, but I would like to suggest that we consider that America's leadership has become even more incompetent then normal with the ascension of Obama to the presidency.
Perhaps we are all better off when government is incapable of functioning due to unreasoning angst.
Surely there were powerful legislative bodies in Europe just as liberal as America's 111th Congress. As well there were bodies just as reactionary and disfunctional as our 112th Congress.
So if there was a divergence (and we are likely to agree there has been) then it would be illuminating to find a rational explanation. It cannot be that leaders in Europe are worse then in America. That makes no sense, for they are all bad.
The search goes on, but I would like to suggest that we consider that America's leadership has become even more incompetent then normal with the ascension of Obama to the presidency.
Perhaps we are all better off when government is incapable of functioning due to unreasoning angst.
2
You imply the alternatives to Obama would have been preferable. But those people are strong advocates for austerity. Had they become President, their economic policies are the same as the EU and we would be in the deflation trap with the EU. Clearly the alternative to Obama would have done more damage to our economy.
65
Rich,
Obama is the best choice. I voted for him twice. I would do so again. You are right to say if either John McCain or Mitt Romney had won we would be ahead of the Euro Zone in our race to the bottom.
But we didn't really do much better from January 2009 to the end of 2010 when Obama had a Democratic Congress. So why did our fates diverge since January 2010?
I merely submit that we may be better off with a disfunctional government then with what is going on in the UK or The Euro Zone right now.
Obama is the best choice. I voted for him twice. I would do so again. You are right to say if either John McCain or Mitt Romney had won we would be ahead of the Euro Zone in our race to the bottom.
But we didn't really do much better from January 2009 to the end of 2010 when Obama had a Democratic Congress. So why did our fates diverge since January 2010?
I merely submit that we may be better off with a disfunctional government then with what is going on in the UK or The Euro Zone right now.
"Spendthrift, loose-money America is experiencing a solid recovery — a reality reflected in President Obama’s feisty State of the Union address." --- Krugman
Yes, but the recovery seems to have been focused almost exclusively on the one percent. They've pulled ahead while nearly everyone else has languished. Our real unemployment rate, counting those in part-time jobs and those who have given up looking for jobs, is still unacceptably high. Too many of our jobs are minimum wage or not much above. Median income has actually fallen slightly in recent years. A large segment of our population would laugh at the idea that we've had much of a recovery.
That being said, Europe has fared even worse than we have, as Krugman notes. The bankers, who don't have to worry about their jobs but are very anxious to avoid inflation since it would cheapen their loans, seem to be in charge of Euro Zone economic policy. Germany, which has never forgotten the extreme inflation of 1923 (even though very few alive today might remember it), is paranoid about the possibility of increasing inflation, and Germany has dominated Euro Zone decisions.
We're more fortunate here in the U.S. that there was some economic stimulus before the Republicans took over de facto control of Congress and started harping about austerity. Also, the Fed ignored the wishes of bankers and some politicians and inflated the money supply to keep interest rates low. But the U.S. recovery is hardly a robust one.
Yes, but the recovery seems to have been focused almost exclusively on the one percent. They've pulled ahead while nearly everyone else has languished. Our real unemployment rate, counting those in part-time jobs and those who have given up looking for jobs, is still unacceptably high. Too many of our jobs are minimum wage or not much above. Median income has actually fallen slightly in recent years. A large segment of our population would laugh at the idea that we've had much of a recovery.
That being said, Europe has fared even worse than we have, as Krugman notes. The bankers, who don't have to worry about their jobs but are very anxious to avoid inflation since it would cheapen their loans, seem to be in charge of Euro Zone economic policy. Germany, which has never forgotten the extreme inflation of 1923 (even though very few alive today might remember it), is paranoid about the possibility of increasing inflation, and Germany has dominated Euro Zone decisions.
We're more fortunate here in the U.S. that there was some economic stimulus before the Republicans took over de facto control of Congress and started harping about austerity. Also, the Fed ignored the wishes of bankers and some politicians and inflated the money supply to keep interest rates low. But the U.S. recovery is hardly a robust one.
19
'We're more fortunate here in the U.S.'
Everybody who is able to compare the US and Europe not only statiistic wise will tell you it depends on the European country.
All of Scandinavia is much more 'fortunate' than the US- and that is not even thinking about the biggest European economy...
Everybody who is able to compare the US and Europe not only statiistic wise will tell you it depends on the European country.
All of Scandinavia is much more 'fortunate' than the US- and that is not even thinking about the biggest European economy...
5
It is ironic that Germany is the country that is opposed to more spending to alleviate the economic malaise that is affecting western Europe at present.
It was Germany who engaged in the most hyper inflationary policy ever seen at that time. When the French would not take a cut in reparations payments in 1921 for WWI, Germany simply printed money, which of course made it worthless.
We recently saw the same thing with Zimbabwe.
We hear the same complaint about the Fed, and now the ECB. However, the difference is, these banks either buy or sell bonds, against which currency is printed. So when the Treasury sells bonds, which are paid back by taxes, and the Fed buys them, against which money is printed against them, there is an actual worth behind those Federal reserve Notes. It does increase the money supply, and the Fed makes care to keep the inflation rate at 3% or close.
With a fixed money supply, you get deflation, as individual currency becomes worth more in some commodity, like gold, copper, or wheat, as an example. But that puts the majority of people in a position of having to buy less as prices increase bringing about deflation. So the ECB is going to increase the money supply, by keeping interest low, encouraging borrowing for financing.
This is the antithesis of the GOP and the TP economic ideology. But beware the machinations of the admirers of 19th century economics, they will lead us to destruction, not the promised land.
It was Germany who engaged in the most hyper inflationary policy ever seen at that time. When the French would not take a cut in reparations payments in 1921 for WWI, Germany simply printed money, which of course made it worthless.
We recently saw the same thing with Zimbabwe.
We hear the same complaint about the Fed, and now the ECB. However, the difference is, these banks either buy or sell bonds, against which currency is printed. So when the Treasury sells bonds, which are paid back by taxes, and the Fed buys them, against which money is printed against them, there is an actual worth behind those Federal reserve Notes. It does increase the money supply, and the Fed makes care to keep the inflation rate at 3% or close.
