"lesson for Republicans''?
This is comedy, not serious analysis...
This is comedy, not serious analysis...
25
So austerity is the problem. If only they could have borrowed more...
17
Amazing that this author received a Nobel Prize in Economics; on second thought, not so much.... The Greedy Lenders should've just let Greece fail. Where would "easy money" have come from? Certainly not "Easy Euros." Let Greece keep spending, print drachmas 'till the cows come home, and we'll see how they fare. My suspicion is that they'll become an Argentina. Keynsians will never let go, no matter how much evidence there is to the contrary.
16
Thank you Mr. Krugman. You always bring your talents to educate us when we are confused by those who only care about themselves.
I always read comments following your articles and I am grateful that you have such a large following. I am happy to be one of them
I always read comments following your articles and I am grateful that you have such a large following. I am happy to be one of them
29
"The secret of the demagogue is to make himself as stupid as his audience so that they believe they are as clever as he."
Is conservative media's ignorance of basic economics a Machievellian plot, or is it the result of too many decades of blind obedience to the "elite"?
A Fox Business contributer yesterday waving a sheet of paper with the Greek government's proposal's on air exclaimed, "A 23% tax on hotels?! What is Tsipras thinking? These socialists just don't understand business!"
Of course, even the most casual observer of this crisis knows that any new VAT tax hikes were required by creditors and Germany, and fought against by the Greek government, but such acknowledgement would mean that Germany is the lefty tax raising loon and Greece is pro business ... Can't have that narrative!
With such piercing political analysis by Fox News as, "Did evil grow, or did America shrink? Some experts say both!", and an intellectually incurious audience, it really doesn't take much effort to twist any reality into a preconceived narrative.
Rich is virtuous, poor is lazy. Owners are blessed, workers should be grateful. Austerity means growth, spending means debt.
Germany good, Greece bad.... That's all, folks, and Trump is surging in the polls.
Maybe America did shrink.
Is conservative media's ignorance of basic economics a Machievellian plot, or is it the result of too many decades of blind obedience to the "elite"?
A Fox Business contributer yesterday waving a sheet of paper with the Greek government's proposal's on air exclaimed, "A 23% tax on hotels?! What is Tsipras thinking? These socialists just don't understand business!"
Of course, even the most casual observer of this crisis knows that any new VAT tax hikes were required by creditors and Germany, and fought against by the Greek government, but such acknowledgement would mean that Germany is the lefty tax raising loon and Greece is pro business ... Can't have that narrative!
With such piercing political analysis by Fox News as, "Did evil grow, or did America shrink? Some experts say both!", and an intellectually incurious audience, it really doesn't take much effort to twist any reality into a preconceived narrative.
Rich is virtuous, poor is lazy. Owners are blessed, workers should be grateful. Austerity means growth, spending means debt.
Germany good, Greece bad.... That's all, folks, and Trump is surging in the polls.
Maybe America did shrink.
63
Welcome to the new world.
There is no such thing as a sovereign state so long as nations are beholden to multi-national banks. All policy is dictated by these masters of the universe, democratic will be damned. The TPP will bring America closer to that reality as well.
You may as well erase the political lines that arbitrarily separate nations - those are relics of the past.
Just color the sections of the world according to the large financial organization that runs them.
There is no such thing as a sovereign state so long as nations are beholden to multi-national banks. All policy is dictated by these masters of the universe, democratic will be damned. The TPP will bring America closer to that reality as well.
You may as well erase the political lines that arbitrarily separate nations - those are relics of the past.
Just color the sections of the world according to the large financial organization that runs them.
37
Those dastardly Republicans are "...blocking offsetting monetary easing"? It's been eased pretty well as much as possible for 6 years. What has that gotten us?
15
what we need is a way to tie our currencies value to something without limiting supply of the currency, and letting the market decide the value of it.
as is currently the norm in america, we have an infinite currency (all fiat currencies are infinite) and we are printing the hell out of it. however, we are only distributing it to a small section of the overall pop. so while printing more = increase supply = decrease value, the only people feeling it are the other 99%. i.e., if i have 20 units of X and there are 40 total and then all of a sudden the total supply gets doubled but you give me 20 more units then i dont really care what the individual value of each unit is, i have the same amount of wealth -- but, for those that recv'd nothing out of the new supply their total wealth is halved.
same goes for greece. eurozone prints doesnt let greece have any everyone else divies up their share while they have the same amount of things but those things are of lower val
tying your currency to gold or something like it is the same situation but everyone feels it -- and while social justice is needed id rather try to raise the std of living.
so what we need sounds impossible. but is it?
No. It is called bit-coin. it fits all of the things we need and allows everyone to personally control their money supply. it does this by setting a finite amount of total coins that will be issued EVER but allowing the currency to be infinitely divisible.
think through the benefits bitcoin.org
as is currently the norm in america, we have an infinite currency (all fiat currencies are infinite) and we are printing the hell out of it. however, we are only distributing it to a small section of the overall pop. so while printing more = increase supply = decrease value, the only people feeling it are the other 99%. i.e., if i have 20 units of X and there are 40 total and then all of a sudden the total supply gets doubled but you give me 20 more units then i dont really care what the individual value of each unit is, i have the same amount of wealth -- but, for those that recv'd nothing out of the new supply their total wealth is halved.
same goes for greece. eurozone prints doesnt let greece have any everyone else divies up their share while they have the same amount of things but those things are of lower val
tying your currency to gold or something like it is the same situation but everyone feels it -- and while social justice is needed id rather try to raise the std of living.
so what we need sounds impossible. but is it?
No. It is called bit-coin. it fits all of the things we need and allows everyone to personally control their money supply. it does this by setting a finite amount of total coins that will be issued EVER but allowing the currency to be infinitely divisible.
think through the benefits bitcoin.org
1
Hoping to divert some attention to the other crisis unraveling in the U.S.
Two very pertinent articles here:
Hedge Fund Vultures in Puerto Rico
http://hedgeclippers.org/hedgepapers-no-17-hedge-fund-billionaires-in-pu...
The Roots of Puerto Rico’s Debt Crisis—and Why Austerity Will Not Solve It
http://www.thenation.com/article/the-roots-of-puerto-ricos-debt-crisis-a...
Two very pertinent articles here:
Hedge Fund Vultures in Puerto Rico
http://hedgeclippers.org/hedgepapers-no-17-hedge-fund-billionaires-in-pu...
The Roots of Puerto Rico’s Debt Crisis—and Why Austerity Will Not Solve It
http://www.thenation.com/article/the-roots-of-puerto-ricos-debt-crisis-a...
3
" But Greece has nonetheless played an outsized role in U.S. political debate, as a symbol of the terrible things that will supposedly happen — any day now — unless we stop helping the less fortunate and printing money to fight unemployment. "
Those not so poor and unfortunate, as Dr. Krugman thinks we need to help, stayed above water financially just because they managed actually to help themselves, many times, against great odds. There is no reason to believe that people's economic welfare should not remain dependent at least to a small degree, on how they persevere against difficulties.
No one said life was supposed to be a 'bowl of cherries', except for economists with the 'rose tinted' glasses. And the adage 'God helps those who help themselves', did Dr. Krugman ever hear it?
Then, about "money to fight unemployment". It has not been proved spending money such as the way Dr. Krugman thinks, namely, via government, will fight unemployment at all. Have we seen any statistics to prove it can, and where it even works like claimed, when enormous debt and declining standard of living are a fact of life? The money instead goes almost instantly straight back, and then more too goes, as a bonus ... to the very rich companies and individuals who control the capital and the real estate in this country.
Those not so poor and unfortunate, as Dr. Krugman thinks we need to help, stayed above water financially just because they managed actually to help themselves, many times, against great odds. There is no reason to believe that people's economic welfare should not remain dependent at least to a small degree, on how they persevere against difficulties.
No one said life was supposed to be a 'bowl of cherries', except for economists with the 'rose tinted' glasses. And the adage 'God helps those who help themselves', did Dr. Krugman ever hear it?
Then, about "money to fight unemployment". It has not been proved spending money such as the way Dr. Krugman thinks, namely, via government, will fight unemployment at all. Have we seen any statistics to prove it can, and where it even works like claimed, when enormous debt and declining standard of living are a fact of life? The money instead goes almost instantly straight back, and then more too goes, as a bonus ... to the very rich companies and individuals who control the capital and the real estate in this country.
5
Yep PK is right; the lesson is to stop borrowing and spending. Thanks!
9
Austerity and trickle down economics are a lie put forth by the billionaires so they don't have to pay their taxes like they did in the Eisenhower years. When your beliefs are not backed up by fact, it is your faith. America's primary religion is worship of the rich. Their money is sacrosanct. Unfortunately, when you worship the golden calf, it requires human sacrifice.
25
Hmm, could that lesson be that you cannot spend more money than you bring in, and not pay it back?
14
“We’re Greece!”
The USA and Greece de-industrialized and relocated our industries that make products to foreign nations as required by the laws created by the US government in the last 20 years starting with NAFTA!
The USA and Greece no longer create much taxable wealth, but now mostly live off of money from the US treasury.
The recently industrialized (mostly Asian) nations are now creating new privately owned national taxable wealth and new manufacturing jobs for themselves in their nations as the USA did for US workers before President Clinton (and Professor Reich) signed NAFTA into law, and then granted Permanent Normal Trade Relation (PNTR) trade status to Communist China and other third world nations.
US citizens are selling (or letting the government mortgage as collateral for US treasury bonds) existing title to every privately owned national taxable wealth (businesses and real property) in the USA that was created by previous working generations of their citizens in order to pay for our government payrolls and other government services (plus our foreign made consumer products).
The US and EU governments are now borrowing privately owned taxable wealth (US Dollars and Euros) back from these taxable wealth creators in Asia to pay for US wealth consuming government services such as US payrolls, US government entitlements and other US government services that do not create any taxable wealth plus pay for our imported products!
The USA and Greece de-industrialized and relocated our industries that make products to foreign nations as required by the laws created by the US government in the last 20 years starting with NAFTA!
The USA and Greece no longer create much taxable wealth, but now mostly live off of money from the US treasury.
The recently industrialized (mostly Asian) nations are now creating new privately owned national taxable wealth and new manufacturing jobs for themselves in their nations as the USA did for US workers before President Clinton (and Professor Reich) signed NAFTA into law, and then granted Permanent Normal Trade Relation (PNTR) trade status to Communist China and other third world nations.
US citizens are selling (or letting the government mortgage as collateral for US treasury bonds) existing title to every privately owned national taxable wealth (businesses and real property) in the USA that was created by previous working generations of their citizens in order to pay for our government payrolls and other government services (plus our foreign made consumer products).
The US and EU governments are now borrowing privately owned taxable wealth (US Dollars and Euros) back from these taxable wealth creators in Asia to pay for US wealth consuming government services such as US payrolls, US government entitlements and other US government services that do not create any taxable wealth plus pay for our imported products!
8
The reality is that the economic track record of Presidents since 1928 puts a lie to the idea that the Conservatives know squat about running an economy. Wrong on the facts, wrong on the policy that is todays Cons.
9
http://www.tradingeconomics.com/greece/government-spending-to-gdp Government spending in Greece was last recorded at 59.2 percent of GDP in 2013.
http://www.tradingeconomics.com/greece/government-spending-to-gdp
Government spending at the start of the 20th century was less than 7 percent of GDP. It vaulted to almost 30 percent of GDP by the end of World War I, and then settled down to 10 percent of GDP in the 1920s. In the 1930s spending doubled to 20 percent of GDP. Defense spending in World War II drove overall government spending over 50 percent of GDP before declining to 22 percent of GDP in the late 1940s. The 1950s began a steady spending increase to about 36 percent of GDP by 1982. In the 1990s and 2000s government spending stayed about constant at 33-35 percent of GDP, but in the aftermath of the Crash of 2008 spending has jogged up to 40 percent of GDP.
From http://www.greece.org/poseidon/work/articles/polemis_one.html
“After the Second World War, the Greek government gave certain guarantees, so that 100 Liberty Ships and 7 T2 Tankers could be given to Greek owners. This was the beginning of the latest re-vitalization of the Greek merchant marine, and in the 30 or so years that followed, they reached the highest peak yet in their very long maritime history of almost 5,000 ships of 52,000,OPO gross in 1977 or 4,750 ships of over 54,000,000 gross tons in 1981, the largest fleet in the world. A magnificent achievement indeed.”
http://www.tradingeconomics.com/greece/government-spending-to-gdp
Government spending at the start of the 20th century was less than 7 percent of GDP. It vaulted to almost 30 percent of GDP by the end of World War I, and then settled down to 10 percent of GDP in the 1920s. In the 1930s spending doubled to 20 percent of GDP. Defense spending in World War II drove overall government spending over 50 percent of GDP before declining to 22 percent of GDP in the late 1940s. The 1950s began a steady spending increase to about 36 percent of GDP by 1982. In the 1990s and 2000s government spending stayed about constant at 33-35 percent of GDP, but in the aftermath of the Crash of 2008 spending has jogged up to 40 percent of GDP.
From http://www.greece.org/poseidon/work/articles/polemis_one.html
“After the Second World War, the Greek government gave certain guarantees, so that 100 Liberty Ships and 7 T2 Tankers could be given to Greek owners. This was the beginning of the latest re-vitalization of the Greek merchant marine, and in the 30 or so years that followed, they reached the highest peak yet in their very long maritime history of almost 5,000 ships of 52,000,OPO gross in 1977 or 4,750 ships of over 54,000,000 gross tons in 1981, the largest fleet in the world. A magnificent achievement indeed.”
6
And the American "right" will be claiming its austerity policies are somehow "faith-based."
9
The Greek NO referendum vote means that the Greek government was directed to not accept any additional loaned Euros along with the Austerity conditions required to make the Greek economy viable as needed for paying its payrolls and other Greek obligations with Euros.
The Greek Government will now have to cut the amounts of all government employee, pensioner, elected official and bureaucrat’s paychecks each month. Maybe a 50% reduction of each Greek Government paycheck each month is required until the government expenses are sufficiently less that the Greek government tax collections as required to make the Greek Government able to meet the Greek Government’s international financial obligations and then to also pay the Greek citizen's paychecks with the remaining money!
Greek Government contractors will probably have to default when the Greek government defaults on their contract obligations and stop providing whatever they contracted with the Greek government in Euros to provide.
The Greek Government will probably decide to buy some paper and print a whole lots of new paper Drachmas and declare this to be the national currency valid for all financial transactions in Greece with one Drachma equal to one Euro.
Each Greek citizen might be allowed to exchange ONLY one Greek Drachma for one Euro ONLY one time per month.
Government paychecks for 1,000 Euros would then be issued for 1,000 Drachmas.
The Greek Government will now have to cut the amounts of all government employee, pensioner, elected official and bureaucrat’s paychecks each month. Maybe a 50% reduction of each Greek Government paycheck each month is required until the government expenses are sufficiently less that the Greek government tax collections as required to make the Greek Government able to meet the Greek Government’s international financial obligations and then to also pay the Greek citizen's paychecks with the remaining money!
Greek Government contractors will probably have to default when the Greek government defaults on their contract obligations and stop providing whatever they contracted with the Greek government in Euros to provide.
The Greek Government will probably decide to buy some paper and print a whole lots of new paper Drachmas and declare this to be the national currency valid for all financial transactions in Greece with one Drachma equal to one Euro.
Each Greek citizen might be allowed to exchange ONLY one Greek Drachma for one Euro ONLY one time per month.
Government paychecks for 1,000 Euros would then be issued for 1,000 Drachmas.
1
It appears that more needs to be done to improve Greece's economy other than easy money and reducing debt. Greece does not have as large an industrial base as other parts of Europe. The European Union should encourage industries in other parts of Europe to relocate to Greece to take advantage of lower labor costs. This would provide a more uniform economy and social stability in Europe without pockets of unemployment and financial difficulties.
4
Why did the Greek industries (ship building, etc.) leave the Greek Nation?
3
Its not the economy its the prejudice against "those lazy Greeks'. They play while we work! they are takers from we givers! This Northern Europe attitude against the South is at play. It is similar to our split between the North and South. Most welfare occurs in the South, more uninsured, less school results etc. This split is similar to Europe and this prejudice is a big part of not being able to come to a solution.
7
What about unemployment? Bloated social programs and pensions? Tax evasion by its citizens?
Creditors demands and easy money certainly accelerated the crisis they find themselves, but the lesson here is fiscal discipline (both micro and macro), and self-reliant and working population. Republicans already preach this.
There is a certain degree of absurdity here comparing Greece to the U.S. Mr. Krugman's critiques of Republicans is a childish list of bumper-sticker politics, well below what I would expect from an esteemed economist.
Creditors demands and easy money certainly accelerated the crisis they find themselves, but the lesson here is fiscal discipline (both micro and macro), and self-reliant and working population. Republicans already preach this.
There is a certain degree of absurdity here comparing Greece to the U.S. Mr. Krugman's critiques of Republicans is a childish list of bumper-sticker politics, well below what I would expect from an esteemed economist.
9
Krugman's Canadian analogy is somewhat weak and actually highlights how much support Greece has received from the EU. Austerity arrived in Canada during the Tequila crisis of early 1995, when the public realized how fiscal deficits made the country vulnerable to international crises. Interest rates jumped significantly during the crisis, and monetary loosening only became possible when the Canadian govt convinced world markets in mid-1995 that it could get public finances under control.
Greece, on the other hand, has been insulated from the markets due to the euro and ECB/EU creditor action. At the cost of German-imposed austerity, Greeks did not experience the anxiety of a plummeting currency. Perhaps as a result, there was no public consensus to support fiscal austerity, unlike in Canada.
Canada did benefit from a highly favorable world economy, especially the boom in the U.S., which boosted exports. The Asian crisis hit Canada hard when commodity prices collapsed in 1998, but by then, the fiscal adjustment was complete. Greece faces a much tougher external environment, although the Arab Spring helped Greek tourism enjoy a record year in 2014.
What lessons to draw from Canada? To me, it's that loose monetary policy is critical, but only if international markets don't lose confidence in your country and currency. The U.S. is far from that point, but it's an important goalpost to keep in mind -- especially when politicians play games like the U.S. debt default in 2011.
Greece, on the other hand, has been insulated from the markets due to the euro and ECB/EU creditor action. At the cost of German-imposed austerity, Greeks did not experience the anxiety of a plummeting currency. Perhaps as a result, there was no public consensus to support fiscal austerity, unlike in Canada.
Canada did benefit from a highly favorable world economy, especially the boom in the U.S., which boosted exports. The Asian crisis hit Canada hard when commodity prices collapsed in 1998, but by then, the fiscal adjustment was complete. Greece faces a much tougher external environment, although the Arab Spring helped Greek tourism enjoy a record year in 2014.
What lessons to draw from Canada? To me, it's that loose monetary policy is critical, but only if international markets don't lose confidence in your country and currency. The U.S. is far from that point, but it's an important goalpost to keep in mind -- especially when politicians play games like the U.S. debt default in 2011.
6
All government economic capability and resources are (only) created by confiscating taxable wealth from the greedy wealth-producing individuals in the that politically controlled (nation, state, city, school district, etc.) area via taxation, while government spending does not create any new taxable national wealth in any politically controlled area.
The US government has destroyed most all of the US Wealth Creating capability by creating the Free Trade Agreements, MFNs, and PNTRs in the last 20 years, starting with NAFTA!
The US government has destroyed most all of the US Wealth Creating capability by creating the Free Trade Agreements, MFNs, and PNTRs in the last 20 years, starting with NAFTA!
2
The majority of the Greek People are wealth consumers, living directly or indirectly off of Greek government payments or Greek government contracts, and these people do not create any new Taxable Wealth in the Greek nation!
Maybe Greece should become industrialized and make widgets, then Greek businesses could make and then sell enough widgets to others outside of Greece so that Greece can accumulate enough privately held profit and taxable wealth to enable the Greeks to buy the other things that Greece needs from other nations that produce those other things (food, shelter, clothing, etc.) that the Greek people consume.
Then hopefully Greece will then have created enough taxable wealth to have some available for government confiscation to pay for Greek government services and future Greek government emergencies without the Greek government borrowing any more money.
Or Greece can continue to live on credit cards except that the lenders of real wealth have stopped increasing the Greek credit card charge limit.
Maybe Greece should become industrialized and make widgets, then Greek businesses could make and then sell enough widgets to others outside of Greece so that Greece can accumulate enough privately held profit and taxable wealth to enable the Greeks to buy the other things that Greece needs from other nations that produce those other things (food, shelter, clothing, etc.) that the Greek people consume.
Then hopefully Greece will then have created enough taxable wealth to have some available for government confiscation to pay for Greek government services and future Greek government emergencies without the Greek government borrowing any more money.
Or Greece can continue to live on credit cards except that the lenders of real wealth have stopped increasing the Greek credit card charge limit.
1
Odd that the professor skipped the main reason Greece got into financial trouble at the outset, irregardless of its subsequent inability to achieve redress:
- Profligate entitlement spending
- Ridiculous Early Retirement and Pension policies
- Bloated, inefficient Civil Service
- Abject inability to assure tax collection.
- Corrupt Union - Politician political favors loop
Given that these are clearly tendencies of the Political Left, ie, aligned with core behaviors and principles of the US Democratic party, which pole of the US political spectrum should better be heeding the lesson of Greece's Economy?
- Profligate entitlement spending
- Ridiculous Early Retirement and Pension policies
- Bloated, inefficient Civil Service
- Abject inability to assure tax collection.
- Corrupt Union - Politician political favors loop
Given that these are clearly tendencies of the Political Left, ie, aligned with core behaviors and principles of the US Democratic party, which pole of the US political spectrum should better be heeding the lesson of Greece's Economy?
9
1. Irregardless is not a word.
2. Liberals support a decent retirement at a humane age. Big difference between "ridiculous early" and decent.
3. Food programs for children and the elderly should hardly be called profligate entitlement spending. Still, conservatives feel the need to slash them.
4. Since when do we equate corrupt union with liberal viewpoints?
Have you no mirror, sir?
We do not have Greece's problems, but you seem intent on fixing imaginary problems to the detriment of the vast majority of our citizens.
2. Liberals support a decent retirement at a humane age. Big difference between "ridiculous early" and decent.
3. Food programs for children and the elderly should hardly be called profligate entitlement spending. Still, conservatives feel the need to slash them.
4. Since when do we equate corrupt union with liberal viewpoints?
Have you no mirror, sir?
We do not have Greece's problems, but you seem intent on fixing imaginary problems to the detriment of the vast majority of our citizens.
5
In Greece, the greedy financial predators don't care about the country or it's people.
In the United States, the greedy financial predators don't care about the country or it's people.
The Republican Party in this country is a business that only cares about it's "shareholders"- the 1%.
We need to first go after the people who, along with their practices, crashed the world economy.
We shouldn't even be talking about Greece until we root out the source of the problem.
In the United States, the greedy financial predators don't care about the country or it's people.
The Republican Party in this country is a business that only cares about it's "shareholders"- the 1%.
We need to first go after the people who, along with their practices, crashed the world economy.
We shouldn't even be talking about Greece until we root out the source of the problem.
9
Greece also has lessons on tax evasion for the U.S., a country where 300,000 have more more wealth than 300 million in a world where 300 individuals have more wealth than the bottom 3.5 billion.
Economies can't grow when they've been eviscerated by parasitic plutocrats expropriating all to themselves, including politicians, and demand collapses when billionaire-owned pols think it's fun to kick hungry children.
Under parasitic plutocracy, tax evasion becomes both art and necessity so that taxes fall on the stinking, repulsive masses and not on the class of gods.
When tax evasion became near universal in Italy, including a majority of the finance ministry personnel, the Italian government borrowed from the cheats. Syriza has not yet done enough to pursue cheats, while the UK is tax evasion central from the Channel Islands to the Cayman Islands.
It is time for a 50 per cent tax on the worldwide wealth of the 0.1 per cent. The penalty for evasion should be a 100 per cent confiscation of all wealth from all who furthered the evasion.
The Kochs' net worth grows by a billion a month, enough to corrupt all American politics, as they pump out a monthly 2 million tonnes of planet killing greenhouse gases. The wealth tax would take only $50 billion from them, an excessively restrained "haircut".
Economies can't grow when they've been eviscerated by parasitic plutocrats expropriating all to themselves, including politicians, and demand collapses when billionaire-owned pols think it's fun to kick hungry children.
Under parasitic plutocracy, tax evasion becomes both art and necessity so that taxes fall on the stinking, repulsive masses and not on the class of gods.
When tax evasion became near universal in Italy, including a majority of the finance ministry personnel, the Italian government borrowed from the cheats. Syriza has not yet done enough to pursue cheats, while the UK is tax evasion central from the Channel Islands to the Cayman Islands.
It is time for a 50 per cent tax on the worldwide wealth of the 0.1 per cent. The penalty for evasion should be a 100 per cent confiscation of all wealth from all who furthered the evasion.
The Kochs' net worth grows by a billion a month, enough to corrupt all American politics, as they pump out a monthly 2 million tonnes of planet killing greenhouse gases. The wealth tax would take only $50 billion from them, an excessively restrained "haircut".
10
Krugman wants it both ways even though he doesn't admit to that: Easy money AND more debt. He ignores the premise that easy money has allowed the government to pile on more debt. The FED needs to make the continuation of easy money contingent upon a tougher line on deficits. Fiscal policy pales in significance as a stimulant for growth compared to business investment and capital formation, both of which would raise living standards with higher productivity and more middle class income. And by the way, such growth would increase tax revenues as well, reducing the deficit without austerity. Krugman is just too politicized himself to provide such rational economic thought to his readers.
3
Greece teaches a simpler and far more important lesson than the one Paul Krugman has chosen to highlight. That is, governments and unions can over promise. And, while borrowing can maintain the facade for a while, the bills will eventually come due.
And what follows is totally predictable: Crying and gnashing of teeth from those who voted themselves these benefits and a complete unwillingness to give them up.
And what follows is totally predictable: Crying and gnashing of teeth from those who voted themselves these benefits and a complete unwillingness to give them up.
5
I hope the Greeks take the same tact as the Icelanders, whose PM decided he had to choose between the companies and the people. He chose the people.
The Greeks will do just fine without the Euro. Reforms can be put in place a fair tax system wherein the taxes are actually collected, and the Greeks can move on.
The big banks who thought they could eke out slightly higher returns on Greek loans? Sorry fellas, the gig's up.
The Greeks will do just fine without the Euro. Reforms can be put in place a fair tax system wherein the taxes are actually collected, and the Greeks can move on.
The big banks who thought they could eke out slightly higher returns on Greek loans? Sorry fellas, the gig's up.
3
From the article today: " But Greece has nonetheless played an outsized role in U.S. political debate, as a symbol of the terrible things that will supposedly happen — any day now — unless we stop helping the less fortunate and printing money to fight unemployment. "
So Dr. Krugman thinks we need to help "the less fortunate". Where is human charity anymore to help them, when the churches are being beseiged today by new rules that restrict them from expressing right to practice religion as they see it?
And, he disregards fact many not so poor, have managed to stay above water financially, just because they tried hard to help themselves, against all odds. A person's economic welfare should remain dependent at least a little, on how he/she perseveres against difficulties.
Did Dr. Krugman ever hear the adage 'God helps those who help themselves' ?
Then, about "money to fight unemployment".
It has not been proved spending money such as the way Dr. Krugman thinks, namely, via government, will reduce unemployment at all. Have we seen any statistics to prove it works like claimed, when there is enormous debt and declining standard of living ?
The money instead goes back, within days or weeks, plus added 'carrying charges' ... to the very rich companies and individuals who control the capital and the real estate in this country. Then continuing 'interest charges' keep being applied upon the U.S. economy.
So Dr. Krugman thinks we need to help "the less fortunate". Where is human charity anymore to help them, when the churches are being beseiged today by new rules that restrict them from expressing right to practice religion as they see it?
And, he disregards fact many not so poor, have managed to stay above water financially, just because they tried hard to help themselves, against all odds. A person's economic welfare should remain dependent at least a little, on how he/she perseveres against difficulties.
Did Dr. Krugman ever hear the adage 'God helps those who help themselves' ?
Then, about "money to fight unemployment".
It has not been proved spending money such as the way Dr. Krugman thinks, namely, via government, will reduce unemployment at all. Have we seen any statistics to prove it works like claimed, when there is enormous debt and declining standard of living ?
The money instead goes back, within days or weeks, plus added 'carrying charges' ... to the very rich companies and individuals who control the capital and the real estate in this country. Then continuing 'interest charges' keep being applied upon the U.S. economy.
1
The United States is so big, powerful, and stable that it has never had an economic crisis for which it's ability to create wealth has been overwhelmed for more than a single decade under the worst conditions and usually recovers in less that two or three years. Furthermore, while it stopped increasing it's industrial capacities at the rates that it had from the Civil War to the early 1970's it has still managed to retain it's awesome dominance of wealth creation in the world no matter what politicians, bubbles, and mishandled finances (public and private) have done to destroy trillions of dollars of wealth over the centuries. Besides the U.S. economy, Greece's is tiny and too weak to recover from even relatively small set backs. Comparing U.S. finances to Greece's is just not possible, it's like comparing a model airplane to a huge 747 airliner -- some principles are a like but one can fly around the world while the other cannot cross one mountain range.
4
Loaning the Greek Government more money to hand out to Greek government bureaucrats, retirees, contractors, police, firefighters, and other government employees will never solve the Greek Nation's Economic Viability problem!
Only the private businesses wealth creation activities in any nation creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary (almost the only) source of funds to be confiscated by governments through taxes to pay for any and all wealth consuming government services.
Government expenditures only consume a nation's taxable wealth and does not create any new taxable wealth, except under the Socialist/Communist forms of government.
Government Contracts paid with money from the taxpayers to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers, only consume taxable national wealth, and do not create national 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, those activities just consume national wealth that was created by other citizens who created new national wealth that was then confiscated by the government to pay for those government services!
The majority of the working citizens in every nation cannot just live off of and get their paychecks from the money collected by the government from the taxpayers plus borrowed government money?
Only the private businesses wealth creation activities in any nation creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary (almost the only) source of funds to be confiscated by governments through taxes to pay for any and all wealth consuming government services.
Government expenditures only consume a nation's taxable wealth and does not create any new taxable wealth, except under the Socialist/Communist forms of government.
Government Contracts paid with money from the taxpayers to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers, only consume taxable national wealth, and do not create national 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, those activities just consume national wealth that was created by other citizens who created new national wealth that was then confiscated by the government to pay for those government services!
The majority of the working citizens in every nation cannot just live off of and get their paychecks from the money collected by the government from the taxpayers plus borrowed government money?
1
All nations, including Greece, should return to basic economic principles and realize/understand that non-government jobs for the working class citizens and privately held taxable national wealth available to be confiscated to pay for common wealth consuming government services are only made, created, and/or acquired when the members of a family or the citizen businessmen of a nation, state, city, island, tribe, school district, hospital district, etc., perform one or more of the following wealth creating tasks:
1. Plant, grow, and/or harvest something of commercial value from the earth;
2. Extract something of commercial value from the earth;
3. Manufacture something of commercial value that is consumable;
4. Construct a building that is permanently useful for rental income;
5. Tourism income from foreign tourists;
6. Provide professional State licensed services such as doctors, lawyers, architects, engineers, land surveyors, and certified public accountants, etc.;
7. Provide other services such as plumbers, electricians, auto mechanics, aircraft mechanics, HVAC mechanics, barbers, real estate agents, financial advisers and etc.;
8. Collect payment for patent and copyright use;
9. Buy things from foreigners in foreign nations, transport them to another foreign nation, and then sell those things to people in that other foreign nation at a profit;
1. Plant, grow, and/or harvest something of commercial value from the earth;
2. Extract something of commercial value from the earth;
3. Manufacture something of commercial value that is consumable;
4. Construct a building that is permanently useful for rental income;
5. Tourism income from foreign tourists;
6. Provide professional State licensed services such as doctors, lawyers, architects, engineers, land surveyors, and certified public accountants, etc.;
7. Provide other services such as plumbers, electricians, auto mechanics, aircraft mechanics, HVAC mechanics, barbers, real estate agents, financial advisers and etc.;
8. Collect payment for patent and copyright use;
9. Buy things from foreigners in foreign nations, transport them to another foreign nation, and then sell those things to people in that other foreign nation at a profit;
Professor Krugman's remarks about Canada's interest rates in the 1990s are a bit misleading. Interest rates fell primarily because inflation in Canada fell in the 1990s, as it did in much of the rest of the world, and the Bank of Canada operates with a targeted inflation rate of 2% and uses interest rates to hit that target. That's all the chart he cites shows. What is true is that the Canadian government had no interest in urging the Bank of Canada to prop up the dollar with interest rates higher than were necessary to approximate that target.
Professor Krugman is quite right that a low value currency has benefits in increasing exports of goods priced in that currency and increasing tourism ad Greece's participation in the Euro prevents it from enjoying those benefits and is probably a mistake.
However a low value currency also has negative effects for smaller economies as well that are worth noting. One is a "brain drain" of highly qualified people to place with higher valued currencies. Another is the high cost of imported equipment necessary for modernizing production and increasing productivity. Smaller economies, unlike the US, simply can't produce the variety of equipment necessary for their manufacturing and resource industries. That's why, for example, one of the biggest markets for big machines made by Caterpillar in Illinois and the US were the Alberta oilsands.
Professor Krugman is quite right that a low value currency has benefits in increasing exports of goods priced in that currency and increasing tourism ad Greece's participation in the Euro prevents it from enjoying those benefits and is probably a mistake.
However a low value currency also has negative effects for smaller economies as well that are worth noting. One is a "brain drain" of highly qualified people to place with higher valued currencies. Another is the high cost of imported equipment necessary for modernizing production and increasing productivity. Smaller economies, unlike the US, simply can't produce the variety of equipment necessary for their manufacturing and resource industries. That's why, for example, one of the biggest markets for big machines made by Caterpillar in Illinois and the US were the Alberta oilsands.
What you write today is the truth but I doubt that the lessons that you teach are not accepted by America's well-off elites. The GOP & the Democratic party are not stupid, they personally believe what you & other distinguished economists are saying about debt, interest rates, & inflation.
The myopic views of the agenda-setters, most being very wealthy, or belonging to an industry that contributes to their wealth, is that they must keep the pressure on elected officials at the local, state, and federal level to treat their interests favorably in regulations in protecting their interests & constraining the their competitors. They seek preferential tax treatment & know that they can buy favorble tax preferences by donating a minor percentage of their gain from tax preferences & regulatory rigging. In short we are swiftly drifting to an oligarchy of monopoly seeking interests. The record of the opposition to Obamacare is but a sample.
The US form of "free market" capitalism has taken its toll on the economy, and its shows in our education, healthcare, environment & our aging, unsafe transport system, in which, the richest Nation in history is killing 33,000 Americans per year and injuring more than 2 million, at a cost of almost 1 Trillion dollars, annually. The public, politicians, & media should be up in arms, & taking every action they could to stop it. Instead, the Congress cannot agree on a long-term transportation plan to augment the Interstates with Maglev.
The myopic views of the agenda-setters, most being very wealthy, or belonging to an industry that contributes to their wealth, is that they must keep the pressure on elected officials at the local, state, and federal level to treat their interests favorably in regulations in protecting their interests & constraining the their competitors. They seek preferential tax treatment & know that they can buy favorble tax preferences by donating a minor percentage of their gain from tax preferences & regulatory rigging. In short we are swiftly drifting to an oligarchy of monopoly seeking interests. The record of the opposition to Obamacare is but a sample.
The US form of "free market" capitalism has taken its toll on the economy, and its shows in our education, healthcare, environment & our aging, unsafe transport system, in which, the richest Nation in history is killing 33,000 Americans per year and injuring more than 2 million, at a cost of almost 1 Trillion dollars, annually. The public, politicians, & media should be up in arms, & taking every action they could to stop it. Instead, the Congress cannot agree on a long-term transportation plan to augment the Interstates with Maglev.
3
Goldman Sachs played a quite substantial role in the first act of the this Greek Tragedy debacle as well with its so-called financial engineering. http://www.bloomberg.com/news/articles/2012-03-06/goldman-secret-greece-...
And I wonder why the German and French bankers don't simply issue bonds whose terms require the funds be used for infrastructure and tax collection resources. That's the best way to help the Greeks help themselves and grow GDP so that they can repay their debts.
And I wonder why the German and French bankers don't simply issue bonds whose terms require the funds be used for infrastructure and tax collection resources. That's the best way to help the Greeks help themselves and grow GDP so that they can repay their debts.
3
True.
The focus is on getting blood from a rock rather than finding a real solution to the problem at hand.
Out of control greed is at the core of the current "solution".
The focus is on getting blood from a rock rather than finding a real solution to the problem at hand.
Out of control greed is at the core of the current "solution".
4
The Republicans and conservatives have tunnel vision, they see risks of losing their money from investing much of it in the real economy right now and of losing much of it if taxes are raised to allow government to use it to generate more economic activity while ignoring all the lost potential for new wealth in generating a lot of new economic activities by using government projects and programs. If Germany's economy depended upon Greek markets, the effects of austerity would have left the Germans weeping for their own recession instead of acting so arrogantly towards the Greeks. We already are suffering from slow growth of demand because of the stifled purchasing power of American consumers from stagnant wage and salaries while the wealthiest individuals and businesses save their accumulating wealth for better opportunities than the American domestic economy can offer. Lowering taxes where incomes are not going to increase just increases national debt because of falling revenues but Republicans are more concerned with their personal incomes and debt than with those of the nations. That is why they refuse to take actions to increase economic expansion and insist upon imposing austerity which will constrain national spend through the government even though it will continue to make new investments to the U.S. economy unattractive.
4
Your operating assumption, Mr. Krugman, is that the Greeks do business in a straightforward way, like everyone else; that a majority of taxpayers do not conceal income and do not, if challenged by the authorities, engage in protracted legal proceedings to delay paying the inevitable tax obligation for as long as humanly possible; that clientelism and social networks do not influence judicial decisions, or inhibit entrepreneurship. In fact, the Greeks are themselves victims of a convoluted economic architecture not unlike those of Japan or even Russia, where being given a highly prized toehold on the lowest rung of commercial activity only happens if you pay tribute & belong to the correct clan structure. The big difference, of course, is that both Russia and Japan have something to sell, lots of it, whereas Greeks export very little. They need to loosen up their own woodwork desperately, and cut away all the dead bits that simply don't perform.
2
From The Lancet http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(15)61226-...
"The recession and crippling austerity measures imposed on the country in the first rescue package in 2010, including cuts to social welfare and health, have damaged the health of the Greek people. The effects include increased rates of child poverty and undernutrition, HIV among those who inject drugs, suicides and suicide attempts, and stillbirths. Other health indicators might well worsen. To reduce costs, cancer screening has been cut and the management of cancer, as with many other disorders, has suffered from serious drug and medical shortages. Many Greeks who have lost their jobs have also lost the health insurance that came with them. Health-care costs that have been passed to patients through various health charges present barriers to accessing care."
"The recession and crippling austerity measures imposed on the country in the first rescue package in 2010, including cuts to social welfare and health, have damaged the health of the Greek people. The effects include increased rates of child poverty and undernutrition, HIV among those who inject drugs, suicides and suicide attempts, and stillbirths. Other health indicators might well worsen. To reduce costs, cancer screening has been cut and the management of cancer, as with many other disorders, has suffered from serious drug and medical shortages. Many Greeks who have lost their jobs have also lost the health insurance that came with them. Health-care costs that have been passed to patients through various health charges present barriers to accessing care."
5
When is a dollar of government spending stimulative, and when not? US government spending in total is massively stimulating, and has never gone down. Is such stimulative spending working?
In Greece, how about: business creates product and sells for a profit, with very low taxes. That would be stimulative.
In Greece, how about: business creates product and sells for a profit, with very low taxes. That would be stimulative.
2
The problem with Greek “austerity” is that it included substantial tax increases. Sound money is never a problem; borrowing for handouts is. In the teeth of a system which effectively refuses to cut spending, Euro-fools insisted on massive tax increases, which produced entirely predictable results.