With a fixed money supply, you get deflation, as individual currency becomes worth more in some commodity, like gold, copper, or wheat, as an example. But that puts the majority of people in a position of having to buy less as prices increase bringing about deflation. So the ECB is going to increase the money supply, by keeping interest low, encouraging borrowing for financing.
This is the antithesis of the GOP and the TP economic ideology. But beware the machinations of the admirers of 19th century economics, they will lead us to destruction, not the promised land.
5
David your post WWI history ain't exactly correct.. The inflation in Germany was caused by external forces, not by the printing of money. Germany could never pay the financial reparations in marks; they had to pay in gold which they had no way to get. In fact, they never paid most of the financial reparations. They just hung around until Hitler said forgedda 'bout it.
The shortages were first caused by the war. The reasons Germany sued for peace were economic as well as military. Then there were reparations in kind--cattle, steel, etc. which Germany could and did pay causing more shortages. Finally in 1923, France seized Germany industries, forced the workers to work and did not pay them. That is when money began to be printed in large quantities--to pay the workers.
The printing of money was caused by the inflation which was caused by the shortages, not the other way around.
In fact every excessive inflation in developed countries (I don't know about the Zimbabwe economy) since WWII at least have been caused by external forces (mainly shortages) not by the excessive printing of money.
In theory, if we print too much money for the amount of stuff we can produce, we could get excessive inflation only it never seems to happen that way.
Also I don't understand what you mean by "Treasury sells bonds, which are paid back by taxes..." The FED actually prints money to buy the bonds and there is no "worth" behind the money thus printed.
It is fiat money.
The shortages were first caused by the war. The reasons Germany sued for peace were economic as well as military. Then there were reparations in kind--cattle, steel, etc. which Germany could and did pay causing more shortages. Finally in 1923, France seized Germany industries, forced the workers to work and did not pay them. That is when money began to be printed in large quantities--to pay the workers.
The printing of money was caused by the inflation which was caused by the shortages, not the other way around.
In fact every excessive inflation in developed countries (I don't know about the Zimbabwe economy) since WWII at least have been caused by external forces (mainly shortages) not by the excessive printing of money.
In theory, if we print too much money for the amount of stuff we can produce, we could get excessive inflation only it never seems to happen that way.
Also I don't understand what you mean by "Treasury sells bonds, which are paid back by taxes..." The FED actually prints money to buy the bonds and there is no "worth" behind the money thus printed.
It is fiat money.
9
Len - Germany completed payment of WWI reparations in October of 2010.
1
In this case, we need to redefine what being responsible means. Being a deficit and inflation hawk is not being "responsible" when it can tank entire economies and force millions of people into poverty. Being that "responsible" is the height of irresponsibility, lets not even get started on how needless cruel it is to ruin millions of lives.
53
@Ruthmarie
Agreed. Its also a question of WHEN, as well as what, to be responsible about. That's what many/most Republicans never seem to grasp in their neverending tsunami of criticism in the face of contrarian facts. Some of them probably don't 'get' it, but I think many do but can't be bothered attempting to make a sophisticated case to the public on behalf of the nation when they can gain so much so easily by being partisan.
Though Germany takes a beating in the opinion of many here (deservedly) over the decades Germany (and its people) has been both thrifty and generous when it was appropriate to be, willing to increase taxes when things were good, and spend big for visionary things. Since the 2008 crash, for various reasons, they've stumbled. Germany doesn't really feel it (yet) in terms of millions of unemployed, but all their partners in the eurozone are feeling their exported pain.
On the other hand, their latest 'big project', eliminating nuke power, will pay off big-time, if they haven't already compromised their ability to stay the course. Not so much because nukes can't be made to work safely, but because they stand to become the most technologically adept in 'green solutions' when the world will be beating a path to their door to learn how its done, sometime in the future. Their 'investment' will pay off handsomely. Two failed wars nothwithstanding, I wouldn't bet against them. Germans are nothing if not persistent when they have an (non-economic) idea.
Agreed. Its also a question of WHEN, as well as what, to be responsible about. That's what many/most Republicans never seem to grasp in their neverending tsunami of criticism in the face of contrarian facts. Some of them probably don't 'get' it, but I think many do but can't be bothered attempting to make a sophisticated case to the public on behalf of the nation when they can gain so much so easily by being partisan.
Though Germany takes a beating in the opinion of many here (deservedly) over the decades Germany (and its people) has been both thrifty and generous when it was appropriate to be, willing to increase taxes when things were good, and spend big for visionary things. Since the 2008 crash, for various reasons, they've stumbled. Germany doesn't really feel it (yet) in terms of millions of unemployed, but all their partners in the eurozone are feeling their exported pain.
On the other hand, their latest 'big project', eliminating nuke power, will pay off big-time, if they haven't already compromised their ability to stay the course. Not so much because nukes can't be made to work safely, but because they stand to become the most technologically adept in 'green solutions' when the world will be beating a path to their door to learn how its done, sometime in the future. Their 'investment' will pay off handsomely. Two failed wars nothwithstanding, I wouldn't bet against them. Germans are nothing if not persistent when they have an (non-economic) idea.
3
Germany has chosen ideology over reality. If the Republican candidates for President in 2008 and 2012 had been elected, they and their compatriots in the Congress would have made the same choices and world would probably be in a deep depression now.
120
An interesting fact that doesn't get news coverage : the median wealth in Germany in 2013 was less than that of Spain, Greece, Ireland or Italy. I suspect the German government made a cynical , national interest based decision by insisting on austerity. Why transfer German wealth to European countries with greater wealth during their recessions?
If you replace words of Germany or German to Republican Party or Republican, you will realize that policy of Germany and Republican Party is same like a twin. Even though smaller and in short time, President Obama's and Democrats' fiscal stimulus and Fed's QE rescued the U.S. from falling into deflation so far. Revenue strapped Florida survived because of the financial help by the Federal Government, indirectly by larger tax paying states, like New York or Connecticut, mostly Democrats majority states. However, how many people in Florida know this fact? Very few! This is because national news media and news media in Florida did not dig into the facts.
Because of the drop of oil prices, most of our oil states, mostly Republican states, would encounter revenue shortage due to collapse of oil boom, similar to Florida after the collapse of housing boom. In that event, I hope national and local media would inform the public how Federal Government and high tax paying states indirectly help oil states financially. The Federal mechanism need to be publicized by a loud speaker, particularly to those Republicans and their supporters that right now demand small Government.
Because of the drop of oil prices, most of our oil states, mostly Republican states, would encounter revenue shortage due to collapse of oil boom, similar to Florida after the collapse of housing boom. In that event, I hope national and local media would inform the public how Federal Government and high tax paying states indirectly help oil states financially. The Federal mechanism need to be publicized by a loud speaker, particularly to those Republicans and their supporters that right now demand small Government.
82
Wind Surfer......you say Germany is like a twin to the US GOP? Our gop is much more right wing. Corporations totally support our Gop.
Even if Germany cuts spending, isn't Germany starting from a different place vs the US to begin with? Especially if they have publicly funded elections, long standing universal health care, and acceptance of union bargaining in their corporate boards.
Also they did not offshore so many jobs as the US did. And during recessions they give workers shorter hours, which the govt pays businesses to do. Thus their workers don’t lose jobs, skills, and livelihoods like here, but are at their jobs when the recession ends.
Can you explain why these differences are not taken into account in these discussions, since they are important in the lives of millions? Globalization is not the same everywhere. Some countries can soften the harsh effects on their salaried workers, and their rich don't dominate their parliaments and take all the fruits of productivity.
Even if Germany cuts spending, isn't Germany starting from a different place vs the US to begin with? Especially if they have publicly funded elections, long standing universal health care, and acceptance of union bargaining in their corporate boards.
Also they did not offshore so many jobs as the US did. And during recessions they give workers shorter hours, which the govt pays businesses to do. Thus their workers don’t lose jobs, skills, and livelihoods like here, but are at their jobs when the recession ends.
Can you explain why these differences are not taken into account in these discussions, since they are important in the lives of millions? Globalization is not the same everywhere. Some countries can soften the harsh effects on their salaried workers, and their rich don't dominate their parliaments and take all the fruits of productivity.
7
'If you replace words of Germany or German to Republican Party or Republican, you will realize that policy of Germany and Republican Party is same like a twin.'
No it is not.
The fact policies in Germany are social and empathetic to a dimension which even makes US Democrats appear to be on the right.
No it is not.
The fact policies in Germany are social and empathetic to a dimension which even makes US Democrats appear to be on the right.
7
The Professor wrote "The United States and Europe have a lot in common"
Which is very true, for austerity we only need to look at countries like Germany and the UK, for states in the US Kansas, Texas, Wisconsin come to mind.
Being in the US I have a number of friends that think having the Congress controlled by one party and the presidency by the other party is a good thing as not much happens. But when bubbles pop "not much happening" isn't always a good thing.
The European Union on the other hand is set-up with the dominant economies (Germany & the UK) calling the shots, sorta like California, New York & Texas telling all the rest of the US what to do.
There is no question that the US system isn't perfect but on the other hand it helped us weather the recession better than Europe.
Which is very true, for austerity we only need to look at countries like Germany and the UK, for states in the US Kansas, Texas, Wisconsin come to mind.
Being in the US I have a number of friends that think having the Congress controlled by one party and the presidency by the other party is a good thing as not much happens. But when bubbles pop "not much happening" isn't always a good thing.
The European Union on the other hand is set-up with the dominant economies (Germany & the UK) calling the shots, sorta like California, New York & Texas telling all the rest of the US what to do.
There is no question that the US system isn't perfect but on the other hand it helped us weather the recession better than Europe.
7
In September 2013 the German people re-elected the CDU (Angela Merkel's conservative party) and added 72 seats to their existing plurality in the legislature. The central election debate issue was the need to financially support weak euro states, particularly Greece.
So the German citizens refused the idea of European economic federalism, at the risk that the whole enterprise could collapse. It seems that hasn't changed much in the past year and a half since the election.
The German officials are following austerity policies because to do otherwise would incur electoral wrath.
They may indeed be cozy and self-indulgent true believers. In that case facts, in particular the counter example of the US, are no match for belief.
Or they may be hypocrites and terrified of their electoral base.
Now where have we heard this saga before? Um, Republicans, facts versus ideology - not just the stimulus but also global warming or immigration or health care or corporate welfare or minimum wage or taxing the one percent or you name it. Is it principle or pander? I certainly can't tell if Ted Cruz (for example) really believes the stuff he says at all. But it's clear that when Marco Rubio pushed for an immigration bill, he got his head handed to him by the crazies.
All of it is fear and resentment, of southern Europeans over there, and of *those people* over here. Channeling Rod Serling, it seems people are alike all over. http://en.wikipedia.org/wiki/People_Are_Alike_All_Over
So the German citizens refused the idea of European economic federalism, at the risk that the whole enterprise could collapse. It seems that hasn't changed much in the past year and a half since the election.
The German officials are following austerity policies because to do otherwise would incur electoral wrath.
They may indeed be cozy and self-indulgent true believers. In that case facts, in particular the counter example of the US, are no match for belief.
Or they may be hypocrites and terrified of their electoral base.
Now where have we heard this saga before? Um, Republicans, facts versus ideology - not just the stimulus but also global warming or immigration or health care or corporate welfare or minimum wage or taxing the one percent or you name it. Is it principle or pander? I certainly can't tell if Ted Cruz (for example) really believes the stuff he says at all. But it's clear that when Marco Rubio pushed for an immigration bill, he got his head handed to him by the crazies.
All of it is fear and resentment, of southern Europeans over there, and of *those people* over here. Channeling Rod Serling, it seems people are alike all over. http://en.wikipedia.org/wiki/People_Are_Alike_All_Over
11
Germany does believe in underwriting poorer economies, but they must be German. So far, Germany has invested, err given, 1.3 trillion Euros to the former East Germany.
http://www.dw.de/eastern-germany-is-western-germanys-trillion-euro-bet/a...
It's time for Germany to leave the European Union as they only support German interests, but oh, then Germans would not be able to buy property in France, Spain, Portugal, Poland, Greece. And since only 20% or so of the homes in Germany are owned by residents... I'll bet a month's pay that more German citizens own property outside of Germany than in Germany.
http://www.dw.de/eastern-germany-is-western-germanys-trillion-euro-bet/a...