A pro-growth policy, of lower taxes and substantial spending cuts, so as to reduce deficits and encourage investment, is precisely what the doctor ordered.
Apparently, the author’s contention is that after we’ve borrowed ourselves into a catastrophe, we can simply inflate away those debts, which, of course, amounts to little more than theft. Inflation doesn’t hurt the poor – their handouts tend to be COLA adjusted. It doesn’t hurt the rich; they can put their money into inflation proof investments. It clobbers the middle class, which sees the value of its income and assets eroded.
Curious, isn’t it, that every time the left aims at the rich, it manages to cream the middle class?
For the story of how Canada managed to prosper, see this piece: http://www.cato.org/policy-report/mayjune-2012/we-can-cut-government-can...
In short, the solution to what ails the US is to ignore Krugman. Cut taxes, primarily on “the rich” (like WJC did), eliminate the corporate tax entirely, and substantially cut spending. Couple that with fewer eco-extremist or Warrenish regulations, and prosperity is essentially guaranteed.
A pro-growth policy, of lower taxes and substantial spending cuts, so as to reduce deficits and encourage investment, is precisely what the doctor ordered.
Apparently, the author’s contention is that after we’ve borrowed ourselves into a catastrophe, we can simply inflate away those debts, which, of course, amounts to little more than theft. Inflation doesn’t hurt the poor – their handouts tend to be COLA adjusted. It doesn’t hurt the rich; they can put their money into inflation proof investments. It clobbers the middle class, which sees the value of its income and assets eroded.
Curious, isn’t it, that every time the left aims at the rich, it manages to cream the middle class?
For the story of how Canada managed to prosper, see this piece: http://www.cato.org/policy-report/mayjune-2012/we-can-cut-government-can...
In short, the solution to what ails the US is to ignore Krugman. Cut taxes, primarily on “the rich” (like WJC did), eliminate the corporate tax entirely, and substantially cut spending. Couple that with fewer eco-extremist or Warrenish regulations, and prosperity is essentially guaranteed.
14
Krugmans politics have clouded his economics
Cut taxes just like Bush did and get the opposite results but the same stupidity.
1
"A pro-growth policy, of lower taxes and substantial spending cuts, so as to reduce deficits and encourage investment, is precisely what the doctor ordered." Seriously? Have you ever made a capital investment in a business? The subject of taxes is never mentioned. Did anyone around the table discus government deficits? Never in a day. Opportunity creates investment. Either you see it or you don't. That's the real world. What obsession over government deficits and debt (with a monetary sovereign its not the total its the composition) does in the real world is prevent a country from building assets, from investing in itself. How long does the country have to live this this nonsense?
4
With or without austerity, any economy needs an industrial or service base to provide buying power for citizens and tax revenue. Greece has a limited industrial/tourism based economy and will have limited income in the future--it is not a good formula for success.
1
Glennmr,
I vaguely remember that the Greek ship building industry was a dominant world economic wealth creating force after WWII until the 1960s.
That industry probably created a lot of taxable national wealth and salaries from ship building industry jobs for the Greek government to confiscate a part and then spend on wealth consuming Greek government services and government benefits.
Why did the wealth creating Greek shipping industry leave Greece?
Unions?
Taxes?
Government regulations?
Socialism?
Without any other wealth creating Greek industry to create taxable wealth, I think that the Greek people decided to emulate the US economic policy of the Government borrowing money to pay for their wealth consuming government services and other activities.
I vaguely remember that the Greek ship building industry was a dominant world economic wealth creating force after WWII until the 1960s.
That industry probably created a lot of taxable national wealth and salaries from ship building industry jobs for the Greek government to confiscate a part and then spend on wealth consuming Greek government services and government benefits.
Why did the wealth creating Greek shipping industry leave Greece?
Unions?
Taxes?
Government regulations?
Socialism?
Without any other wealth creating Greek industry to create taxable wealth, I think that the Greek people decided to emulate the US economic policy of the Government borrowing money to pay for their wealth consuming government services and other activities.
1
punish, punish, punish. America has an inferiority complex built into its
plantation past and the degeneracy of racism that goes with that. it's still alive,
unmentionable, going from one underside of a rock to another throughout
the country. because of it we're are the worst neighbor of all times to this hemisphere and the world, a rainbow coalition of all peoples yearning to be free of our handpicked dictators in other nations wherever our meddling
hand or troop have trod.
plantation past and the degeneracy of racism that goes with that. it's still alive,
unmentionable, going from one underside of a rock to another throughout
the country. because of it we're are the worst neighbor of all times to this hemisphere and the world, a rainbow coalition of all peoples yearning to be free of our handpicked dictators in other nations wherever our meddling
hand or troop have trod.
3
Greece is running a primary surplus. That is, the government is living within its means, NOT COUNTING payment on the past debt run up by both center-left and center-right governments in an orgy of cooked books (credit an assist to Goldman Sachs), corruption, and tax evasion. There is absolutely no chance Greece can pay back this debt. The issue is whether to have some sort of Greek economy, or keep the country in a state of economic disaster, not so much as punishment for the profligate spending, as for "refusing" to recover with the medicine prescribed by the troika, viz., harsh austerity. The evident truth that the medicine is mislabeled poison is something the Germans and their allies refuse to admit.
2
I've always loved the expression "irresponsible lenders". Is that like "irresponsible car dealers", "irresponsible casinos", "irresponsible jetski dealers", "irresponsible realtors", you know people who sell things to people?
Who is responsible for spending, the person doing it or the person doing the selling? Perhaps we need some national or international super daddy that can keep the kids from buying stuff they can't afford?
Who is responsible for spending, the person doing it or the person doing the selling? Perhaps we need some national or international super daddy that can keep the kids from buying stuff they can't afford?
3
Dear Professor Krugman,
Would you mind to explain us the effect of CDS (credit default swaps) and interests ranging from 20-30% on the Greek debt in a quite well orchestrated hedge on the default of the sovereign Greek debt by financial institutes?
Also would you mind to present us the initial part of arms sales in the early swelling of said debts?
Just so we see the whole picture. Thank you very much in advance.
Would you mind to explain us the effect of CDS (credit default swaps) and interests ranging from 20-30% on the Greek debt in a quite well orchestrated hedge on the default of the sovereign Greek debt by financial institutes?
Also would you mind to present us the initial part of arms sales in the early swelling of said debts?
Just so we see the whole picture. Thank you very much in advance.
2
Here is the problem: We, who read the New York Times and the highly intelligent and informative contributions of Paul Krugman are pathetically in the minority. The venomous and poison spewing right wing talking heads reach infinitely higher numbers of gullible listeners. Unless there is a massive change towards an educational system that reaches those who live on the outskirts of ignorance and finally makes them call out that the emperor does not wear any clothes the Republican Party will merrily go about their business of successfully pulling the wool over the eyes of a large segment of our society.
4
There is one more circumstance (in addition to or instead of currency devaluation) that makes it easier for countries to recover (even with austerity): growth in their economic zone. Greece was a poor little one trying to get out of the slump in a contracting environment. That just couldn't be done. To give the right-wingers their point, I don't know if Greece could have profited from an upswing in the Eurozone with their economy set up as it's set up. Those two factors were where Germany was lucky/ did well and suffered under the Social Democrat Schroeder.
Just a couple of thoughts.
First, in the US, through a stroke of genius, someone wrote in the Fed Mandate the dual responsibilities for inflation and unemployment. I have not heard that many countries provide their central banks with these, instead just focusing on inflation. Without a mandate on unemployment, Fed would have been hard pressed to take the sort of actions it has done on monetary side to bolster employment.
Second, actually the Federal Reserves were a reluctant party to the monetary stimulus. Their tools at some point become quite blunt and inefficient. If congress had stepped up to its responsibility on government spending to rebuild our infrastructure and position us strongly for the future, the Federal Reserve would not have had to step in, perhaps, at all.
Mr. Larry Summers, I believe, has made a case for having the future cost of "postponed/delayed" infrastructure spending show up in Government Finances (instead of providing a set of more rosier books without recognizing the upcoming cost). I think this is an excellent idea!
First, in the US, through a stroke of genius, someone wrote in the Fed Mandate the dual responsibilities for inflation and unemployment. I have not heard that many countries provide their central banks with these, instead just focusing on inflation. Without a mandate on unemployment, Fed would have been hard pressed to take the sort of actions it has done on monetary side to bolster employment.
Second, actually the Federal Reserves were a reluctant party to the monetary stimulus. Their tools at some point become quite blunt and inefficient. If congress had stepped up to its responsibility on government spending to rebuild our infrastructure and position us strongly for the future, the Federal Reserve would not have had to step in, perhaps, at all.
Mr. Larry Summers, I believe, has made a case for having the future cost of "postponed/delayed" infrastructure spending show up in Government Finances (instead of providing a set of more rosier books without recognizing the upcoming cost). I think this is an excellent idea!
2
"The point" is that if you really worry that the U.S. might turn into Greece, you should focus your concern on America’s LEFT. Why? Because the ROOT of Greece's problems, as with America's right now, is an absurdly activist government run by fools who believe that it is economically sustainable for a nation to spend more than it produces. It can't and never could.
We can argue all day about the proper remedies for economies in distress - typically conservative prioritization of markets and growth vs. the typically liberal prioritization of more government borrowing and spending - but the first point of order is - and always has been - how to avoid getting into these messes in the first place. THAT question rolls right up to the doorsteps of the Democrat/Progressive Left (and the Social Dems in Greece) and their blindness to the consequences of government economic policymaking that can be distilled into three words: spend, spend, spend (and worry about how to pay for it later).
The biggest challenge facing economies the world over is how to rein in the incessant voices of 'compassion' whose economics of help-now-pay-later (with the convenient sub-benefit of building a dependably supportive voting bloc dependent upon their government largess) are strangling the very energies of productivity, growth and optimism that empowered any prioritization of government-as-helper in the first place.
Long term the answer is simple: economic growth and sensible, restrained spending.
We can argue all day about the proper remedies for economies in distress - typically conservative prioritization of markets and growth vs. the typically liberal prioritization of more government borrowing and spending - but the first point of order is - and always has been - how to avoid getting into these messes in the first place. THAT question rolls right up to the doorsteps of the Democrat/Progressive Left (and the Social Dems in Greece) and their blindness to the consequences of government economic policymaking that can be distilled into three words: spend, spend, spend (and worry about how to pay for it later).
The biggest challenge facing economies the world over is how to rein in the incessant voices of 'compassion' whose economics of help-now-pay-later (with the convenient sub-benefit of building a dependably supportive voting bloc dependent upon their government largess) are strangling the very energies of productivity, growth and optimism that empowered any prioritization of government-as-helper in the first place.
Long term the answer is simple: economic growth and sensible, restrained spending.
5
I believe the responsibility for "spend, spend, spend (and worry about how to pay for it later)" falls at the feet of Republicans i.e. the George W. Bush administration and putting two wars on the credit card and not funding them ahead of time. I believe the Clinton Administration left the nation with a surplus and not a deficit. Just sayin'.
2
But, in all of the discussion there is only scant talk about the structural and social inability of the government to actually collect taxes. I've been in Greece and have been cursed at by hotel operators, merchants, and others when I ask for a receipt (if there's a receipt then they have to pay taxes). The biggest (only) industry in the country (shipping) pay practically no taxes. I seriously doubt they even need to raise taxes at all, except perhaps to even out the discounted taxes to the southern islands, just effectively collect the taxes that are due to the government in the first place. I mean the entire country is effectively run like a huge cash and carry swap meet. On pensions (I had long talks on my trips there with people) and it's even more laughable. All the press about cutting pensions to the old and poor is silly, that's not the problem (I noticed that Trispas agreed to cutting some of theirs but not to the wealthier pensions). The problem is those who get significant, like 96% pensions without putting even 10 years worth of contributions into the system. I wish Paul that you would examine and comment on how fast Greece's debt problem would be fixed just with these simple measures. See what happens with that, then work on whatever other fixes might remain. The lenders probably did lend too much, but the math based on the admittedly bad information from Greece, still probably showed enough people paying enough taxes to handle the debt.
1
Freshly printed paper “Sovereign Issued” US Treasury bonds and other US securities denominated in US dollars that the US government periodically prints on paper and then sells at public auction to (Communist Chinese and other industrialist individuals in the taxable wealth creating BRIC nations in return for their US Dollars they got by selling their products to US citizens) raise funds to pay for various taxable wealth consuming US government services actually have absolutely NO VALUE at all, except that these financial instruments are 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 redeeming of US Dollars with US located property instead of Gold by foreigners was not allowed, then our US Dollars would not be honored by anyone anywhere for any purchase or business transaction.
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 securities the value of the US Dollar will approach the value of monopoly money or toilet paper.
If this redeeming of US Dollars with US located property instead of Gold by foreigners was not allowed, then our US Dollars would not be honored by anyone anywhere for any purchase or business transaction.
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 securities the value of the US Dollar will approach the value of monopoly money or toilet paper.
To see jus how extreme the Republican Party has become, it is useful to look at the Eisenhower years. During that time corporate taxes were much higher than they are today, and so were taxes on wealthy individuals. Eisenhower's administration also believed in activist government, and built the interstate highway system. Eisenhower was also an outspoken defender of government programs that worked, most notably Social Security.
All of these circumstances helped make the 1950s a decade of American prosperity and dominance.
Today's Republican Party, by contrast, amazingly wins elections by campaigning against the idea of a strong government. They actively attempt to prevent government from helping the country, and try to sabotage government programs that work.
If today's GOP had been in charge in the 1950s, the United States would be even more of a third-world country than we are becoming.
All of these circumstances helped make the 1950s a decade of American prosperity and dominance.
Today's Republican Party, by contrast, amazingly wins elections by campaigning against the idea of a strong government. They actively attempt to prevent government from helping the country, and try to sabotage government programs that work.
If today's GOP had been in charge in the 1950s, the United States would be even more of a third-world country than we are becoming.
2
If Greece leaves the Eurozone and goes back to using its own currency, the exchange rate between that currency and the euro will be completely lop-sided.
The average German worker will discover that a three-week vacation in Greece for the whole family will cost next to nothing.
And that is how the Greek economy will recover: tourism, building new hotels, etc.
The average German worker will discover that a three-week vacation in Greece for the whole family will cost next to nothing.
And that is how the Greek economy will recover: tourism, building new hotels, etc.
3
Many comments here do not mention the obvious- the Greek love of tax evasion. This is a country that according to a European Commission study is collecting 10 billion Euros less than it should in consumption taxes. Self employed workers underreported taxes by about 28 billion euros a year. The cronyism of giving jobs (often of questionable need or value) has been a cultural byline in this country. And their missing their debt payment in June put them on the par with Zimbabwe. And now Tsiris offers the European Commission the same offerings his people voted against just a few days ago shows that the Greek government has miscalculated the stance of Merkel and the EU. The Greek people are worse off now than they were under the previous government; now the real austerity begins- unfortunately for the people in Greece who are honest and hard working.
1
Well we have the same things here; unions who want to bleed the taxpayer no matter what the consequences, state and federal workers who are the only people retiring at 55, tremendous debt, constantly continuous borrowing and not thinking about the future in this "entitlement minded society". Get ready as it is just a matter of time until the U.S. has a huge financial meltdown. And the people who continue to have the "wants" with unnecessary programs and out-of-control will be the first to complain as they always do.
4
No one in Greece has the incentive to work, save, or invest because it takes 3 years to obtain the 79 permits required to start a business. Greece needs micro reform. All the comments regarding macro economics, including Paul Krugman articles, are magical thinking.
3
Urban legends abound, San Martin, even in the sunny Aegean. Putting that aside, some "micro reform" cannot hurt, but it is no substitute for addressing the big problem of a currency beyond the control of the people forced to use it. To suppose otherwise is truly "magical thinking" for both debtor and creditor.
It is hard for me to accept that the Republican party could be so cynical as to want to plunge America into a deep recession. I thought growing up that these people were patriotic citizens who simply saw things from a different perspective and actually believed the whole nation would benefit if they got their way. Wow, was that dumb, naivete given birth by public school education that, ah, neglected to uncover the base motives of various factions in our nation.
I would like for all my Republican friends (I have a few) and relatives who adhere to worshiping at the Church of the Free Enterprise System that the GOP almost got its way. If they had the power in 2009 and in the ensuing years, we would have gone into a very deep recession, one that might have lasted for ten years or more. All of this would have been instantly blamed on the Democrats and their desire to spend, spend, spend. (The fact that Republicans under G.W. Bush were doing a good imitation of old style Democrats, spending to try to keep their jobs, would have been blindly ignored.)
In the run up to the 2012 presidential race, Mitch McConnell said repeatedly that Obama "got everything he wanted and its not working." A compound lie: he didn't get everything he wanted and it was, and is, working.
For all the Obama haters out there: if you have a job, if you've been able to pay for your house/car/boat/vacation, stop and think what it would be like to have none of those. The Republicans almost got you.
I would like for all my Republican friends (I have a few) and relatives who adhere to worshiping at the Church of the Free Enterprise System that the GOP almost got its way. If they had the power in 2009 and in the ensuing years, we would have gone into a very deep recession, one that might have lasted for ten years or more. All of this would have been instantly blamed on the Democrats and their desire to spend, spend, spend. (The fact that Republicans under G.W. Bush were doing a good imitation of old style Democrats, spending to try to keep their jobs, would have been blindly ignored.)
In the run up to the 2012 presidential race, Mitch McConnell said repeatedly that Obama "got everything he wanted and its not working." A compound lie: he didn't get everything he wanted and it was, and is, working.
For all the Obama haters out there: if you have a job, if you've been able to pay for your house/car/boat/vacation, stop and think what it would be like to have none of those. The Republicans almost got you.
4
Sorry, Paul. The lesson is one of excessive deficit spending and taking on too much debt relative to wealth or income. The market (or "the wisdom of crowds") finally realized it was too much debt to ever pay back. It's also a story of excessive regulation -- Greece is the hardest country in the OECD in which to start a new business -- and anti-business, entitlement cultures more generally. The market imposed austerity because the Greeks borrowed too much, and it could happen anywhere. That is the lesson for America.
2
Goldman Sachs, AIG, etc got bailed out. Where was "wisdom of the crowds" then?
1
The austerity crowd is akin to the Flat Earth Society. There's no reasoning with them because their beliefs are so entrenched, they amount to a religion. Our only hope is to elect officials who are open-minded and cling to facts, not dogma.
2
On the other hand, Canada currently has reduced interest rates, let the dollar fall in value for several years, has mostly increased spending at the federal and provincial level as a percentage of GNP and running deficits of various dimensions, and is currently, so far as anyone can tell, is suffering big trade deficits and is in recession, albeit a strange one in which unemployment is at 5.8% (measured in the US way) or 6.8% (Canadian measure). The fall in oil prices is one factor, but oil prices fell in the 1990s as well. What Canada (and Sweden and Finland) had going for them in the 1990s was the rest of the world economy. That's something Greece doesn't have going for it.
1
That's exactly right Professor K-the way you fix a debt problem like Greece's is either to grow your way out of it or inflate the debt away by devaluing your currency-something you have taught us, incessantly, that Greece cannot do.
All that is fine, for the country doing it, and especially for those owe. But it isn't so good for those evil bondholders you loath with such vehemence. People like my wife and me, good Democrats who worked hard all our lives and saved diligently for retirement. Like sand shifting through a child's fingers, the value of those bonds erodes with each drop in the currency value.
All that is fine, for the country doing it, and especially for those owe. But it isn't so good for those evil bondholders you loath with such vehemence. People like my wife and me, good Democrats who worked hard all our lives and saved diligently for retirement. Like sand shifting through a child's fingers, the value of those bonds erodes with each drop in the currency value.
Greece was the birthplace of both Western style democracy and capitalism. Torn between the Athenian and Spartan models against the backdrop of the Persian, Macedonian, Roman, Ottoman, British, Austrian- Hungarian and German Empires, the history of Greece is a mixture of the dramatic tragedy, the inspirational heroics, the simple daily life and the comedic farce typical of human beings. From the beginning of their classical history until the present Greeks have been fascinated by living beyond their means and in debt.
America's endemic enduring exceptional hubris is beyond any practical ordinary lessons or educational attention with regard to socioeconomics, politics and education. Much like the Greeks, Americans have created a mythology of supernatural deities and history full of all to natural normal nurtured flawed ordinary persons.
America's endemic enduring exceptional hubris is beyond any practical ordinary lessons or educational attention with regard to socioeconomics, politics and education. Much like the Greeks, Americans have created a mythology of supernatural deities and history full of all to natural normal nurtured flawed ordinary persons.
1
Simon Wren-Lewis discusses the political role of the European Central Bank in the Greek crisis. http://mainlymacro.blogspot.com/
1
"So who wants to impose that kind of toxic policy mix on America? The answer is, most of the Republican Party."
More specifically, it is the people within the Republican Party who already have money. For them, hard money is more valuable money. For them, stimulus is just expense to avoid, because they've got theirs and just want to keep it and maximize it.
So it is run by the selfish, supported by the rest against their own interests because they are misled with polling group tested lies no different from the advertising that sells so much else to them.
More specifically, it is the people within the Republican Party who already have money. For them, hard money is more valuable money. For them, stimulus is just expense to avoid, because they've got theirs and just want to keep it and maximize it.
So it is run by the selfish, supported by the rest against their own interests because they are misled with polling group tested lies no different from the advertising that sells so much else to them.
7
So, an easy money policy is the key? How low can interest rates go? Below zero? What if you're at that point and you want to make your monetary policy easier? What do you do? I guess the answer would be to sell more bonds and inject that money into the economy. Isn't that what the Greeks did? They promised retirement at 50 with govt pension, they employed lots of people in bureaucratic jobs and everybody was merry. But, creditors saw risk and wouldn't buy bonds unless the interest rate was high enough to motivate them. But, obviously, the interest rate being high just increased pressure on the govt when time came to roll over or pay back the debt, and debt service became more onerous. So, what do you want to do, Mr. Krugman? I'm sure your position would be to infuse liquidity into the Greek banks by shifting the burden to other countries in the EU and preventing a Greek default. But, the situation may have reached the point where further infusion of money into Greece exacerbates problems in other EU members. Debt can't be increased indefinitely and infinitely, even if you'd like it to be so.
5
When I lived in Greece sometime ago I had to pay duty for dog food because it was not produced locally. Herein is the problem. If you are import dependent, good luck to you.
To use Dr. K's analogy, a country the size of greater Miami had 900,000 civil servants in 2009. That's 8% of their entire population (including kids and retirees). When those civil servants retire, they enjoy incomes of 80% pre-retirement levels. The US has 1.8 million federal workers, but we have a much larger population. Somehow, Dr. K never mentions Greece's bloated public sector when he discusses its problems.
NYT - I'd love to get some real economic analysis with my subscription rather than Dr. K's un-intellectual partisan economic bickering. Please get Ben Bernanke or Larry Summers to pen a column.
NYT - I'd love to get some real economic analysis with my subscription rather than Dr. K's un-intellectual partisan economic bickering. Please get Ben Bernanke or Larry Summers to pen a column.
7
Yeah, debt's never the issue with Krugman: There it is, I can see it from here, The Big Rock Candy Mountain.
Get a clue: It's all a put up job--just a matter of keeping the rabble in the street believing. History tells us that it can't go on forever. We're no different from the rest. Just a matter of time.
Get a clue: It's all a put up job--just a matter of keeping the rabble in the street believing. History tells us that it can't go on forever. We're no different from the rest. Just a matter of time.
2
Greece’s Economy Is a Lesson for Republicans in the US -
and for the Right Wing Parties of Germany - they are together with Paul Krugman for a Grexit.
What?!
They are together with Paul Krugman for a Grexit and if they get the majority in the German Parliament Prof. Krugman will get his 'Grexit'.
That's how absurd contemporaray economics have become!
and for the Right Wing Parties of Germany - they are together with Paul Krugman for a Grexit.
What?!
They are together with Paul Krugman for a Grexit and if they get the majority in the German Parliament Prof. Krugman will get his 'Grexit'.
That's how absurd contemporaray economics have become!
3
So we shouldn't combine the US Dollar with the Loonie and the Mexican Peso? It almost sounds like Professor Krugman is recommending that Greece return to the Drachma.
1
To put things more simply: the US will never be Greece because we have our own currency and our own central bank (the Federal Reserve) to offset fiscal austerity imposed by idiot politicians during economic downturns.
4
Here's something about Greece written by an IMF official:
http://blog-imfdirect.imf.org/2015/07/09/greece-past-critiques-and-the-p...
http://blog-imfdirect.imf.org/2015/07/09/greece-past-critiques-and-the-p...
When evaluating Republican policy you must always keep in mind that their objective is to benefit the rich. If their policies harm the rest of us that isn't their concern.
5
The doctor recommends we open the floodgates on easy money-yet again. He tells half-truths when he says that Paul Ryan wants to give the rich a tax cut while cutting welfare programs.
What Ryan and the Republicans want is to return to growth. This is exactly what Greece needs. You will never have growth by raising taxes and increasing government. I read that the Greek government consumes over 1/2 of GDP. How is that efficient? I guess if you are in a government job with union protection from ever being fired or laid off it could work-on a personal level.
We also have Bernie Sanders running on the Greek economic platform. Raise taxes, increase government transfers, give the people everything they want.
The doctor also feels that inflation is what we need. Yes, lots and lots of inflation will help us. Well, not those who have saved a few dollars and are hoping to use this money to support them in retirement-they get screwed because prices always rise faster than any additional interest they may get.
What Ryan and the Republicans want is to return to growth. This is exactly what Greece needs. You will never have growth by raising taxes and increasing government. I read that the Greek government consumes over 1/2 of GDP. How is that efficient? I guess if you are in a government job with union protection from ever being fired or laid off it could work-on a personal level.
We also have Bernie Sanders running on the Greek economic platform. Raise taxes, increase government transfers, give the people everything they want.
The doctor also feels that inflation is what we need. Yes, lots and lots of inflation will help us. Well, not those who have saved a few dollars and are hoping to use this money to support them in retirement-they get screwed because prices always rise faster than any additional interest they may get.
4
Dr. Krugman is being very disingenuous to keep his narrative going.
No one is seriously comparing the situation in Greece with the fiscal situation in the US.
However,
The situation in Greece (an Eurozone jurisdiction) is directly compared to the situation in Detroit, Camden, Illinois (an US dollar jurisdiction).
When Detroit, Camden and now Illinois go on overpraising on pensions and overspending under single-party democratic control, the results were very similar. Street lights that don't work, police that can't respond to calls, water service being cut, population exodus.
So, Dr. Krugman, how about you explain to the readers how Detroit or Illinois are not like Greece, and don't face the same prospects when they run up too much debt.
No one is seriously comparing the situation in Greece with the fiscal situation in the US.
However,
The situation in Greece (an Eurozone jurisdiction) is directly compared to the situation in Detroit, Camden, Illinois (an US dollar jurisdiction).
When Detroit, Camden and now Illinois go on overpraising on pensions and overspending under single-party democratic control, the results were very similar. Street lights that don't work, police that can't respond to calls, water service being cut, population exodus.
So, Dr. Krugman, how about you explain to the readers how Detroit or Illinois are not like Greece, and don't face the same prospects when they run up too much debt.
5
No, the Greek economy is a lesson for ALL politicians, including Democrats. If we continue our massive spending programs and propose ways to grow them we will end up just like Greece. That is how Greece got to where it was in the first place, not because of "austerity". We shouldn't have austerity here but government spending needs to be gradually scaled back as a fraction of the economy and to end the annual budget deficits.
3
You didn't read a word of the column, did you?
6
Arithmetic.
GDP=ConsumerSpending+GovernmentSpending+Investment+(Exports-Imports)
What Prof. Krugman is pointing out is not new, nor is it ideological.
To pay off debt, or grow a nation's economy, arithmetic says we should increase those revenues that grow GDP. To wit-
1) actions that increase consumer spending (minimum wage, policies that encourage hiring more unemployed)
2) actions that increase government spending (policies that support public works projects, purchases of domestic goods and services)
3) Investment spending increases, R&D, education, training, future projects and public/private partnerships
4) Reduce imports with policies that reward local production of consumer goods and services
5) Export more.
Prof. Krugman is simply pointing out that Republicans take the very OPPOSITE positon on each of these components of GDP.
You can't pay off debt in a shrinking economy.
Pinching pennies is fruitless. (see years of proof)
Pay the debt from growth while interest is low, or wait and interest on debt will eventually consume all new GDP.
GDP=ConsumerSpending+GovernmentSpending+Investment+(Exports-Imports)
What Prof. Krugman is pointing out is not new, nor is it ideological.
To pay off debt, or grow a nation's economy, arithmetic says we should increase those revenues that grow GDP. To wit-
1) actions that increase consumer spending (minimum wage, policies that encourage hiring more unemployed)
2) actions that increase government spending (policies that support public works projects, purchases of domestic goods and services)
3) Investment spending increases, R&D, education, training, future projects and public/private partnerships
4) Reduce imports with policies that reward local production of consumer goods and services
5) Export more.
Prof. Krugman is simply pointing out that Republicans take the very OPPOSITE positon on each of these components of GDP.
You can't pay off debt in a shrinking economy.
Pinching pennies is fruitless. (see years of proof)
Pay the debt from growth while interest is low, or wait and interest on debt will eventually consume all new GDP.
2
In several of Mr. Krugman's articles, the theme is - austerity is bad because it brings recession. Logically this is correct but the topic of fixing the root causes that brought us here seems to be not addressed.
Undisciplined spending, corruption etc are the motherhood "bad" things that need to be fixed and there should not be room for any discussions. No amount of growth can overcome this. The lenders are not asking for "austerity", they are asking for "reforms" that try to go to the root cause by forcing discipline and structural changes for the future good.
Yes these reforms will cause pain but it is Greek government's job to manage it. To some extent, who suffers and how much is within the government's control and their political will.
The willingness to implement these changes must be there. The track record of the past/present Greek governments does not inspire confidence. They are still trying to negotiate the "best deal", meaning least amount of changes to fix the root cause issues they can get away with and continue with their "wrong" ways.
If this willingness was there, I am sure the conversation will be very different. Just as an example, I would be more sympathetic if they were asking for $ to fix their tax collection system so it can get 50x in revenue. Or ask for some resources to strengthen the tourism industry ...
So instead of asking for the "best deal", Greeks should be asking for resources to help fix the root cause issues.
Undisciplined spending, corruption etc are the motherhood "bad" things that need to be fixed and there should not be room for any discussions. No amount of growth can overcome this. The lenders are not asking for "austerity", they are asking for "reforms" that try to go to the root cause by forcing discipline and structural changes for the future good.
Yes these reforms will cause pain but it is Greek government's job to manage it. To some extent, who suffers and how much is within the government's control and their political will.
The willingness to implement these changes must be there. The track record of the past/present Greek governments does not inspire confidence. They are still trying to negotiate the "best deal", meaning least amount of changes to fix the root cause issues they can get away with and continue with their "wrong" ways.
If this willingness was there, I am sure the conversation will be very different. Just as an example, I would be more sympathetic if they were asking for $ to fix their tax collection system so it can get 50x in revenue. Or ask for some resources to strengthen the tourism industry ...
So instead of asking for the "best deal", Greeks should be asking for resources to help fix the root cause issues.
1
It's amazing how sound your arguments can sound when you are allowed, as Prof. Krugman generally is, to make up your own facts and narrative to support your liberal philosophies. But in spite of his "recollections" of the 90s debt crisis in Canada and how it supports his recommendations of fiscal policy for Greece and the U.S., reality, according to Reuters and Moody's news services, is that at its peak Canadian debt:GDP was 68.4% in 1995, below both the U.S. over the last 6 years and far below Greece's 130%. And Canada's Liberal Finance Minister Paul Martin in 1995 proposed and the Liberal Canadian government soon approved a deficit cutting budget which included $7 worth of budget cuts for every $1 increase in taxes and which targeted restricting growth in government spending to less that 3% per year until the budget was balanced. So yes, Prof. Krugman is at least right that Greece is very hampered by their inability to deflate their currency and therby inflate their economy to at least inflate their GDP on paper (which does seem to admit that if we followed his advice then it would prove the Republicans right about inflation), but other than that it seems his lessons for America relative to Greece and Canada seem to be misguided because they don't appear to be based in facts. Yes austerity has had a disproportionate effect on Greek GDP... Because Greek federal spending represented too much of the Greek economy to start with... Precisely the Republicans point.
4
The conversation around the Greece 'crisis' seems to boil down to one basic question. What is responsible debt. In 2005 George bush was asked what the average American could do to support the war effort in Iraq. His response, nothing just keep spending. For the wealthy this meant little as they had plenty of resources to support this habit, but for the average American this meant borrowing to pay for inflated houses, cars and burgeoning credit card debt. Wages were flat as they are now , cash tight and people over extended as in Greece today and thus our crash of 2008.
But the wealthy made out like bandits deserting the American market and cashing in on lower taxes and defense spending. But the poor and middle class were left holding the bag in the form of huge debt, houses that lost value and educational loans as well as less spending on such government programs such as infrastructure. It is only in hindsight that Greece seems to have over borrowed, but for many in their economy as in ours borrowing seemed to be the only path to a better standard of living. Now the banksters are cashing in telling us it was wrong to borrow and that we must pay the piper. What is needed is real stimulus so that we need to do less borrowing or at least do not borrow beyond our means, but the banksters love it when we give up autonomy to them through debt and we lose the power to control our own lives through debt from which a country or person has a difficult time recovering.
But the wealthy made out like bandits deserting the American market and cashing in on lower taxes and defense spending. But the poor and middle class were left holding the bag in the form of huge debt, houses that lost value and educational loans as well as less spending on such government programs such as infrastructure. It is only in hindsight that Greece seems to have over borrowed, but for many in their economy as in ours borrowing seemed to be the only path to a better standard of living. Now the banksters are cashing in telling us it was wrong to borrow and that we must pay the piper. What is needed is real stimulus so that we need to do less borrowing or at least do not borrow beyond our means, but the banksters love it when we give up autonomy to them through debt and we lose the power to control our own lives through debt from which a country or person has a difficult time recovering.
Canada in the 1990s benefitted from systematic reforms begun in the 1980s and most important about 45 percent of GDP was in exports that were growing at a rapid rate from robust demand especially from the U.S. Reduced aggregate demand from public sector austerity was more than offset by export growth.
1
Here's the situation. Big government liberals in Greece promised big handouts and paid for them with other countries money. Then when those other countries said "no more." the Greek government had nowhere else to go t continue handing our "other people's money."
Now, I know how you and your ilk would handle the problem, you would set up a "world government" to take from those nations who have been frugal enough to have some reserves, and give more and more money to Greece. Unfortunately, we still live in a world where national sovereignty would prohibit you from doing so. Stay tuned!
Now, I know how you and your ilk would handle the problem, you would set up a "world government" to take from those nations who have been frugal enough to have some reserves, and give more and more money to Greece. Unfortunately, we still live in a world where national sovereignty would prohibit you from doing so. Stay tuned!
3
I believe , republicans are all talk but no action. Why?
Did you remember what GW Bush and his Treasury Paulson did in the wake of 2008 collapse?
Bailout the system, pump the money in to the system, it was clear then , clear now.
What about since then we are listening from the GOP hordes. I will call white noise , annoying white noise, none of their word make any sense.
Hey folks If America become Greece, There is no way to run.
That is why Paulson immediately went to congress and request 750 billion no string attached money pumped in to system, no strings attached hear hear.
Krugman is telling years after years to this GOP hordes, you are just making white noise , nonsense arguments .
Did you remember what GW Bush and his Treasury Paulson did in the wake of 2008 collapse?
Bailout the system, pump the money in to the system, it was clear then , clear now.
What about since then we are listening from the GOP hordes. I will call white noise , annoying white noise, none of their word make any sense.
Hey folks If America become Greece, There is no way to run.
That is why Paulson immediately went to congress and request 750 billion no string attached money pumped in to system, no strings attached hear hear.
Krugman is telling years after years to this GOP hordes, you are just making white noise , nonsense arguments .
1
the people have had enough of the right, austerity, and the banking empire. england will vote to leave the EU, canadians are throwing conservatives out and we are waiting for a voting revolution in the US, while germany, the country which needed 3 bailouts, is the BIG BAD WOLFE, following the commands of the german banking empire.
You cite Canada as a case where "austerity" worked. You try to claim that as an argument for "easy money". But let's not forget the fundamentals. IT was a program to get their house in order and live within their means. And it is THAT which Greece is balking at.
The thing is, without first living within one's means, NOTHING can succeed. Without first living within one's means (aka "austerity"), everything else is a fool's errand.
The EU IS willing to provide Greece with easy money, on condition they do the other part of what Canada did. Which Greece is emphatically unwilling to do. So the EU sees further easy money without that as the fool's errand for which it is. After all, what is "easy money"? The terms the EU is willing to give Greece is FAR below any rates r conditions they could get on the open market. Which is why they are so dependent on the EU's "easy money". Now if only they would shoulder the responsibility as did Canada to make it worthwhile.
The thing is, without first living within one's means, NOTHING can succeed. Without first living within one's means (aka "austerity"), everything else is a fool's errand.
The EU IS willing to provide Greece with easy money, on condition they do the other part of what Canada did. Which Greece is emphatically unwilling to do. So the EU sees further easy money without that as the fool's errand for which it is. After all, what is "easy money"? The terms the EU is willing to give Greece is FAR below any rates r conditions they could get on the open market. Which is why they are so dependent on the EU's "easy money". Now if only they would shoulder the responsibility as did Canada to make it worthwhile.
2
Comment part 1
You blame Republicans because they look only to the US home garden not understanding the worldwide geopolitical and economical implications.
I blame for the same reason by the Eurocrats like Mr Juncker, by the Chiefs of State like Ms Merkel (so loved by Mr Obama), like his deputy Mr Gabriel and like her harsh Finance Minister Mr Schäuble, and even by the President of the European Parliament Mr Schulz.
All the mentioned people made a Terrorist campaign before the Greek referendum, treating the Greeks that if they would have voted NO, Greece would have been automatically out of the Euro and out of the EU: pure lies, because no treaty allows to expel a member country.
After the massive NO vote, Mr Tsipras came back to the talking table, but the Ms Merkel, leading the other spineless Chiefs of State, asked to Mr Tsipras to give in two days a detailed report of the reform that he plans to do, otherwise is need to have new fresh money could not be accepted.
So Ms Merkel didn't understand the meaning of the Greek NO vote, and still wanted to humiliate Mr Tsipras.
At this point we have a German problem, which was forgiven in WWI and WWII by the pity of the winners, so Germany never repaid its debts, and was also helped after three times after WWII, in 1948 with the Marshal plan, in 1963 reducing its debt by 85%, in 1992 when they managed trough the ESM to let pay the reunification costs to UK, France and Italy.
You blame Republicans because they look only to the US home garden not understanding the worldwide geopolitical and economical implications.
I blame for the same reason by the Eurocrats like Mr Juncker, by the Chiefs of State like Ms Merkel (so loved by Mr Obama), like his deputy Mr Gabriel and like her harsh Finance Minister Mr Schäuble, and even by the President of the European Parliament Mr Schulz.
All the mentioned people made a Terrorist campaign before the Greek referendum, treating the Greeks that if they would have voted NO, Greece would have been automatically out of the Euro and out of the EU: pure lies, because no treaty allows to expel a member country.
After the massive NO vote, Mr Tsipras came back to the talking table, but the Ms Merkel, leading the other spineless Chiefs of State, asked to Mr Tsipras to give in two days a detailed report of the reform that he plans to do, otherwise is need to have new fresh money could not be accepted.
So Ms Merkel didn't understand the meaning of the Greek NO vote, and still wanted to humiliate Mr Tsipras.
At this point we have a German problem, which was forgiven in WWI and WWII by the pity of the winners, so Germany never repaid its debts, and was also helped after three times after WWII, in 1948 with the Marshal plan, in 1963 reducing its debt by 85%, in 1992 when they managed trough the ESM to let pay the reunification costs to UK, France and Italy.
2
The ration of debt to GDP doesn't change. Either your adding austerity measures which reduces GDP, or your borrowing more to maintain GDP. The end result is the same.