It's time for Germany to leave the European Union as they only support German interests, but oh, then Germans would not be able to buy property in France, Spain, Portugal, Poland, Greece. And since only 20% or so of the homes in Germany are owned by residents... I'll bet a month's pay that more German citizens own property outside of Germany than in Germany.
11
It has not been about a difference in attitudes, but a difference in political institutions. "Someone" has bought up the Right Wing in both areas, and is determined to deny all the evidence that Keynesian economic policies work.
As you point out, Extended Unemployment Insurance, Social Security, SNAP and the Stimulus (Such as it was) served as a transfer from the Federal Government to the most distressed regions. But some our Red States European experience, persisting in the "Faith Based" doctrine of cuts and punishment. Most Notably Kansas, persisting with the tax cut agenda, but most of the regulars here know about the others.
Here in Arkansas, dark money (The Democrats were outspent in the past election cycle around 6:1) means a Republican Governor and supermajority determined to cut taxes and budgets, instead of building the new prison we really need (2,400 inmates in county jails, waiting for prison space in an overcrowded system). Forget discussing alternatives, Medicaid expansion (The Private Option), early childhood education or maintaining a University Worthy of it's Football team.
One must ask, who gains the most from the low tax exploitation of the rest of us, and what can we as individuals do to stop it?
As you point out, Extended Unemployment Insurance, Social Security, SNAP and the Stimulus (Such as it was) served as a transfer from the Federal Government to the most distressed regions. But some our Red States European experience, persisting in the "Faith Based" doctrine of cuts and punishment. Most Notably Kansas, persisting with the tax cut agenda, but most of the regulars here know about the others.
Here in Arkansas, dark money (The Democrats were outspent in the past election cycle around 6:1) means a Republican Governor and supermajority determined to cut taxes and budgets, instead of building the new prison we really need (2,400 inmates in county jails, waiting for prison space in an overcrowded system). Forget discussing alternatives, Medicaid expansion (The Private Option), early childhood education or maintaining a University Worthy of it's Football team.
One must ask, who gains the most from the low tax exploitation of the rest of us, and what can we as individuals do to stop it?
29
The money which you retain from investment diminishes in value with time and can be used up by expenses to cover insufficient new money coming in but the money which you invest could be lost if the investment turns out poorly. What is good for the individual investor, retaining money until the risks are more acceptable, means slow growth for the economy if a huge proportion of the investors do the same. Europe was more afraid of losing than desirous of winning, and it ended up so risk averse that it let it's economy stagnate.
2
If Mr. Krugman was correct in the past about the benefits of a global economy and relaxed trade barriers would we not be at a stage in its development where deflation would be extremely unlikely regardless of the actions of central banks one way or the other? Yet here are the European economies, looking more and more like an old basketball with a slow leak. As shareholders, willing or otherwise, in the global economy when exactly is it we get our promised dividends? We have in the United States and Europe have essentially levied a tax on ourselves to provide revenue to expand the economies of China and India. In this game of economic jeopardy Mr. Krugman's constant reply is, "What is increased debt and taxes, Alex?" It is to laugh.
2
The USA has reaped significant dividends from the global economy. The only problem is that, within the USA, all of those dividends have gone to the top 10%. But anyone who wants to share those dividends is labeled a socialist promoting "class warfare".
63
GR...The US big profits from the global economy has gone to the top 10 %, and that is then applied to our congress in the form of campaign donations and subsidies. Both are profiting, as the number of millionaires in congress has increased greatly.
Any attempt to rebalance this in favor of the majority of salaried Americans is just labeled class warfare and redistribution--but it's the top few who are redistributing.
Btw Krugman is in favor of free trade, as he said in a blog the other day. Other advanced countries have ways of mitigating the bad effects of globalization on their citizens, but he never mentions these. It's time our liberal columnists explained this to Americans, as another way of doing globalization.
Any attempt to rebalance this in favor of the majority of salaried Americans is just labeled class warfare and redistribution--but it's the top few who are redistributing.
Btw Krugman is in favor of free trade, as he said in a blog the other day. Other advanced countries have ways of mitigating the bad effects of globalization on their citizens, but he never mentions these. It's time our liberal columnists explained this to Americans, as another way of doing globalization.
1
It is a question of timing. Do we protect decent wage jobs in this country now or must we wait on the investor class to profit by the off shoring of jobs and then harvest their profits through taxation? I agree income inequality is a problem. I disagree that a global economy is the solution because I believe a global economy by definition creates a transfer of income from the working poor to the investor class. Economies are like ecosystems, requiring a diversity of forms within them. If we allow capitalism to run amuk with low skill jobs constantly flowing across borders seeking the cheapest wages we inevitably concentrate wealth in the hands of the top earners. Free trade unrestrained is simply not compatible with income equality unless you view the government as a farmer harvesting a crop of off shore investments to feed a giant family. That is not a workable or socially desirable system.
1
Krugman is completely right that austerity has badly hurt Europe.
But he fails at uncovering the reasons for this behavior.
The real problem in the eurozone, is that questions of budgets and transfer payments haven't been resolved. Currently, debtors are completely unwilling to relinquish any part of their budget decisions, and creditors are unwilling to make transfer payments on an institutional basis. Obviously, both parts could only be resolved simultaneously. But that's not happening. Instead, we have constant hagling, minimum budgets, and grudging emergency payments. The project that was meant as the master stroke to unite Europe, is making it come apart.
But he fails at uncovering the reasons for this behavior.
The real problem in the eurozone, is that questions of budgets and transfer payments haven't been resolved. Currently, debtors are completely unwilling to relinquish any part of their budget decisions, and creditors are unwilling to make transfer payments on an institutional basis. Obviously, both parts could only be resolved simultaneously. But that's not happening. Instead, we have constant hagling, minimum budgets, and grudging emergency payments. The project that was meant as the master stroke to unite Europe, is making it come apart.
9
There's some truth to that, Stefan. But the problem is that someone has to make the first move, and it is so much easier for the creditor nations to do that. Sp, the utter inflexibility of Germany, by itself, is an impediment to saving the Euro.
9
In my opinion, there can be no "first move". Because if any side would move first, it would lose the leverage for the other half of the deal.
People are beginning to realize how useful floating currency exchange rates can be. "Internal devaluation" is a fantasy, and a dystopian one at that. People can live with foreign products becoming more expensive, but they can't live with a 20% paycheck cut out of the blue.
People are beginning to realize how useful floating currency exchange rates can be. "Internal devaluation" is a fantasy, and a dystopian one at that. People can live with foreign products becoming more expensive, but they can't live with a 20% paycheck cut out of the blue.
5
Stefan,
For most of Europe the Euro was always a "scam" to borrow more money by revaluing their assets upward through stating a new higher value in Euros. The plan was to replace the dollar as the international currency. That plan failed and then the market crashed! It's been all downhill for the Euro ever since.
The Swiss pulled the plug just prior to the European Central Bank announced QE, I wonder how they knew in advance? (not!) Germany and a few others will again be stuck with the check, though lower prices for the goods from Europe and higher prices for the goods from China will help things in the long run. That said balancing your budget on the backs of the poor is a bad idea wherever it is tried. Your social payments will buy about 20% less this year even if they remain the same!
The dollar of course was the really big winner because we can borrow lots more now and based on oil as something of "true worth" we just cut our debt in half!
This example of generating "wealth" out of air by national governments may be what finally makes people take an alternative international currency like "bitcoin" seriously to stop these games! Gold, in the past played that roll but became so debased from reality that the debasers stopped using it. Because even they couldn't explain currency values in terms of gold.
Today, they can't explain currency values period leading to the current mess!
For most of Europe the Euro was always a "scam" to borrow more money by revaluing their assets upward through stating a new higher value in Euros. The plan was to replace the dollar as the international currency. That plan failed and then the market crashed! It's been all downhill for the Euro ever since.
The Swiss pulled the plug just prior to the European Central Bank announced QE, I wonder how they knew in advance? (not!) Germany and a few others will again be stuck with the check, though lower prices for the goods from Europe and higher prices for the goods from China will help things in the long run. That said balancing your budget on the backs of the poor is a bad idea wherever it is tried. Your social payments will buy about 20% less this year even if they remain the same!
The dollar of course was the really big winner because we can borrow lots more now and based on oil as something of "true worth" we just cut our debt in half!
This example of generating "wealth" out of air by national governments may be what finally makes people take an alternative international currency like "bitcoin" seriously to stop these games! Gold, in the past played that roll but became so debased from reality that the debasers stopped using it. Because even they couldn't explain currency values in terms of gold.
Today, they can't explain currency values period leading to the current mess!
1
A bubble bursting is like a cherry-picker getting his cherry picked. Indeed it's painful. It hurt in 2007-2008. Hope is a fetish that somehow the debt invested is gonna pay off. But when Prince Charming never bothers paying a visit by showing up for all the confidence fairies flashed, hope fades. So we moved to seizures, forfeitures, bankruptcies, liquidation, securitization, loan bundling underwater stuff & plain old devaluation & slumps, etc... The debt market has its own bubbles. The sort of optimism that emerges out of that boring but unavoidable supply is kind of different though. Attitudes are duller, more tame. More disciplined too. Mostly experts, pro's with little prospects at making images that titillate our American dreamers.
The professor is a master at setting the mood for this evolved phase of our economic adventurism. For that he deserves another Nobel.
The professor is a master at setting the mood for this evolved phase of our economic adventurism. For that he deserves another Nobel.
2
What does this say about the wisdom of European economic unification? I'm not claiming to know; I'm asking. If there were "eighteen different answers" would the situation be less dire, more flexible?
1
Confusing....what about American states' unification? How unified are we as a nation? Where individual states have the right to set policy for social services. They must balance budgets. So the citizens' security vs poverty levels will vary starkly depending on geography, as will their health care and abortion rights.
Each state can decide on welfare, medical care, UI, union policy, education funding. Oh, and life and death matters like the death penalty.
Often in our history, the most conservative states have been able, through powerful committee heads in congress, to set policy for the nation--with a race to the bottom.
Many EU countries have federal policies consistent within their own nations, even if the sovereign nations vary widely from each other.
Each state can decide on welfare, medical care, UI, union policy, education funding. Oh, and life and death matters like the death penalty.
Often in our history, the most conservative states have been able, through powerful committee heads in congress, to set policy for the nation--with a race to the bottom.
Many EU countries have federal policies consistent within their own nations, even if the sovereign nations vary widely from each other.
8
Boehner et al, seem eager to
Revert to what Europeans do,
Tax cuts for the Rich,
To austerity switch,
A step in the end we'll all rue.
To make Government much much smaller
And billionaire bankrolls much taller,
Having starved the beast
Pay poor folk the least,
For fifty percent an appaller!
Revert to what Europeans do,
Tax cuts for the Rich,
To austerity switch,
A step in the end we'll all rue.
To make Government much much smaller
And billionaire bankrolls much taller,
Having starved the beast
Pay poor folk the least,
For fifty percent an appaller!
120
Calvin Trillin lives! Thanks!
Did you hear the one about the man from Nantucket?
1
We should keep in mind that had it been up to the honorable opposition, the Republicans, and certainly to the Tea Party faction of that party, the U.S. wouldn't be enjoying the meager advances we have enjoyed.
When Christina Romer wrote about stimulus in the NYTs in 2012 she pointedly challenged Conservative charges that sought to characterize what had been done, as well as its effects.
http://www.nytimes.com/2012/10/21/business/how-the-fiscal-stimulus-helpe...
The Europeans unfortunately for them, won't enjoy the full result of QE as we did in the U.S. Draghi was quite explicit about the need to continue austerity and to not use any of the $60 billion a month for spending.
Pity the children. Pity the unemployed. Pity the downtrodden, underemployed, and the hopeless. When Europe goes looking for causes of social unrest and the seedbeds for terrorism they need look no further than the powerful elite who impose austerity at all costs.
The fault lies in themselves and not in the stars.
.
When Christina Romer wrote about stimulus in the NYTs in 2012 she pointedly challenged Conservative charges that sought to characterize what had been done, as well as its effects.
http://www.nytimes.com/2012/10/21/business/how-the-fiscal-stimulus-helpe...
The Europeans unfortunately for them, won't enjoy the full result of QE as we did in the U.S. Draghi was quite explicit about the need to continue austerity and to not use any of the $60 billion a month for spending.