I have a different take on Greece because I don’t see a single entity but a number of constituencies. The Germans do have some valid complaints: wealthy Greeks don’t pay their fair share because they rigged the system to that end; and politically powerful groups receive pension payments from pension funds that were never fully funded & draw on funds that should go for other real public purposes.
But I also believe the vast majority of the Greek people are being forced to bear too great a burden to pay for the sins of those who created the problem & which they had very little say over.
However, the solution being proposed, more austerity imposed upon most of the Greek people, is wrong because, like Krugman, I don’t see that in any way reversing the direction of the Greek economy. Instead, it will most probably cause further contraction that will result in a call for another round of austerity whereas the only exit is to GROW the Greek economy
But I also believe the vast majority of the Greek people are being forced to bear too great a burden to pay for the sins of those who created the problem & which they had very little say over.
However, the solution being proposed, more austerity imposed upon most of the Greek people, is wrong because, like Krugman, I don’t see that in any way reversing the direction of the Greek economy. Instead, it will most probably cause further contraction that will result in a call for another round of austerity whereas the only exit is to GROW the Greek economy
1
Greece's economy is exactly what the United States will look like if Krugman has his way. Borrow, spend, and repeat. Ignore deficits and debt. That is the Keynesian model. What has happened in Greece will happen here unless our runaway federal debt is addressed and cut. A 55% federal debt increase form $11 trillion to more than $17 trillion in the 6 short years of the Obama administration is proof positive that we are on the road to Greek-like economic disaster in short order. It's the Krugman model for failure.
5
The Democrats were decried for tax and spend economics so we replaced them with Republicans who spend and borrow.
More hysteria with nothing to back it up.
The ceaseless partisan editorials and much of the reader commentary are symptoms of a dysfunctional two party American democracy. There is little to no discuss of ideas, just childish name calling and finger pointing - as if that has ever advanced any debate from 3rd grade on.
The fact that this column begins with "all of Greece's problems are the fault of the red team", even if parroted by "a professor" is just sad and embarrassing. If this is as good as the debate gets in American democracy, it's time to call this experiment over.
The fact that this column begins with "all of Greece's problems are the fault of the red team", even if parroted by "a professor" is just sad and embarrassing. If this is as good as the debate gets in American democracy, it's time to call this experiment over.
1
Sorry, craig, but isn't it a little past time for you to be learning that one side has been shown by reality and evidence to be completely wrong? 30+ years of saying the same thing no matter how badly the evidence refutes everything they say makes the GOP the Party of Wrong as well as the Party of Stupid (at least those who still buy into it). Any person still voting for the GOP is either an ignoramus, stupid, a mean-spirited jerk, or somebody who simply doesn't care about the stinking sewer of a planet future generations will be handed (or some combination).
Great column. I get the picture: austerity must go hand in hand with monetary easing. Didn't/can't happen in Greece: financial collapse. Isn't/can't happening in Kansas, Wisconsin, NJ (unless you could launching bond drives): their state economies are in a total mess too, particularly those whose credit ratings are so low that bond programs can't run.
Why oh why must the same people keep pronouncing the same cures over and over keep being listened to as if they were offering something new from the Oracle at Delphi? To preserve the Greek imagery, wasn't it Sisyphus who embodied the idea of permanent insanity: rolling the stone up the hill against gravity over and over, while expecting different results (or else resigned to a truly unrewarding future).
I think basic economics should be added to high school curricula as part of the required US history courses in junior and senior year. How can one vote intelligently without some understanding of where money goes, how it's spent, and what makes an international economy tick?
Why oh why must the same people keep pronouncing the same cures over and over keep being listened to as if they were offering something new from the Oracle at Delphi? To preserve the Greek imagery, wasn't it Sisyphus who embodied the idea of permanent insanity: rolling the stone up the hill against gravity over and over, while expecting different results (or else resigned to a truly unrewarding future).
I think basic economics should be added to high school curricula as part of the required US history courses in junior and senior year. How can one vote intelligently without some understanding of where money goes, how it's spent, and what makes an international economy tick?
1
The problem seems to be historians who think they are economists.
This economic analysis is generally correct, but misses some of the key problems with the Greek crisis and how the Left in America is pushing us in those directions.
Greece is a country with strong labor unions. And a very big public pension system. These obligations, and the people's unwillingness to recognize that though their government (which they elected) promised them these benefits, they didn't earn them. They have repeated elected governments that promised them economic benefits that required giant borrowing to finance. They have now run out of other people's money.
As the author suggests, America has the capability to print money and inflate down both the national debt and (if we adjust COLA laws) our social security obligations. We are not on track for a Greek-like meltdown.
We are though growing much slower than historical standards (3.5%-4.5% annually) since the recession. Some of this is Europe's fault, but a lot is the residual fear in both US consumers and US firms that, due to our debt another big recession is coming.
But the author paints with way too broad a brush when he makes the GOP the boogieman in his argument. Most Republicans, myself included, support low interest rates, so long as inflation stays low. We too fear a deflationary spiral, which remains (thanks again Europe) the bigger risk. Personally, as a home-owner with a fixed-rate mortgage, I would love to see more inflation than we have had over the last 10 years.
Greece is a country with strong labor unions. And a very big public pension system. These obligations, and the people's unwillingness to recognize that though their government (which they elected) promised them these benefits, they didn't earn them. They have repeated elected governments that promised them economic benefits that required giant borrowing to finance. They have now run out of other people's money.
As the author suggests, America has the capability to print money and inflate down both the national debt and (if we adjust COLA laws) our social security obligations. We are not on track for a Greek-like meltdown.
We are though growing much slower than historical standards (3.5%-4.5% annually) since the recession. Some of this is Europe's fault, but a lot is the residual fear in both US consumers and US firms that, due to our debt another big recession is coming.
But the author paints with way too broad a brush when he makes the GOP the boogieman in his argument. Most Republicans, myself included, support low interest rates, so long as inflation stays low. We too fear a deflationary spiral, which remains (thanks again Europe) the bigger risk. Personally, as a home-owner with a fixed-rate mortgage, I would love to see more inflation than we have had over the last 10 years.
Josh, what historical standards?
Please identify five years in the past two decades when growth has been 3.5 - 4.5%. You can even have three decades. It doesn't matter what flummery J. E. B. prattles about. It isn't true.
What is true is that Republican policies frequently produce the opposite effect of what they are sold to accomplish. Seven years of Reaganomics led to interest rates of 18%. Bush junior took office with a handsome surplus and managed to leave the country in shambles from his incompetent management and fiscal policies. Currently, Sam Brownback is bankrupting Kansas with his lunatic schemes. And they aren't alone. (Maybe the Donald can bring a few of his bankruptcy lawyers into a new Department of Smoke and Mirrors.)
What is needed is not so much low interest rates (a la George Bush, the "housing President") but an equal measure of pain in sharing the burden. Republicans are all hot for "the right to bear arms" but are completely hostile to "promote the general welfare".
Please identify five years in the past two decades when growth has been 3.5 - 4.5%. You can even have three decades. It doesn't matter what flummery J. E. B. prattles about. It isn't true.
What is true is that Republican policies frequently produce the opposite effect of what they are sold to accomplish. Seven years of Reaganomics led to interest rates of 18%. Bush junior took office with a handsome surplus and managed to leave the country in shambles from his incompetent management and fiscal policies. Currently, Sam Brownback is bankrupting Kansas with his lunatic schemes. And they aren't alone. (Maybe the Donald can bring a few of his bankruptcy lawyers into a new Department of Smoke and Mirrors.)
What is needed is not so much low interest rates (a la George Bush, the "housing President") but an equal measure of pain in sharing the burden. Republicans are all hot for "the right to bear arms" but are completely hostile to "promote the general welfare".
3
Check your facts. Reagan inherited long term rates of 14% in when he took office. He brought them down to under 7% before leaving office.
The Democrat solution is to get 90% of the population on some form of government aid and hope that the rest of the population does not hide their assets offshore.
2
The Republican solution is to hide their assets offshore and hope they can but the next Congress.
There was 'stag-flation' in the 80's. Therefore, inflation is just around the corner - or so it goes.
Hey Paul Krugman, Japan is on the line, they want Ireland's phone number. You don't happen to know it do you? No, they don't want to actually talk to you anymore, just want want to get in touch with Ireland.
1
The economist I'm married to says the only thing that she's afraid of, in terms of the US economy, is a Republican president. Krugman hits it out of the park again!
2
Insanity has been defined as "doing the same thing over and over while expecting different results." Given this definition, Krugman's take on this is insane. To him, there is no amount of debt that is too much for a country to take on. Having the ability to pay back your debts must be foreign to Krugman
Austerity did not get Greece into trouble, too much spending did. Austerity has been attempted to help them get their financial act together so that they don't spiral deeper into the debt abyss.
Greece can not repay the loans that it currently has, only an idiot would continue to throw good money after bad by continuing to loan(give) them more money that they won't be able to pay back later.
That Paul Krugman has "won" a Nobel Prize cheapens the idea of what a Nobel Prize is.
Austerity did not get Greece into trouble, too much spending did. Austerity has been attempted to help them get their financial act together so that they don't spiral deeper into the debt abyss.
Greece can not repay the loans that it currently has, only an idiot would continue to throw good money after bad by continuing to loan(give) them more money that they won't be able to pay back later.
That Paul Krugman has "won" a Nobel Prize cheapens the idea of what a Nobel Prize is.
5
You clearly did not read Mr. Krugman's column thoroughly.
2
Did you even read the article? Did you? The part about the GDP contracting? Did you miss that or did it go over your head?
3
As others have noted, Geermany's piety is hypocritical. After WWII, Germany was forgiven its debts. That was a major reason that it is economically viable today.
Interesting. I think this makes the point why Greece should immediately exit the Euro zone. That is what Schaeuble thinks too.
1
Krugman states that "What turned Greek debt troubles into catastrophe was Greece’s inability, thanks to the euro, to do what countries with large debts usually do: impose fiscal austerity, yes, but offset it with easy money."
Basically Krugman is saying that because Greeks lacked the capacity to print money to repay their lenders, that they got the short end of the stick. Printing money for any society solves is a dodgy proposition, not the panacea suggested by Dr Krugman.
Printing money devalues your currency. It punishes savers to the benefit of debtors. It does solve the short term problem of allowing a country to repay its fixed debt. There are also some serious downsides that Krugman never acknowledges. 1) It makes it very difficult to borrow in your own currency in the future. Who would lend to somebody that prints money to pack back their debts? 2) More importantly it discourages people from saving. Who will choose to save money when they know their government will begin printing whenever it has a problem to solve.
Republicans do believe that austerity is better long term than printing because they value the long term benefits of repaying debt without devaluing the currency over the short term benefits of political expediency of printing money.
And austerity did not cause the Greek debt to expand the past five year. At 130% debt to GDP, the interest payments alone are crushing the economy.
Basically Krugman is saying that because Greeks lacked the capacity to print money to repay their lenders, that they got the short end of the stick. Printing money for any society solves is a dodgy proposition, not the panacea suggested by Dr Krugman.
Printing money devalues your currency. It punishes savers to the benefit of debtors. It does solve the short term problem of allowing a country to repay its fixed debt. There are also some serious downsides that Krugman never acknowledges. 1) It makes it very difficult to borrow in your own currency in the future. Who would lend to somebody that prints money to pack back their debts? 2) More importantly it discourages people from saving. Who will choose to save money when they know their government will begin printing whenever it has a problem to solve.
Republicans do believe that austerity is better long term than printing because they value the long term benefits of repaying debt without devaluing the currency over the short term benefits of political expediency of printing money.
And austerity did not cause the Greek debt to expand the past five year. At 130% debt to GDP, the interest payments alone are crushing the economy.
2
Tell that to Clive Bundy.
Tell that to Donald ("Chapter 11") Trump, currently one of the top GOP Presidential candidates according to all polls of Republican voters.
Paul Krugman is wrong on so many levels. Unlike the US, Greece is prevented from printing/borrowing more money and priming their stock market with what is essentially borrowed money.
According to the partisan hack Krugman...
A Republican President deficit spending: harmful to the US economy.
A Democrat President deficit spending: essential to the US economy.
According to the partisan hack Krugman...
A Republican President deficit spending: harmful to the US economy.
A Democrat President deficit spending: essential to the US economy.
2
But then Greek "governance" is a lesson for Democrats.
1
The emergence of Greece’s current leadership, for whatever shortcomings they may have, didn’t occur in vacuum. To the contrary, they were almost certainly elected, at least in part, as a reaction to the consequences of austerity.
Were austerity to be implemented in the United States, in a manner similar to Greece, I see little preventing comparable firebrands—be they from the left or from the right—from being elected as well.
Be careful what you wish for.
Were austerity to be implemented in the United States, in a manner similar to Greece, I see little preventing comparable firebrands—be they from the left or from the right—from being elected as well.
Be careful what you wish for.
Amusing to read all the excoriating comments directed at Krugman coming from the South. The Germans with whom you side in regard to the Greek question would laugh you out of house & home in light of the pathetically maladjusted element in your region leading the USA in poverty.
Despite luring business & industry with tax incentives, low wages & benefits & health & safety shortcuts from those states who care, the condition of your regional economy is sick. Before offering international economic advice, why not take care of your own problems.
Despite luring business & industry with tax incentives, low wages & benefits & health & safety shortcuts from those states who care, the condition of your regional economy is sick. Before offering international economic advice, why not take care of your own problems.
2
Does the lesson apply to Detroit, Cleveland, Chicago, Puerto Rico and many other cities/countries on the financial brink? Republicans and Democrats should learn from Greece that corruption, irresponsible borrowing, public officials' incompetence and buying votes with outlandish entitlements is not sustainable.
2
"The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes"
Well Krugman oughta (sic) know---there's been no one more wrong as often as Krugman has. It's a wonder the 'Ye Olde' York Times still employs him.
Well Krugman oughta (sic) know---there's been no one more wrong as often as Krugman has. It's a wonder the 'Ye Olde' York Times still employs him.
1
and I still think - the best lesson would be - if the Eurozone would take Puerto Rico into the Eurozone in exchange for Greece -
(as the German Finance Minister suggested)
(as the German Finance Minister suggested)
Dr. Krugman, a lesson fro republicans. There are no lessons of any kind that will influence ignorant blind adherence to dogma.
"Canada in the ’90s drastically reduced interest rates, encouraging private spending, while allowing its currency to depreciate, encouraging exports. " Next - Canada will re-introduce Social Credit, to the benefit of all!
Can someone please send this to Paul Ryan, post haste. Please.
1
A socialist country which overspends on it entitlements and Krugman finds some tortured logic to connect it to the GOP?? Who has more in common with the tax and spend habits of the Greeks? The Dems or the GOP? Is he serious?
1
The current government is not the one that ran up the debts.
What does this have to do with same sex marriage, which has been the only story being extensively covered by the media, except for sports. Now it's Greece, since how the 2008 market debacle happened has been spun out of existence and all the culprits are at it again, without consequences. The criminal justice system made the headlines but too much money is at stake. Americans loves law and order on TV and getting a subpoena to a grand jury to prove their loyalty to the governments ability to indict a ham sandwich.
How funny, that's a ham sandwich Cochise style. Every time I turn on the news on CNN it's a live photo of the Confederate flag with anchors yakking about the bravery of the South Carolina legislature. I'm just grateful they've moved on from the 24 hr coverage of the downing of Malaysia Flight #17 which will eventually spin out into a documentary which can be broadcast on a continual loop on CNN for the benefit of the airport & rental car patrons forced to watch in their airport holding pens. Then, of course, there is the serious debate about Donald Trump and his latest Coup de grâce words of wisdom about the threats of illegal immigrants spreading mayhem, disease, rape & Strychnine which has the potential to kill the US rat population including small terriers exposed to air borne diseases. The US news shows are informative to the comatose brain transplant patients bed ridden in hospitals or the agoraphobics who fear leaving the house in case a child molestor, Black gang member, hijacked plane or KKK murderer is on the loose & they may be the next victim.
2
So, Greece borrowed too much, spent too much, did not collect taxes and now cannot pay off their debts.
The GOP wants to spend less, borrow less, and *some* want to simplify the tax code to make it more desirable for corporations to pay US taxes rather than to shell companies. But somehow this plan will lead the US into a crisis like Greece?
Liberal Detroit had similar policies to Greece and is now bankrupt. Puerto Rico has a high minimum wage and small tax base that borrows more than it spends (liberal policies) and it is on the verge of being bankrupt.
This article is nuts.
The GOP wants to spend less, borrow less, and *some* want to simplify the tax code to make it more desirable for corporations to pay US taxes rather than to shell companies. But somehow this plan will lead the US into a crisis like Greece?
Liberal Detroit had similar policies to Greece and is now bankrupt. Puerto Rico has a high minimum wage and small tax base that borrows more than it spends (liberal policies) and it is on the verge of being bankrupt.
This article is nuts.
4
How Kansas and Lousiana both enacted large tax cuts but things haven't worked out as promised--they're economies haven't been booming as much as proponents promised.
Kansas begrudgingly raised sales taxes, though it probably won't bring in enough revenue.
Louisiana is basically filling in a shortfall with accounting games but how they're going to balance the budget next year is anyone's guess.
Kansas begrudgingly raised sales taxes, though it probably won't bring in enough revenue.
Louisiana is basically filling in a shortfall with accounting games but how they're going to balance the budget next year is anyone's guess.
It is hard to comprehend how Mr Krugman, who I quite affectionately call "the Chauncey Gardiner (from Being There / Peter Sellers) of economics" can continue to somehow twist a small country's complete mishandling of their economy as a "lesson to Republicans" who might simply desire more responsible government spending by minimizing abuse, fraud, and waste.
His ongoing and ridiculous assertion (with the exception in this article of Canada) that austerity is the ultimate sin of governmental economics continues to be amusing.
"In a garden....
His ongoing and ridiculous assertion (with the exception in this article of Canada) that austerity is the ultimate sin of governmental economics continues to be amusing.
"In a garden....
5
It's not helpful to use Canada as an example. Canada has a wide range of exports, while Greece doesn't. Hence, even if it had the Drachma, devaluation wouldn't work as well. Greece is mostly an importing nation, and prices for such products would rise with devaluation, and perhaps trigger hyper inflation.
Joseph in Missoula
Joseph in Missoula
There are those who see the glass as half empty.
There are those who see the glass as half full.
What they both miss....
The glass is refillable.
In Greece tax avoidance seems to be a sport enjoyed by all.
In the U.S. tax avoidance has become a religion to a segment of our society, the republican segment. Republicans have equated tax collection with theft.
They have managed to convince a sizable portion of the voters that taxing the rich is somehow sinful and when lumped in with all the other sins they are constantly screeching about we find ourselves in a similar straight jacket with Greece.
In 2016 we had better get out the vote and.......
Take back our country.
There are those who see the glass as half full.
What they both miss....
The glass is refillable.
In Greece tax avoidance seems to be a sport enjoyed by all.
In the U.S. tax avoidance has become a religion to a segment of our society, the republican segment. Republicans have equated tax collection with theft.
They have managed to convince a sizable portion of the voters that taxing the rich is somehow sinful and when lumped in with all the other sins they are constantly screeching about we find ourselves in a similar straight jacket with Greece.
In 2016 we had better get out the vote and.......
Take back our country.
"In the U.S. tax avoidance has become a religion to a segment of our society, the republican segment."
Tax avoidance is legal (or at least it was until FDR tried to make tax avoidance and tax evasion the same thing in order to go after people like Andrew Mellon and Samuel Insull). And it certainly isn't done exclusively by Republicans, Bob. No one wants to pay more than he legally has to, not even you. If you want to complain about people avoiding taxes, then write your Congressman to have the tax code simplified - no deductions or subsidies for any one or any group. Have some simplified flat tax system or a consumption tax, but not both. That would almost guarantee that K Street would be a ghost town.
If you really want to see how you much you pay in taxes every year, let's abolish all withholdings from your check, whether it's from an employer or some form of government subsistence/benefit/entitlement. Then in January, when you get the bill, see how many people start crying out about how high their taxes are. Maybe even the Dems will get the picture about tax rates.
Tax avoidance is legal (or at least it was until FDR tried to make tax avoidance and tax evasion the same thing in order to go after people like Andrew Mellon and Samuel Insull). And it certainly isn't done exclusively by Republicans, Bob. No one wants to pay more than he legally has to, not even you. If you want to complain about people avoiding taxes, then write your Congressman to have the tax code simplified - no deductions or subsidies for any one or any group. Have some simplified flat tax system or a consumption tax, but not both. That would almost guarantee that K Street would be a ghost town.
If you really want to see how you much you pay in taxes every year, let's abolish all withholdings from your check, whether it's from an employer or some form of government subsistence/benefit/entitlement. Then in January, when you get the bill, see how many people start crying out about how high their taxes are. Maybe even the Dems will get the picture about tax rates.
Says Mr. Krugman, "Because if the right gets its way on economic policy — slashing spending while blocking any offsetting monetary easing — it will, in effect, bring the policies behind the Greek disaster to America."
I thought part of the Republican platform included tax cuts in addition to spending cuts. Of course, other than sequestration, I don't believe the GOP has ever actually spent less than the year before - they merely reduced the rate of growth. If a budget goes from an 8% increase to a 5% increase, Dems are likely to call the reduction "draconian" or "mean spirited".
So why doesn't Mr. Krugman mention tax rates increasing or decreasing and what effect that has on the economy? Yes, he talks about "austerity" in terms of spending cuts, but did Greece increase or decrease tax rates? The former that would only add to Greece's economic woes.
I thought part of the Republican platform included tax cuts in addition to spending cuts. Of course, other than sequestration, I don't believe the GOP has ever actually spent less than the year before - they merely reduced the rate of growth. If a budget goes from an 8% increase to a 5% increase, Dems are likely to call the reduction "draconian" or "mean spirited".
So why doesn't Mr. Krugman mention tax rates increasing or decreasing and what effect that has on the economy? Yes, he talks about "austerity" in terms of spending cuts, but did Greece increase or decrease tax rates? The former that would only add to Greece's economic woes.
The GOP reduced actual spending for the last two years. The first time that has happened in more than 40 years.
"The GOP reduced actual spending for the last two years. The first time that has happened in more than 40 years."
Was this as a result of sequestration (forced by an agreement) or an actual reduction?
Was this as a result of sequestration (forced by an agreement) or an actual reduction?
i think you are labouring under the misconception that the gop wants a good economy.
given the fact that the gop continually breaks or damages the economy we have to assume that that is their goal
once broken, those in a position to do so pick up the pieces for a song.
who was the last rep president to hand off a decent economy? even Ike (with 2 surplus budgets) handed off a recession
given the fact that the gop continually breaks or damages the economy we have to assume that that is their goal
once broken, those in a position to do so pick up the pieces for a song.
who was the last rep president to hand off a decent economy? even Ike (with 2 surplus budgets) handed off a recession
4
"i think you are labouring under the misconception that the gop wants a good economy."
Both political parties want a good economy. But both will, in order to advance a political agenda, temporarily damage an economy under the guise of "fairness", "equality", or a "level playing field". The bottom line is that when government makes decisions like that in order to make the economy work for them, they rarely realize the impact of their own hubris.
Both political parties want a good economy. But both will, in order to advance a political agenda, temporarily damage an economy under the guise of "fairness", "equality", or a "level playing field". The bottom line is that when government makes decisions like that in order to make the economy work for them, they rarely realize the impact of their own hubris.
If you want to see Republicans change their tune, just elect a Republiican in 2016. Then we will hear a reprise of Cheney's statement; 'deficits don't matter." They have figured out that deficits lead to good times, and they only want that to happen during Republican administrations.
The concept that deficits are a contra-cyclical tool and should be used to control economic cycles, escapes them
So, for those who would like a period like the Coolidge/Hoover Roaring 20's, or the Bush era of guns and butter, but do not care what happens later, the soluution is obvious.
The concept that deficits are a contra-cyclical tool and should be used to control economic cycles, escapes them
So, for those who would like a period like the Coolidge/Hoover Roaring 20's, or the Bush era of guns and butter, but do not care what happens later, the soluution is obvious.
"If you want to see Republicans change their tune, just elect a Republiican in 2016. Then we will hear a reprise of Cheney's statement; 'deficits don't matter.""
Both political parties love deficit spending; it's just that each one have their own pet projects to spend on.
Both political parties love deficit spending; it's just that each one have their own pet projects to spend on.
'Inverted thinking' allows 'inside-out thinkers' to block 'outside-in thoughts' in order to avoid humanitarian concerns and serve self.
Thought inversion is a critical key to the Republican world of voodoo economics in which the 'witch doctors' get the chicken and everyone else gets to be mesmerized by watching them splatter the blood and 'shake the bones'.
The key to a happy, rational life is to avoid being distracted by the 'rattling sounds and flashes of color', and vote for something more than chicken bones.
Thought inversion is a critical key to the Republican world of voodoo economics in which the 'witch doctors' get the chicken and everyone else gets to be mesmerized by watching them splatter the blood and 'shake the bones'.
The key to a happy, rational life is to avoid being distracted by the 'rattling sounds and flashes of color', and vote for something more than chicken bones.
"By poisoning relations among Europe’s democracies, the Greek crisis risks depriving the United States of crucial allies."
Hyperventilate much?
Hyperventilate much?
1
It occurs to me suddenly that with the Euro Germany owns most all of Europe. Ironic that they couldn't do this with force losing in both WWI and WWII, but with the Euro they have finally achieved it.
1
There is one thing wrong with Krugman's concept. Some day, some way, deficits and borrowing must be paid. By whom and how is part of the equation. It is one thing to borrow money to invest in infrastructure, but it is another thing to borrow money for entitlements for the elderly.
Listening to Krugman, he sounds like a Reaganomics "deficits don't matter" closet Republican.
Deficits do matter.
Listening to Krugman, he sounds like a Reaganomics "deficits don't matter" closet Republican.
Deficits do matter.
It seems to me that the contagion of "nobody wanting to work" in Greece was possibly spread from the very wealthy in Greece who "didn't want to pay taxes". What is the incentive to work when the little people get Capitalism and the big people get Socialism ?
96
Tell me, Mr. Krugman, surely, you must be joking. My hand is trembling, my pulse is racing and my heart is pounding as I question the bizarre ratiocination proffered by a Nobel Laureate, but what else can an average-educated South Asian guy with no Ivy League punditry credentials do?
Successive Greek governments have inflicted this cruel punishment on its people. I empathize with the poor on fixed incomes and average middle-class pensioners about to get a painful haircut. But, it’s hard to find any sympathy for the rich, unscrupulous oligarchs who gamed the system with active connivance of venal politicians; for a large section of Greek citizens who are cheats and never paid or underpaid or evaded taxes; for government bureaucrats who turned a blind eye to rampant tax-avoidance schemes; and for the citizenry as a whole who were lulled into buying what Econ. 101 says is an impossibility – at some point, your national debts will exceed your GDP, and you can’t fend off your debtors indefinitely.
Why exactly the rest of Europe must fund the easygoing lifestyles of the Greeks so they can binge on someone else’s drachma (which must be worthless now)? Why exactly must the rest of Europe be vilified, feathered and tarred as the culprit when the Greeks themselves chose to do ignore the Micawber principle?
As to the dire fate that awaits the U.S. in Prof. Krugman’s doomsday scenario, I’d leave the rebuttal to the expertise of more academically-qualified, pedigreed individuals.
Successive Greek governments have inflicted this cruel punishment on its people. I empathize with the poor on fixed incomes and average middle-class pensioners about to get a painful haircut. But, it’s hard to find any sympathy for the rich, unscrupulous oligarchs who gamed the system with active connivance of venal politicians; for a large section of Greek citizens who are cheats and never paid or underpaid or evaded taxes; for government bureaucrats who turned a blind eye to rampant tax-avoidance schemes; and for the citizenry as a whole who were lulled into buying what Econ. 101 says is an impossibility – at some point, your national debts will exceed your GDP, and you can’t fend off your debtors indefinitely.
Why exactly the rest of Europe must fund the easygoing lifestyles of the Greeks so they can binge on someone else’s drachma (which must be worthless now)? Why exactly must the rest of Europe be vilified, feathered and tarred as the culprit when the Greeks themselves chose to do ignore the Micawber principle?
As to the dire fate that awaits the U.S. in Prof. Krugman’s doomsday scenario, I’d leave the rebuttal to the expertise of more academically-qualified, pedigreed individuals.
4
Sure, let's ignore the fact that the point to "austerity" is to live within one's means. But then the concept of living with one's means is an evil concept to the conscience of a liberal. So let's ignore the fact that every other country having endured it is better off or well on the road to being better off. That goes for the rest of PII(G)S. That goes for countries that shouldered the burden of getting their fiscal houses in order as condition to entry into the EU in the first place.
And for that matter, even Greece, was beginning to show gains. That was, up until they started throwing temper-tantrums that wiped away those hard fought meager gains. Austerity wasn't "working"? Debatable. But what is not debatable is that it wasn't until that tried to get out of that thing really took a turn for the worse.
And let's also not forget, it was a failure to live within their means (aka "austerity") in a huge way that created this predicament in the first place.
And it may be the case that Greece is so far gone due to their massive irresponsibility that nothing can save them. And perhaps even more now as a result of their tantrum.
They wish to quit "austerity"? Well, as eloquently expressed in the "Two and a Half Men" episode "I can't Afford Hyenas":
[Charlie has run into some financial trouble]
Charlie: I can't do this anymore. I quit.
Alan: You can't quit poverty, Charlie.
"Austerity-lite" is trying to save them from jumping from the frying pan to the fire of real austerity.
And for that matter, even Greece, was beginning to show gains. That was, up until they started throwing temper-tantrums that wiped away those hard fought meager gains. Austerity wasn't "working"? Debatable. But what is not debatable is that it wasn't until that tried to get out of that thing really took a turn for the worse.
And let's also not forget, it was a failure to live within their means (aka "austerity") in a huge way that created this predicament in the first place.
And it may be the case that Greece is so far gone due to their massive irresponsibility that nothing can save them. And perhaps even more now as a result of their tantrum.
They wish to quit "austerity"? Well, as eloquently expressed in the "Two and a Half Men" episode "I can't Afford Hyenas":
[Charlie has run into some financial trouble]
Charlie: I can't do this anymore. I quit.
Alan: You can't quit poverty, Charlie.
"Austerity-lite" is trying to save them from jumping from the frying pan to the fire of real austerity.
3
There are so many Krugman haters out there who find the time to post responses to what he writes. I wonder if it is an organized bunch of paid hacks?
1
Sure that's what you wonder, because you can't argue they aren't right.
No, but Krugman, like most op-ed writers, only puts out information that makes his own narrative look good. I teach history, civics and economics in high school. I have yet to see any textbook on those subjects give a balanced view. It is mostly a liberal bias in textbooks but there are a few (very few) conservative-biased textbooks. Regardless of your political persuasion, getting only one side of the story is never a good thing.
Prof. Krugman is missing the point. Republican economic policy is not incorrect; rather, it has a different goal for America - Downton Abby over the American Dream. American workers have not had a raise since Ronald Reagan cut taxes for the wealthy 35 years ago and won't get a raise until the Fairness Doctrine is restored and Fox News can't broadcast Republican propaganda 24/7. In the meantime, recent articles in the MIT Technology Review and The Atlantic Monthly state that technology will soon erase millions of jobs. Whether benefits from this productivity is shared or not is ultimately up to voters. People who live in a democracy get the government they deserve.
Obviously the Greek crisis demonstrates a basic problem with the Eurozone idea. You can't continue to act like separate countries with separate economies if you want to have one common currency. You have to in effect treat Greece's debt and it's economy as your own. The individual member states in the Eurozone are basically too big to fail, so they have to be bailed out if necessary. Then you work on controls and transparency to keep the over-leveraging from happening again. As long as the Greek people are suffering then the whole Eurozone will suffer with them.
The geographical size of Greece is about 51,000 square miles. The size of the state of Florida is 66,000 square miles. How does it make sense then that the size of the Greece economy is so small? Yes, the debt ratios of Greece is not much compared to that of the US or Britain after WW2, but what did the US and Britain do after WW2? There was a massive increase in industrial production leading to a greater GDP. Greece simply needs to produce more.
2
Actually, Greece's ongoing reduction in GDP is mostly based on the same demographic pattern we are seeing in Europe. Europe's population is declining and worker productivity is declining. Access to abundant raw materials is lower than historical norms because Europe has mostly used them all. Declining fisheries and soil horizons in Greece are also taking a heavy toll. Above all, as the populations of Europe age and people begin to have fewer children based on economic choices (even before the debt problem) GDP is going to shrink. You use the United States as a comparable example but fail to mention the huge boom in births or manufacturing that followed based on on other nation's post-war growth. In other words, for governments to just keep spending money after they have overshot their demographic PPF (Production Possibilities Frontier), the choice is then in one direction only. Government spending must decline because productivity is declining. Very soon we will see Italy go the same route. In this case, Krugman is wrong.
1
Who is derping (as Paul likes to say) now? Greece's problems were decades in the making not the result of recent austerity. Paul's solution is to inflate your way out of debt by reducing the value of the money that you pay it back with. Whatever he want to call it, that is just another form of default, it is just that it has become accepted by economists, so I guess that makes it okay.
Also, as for Paul's consistent referral to the U.S debt load at the end of WWII, he leaves out one important fact, much of that debt was accumulated increasing US production capacity while simultaneously destroying that of our global competitors in Germany and Japan. As such, at the end of WWII, the U.S. accounted for 50% of world GDP and most of its productive capacity. By then extending creditor financing to the rest of the world to buy from us in order to rebuild we utilized that capacity, we were able to grow out of that debt.
With low productive capabilities, early retirement, a generous welfare state, inflexible work rules, and a competitive global economy, that is not an option for Greece. Paul's selective citing of history and denial of even his former statements about ecessive govt debt to satisfy his political agenda is a perfect example the of derping that he so frequently accuses his opponents of.
Also, as for Paul's consistent referral to the U.S debt load at the end of WWII, he leaves out one important fact, much of that debt was accumulated increasing US production capacity while simultaneously destroying that of our global competitors in Germany and Japan. As such, at the end of WWII, the U.S. accounted for 50% of world GDP and most of its productive capacity. By then extending creditor financing to the rest of the world to buy from us in order to rebuild we utilized that capacity, we were able to grow out of that debt.
With low productive capabilities, early retirement, a generous welfare state, inflexible work rules, and a competitive global economy, that is not an option for Greece. Paul's selective citing of history and denial of even his former statements about ecessive govt debt to satisfy his political agenda is a perfect example the of derping that he so frequently accuses his opponents of.
2
Paul,
The final objective of the European Troika's demand for ever-greater Greek austerity is hinted at in Piketty's "Capital in the 21st Century". In a short passage, Piketty observes with wonder at the rise of the Russian Oligarchs from the ashes of the former USSR; that in a brief span of years the world's richest plutocrats sprang from the remnants of the Soviet command economy. Piketty's explanation was that these politically-connected plutocrats were able to purchase state assets for fractions of their real worth, and that formed the basis of their now billion(s)-dollar empires.
The same goal is present here. The moneyed interests of Germany and other industrialized European countries are prompting the Troika to do the dirty work that will permit them to swoop in and purchase Greek government (as well as private) assets for a song. If they stay in the Euro, there will be desperation to raise funds by any expedient means necessary; if the drachma is reconstituted, its value will be so low that it will effectively accomplish the same end.
To those seeking to engorge themselves with the assets of the Greeks, there is only one strategy: more and more austerity.
The final objective of the European Troika's demand for ever-greater Greek austerity is hinted at in Piketty's "Capital in the 21st Century". In a short passage, Piketty observes with wonder at the rise of the Russian Oligarchs from the ashes of the former USSR; that in a brief span of years the world's richest plutocrats sprang from the remnants of the Soviet command economy. Piketty's explanation was that these politically-connected plutocrats were able to purchase state assets for fractions of their real worth, and that formed the basis of their now billion(s)-dollar empires.
The same goal is present here. The moneyed interests of Germany and other industrialized European countries are prompting the Troika to do the dirty work that will permit them to swoop in and purchase Greek government (as well as private) assets for a song. If they stay in the Euro, there will be desperation to raise funds by any expedient means necessary; if the drachma is reconstituted, its value will be so low that it will effectively accomplish the same end.
To those seeking to engorge themselves with the assets of the Greeks, there is only one strategy: more and more austerity.
7
"Greece, unfortunately, no longer had its own currency when it was forced into drastic fiscal retrenchment. " This is the point that the GOP doesn't make. They don't want us to understand how what is happening to Greece is different than what can happen to the United States as a whole. The Gibbering Odious Prunes prefer to paint everything Obama wants to do as disastrous for the economy, their economy, not the one we're living in. Their economy and world view is stuck in the idea that if you don't make enough money to live you don't deserve a decent life rather than understanding that they have enabled much of what is currently wrong with our economy to devastate the middle and working classes. It's always easier to blame those who don't give you your campaign monies.
1
...and further vis a vis my previous post:
The argument presented for QE was that if we increase cash balances with QE, then a _trickle down_ to the greater economy will ensue. QE will increase stock valuations which will trickle down through wealth effect. Increased bank cash balances will trickle down through more lending. Increased corporate cash balances will trickle down through more hiring and investment. Well, the antecedent certainly happened in spades, the trickle down consequent, not so much.
Now you try to walk back the argument in the face of failure to claim that the object was only the antecedent and not the consequent. When people say QE failed because the consequent failed to materialize, your argument is to say the consequent wasn't the point, the antecedent was the point. Well, if that was the goal, then kudos for a rousing success. So what's the point of that, exactly? How does that help, exactly?
But then it wouldn't make a compelling argument against the inflation predictors to admit that the consequent of the QE argument, which was the antecedent of the inflation argument, never materialized.
The argument presented for QE was that if we increase cash balances with QE, then a _trickle down_ to the greater economy will ensue. QE will increase stock valuations which will trickle down through wealth effect. Increased bank cash balances will trickle down through more lending. Increased corporate cash balances will trickle down through more hiring and investment. Well, the antecedent certainly happened in spades, the trickle down consequent, not so much.
Now you try to walk back the argument in the face of failure to claim that the object was only the antecedent and not the consequent. When people say QE failed because the consequent failed to materialize, your argument is to say the consequent wasn't the point, the antecedent was the point. Well, if that was the goal, then kudos for a rousing success. So what's the point of that, exactly? How does that help, exactly?
But then it wouldn't make a compelling argument against the inflation predictors to admit that the consequent of the QE argument, which was the antecedent of the inflation argument, never materialized.
Banksters! Profligacy! Both sides have finally come down from their respective ledges to find the necessary compromise between debt relief on one side and changes to pensions, taxes, tax collection, regulation, etc. The term austerity connotes unnecessary hardship, but there is no way out for Greece without changes. They are necessary. A better term would be sanity.
Greece really does need to reform its economy. Remaining in the EU allows Greeks the opportunity to leave and find work elsewhere in the EU. And it provides a fledgling joint military. These are the reasons Greece wants to and should remain in the EU. Merkel is trying to set the parameters of an EU wide economic policy. Yes, this means a loss of sovereignty. That is the whole point of the EU.
1
What goes unmentioned almost all the time in discussions of Greece's situation is the Greek population's attitude about paying taxes: they don't.
Besides all the perq's the Greek governments have made ingrained components of Greek private life, which cost money, the populace actively avoids paying taxes to the tune of 1/3 of their annual deficit (https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece). Some 15,000 citizens are said to owe the government 37b Euros.
According the WSJ, Greece's government was carrying 76b Euros in unpaid back taxes. (http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-thei...
That's a lot of cash.
I am not anti government-provided health care or retirement programs, active public works programs, or public sector employees being well paid. Quite the contrary. But I find it hard to be overly sympathetic to the common person's plight in Greece in light of their approach towards paying what's due their country's government (which admittedly is said to have its own corruption problems).
This is far from a black and white situation.
Besides all the perq's the Greek governments have made ingrained components of Greek private life, which cost money, the populace actively avoids paying taxes to the tune of 1/3 of their annual deficit (https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece). Some 15,000 citizens are said to owe the government 37b Euros.
According the WSJ, Greece's government was carrying 76b Euros in unpaid back taxes. (http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-thei...