Pity the children. Pity the unemployed. Pity the downtrodden, underemployed, and the hopeless. When Europe goes looking for causes of social unrest and the seedbeds for terrorism they need look no further than the powerful elite who impose austerity at all costs.
The fault lies in themselves and not in the stars.
.
261
The Fed’s balance sheet is $4.5Trlllion. And the banks have Excess Reserves of $2.5Trillion parked at the Fed. So, how did the QEs benefit the US?
It did have a benefit; to the banksters. As has been said over and over, the rich are getting richer and everyone else is stagnating. Because of QE.
Why would anyone think that central banks buying up government debt, which is what QE is would help anyone but the governments? And their bankster cronies. Who rake in the vig.
It did have a benefit; to the banksters. As has been said over and over, the rich are getting richer and everyone else is stagnating. Because of QE.
Why would anyone think that central banks buying up government debt, which is what QE is would help anyone but the governments? And their bankster cronies. Who rake in the vig.
3
'Quantitative Easing money' was not used for spending. It did not increase the money supply -- it took non-liquid assets off of banks' books and replaced them with liquid assets.
That's one of the things the US needed. I don't know if that's what Europe needs, though.
That's one of the things the US needed. I don't know if that's what Europe needs, though.
1
John,
The "Fault" lies with the fact that there is somewhere else for the capital to flee to, like Switzerland and the U.S.! We are the only country that can get away with monetizing our debt through QE and not suffer devaluation, not Europe and not Russia as has just been demonstrated twice this year.
The "Why" is simple there is nowhere else for the capital to flee to YET! When there is it will flee from here just as fast leaving the mess for our children to clean up. Until that day all of you "deficit spending is not a problem" types are correct, we can spend as much as we can print, you're just digging a hole for our kids to deal with when there is a choice in that future time.
The "Fault" lies with the fact that there is somewhere else for the capital to flee to, like Switzerland and the U.S.! We are the only country that can get away with monetizing our debt through QE and not suffer devaluation, not Europe and not Russia as has just been demonstrated twice this year.
The "Why" is simple there is nowhere else for the capital to flee to YET! When there is it will flee from here just as fast leaving the mess for our children to clean up. Until that day all of you "deficit spending is not a problem" types are correct, we can spend as much as we can print, you're just digging a hole for our kids to deal with when there is a choice in that future time.
2
Paul, we have not had a “solid recovery” when most of the jobs created have been low-wage and part-time jobs, and 95% of all new income has gone to the top 1% since 2009. In addition, wages have stagnated or declined for many Americans during the past four decades.
A higher minimum wage will help to boost the wages of other income earners. The minimum wage in Australia is roughly $15.00-US for adults; workers receive an annual cost of living adjustment. As a result, the Australian median wage was roughly $52,000-US in 2011. The median wage in the US was only $28,013 in 2013.
How is it that the Aussies can afford to pay a living wage and provide good benefits, including universal healthcare? Business profits as a percentage of national income are 12.7% in Australia; profits in the U.S. are 20.4%.
Our middle class is shrinking and we have the highest rate of income and wealth inequality in the developed world. In addition to raising the minimum wage to a living wage, we need to rewrite our disastrous so-called free trade agreements (and Congress needs to vote “no” on the TPP). We need to strengthen labor legislation. We need to return to a progressive tax code and corporations need to pay their fair share of taxes. In the 50s, corporations paid 32% of federal revenue; today, it is only about 10%. And we need to make significant investments in our crumbling infrastructure, education, research, energy efficiency and clean energy, creating millions of good-paying jobs.
A higher minimum wage will help to boost the wages of other income earners. The minimum wage in Australia is roughly $15.00-US for adults; workers receive an annual cost of living adjustment. As a result, the Australian median wage was roughly $52,000-US in 2011. The median wage in the US was only $28,013 in 2013.
How is it that the Aussies can afford to pay a living wage and provide good benefits, including universal healthcare? Business profits as a percentage of national income are 12.7% in Australia; profits in the U.S. are 20.4%.
Our middle class is shrinking and we have the highest rate of income and wealth inequality in the developed world. In addition to raising the minimum wage to a living wage, we need to rewrite our disastrous so-called free trade agreements (and Congress needs to vote “no” on the TPP). We need to strengthen labor legislation. We need to return to a progressive tax code and corporations need to pay their fair share of taxes. In the 50s, corporations paid 32% of federal revenue; today, it is only about 10%. And we need to make significant investments in our crumbling infrastructure, education, research, energy efficiency and clean energy, creating millions of good-paying jobs.
600
Amen.
We need a progressive corporate income tax, to dissuade corporations from becoming larger and larger. Money in politics is the root of these evils.
It is going to take a lot more pain to fix this, and blood, nobody gives up the powers our oligarchs have accumulated without a nasty fight.
There will be a trigger sometime, it will come, as our path is clear, it's going to get worse. It's just when, not if, and the longer it takes to happen the harder will be the fall.
We need a progressive corporate income tax, to dissuade corporations from becoming larger and larger. Money in politics is the root of these evils.
It is going to take a lot more pain to fix this, and blood, nobody gives up the powers our oligarchs have accumulated without a nasty fight.
There will be a trigger sometime, it will come, as our path is clear, it's going to get worse. It's just when, not if, and the longer it takes to happen the harder will be the fall.
4
No, rolling back free trade just shrinks the pie. We need for the pie to be bigger; just not have the wealthy hog such a huge portion.
1
RLS.....'Business profits as a percentage of national income are 12.7% in Australia; profits in the U.S. are 20.4%.'
My god, why does Australian business put up with profits lower than the US? Don't they have rw parties like our Gop lobbying for them? What does their rw media have to say about this? Don't their rich political donors influence lawmakers to 'arrange' things in favor of business?
Don't they have a party vowing to dismantle universal h/c? and saying their higher min wage will destroy the economy? Where are all their anti tax, anti govt politicians? I read they passed strict gun safety laws there--guess they don't have America's independent spirit.
And I guess they don't value true 'freedom of speech' like our S. Court has equated with money. Think of the profits they're giving up. What a scandal.
Krugman is now on an Asian trip. He might stop by Australia, ask a few questions and report back.
My god, why does Australian business put up with profits lower than the US? Don't they have rw parties like our Gop lobbying for them? What does their rw media have to say about this? Don't their rich political donors influence lawmakers to 'arrange' things in favor of business?
Don't they have a party vowing to dismantle universal h/c? and saying their higher min wage will destroy the economy? Where are all their anti tax, anti govt politicians? I read they passed strict gun safety laws there--guess they don't have America's independent spirit.
And I guess they don't value true 'freedom of speech' like our S. Court has equated with money. Think of the profits they're giving up. What a scandal.
Krugman is now on an Asian trip. He might stop by Australia, ask a few questions and report back.
10
The European Community is ruled by a meritocracy, with the potential for theory to trump pragmatism and for elites to be out of touch with the rest of the population. The US does have a robust democratic process, despite its flaws, and lawmakers know that prosperity helps assure their re-election.
3
But the US lawmakers are overly concerned with campaign financing and do not heed the populace directly. They dance more for the moneyed to secure funds for re-elections (look at Adelson's and Koch's anointments and "primaries") than they respond to the conditions of their constituents. The disconnect is glaring. The waste expenditure of money in campaigns is second only to our waste expenditures in war and national security. Campaigns cost money as does national security, but both expenditures are now obscenely outsized and miss appealing to our better selves. The citizen is ill served.
108
So why is inequality in the US much higher than in europe, why is healthcare so expensive and inadequate, why is incarceration rate ten times higher than in europe ?
If you take out the top 1% of the society, many european countries have surpassed the US in wealth. If you take a look at the bottom 20%, US is a disgrace among the industrial nations.
All your observations about the US and Europe, we in europe believe it is exactly the other way around.
If you take out the top 1% of the society, many european countries have surpassed the US in wealth. If you take a look at the bottom 20%, US is a disgrace among the industrial nations.
All your observations about the US and Europe, we in europe believe it is exactly the other way around.
22
How does your theory explain the existence of Republicans?
9
If we're experiencing such a solid recovery, why are half of all American school children living in poverty? Why, as the wealthiest nation on earth, do we rank #21 in life expectancy and 25th in infant mortality out of the 30 nations surveyed in the Organization of Economic Cooperation and Development?
The USA is exceptional, all right. Based on Gini scale measurements, we are the most unequal country of them all. Of the 80 billionaires owning half the wealth of the entire world, nearly half are Americans. Wages continue to stagnate, while the salary of the average CEO is more than 300 times that of the average worker.
Austerity is relative. Europe has been slow on the stimulus uptake, but most of its citizens have a strong social safety net to fall back on: universal medical care, free education from K through college, extended vacation, paid sick and parental leave. In Greece, which has borne the brunt of the world banking cartel's punishing austerity, the people are taking matters into their own hands. Syriza, the new political party of the left, seems poised for victory.
Meanwhile, if PK really thinks that Obama's "feisty" SOTU song of himself is evidence of a solid recovery, then all I can say is that propaganda can work wonders when coming from a talented orator. The reality, though, is that too many of us are still in the economic doldrums. The Panglossian hype and hope are getting both stale and noxious. We're not that stupid.
http://kmgarcia2000.blogspot.com/
The USA is exceptional, all right. Based on Gini scale measurements, we are the most unequal country of them all. Of the 80 billionaires owning half the wealth of the entire world, nearly half are Americans. Wages continue to stagnate, while the salary of the average CEO is more than 300 times that of the average worker.
Austerity is relative. Europe has been slow on the stimulus uptake, but most of its citizens have a strong social safety net to fall back on: universal medical care, free education from K through college, extended vacation, paid sick and parental leave. In Greece, which has borne the brunt of the world banking cartel's punishing austerity, the people are taking matters into their own hands. Syriza, the new political party of the left, seems poised for victory.
Meanwhile, if PK really thinks that Obama's "feisty" SOTU song of himself is evidence of a solid recovery, then all I can say is that propaganda can work wonders when coming from a talented orator. The reality, though, is that too many of us are still in the economic doldrums. The Panglossian hype and hope are getting both stale and noxious. We're not that stupid.
http://kmgarcia2000.blogspot.com/
437
Let's be thankful for what the Obama administration accomplished in the face of determined Republican Confederacy of Dunces tactics attempting to ensure our economy failed as a way of making Obama and the Democrats fail. Their belief that a bird in the hand is better than two in the Bush should warn us of the depradations of a Bush III economic disaster.
39
Can I add here that while an emphasis on the middle class may be irreproachable, not all middle class issues are families-with-children issues. I have no problem with policies to support child care and education and so on, but the set of people who will be helped by child tax credits and new payment options for community college is not the full set of middle class people who need help, it seems to me. It feels as if the focus has narrowed to people whose lives fit a certain pattern.
123
Middle class people with children tend to be the ones with the biggest problems; and educating those children is the problem that has the biggest long-term return from finding a solution. There's a big difference between $60K split two ways, vs. four ways.
9
Looking at the Euro-zone, we can see what the situation in the U.S. would be if there were only about 18 states, all with their own heads of government, and all with debt denominated in different currencies, which the central bank was going to need to pick and choose from each state whose debt to buy during Quantitative Easing.
We wish them luck.
But YURP's situation is held back by the internal politics of each ' state ', and by manipulations in the more powerful countries to play the less powerful against each other, taking advantage of tendencies in human nature illustrated in literature by such books as The Lottery, The Oxbow Incident, Lord of the Flies, and recently, The Hunger Games.
There is no indication an ending to this game of manipulation has been thought out, certainly not an ending much cognizant of the recent centuries of YURPean history.
We wish them luck.
But YURP's situation is held back by the internal politics of each ' state ', and by manipulations in the more powerful countries to play the less powerful against each other, taking advantage of tendencies in human nature illustrated in literature by such books as The Lottery, The Oxbow Incident, Lord of the Flies, and recently, The Hunger Games.
There is no indication an ending to this game of manipulation has been thought out, certainly not an ending much cognizant of the recent centuries of YURPean history.
7
The difference in how we've come out of a Great Recession that hit both sides of the pond are stark. When we average out the first two years of the Obama administration with the next four, thanks to Republican obstruction, we ended up doing a bare minimum and not what we really needed. The price we are paying for that is a lost generation of middle aged and young workers who got caught up in the recession politics. Europe did what the Republicans would have done, had they still been in power. It could have been us!