That's a lot of cash.
I am not anti government-provided health care or retirement programs, active public works programs, or public sector employees being well paid. Quite the contrary. But I find it hard to be overly sympathetic to the common person's plight in Greece in light of their approach towards paying what's due their country's government (which admittedly is said to have its own corruption problems).
This is far from a black and white situation.
4
It is tiresome to read unqualified criticism of banks in relation to the current state of play of the Greek crisis. The Banks no doubt had plenty of sins to their credit (sic); however in the 2012 restructuring, commercial creditors (certainly including the Banks) got a 50% haircut (i.e., received 50 cents on a dollar) and an exit pass. That is why virtually all Greek debt is now held by official entities (Eurozone countries or in other words their taxpayers, ECB and the IMF.) So the greedy Banks did not get off unscathed!
Secondly the Debt/GDP ratio can be a useful parameter but may also be misleading. Average maturity of the debt and interest rate charged matter greatly. In the Greek restructurings, maturities were stretched out and interest charges reduced. In the immediate future, the annual burden of servicing the debt is thereby greatly reduced. In this context it is gratuitous to harp on the 170% Debt/GDP ratio since it is really not comparable to the same ratio in 2010 because the actual burden is quite different.
And finally there is the question of equity. The Greek Pension System provides a generous safety net but is not financially self-sufficient. Since many creditor countries have higher retirement ages and stricter provisions regarding early retirement, their taxpayers naturally object to having to contribute to the solvency of the Greek system - and some of them,like Slovakia, are poorer than the Greeks. They all vote too!
Secondly the Debt/GDP ratio can be a useful parameter but may also be misleading. Average maturity of the debt and interest rate charged matter greatly. In the Greek restructurings, maturities were stretched out and interest charges reduced. In the immediate future, the annual burden of servicing the debt is thereby greatly reduced. In this context it is gratuitous to harp on the 170% Debt/GDP ratio since it is really not comparable to the same ratio in 2010 because the actual burden is quite different.
And finally there is the question of equity. The Greek Pension System provides a generous safety net but is not financially self-sufficient. Since many creditor countries have higher retirement ages and stricter provisions regarding early retirement, their taxpayers naturally object to having to contribute to the solvency of the Greek system - and some of them,like Slovakia, are poorer than the Greeks. They all vote too!
4
Paul Krugman's analysis of the Greek situation is a little incomplete to me.
Greece, whatever quantitative easing could be applied and austerity measures lifted will never be able to refund its debt for its economy is way too weak. Greece, apart from tourism (and olive oil !), hardly produces anything that has some export value. Shipping, its most valuable industry, is not taxable, thanks to its unwilling ship-owners and will be very difficult to be taxed under their long-time threat to move their flag to more welcoming countries.
Devaluation could be a tempting option, should Greece opt out of the Euro zone but at a terrible cost for the Greek population who does not want out anyway.
The parallel with Canada is not a pertinent one. Canada is a rich country with a developed industry, great farming and natural resources that Greece does not own.
And Canada has a government. One can hardly say the same about Greece: a total absence of a comprehensive register of real estate, arbitrary fiscal policy, obese administration rife with cronyism, disproportionate military spending ( 4% of the budget in a country at peace).
But P.Krugman is right: The GOP would go out of their way in absurdities to prevent the American administration from reducing taxes on the rich and government spending to aid low-income families.
A sign they have no more arguments.
Greece, whatever quantitative easing could be applied and austerity measures lifted will never be able to refund its debt for its economy is way too weak. Greece, apart from tourism (and olive oil !), hardly produces anything that has some export value. Shipping, its most valuable industry, is not taxable, thanks to its unwilling ship-owners and will be very difficult to be taxed under their long-time threat to move their flag to more welcoming countries.
Devaluation could be a tempting option, should Greece opt out of the Euro zone but at a terrible cost for the Greek population who does not want out anyway.
The parallel with Canada is not a pertinent one. Canada is a rich country with a developed industry, great farming and natural resources that Greece does not own.
And Canada has a government. One can hardly say the same about Greece: a total absence of a comprehensive register of real estate, arbitrary fiscal policy, obese administration rife with cronyism, disproportionate military spending ( 4% of the budget in a country at peace).
But P.Krugman is right: The GOP would go out of their way in absurdities to prevent the American administration from reducing taxes on the rich and government spending to aid low-income families.
A sign they have no more arguments.
1
Changing Republican's minds on economic policy seems to be like trying to get a snake to eat carrots. Somehow the word 'taxes' has gotten into their DNA. It makes their eyes go narrow and they go into a coil ready to strike. Sometimes it seems their only reason for being. Strike and swallow. If there is reasoning ever involved it is what they were born with (Reagan era spawn!).
2
Here's the problem with economics as a profession: it doesn't have enough of a negative feedback loop. If you are a physicist or biologist and you get it wrong over and over again eventually you don't get published any more, and people stop paying attention. The ideas that work are retained and things move forward. Somehow it doesn't work like that with economists.
2
The GOP warns of "the dangers of government debt."--the danger being "predicted soaring interest rates and runaway inflation in 2010 ... 2011." The predictions never came true.
So If dangerous Government debt (P), then high interest and inflation (Q); not Q, then not P. A basic law of logic.
It's behind the definition misattributed to Einstein: "Insanity" is doing the same thing over and over (P) and expecting a different result (Q)--when it is actually not-Q. The problem with the quote is that "same thing" generally
(say "government debt") can vary tremendously in detail (say % of GDP).
"Try, try again"--is doing the same thing--generally--hoping for different results--due to little variations. It's improvement by "trial and error."
Not GOP--theirs is "dooms day logic"--predicted Hell; it applies also to predicted Heaven. They are never the "here and now real" so never verifiable. "Believe" then be Immortal. Don't "Believe" then Die.
Thus the Biblical Paul inflated "the land of milk and honey" (real estate and earthly economic prosperity) for otherworldly rewards--more valuable--but unverifiable and improbable. BUT it undermines the constant complaint--"where's the milk and honey" without excuses--"Yahweh is mad at you--for this or that."
The future is a little otherwordly--it doesn't exist. Yesterday's prediction about the future need not be true today; that's because today is real; tomorrow is the future--a bit like a fictional world. Thus GOP logic.
So If dangerous Government debt (P), then high interest and inflation (Q); not Q, then not P. A basic law of logic.
It's behind the definition misattributed to Einstein: "Insanity" is doing the same thing over and over (P) and expecting a different result (Q)--when it is actually not-Q. The problem with the quote is that "same thing" generally
(say "government debt") can vary tremendously in detail (say % of GDP).
"Try, try again"--is doing the same thing--generally--hoping for different results--due to little variations. It's improvement by "trial and error."
Not GOP--theirs is "dooms day logic"--predicted Hell; it applies also to predicted Heaven. They are never the "here and now real" so never verifiable. "Believe" then be Immortal. Don't "Believe" then Die.
Thus the Biblical Paul inflated "the land of milk and honey" (real estate and earthly economic prosperity) for otherworldly rewards--more valuable--but unverifiable and improbable. BUT it undermines the constant complaint--"where's the milk and honey" without excuses--"Yahweh is mad at you--for this or that."
The future is a little otherwordly--it doesn't exist. Yesterday's prediction about the future need not be true today; that's because today is real; tomorrow is the future--a bit like a fictional world. Thus GOP logic.
2
Another pure fabrication from mr. Krogman. He insinuates that the main focus of the Republican Party is to cut aid to families which is just purely false.
It is growing A bit tiresome as this columnist has a never ending need to find fault with conservatives which require setting up a false narrative.
It is growing A bit tiresome as this columnist has a never ending need to find fault with conservatives which require setting up a false narrative.
2
I wonder if we can now cut aid, like food stamps, back to the 2007 level now that the economy is doing so great and unemployment is back down near 5%. It's easy to give out money, but hard to cut off the largess once it's no longer needed.
Mr. Steve, do you even read the news or are you so wrapped up in your dogma to not see this? Please take a look at Kansas (a case study in pure Republican values), or Louisiana (another case study) - Aid to families has been decimated and taxes on the wealthy cut. Surprise - their economy is in the dumps. Several other cases exist or you can just look at the policy positions of any of the Presidential candidates on the Republican side.
One might argue that the delusions on the Right are tiresome.
One might argue that the delusions on the Right are tiresome.
I live in a State that's about as dependably Republican as they come. Democrats are an endangered specie here. Cutting aid to families is pretty much what Republicans do here. The most conservative corners of our State haven't created a job in about 75 years. For the record, we have 93 Counties and for 75 of those Counties, they reached their peak population before 1920. In most of those dependably Republican counties, they won't build anything unless the Federal government agrees to fund most of it. I've had 65 years to observe day-to-day conservatism in action, and the Professor is pretty accurate.
You'd think there's enough persons in Germany and the EU to realize that, among other things mentioned here, Greece needs to devalue its currency to improve even more the selling position of its scarce exports, of olives, olive oil and feta, though one should be open to the possibility that devaluation won't help tourism, another one of Greece's few mainstays. Since being a part of the EU precluded this for Greece, maybe the real issue is that the eu is not a good fit for some countries, like Greece, whose economy is still as backwards today as in the days of Zorba the Greek, the end of which is an apt metaphor for now (ie outsider professor and his big idea that's supposed to be an uplifting boon to a town mired in its medieval ways comes crashing down on the town). Maybe it's just as well to keep Greece outside of the EU, as well as any other place with similar economies? As for its debt to German lenders, who cares? They knew that they were lending to this bass awkward economy: it's obvious Merkel was bullying Greece to bailout those lenders, and, in the end, it is she and the eu who lose, for revealing what idiots they have been all along.
1
Everyone says "who cares" about the lenders until they won't lend YOU money. Then it becomes a different story.
Krugman writes - "Greece did indeed run up too much debt (with a lot of help from irresponsible lenders). But its debt, while high, wasn’t that high by historical standards."
On one hand you blame the creditors for lending irresponsibly, on the other hand you say the debt wasn't too high!! Make up your mind.
You want the creditors to behave the way you want them to. Well, the world is the way it is. If you can't handle high debt, just don't take it. Nobody forced Greece to borrow irresponsibly. Everybody understands the cons of having once currency, but there are lots of pros of being part of a common Euro zone network (Socially, politically and economically!!) which you never talk about. This is intellectual dishonesty. You want the world to behave in a way in order to prove your theories right!
I wonder if you lend money to someone and when they are not able to pay back, will you be as forgiving as you are asking others to be??
On one hand you blame the creditors for lending irresponsibly, on the other hand you say the debt wasn't too high!! Make up your mind.
You want the creditors to behave the way you want them to. Well, the world is the way it is. If you can't handle high debt, just don't take it. Nobody forced Greece to borrow irresponsibly. Everybody understands the cons of having once currency, but there are lots of pros of being part of a common Euro zone network (Socially, politically and economically!!) which you never talk about. This is intellectual dishonesty. You want the world to behave in a way in order to prove your theories right!
I wonder if you lend money to someone and when they are not able to pay back, will you be as forgiving as you are asking others to be??
3
If you lend money to someone and that person is entirely unable to pay you back, even if he no longer is able to buy food for himself, do you negotiate a cut in the principle owed, or do you continue to demand full payment, knowing that the person will declare bankruptcy and you may not even get 10 cents on the dollar?
Hey, it was your example.
Hey, it was your example.
Krugman is either a blind, radical Marxist believer or he is a disgusting propagandist. He builds this twisted argument based on multiple questionable assumption downplaying Greece's debt and ignoring the fact that Greece's leaders responsible for the crisis hold exactly Krugman's failed economic/political views.
Krugman's ideas do however have some value - leaders should listen to Krugman's proposals and know with certainty that is the wrong way to go.
Krugman's ideas do however have some value - leaders should listen to Krugman's proposals and know with certainty that is the wrong way to go.
3
jacobi, Prof. Krugman has made it his life work to study exactly the economic situations that Greece is experiencing. How many years, days, hours? have you studied economics?
I will stick with the expert's opinion. He has been mostly right all along and when he is wrong he openly admits it.
BTW, to call someone a Marxist is no slander. Marx was a remarkable accurate predictor of the consequences of unbridled capitalism.
I will stick with the expert's opinion. He has been mostly right all along and when he is wrong he openly admits it.
BTW, to call someone a Marxist is no slander. Marx was a remarkable accurate predictor of the consequences of unbridled capitalism.
Krugman has been saying for years that Greece's inability to control its own currency was an issue. If Greek leaders held his views, they would not be on the Euro and would have devalued their currency to improve their debt to GDP ratio and increase exports. Do you have any empirical support for your views? Because Dr. Krugman does. It is all well and good to disagree with someone, but you provide absolutely no support for your views.
"Blind, radical Marxist!" Really? Haven't read much Marx, have you? Apparently haven't read much Krugman, either. You might want to start with his textbook, entitled simply "Economics." I know it's pretty expensive--it cost me $215 on Amazon--but it does explain the basics pretty well. Do you also favor returning to the gold standard? Just curious. Granted, the Nobel Prize is awarded by those Socialist Swedes, but that doesn't prove they are wrong about EVERYTHING. After all, they gave it to Milton Friedman, too. While you are catching up on your reading, you might also want to look at Friedman's analysis of the Great Depression, in which he concludes that our adherence to monetary rigidity contributed greatly both to the depth and duration of our suffering in that world-wide economic downturn.
1
The critical evaluation of the Greek crisis and the comparative analysis with the Republican Party is spot on. In Pennsylvania the Corbett administration (that lasted one term only) imposed more austerity will reducing taxes for the wealthy (and refusing to tax fracking companies), slashing funds for education by over $1 billion annually and then further slashing government agencies and services. The result was disastrous for PA and the Republicans. The Corbett policies almost destroyed the education system by starving it financially and then added to the pain by refusing to fund teachers and state employee pension plans. Then the Republican lead administration added more oil to the fire by refusing to fund the Department of Transportation letting bridges and roads decay while postponing work and laying off more state workers. All that and refusal to accept the money for the insurance exchanges for Obama care did nothing for PA or the Republicans.
In Florida, the Republican administration is going down the same path as PA. The result is roads not maintained, an education system that is failing and continued impoverishment and unemployment for thousands of Floridians.
Professor Krugman is right. Austerity and tight money gets everyone nowhere and does far more harm to citizens than even imagined. Republicans should start not just taking note but they should also change direction. Our economy and our future is at risk.
In Florida, the Republican administration is going down the same path as PA. The result is roads not maintained, an education system that is failing and continued impoverishment and unemployment for thousands of Floridians.
Professor Krugman is right. Austerity and tight money gets everyone nowhere and does far more harm to citizens than even imagined. Republicans should start not just taking note but they should also change direction. Our economy and our future is at risk.
4
Ditto in Michigan. I would like to say that it was the extreme hatcheting of the public education system that got everyone up in arms, but it is the condition of the roads that will be the final pothole for the all-republican-all-the-tine governance of the state.
1
Austerity: Cure the disease by killing the patient.
93
Nostradamus was a smart fellow--if around today, he'd see that Republicans are wrong about the economy, wrong about military interventions, wrong about minority rights, and in control of both houses of congress. Roughly 50% of American voters like these wrong policies--wanna guess the correct prediction of our future?
2
Does Krugman ever write a new column? He trots out the same ideas, as well as the same insults, and the same narrow, one-sided perspective on complex financial and economic issues in every column (or should I say calumny since that better represents his distortions of the views, and characters, of anyone who disagrees with his views). I expect a little more maturity, humility, and nuance, as well as open-mindedness, from someone who is past the age of 60 and is a Nobel laureate and tenured full professor at a major university. But then we live in an age of attack, name-calling, and most especially ENABLEMENT of such puerile behavior. The fault then, I guess, isn't with Krugman- it's with us.
8
Coming next from Professor Krugman, "How Republican thought can cause autism, pedophilia and bad breath."
This article is so rabidly unbalanced it should not be printed in a respectable paper like the New York Times.
This article is so rabidly unbalanced it should not be printed in a respectable paper like the New York Times.
5
Prof. Krugman is an op-ed writer, not a journalist. He is expected to write his opinion. You get balance by reading other opinion writers.
There are those, and Professor Krugman is one, who do not subscribe to the popular but egregious press practice of saying something nice about both sides in a debate, even if the facts on the ground are rather one sided. And you have said nothing here to convince us that the facts of the matter are not as one-sided as they are presented here.
Good luck with that, because there are no facts, or science, or rationality that I can see in right wing land, only wishful thinking and testosterone fueled emotion.
Good luck with that, because there are no facts, or science, or rationality that I can see in right wing land, only wishful thinking and testosterone fueled emotion.
You act as though Republicans don't know perfectly well where their policies are heading: lower government spending flowing to lower taxes on the 1%. Economic growth and the 99% be damned.
3
If I were Greek and had the price of a plane ticket, I'd leave the country. Why would anyone stick around, working himself into an early grave, just to bail out Angela Merkel and the international banking system?
3
Yes and who's going to give you a visa to live and work in their country?
Good question. I suggest you interview citizens of Mexico about why they stay in their homes rather than attempt to come to America. Turns out, there's a lot of reasons.
As this space there has pointed out many times: there are serious impediments structurally to long term Euro success. The Euro (and EU) has (have) no FED, nor a real federal government to act for the "union". Hence in a pinch each member nation is on its own, and good luck.
But it seems to me identity, a very squishy commodity, is actually central, and the lack of structures is an effect that. In the US we see those in AK, AL, FL, ID & NH as much "us" as CA, NY, IL etc. If something lousy like a hurricane, a recession, or even longterm poverty (if Dems in WH) exists anywhere that is OUR problem. We share a common language, broad culture, and history. We embrace the identity. Europe ? Not so much. There it is "our money, their problem" (even though clearly it is a continent wide condition).
In that way the EU is more like the ex Soviet Union than the US.
But it seems to me identity, a very squishy commodity, is actually central, and the lack of structures is an effect that. In the US we see those in AK, AL, FL, ID & NH as much "us" as CA, NY, IL etc. If something lousy like a hurricane, a recession, or even longterm poverty (if Dems in WH) exists anywhere that is OUR problem. We share a common language, broad culture, and history. We embrace the identity. Europe ? Not so much. There it is "our money, their problem" (even though clearly it is a continent wide condition).
In that way the EU is more like the ex Soviet Union than the US.
5
Can we please, PLEASE, get a Krugman article that just stats facts and makes an economic points without always relooping back to the Republican party? I was genuinely interested in the Greece situation and its parallel to America, and then...."So who wants to impose that kind of toxic policy mix on America? The answer is, most of the Republican Party."
You're an absolute broken record Paul.
You're an absolute broken record Paul.
6
He IS stating the facts.
Looping back to the parallels with Republican economic policies is the important part. You just want facts and no insight? A person can just be a rubber necker at a fatal car crash and observe the gore OR one might absorb the lesson that driving drunk can make you into a corpse. The second choice is the one that can improve your life.
As always, Krugman leads with economics then gets into politics and carefully selects only parts of the story that support how world view. In this case he tells us about Greek debt austerity and hard money but he skips over major points in negotiations: restructuring the tax and pension systems. Why does Krugman ignore these major points? Because he is pushing a political point of view and wants to skew the story. Stick to economics and leave politics to people and their politicians.
8
Economists aren't people? I wonder if Krugman knows...
My only question is how can a country with only 11 million population create a havoc in the world markets. I am no economist but given the 11 million population there is some disconnect some where.
That is 1.5% of entire Europe and 0.15% of world population. In another words there are 3 Greeks for every 2000 persons. So 3 Greeks have the capacity to destroy what the remaining 1997 persons have? Our Economic theories have serious problems even if we are interconnected.
That is 1.5% of entire Europe and 0.15% of world population. In another words there are 3 Greeks for every 2000 persons. So 3 Greeks have the capacity to destroy what the remaining 1997 persons have? Our Economic theories have serious problems even if we are interconnected.
2
But Prof Krugman answered your question in the first sentence of his article. Greece cannot create havoc in the world markets.
"the same people who predicted soaring interest rates and runaway inflation in 2010; then, when it didn’t happen, ...; then, well, you get the picture."
Still arguing that disproved claim are we? And the other side predicted that QE would (a) save the economy by (b) predicting the QE would cause more liquidity being injected into the economy. Well both predictions turned out wrong, well, you get the picture. And the thing is, the prediction of inflation was predicated on prediction (b) which did not happen, it is a logical fallacy to claim the consequent was in error if the antecedent never materialized.
That is to say, the LOGIC and PRINCIPLE that led to the prediction was not in error, the "error" was that the antecedent on which that prediction was based did not materialize.
If A then B is not disproved by - If not-A then not-B. If liquidity L injected, then inflation will result. It turned out If L not injected then no inflation. These are two logically independent expressions so the latter cannot be used as a argument to "disprove" the former. In fact they are consistent.
Need I remind you, the antecedent was the argument for QE. And your counter argument that that is not the case is also a fallacy. Would QE inject L directly? No. It's function was to inflate balances so that institutions would in turn do so. Trying to argue the means is different does not disprove the intended end result was as stated. Why would the the point be balances with no L in the economy?
Still arguing that disproved claim are we? And the other side predicted that QE would (a) save the economy by (b) predicting the QE would cause more liquidity being injected into the economy. Well both predictions turned out wrong, well, you get the picture. And the thing is, the prediction of inflation was predicated on prediction (b) which did not happen, it is a logical fallacy to claim the consequent was in error if the antecedent never materialized.
That is to say, the LOGIC and PRINCIPLE that led to the prediction was not in error, the "error" was that the antecedent on which that prediction was based did not materialize.
If A then B is not disproved by - If not-A then not-B. If liquidity L injected, then inflation will result. It turned out If L not injected then no inflation. These are two logically independent expressions so the latter cannot be used as a argument to "disprove" the former. In fact they are consistent.
Need I remind you, the antecedent was the argument for QE. And your counter argument that that is not the case is also a fallacy. Would QE inject L directly? No. It's function was to inflate balances so that institutions would in turn do so. Trying to argue the means is different does not disprove the intended end result was as stated. Why would the the point be balances with no L in the economy?
1
QE DID save the economy. We did NOT have a Greek-style depression. The Republicans imposed austerity; the Fed proposed easy money to counterbalance that. Voila-- a balance such that the country teetered between mild recession and slow growth. The alternative-- austerity without QE-- would've given us Greek-style depression.
If you are going to counter someone's argument, you should at least start by representing it correctly. No one has argued that QE would overcome austerity to create massive growth and liquidity; just that QE would compensate for it.
If you are going to counter someone's argument, you should at least start by representing it correctly. No one has argued that QE would overcome austerity to create massive growth and liquidity; just that QE would compensate for it.
3
Meanwhile over in the real world the Greeks have just submitted proposals to the Eurogroup which are essentially the same as those they rejected overwhelmingly in a referendum last Sunday in which Krugman urged rejection. Why have they done this? The Greek economy is imploding.
4
Greece Greece Greece all the time everywhere. Fine. An important crisis to be sure and so on. But there is another crisis unraveling much closer to home and in the U.S., trivialized by silence and dismissal: Puerto Rico's economic collapse. Prof. Krugman wrote lightly about it last week but nothing since. What is he and others waiting for? Read this:
http://www.economist.com/news/united-states/21657380-many-reasons-mainla...
http://www.economist.com/news/united-states/21657380-many-reasons-mainla...
1
If you want to see what will happen if the Republicans gain control of fiscal and monetary policy, take a close look at Kansas where the governor and legislature are forcing this policy and view on the state and have been in violation of the state constitution according to the Kansas Supreme Court. These branches of government are so at odds, the the legislature and governor are re-writing the rules. After all, when Pres. A. Jackson was at odds with the SCOTUS, he simply ignored it. Gov. Brownback is doing the same. What do you call an elected official that ignores the law and the court system?
6
I agree with everything you write. But why do people on the right strongly believe in policies that have been scientifically disproven? I would argue that it's the cold, dead hand of paleogenetics that determines their world view (other aspects of that determine the world view of people on the left of the political spectrum, but that's another story).
All of this is takes place unconsciously, of course.
The genetically hardwired drive to control the behavior of everyone in the group--to make sure there are no cheaters or freeloaders--permeates our DNA, leading everyone from Mitt Romney (remember the 47 percent ?) to the IMF to impose a harsh straitjacket on others, even when those policies have been scientifically disproven.
All of this is takes place unconsciously, of course.
The genetically hardwired drive to control the behavior of everyone in the group--to make sure there are no cheaters or freeloaders--permeates our DNA, leading everyone from Mitt Romney (remember the 47 percent ?) to the IMF to impose a harsh straitjacket on others, even when those policies have been scientifically disproven.
4
Your kidding right? This was intended as a joke Right. Greece's downfall is because of liberal policies that created a welfare state. Are Republicans suggesting this? It is only people like you that are suggesting that we follow the EU model
When you write stuff like this it makes you look silly.
When you write stuff like this it makes you look silly.
9
Ron:
First of all, the first word in your comment, "your", should be "you're".
Secondly, your blanket opinion "Greece's downfall is because of liberal policies" is unsupported by either fact or reasoning.
When you write stuff like this, Ron, it demonstrates that you don't just look silly, you *are* silly.
First of all, the first word in your comment, "your", should be "you're".
Secondly, your blanket opinion "Greece's downfall is because of liberal policies" is unsupported by either fact or reasoning.
When you write stuff like this, Ron, it demonstrates that you don't just look silly, you *are* silly.
You don't actually read Krugman's columns, do you? No one, including Krugman, has said excessive government spending did not trigger Greece's problems. What he and others have forcefully argued is that EU and creditor imposed remediation policies, coupled with problems intrinsic to the Euro, have made the situation much worse. He said this right in the article-- in fact this is the very point of the article-- and yet you totally ignore this. Basically, you stuck in your fingers in your ears and said, in summary, "LALALA I already know it's the liberals so I am not even going to read your article."
Yeah, and that's why economies are imploding across Scandinavia. Oh wait...
If republicans were concerned about debt they would have allowed the government to use their buying power in order to negotiate the best drug prices they can!!
3
Do economists get anything right and why are they so ubiquitous?
If you have a shortage of doctors you have a problem.
If you have a shortage of teachers you have a problem.
If you have a shortage of police you have a problem.
If you have a shortage of farmers you have a problem.
if you have a shortage of tradesmen you have a problem.
If you have a shortage of economists - no problem.
If you have a shortage of doctors you have a problem.
If you have a shortage of teachers you have a problem.
If you have a shortage of police you have a problem.
If you have a shortage of farmers you have a problem.
if you have a shortage of tradesmen you have a problem.
If you have a shortage of economists - no problem.
1
well, if you listen to a smart economist, you create an economy that sustains infrastructure, tourism, security, business, education... all the aspects of life that attract doctors, teachers, etc . If you allow financiers to loan your gov't trillions in toxic derivatives (anyone remember those folk at Goldman Sachs et al) you'll bite the dust along with the rest of the global economy. I don't remember any macro economist, and never PK, suggesting that toxic paper was a good idea. Absence of good economic advice was a problem.
Every column he writes is full of hate and ridicule. This is how the hero to the left behaves? Greece borrowed too much, spent too much, and gave too much to non-productive members of their society. We are doing the same here, the only reason we are not like them yet is because we are a much larger and more diverse economy, we are artificially holding interest rates at zero, and the dollar is the world's reserve currency. If interest rates go up here, we will be headed towards Greece at a much faster pace. Right now, these policies under Obama are only benefiting the 1% while everyone else has seen their wages drop - is that the model economy Krugman wants? Oh, that's right, he is in the 1%.
5
@ Mf Reasonable
Er....real wages aren't dropping and if you think the 90% of the country who are up to their ears in debt (household debt is around 12.5 trillion) are not benefitting enormously from record low interest rates then you are either a fool or disingenuous.
Er....real wages aren't dropping and if you think the 90% of the country who are up to their ears in debt (household debt is around 12.5 trillion) are not benefitting enormously from record low interest rates then you are either a fool or disingenuous.
Can you provide an example of "hate" in this article, please. I will admit he does hold some up to ridicule; mainly because they espouse ideas that seem ridiculous. But "hate"? Please!
While Krugman's assessment is correct, we also have to keep in mind that government spending in Greece is 60 percent of GDP (much higher than here), its economy's GDP is low and not based on diversity of products both for domestic consumption (two-thirds are imported) and for export, and that while citizens want generous socialism and public employment, they are not willing to pay for it — tax evasion is rampant. Greece's elected leaders have failed to deal effectively with any of these issues, and voters let them.
Eclectic Pragmatist — http://eclectic-pragmatist.tumblr.com/
Eclectic Pragmatist — http://eclectic-pragmatist.tumblr.com/
3
Government spending as a percentage of GDP prior to this crisis was high. But cutting of government spending has made this percentage higher, not lower, because the GDP has dropped. That's the point-- fiscal austerity without monetary stimulus= depression.
I agree with you on collecting tax revenues. But this requires time to both build up the infrastructure to go after tax collectors (essentially, funding and strengthening their IRS) as well as the cooperation of offshore (mainly Swiss) bankers in ferreting out evader's accounts.
BTW, where is the argument for funding the US IRS to prevent Greek-style tax evasion?
I agree with you on collecting tax revenues. But this requires time to both build up the infrastructure to go after tax collectors (essentially, funding and strengthening their IRS) as well as the cooperation of offshore (mainly Swiss) bankers in ferreting out evader's accounts.
BTW, where is the argument for funding the US IRS to prevent Greek-style tax evasion?
Greece's most important lesson for the US is NOT to call a public referendum on the question if we should pay our debt to China, currently at $ 1,3 trillion.
The American public, not trained in international relations, might well vote NO, with a little help from Dr. Krugman, that doing so would be economically beneficial.
The American public, not trained in international relations, might well vote NO, with a little help from Dr. Krugman, that doing so would be economically beneficial.
1
We never have to pay our debt to China because like any one else that accepts our pieces of paper for goods that is all they get.
Another myth. There is no explicit "debt to China". China just buys massive amounts of T-bills. The only way not to "pay our debt to China" is for the Treasury to stop redeeming T-bills for everyone. Which the Treasure are required by law to redeem, and which they can just redeem by "printing money."
Thus, "debt to China" is nothing like debt as we know it, but just another way for China to hoard US currency and manipulate exchange rates in order to boost their exports.
Thus, "debt to China" is nothing like debt as we know it, but just another way for China to hoard US currency and manipulate exchange rates in order to boost their exports.
Dear Professor Krugman: The American people, no matter what their party or cognitive style (intuitive or analytical) would not invite economic disaster by approving of Republican economic policies, if they understood the consequences of those policies, as they understand what the result is of jumping off of a tall building with nothing but your street clothes. But they don't understand the consequences of economic policies with that clarity and force, because economics is hard stuff and is often counter intuitive. Indeed, many senior Republicans, who are true believers, are just as confused.
So the pedagogic task is to educate the public about esoteric macroeconomics so that they get it, just as they get jumping off a tall building. How does one do that?
You are a very good teacher when it comes to explaining economics to the uninitiated (which is why I think that you should always teach at least one introductory class), but even your pedagogic skills, thought they reach many in your column and blog, aren't enough. There are many who either don't hear you, or, if they hear, still don't understand. So what's needed is to establish ethical and competent authorities that people respect and trust.
But how do you do that? How do you establish ethical and competent authorities and win the people's trust in those authorities, especially in an age, such as ours, where liars, scoundrels, and fools are myriad and set themselves up as authorities to deceive the people?
So the pedagogic task is to educate the public about esoteric macroeconomics so that they get it, just as they get jumping off a tall building. How does one do that?
You are a very good teacher when it comes to explaining economics to the uninitiated (which is why I think that you should always teach at least one introductory class), but even your pedagogic skills, thought they reach many in your column and blog, aren't enough. There are many who either don't hear you, or, if they hear, still don't understand. So what's needed is to establish ethical and competent authorities that people respect and trust.
But how do you do that? How do you establish ethical and competent authorities and win the people's trust in those authorities, especially in an age, such as ours, where liars, scoundrels, and fools are myriad and set themselves up as authorities to deceive the people?
4
Krugman is missing the point again. He mutilates and crushes and twists the truth in order to force it into his "austerity" narrative.
Greece is not an austerity story; it is a story of a pervasively corrupt and grossly mismanaged economy.
Therefore any bailout that does not include concrete plans with enforceable deadlines for reforming the Greek economy will simply enable the Greeks' worst habits and make another replay of this crisis inevitable.
Here is the rub: The EU cannot trust Tsipras and Syriza to keep their promises to reform the Greek economy. Why? For one thing, they don't know anything about economics or governance; they are simply bomb throwers who graduated from college with majors in student activism. Second, they have made no secret of the fact that they are ideologically opposed to the necessary reforms.
An alternative would be to create a "Emergency Financial Control Board" (as was done in the case of NYC in the 1970s). That board would oversee and enforce the terms of the bailout. But that is unworkable because Greece is a sovereign country and one that is pathologically touchy about its sovereignty.
So the Greeks have painted themselves into a corner. That leaves Grexit as the only way out.
Krugman doesn't understand that if you subsidize a problem you don't cure it -- you just wind up with a bigger problem.
Greece is not an austerity story; it is a story of a pervasively corrupt and grossly mismanaged economy.
Therefore any bailout that does not include concrete plans with enforceable deadlines for reforming the Greek economy will simply enable the Greeks' worst habits and make another replay of this crisis inevitable.
Here is the rub: The EU cannot trust Tsipras and Syriza to keep their promises to reform the Greek economy. Why? For one thing, they don't know anything about economics or governance; they are simply bomb throwers who graduated from college with majors in student activism. Second, they have made no secret of the fact that they are ideologically opposed to the necessary reforms.
An alternative would be to create a "Emergency Financial Control Board" (as was done in the case of NYC in the 1970s). That board would oversee and enforce the terms of the bailout. But that is unworkable because Greece is a sovereign country and one that is pathologically touchy about its sovereignty.
So the Greeks have painted themselves into a corner. That leaves Grexit as the only way out.
Krugman doesn't understand that if you subsidize a problem you don't cure it -- you just wind up with a bigger problem.
7
Greece's problems extend to the fact that 50% of its population is on some form of government pension. Has a hugely bloated and inefficient bureaucracy. Finally they have a cadre of leadership who are afraid to make tough and painful choices. Sometimes you have to cut off the arm to save the body.
2
Mr. Krugman is of course right on the main points----but those who claim to want to reduce government spending always focus on the minuscule dollars allocated to welfare mothers and scientific research, while blithely throwing off-the-budget trillions into military spending. Our roads,bridges, and schools are falling apart---and everybody in Washington wrings their hands, claiming there is simply no money available to address these issues. But the very same elected officials never place any limits on military and war contractor profiteering, as portions of those same profiteering dollars are kicked back to drive congressional campaign finance for both Democratic and GOP parties. Democracy is on its last legs, unless enough Americans wake up and insist that the dollars we pay in taxes must be invested in our own infrastructure, and not used to finance wars of opportunity without end.
2
Paul, as usual, is very selective in his use of figures.
Note that Paul acknowledges "some write down" of Greek debt in 2012. The haircut was 40% for private debt holders and 40% to 60% for government debt holders. It was voluntary but when you put the debt back to it's original value, all of Paul's numbers post 2012 are distorted. The debt increased with the draw down of the E 100 billion bail out.
In 2012 the debt holders agreed to cut interest rates from 6% to 3.5% and extend the repayment period from 7 to 15 years. This substantially lowered the value of all debt but not all debt holders took the writedown.
Here are the Greek numbers from 2004 to 2009:
Output +40%
Expenditures + 87%
Tax revenue + 31%
The Greek government was running a deficit before 2004. Note that expenditures grew 56% more than revenue while GDP grew over 8.5% per year over this period. Does that sound like a GDP problem? Over 50% of the growth was coming from government expenditures. Of course, the lenders by 2012 refused to continue to fund the deficits without a reduction in expenditures and an increase in income.
Paul would have you believe that all Greece had to do was to continue to borrow to solve the problem. Paul's selective figures are a gross distortion aided by accounting that has consistently understated Greek debt and overstated forecasts.
Sound familiar? Federal, state and local USA government expenditures plus direct pull through are now over half of US GDP!
Note that Paul acknowledges "some write down" of Greek debt in 2012. The haircut was 40% for private debt holders and 40% to 60% for government debt holders. It was voluntary but when you put the debt back to it's original value, all of Paul's numbers post 2012 are distorted. The debt increased with the draw down of the E 100 billion bail out.
In 2012 the debt holders agreed to cut interest rates from 6% to 3.5% and extend the repayment period from 7 to 15 years. This substantially lowered the value of all debt but not all debt holders took the writedown.
Here are the Greek numbers from 2004 to 2009:
Output +40%
Expenditures + 87%
Tax revenue + 31%
The Greek government was running a deficit before 2004. Note that expenditures grew 56% more than revenue while GDP grew over 8.5% per year over this period. Does that sound like a GDP problem? Over 50% of the growth was coming from government expenditures. Of course, the lenders by 2012 refused to continue to fund the deficits without a reduction in expenditures and an increase in income.
Paul would have you believe that all Greece had to do was to continue to borrow to solve the problem. Paul's selective figures are a gross distortion aided by accounting that has consistently understated Greek debt and overstated forecasts.
Sound familiar? Federal, state and local USA government expenditures plus direct pull through are now over half of US GDP!
5
Just keep saying, "It's all about debt to GDP ratio; it's all about debt to GDP ratio...." You'll get through this.
No Dr. Krugman would have you believe that many states have public sectors that clock in at 50% of GDP (including the might Germany), but that what keeps Greece locked into an endless depression is the inability to devalue their currency.
No Dr. Krugman would have you believe that many states have public sectors that clock in at 50% of GDP (including the might Germany), but that what keeps Greece locked into an endless depression is the inability to devalue their currency.
And why should we believe that the Republican strategists do not know that this is the case? Surely they are prepared to blame Obama when their policies create a major depression, "see, if we hadn't intervened it would have been so much worse!"
I don't know about Greece (or Germany for that matter), but it is pointless to expect the American electorate to understand macroeconomics. Most of them have had no exposure to personal finance in high school or college, let alone microeconomics. Their understanding of all things money is actually worse than the professed beliefs of Rand Paul or Paul Ryan (both of whom claim to be experts?)
I don't know about Greece (or Germany for that matter), but it is pointless to expect the American electorate to understand macroeconomics. Most of them have had no exposure to personal finance in high school or college, let alone microeconomics. Their understanding of all things money is actually worse than the professed beliefs of Rand Paul or Paul Ryan (both of whom claim to be experts?)
1
Don't forget the Republicans aversion to tax collection. Hamstring the IRS so that they cannot afford to collect taxes from those able to afford complex tax avoidance schemes.
2
This article, as well as other recent articles by Professor Krugman about the Greek crisis, are exposing the truth about Professor Krugman's dogmatic application of Keynesian economic theory. That is, there are limits. This particular piece brings to mind the Hans Christian Anderson fable about the emperor and his clothes. I hope Professor Krugman takes some of his own advice and tries "to understand the real lessons of Greece."
"Lessons" and "Republicans" don't usually go hand in hand, unless it's about employing racial dog whistle politics or funneling secret cash; then they have that stuff down pat. Economic lessons for real people? Not so much.
1
The incessant drumbeat of 'inflation' has been effective in assuring the wealthy remain wealthy; their wealth gains more value with greater deals to be had while hell bent in destroying the middle class. Its just the nature of the beast consuming itself --- taking the rest of us and our environment with it.
1
Hmmmm an interesting treaties on the Greek problem turned into his usual political harangue against the Republicans....too bad.
I would be much more interested in hearing Dr Krugman's opinion on Puerto Rico's debt problem contrasted to Greece's. I think the similarities make more sense this one does.
I would be much more interested in hearing Dr Krugman's opinion on Puerto Rico's debt problem contrasted to Greece's. I think the similarities make more sense this one does.
1
You would have thought Europe could afford to buy greater Miami outright. This is about punishment, not debt, and it is motivated as much by German self-interest as by Greek self-interest.