Let's not forget that Republicans still will have a lot of influence over the next two years and what they do could derail our progress:
Take GOP Rep. Mc. Clintock of California: "During an appearance on C-SPAN’s Washington Journal, host Greta Brawner asked McClintock if he could get behind a presidential candidate like Mitt Romney, who is one of an increasing number of Republicans saying that the minimum wage should be at least $10.10 an hour.
But McClintock argued that raising the minimum wage would “rip the first rung in the ladder of opportunity for teenagers, for minorities, for people who are trying to get into the job market for their first job.”"
How many more Republicans like him in both houses? There are members who are still talking about bloated government and out of control spending, forced austerity could still be on the table.
http://www.rawstory.com/rs/2015/01/gop-rep-keep-minimum-wage-low-for-min...
Let's not forget that Republicans still will have a lot of influence over the next two years and what they do could derail our progress:
Take GOP Rep. Mc. Clintock of California: "During an appearance on C-SPAN’s Washington Journal, host Greta Brawner asked McClintock if he could get behind a presidential candidate like Mitt Romney, who is one of an increasing number of Republicans saying that the minimum wage should be at least $10.10 an hour.
But McClintock argued that raising the minimum wage would “rip the first rung in the ladder of opportunity for teenagers, for minorities, for people who are trying to get into the job market for their first job.”"
How many more Republicans like him in both houses? There are members who are still talking about bloated government and out of control spending, forced austerity could still be on the table.
http://www.rawstory.com/rs/2015/01/gop-rep-keep-minimum-wage-low-for-min...
226
Rima,
It was 1846 when Robert Peel's Conservative government fell because Peel wished to feed the starving Irish and the McClintocks left Peel because it conflicted with their economic and moral beliefs.
When Senator Paul talks he often invokes the economic philosophy of Adam Smith, when one looks at the history of the Irish starvation one finds out that while millions starved Ireland exported food that fed millions in Europe and the Americas.
Western economics is a religion and even as Smith's philosophy was responsible for the death of millions in the 1840s many understood the pre Darwin Darwinian Economics of the time as religion. Even then the Economist was a mainstay in determining that serving the economy was more important than maintaining life.
What you hear from today's GOP is the echo of the landlords of Ireland one hundred and seventy years ago. The attacks on welfare, immigrants and public education are no different now than they were when John Russell's Whigs oversaw the death of more than a million Irish peasants because it was an economic and moral imperative.
Canadian philosopher John Ralston Saul says we are finally at the end of the Age of Reason and I sincerely hope he is correct. Western economics is entirely reasonable unfortunately it is also anti human.
It was 1846 when Robert Peel's Conservative government fell because Peel wished to feed the starving Irish and the McClintocks left Peel because it conflicted with their economic and moral beliefs.
When Senator Paul talks he often invokes the economic philosophy of Adam Smith, when one looks at the history of the Irish starvation one finds out that while millions starved Ireland exported food that fed millions in Europe and the Americas.
Western economics is a religion and even as Smith's philosophy was responsible for the death of millions in the 1840s many understood the pre Darwin Darwinian Economics of the time as religion. Even then the Economist was a mainstay in determining that serving the economy was more important than maintaining life.
What you hear from today's GOP is the echo of the landlords of Ireland one hundred and seventy years ago. The attacks on welfare, immigrants and public education are no different now than they were when John Russell's Whigs oversaw the death of more than a million Irish peasants because it was an economic and moral imperative.
Canadian philosopher John Ralston Saul says we are finally at the end of the Age of Reason and I sincerely hope he is correct. Western economics is entirely reasonable unfortunately it is also anti human.
25
Jeb Bush can't take over soon enough and rid us of Obamacare. Watch our economy then soar.
3
Having a $15 minimum wage at taxpayer/society's expense, until if at all it's a substantial drag on the economy, for post teens who have paid 4 quarters of payroll tax may be the best first step to reverse the burgeoning inequality. This would entice inner-city youths to move away from petty crimes, eventually becoming a menace more to their own neighborhoods than elsewhere, and perpetuating racial prejudice. The ensuing reduction of expenses on the penal system will pay for the taxpayer expense to raise the minimum wage until the businesses can absorb the higher minimum wage.
Minimum wage was almost $11 in current dollars in 1968, when it was on an upward trajectory, since FDR managed to introduce first in the US in 1938. But then it stalled & then about reversed since the dawn of the current Reagan era. Despite progress in areas of gay rights women's rights and desegregation, the minimum wage was stuck in neutral and began its natural reverse course from inflation. We can't rely on organized bargaining by trade unions.
In 2014, despite Democrats took a shellacking, the minimum wage measure on the ballots passed in ALL states. We should have such ballot measures in as many states as possible in 2016 election. There is better than an even chance for that ballot measure to be successful.
Minimum wage was almost $11 in current dollars in 1968, when it was on an upward trajectory, since FDR managed to introduce first in the US in 1938. But then it stalled & then about reversed since the dawn of the current Reagan era. Despite progress in areas of gay rights women's rights and desegregation, the minimum wage was stuck in neutral and began its natural reverse course from inflation. We can't rely on organized bargaining by trade unions.
In 2014, despite Democrats took a shellacking, the minimum wage measure on the ballots passed in ALL states. We should have such ballot measures in as many states as possible in 2016 election. There is better than an even chance for that ballot measure to be successful.
8
When he is going to a conference Professor Krugman admits that many of these European elites that he is writing about now did some of their training in the Ivy leagues that he is a part of. Obviously they did not learn flexible or creative thinking while they were there. They probably were not exposed to many minorities or women as faculty who would have had different views of economics. Like many of his colleagues these elites failed upwards and did not experience long periods of unemployment or marginal employment that would have forced them to rethink their views. This is partly because they have a buddy system of recommendations for jobs which makes them the "obvious choice" for Fed Chair, World Bank head or Euro Bank #1 or whatever. If their policies fail they suffer no negative effects and probably will not even have an accurate bio written of their policy failures. The US is not multicultural in the same way. There are no blocks of stubborn Germans and risk adverse Latinos. Even bible country USA is more likely to have diverse views.
14
Thank goodness the "obvious choice for Fed Chair" this time was a woman!
3
Are you implying there's no similar buddy system in American corporations? Sure sounds like it.
7