1
Dr. Krugman's analysis of the Canadian situation is correct and a good analogy in respect of what Greece could NOT do. The Canadian dollar gained in value after that episode but is now back down to about 78 cents US - largely because of the severe declines of commodity prices in the recent past, to which the country is over-exposed because the economy's international trade (and domestic output) is insufficiently diversified. We are too commodity-dependent. In a way, Greece faces the same issue of an undiversified economy, relying too much on tourism and agricultural exports. Greece needs a program and a strategy that helps it to develop a growing and diversified economy that will generate the kind of surpluses needed to grow its way out of its problems. At a different level and in different ways, the same could be said for Canada.
1
I'd think Greece would be their paradise rather than a cautionary tale; rich Greeks hardly pay any taxes.
3
Amen to Bart DePalma! We're increasing the "permanently-out-of-the-workforce" population every month of the Obama tenure, approaching the 100,000,000 milestone. Yeah, that printing money is a wonderful program.
2
It's not complicated. The Repulsicans are full-bore supporters of America's inexorable movement to a feudal society. Their politicians answer only to the Corporate Paymasters and Feudal Overlords. The rich will simply own and control everything (often through Corporations--who are people!) and pay little or no taxes. They will have the "little people" pay for the roads, bridges, highways, water and sewer systems, military, police and fire services, ports, airports, courts, transportation systems, and schools that educate their menial-paid worker slaves. And they'll use any line of hooey it takes to make that happen: "Fix the Debt!" "Stop the Spending!" "Pull yourself up by your own bootstraps," "Makers and Takers," "We Built it." ........What a Brave New World.
4
Hello Mr. Krugman!
As in all priesthoods, language and vocabulary particular to the religion carries much weight (and symbolism). You are to be commended for generally using little of the economic jargon that can baffle the unschooled reader. In this article, however, you used the term "hard money" to describe one of the major reasons behind the Greek crisis. Combined with "easy money" (and the ultimate in hard money, the gold standard), I sense a need for guidance. Would you consider doing a short tutorial on the subject? Thank you!
Will Stephenson
As in all priesthoods, language and vocabulary particular to the religion carries much weight (and symbolism). You are to be commended for generally using little of the economic jargon that can baffle the unschooled reader. In this article, however, you used the term "hard money" to describe one of the major reasons behind the Greek crisis. Combined with "easy money" (and the ultimate in hard money, the gold standard), I sense a need for guidance. Would you consider doing a short tutorial on the subject? Thank you!
Will Stephenson
What Paul; wants everyone to forget is the cause of the Debt Crisis!
Why did the debt levels become so high ??
Everyone knows the answer ...but they do not want to accept the answer.
The growth of debt to an unsustainable level was due to the overly generous welfare state.
The US must learn from the example of Greece and avoid growing the US welfare state.
A large welfare state is unsustainable!!
See how easy it is to prove a Nobel Prize winning economist wrong !!
Why did the debt levels become so high ??
Everyone knows the answer ...but they do not want to accept the answer.
The growth of debt to an unsustainable level was due to the overly generous welfare state.
The US must learn from the example of Greece and avoid growing the US welfare state.
A large welfare state is unsustainable!!
See how easy it is to prove a Nobel Prize winning economist wrong !!
2
"See how easy it is to prove a Nobel Prize winning economist wrong !!"
Not really, no. That would be a "nope."
Looking for a few footnotes, a little evidence, maybe. Some economic jargon attached to theories or formulas. Still, thinking, no, here.
Not really, no. That would be a "nope."
Looking for a few footnotes, a little evidence, maybe. Some economic jargon attached to theories or formulas. Still, thinking, no, here.
One issue that constantly gets muddled up in these kind of discussions, Dr. Krugman is by no means the sole culprit, is the fact that it is not reasonable to compare Greece and US (or Canada). In reality Greece is a member state of a semi-federation, so really you should compare Greece to Puerto Rico. Would you recommend Puerto Rico to start printing their own pesos if monetary policy of the Fed is not favorable to them?
2
Paul, it's not about 'slashing' spending as it is not getting in debt in the first place. Of course, the blame for this rests with the Left. Therefore Greece's economy is more a lesson for Democrats.
2
I am always amazed at how little people on the political right understand economics. When you suggest that they go back to college, you hear all manner of excuses. I chuckle when I hear the one about all professors being liberals or failures. If you want to watch a bunch of goons, just turn on the stock market channel (although Bloomberg is a little more sophisticated). My Republican Congressman makes a fool out of himself every time he opens his mouth on the subject. My Republican Senator (a political science major) has never taken the first course in macroeconomics) but he is constantly making economic policy suggestions. My suggestion to all of them: GO BACK TO SCHOOL, and quit making excuses. Professor Krugman has a very good textbook on the subject, used in the honors courses of my local college.
4
My question for Professor Krugman is whether a Greek-like scenario can happen on a state level here? Granted, I know there wouldn't be discussion of leaving the dollar but what would be the solution if a state runs into a default situation (similar to what is happening in P.R.)?
We and the Europeans have learned a couple of things from the crisis in Greece. The euro is an inherently flawed currency, a straightjacket hobbling an economy like Greece's in trouble. Many people apparently knew it from the beginning and said so. I did not. Can it be fixed? The second is even more distressing. The EU is not a nation and the odds that it can become one aren't great. Knew the former but not the latter. No common language, unfavorable history, disparate cultures, lingering tribalism and nationalism. Germany's contempt for Greece seems to be only matched by Greece's for Germany. In what sense are the European countries a community? Despite all this, the Greeks want to keep the euro and stay in the EU. So, despite the odds against it, Europeans may decide they would be worse off without the EU, even without the euro. Perhaps the EU is a rudimentary community, still being born, and these are rather bad birth pains. Hard to watch and a horror to live through.
2
So let me get this right. All we need to do to avoid being like Greece is spend more, and devalue our currency. Sounds good. Let's get the party rolling!
35
Actually, you are entirely correct. We do need to spend more money on the right things, like financing infrastructure projects around the country. The economic benefits would be enormous, just as they were earlier when the Republicans under Eisenhower used to support such policies. Alas, they no longer do. A dollar worth something less than now would also benefit exports, which is something Republicans say they favor, but which gets lost in all the "debasing the currency" nonsense.
1
By that do you mean having sovereign monetary and fiscal policies? Then, yeah, that's what it has taken (turn around and look behind you :)
1
We've been doing that since the Great Depression.
1
The Republicans are right, "'We're Greece!" In fact, it's already happened due, as you note, to "irresponsible lenders." We have a population equivalent to Greece--our sons, daughters, brothers and sisters who are carrying over $1 trillion in unsustainable student loan debt. I just received a letter informing me that the interest on my son's student loan that I co-signed has just been raised to 7.29 percent. And that from the "too big to fail banks" that can borrow from the Fed at 0 percent. And guess who's consistently opposed lowering that interest rate to more competitive rates like the 3.82 percent I can get on a 30-year fixed-rate mortgage or 1.82 percent on an auto loan? Yes, it's those conservative Paul Ryan, Congressional Republicans. And, like all the Greek bashing, now we're hearing from Jeb Bush that they just need to work harder if only they can get a job or take on a third job since their two minimum wage ones are not enough. So, it seems that the Republicans have already learned the "lesson of Greece's economy"--don't blame the banks, deregulate them more, let them charge above market interest rates just as the French and German banks are charging the Greeks, and, by all means, blame the incompetent, irresponsible victims while keeping their wages low--that is, you, me and the students of America.
7
That student loan rate is ... thanks for pointing that out. The student loan programs as set up in this country are criminal. And our politicians went along with this. I'll withhold my respect for those windbags and crooks.
Goldman Sachs does it again!
2
I completely echo the comment by "An Ordinary American," viz, "...they are not intellectually or morally equipped to do it." We talk about the "rich" as though they were an inherent block with no developmental history. This is reinforced by the right's "noblesse oblige", which can only increase a sense of permanence on the part of the wealthy. I do wonder if there is not some alteration in the social awareness of people who become rich such that they stop thinking in creative terms about the social contract in our country. Thus, there may be a process that occurs as some people become wealthy that alters their "intellectual and moral capacity to govern." Nearly all of our "representatives" in Congress are very wealthy. Perhaps there needs to be a new qualification for those running for office...net worth less than $1M.
1
Australia weathers these storms well as they have a debt to GDP of around 30%. It seems to me Greece got into this mess by having too much debt in the first place. America is around 100% debt to GDP. I would feel much better with 30% debt to GDP than 100% should the economy take another turn for the worse. I think what Krugman has missed or at least failed to mention is the debt a country carries going into a crisis.
With a 170% debt to GDP Greece finds it hard to spend anymore. When Australia goes into a crisis they have much more room to spend, lend and implement government work programs which are the things Krugman and many economist feel is the right way to weather a crisis. The key is having low debt so a country does not get caught trying to stimulate an economy while carrying high debt. Krugman only has half of the equation right. He missed the x factor. Lets hope America does not.
With a 170% debt to GDP Greece finds it hard to spend anymore. When Australia goes into a crisis they have much more room to spend, lend and implement government work programs which are the things Krugman and many economist feel is the right way to weather a crisis. The key is having low debt so a country does not get caught trying to stimulate an economy while carrying high debt. Krugman only has half of the equation right. He missed the x factor. Lets hope America does not.
3
Mr. Krugman sometimes writes as though he is speaking to an auditorium full of youth who are all empty headed.
How did your Vegas debate go Paul?
How did your Vegas debate go Paul?
Krugman: "They’ve been wrong about everything, year after year, but refuse to learn from their mistakes. The people now saying that Greece offers an object lesson in the dangers of government debt...are the same people who predicted soaring interest rates and runaway inflation in 2010..."
If anyone or anything offers us an "object lesson" in economic matters it is those in the Republican Party, such as Paul Ryan, that fancy themselves to be stellar economists " wrong about everything." However, do not think this is anything new, unfortunately.
If anyone or anything offers us an "object lesson" in economic matters it is those in the Republican Party, such as Paul Ryan, that fancy themselves to be stellar economists " wrong about everything." However, do not think this is anything new, unfortunately.
2
The big lesson learned is irresponsible spending and borrowing results in a financial disaster. Unfortunately, Krugman pushes the very policies that led to this disaster and is now busy trying to obfuscate the obvious.
5
Krugman's contempt for wealth is once again on full display. He acts as if debt financed consumption never comes home to roost so long a devaluation tools are at hand. Preposterous.
3
Please tell me that Paul Krugman made some money from his correct call that interest rates would stay low for the last 5 years. Eurodollar futures, swaps inverse floaters all could have made Paul a ton of money
"....Many who have been vociferous in criticizing income and wealth inequality such as Paul Krugman and Joseph Stiglitz have not pointed to the increase income inequality as the cause of the depression. Those on the left who might be the natural proponents of a more progressive tax system have not connected the dots. They have a different theory as to the cause of the depression. They are adherents to the regulatory fallacy, the belief that the depression was caused by insufficient regulation.
To determine if someone is an adherent of the regulatory fallacy ask this question: Do you believe that given the degree that the tax burden was shifted from the rich to the middle class, was there any type of regulatory policy which would have prevented the financial crisis? If they answer yes, they are adherents to the regulatory fallacy
In Paul Krugman’s 2012 book “End this Depression Now!” he comes heartbreakingly close to connecting the dots between the reduction in the progressivity of the tax system and the cycle of overinvestment that caused the depression. He states that the book is much less concerned with the cause of the depression than what should be done to end it. His prescription is fiscal stimulus focused on the...."
http://seekingalpha.com/article/1543642
"....Many who have been vociferous in criticizing income and wealth inequality such as Paul Krugman and Joseph Stiglitz have not pointed to the increase income inequality as the cause of the depression. Those on the left who might be the natural proponents of a more progressive tax system have not connected the dots. They have a different theory as to the cause of the depression. They are adherents to the regulatory fallacy, the belief that the depression was caused by insufficient regulation.
To determine if someone is an adherent of the regulatory fallacy ask this question: Do you believe that given the degree that the tax burden was shifted from the rich to the middle class, was there any type of regulatory policy which would have prevented the financial crisis? If they answer yes, they are adherents to the regulatory fallacy
In Paul Krugman’s 2012 book “End this Depression Now!” he comes heartbreakingly close to connecting the dots between the reduction in the progressivity of the tax system and the cycle of overinvestment that caused the depression. He states that the book is much less concerned with the cause of the depression than what should be done to end it. His prescription is fiscal stimulus focused on the...."
http://seekingalpha.com/article/1543642
The Heritage Foundation's Index of Economic Freedom ranks Singapore #2 in the world right behind Hong Kong. http://www.heritage.org/index/ranking
Singapore has a national debt 111% of its GDP; one of the highest debt to GDP ratios in the world: https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
Where's the outrage neolibs?
Japan's debt is at 222% of GDP and their world is not ending.
Perhaps Republicans would have the U.S. aspire to the respectable debt ratios of the economic winners: Algeria 7.9%; Russia 7.7%; Equitorial Guinea 7.7%. And raise your glasses, fiscal hawks, to Liberia which just beat out Libya for the world title of 2.6% http://www.therichest.com/rich-list/rich-countries/top-10-countries-with...
Singapore has a national debt 111% of its GDP; one of the highest debt to GDP ratios in the world: https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
Where's the outrage neolibs?
Japan's debt is at 222% of GDP and their world is not ending.
Perhaps Republicans would have the U.S. aspire to the respectable debt ratios of the economic winners: Algeria 7.9%; Russia 7.7%; Equitorial Guinea 7.7%. And raise your glasses, fiscal hawks, to Liberia which just beat out Libya for the world title of 2.6% http://www.therichest.com/rich-list/rich-countries/top-10-countries-with...
1
My father-in-law was a CLU and taught classes to prospective CLU students. He would start out his first class with the statement that any republicans in his class would have trouble understanding the economic principles that he would be teaching and suggested that if they wanted to pass the CLU exam they should memorize the material, even though they could not understand it. And without fail some republican in the class would go to the Dean and complain about this. My father-in-law would then have to talk to the Dean, but held his ground on this opinion, having seen this situation many times before. And invariably at the then of the class the same complaining republican would come to him and thank him for getting them through this difficult subject. So Dr. K, I think your chances of actually educating the wizards of the GOP are pretty slim, based on this long history.
2
It's simple, really.
First, the banksters sub-primed America, primarily as a roundabout way of accomplishing what they'd been after prior to the crash of 2008, with a systematic propaganda effort to convince everyone "Social Security is too expensive! We must privatize!" The intentional Housing Bubble Crash was the substitute for stealing Social Security, and accomplished pretty much the same thing it would have, ripping off public wealth and putting it into the greasy hands of the .01%.
The next experiment was Greece. Same principle, different scale. Instead of offering the wide-scale lies of sub-prime mortgage financing, the banksters used the Greek banking system and "loans" to produce indentured servitude in the "periphery" states, and to steal public wealth, capital and transfer it north into the hands of the -- oh wait, same people -- .01%.
Further experiments have been made on Detroit, and they're after Chicago, too, as Act I in sub-priming what's left of public capital in America.
It's all the same goal: create a global, elite autocracy and slavery for the world's populations in submission to their whims. This is our collective future: Global Fascism. Slavery for all.
Debt is the real WMD. Any debt you have, or more importantly, are encouraged to have, in whatever form, personal, national, international, is a weapon to be used against you.
Traditional military warfare is increasingly a sideshow to this global rape of the planet through weaponized finance.
First, the banksters sub-primed America, primarily as a roundabout way of accomplishing what they'd been after prior to the crash of 2008, with a systematic propaganda effort to convince everyone "Social Security is too expensive! We must privatize!" The intentional Housing Bubble Crash was the substitute for stealing Social Security, and accomplished pretty much the same thing it would have, ripping off public wealth and putting it into the greasy hands of the .01%.
The next experiment was Greece. Same principle, different scale. Instead of offering the wide-scale lies of sub-prime mortgage financing, the banksters used the Greek banking system and "loans" to produce indentured servitude in the "periphery" states, and to steal public wealth, capital and transfer it north into the hands of the -- oh wait, same people -- .01%.
Further experiments have been made on Detroit, and they're after Chicago, too, as Act I in sub-priming what's left of public capital in America.
It's all the same goal: create a global, elite autocracy and slavery for the world's populations in submission to their whims. This is our collective future: Global Fascism. Slavery for all.
Debt is the real WMD. Any debt you have, or more importantly, are encouraged to have, in whatever form, personal, national, international, is a weapon to be used against you.
Traditional military warfare is increasingly a sideshow to this global rape of the planet through weaponized finance.
1
Except Republicans will do no such thing if they get to make economic policy. Austerity and hard money are the flavor of the day because the Democrats have the White House. The second a Republican moves into 1600 Pennsylvania Avenue, you can expect to see them spend like drunken sailors. They did it before, they'll do it again.
1
And the spending will all be in the form of more fat added to the military budget and more tax breaks for the wealthy.
Greece is going to the poorhouse because of the rich refuse to pay taxes and political corruption. So which party insists that it is good for rich people to have more money? The thing about learning is that you do not repeat your mistakes. This breed of conservatives insist on repeating mistakes because for conservatism means not changing.
1
Paul Krugman has one tune. Ignore government irresponsibility and layer on more debt. His basic premise governments are incapable of managing their affairs within policy, fiscal and monetary constraints and so when they are about to blow up, you need to inject more cash into the system. Instead of recognizing the basic moral hazard with this apologists approach, he blames the reluctance on the part of central banks, lenders and legislators on the problem. Perhaps the real problem is that every time you blame out a government that has shown complete disregard for any semblance of proper management, you encourage the entire system to follow suit.
1
Dr. Krugman keeps advocating two things to cure to economic woes: lots of government spending and easy money policies. If this prescription is indeed correct, Greece should return to the drachma and continue it's current level of government spending. But if you carefully read Dr. Krugman's prior columns, he actually advocates neither. Is this because he knows his economic prescriptions would spell disaster? By not forcefully arguing otherwise, he essentially concedes that staying with the Euro (with it tight money policies) and reining in government spending are required. Seems that Dr. Krugman is more like a Republican than he thinks.
2
The lesson is simply this: overspending has consequences. Borrowing heavily means paying back heavily, i.e. its borrowing from the future. We must be careful of over-spending as it greatly burdens our future. Public employee pensions, entitlements, handing out money just has gotta have limits. That is is the simple economics and common sense lesson that history has shown many many times.
1
As Professor Krugman suggests, the whole concept of the Euro--relinquishing a nation’s control of both its currency and its monetary policy--was dumb. Canada’s ability to manipulate the two basic policies--fiscal and monetary, simultaneously--is an excellent example of the fallacy behind the dysfunctional common currency.
The founders of the Eurozone misunderstood what the impact of: failing to provide for flexible adjustments along the way might be; a responsible ECB President (certainly not Trichet); and the insanity of expecting the egos of the various politicians to make decisive and coherent decisions--especially as the Euro grew to 19 member nations.
The markets--that invisible hand of fate--didn’t properly understand how to play the Euro. When Greece first joined, the rate it paid on its debt dropped by three percent. Did what had been somewhat of a spendthrift nation before it joined The Club, all of a sudden rank nearly up there with the likes of France and Germany? What had changed? Was Greece no longer Greece?
So, there is plenty of blame to go around. The creators of the Euro, the creditors who failed to heed the IMF’s warnings about unsustainable debt as early as 2010, the bankers who assisted Greece in its avarice through unproven, but high-commission panacea for investment products. And the investors who just went along for the ride, charging Greece just a bit more than Germany, which was regarded as a “sure thing”.
http://thetruthoncommonsense.com
The founders of the Eurozone misunderstood what the impact of: failing to provide for flexible adjustments along the way might be; a responsible ECB President (certainly not Trichet); and the insanity of expecting the egos of the various politicians to make decisive and coherent decisions--especially as the Euro grew to 19 member nations.
The markets--that invisible hand of fate--didn’t properly understand how to play the Euro. When Greece first joined, the rate it paid on its debt dropped by three percent. Did what had been somewhat of a spendthrift nation before it joined The Club, all of a sudden rank nearly up there with the likes of France and Germany? What had changed? Was Greece no longer Greece?
So, there is plenty of blame to go around. The creators of the Euro, the creditors who failed to heed the IMF’s warnings about unsustainable debt as early as 2010, the bankers who assisted Greece in its avarice through unproven, but high-commission panacea for investment products. And the investors who just went along for the ride, charging Greece just a bit more than Germany, which was regarded as a “sure thing”.
http://thetruthoncommonsense.com
As Paul often points out,austerity in response to a sluggish economy is the opposite of what's needed.As well as we currently don't need anti inflation measures for a non existing threat.What is needed is a large stimulous,bigger than Obama's during his first term.This week( this my opinion ,now) the President took a step in the right direction by making money available to low and middle income households for solar energy.But this a small step towards what is really needed; massive spending to modernize both our energy and transportation infrastructures to make them green.Our transportation infrastructure ,basically unchanged since the beginning of the interstate freeway system in the 1950s and '60s is completely out of date,inadequet and inefficient,with individual vehicles competing for space with public transit that itself consisting mostly of oudated,fossil fuel driven buses.Likewise our energy grid,either relying largely on fossile fuel,or here in the drought ravaged west,hydro power.While the needed modernizations of these infrastructures would require much in the way of deficit spending,it would also result many good paying jobs,and at long last real full employment.
1
I guess Paul Krugman ignores the low retirement age, massive government give aways, excessive regulations and a culture that is anti-entrepreneur, and people who abuse the tax code. This quotation sums it up:
"John Challenger, CEO of global outplacement and executive coaching consultancy Challenger, Gray and Christmas, told ABC News that entrepreneurism is in dire straits in Greece."
http://abcnews.go.com/Business/reasons-greece-economic-crisis/story?id=3...
Democrats in the US are encouraging a nanny state and business climate that will lead the US to the same condition, but good luck getting ideologues like Paul Krugman to acknowledge reality, let alone his own mistakes.
"John Challenger, CEO of global outplacement and executive coaching consultancy Challenger, Gray and Christmas, told ABC News that entrepreneurism is in dire straits in Greece."
http://abcnews.go.com/Business/reasons-greece-economic-crisis/story?id=3...
Democrats in the US are encouraging a nanny state and business climate that will lead the US to the same condition, but good luck getting ideologues like Paul Krugman to acknowledge reality, let alone his own mistakes.
1
Whew! And all this time I was worried that borrowing money you could never hope to pay back, and refusing to collect taxes (or pay them), and making half the population civil servants so no new wealth can be created, and then putting in a regulatory structure that invited business to leave, and THEN giving out pensions so big that no one would ever dare work a day after turning 55, would somehow be bad for an economy.
Silly me! It was the AUSTERITY that caused it all!
Thank goodness we got that all cleared up.
WR
Silly me! It was the AUSTERITY that caused it all!
Thank goodness we got that all cleared up.
WR
When the GOP say our coming fate is like that of Greece, it's like comparing a fit, healthy footballer who has a scrape on her knee to an aged, chronically-ill patient with melanoma.
On the other hand, it is legitimate to point to the long history of dysfunction in Greece (it didn't begin with the euro, or even with the EEC). The GOP has put us on a path of decay in education, in research, in infrastructure, and in real hope. They have spread dismay and fear for so long that there is at least one generation of Whites who will never see the clear light of hope again.
Obama has taken a long view. He has introduced Americans to the slow and steady way of doing foreign policy, and the slow and steady way of raising hope at home. If the next POTUS is a Republican, say good bye to all that. Prepare for war, and a war dividend in low-wage jobs, and another massive dividend for the wealthy.
On the other hand, it is legitimate to point to the long history of dysfunction in Greece (it didn't begin with the euro, or even with the EEC). The GOP has put us on a path of decay in education, in research, in infrastructure, and in real hope. They have spread dismay and fear for so long that there is at least one generation of Whites who will never see the clear light of hope again.
Obama has taken a long view. He has introduced Americans to the slow and steady way of doing foreign policy, and the slow and steady way of raising hope at home. If the next POTUS is a Republican, say good bye to all that. Prepare for war, and a war dividend in low-wage jobs, and another massive dividend for the wealthy.
136
Please explain how the GOP has put us on a path of decay in education? We spend more on education than almost any other country on the planet and student performance has fallen decade after decade. Last survey I looked at said the U.S. was ranked 36th in reading, math and science. Also, I would say unequivocally it's Democrats that fight school choice, and backing the same teacher unions that have led to this dismal decline.
"The GOP has put us on a path of decay in education, in research, in infrastructure, and in real hope."
Let's stop blaming one political party here. We have been, for the most part, on a deficit spending binge since Hoover and the Great Depression. It's been true for both political parties, no matter who controlled Congress or the White House. And let's not forget that in the 1932 election, FDR blasted Hoover for deficit spending. The federal government has grown into the leviathan state and that's what people want. People also don't want to be taxed to support this system; they want others to be taxed to support this system. FDR pioneered group-identity politics to advance his agenda and both parties have been playing that game ever since.
Let's stop blaming one political party here. We have been, for the most part, on a deficit spending binge since Hoover and the Great Depression. It's been true for both political parties, no matter who controlled Congress or the White House. And let's not forget that in the 1932 election, FDR blasted Hoover for deficit spending. The federal government has grown into the leviathan state and that's what people want. People also don't want to be taxed to support this system; they want others to be taxed to support this system. FDR pioneered group-identity politics to advance his agenda and both parties have been playing that game ever since.
"He has introduced Americans to the slow and steady way of doing foreign policy, and the slow and steady way of raising hope at home."
What are you talking about? What is his view on foreign policy? No one except you seems to know.
Also, how is he "raising hope" at home? What does that even mean?
What are you talking about? What is his view on foreign policy? No one except you seems to know.
Also, how is he "raising hope" at home? What does that even mean?
Evidently AM radio and Fox News have been pushing this "We're Greece!" meme, or, more accurately, "We're Spain and Greece!" meme for years, even though the roots of the crises in Spain and Greece are different.
Too bad AM radio and Fox News don't tell the rest of the story, namely, that the two biggest items in our discretionary budget are military expenditures (not only in the Department of "Defense," but also in Energy, Homeland Security, and Veterans' Affairs) and interest on the existing debt, most of which results from military expenditures.
Too bad AM radio and Fox News don't tell the rest of the story, namely, that the two biggest items in our discretionary budget are military expenditures (not only in the Department of "Defense," but also in Energy, Homeland Security, and Veterans' Affairs) and interest on the existing debt, most of which results from military expenditures.
The Republicans are actually for Big Government except they will never admit it. They are for huge increases in defense spending. They are for big subsidies to large agricultural firms (which they call the 'farmers'). They are for big subsidies to the energy industries and to the pharmaceutical industries. And, of course, they are for huge tax cuts for the wealthy (which most economists consider tax expenditures).
They also want to impose their morality on the rest of the country by depriving women of the right to have abortions or to receive family planning services. That's really Big Government.
But, they pretend to be against Big Government. In particular, they don't like paying money into Social Security, Medicare, Medicaid, the ACA, CHIPS, food subsidies or any social service that actually helps people who are struggling. But, rather than come out openly and say they are against programs for helping people, they cover that up by making a pseudo-economic argument of "We can't afford it" (notice that it is very selective as to when they use that criticism).
In other words, they really are for Big Government for their supporters and Little Government for the rest of us.
They also want to impose their morality on the rest of the country by depriving women of the right to have abortions or to receive family planning services. That's really Big Government.
But, they pretend to be against Big Government. In particular, they don't like paying money into Social Security, Medicare, Medicaid, the ACA, CHIPS, food subsidies or any social service that actually helps people who are struggling. But, rather than come out openly and say they are against programs for helping people, they cover that up by making a pseudo-economic argument of "We can't afford it" (notice that it is very selective as to when they use that criticism).
In other words, they really are for Big Government for their supporters and Little Government for the rest of us.
3
As we read about the murders in Charleston, some have written about the economic causes of the Civil War. They are trying to diminish the importance of slavery, which also had economic implications.
One aspect of the states rights arguments of the time ascribed economic rights similar to that of a nation. People in South Carolina thought they were victimized by bankers and an industrial complex that was mostly in the north. Slavery was the reason for secession, but distrust and dislike of the North played into the argument.
I'm wondering how similar the situation in Greece will become to that in the USA prior to the Civil War. Will there be violent repercussions? Are the seeds being sown for future European conflicts?
One aspect of the states rights arguments of the time ascribed economic rights similar to that of a nation. People in South Carolina thought they were victimized by bankers and an industrial complex that was mostly in the north. Slavery was the reason for secession, but distrust and dislike of the North played into the argument.
I'm wondering how similar the situation in Greece will become to that in the USA prior to the Civil War. Will there be violent repercussions? Are the seeds being sown for future European conflicts?
1
As a NE transplant living in the south it's clear that people here are tired of being told they are wrong by northern elites.
It may make people in the north feel superior but it's not helping.
It may make people in the north feel superior but it's not helping.
I usually don't even bother reading Krugman, because he is a political hack, but I was in need of a laugh.
He sets up straw men, uses intense adjectives such as "slash" when referring to lowering government spending, and gives no answer to what the correct course would be for Greece. I suppose they should just continue their Socialist lifestyle at everyone else's expense.
The punch line was blaming predatory lending for the Greek debt. That's just hilarious!
He sets up straw men, uses intense adjectives such as "slash" when referring to lowering government spending, and gives no answer to what the correct course would be for Greece. I suppose they should just continue their Socialist lifestyle at everyone else's expense.
The punch line was blaming predatory lending for the Greek debt. That's just hilarious!
4
What Krugman said was the lenders were irresponsible. He did not say they were predatory. Those are two very different problems. If you don't think the lenders were irresponsible, you should really look into the situation more. Not to take most of the responsibility off of Greece, but RESPONSIBLE lenders know the capability of their borrowers to pay, and the total debt on their books. Euro zone lenders, primarily Germany and France, looked the other way on these counts until it was to late, and then at surprised when it falls apart.
You should probably continue to stay away from Krugman, or any other writer discussing complex problems, if you are not going to read more carefully.
You should probably continue to stay away from Krugman, or any other writer discussing complex problems, if you are not going to read more carefully.
I have read a few articles about the situation in Greece over the last few days. One subject that does not seem to be receiving much attention is the pensions. I would like to know more about those pensions, what they are costing the Greek Government, and the roll they have played in the financial crises.
2
Wake up professor.
Every single progressive nation (including now the US under Obama) is at some stage of labor, economic and fiscal implosion. Greece is the end state of progressivism.
Krugman is correct that Greek debt was not that high by historical standards in progressive nations. The rest of the EU (including Germany) and the US is on the same road as Greece. Our public debt has doubled in less than a decade and our combined public and Social Security debt has soared above 100% of our GDP. Krugman wants to accelerate our pace on the road to Greek-style insolvency by borrowing and spending even more.
Krugman notes that Greece’s debt ratio in 2009 was about the same as the United States after WWII. What he does not tell you is that we were on the razor's edge of sovereign insolvency by the end of WWII, we slashed spending in half in 1946 to remain solvent, and the private economy finally recovered after 16 years of depression. Greece needs to follow America's example by cutting their welfare state in half and getting back to work.
Every single progressive nation (including now the US under Obama) is at some stage of labor, economic and fiscal implosion. Greece is the end state of progressivism.
Krugman is correct that Greek debt was not that high by historical standards in progressive nations. The rest of the EU (including Germany) and the US is on the same road as Greece. Our public debt has doubled in less than a decade and our combined public and Social Security debt has soared above 100% of our GDP. Krugman wants to accelerate our pace on the road to Greek-style insolvency by borrowing and spending even more.
Krugman notes that Greece’s debt ratio in 2009 was about the same as the United States after WWII. What he does not tell you is that we were on the razor's edge of sovereign insolvency by the end of WWII, we slashed spending in half in 1946 to remain solvent, and the private economy finally recovered after 16 years of depression. Greece needs to follow America's example by cutting their welfare state in half and getting back to work.
4
Hmm, I'm guessing that the US was able to slash spending in half in 1946 because our part in a World War had just ended. Perhaps you do have a point: we should end our part in the current world war.
Krugman's magic elixir for any country's economic problems: print more money, stimulate the economy, and devalue your way out of debt.
He claims that Obama's massive borrowing hasn't caused inflation. The statistics may back him up on that, but I don't believe it, and neither should you. Inflation statistics (like climate change "historical" temperatures) are subject to "adjustments" which always seems to help lead toward the "right" answers.
Eventually, devaluing the currency hurts ordinary real people -not the rich. People who live on savings and fixed income are hurt when the currency is devalued- not so our lords who receive government pensions subject to periodic increases.
Left-leaning countries, led by the US, pressured Germany to cave, to avoid Greece setting the example that unchecked government borrowing leads to severe ruin.
Who will pressure our creditors to continue to lend us money when they finally see we are unable to repay the $trillions we have borrrowed?
He claims that Obama's massive borrowing hasn't caused inflation. The statistics may back him up on that, but I don't believe it, and neither should you. Inflation statistics (like climate change "historical" temperatures) are subject to "adjustments" which always seems to help lead toward the "right" answers.
Eventually, devaluing the currency hurts ordinary real people -not the rich. People who live on savings and fixed income are hurt when the currency is devalued- not so our lords who receive government pensions subject to periodic increases.
Left-leaning countries, led by the US, pressured Germany to cave, to avoid Greece setting the example that unchecked government borrowing leads to severe ruin.
Who will pressure our creditors to continue to lend us money when they finally see we are unable to repay the $trillions we have borrrowed?
3
the question then is what kind of evidence you would accept as challenging to your beliefs in these areas
1
Another one who likes the fox fantasy world better than reality.
"The statistics may back him up on that, but I don't believe it"
Republicanism in a nutshell.
You know what else hurts ordinary people? Cutting public spending.
Republicanism in a nutshell.
You know what else hurts ordinary people? Cutting public spending.
I did some public policy work for an NGO in Central & Eastern Europe in the early 1990s after the USSR fell apart. One thing I noticed: those former communist countries were flooded with economists & bankers from the USA preaching extreme "free market" (i.e., no-regulation) capitalism. As a result, those economies were stripped of one of the few things they had left after 40 years of communism: a safety net for working people. The USA-led multinationals that began setting up shop imposed fundamentalist economic policies that wouldn't have been considered for the USA (even under Reagan). As a result, economic recovery in those former Eastern Bloc countries was delayed for more than a decade. The same approach won't work for Greece, either. So it's somewhat dismaying to see the bankers and hired-gun economists still playing the same tired gambit. In the short run, they may win a few hands but in the long run they lose the game. Meanwhile, ordinary working people suffer. In the end, I can only say this is what happens when the wealthy are allowed to run economic and social policy via their technocrats. They aren't intellectually or morally equipped to do it.
40
Half the country is employed by a safety net (government) and retires on full pension at 50. On top of that the government is corrupt and inefficient. Free market capitalism has had nothing to do with the failure of Greece. Greece is failing because of failed socialist policies. Hopefully this real time experiment will enlighten enough people again to the perils of Socialism.
Greece spent like a socialist drunken sailor, but they can't print more money to screw the creditors (thus devaluing it) and those who use the dollar (us). So by all means, Mr. Krugman, lets just keep heading down that path. It will never end up like Germany in post World War I who could also print their own money.
8
When a lender lends, it takes on something called "risk". When the loan is to a borrower who may have difficulty paying, the risk is higher. The risk can be fulfilled in various ways: some lenders, including individuals and companies, may simply be unable to pay. For that circumstance, we have bankruptcy laws, since we've long since learned that locking up debtors does not improve their ability to pay.
But if you lend to a sovereign, who maintains a currency, the risk of loss on a debt can also take the form of debasement: the borrower can devalue its currency as a way, absolutely, of decreasing its repayment; it's not a 100% loss like bankruptcy, but a devaluation of the amount paid. Simultaneously, it makes the sovereign borrower better able to pay, since devaluing a currency also increases exports and decreases imports (and makes things more expensive for consumers).
Putting a sovereign borrower into a hard currency (gold, the Euro) removes the option of devaluation. And we also don't have bankruptcy law for sovereigns, really: they can default, but there's no recognized mechanism for canceling debt and allowing a new start. Instead, we get Wolfgang Schäuble's approach, which is to lock up the debtor (like Greece) in the prison of 'austerity', which makes the Greek government and people _less_ able to pay their debt (just like locking up an individual debtor in debtor's prison).
But if you lend to a sovereign, who maintains a currency, the risk of loss on a debt can also take the form of debasement: the borrower can devalue its currency as a way, absolutely, of decreasing its repayment; it's not a 100% loss like bankruptcy, but a devaluation of the amount paid. Simultaneously, it makes the sovereign borrower better able to pay, since devaluing a currency also increases exports and decreases imports (and makes things more expensive for consumers).
Putting a sovereign borrower into a hard currency (gold, the Euro) removes the option of devaluation. And we also don't have bankruptcy law for sovereigns, really: they can default, but there's no recognized mechanism for canceling debt and allowing a new start. Instead, we get Wolfgang Schäuble's approach, which is to lock up the debtor (like Greece) in the prison of 'austerity', which makes the Greek government and people _less_ able to pay their debt (just like locking up an individual debtor in debtor's prison).
17
Exactly. Greece is in a modern debtor's prison, put there by the country whose heavy debt we all forgave in 1953.
1
PQuincey. I understand what you said. That is my point. We may not turn out like Greece, but we can turn out like post World War I Germany. We can devalue our dollar to get out of debt and the cost of our dollar not being able to buy anything. Krugman's assurance that we are different than Greece is not the same as saying we are going to be fine. Spending too much money and then printing your way out of debt has never been a good idea. Instead of debtor's prison we can bask in the warm glow of burning money in our fireplace to keep us warm.
When it comes to taxes the difference between Greece and the US is that the rich in Greece breaking the law with impunity when they do not pay taxes while in the US the law allows them to pay less proportionally than the average working family. What Greece needs is robust enforcement, what the US needs is new tax laws.
34
One more way in which Republican desires might mimic Greek disaster-prone policies: cutting or suppressing taxes for the wealthy and large corporations. A not insignificant factor in Greece's horrible deficit was their inability or unwillingness to collect taxes from the wealthy, the politically connected, and large businesses that paid graft.
15
In America we pay lobbyists.
1
The commentariat is caught up in the day-to-day politics of the Greek crisis and is in fact missing the most important lesson, which is the importance of what Krugman mentions in passing as irresponsible lending. What caused the crash in the first place was a widespread epidemic of improper and risky lending, mostly in housing but including many other things. This took place within and between countries and did not depend on any particular currency regime. The US and the UK had housing bubbles and suffered severe recessions - they do not use the euro. Spain unlike Greece did not run up a large national debt, but nevertheless has suffered a very severe recession. Debt becomes dangerous when it crosses international borders and what Krugman refers to as "capital flow" among European countries certainly contributed to the problem, but this is something that should be under the control of EU authorities just as dangerous lending within borders should be under the control of national authorities. The cause of bubbles and crashes has always been runaway capitalism, not any kind of socialism.
Some regulatory measures have been taken but the big banks, having been bailed out, are stronger and more powerful than ever. Expect the regulations to be eroded and evaded and whole thing to repeat before many years have passed.
Some regulatory measures have been taken but the big banks, having been bailed out, are stronger and more powerful than ever. Expect the regulations to be eroded and evaded and whole thing to repeat before many years have passed.
139
What you suggest may be partly true, but did careless lenders force loans on reluctant Greek borrowers?
Let's follow the money trail back beyond Europe to the deregulation of the banking sector (Gramm–Leach–Bliley Act which eviscerated 1933 Glass–Steagall Act) during Clinton's presidency. This allowed Wall Street to surreptitiously bundle sub-prime junk bonds to unsuspecting lenders. Clinton also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from any and all regulation which, in combination with his loosened of housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods, caused the stock market & housing bubbles & eventual collapse of the global markets in 2008. Another reason why US SEC regulatory agency needs to be expanded to reassure foreign investors as China builds up an alternative parallel system for eventual global participation along with the Asian Infrastructure Investment Bank. It will be interesting to see whether the Chinese Communist Party is better able to guarantee that a repeat of the US banking & stock market corruption never happens under their watch or else the global community is susceptible to financial collapse.
The bigger concern is that Democrat states like Illinois, California, and New York are going Greek. Their pensions are underfunded and their taxpayers are leaving while the responsible states try to gauge the probability that their own taxpayers will have to bailout much wealthier government workers in the liberal train wreck states.
8
That liberal train wreck has been supporting those responsible states for a long time. Maybe that's the problem. If we got back more from the government than we pay, perhaps everything would be rosy.
Wisconsin and Kansas are doing well either.
Huh, what? More federal tax money is collected from blue states than red, and more flows to red states than blue. You've got it backwards. Is Mississippi one of your "responsible" states?
How, pray tell, would the Republican party be able to "block[ing] any offsetting monetary easing"? Do the Republicans control the Federal Reserve? Does anyone (except perhaps the bankers it serves) control the Federal Reserve? The idea that Republicans could block any offsetting monetary easing is a straw man. They might say they wish to block any monetary easing, but they can't, so they're just pandering to their base, which is hardly an attribute unique to Republicans.
And that's not even what the Republicans are caterwauling for. The play to their base is that the Federal Reserve is answerable to no one. It has effectively become a price-setting Politburo that issues diktats from on high of what accepted price levels should be, and in which direction they should be always changing (i.e., up). And so the Fed have succeeded. The CPI, which should have declined in the midst of declining or flat demand and increasingly efficient production, instead had only a hiccup during the financial crisis on its way to ever loftier heights. And with some lag, so too have financial assets continued their relentless climb.
The Fed's default position since the Greenspan era is that prices must relentlessly, but slowly, increase. But this is bad economics. It directly led to the financial crisis in 2008 and will cause the next one, and the fact the Fed can follow such a policy with impunity is what the Republicans, or at least the smart ones, are concerned with.
And that's not even what the Republicans are caterwauling for. The play to their base is that the Federal Reserve is answerable to no one. It has effectively become a price-setting Politburo that issues diktats from on high of what accepted price levels should be, and in which direction they should be always changing (i.e., up). And so the Fed have succeeded. The CPI, which should have declined in the midst of declining or flat demand and increasingly efficient production, instead had only a hiccup during the financial crisis on its way to ever loftier heights. And with some lag, so too have financial assets continued their relentless climb.
The Fed's default position since the Greenspan era is that prices must relentlessly, but slowly, increase. But this is bad economics. It directly led to the financial crisis in 2008 and will cause the next one, and the fact the Fed can follow such a policy with impunity is what the Republicans, or at least the smart ones, are concerned with.
5
Before 1946, the FRB's sole role was to be lender of last resort. It fell down on the job after the 1929 Market Crash showed how misplaced confidence in the economy had been. The FRB raised interest rates, tanking the real economy.
Starting with the Full Employment of 1946, the FRB was supposed to ensure what else?--Full employment! That moved the FRB from influencing money supply to expectations that it could influence production of goods & services.
In 1978, Minnesota's irrepressible, voluble, extrovert Sen Humphrey got the Humphrey Hawkins Act passed. Then FRB had to juggle:
1. Being lender of last resort.
2. Full employment
3. Keeping inflation down.
Humphrey and that act's other backers had never heard of the Phillips Curve or how by the mid-1970s it began misbehaving as Phillips never imagined.
As if that were not enough! One person's economic predictions are not consistently reliable. Two or more economists rarely agree on anything, so any so-called consensus will be useless too.
Some may protest, citing Greenspan. If one recalls, cryptic Greenspan never foretold anything one could point to. He fitted explanations to events afterwards. He was just Fed Chmn in a time when the economy was unsinkable. His PhD thesis, however, foretold the very kind of housing bubble that popped to tank the US economy. His ideologic beacon on the economy! was screen writer Ayn Rand.
Starting with the Full Employment of 1946, the FRB was supposed to ensure what else?--Full employment! That moved the FRB from influencing money supply to expectations that it could influence production of goods & services.
In 1978, Minnesota's irrepressible, voluble, extrovert Sen Humphrey got the Humphrey Hawkins Act passed. Then FRB had to juggle:
1. Being lender of last resort.
2. Full employment
3. Keeping inflation down.
Humphrey and that act's other backers had never heard of the Phillips Curve or how by the mid-1970s it began misbehaving as Phillips never imagined.
As if that were not enough! One person's economic predictions are not consistently reliable. Two or more economists rarely agree on anything, so any so-called consensus will be useless too.
Some may protest, citing Greenspan. If one recalls, cryptic Greenspan never foretold anything one could point to. He fitted explanations to events afterwards. He was just Fed Chmn in a time when the economy was unsinkable. His PhD thesis, however, foretold the very kind of housing bubble that popped to tank the US economy. His ideologic beacon on the economy! was screen writer Ayn Rand.
1
Random thoughts.
But Dr. K - I thought the socialists in Greece ran out of everyone else's money....
Snark aside - when we read that the Greek government bureaucracy is unsustainable - what counts as a government employee? Do local teachers count as federal employees in Greece for instance.
What are some of the the better ways for a country to spend loan moneys, that gives a better return on investment?
But Dr. K - I thought the socialists in Greece ran out of everyone else's money....
Snark aside - when we read that the Greek government bureaucracy is unsustainable - what counts as a government employee? Do local teachers count as federal employees in Greece for instance.
What are some of the the better ways for a country to spend loan moneys, that gives a better return on investment?
2
Most of Greece's teachers work for public institutions and are government employees. What is meant are mainly burocrats, who can go to work for the government around 22 to 25 years and retire after 20 years (or something close to that) and live on their pensions until they die around their upper seventies. Teachers, firemen, postmen, employees of the national airline and TV can do pretty much the same, but the pct. of Greek, desk-manning burocrats for so poor a country is huge.
This article takes a lot of Chutzpa. Rather than attempt to explain away how the US is not Greece, Krugman is actually attempting to excuse Greece! Greece isn't irresponsible, he explains, it's the darned European Union that has held it back. It's the irresponsible lenders! It's the stable currency!
I hope Krugman's readers realize just how absurd this is. There are countless emerging countries that would love to be part of the European Union and its stable currency. Yes, it takes budgetary restraint, pro-growth policies, and fiscal responsibility to keep up with the big boys, but 'posh' says Krugman. What Greece really needs is the ability to pull an Argentina and debase its currency. Just ask Argentinians how well that's working out for them as they are suffering through their second default in 15 years and yet another era of runaway inflation.
That's right: Krugman wants Greece to be Argentina! Someone please explain to me how being Argentia forebodes a better fate than being Greece!
I hope Krugman's readers realize just how absurd this is. There are countless emerging countries that would love to be part of the European Union and its stable currency. Yes, it takes budgetary restraint, pro-growth policies, and fiscal responsibility to keep up with the big boys, but 'posh' says Krugman. What Greece really needs is the ability to pull an Argentina and debase its currency. Just ask Argentinians how well that's working out for them as they are suffering through their second default in 15 years and yet another era of runaway inflation.
That's right: Krugman wants Greece to be Argentina! Someone please explain to me how being Argentia forebodes a better fate than being Greece!
11
Paul Krugman is correct that the Greece is small. I hope he is correct that it is only about geopolitics. I remember that Bear Stearns was allowed to fail because it was seen as too small to upset the market much. How'd that work out?
Over here in Europe the former Eastern European countries, with weaker economies than their Central European partners, are more at risk. Those former EE countries are driving growth right now in Europe (e.g. Romania expects 4% growth in the next year). Those economies will definitely be affected by a Grexit, how much and how much it might ripple I would definitely rather not experience.
Over here in Europe the former Eastern European countries, with weaker economies than their Central European partners, are more at risk. Those former EE countries are driving growth right now in Europe (e.g. Romania expects 4% growth in the next year). Those economies will definitely be affected by a Grexit, how much and how much it might ripple I would definitely rather not experience.
The lesson is you run out of other peoples money and that endemic corruptions is bad for the economy. That socialism lead to economic decline as more and more people produce less and less so they can receive more government largess while working in the black market.
3
Socialism bad, but unregulated capitalism with outrageously wealth disparity is good? Is that how it works. "Other people's money" desperately needs to be retired. It's simplistic, says nothing and is right outta Fox! Meaningless gibberish!
Hey Paul. The very idea of equating the U.S. with Greece is ludicrous. While it is complex, it's not hard to understand that we have our own currency (like Canada does) which we control. Which is what the Fed has been doing ever since 2008, and which the drives the Republicans bonkers. It's also not hard to see what their actual goal/agenda is: destroy the safety net. These programs which help low income people must go, not the government's business. Reality check. It IS the government's business!
3
It is difficult to critique critics who critique with deliberate bad faith (as many Republicans do) while ignoring that a lot of debt in Greece originated with corrupt banks which got the governments to give them money, and escape from the mess they created.
Also, as in the USA, a lot of rich people in Greece and very rich organizations, pay little or no tax (as in the USA, or even Germany).
One thing, for sure: when average people get punished with too much austerity, it breaks the economy.
Also, as in the USA, a lot of rich people in Greece and very rich organizations, pay little or no tax (as in the USA, or even Germany).
One thing, for sure: when average people get punished with too much austerity, it breaks the economy.
12
Paul as usual we agree on the big picture but disagree on many individual issues : The first issue is although you give a passing nod to banks baring some responsibility you give Goldman Sachs, who set much of the financial engineering that put Greece in this place to begin with; this is all easily substantiated by going to Goldman/ Greece on the internet; why aren't there clawbacks as there were in other schemes such as Madoff, because their Greeks not other wealthy people with connections? The second issue is that you insist that there is no inflation, this is absurd,only slightly less so than how inflation numbers are arrived at thru the Beige Book". We are currently in an asset bubble in both stocks and real estate in many parts of the country: as you so famously said "they are selling each other condos in Florida" [to keep the party going], you could add to that many other places including here in Portland. This is not to mention the skyrocketing costs of health care and try going to the grocery store occasionally, if the price hasn't gone up the container size has gone down e.g. a "pound " of coffee is now 10 ounces. Lastly I would disagree with you on the good created by printing money it would have been great had it been used for infrastructure or new factories etc. but cheap money seems to have been utilized by companies primarily to encourage mergers, acquisitions or buybacks resulting in job losses. So Greece exit E.U., end globalization and Bernie Sanders 2016!
4
One of the problems that plagues Greece is that a large underground economy means that only about half of taxes that are due are actually paid. In the US, that figure is about 25%. The Tea Party and Grover Norquist clones encourage tax avoidance and cheating. That is where the Republican Party deserves blame.
9
To be a modern economy, the Greeks must do more than produce just olives and feta cheese and sell tickets to the Parthenon to grow GDP. When did you last buy a drug developed in Greece or electronic components manufactured in Greece?
4
Whatever might be the merits of Prof. Krugman's economic arguments, I find it difficult to compare the U.S. with a country ruled by cryptocommunists, whose only success so far has been to disguise themselves as democrats and mislead the Greek people.
5
There was one conservative that absolutely correct and predicted this crisis many years ago.
" The trouble with socialism is that eventually you run out of other people's money"
Until they invent a perpetual motion machine otherwise know as a free lunch. it will always be so.
Printing money is nothing more than legalized theft.
I gladly worked all my life and my youth for a piece of paper, an IOU from the government, otherwise known as official currency.
Trouble is by the time I was ready to retire, they had arbitrarily inflated and reduced the value of the IOU, by two thirds.
So bow in what should be my retirement years, I am still working to help pay for my own necessities of life, and that of many others, through my "taxes".
" The trouble with socialism is that eventually you run out of other people's money"
Until they invent a perpetual motion machine otherwise know as a free lunch. it will always be so.
Printing money is nothing more than legalized theft.
I gladly worked all my life and my youth for a piece of paper, an IOU from the government, otherwise known as official currency.
Trouble is by the time I was ready to retire, they had arbitrarily inflated and reduced the value of the IOU, by two thirds.
So bow in what should be my retirement years, I am still working to help pay for my own necessities of life, and that of many others, through my "taxes".
6
Due to inflation, you made more. If you bought a house at a fixed interest rate, then the house would eventually be practically free. If you invested properly, the money would have grown, perhaps just under the rate of inflation (or even above if you invested in commercial real estate). Really, I could go on and on, but I have a feeling I'm wasting my time. Bottom line: You're not still working because of inflation but because the people in power know as little about democratic socialism as you do.
Re investing properly
The great recession showed that houses can be very bad investments.
The great recession showed that houses can be very bad investments.
The creditors surely knew that Greece wouldn't be able to pay back the money they were borrowing. Yet only the borrowers will be punished... by the lenders of course.
8
In 2012 the banks took an 'haircut" of more than 50%.They certainly deserved to be punished for their stupidity, but I doubt that things went according to plan for them .Now the creditors are the European taxpayers (and for a small part American taxpayers by way of the IMF),no payment is to be made for them until 2020 ,and the interest rates are close to zero. Even if there is no debt pardon there might be a rescheduling of part of the debt over 50 years without interest! It is not too surprising that the Greeks are not too popular in some parts of Europe. Apparently a part of the NYT readers are under the delusion that somebody must have gained from that debacle, unfortunately this is not the case.
Krugman does it again in his never ending attempt to prove his throw taxpayer money out the window strategy is not to blame. Greece and the U.S. are in no way related as he we would have you believe. They never should have been allowed into the European Monetary Union. Once they did, they became in effect a state within that union like Illinois in ours with know way to grow out of their debt via a free floating currency. The United States does have a free floating currency. That currency right now is bouncing around like a soccer ball while interest rates set by the Fed remain unchanged. Raise the rate a quarter point, money floods in, the dollar will rise initially as money comes in from abroad and sticks will drop temporarily. Business will adjust, stocks will level. We are completely sovereign. Greece is not, though they have not figured that out yet. They are a third world country trying to act like a developed economy. Maybe more like Detroit than Illinois. Borrowing money so its workers can retire at 50. But of course, as usual, he knows the truth. He's just not willing to share it with you.
4
As Keynes tried to point out, there is ultimately only one, single job-creator: aggregate demand. While Democrats have yet to grasp the full implications of this central economic principle, Republicans seem to deny it altogether.
This should come as no surprise to anyone since denialism is the central feature of virtually all Republican policy proposals in virtually all areas: education, sex education, immigration, science, criminology, gun control, global warming, etc.
This should come as no surprise to anyone since denialism is the central feature of virtually all Republican policy proposals in virtually all areas: education, sex education, immigration, science, criminology, gun control, global warming, etc.
27
Despite their rhetoric the republican establishment is clearly not very concerned about the debt. Our endless war policy without tax increases to pay for the military should have proven that. Not closing corproate tax loop holes, and an inability to get a tobix tax. Plus against a living wage (which would lower corproate subsidies and government spending on food stamps for example . It's about maintaining a poor workforce forced into debt slavery and cheap labor. Debt is just a cover!!
21
The Democrats cannot accuse anyone else of endless war policy. Remember Obama? Hillary? Kerry? Biden? Vote libertarian!
"Reagan proved deficits don't matter."
-- Vice President Richard Cheney
-- Vice President Richard Cheney
70% off all U.S. debt was incurred by Reagan, Bush I and bush ii.
The debt being accumulated during Obama's term should be lumped into bush ii debt since the depression started on his watch due to his policies.
The debt being accumulated during Obama's term should be lumped into bush ii debt since the depression started on his watch due to his policies.
Krugman is so biased he will blame anything and everything on the Republicans. That aside, here is a quote from Mark Steyn...""Europe" has a basic identity crisis: As the Germans have begun to figure out, just because the Greeks live in the same general neighborhood is no reason to open a joint checking account. And yet a decade ago, when it counted, everyone who mattered on the Continent assumed a common currency for nations with nothing in common was so obviously brilliant an idea it was barely worth explaining to the masses."
10
Paul, You've got it completely backwards. Obama has more than doubled the US debt since taking office, then you try to say Republicans need a lesson? Come on Paul, you need to look at facts and remove those blinders. If the US economy tanks it's going to be because liberal Democrats keep spending money that'll take a century to repay.
9
If you had thought about who has added more net debt, it has consistently been Republicans with their penchant for magical thinking, I.e. that you can lower taxes and increase the amount collected. If there has been a lot of debt added during Obama it has been because of the implosion that happened at the end of GWB's presidency, but nice try anyway.
"Obama has more than doubled the US debt since taking office..."
US debt is not north of $20 trillion.
US debt is not north of $20 trillion.
Honey, policies enacted by GWB accounted for 5Trillion in debt increase vs under 1Trillion projected through 2017 for current president policies.... sorry, dear, you'll just have to do your homework, take that remedial math course before you peruse the actual data, or go to WAPO http://www.washingtonpost.com/business/economy/adding-to-the-deficit-bus... for a quick chart/analysis of who did what. This is old and known.
Actually there is an example to learn from this, and interestingly enough it comes from Greece itself.
The Spartan economy was largely based on Helot labor, the labor of slaves they had won by conquest. If a Helot tried to learn anything, or tried to speak up even to try to make the fields more productive, he was summarily executed. The last thing the Spartans wanted was a smart Helot.
This insistence on austerity is a similar policy. Germany's reversal of the outcome of WWII depends on keeping down the periphery of the economies it now dominates and orders about to its exclusive benefit. By lending, it has arranged to purchase those nations' governments and leave itself in position to dictate their social policies. The social policies the Germans dictate ensure that the debt can NEVER be repaid by forcing the economy of the debtor nation into continual recession.
If the debtor nations try to raise their heads, they are "executed" by suddenly pulling the lending plug, resulting in horrible privation for the people of those nations.
Greece will never recover unless and until it pulls out of the Euro and goes back to a Drachma it can control itself.
The Spartan economy was largely based on Helot labor, the labor of slaves they had won by conquest. If a Helot tried to learn anything, or tried to speak up even to try to make the fields more productive, he was summarily executed. The last thing the Spartans wanted was a smart Helot.
This insistence on austerity is a similar policy. Germany's reversal of the outcome of WWII depends on keeping down the periphery of the economies it now dominates and orders about to its exclusive benefit. By lending, it has arranged to purchase those nations' governments and leave itself in position to dictate their social policies. The social policies the Germans dictate ensure that the debt can NEVER be repaid by forcing the economy of the debtor nation into continual recession.
If the debtor nations try to raise their heads, they are "executed" by suddenly pulling the lending plug, resulting in horrible privation for the people of those nations.
Greece will never recover unless and until it pulls out of the Euro and goes back to a Drachma it can control itself.
11
The Republican party in the US has become the party of the id. They spout that they are adherents of Christianity, but when it comes down to action they are about war, denying help to the poor sick and aged, and crossing to the other side of the road to help the billionaires among us. If Republicans were watching Jesus create food for the 5000 out of a few loaves of bread and fish, would they then complain about the Savior devaluing the food supply by creating more of it?
16
my take on the loaves and fishes after preaching about Blessed are the poor when the baskets were passed around each person looked and said this is not enough and passed the basket and said you eat I am NOT hungry. Each person did this. And when it came to the people who had food they did the same but they put in what they had so that the brother could eat. I'm not hungry you eat. That was the miracle. Not that food was created out of the quantum foam but that we wanted our brother to eat more than our selves. A lesson that would be very helpful now
Scott, if the Republicans are enemies of the poor then why do the most (capital D) Democratic states have the most material poverty and the most wealth disparity?
You're right about the wealth disparity (lots of very affluent Wall Street types and "captains of industry") but material poverty...? If there are more poor people in New York than in Mississippi it's because there are more PEOPLE in NY than in old Miss. By all reasonable standards, the capital R states have more unemployed, more uneducated, fewer with medical insurance, lower standards of living, etc. etc.
"...many Republicans hanker for a return to the gold standard... ."
P. Krugman, July 2015
"If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold." W.J. Bryan, July 1896.
How sad that we still must defend against 19th century Republicans.
P. Krugman, July 2015
"If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold." W.J. Bryan, July 1896.
How sad that we still must defend against 19th century Republicans.
10
No matter what the "lesson" is the GOP will never listen, Paul.
It's clear that after years upon years of intransigence, followed since 2008 by outright, deliberate, willful misgoverning by the GOP in an attempt to block any item that the President has put forth, they will NEVER compromise.
It is a sad point for my former party; the days of Reagan and Tip O'Neill sitting down and working together to forge a path forward for the nation are long gone.
It's clear that after years upon years of intransigence, followed since 2008 by outright, deliberate, willful misgoverning by the GOP in an attempt to block any item that the President has put forth, they will NEVER compromise.
It is a sad point for my former party; the days of Reagan and Tip O'Neill sitting down and working together to forge a path forward for the nation are long gone.
12
If the Republicans are so worried about debt and spending, why don't they begin by cutting the bloated Defense budget? Really, do we need to spend nearly trillion dollars? The F35 costs billions and still won't fly? Five hundred million to train 60 Syrian troops? Why didn't the GOP scream when the DOD reported that the other day?
24
"Greece’s Economy Is a Lesson for Republicans in the U.S."
You bet it is. Socialism is unsuccessful everywhere it is tried and liberal policies eventually lead to the economic death of a country.
Krugman is the poster child for stupid ideas, chief among them spending other people's money like there is no tomorrow.
You bet it is. Socialism is unsuccessful everywhere it is tried and liberal policies eventually lead to the economic death of a country.
Krugman is the poster child for stupid ideas, chief among them spending other people's money like there is no tomorrow.
4
I think what is easy more stupid is cutting other people's benefits and cutting other people's taxes.
Dude, you are so right. Cuba, Venezuela, Russia, Vietnam, China 1950-1980, socialism has always had dire consequences for human rights, human lives, and for their quality of life. Today's bread lines in Venezuela highlight the dangers of populist politics.
Tell that to the Scandinavian countries.
The crisis in Greece reminds us that the boundary between politics and economics is illusory. "An economy roughly the size of greater Miami" clearly is in trouble. The roots of that trouble lie in political failure and the political failure must be corrected to achieve an economic recovery. Greece is more analogous to Kansas than to the United States.
Just as the broadly supported, Brownback-led tax cuts in Kansas have undermined fiscal policy in Kansas, the broadly supported systemic corruption and political patronage in Greece have undermined fiscal policy in Greece. At some point the people of Kansas must collectively decide that Brownback's policies have failed. And at some point the Greeks must decide that corruption and patronage have failed. That is the path to economic recovery in Greece.
It also strikes me that neither Greece nor "greater Miami" has a economy large enough to thrive as a truly independent nation issuing its own currency and competing with the far larger economies of its neighbors. Greece needs its political ties to Europe just as "greater Miami" needs its political ties to the United States.
Just as the broadly supported, Brownback-led tax cuts in Kansas have undermined fiscal policy in Kansas, the broadly supported systemic corruption and political patronage in Greece have undermined fiscal policy in Greece. At some point the people of Kansas must collectively decide that Brownback's policies have failed. And at some point the Greeks must decide that corruption and patronage have failed. That is the path to economic recovery in Greece.
It also strikes me that neither Greece nor "greater Miami" has a economy large enough to thrive as a truly independent nation issuing its own currency and competing with the far larger economies of its neighbors. Greece needs its political ties to Europe just as "greater Miami" needs its political ties to the United States.
4
Let's let the market decide who is right and who is wrong. Every time a so-called Right-wing pundit or alleged "news" outlet asserts that the sky is falling because of debt, they should put $100 in a pay pal account. Every time Professor Krugman or anyone else writes essentially the same column detailing the failures of the so-called Right, he or she should do the same. Let's look at the economy in one year, and see how high inflation is. The money is split amongst the camp that actually was correct.
If no one is willing to actually put up money, then this debate needs to stop. It's beyond silly to argue a point that has already proven because one side is too stubborn and privileged to admit it was wrong.
If no one is willing to actually put up money, then this debate needs to stop. It's beyond silly to argue a point that has already proven because one side is too stubborn and privileged to admit it was wrong.
2
2 facts Krugman omitted: 1. 90% of Greeks don't pay their taxes & 2. Greek Pensions are 18% of the budget. Given the nature of the tourism based Greek economy the only solution is for Greek to leave the Euro and start printing drachmas, because the Greek economic culture will never be able to pay back the bailouts.
7
Nowhere in today’s column, Kenneth Lindsey, will you find Paul Krugman denying that over the years the Greeks were guilty of mismanaging their economy and of ignoring basic rules of sound fiscal policy. As far as having “omitted” facts, the thrust of the column was not to present an exhaustive list of Greek sins. The point was and is to debunk the idea that austerity will succeed without the flexibility of creating easy money for domestic expenditures and investment, which translates into devaluation to make exports much more competitive.
In short, pure austerity will not work for Greece because they are tied to the euro, a currency over which they have no control. For the same reason, austerity would not have worked for America without the offset by the Federal Reserve of keeping interest rates and the relative value of the dollar low.
The endgame for Greece may be an orderly exit from the euro and back to the drachma, as you suggest. In the meantime, basic humanity requires aid to ordinary Greek citizens trying to survive.
In short, pure austerity will not work for Greece because they are tied to the euro, a currency over which they have no control. For the same reason, austerity would not have worked for America without the offset by the Federal Reserve of keeping interest rates and the relative value of the dollar low.
The endgame for Greece may be an orderly exit from the euro and back to the drachma, as you suggest. In the meantime, basic humanity requires aid to ordinary Greek citizens trying to survive.
I thought taxes were a bad thing.
The lessons people take away from current events or from history tend not to be real lessons, but simply imagined confirmation of some guiding principle which they already hold. Paul Krugman aptly illustrates that point in his discussion of the predictable reaction of Paul Ryan and other Republicans to the financial crisis in Greece.
Lots of luck getting any Republican to admit that his or her simplistic interpretation is dead wrong.
Lots of luck getting any Republican to admit that his or her simplistic interpretation is dead wrong.
5
Krugman has an extremely limited understanding of the root causes of the Greek problem. It's not as much about debt but rather an aging population. Austerity measures will do little to solve a problem if fewer and fewer people are of working age than those that are retired. The Greek leadership doesn't have the stomach to institute prosperity measures that force all of the early Greek retirees back to work. http://greece.greekreporter.com/2014/12/04/75-of-greek-pensioners-enjoy-...
6
The pension problems associated with an aging population are not the same as those associated with a pension system that allows such early retirement with so few years of work. Most western industrialized nations have aging populations, but none have early retirement policies comparable to Greece's.
3
His understanding is even more limited than you say. It is not the austerity per se that has caused this problem, but the fact that virtually no one pays taxes, everyone freely admits it and is happy about it and people retire in their young 50s with great pensions, more than the citizens of their benefactors get who work more years and earn much more. A country that produces nothing and borrows way beyond its means ever to repay (and yes, the creditors are at fault here as well) has no relevance to the US (we are well on our way to the second half, but still produce enough to make the Greek case inapt).
2
While early retirement is no doubt part of the problem in Greece, I'm not so sure we can say it's the root cause of that country's problems.
The labor force participation rate in Greece is indeed low (53% in 2013, the latest year I could find data for). This is however higher than the rate in several states here: Alabama. Mississippi have labor force participation rates that are less than Greece's and in W Virginia the rate is 49%, which means of course that less than half of the working age population is employed.
I think we can safely rule out government-mandated early retirement as a cause of the dismal labor participation rate in these states. Perhaps the culprit is Involuntary early retirement but I think the likely real cause, both in AL, MI and WV as well as in Greece, is simply lack of employment opportunities.
The labor force participation rate in Greece is indeed low (53% in 2013, the latest year I could find data for). This is however higher than the rate in several states here: Alabama. Mississippi have labor force participation rates that are less than Greece's and in W Virginia the rate is 49%, which means of course that less than half of the working age population is employed.
I think we can safely rule out government-mandated early retirement as a cause of the dismal labor participation rate in these states. Perhaps the culprit is Involuntary early retirement but I think the likely real cause, both in AL, MI and WV as well as in Greece, is simply lack of employment opportunities.
Don't forget the other errant economic policy that Republicans inevitably push: the balanced budget amendment. I guess to Republicans, there's just nothing more ideologically satisfying than making it impossible for the government to respond flexibly to economic and geopolitical contingencies.
6
You do realize that every state in the country has balanced budget requirements.
I find Krugman's austerity example a little odd from the man who has been stressing almost daily in his blog that it's always wrong to impose austerity during recession. This seems to give the impression that there are some circumstances where austerity works, but it's of course more complicated than that, the 90s was a period of pretty high growth. It's strange of him to throw a bone to the austerians in this way without qualifying it with some mention of the business cycle.
Also, I'd like some more examples how exactly the Canadians imposed austerity, I wonder if their austerity looks like the Greeks austerity. For example reducing pensions or any other policy that reduced the purchasing ability of those most likely to spend it will hurt the economy.
Also, I'd like some more examples how exactly the Canadians imposed austerity, I wonder if their austerity looks like the Greeks austerity. For example reducing pensions or any other policy that reduced the purchasing ability of those most likely to spend it will hurt the economy.
36
Federal debt exploded under Reagan and Bush. It was Republicans who said, “Reagan showed that debt doesn’t matter.” Clinton’s moderate tax increase was appropriate belt-tightening during prosperity. It did not stop economic growth. The Republican opposition and fear mongering in response demonstrates their hypocrisy.
Federal debt exploded under Reagan and Bush. It was Republicans who said, “Reagan showed that debt doesn’t matter.” Clinton’s moderate tax increase was appropriate belt-tightening during prosperity. It did not stop economic growth. The Republican opposition and fear mongering in response demonstrates their hypocrisy.
As an economist, you should know better. In the days before the euro, Greek citizens were competing with each other for buying power and thereby set their own level of productivity. That was reflected in the value of the drachma. Once the euro was adopted, the Greek citizens were forced to compete with German auto workers and French aerospace worker for buying power. That raised the cost of living in Greece dramatically. As a result, they had to borrow more to maintain their leisurely drachma lifestyle.
The solution is to go back to the drachma. This way the difference in value of labor reverts back to the exchange rate between the drachma and the euro. Without that first step, the debt problem is forever.
By the way... fiscal discipline (i.e., 'austerity") does not affect GDP -- it only affects the governments portion of the GDP it consumes. Governments, after all, do not produce wealth. They tax it.
The solution is to go back to the drachma. This way the difference in value of labor reverts back to the exchange rate between the drachma and the euro. Without that first step, the debt problem is forever.
By the way... fiscal discipline (i.e., 'austerity") does not affect GDP -- it only affects the governments portion of the GDP it consumes. Governments, after all, do not produce wealth. They tax it.
6
Of course governments produce wealth with the very tax policies you so decry. They produce wealth with enormous defense expenditures to private enterprise. Need I go on?
1
Government can produce policies that encourage growth and thus wealth. Think of the Homestead Act and western railroad bill of the 1860's. More recently, the development of digital computers was financially supported by the US government in the 1940's and 1950's
1
Prof. Krugman, thanks, I agree with your article, but I think making Greece a teachable moment for the Republicans is a mismatch since I do not believe the Republican economic plan seeks in any way, shape or form to maximize overall American prosperity.
Instead, they seem to want to make further winners of the already rich. There are many subtle (and not so subtle) ways the Republican economic plan would tilt the table for them. One example would be that Republicans want to cut spending for the people and spend more on war; this in turn would lead to a higher oil price (as warfighting in the Middle East takes oilfields off-line), lower wages (as the poor must then tolerate a lower salary as the economy suffers, like Greece) and a stronger dollar (which I suppose makes it easier for the uber-rich to buy megayachts or other decadent, superfluous thingamajigs). Throw in tax cuts for the rich, and you supercharge their wealth increase. Oilmen get rich under this scheme (as they did during the GWB years), and it is a fact incontrovertible that oilmen wield heavy influence in Republic circles.
There are many other examples one could cite that make the same point: the already rich would benefit from the Republican economic plan.
In summary, I believe Rep. Ryan and the others hide behind their sham economics in order to preserve the true economic agenda, which is to widen further the income disparity for the benefit of those who placed them into political power.
Instead, they seem to want to make further winners of the already rich. There are many subtle (and not so subtle) ways the Republican economic plan would tilt the table for them. One example would be that Republicans want to cut spending for the people and spend more on war; this in turn would lead to a higher oil price (as warfighting in the Middle East takes oilfields off-line), lower wages (as the poor must then tolerate a lower salary as the economy suffers, like Greece) and a stronger dollar (which I suppose makes it easier for the uber-rich to buy megayachts or other decadent, superfluous thingamajigs). Throw in tax cuts for the rich, and you supercharge their wealth increase. Oilmen get rich under this scheme (as they did during the GWB years), and it is a fact incontrovertible that oilmen wield heavy influence in Republic circles.
There are many other examples one could cite that make the same point: the already rich would benefit from the Republican economic plan.
In summary, I believe Rep. Ryan and the others hide behind their sham economics in order to preserve the true economic agenda, which is to widen further the income disparity for the benefit of those who placed them into political power.
8
You do realize that income disparity has increased during this presidency at an accelerated rate despite rising taxes on the wealthy. It's about growth and this is the worst recovery of the modern era.
Paul, what is the lesson, that you can lie your way to prosperity? You and I know that Greece will continue to lie about its fiscal condition and the steps they will take to cure the problem, which is living within its means. Think about it, Greece has promised to never pay its debt and expects people to give them more loans. How stupid are those that believe such nonsense. Only suckers, like your self, adopt delusional thinking when it comes to believing anything that politicians say, and I mean ever. Back to the USA. No one in the country believes the national debt will ever be paid off. The Fed will monetize it, that you can depend on. My definition of austerity is living within your means. This is something the US has no intention of doing, ever. Politicians will never permit it. Uncle Sam must always be a 'sugar daddy', wise up.
6
Dear Professor, I lost track long ago of how many times you have chided the Republican austerity hawks or deficit hawks or inflation hawks who are all the same people for their being wrong, not merely because their theories differ from yours but because existing facts establish that they are wrong. However, so long as they keep telling their big lies, you must keep telling these big truths. The then existing power structure did not believe Copernicus either. Truth will out, always.
6
The deficit curbed by Spending agreement between Republican congress and president. Inflation curbed by fracking revolution on energy prices and the failure of low interest rates being turned into actual loans other than companies like Apple borrowing to buy back stock, which enriches investors like myself.
while this is partially correct, the missing issue is the far to expensive public entitlements that cause Greece to be in the position it is in. That is the important part.
4
The correlation of Paul Ryan's (Republican Party) often stated goal to "reform" Social Security is especially interesting in light of the fact that Greece has been forced to cut pensions again. Called for a "reform" of their pension system but this time the world bank lenders are demanding pension cuts in the 40% range. Possibly a coincident or actually a focus of the world banks since it is a similar recommendation of Republicans. The solution of the Republicans is always to force Social Security and retirement contributions into the volatile private investment markets. Now that the world banks have forced Greeks to not trust their pension system, the natural future is to force Greeks into a pension system based in the volatile private investment markets. Cutting the pensions of the elderly Greeks is similar to large corporations balancing their budgets by firing the cleaning crew rather than reviewing the corporate bonuses. The elderly of Greece and the world have no alternatives to these cuts and the younger Greeks and world now have a harsh lesson given by the banks. The future that the world banks are offering us that it is their way or highway and the elderly are their newest target. The lesson is not that debt matters but watch who you borrow from they are may have other motives than lending.
4
You do realize the money Greece borrowed for pensions was to support people retiring in their 50's?
Among the problems faced by the Greeks is the failure of the government to collect taxes. This could become the Greek problem the United States faces in the future.
The relentless anti-tax message of the GOP that started during Reagan's administration and is at the root of Tea party ideology couple with the funding cuts in the IRS budget are setting the stage for massive cheating.
That the IRS actually started to look at the clearly political organizations flying under the colors of being educational and social service organizations in order to shield donor identity and enjoy tax exempt status enraged the GOP. It also gave the GOP more ammunition to use against the IRS and to bolster its anti-tax message.
Today, the GOP is practically inviting Americans to behave the way Greeks behave when it comes to not paying taxes.
The relentless anti-tax message of the GOP that started during Reagan's administration and is at the root of Tea party ideology couple with the funding cuts in the IRS budget are setting the stage for massive cheating.
That the IRS actually started to look at the clearly political organizations flying under the colors of being educational and social service organizations in order to shield donor identity and enjoy tax exempt status enraged the GOP. It also gave the GOP more ammunition to use against the IRS and to bolster its anti-tax message.
Today, the GOP is practically inviting Americans to behave the way Greeks behave when it comes to not paying taxes.
15
JFK came before Reagan....
The underscored lesson is not to allow an incompetent and amateur president to borrow trillions of dollars. Krugman is no economist, although I'm pretty sure he shopped around in order to hear what he wanted to hear before writing this article. "Offset austerity with easy money" is tantamount to what Greece is asking for and getting now. No insight here Krugman. The naive perspective that a country can borrow too much money, allow civil servants to retire at 50 (similar situation in CA), and throw money at the unemployed in a continuous fashion is Paul's fantasy.
The geopolitical issue is that Greece is the barrier between Europe and the Arabs. Nothing could be clearer. Should Greece get help instead of being forced into more poverty- of course. The reason Greece's debt is a problem is because they have no industry as several have pointed out already. Call it austerity or tightening the belt- its definitely going to be part of any country's plan in a similar situation. Krugman points some pertinent facts but doesn't well understand them. It's a bit more complicated than Paul's article.
The geopolitical issue is that Greece is the barrier between Europe and the Arabs. Nothing could be clearer. Should Greece get help instead of being forced into more poverty- of course. The reason Greece's debt is a problem is because they have no industry as several have pointed out already. Call it austerity or tightening the belt- its definitely going to be part of any country's plan in a similar situation. Krugman points some pertinent facts but doesn't well understand them. It's a bit more complicated than Paul's article.
5
Greece is a currency user while the US is a currency owner. Didn't that whole QE(x) policy teach you anything about the true nature of the US dollar?
AS usual, Dr. Krugman figures a way to blame all Republicans for the type of problem Greece is now facing. Trying to compare Greece and the US is so ridiculous that the premise of the argument he generates is moot. Talking about the US Debt to GDP ratio just after WW II is specious. The US had a significant debt being paid down by England and some of the Allies for their assistance leading up to and during our sacrifices in that war - a European war that spread like a virus. We also used the run up and the war to super-boost our manufacturing capabilities and an inclusive workforce not seen since colonial days. WE ended up as the most industrialized economy in the world and it helped us for the next 50 years.
Dr. Krugman, please focus on the culture of the Greek society as the problem of their debt and get ready to explain how that mentality has spread to Portugal, Spain and gulp, Italy.
Dr. Krugman, please focus on the culture of the Greek society as the problem of their debt and get ready to explain how that mentality has spread to Portugal, Spain and gulp, Italy.
6
The 800 pound gorilla in the room is the republican party. "Trying to compare Greece and the US is so ridiculous that the premise of the argument he generates is moot." Seems like you've not been paying attention the last 6 or so years when it was the republicans that were comparing us to Greece. I guess it's all about that black Kenyan interloper who won the White House twice and saved us from the disastrous Bush economic debacle.
5
Krugman forgot that after WWII, the USA was the only manufacturing country left undamaged in the world. Of course our post war production accelerated as the world needed to be rebuilt. I personally find Krugman's articles are more about pushing a radical Socialist political agenda than articles about economics.
Let's keep our eyes on the matter of who ends up owning Greece as the situation grinds on. Krugman wants there to be rationality and a lesson in it, and is endlessly irked by pigheaded students who learn nothing. For the creditors, it's strictly 'bizinis' and a chance to acquire and expand. They seem to be doing pretty well, despite the failing grades in macro.
1
I would say that there more lessons here for our liberal politicians than our conservative ones. Yes, it's true Prof. Krugman, as you've told us in every one of your last ten essays, that governments need to spend more in a recessionary period, not cut back. But that needs to be balanced by reduced spending when things are going well. Moreover, the increase in deficit spending should be aimed at investments in infrastructure and the like that will yield future gains.
More importantly, our government needs to curtail its entitlement spending (can you hear that Illinois?) and our defense spending (F35 disaster might be a place to start).
And while we're at it, let's fix the #1 drag on our economy and get serious about tort reform.
More importantly, our government needs to curtail its entitlement spending (can you hear that Illinois?) and our defense spending (F35 disaster might be a place to start).
And while we're at it, let's fix the #1 drag on our economy and get serious about tort reform.
5
Just a thought, we pay 7-9% sales tax when we buy an Apple phone, and Apple says all the earnings were created by IP, parked overseas, and Apple pays no tax on their earnings. Then, an idea is floated to give Apple a 'Tax Holiday' to return their earnings to America.
Now, tort reform, seems about #200, on the list, after perpetual war and citizens who pay taxes, while corporations do not pay taxes
Now, tort reform, seems about #200, on the list, after perpetual war and citizens who pay taxes, while corporations do not pay taxes
"But that needs to be balanced by reduced spending when things are going well."
Maybe you should read more. Professor Krugman has stated that many times during the past 6 years.
Maybe you should read more. Professor Krugman has stated that many times during the past 6 years.
The Greek crisis is almost wholly the responsibility of the EU technocrats and the mean spirited Germans who have set this as a crazy morality play to teach the Greeks a lesson. Krugman is right.
8
And the irresponsible borrowing and spending had nothing to do with Greece's situation? It is all somebody else's fault?
Republicans aren't interested in learning any lessons on economics. They're interested in imposing a political will that contains political objectives that transcend economics. It is not the functioning of the economy they care about. It is the form of the economy they care about. It is form over function. They do not care who or how many are harmed or destroyed in the process. They do not care that their preferred world creates a nightmare planet for future generations.
To understand that liberals/progressives do not get this after 30+ years of it is to understand why liberals/progressives have lost so badly. It is liberals/progressive reality denial every bit as dangerous as the conservative reality denial on science and economics. Liberals/progressives are on the verge of giving away the 20th political century and still refuse to understand that conservatives simply want a very different, very ugly, very nasty new world. That new world is the neo-feudalism, neo-Confederacy that is obvious to even the blindest of observers, yet our supposedly sharpest never seem to make the connection.
Repeat this until you feel it in your gut:
Republicans don't care.
They don't care.
They don't care.
They don't care.
To understand that liberals/progressives do not get this after 30+ years of it is to understand why liberals/progressives have lost so badly. It is liberals/progressive reality denial every bit as dangerous as the conservative reality denial on science and economics. Liberals/progressives are on the verge of giving away the 20th political century and still refuse to understand that conservatives simply want a very different, very ugly, very nasty new world. That new world is the neo-feudalism, neo-Confederacy that is obvious to even the blindest of observers, yet our supposedly sharpest never seem to make the connection.
Repeat this until you feel it in your gut:
Republicans don't care.
They don't care.
They don't care.
They don't care.
23
Amen to that the republican supporters are the well off and corporation who would like nothing better than to control the US economy through its oligarchy of have's.
The Greek economy is based on bribery and tax evasion. The statistics: In Athens, only 2,000 people are listed as having an income over 130,000 euros per year. Pensions are being paid to thousands of deceased people. The average doctor's salary is 15,000 euros per year. Etc. It's not complicated: the government does not collect tax, period.
9
According to Krugman, the Repbulican are somehow responsible. Chrisitne, please do not let the facts get in the way of ideology
I accept the point that the austerity program had a negative impact on Greece. There is little doubt that when you dig a deep hole and cannot print your way out of it, if your money goes back to lenders, your standard of living will fall. I am confused by the "irresponsible lender" comment. What he seems to be saying is that if lenders did their homework, there would have been less lending earlier to Greece. Wouldn't this have been its own form of austerity with the result that one's living standard falls?
31
It means that the Greeks were among those who were purchasing housing market derivatives, and other junk debt, marketed by unscrupulous American lenders. This is not mere rhetoric; I knew one of these people. He worked for a major investment bank, and his region was southern Europe and, specifically, Greece.
He lost his job in 2009, along with most of the members of his department. Greece didn't dig itself into a hole; the hole was dug for Greece by foreign interests, including us.
He lost his job in 2009, along with most of the members of his department. Greece didn't dig itself into a hole; the hole was dug for Greece by foreign interests, including us.
3
I believe the timing on when austerity is done is important. Had the lenders not lent so freely in good times the bubble would have been much smaller and the recovery quicker. Austerity is more a government thing--when austerity is the policy in bad economic times then no one is spending (the private sector isn't spending by definition) so income is lowered (remember my spending is your income) and tax revenues spiral down and debt goes up. Austerity is obviously self-defeating. The time for governments to spend less would be when economic times are good and the private sector is spending. In the US that is when Bush decided to give the surplus back to the people who were already spending too much. Adding to the problem he then went on to spend like there was no tomorrow. I so wish our leaders could get a basic understanding of economics.
3
If the lenders had been more careful with their lending to Greece, it wouldn't have been like austerity at all. Simply, less access to easy money would have forced Greece to pay more attention to its expenses, to plan its budgets properly and to enforce the rule of law with regards to corruption and tax evasion.
Greece has spent the last decade like a lottery winner on a drunken binge, fuelled by cheap money from irresponsible lenders. Had those lenders been more careful, so probably would have Greece.
Still, that doesn't take away the fact that the European Union is effectively covering the losses of those irresponsible lenders with the blood and sweat of ordinary Greek citizens and of EU taxpayers in general.
Greece has spent the last decade like a lottery winner on a drunken binge, fuelled by cheap money from irresponsible lenders. Had those lenders been more careful, so probably would have Greece.
Still, that doesn't take away the fact that the European Union is effectively covering the losses of those irresponsible lenders with the blood and sweat of ordinary Greek citizens and of EU taxpayers in general.
1
Current Republican economic dogma isn't about "How do we best create opportunity for more Americans?" It's all about "How do we punish those poor people who aren't as smart as us, for being poor people who aren't as smart as us?"
7
Why would anyone expect the science deniers on cigarettes and man-made climate change -- to mention a few facts and truths about what kills us -- to understand, accept and promote the fundamentals of basic economics?
6
We've seen a drumbeat of comments about the Greek debt crisis emphasizing that they must pay their debts. Consider the words:
He owed me money. He's got to pay. A man's got to honor his debts.
These words are from the Sopranos when Tony's father explained why he cut off a man's finger who wasn't paying his debts Beware of moralists who sound like gangsters.
He owed me money. He's got to pay. A man's got to honor his debts.
These words are from the Sopranos when Tony's father explained why he cut off a man's finger who wasn't paying his debts Beware of moralists who sound like gangsters.
3
Thank you again PK, for your thoughtful analysis and commentary that is backed up with facts, examples and lessons. Understanding how Canada managed their circumstances and how Greece cannot is illustrative of the threat represented by those who claim spending as the enemy and can't provide the clear economic picture accompanied by examples that back up their claims. The Republican Party appears to have a short memory that doesn't include the economic and political ruination that occurred during George W. Bush's presidency. The simple message sent by the right may be accessible, but that doesn't mean it is correct, and the more folks know the more they will realize how just a few more facts can better inform the debate and ultimately better guide folks' decisions as to who should lead us.
6
Republican economic policy is not incorrect; rather, it has a different goal for America - Downton Abby over the American Dream. American workers have not had a raise since Reagan cut taxes for the wealthy and won't get a raise until the Fairness Doctrine is restored and Fox News can't broadcast Republican propaganda 24/7.
5
Would this apply to NPR, NYT?
Insufficient attention has been paid to the parallel between Greece's unwillingness to collect taxes and our own. Surely their economic crisis (and our own economic struggles) would be substantially mitigated if our respective governments were able to collect the taxes owed -- particularly from the rich.
The GOP spends endless amounts of time attacking and vilifying the IRS, and cutting the IRS's budget by enormous sums every year. The direct consequence of this is that our Treasury is collecting far less in revenues than would be the case if bashing and crippling the IRS weren't a popular GOP pastime. Then the GOP has the audacity to complain about our country's inability to balance its budget or pay off the national debt. (Not to mention complain about sensitive data being stolen from antiquated IRS computers operated by its skeleton staff of IT people.)
It is a well-known fact that every revenue agent hired by the IRS to collect taxes brings in at least four times his/her salary in taxes owed to the Treasury. Of course, it's politically unpopular to support the IRS, which is why we don't have nearly enough revenue agents, and at least to some extent why our debt to GDP ratio isn't lower.
The GOP spends endless amounts of time attacking and vilifying the IRS, and cutting the IRS's budget by enormous sums every year. The direct consequence of this is that our Treasury is collecting far less in revenues than would be the case if bashing and crippling the IRS weren't a popular GOP pastime. Then the GOP has the audacity to complain about our country's inability to balance its budget or pay off the national debt. (Not to mention complain about sensitive data being stolen from antiquated IRS computers operated by its skeleton staff of IT people.)
It is a well-known fact that every revenue agent hired by the IRS to collect taxes brings in at least four times his/her salary in taxes owed to the Treasury. Of course, it's politically unpopular to support the IRS, which is why we don't have nearly enough revenue agents, and at least to some extent why our debt to GDP ratio isn't lower.
9
So glad that Prof. Krugman is not in charge of the US economy. As to his views on Greece he totally ignores the rotten clientelism of the political class in Greece. That's the core of the problem.
5
"rotten clientelism of the political class in Greece" … What about the same in the US? Stop pretending that you have a morally superior system. The latest lunatic from your "rotten" political class is the Donald.
1
No he doesn't. He just recognizes the importance of having enough money for an economy to function.
Another excellent and very informative article by Professor Krugman.
2
Thanks, Paul, for making the dismal science involved with the Greece matter comprehensible to a civilian.
4
Paul, once again you have presented a cogent, logical and sensible argument. I totally agree with your comments. It is such a pity that the minds of so many on the Republican side of politics are closed to logic and reason. In my very humble opinion I would suggest that you continue to argue using logic and reason. Let the other side be the one to resort to emotion, prejudice and bigotry. It is their specialty and they have had years of experience with it.
3
The goal of the elites in all this austerity mongering is to bankrupt state and local governments so they sell off public goods at fire sale prices to those same elites who then charge rents to us all for the use of those same goods, which we built and paid for with our taxes. They invest a fraction of the cost of creating those goods and derive endless benefits as they represent things we all need, like water and sewer. No mystery here. The goal is to beggar us all.
8
Ah yes, the Republican party which tried to pass legislation to fly the confederate battle flag in our national parks and still pines for those happy days of slavery or at least white supremacy.
Talk about being out of touch and wrong about everything since TR left office. In 1946 we had a massive debt but to my recollection it was a debt owed to mostly Americans for the sale of bonds to finance the war. I do not recall being indebted to foreign banks or governments and the answer was not austerity but growth.
Did anyone ever talk of defaulting on our national debt, anyone except the Republican party to blackmail the nation into adopting its totally wrong policies? No because that would be reckless, stupid and would cause a world depression. Who would shut down the government at the cost of 40+ billion dollars and is preparing to do it again? You guest it, the billionaires must govern, the people are lazy, Hoover had it right, Republican party. This was the party which was pro German until Pearl Harbor. What a history of being always wrong on the big things. Now they are selling austerity but not for the rich. They are experts in Newspeak and Double-Think. Everyone is equal except Republicans are more equal than others.
Talk about being out of touch and wrong about everything since TR left office. In 1946 we had a massive debt but to my recollection it was a debt owed to mostly Americans for the sale of bonds to finance the war. I do not recall being indebted to foreign banks or governments and the answer was not austerity but growth.
Did anyone ever talk of defaulting on our national debt, anyone except the Republican party to blackmail the nation into adopting its totally wrong policies? No because that would be reckless, stupid and would cause a world depression. Who would shut down the government at the cost of 40+ billion dollars and is preparing to do it again? You guest it, the billionaires must govern, the people are lazy, Hoover had it right, Republican party. This was the party which was pro German until Pearl Harbor. What a history of being always wrong on the big things. Now they are selling austerity but not for the rich. They are experts in Newspeak and Double-Think. Everyone is equal except Republicans are more equal than others.
10
The Greek penchant for unlimited welfare and the earliest government funded retirement in the civilized world are all the stated goals of the Democrat party.
3
Uh, where were these stated? Sounds like a retiree getting more out of the system than he put in....
when skiing in the woods, the one thing not to do is to look at a tree. you must look down hill beyond those trees coming up on you. If your eyes get stuck and focus on an individual tree you will ski into it, unless you stop first.
1
Hard money brings hard times.
2
As most of the current candidates stampeding along with their brethren in the '16 General support a two-tiered flat tax with an elimination of the loopholes in the system, this, if passed, would eliminate the problem. By paying down the burgeoning debt, reforming - not eliminating - the current programs to aid low-income families and immigration while not slashing certain gov't programs like defense spending, the US could remain a beacon of freedom to the world.
3
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. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 36% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Are you sure you want to pay down the burgeoning debt?
Are you sure you want to pay down the burgeoning debt?
2
Tripling the national debt as we slowly emerge from "the Great Recession" certainly puts us afloat in that proverbial handbasket.
True but incomplete.The Euro ,which Krugman asserts was the reason for lack of easy money to accompany austerity,was also the "artificial" engine of economic growth in Greece leading up to the crisis.Since the Euro is a blended currency representing both strong and weak economies, it enabled the country to purchase foreign goods that would have been much more expensive had Greece retained it's own currency.In addition,one of the main reasons Greek government debt was so large in the first place was that economic growth in Greece was not accompanied by a corresponding increase in Government income (tax base) since businesses and individuals grossly under-report earnings.So yes,the US isn't Greece but not only for the reasons Krugman presents.
Comparisons with Greece are, and always have been, a joke.
When was the last time anyone here saw, let alone bought, a car made in Greece? How about a computer? Dishwasher? Software? How many Greek movies did you go to last year? How many alumni of Greek universities work with you?
If the US government didn't tax and distribute money from our richer states to our poorer states, then Mississippi and Arkansas would be Greece and Portugal. And if the EU began to distribute receipts from Germany to Greece and Portugal, then those countries would benefit as much as Mississippi and Arkansas benefit from being in the US.
Of course, the GOP might also benefit from a reminder of this.
When was the last time anyone here saw, let alone bought, a car made in Greece? How about a computer? Dishwasher? Software? How many Greek movies did you go to last year? How many alumni of Greek universities work with you?
If the US government didn't tax and distribute money from our richer states to our poorer states, then Mississippi and Arkansas would be Greece and Portugal. And if the EU began to distribute receipts from Germany to Greece and Portugal, then those countries would benefit as much as Mississippi and Arkansas benefit from being in the US.
Of course, the GOP might also benefit from a reminder of this.
17
Paul Ryan is nothing more than a parrot. He couldn't explain the virtues of any of his diatribes against the Fed. At least Ryan functions beneficially at one level. He proves that "ignorance is not bliss," which effectively destroys that old cliché. The tragedy of Greece, the home of "tragedy in Western culture," is exactly as you say. To expect any of our conservative pols to care about anyone but the rich who care nothing about anyone else is like expecting Kansas to have a rainbow with gold on one end which could end the mismanagement of their state by conservative idiocy. In our country we have supported Greek like states since millennia, take Mississippi a total economic bust since the Civil War. In America we carry unproductive states, those that get more federal money than they send in in taxes, as the accepted rule. And many of their pols are among those conservatives who hate everyone but the rich as they represent states that can't carry their own load. So much for irony! Maybe I am just old, but I find it difficult to imagine Germany as a beneficent state. Unfortunately, I have no solution for Greece except that maybe the rest of the Western World ought to come to her aid since she is responsible for the birth of our culture. I, now, understand why the UK never adopted the Euro.
7
If the Greek economy is "an economy roughly the size of greater Miami..." we might think of helping them out. Greece is the mother of our western tradition. That's a good reason. We could use our capitalist notions of dominance to fuel up their industrial economy, their travel industry, improve their financial marketing, and by just showing the way, we'd get 'em out of this fix. And for very little. They we could do Puerto Rico, maybe Cuba. Pretty soon line up a lot of little states that want to be our friends.
137
Oh come on. Today's Greece has as much relationship to Golden Athens as Japan. Greece is a Balkan state with more commonality to Byzantium than anything else. The fact that today's Greeks occupy the same bit of ground that the ancients did is completely irrelevant. You would benefit from reading Balkan Ghosts.
The US does not make friends. It dominates and intimidates others. That is why we make enemies. Greece doesn't have much in raw materials. We aren't interested.
The Organisation for Economic Co-operation and Development (OECD) already gives foreign aid to "stimulate economic progress and world trade" (aka bribes) in the name of peacekeeping like Pakistan ($3.5 billion), Afghanistan (6.8 billion), Israel (6.2 B), Egypt (1.6 B), Jordan (6.8 million), Kenya (652 million), Ethiopia (3.539 Billion), Tanzania (531 M), Nigeria (625 M), Albania (350 M), Bangladesh (1.49 Billion), Bolivia (1.17 Billion), Côte d'Ivoire (1.436 Billion), Columbia (1.018 Billion), Congo, Dem. Rep. (5.534 Billion), Ghana (1.81 Billion), etc. If Greece were to be added to the list they would join the 3rd world status ranks of Haiti, etc. as failed states that rely on financial peacekeeping by the West, Russia & China to prop up their economies. This would undoubtedly send jitters throughout the world's stock markets as a sign of a crumbling & unstable European Union bolstered up by outside help. Remember the US is not part of Europe. In fact, Russia has more ties with Greece and the EU due to history & geography than the Americas.
1
Greece's economic downfall is a lesson for all governments to strictly enforce tax laws by going after tax evadersas well as not relying on tourism as the primary source of national GDP. Tourism represents 1/6 of the Greek economy which is being negatively impacted by the current crisis during the crucial summer vacation peak. The radical left leaning Syriza government had no experience or expertise in economic reform, thus exacerbating the crisis to appeal to the Greek voter's frustrations. They have steered the Greek vessel into the rocks in their attempts to appeal to populist demands by failing to address the bloated pension system which allowed people to retire in their 50s. The Greek government used pension benefits to bolster their popularity and ensure left wing electoral success. Most notoriously, Greek hairdressers infamously qualified for pensions at age 50 due to the rigor of their work. Pensions account for 17.5% of the Greek GDP which is unsustainable given that the country imports oil & has little to export to the world other than culture & tourism. The size of the Greek pensions also had the rest of Europe rangled labeling Greeks as the laziest people in Europe. The annual pension for a Greek retiree in 2010 amounted to 96% of the salary they made when they were working. For Germans, the share was 50%. A 2013 Pew research poll found that Europeans considered Greece to be the laziest & most corrupt of all the EU countries.
4
Perhaps if the rest of the world valued culture and vacations, there would be no problem in Greece or elsewhere. Viva la Difference' !!
Absolutely, culture & economic success need not be mutually exclusive. Although valuing culture & being able to afford vacations to far away places is a fantasy to 99.5% of the world's population. If the New World Order global elite want to set up a fund for international travel, I'm sure many would enlist.
If the economy improves, don't the wealthy benefit as much, if not more, than everybody else does? Yes, thy do. So putting money at the bottom of the food chain just means people are selling their goods and services. Win, win. We know it works, we've seen how social service programs pay back a lot of their costs in terms of GDP, just like we see that the tight money, welfare cut program is always a failure. Who bene fits economically frm these policies? No one really. So the reward for Republican positions must be something else. I look at what Dr. K has called "sado-economics_, the pleasure of making other s suffer. Oh, and controlling them politically like we are all mere ungrateful servants of the wealthy elite. Ayn Rand describes it better.
4
Excellent point, Mr. Veintraub, only I call it "psychopathonomics." "Sado-economics" is probably better.
The ancient Greeks and the ancient Israelites were well aware that these vices of greed and sadism among the rich and powerful destroy nations and civilizations. Look at the Greek concepts of the Anacyclosis, pleonexia and epichairekakia, and the Ayn Rand-like mythic figure Kakia, who corrupts privileged youth.
The story of Sodom & Gomorrah was supposed to be a warning tale of how greed and cruelty destroy states, in line with the Jewish teaching of the importance of justice for the poor. The homophobic version was a medieval corruption and a dual evil, spreading hate and obscuring the true moral.
Psychopaths manipulate the rest of us by appealing to himanity's lowest and most disgusting traits, the tendency to feed greed and ego by demonizing and dehumanizing others. This filth is rife in corporate governance and in the reactionary garbage that is palmed off as conservatism today.
The ancient Greeks and the ancient Israelites were well aware that these vices of greed and sadism among the rich and powerful destroy nations and civilizations. Look at the Greek concepts of the Anacyclosis, pleonexia and epichairekakia, and the Ayn Rand-like mythic figure Kakia, who corrupts privileged youth.
The story of Sodom & Gomorrah was supposed to be a warning tale of how greed and cruelty destroy states, in line with the Jewish teaching of the importance of justice for the poor. The homophobic version was a medieval corruption and a dual evil, spreading hate and obscuring the true moral.
Psychopaths manipulate the rest of us by appealing to himanity's lowest and most disgusting traits, the tendency to feed greed and ego by demonizing and dehumanizing others. This filth is rife in corporate governance and in the reactionary garbage that is palmed off as conservatism today.
1
There are two comparisons between the US and Greece. The first would be borrowing, although so far we can pay our debt. As I recall, when Bill Clinton left office there was a surplus, which George Bush proceeded to blow, and then run up trillions in debt for two unpaid wars. So we'll be dealing with that for some time. All of these comments about Republicans standing for financial probity are hilarious. Secondly, we also have a problem with our tax system. We are not putting enough investment into collection, determining tax evasion, and determining whether organizations should be eligible for tax relief. And I'm not blaming the IRS for that. They need support and money from Congress and 21st century technology.
8
Carol as a percentage of GDP, our debt was about 49% larger in 1946 than it is today. Ask yourself when did we even pay that down? As time went on, it just became insignificant.
The lesson of Greece is that when you borrow money the creditors make the rules. Mr. Krugman's assertion that printing money fights unemployment only works if 1. the people getting the new money spend it on something their own country makes and 2. you have a country where the people want to work. Neither condition exists in Greece to any sufficient degree. And, YES! The USA is speeding down that same path. The Trade Agreements struck since the mid 1990s have and continue to drive manufacturing elsewhere and as more Baby Boomers retire the population has shifted to where there are more people getting money from the government than paying taxes to support those social programs. Into the mid 1960s the USA was the world's largest creditor, which enabled other countries to purchase our goods; But, the rise of social programs for housing, education, medicine, food, and retirement, in combination with perpetual war, has destroyed the economic foundation of the United States. Interest rates have not risen because we now live in a controlled economy and are in fact in slowly evolving Great Depression, which is the logical conclusion to years of excessive money printing and leverage.
42
Actually from 1946 to 1973, out debt increased 75%. And it was largely the increase in social programs combined with other government spending that was responsible for the Great Prosperity of these years.
Compare that to post WWI when we cut the debt by 38% so that it was only 16% of GDP in 10/1929. And then what happened?
Compare that to post WWI when we cut the debt by 38% so that it was only 16% of GDP in 10/1929. And then what happened?
Than I guess everything is great now since our debt to GDP ratio is over 100% and the two are accelerating in opposite directions.
Patrick, I am not sure what you are talking about. The deficit, the derivative of the debt, decreased 66% from 2009 to 2014, so the acceleration of the debt which is the derivative of the debt is negative. While GDP growth has increased so the acceleration of the GDP is positive.
http://www.politifact.com/truth-o-meter/statements/2015/jan/20/barack-ob...
http://www.politifact.com/truth-o-meter/statements/2015/jan/20/barack-ob...
Very interesting that Krugman does not address Greece's horrific record collecting taxes. US Republicans are attempting to adopt this Greek symptom as Republicans continually under fund the IRS
8
I was impressed to hear that Dr. Krugman has put his money where his mouth is and has transferred his entire retirement account into Greek bonds. His determination to show us that corrupt profligacy is a sure cure for determined austerity is rather awesome.
4
"just about everyone in the G.O.P. demands that we reduce government spending.." No No and again NO!
The Republicans since Nixon have NEVER reduced government spending!
LBJ actually had a balanced budget despite the Vietnam War and the Great Society. Nixon began running deficits which were reduced under Carter until Reagan ran deficits so huge he turned the US from a net creditor to a net debot nation. Clinton actually had budget surplus which Bush promptly blew away in a year! Republicans love to spend our money on endless Wars and their profits for the Merchants of Death which is in fact over half the Federal budget. The total costs of War are $1 Trillion every year. Democrats unfortunately also support the endless Wars but just not as much and usually enact some very small cuts in military spending which thus cuts government spending. But in the age of Peak Oil and Climate Change we cannot afford this destructive waste any longer. The Pentagon consumes 6% of US oil consumption and is the biggest greenhouse emitter on the planet.
When will Krugman mention this fact?
The Republicans since Nixon have NEVER reduced government spending!
LBJ actually had a balanced budget despite the Vietnam War and the Great Society. Nixon began running deficits which were reduced under Carter until Reagan ran deficits so huge he turned the US from a net creditor to a net debot nation. Clinton actually had budget surplus which Bush promptly blew away in a year! Republicans love to spend our money on endless Wars and their profits for the Merchants of Death which is in fact over half the Federal budget. The total costs of War are $1 Trillion every year. Democrats unfortunately also support the endless Wars but just not as much and usually enact some very small cuts in military spending which thus cuts government spending. But in the age of Peak Oil and Climate Change we cannot afford this destructive waste any longer. The Pentagon consumes 6% of US oil consumption and is the biggest greenhouse emitter on the planet.
When will Krugman mention this fact?
14
He said the Right's recommendation is cuts to spending on people, not on agribusiness and fossil-fuel subsidies and foreign wars.
There is something seriously wrong with an economic system that suggests buying stocks when the market is down, spending money when in debt and increasing interest rates when people cannot pay.
3
You should learn to distinguish public debt from private debt. The federal deficit measures the flow of money FROM the federal government TO people, businesses, and state & local governments.
Hi Dr. Krugman:
It is said about the Bourbons that they never forgot anything and never learned anything. Today's Republican pols never remember anything and of course never learned anything either.
Best Regards,
Celso E. Lopez
It is said about the Bourbons that they never forgot anything and never learned anything. Today's Republican pols never remember anything and of course never learned anything either.
Best Regards,
Celso E. Lopez
9
perhaps you in PR need to have learned this lesson some time ago.
As commenter Montreal Moe said, "We are all Greeks," and to me that is the lesson we-the-little people better take to heart. The common thread for Americans and Greeks is that in the minds of the economic and political elite in the U.S. and Europe, it is "us versus them," and we-the-people are the "them."
As I date it, people were factored out of the economic and political decision-making process when Margaret Thatcher ranted against people needing government help and proclaimed: "There is no such thing as society."
Nonsense, of course, but her point was to absolve the wealthy set from any moral obligation (noblesse oblige) to have their tax dollars go to help lesser persons who are not rich, and to give permission to governments to ignore the needs of society, such as public services and a safety net for people. Music to the greedy fat cats' ears!
While the basic job of the government is to balance the needs of the market sector with those of civil society (the interests & community of people), the market sector right wingers demand the government do their bidding--partially by trying to obliterate concerns and considerations related to the well being of people and society. They play a zero-sum game at our and our children's expense.
What evidence is there the Ayn Randian Republicans or the international bankers give a damn what happens to human beings or the planet? Out of whack and out of balance. There will be a correction factor—or else…
We are all Greeks
As I date it, people were factored out of the economic and political decision-making process when Margaret Thatcher ranted against people needing government help and proclaimed: "There is no such thing as society."
Nonsense, of course, but her point was to absolve the wealthy set from any moral obligation (noblesse oblige) to have their tax dollars go to help lesser persons who are not rich, and to give permission to governments to ignore the needs of society, such as public services and a safety net for people. Music to the greedy fat cats' ears!
While the basic job of the government is to balance the needs of the market sector with those of civil society (the interests & community of people), the market sector right wingers demand the government do their bidding--partially by trying to obliterate concerns and considerations related to the well being of people and society. They play a zero-sum game at our and our children's expense.
What evidence is there the Ayn Randian Republicans or the international bankers give a damn what happens to human beings or the planet? Out of whack and out of balance. There will be a correction factor—or else…
We are all Greeks
5
Jeb Bush, the anointed front-runner for the Republican nomination, has been claiming he'll increase the growth rate in the U.S. GDP to 4 percent a year--a number not even achieved in the boom years of the Clinton Administration. But, what many do not seem to know is that Greece was hitting that number during the '90s while the rest of Europe was growing at only 2.5 percent. The economic decline in Greece actually began when that were forced to hold the 2004 Olympic games to mark the 100th anniversary of the modern games. The over $10 billion cost started Greece down the path of debt that was made unsustainable in the U.S.-caused economic collapse of 2008--due, in large part to poor mortgage lending practice here at home. Of course, no bankers went to jail since they were "too big to fail" and, in fact, too big not to bail. So, as Prof. Krugman has noted, Europe rescued Greece with bad lending practices, and despite all the Republican-lite Greece bashing, Greece did comply with the austerity regime which only made their economic situation worse with 25 percent unemployment (60 percent for youths) and an equal decline in their GDP. The moral of this story is: Beware of bankers bearing gifts of high-interest loans (yes, they have also been over-charging Greece on interest) and punish these felons not their victims (so far only Iceland has done that!).
7
Greece is simply not a modern, first world economy. An economy where per capita income is half the first world average has little issue hitting 4% growth rates because the base is so low. The US has 800 cars per 1000 people. China has under 100 per 10000. If 3% of the US ADDS cars, the growth rate is 4%. If 1% of Chinese ADDS cars, the growth rate is 10%.
Greece needs to stabilize, and then leave the Euro, so that it can be truly competitive if it so desires.
Greece needs to stabilize, and then leave the Euro, so that it can be truly competitive if it so desires.
My wife has family in Greece. Much of what you say is true, except the centenary of the Modern Games wasn't 2004, it was 1996. Athens bid on the 1996 games, but the IOC chose Atlanta, instead. That 8 year difference makes all the difference between a cost and the millstone cost of 2004.
1
What Republicans and like-minded Americans are really concerned about is the "moral hazard" of giving low-income (specifically black and brown) people financial help without them working for it. As a way around this stumbling block, I think we should guarantee a job opportunity to every American who wants one, something along the lines of the WPA program from the 1930s. It will be expensive, it will involve the federal government in a major way, and it will be susceptible to corruption. But it worked during one period of American history and can do so again, if administered properly. Any one who has been conscious for the last decade knows there is plenty of work needed to be done in this country that is not currently addressed by private markets.
4
Krugman ignores basic economic facts: Greece overspent, mismanaged, impeded business, has 19% on government payrolll, did not collect taxes.
4
I guess Mr. Krugman subscribes to, every life is precious and sacred, unless they vote Republican!!
Yes, Krugman does not like Republicans.
It's puzzling that Prof. Krugman chooses to ignore the Caribbean elephant in the room in this column which is of course the trending topic of Puerto Rico and it's problem with an unsustainable debt (also in part due to irresponsible lending if I might add).
Mr. Krugman has in his blog pointed out some of the differences between Puerto Rico and Greece, rightly so, but the moral of this same column could well be said of what could happen to Puerto Rico. This is not so much based on pure hypothesis but on the fact that Puerto Rico commissioned a study from ex IMF economists that recommends some extreme austerity measures, including lowering the minimum wage, while we "grow" our economy to pay for debt.
Given that like Greece we don't have our own currency, to impose these austerity measures even partially means an ever greater exodus and a very prolonged recession and without debt restructuring, which the US Congress has refused to facilitate by denying access to bankruptcy, we are talking about a very grim set of prospects. So the point of this column applies to the situation in PR on a very immediate manner and while there's still time to take the right course of action austerity is at our doorstep, the IMF ideology being backed by Republicans which claim austerity will solve all our problems.
Mr. Krugman has in his blog pointed out some of the differences between Puerto Rico and Greece, rightly so, but the moral of this same column could well be said of what could happen to Puerto Rico. This is not so much based on pure hypothesis but on the fact that Puerto Rico commissioned a study from ex IMF economists that recommends some extreme austerity measures, including lowering the minimum wage, while we "grow" our economy to pay for debt.
Given that like Greece we don't have our own currency, to impose these austerity measures even partially means an ever greater exodus and a very prolonged recession and without debt restructuring, which the US Congress has refused to facilitate by denying access to bankruptcy, we are talking about a very grim set of prospects. So the point of this column applies to the situation in PR on a very immediate manner and while there's still time to take the right course of action austerity is at our doorstep, the IMF ideology being backed by Republicans which claim austerity will solve all our problems.
7
So true. And, sadly, there seems to be no cure for economically stupid, no matter how many times you try to educate from history. and most of this intentional ignorance resides with Republicans because it serves the purposes of their very wealthy puppet masters.
4
"...the Greek crisis risks depriving the United States of crucial allies."
I think the USA could help Greece and maintain it as one of our crucial allies. Move all of our military bases out of Germany and into Greece. The money the USA would spend on setting up these bases, the annual rent for these bases, plus the money our troops would spend in the local economy might be enough to help them turn the corner. This move would put us closer to the Ukraine and allow us to put a larger shadow over that problem as well. Germany obviously does not need the economic injection our bases give them either. And the biggest selling point is that the GOP has never met a bill they didn't like that didn't involve increasing the Pentagons budget.
I think the USA could help Greece and maintain it as one of our crucial allies. Move all of our military bases out of Germany and into Greece. The money the USA would spend on setting up these bases, the annual rent for these bases, plus the money our troops would spend in the local economy might be enough to help them turn the corner. This move would put us closer to the Ukraine and allow us to put a larger shadow over that problem as well. Germany obviously does not need the economic injection our bases give them either. And the biggest selling point is that the GOP has never met a bill they didn't like that didn't involve increasing the Pentagons budget.
40
Good idea but instead of American troops we can ask Russia to station their troops in Greece to balance NATO''s aggression in Eastern Europe and bring our troops now stationed in Germany home. The German's can then bear the full cost for policing Europe and promoting democracy and capitalism throughout Europe.
Better yet just bring all our troops home and let the Euro Nations sort this mess that they created out themselves.
Better yet just bring all our troops home and let the Euro Nations sort this mess that they created out themselves.
The politicizing of Greece on all sides has clouded any sort of objective lessons to be learned here. We all want to use Greece as an ideological bludgeon, refusing to listen to anything that just might soften the boogeymen we so desperately need to make our case. Economic analysis is so fraught with partisanship these days that I'm doubtful reasonable lessons can be learned.
6
This is another great political attack piece that furthers Krugman's goal of advancing a liberal agenda. It does a great disservice however in that it is extremely misleading and, as usual Krugman states his highly biased opinion as being incontrovertible fact. The core cause of the Greek tragedy is to few people working and paying taxes, a massively bloated public sector and overly generous retirement benefits for 50 year olds. These a far closer to ideals advanced by the American left than anything that conservatives talk about. There has been much mocking of Greece for people who retire at 45 with full pension benefits yet this is standard practice in the US public sector where millions are eligible for generous retirements after just 20 years of "service", they then go on the public payroll while they go on to work privately for another 20 years. These people are not voting Republican. You should be ashamed of yourself Krugman. You have lost all credibility because of your extreme dedication to partisan attack pieces.
4
I suspect that the majority of government employees in the U.S. That are retiring "early" and going on to other employment are military. Are you saying that ex military are voting for Democrats? What other government employees are retiring at 20 years with "generous" retirements, specifically?
16
"As usual Krugman states his highly biased opinion as being incontrovertible fact".
Oh dear, Prof. Krugman must have gotten his Nobel Prize in economics for his 'biased' knowledge.
As to Greece, the retirement age has been raised to 66 in 2014 and to 67 in 2015 - higher than it is in the 'greatest nation in the word'.
As Carol so correctly stated, only members of the military can retire now after 20 years of service, meaning some of them are still only in their early 40s, are not yet one of more star generals, and can hardly live on their military pension while putting children through school.
Oh dear, Prof. Krugman must have gotten his Nobel Prize in economics for his 'biased' knowledge.
As to Greece, the retirement age has been raised to 66 in 2014 and to 67 in 2015 - higher than it is in the 'greatest nation in the word'.
As Carol so correctly stated, only members of the military can retire now after 20 years of service, meaning some of them are still only in their early 40s, are not yet one of more star generals, and can hardly live on their military pension while putting children through school.
1
police in nyc
The GOP orthodoxy is to empower the rich and denigrate all those who have fallen short of success. America, they feel, is best when there are no filters, regulations or governors to hold back the unbridled greed of the wealthy class. Being anti-immigrant is a large part of this, as well, so that the definition of rich includes skin color and, preferably, the male sex. Given the long history of prejudice in America, I ask: why is this GOP push for plutocratic economics not part of that continuum of white privilege ?
6
Liberals frequently confuse "encourage" with "denigrate".
When I lived in Greece for about a year, many years ago, there were a lot of German tourists. Maybe it was just the beaches and ancient artifacts, but I wonder whether, if the euro people are successful in turning Greece into more of an austere culture, the destination will still hold the same attraction. It was clear to me back then that the way of doing business in Greece was different from what I was used to in the U.S., but while we observed those features, we didn't think about trying to excise or remodel them. As has been pointed out, Greece functioned before it joined the euro, so its practices are not in and of themselves incompatible with functioning, it seems to me; perhaps the root of the problem was, simply, giving Greece a credit card.
12
"As has been pointed out, Greece functioned before it joined the euro, so its practices are not in and of themselves incompatible with functioning, it seems to me; perhaps the root of the problem was, simply, giving Greece a credit card."
Just can't bring yourself to say "the root of the problem was, simply, Greece borrowed too much money".
Just can't bring yourself to say "the root of the problem was, simply, Greece borrowed too much money".
1
like giving a teenager a credit card?
1
Jp
One can't borrow what others aren't willing to lend.
One can't borrow what others aren't willing to lend.
This is for Peter, retirement age in Greece: And OECD website
http://www.oecd.org/els/emp/ageingandemploymentpolicies-statisticsonaver...
http://www.oecd.org/els/emp/ageingandemploymentpolicies-statisticsonaver...
2
I don't find it surprising that Republicans want austerity for workers; I find it surprising that any workers vote for Republican government.
19
As President Clinton said in 2012, there is one word that explains his success in fiscal and economic policy: ''Arithmetic.''
A ratio is the ''quotient of one quantity divided by the other.'' If the ratio of Greek debt to GDP has increased, it it important to look at what has happened to both quantities.
The decline in the Greek economy (GDP) since the crisis began is larger than the decline the US suffered in the Great Depression. As the US demonstrated after WWII, the way to reduce the ratio of debt to GDP is to encourage economic growth, not to suppress growth.
Who is going to pay off the debt if nobody is working and businesses are failing? The IMF has admitted that its growth forecasts for Greece were too optimistic and that Greece cannot pay its debt under current terms.
In any event, it looks as if Greece has accepted its Euro fate, so we'll just have to wait and see how wise other Europeans can be.
A ratio is the ''quotient of one quantity divided by the other.'' If the ratio of Greek debt to GDP has increased, it it important to look at what has happened to both quantities.
The decline in the Greek economy (GDP) since the crisis began is larger than the decline the US suffered in the Great Depression. As the US demonstrated after WWII, the way to reduce the ratio of debt to GDP is to encourage economic growth, not to suppress growth.
Who is going to pay off the debt if nobody is working and businesses are failing? The IMF has admitted that its growth forecasts for Greece were too optimistic and that Greece cannot pay its debt under current terms.
In any event, it looks as if Greece has accepted its Euro fate, so we'll just have to wait and see how wise other Europeans can be.
8
Dr. K is mostly correct on this, in my opinion, but fails to entertain the notion that it is also self defeating to delegate money creation to a central bank from which you then borrow it at interest, when it is both legal and debt free to coin it as a sovereign, constitutional right.
and so in conclusion Greece's Economy should not only be a a lesson for US Republicans but perhaps also lesson for US economists - and to refine that lesson we would like to offer the words of a great Belgian to -
(and he is not even a member of the European Left -
Or he is? - as his point of view in the US probably would be considered 'communism'?)
Let me present a truly GREAT European: Guy Verhofstadt
https://www.youtube.com/watch?v=P84tN0z4jqM
(and he is not even a member of the European Left -
Or he is? - as his point of view in the US probably would be considered 'communism'?)
Let me present a truly GREAT European: Guy Verhofstadt
https://www.youtube.com/watch?v=P84tN0z4jqM
I find it amazing that the Greek Debt Crisis discussion is still being framed as a honest, thoughtful policy decision: Balancing the rights of Greece's EU creditors against a collapsing Greek economy and the suffering of its people.
This is no policy decision; it's a collection action. The EU leadership (and the private creditors for whom they carry water) couldn't care less how much Greece and its citizens suffer. They have no accountability towards Greeks. They're neither elected by Greek's citizens nor appointed by Greek officials. In the words of "Goodfellas'" Henry Hill: "[Blank] you. Pay me!"
We'll know when the negotiations become a balanced policy matter for the EU. It will be the day when the EU announces that the Greeks have suffered enough and it's time to offer substantial debt relief.
**crickets**
This is no policy decision; it's a collection action. The EU leadership (and the private creditors for whom they carry water) couldn't care less how much Greece and its citizens suffer. They have no accountability towards Greeks. They're neither elected by Greek's citizens nor appointed by Greek officials. In the words of "Goodfellas'" Henry Hill: "[Blank] you. Pay me!"
We'll know when the negotiations become a balanced policy matter for the EU. It will be the day when the EU announces that the Greeks have suffered enough and it's time to offer substantial debt relief.
**crickets**
11
All true. But we now live in a very cynical America; where Republican politicians and tens of millions of their supporters rally behind meaningless nonsense. They have no interest in learning the truth. They actually have no interest in the Constitution, except where they can use it to reach their goals. They've invented a false reality that's self-feeding. We've been through such patches before, but never with such numbers. Crazy politics has come to the center of the Republican Party with a level of arrogance and righteousness that smacks of a schoolyard bully. Bigotry and racism are back in style, disguised as religious freedom and even intellectualism. Fox News and a group of select mouthpieces fan the flames daily for big paychecks. Facts have been turned into abstract concepts perpetuated by loathsome liberals out to destroy America. And into this fray comes a heard of contenders for the 2016 Republican nomination. I have never before seen such a collection of clowns. But America is greater than its worst elements and eventually the insanity will blow over. Just in time for global warming to body slam us. I thought I should end on a positive note.
26
It's interesting that you never mentioned the problem in Greece.
Irresponsible lending... unrealistic pensions... out of control welfare...are at the summit of the problems in Greece. Paul Krugman has a tendency to fault Republicans in all of his "lessons" framed in hypocrisy. Greece has acted irresponsibly. The real lesson here that Krugman carefully avoids is governments that incur massive debt with no concern for controls or austerity must face their lenders at some point. That is what happened in Greece. And frankly that will happen to any country that follows this course.
5
How about the lenders who kept giving money to Greece without doing any due diligence - but who did charge higher interest rates? Shouldn't those irresponsible lenders be hit with the same level of financial consequences that Greece now faces? Or are bankers, being rich, deserving of "special rights"?
One of the things seldom mentioned is that Greece, like the U.S., gave massive unfounded tax cuts to the rich. The Greeks did this by allowing the rich to evade taxes rather than by tax cuts. Notice how the Republicans keep underfunding the IRS? Call me cynical, but it seems to me that the Very Serious People plan on crashing the U.S. economy by cutting taxes to reduce government revenue, and then crying that the only way out is slashing social security (what Greece calls "pensions") and raising taxes on the poor and middle class (VAT is a type of sales tax, and thus regressive) - while leaving the rich paying far less than their fair share.
For an example of the template, see Kansas.
One of the things seldom mentioned is that Greece, like the U.S., gave massive unfounded tax cuts to the rich. The Greeks did this by allowing the rich to evade taxes rather than by tax cuts. Notice how the Republicans keep underfunding the IRS? Call me cynical, but it seems to me that the Very Serious People plan on crashing the U.S. economy by cutting taxes to reduce government revenue, and then crying that the only way out is slashing social security (what Greece calls "pensions") and raising taxes on the poor and middle class (VAT is a type of sales tax, and thus regressive) - while leaving the rich paying far less than their fair share.
For an example of the template, see Kansas.
3
Consequences
“To relieve the present exigency is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of public revenue they leave to the care of posterity.” -Adam Smith, The Wealth of Nations (1776)
2010. Greece was about to default on its debts. As usual, politicians blamed everyone but the perpetrators — the politicians. They politicians and bureaucrats claimed that the only way to relieve the crisis of debt was debt itself.
Problem: An excess of borrowing behavior by Greeks.
Goal: To have saved the Big Banks, mainly in France and Germany.
Plan: To allow Greeks to default to non-banking creditors; have the European Central Bank and International Monetary Fund lend even more money to Greece in order to give Big Banks time to rid themselves of basically worthless Greek debt; then, when Greece finally defaults, charge the taxpayers in the European Union for the losses to the ECB and IMF.
Measurement: Success for bankers, bureaucrats, and politicians. Failure for taxpayers.
There were alternatives more fair and just; for example, see “Debt & the Race to the Bottom” at ... http://nationonfire.com/category/economy/page/3/ .
2015. Greece defaults.
See “Coming Apart?” at ... http://nationonfire.com/category/economy/ .
“To relieve the present exigency is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of public revenue they leave to the care of posterity.” -Adam Smith, The Wealth of Nations (1776)
2010. Greece was about to default on its debts. As usual, politicians blamed everyone but the perpetrators — the politicians. They politicians and bureaucrats claimed that the only way to relieve the crisis of debt was debt itself.
Problem: An excess of borrowing behavior by Greeks.
Goal: To have saved the Big Banks, mainly in France and Germany.
Plan: To allow Greeks to default to non-banking creditors; have the European Central Bank and International Monetary Fund lend even more money to Greece in order to give Big Banks time to rid themselves of basically worthless Greek debt; then, when Greece finally defaults, charge the taxpayers in the European Union for the losses to the ECB and IMF.
Measurement: Success for bankers, bureaucrats, and politicians. Failure for taxpayers.
There were alternatives more fair and just; for example, see “Debt & the Race to the Bottom” at ... http://nationonfire.com/category/economy/page/3/ .
2015. Greece defaults.
See “Coming Apart?” at ... http://nationonfire.com/category/economy/ .
3
What do sanctimonious right-wingers think public debt is? Has it ever occurred to them that it is the triple-tax exempt municipal bonds in which they take so much pleasure in buying, in part, because of the emotional pleasure of paying no income tax? Or their beloved TIPS (treasury inflation protected securities) to which they flee for the full faith and credit of the government of the United States?
For that matter, what, exactly, do they think their "conservative" bank deposits are? Under current capital requirements, nine of ten of those dollars are invested in either public or private debt.
As Professor Krugman likes to say, "Your spending is my income." The corollary would be, "Your debt is my savings."
The real problem in Greece is and has long been cultural and political. It is a society in which deep corruption and 'beating the system" are assumed, and even lauded as evidence of personal cleverness and pride. This is not to say that northwestern Europeans don't have their tax cheats and freeloaders, but in general, there is a greater understanding of the personal benefit of living under the rule of law. The EC, the ECB, and the IMF are dominated by the north, the mania and blind spot of which is "expansionary austerity.".
Think of it as the difference between haggling over everything and paying the price on the tag. The Greeks and the troika are simply talking past one another.
For that matter, what, exactly, do they think their "conservative" bank deposits are? Under current capital requirements, nine of ten of those dollars are invested in either public or private debt.
As Professor Krugman likes to say, "Your spending is my income." The corollary would be, "Your debt is my savings."
The real problem in Greece is and has long been cultural and political. It is a society in which deep corruption and 'beating the system" are assumed, and even lauded as evidence of personal cleverness and pride. This is not to say that northwestern Europeans don't have their tax cheats and freeloaders, but in general, there is a greater understanding of the personal benefit of living under the rule of law. The EC, the ECB, and the IMF are dominated by the north, the mania and blind spot of which is "expansionary austerity.".
Think of it as the difference between haggling over everything and paying the price on the tag. The Greeks and the troika are simply talking past one another.
7
It's interesting how once more PK turns a position into a defense of the indefensible federal reserve. if you know the economics PK's position is very banker friendly. Where is debt write offs in this picture as a way to help greece. Printing helps rescue malinvested credit that should be written off. The federal reserve clearly has been against debt write offs. Geithner gave goldman no haircut on AIG derivatives, the fed has worked to keep asset prices high all so bad credit (housing) wouldn't have to be written off hurting banks. PK pretends the printing is about unemployment here. It's isn't because only 3% goes into the real economy. the majority goes directly to the uber wealthy via asset prices. If you don't advocate fixing the structure of the financial system (which PK doesn't do) you are just advocating worse inequality. We've been printing since the Greenspan put and middle class wages have effectively gone down for 40 years, while the benefits of each recovery have gone more and more to the top few %. Pk paints a nice picture if you look at something in isolation and ignore 30 years of data. I'm against austerity, but lets actually fix something and not just keep the rigged status qo financial system
6
Gail Tverberg, a longtime Peak Oil analyst from http://theoildrum.com and now with her own Website http://ourfiniteworld.com/ points out that Greece and other Southern European countries with debt problems get a very high percentage of their energy from oil. Yet they are basking in sunshine!
This begs for a German Marshall Plan - instead of bleeding these countries to death with austerity and dismantling their public assets, why not provide debt relief in the form of German produced solar panels which will then decrease their energy costs while also saving the planet from greenhouse emissions?
This begs for a German Marshall Plan - instead of bleeding these countries to death with austerity and dismantling their public assets, why not provide debt relief in the form of German produced solar panels which will then decrease their energy costs while also saving the planet from greenhouse emissions?
George Orwell would have a field day with this column. How is it possible--that a country placed in serious economic duress--by practicing the policies Krugman espouses (spend, spend, spend), can be a lesson for Republicans?
Greece is not an allegory for Conservatives--but for Liberals--who believe unlimited government borrowing and spending is the key to financial health. If it was possible to spend oneself into prosperity, Greece surely would have done it.
Honestly, I fail to see how Krugman arises each morning, and stands in front of the mirror--without sporting a red face. When the burden of government grows so heavy that the private sector can no longer support it, the solution is not to increase the burden. I fail to see how this simple lesson in economics continues to elude him--and how eh can keep pounding the table for all governments to spend beyond their means.
For all of you Krugmanites out there--who believe he is right about everything--and believe the U.S., even with its 18 trillion debt should continue to borrow, print and spend--have you ever contemplated the commanding position we would currently be in--if we had never accumulated any debt at all? We would be in a position to lend--not borrow. And 200 + billion we pay each year to service the debt, could be used for something much more productive.
Greece is not an allegory for Conservatives--but for Liberals--who believe unlimited government borrowing and spending is the key to financial health. If it was possible to spend oneself into prosperity, Greece surely would have done it.
Honestly, I fail to see how Krugman arises each morning, and stands in front of the mirror--without sporting a red face. When the burden of government grows so heavy that the private sector can no longer support it, the solution is not to increase the burden. I fail to see how this simple lesson in economics continues to elude him--and how eh can keep pounding the table for all governments to spend beyond their means.
For all of you Krugmanites out there--who believe he is right about everything--and believe the U.S., even with its 18 trillion debt should continue to borrow, print and spend--have you ever contemplated the commanding position we would currently be in--if we had never accumulated any debt at all? We would be in a position to lend--not borrow. And 200 + billion we pay each year to service the debt, could be used for something much more productive.
5
This comment by "Jesse" is SO wrong, that I must respond. The largest creditor in the US debt structure is Social Security. The second is China. So the US debt is in th hands of people who want the US to succeed. The fundamental problem with Jesse's comment is the assumption that "Household economics=macro economics", which is WRONG! At least wrong when you have your own currency.
My comparison with Greece is NYC in 1975. Then the city borrowed to pay salaries. The Greeks are doing the same, and it will be very hard for them to recover by cutting pensions and civil servant salaries, while collecting more taxes. The Greek error is that they did not tighten up their tax system and reduce civil servant salaries and pension starting 5 years ago.
My comparison with Greece is NYC in 1975. Then the city borrowed to pay salaries. The Greeks are doing the same, and it will be very hard for them to recover by cutting pensions and civil servant salaries, while collecting more taxes. The Greek error is that they did not tighten up their tax system and reduce civil servant salaries and pension starting 5 years ago.
4
thank you for articulating a position I have long felt. Every PK column is tax punishment on working people (read rich) and deficit spending as a response to slow growth. Take an honest look....that is the sum of every one of his missives.
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
GOP fiscal policies have been disastrous for the U.S. but it doesn't happen overnight. Bush 2 gave away our surplus in tax cuts and bigger farm subsidies to corporate farms and the effect was not experienced until 5 years later. The country elected a Democrat and things got better. Stats show that overall Americans do better with a president from the Democratic Party. Yet due to boredom probably, we return a Republican to the presidency. Some may want to point to Carter to show that my theory is false. Carter's presidency suffered from an oil crisis due the ousting of the Shah which was exploited by the Saudis and the unwinding of price controls imposed by Nixon. Both led to explosive inflation. Then of course a treasonous sale of guns to the Iranians by Reagan flunkies known as Iran contra occured in the following GOP administration.
8
Unfortunately, the American public is quite open to false analogies. Whether it is Greece or the recent murder in San Francisco, the media, particularly Fox, calls on it pundit experts to make all kinds of cause and effect analogies, which then play into the dooms day mentality of their audiences. We keep looking at test scores to judge the quality of our educational system. A better indicator of our public's educational level is looking at Fox news ratings--- a decline would indicate our educational system is working.
22
Krugman blames Greek debt, which is bad, on irresponsible lenders, but American debt irresponsibly let to ourselves isn't bad?
I'm curious how Krugman assesses Greek debt as "not too high" when it's been determined that the country of 11 Million people will never, ever be able to pay off the $380 Billion in debt? Can't ever pay it off squares with "not too high" how exactly?
Krugman blames their decrease in GDP on austerity. Curious that he doesn't blame it on the fact that 50% of Greek economic activity is now done in Cash to avoid taxation necessary to repay debt. If Krugman's argument is that High Taxes decreases revenue, OK, but that will be a first.
"Economist" infers science, his one sided conflicting ignorance of behaviro removes that title.
I'm curious how Krugman assesses Greek debt as "not too high" when it's been determined that the country of 11 Million people will never, ever be able to pay off the $380 Billion in debt? Can't ever pay it off squares with "not too high" how exactly?
Krugman blames their decrease in GDP on austerity. Curious that he doesn't blame it on the fact that 50% of Greek economic activity is now done in Cash to avoid taxation necessary to repay debt. If Krugman's argument is that High Taxes decreases revenue, OK, but that will be a first.
"Economist" infers science, his one sided conflicting ignorance of behaviro removes that title.
6
The underlying assumption is that growth will increase and thus the ratio of debt to GDP becomes smaller. At present Greece's economy has shrunk. So things are MUCH worse than before. This is a crucial point in the article. Read it again.
A more philosophical question is whether growth can go on forever. That is not the question for Greece since they could develop their tourist industry. But the last weeks will cost Greece a very great deal for a very long time. And for nothing.
A more philosophical question is whether growth can go on forever. That is not the question for Greece since they could develop their tourist industry. But the last weeks will cost Greece a very great deal for a very long time. And for nothing.
1
Wow. Boy Oh Boy.
Thank you for making these complex issues so clear!
Thank you for making these complex issues so clear!
We can print our own money and our debt is in our own currency. Big difference.
It's no wonder the Republican megaphone has such success with expletives like "Greece" and "debasing," when this convoluted, complicated piece of writing is the best our lionized, liberal spokesman can do to counter it. This is not Krugman's best effort. Several of his shorter blog posts addressed this issue far more simply and persuasively.
3
I read lots of financial press and haven't seen a single person state we are "greece". You make upphantom pundits , never attach names to them. set up a straw man and knock it down. Which is a logical fallacy. Your first error is the statement "printing money to fight unemployment" . labor force participation is at 1977 levels. only 3% of that printed money goes to the real economy. (Unlike you I can provide many citations). We print money to go into the "markets" (owned overwhelmingly by the wealthy) making them much more wealthy, and then they toss us scraps. People like you pretend it's about unemployment, which is just about as bad as Bush pretending the Iraq war was about WMD. Just once you could represent the anti printing view accurately. I'm not for austerity, and I don't even know who is except some in europe. The much more common view of the anti printing side is that government spending to the real economy works better, and restructuring the financial system architecture in order to deliver stimulus where it should go. If 3% of the printing goes towards the real economy and 97% goes to asset prices it's not printing for unemployment. That's the bankers serving propaganda of the federal reserve and you. The unemployment aspect is a small side effect, nothing more. Dismantle financialization, fix banking, provide stimulus that works. Iceland has a good plant, or the data on how large financial sectors lower real economy GDP (TFP) is there. Try reading it!!
7
Many Republicans have indeed said things like we are on the road to being Greece (Rand Paul and Congressman Ryan come to mind). Also many have said a government is like "a family" and when a recession comes, we must cut, cut cut back. if you never heard that perhaps you were not listening. Having your own currency offers more flexibility to alter fiscal and monetary policies so as to adjust, just as PK says. No doubt a lot of the easy money went to asset purchases and helped banks heal their balance sheets, not to individual working class citizens. I believe PK would agree with you on that (the stimulus was too small). But as far as you saying you can support your opinion with citations, I'll take the Nobel prize winning economists (Krugman and Stieglitz) over the no debt crowd. After all, why are rates so low and banks having such a tough time finding deals to fund - it's lack of aggregate demand. Cutting only exacerbates this. There will be a time to pay off these bills, but each time we get there, the Republicans insist on tax cuts instead of debt reduction, (i.e. the Bush tax cuts had a 10 year period to expire precisely because they could not make the corresponding cuts - which was against the agreed upon policy and vexes us to this day). A better policy would have been to keep paying down the debt when Bush had the chance. Instead we went with the "10 million job claim" - now there was a real phantom - he had the worse job creation in the last 50 years.
1
You accuse Krugman of not citing his claims, but you do the same thing. Where are your citations for the claims you make? I would certainly like to read some of them, especially the last one on Iceland?
So, Greece borrows a massive amount of money and can't pay it back. This is a republican problem? Krugman's analysis of the republicans is incredibly biased. What republicans generally want to do is to reduce the size of government, gradually reduce the debt, eliminate the stifling bureaucracy of the federal government, and get GDP growth back to the 3 to 4% range. These are not radical proposals.
5
There's only one radical aspect of drastically reducing government regulation and delivering our economy - hook, line and sinker - into the hands of the market. The market is dominated by businesses that are constantly consolidating in the name of efficiency, constantly absorbing their willing competitors to form streamlined entities that bring shareholders a maximum profit. We have no say in the stifling bureaucracy of such large corporate structures, and when we've given them complete free rein - rather than cleaning up the bureaucratic problems in our own government - we'll be setting up the same situation that led us to establish this country in the first place.
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. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 36% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Are you sure you want to reduce the debt?
Are you sure you want to reduce the debt?
All of your fiscal proposals are direct cuts to GDP, which is how the financial crisis snowballed in Greece.
I think that Dr. Krugman gives the GOP too much credit - that they honestly think their policies will improve the economy or anything else.
The fact of the matter is that they enjoy bullying the rest of us into hurting ourselves because it provides them with the delusion of being superior.
The fact of the matter is that they enjoy bullying the rest of us into hurting ourselves because it provides them with the delusion of being superior.
16
Dr. Krugman, thank you for your consistently clear and straightforward opinions. Governments play a key role in growing and advancing their country's economic health. Government officials and politician, therefore, need to know how to manage the tools available to them to ensure healthy growth. Greece unfortunately had some of those tools denied them by the euro and so struggle mightily under austerity measures with no way to ease some of the pain through currency adjustments. Now, the GOP may lead the U.S. right into a Greek-style horror story if they get their fiscal way. I don't believe that will happen but it is a frightening scenario given the GOP economic rhetoric. I do wonder, though, what you have to say to the Democrats? No party is perfect.
8
When I talk to working class whites, which form the base of the GOP, the one thing they always say about our economic policy is that we, "keep printing money." They have been brainwashed by the GOP that the FED and our federal government are flooding the world with dollars. They think there is some physical printing press running 24/7 that is making our money worth less and less each day. These surplus dollars are then given to the welfare recipients and others they despise as leeches.
The GOP leaders that provided them these words speak from ignorance. The GOP austerity extremists don't have a clue how central banking works. They don't understand how liquidity works. They don't understand how the currency markets work. They don't understand how monetary policy works.
Thier fanaticism is so great that they are blinded to the effects of monetary policy and yearn for the gold standard which the entire planet has rejected for nearly 100 years.
Possessing such complete ignorance of economics drives the GOP rants of runaway inflation. They expect it because they don't understand what causes it. They claim we are debasing the dollar because they don't understand currency markets.
If Greece had its own currency, it would not have its current problems. They can't devalue and provide additional liquidity to correct the excesses.
We don't have these problems. We are not Greece. Ignorance has not won. Not yet anyway.
The GOP leaders that provided them these words speak from ignorance. The GOP austerity extremists don't have a clue how central banking works. They don't understand how liquidity works. They don't understand how the currency markets work. They don't understand how monetary policy works.
Thier fanaticism is so great that they are blinded to the effects of monetary policy and yearn for the gold standard which the entire planet has rejected for nearly 100 years.
Possessing such complete ignorance of economics drives the GOP rants of runaway inflation. They expect it because they don't understand what causes it. They claim we are debasing the dollar because they don't understand currency markets.
If Greece had its own currency, it would not have its current problems. They can't devalue and provide additional liquidity to correct the excesses.
We don't have these problems. We are not Greece. Ignorance has not won. Not yet anyway.
26
Bruce,
Your experience mirrors my own when it comes to discussing matters with members of the GOP/Tea-party.
I used to believe it was an honest difference of opinion, but I have come to the sad conclusion that a great many otherwise good people simply refuse to consider any view that is not their own (or that of Fox Propaganda), and that 'knowledge' and learning are somehow 'evil'.
Your experience mirrors my own when it comes to discussing matters with members of the GOP/Tea-party.
I used to believe it was an honest difference of opinion, but I have come to the sad conclusion that a great many otherwise good people simply refuse to consider any view that is not their own (or that of Fox Propaganda), and that 'knowledge' and learning are somehow 'evil'.
1
So the acceleration of our national debt to 18 trillion and beyond is not a problem? What a relief! We just don't understand and need not worry about monetary policy and such. You and Krugman have all the answers and can assure the rest of us that our currency backed by the full faith and credit of a country fast approaching 20 trillion in debt is rock solid. We need not worry our little heads about inflation, bankrupt cities, bankrupt states, etc. All will be just fine...until it's not.
Greece is small potatoes; what about China? In the case of the latter, when facing a deceleration in their stock markets, deflation in property values, and a slowing of growth in GDP, they have begun spending to prop up markets, "encouraged" businesses to do likewise while suspending margin calls on small investors. I notice the same austerity crowd bemoaning "moral hazard" and clucking their tongues on these measures. But, China is flush with capital from four decades of growth and, since they don't have popular election, see keeping the standard of living, if not growing, at least level through hard times.
My question is: Is China's blend of state socialism and capital markets, with a firm, activist, and benevolent control, a model for capitalisms in general? Our unbridled version of capitalism has resulted an ever tightening consolidation of wealth in the hands of a few; could China's version be something we might (or should) be moving towards?
My question is: Is China's blend of state socialism and capital markets, with a firm, activist, and benevolent control, a model for capitalisms in general? Our unbridled version of capitalism has resulted an ever tightening consolidation of wealth in the hands of a few; could China's version be something we might (or should) be moving towards?
1
tdom - Please understand that China's wealth is also largely in the hands of the few at the top.
Ronald Reagan died in 1994 but his "trickle-down" is alive today in right-wing ideology. President Obama is less a concern now to GOP/TP factions. Their financial imperatives will outlast his presidency and if they can continue to dupe the white working class with ghost stories of Greece and Socialism, they will take the White House in 2016 and then you'll see a Treasury Secretary Paul Ryan re-imposing fiscal austerity while doubling down on "trickle-down." Look for continued off-shoring of corporate profits and lower tax rates for the .01%.
10
Ronald Reagan died June 5, 2004.
Greece has a new government and that new government deserves a chance to make changes in their tax system. To sit and blame the new government and put deadlines on them is not my idea of Democracy. Greece needs time to make the changes needed. Comments by some are no different than the Republican Party trying to blame President Obama for all the problems that he inherited.
I support the people of Greece and am glad they turned down the EU's demands. It is what Democracy is supposed to be about.
Forgive Greece debt.
I support the people of Greece and am glad they turned down the EU's demands. It is what Democracy is supposed to be about.
Forgive Greece debt.
5
Dr Krugman points out that Greek debt was 130% of GDP in 2009 and now is 170% of GDP. Hmmmm. And the lenders were "irresponsible" for lending? Yet, when those same lenders (the other Euro govt's) say no more lending, they are wrong in that too? Very convenient, Dr. K...if they lend they are irresponsible, and if they don't they are wrong as well.
And that the Greeks were given "...some debt relief.." in 2012. Actually, "some" is 53%...that's right, 53% of their debt was forgiven. That's over half, not "some".
And since then, their debt has gone up, not down - up by 30% in 5 years.
If they are still giving out more money than they take in, then they will continue to accrue debt. However, I'm sure that Dr. Krugman is first in line to hand over his money to bail out Greece --- or is it only other people's money that the good Dr. wants handed over?
And that the Greeks were given "...some debt relief.." in 2012. Actually, "some" is 53%...that's right, 53% of their debt was forgiven. That's over half, not "some".
And since then, their debt has gone up, not down - up by 30% in 5 years.
If they are still giving out more money than they take in, then they will continue to accrue debt. However, I'm sure that Dr. Krugman is first in line to hand over his money to bail out Greece --- or is it only other people's money that the good Dr. wants handed over?
11
John,
What you fail to note is that the 'austerity' that the Greeks were forced into has destroyed their economy.
How, exactly, are they supposed to improve their GDP with an economy hobbled by austerity (which is counterproductive), the same policy that the EU has since stopped doing in their awn countries?
What you fail to note is that the 'austerity' that the Greeks were forced into has destroyed their economy.
How, exactly, are they supposed to improve their GDP with an economy hobbled by austerity (which is counterproductive), the same policy that the EU has since stopped doing in their awn countries?
4
Greece may have to hit rock bottom to reform its crony business environment and change the tax evasion culture. New businesses can't start and it never collects enough tax to pay its bills to the Germans. They need to see that if a pensioner in their family is getting 30% of what is promised, that those who are tax cheats are the culprits. Given Greece's high unemployment rate expecting pensioners to go back to work is ludicrous.
Dectra - if the austerity you speak of is the one where they've cut back yet still pay more in pensions than the other EU countries - and still pay out more than they collect, they will be ever increasing their debt.
If you want to keep the status quo of their social programs, which cost more than they generate, then one must forgive all the loans and create a program to subsidize this set of programs that cannot be sustained any other way.
Trouble is, those lenders ARE the other EU countries, not Goldman Sachs. Therefore, forgiving the debt = a massive hit to the EU citizens outside of Greece. The Germans - for example - would have be agreeable to working many more years in order to fund the early retirement / pension model in Greece. Why would a citizen in one country work 10+ more years in order to pay for a pension in Greece?
If you want to keep the status quo of their social programs, which cost more than they generate, then one must forgive all the loans and create a program to subsidize this set of programs that cannot be sustained any other way.
Trouble is, those lenders ARE the other EU countries, not Goldman Sachs. Therefore, forgiving the debt = a massive hit to the EU citizens outside of Greece. The Germans - for example - would have be agreeable to working many more years in order to fund the early retirement / pension model in Greece. Why would a citizen in one country work 10+ more years in order to pay for a pension in Greece?
I stopped reading when I read,
"The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes."
I can no longer stomach, Dr. Krugman's incessant modus operandi of setting up straw men by selectively finding anecdotal statements, mostly by politicians, and suggesting that this is somehow a scientific argument in favor of his economic opinions.
Did Dr. Krugman predict the economic significance of the internet? No. He predicted that it would be no more significant than the fax machine. Did he predict the collapse of the Internet bubble in 2000? No, but he did predict that Europe would recover faster than the US and was wrong. Did he predict the collapse of the financial markets in 2008? No. Did he predict the problems Europe is now facing. No, as recently as 2011 he was touting the European economy as a success as compared to the US. He has repeatedly predicted that the Euro is doomed. He makes a good case that the Euro was a bad idea and both he and Milton Friedman argued against it, but his predictions of its imminent demise have been wrong.
"The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes."
I can no longer stomach, Dr. Krugman's incessant modus operandi of setting up straw men by selectively finding anecdotal statements, mostly by politicians, and suggesting that this is somehow a scientific argument in favor of his economic opinions.
Did Dr. Krugman predict the economic significance of the internet? No. He predicted that it would be no more significant than the fax machine. Did he predict the collapse of the Internet bubble in 2000? No, but he did predict that Europe would recover faster than the US and was wrong. Did he predict the collapse of the financial markets in 2008? No. Did he predict the problems Europe is now facing. No, as recently as 2011 he was touting the European economy as a success as compared to the US. He has repeatedly predicted that the Euro is doomed. He makes a good case that the Euro was a bad idea and both he and Milton Friedman argued against it, but his predictions of its imminent demise have been wrong.
9
But that's the point of the article isn't it? He's saying that the " We're Greece " crowd is back and then provides examples of what he means.
Actually he predicted many of these things. You only need to go back and read his columns from ten years ago.
Can you just admit they borrowed too much before suggesting solutions. And yes depreciating the currency has positive effects: exports are more competitive, but in the long run the government is just inflating away their local currency debt (the same as debt forgiveness only more stealthy painful for the populace). Thats the other thing that is critical about currency manipulation - the debt needs to be in local currency.
I thought running budget surpluses in the good times to pay down debt so that there's room to run deficits during the bad time was the game. Not for Greece and not for most governments, local or otherwise.
I thought running budget surpluses in the good times to pay down debt so that there's room to run deficits during the bad time was the game. Not for Greece and not for most governments, local or otherwise.
4
Did they borrow too much? Yes.
Did the troika's policies make it worse? Yes.
Are the people being asked to pay the same people who benefited from the irresponsible borrowing? No.
But don't let that bother you.....
Did the troika's policies make it worse? Yes.
Are the people being asked to pay the same people who benefited from the irresponsible borrowing? No.
But don't let that bother you.....
Unfortunately, your column omitted even mention of the word "pension". The Greek pension system has been a source of this mounting debt and fractured relations with EU partners (e.g. Germany, where retirement ages were extended above Greece provisions and benefit levels reduced well before Greece). Additionally, government entities have failed to fund pensions properly in Greece. We still have yet to address our public pension nightmare, so the lesson for us is clear in this respect.
9
You would prefer people retire later, closer to their end of life, and on more meagre pensions adding to an already intolerable levels of poverty and inequality. Capitalism seems to have less and less to offer ordinary decent human beings. We exist to serve Capitalism, when an economic system should serve us. Are we to be content to be cannon fodder for the rich? Contra Thatcher, Reagan and the proto fascist Republican party there is an alternative - democratic socialism.
1
There is one other main problem. From what I have witnessed, Greece has a major corruption problem. And this is mostly a problem perpetuated by the wealthy. The fellow I know that worked for a shipping company, earned a generous salary well into the hundred thousands. And yet his "official" pay was something on the order of $30,000 per year. With the remainder paid offshore. I bet this one story is representative of many in Greece. And I think the wealthy in the US are learning to behave the same.
15
Debt does not live in a vacuum. If a nation effectively manages the way its citizens are employed and regulates its financial markets, et. al. then debt at reasonable interest rates, can be maintained for long periods of time.
As we speak several problems exist in our nation. Wall street has been overtaken by high speed traders. Long term investing is quickly dying on the vine. The continued offshoring of jobs and the importation of cheap and cheaper labor will lead to serious consequences.
Once again I bring up the recent Disney event where American technical workers had to train their H -1B replacements. I saw this happen in the semiconductor industry.
Yes, low interest rates worked to save the economy after eight years of 'W' culminating in the 2008 Lehman fiasco. Savers could compensate by investing in the stock market, but who knows where all this high freq stuff will lead to. If not regulated, I think disaster!
I think, professor, you need to do some research in these areas. The house that debt built: a viable town or an empty shack.
As we speak several problems exist in our nation. Wall street has been overtaken by high speed traders. Long term investing is quickly dying on the vine. The continued offshoring of jobs and the importation of cheap and cheaper labor will lead to serious consequences.
Once again I bring up the recent Disney event where American technical workers had to train their H -1B replacements. I saw this happen in the semiconductor industry.
Yes, low interest rates worked to save the economy after eight years of 'W' culminating in the 2008 Lehman fiasco. Savers could compensate by investing in the stock market, but who knows where all this high freq stuff will lead to. If not regulated, I think disaster!
I think, professor, you need to do some research in these areas. The house that debt built: a viable town or an empty shack.
6
Isn't it odd that those supporting austerity for the Greeks point to the Greek rich who have not been forced to pay taxes as a reason Greece is not able to pay its's bills and why it ran up such great debt. Meanwhile here in America those same people lecturing Greece are cutting taxes on the rich. How convoluted is that?
82
Patty Ann - Greece fails to collect more than 85% of taxes due. That's not just the "rich" we're talking about.
Our plutocrats also use offshore tax havens to avoid taxes, just like the Greek plutocrats. Plus ca change.
It's a shame that people like Krugman need to go on arguing against GOP "economic policy," when the disastrous results are everywhere to be seen.
When the GOP opted for its Southern Strategy, it turned its back on logic and reason. They realized that hot button issues would win more votes than would policy-wonking for the new world we all face. Appealing to emotion and promoting fear, they've given us too many voters who are stuffed like French geese, except that here the stuffing is not with rich food but with disinformation and lies. And French geese get fatty livers, while GOP supporters get dumbed-down politics.
Maybe this election season will change that somewhat. At least Gov. Haley and other SC Republicans saw that it was time to change part of their public image. While Trump gives “interviews” in which he fails to answer questions but bullies the interviewer, other Republicans see the negative effects of his brand of blatant populism. They now have the opening to return to the politics of reason. Maybe.
When the GOP opted for its Southern Strategy, it turned its back on logic and reason. They realized that hot button issues would win more votes than would policy-wonking for the new world we all face. Appealing to emotion and promoting fear, they've given us too many voters who are stuffed like French geese, except that here the stuffing is not with rich food but with disinformation and lies. And French geese get fatty livers, while GOP supporters get dumbed-down politics.
Maybe this election season will change that somewhat. At least Gov. Haley and other SC Republicans saw that it was time to change part of their public image. While Trump gives “interviews” in which he fails to answer questions but bullies the interviewer, other Republicans see the negative effects of his brand of blatant populism. They now have the opening to return to the politics of reason. Maybe.
11
Inane though it may be, I agree that comparing Greek debt levels today to those in the US and UK right after WWII does offer at least one lesson. The trajectory of debt reversed in the immediate post war era because government spending abated, self-initiative reigned via a robust marketplace, and workers outnumbered pensioners. That's a formula the Greeks might consider.
2
Greece's GDP, inflated by irresponsible fiscal policy, finds its natural state absent other people's money. Oh my, how awful.
The old worn out concept of living within your means is just too hard for the Progressive to swallow. Responsibility is an unknown concept to the Progressive.
The old worn out concept of living within your means is just too hard for the Progressive to swallow. Responsibility is an unknown concept to the Progressive.
8
I suppose that we can offer the example of the Kansas experiment as proof of fiscal responsibility. Also, the unfunded wars and tax cuts ( which we are still on the hook for) are not exactly responsible examples of " responsibility". Let's throw in TARP while we are at it.
11
Exactly! Just like Reagan did! Wait...
Bob, I suppose living within your means requires that we not repair our roads and not send our children to college. Those things require loans. They are called investments. And show we all be buying houses with cash only? Is that living within our means? Investment requires some risk. You have to take chances to get ahead.
"What turned Greek debt troubles into catastrophe was Greece’s inability, thanks to the euro, to do what countries with large debts usually do: impose fiscal austerity, yes, but offset it with easy money" . . . AND generate income via exporting hard goods to outside entities, enforce a reasonable tax collection system, institute significant pension reform, and make cuts to a bloated and unproductive public sector.
12
Professor, I couldn't agree more, but until the GOP senses that their base can actually connect their debased living standards with the party's policies, nothing will change in their ongoing, counter-intuitive harangue.
48
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"The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes." (PK)
I'm of this crowd. But I understand that history and folly with their linked cause & effect take time to fully express themselves.
We are exactly Greece (in the womb), our tax revenues are too low etc...... Isn't our GDP now less than our debt?
Moreover it is the GOP's policies, via intentional design, that have made us like Greece. We are like a person that has cancer but does not yet know it.
The GOP game plan is Greece!!! Simply bankrupt the country then go after the social programs by giving the people a choice: raise taxes or cut benefits, pensions etc... The GOP figures 51% will vote for cuts.
So the only thing the GOP learns via Greece is how to do this. It is like a laboratory to them. What do you think? When a Republican hears or reads about cuts in Greece spending, that pensions have been sliced in half etc..., do you think they say oh how terrible? No!
They say see this is how we can do it.
These are the lessons the GOP learns from Greece. They've always wanted to destroy SS, medicare, what is left of the New Deal, etc... Their problem has always been how to do it without a revolution. This is the trick for the conservative. That is, to get the people to WILLING give them up. So far everything is going as planned
"The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes." (PK)
I'm of this crowd. But I understand that history and folly with their linked cause & effect take time to fully express themselves.
We are exactly Greece (in the womb), our tax revenues are too low etc...... Isn't our GDP now less than our debt?
Moreover it is the GOP's policies, via intentional design, that have made us like Greece. We are like a person that has cancer but does not yet know it.
The GOP game plan is Greece!!! Simply bankrupt the country then go after the social programs by giving the people a choice: raise taxes or cut benefits, pensions etc... The GOP figures 51% will vote for cuts.
So the only thing the GOP learns via Greece is how to do this. It is like a laboratory to them. What do you think? When a Republican hears or reads about cuts in Greece spending, that pensions have been sliced in half etc..., do you think they say oh how terrible? No!
They say see this is how we can do it.
These are the lessons the GOP learns from Greece. They've always wanted to destroy SS, medicare, what is left of the New Deal, etc... Their problem has always been how to do it without a revolution. This is the trick for the conservative. That is, to get the people to WILLING give them up. So far everything is going as planned
62
What I don't understand is just WHY the GOP is doing this. So that 100 people in the US can own the whole country, with nothing left for the other 300M?
I have a picture of the richest trillionaire sitting alone on a huge pile of cash and gold bars, gnawing on the thigh bone of the next richest. When that's gone, he will starve to death.
I have a picture of the richest trillionaire sitting alone on a huge pile of cash and gold bars, gnawing on the thigh bone of the next richest. When that's gone, he will starve to death.
My question is how do we get the U.S. debt down. Or is that not a real issue??
Seems that too much borrowing is part of the problem.
Seems that too much borrowing is part of the problem.
2
Some of the commenters wonder whether the U.S. is in the early stages of a debt crisis. Hence "...how do we get U.S. debt down. Or is that not the real issue?"
The answers are really very easy.
1. To reduce U.S. government debt, the answer is simple. First, raise taxes moderately on corporations (via reduced rate and elimination of most loopholes that in combination generate more overall corporate tax revenue) and also on higher income people (that have captured most of the economic gains since the recession ended in 2009). Second, cut military spending drastically. There is no rational reason why U.S. military spending should be greater than the next 18 nations combined.
2. And no U.S. debt is NOT the main problem. The main problems are still about economic growth (growing but too slowly), employment and wages for most workers (despite improvements it is still a very bad labor market for workers), and worsening inequality (U.S. GDP per capita is higher today than ever but almost all of the gains have gone to the top few percentage income earners).
The answers are really very easy.
1. To reduce U.S. government debt, the answer is simple. First, raise taxes moderately on corporations (via reduced rate and elimination of most loopholes that in combination generate more overall corporate tax revenue) and also on higher income people (that have captured most of the economic gains since the recession ended in 2009). Second, cut military spending drastically. There is no rational reason why U.S. military spending should be greater than the next 18 nations combined.
2. And no U.S. debt is NOT the main problem. The main problems are still about economic growth (growing but too slowly), employment and wages for most workers (despite improvements it is still a very bad labor market for workers), and worsening inequality (U.S. GDP per capita is higher today than ever but almost all of the gains have gone to the top few percentage income earners).
6
It is not only NOT a real issue, it is and always has been a terrible idea.
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. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 36% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Are you sure you want to pay down the debt?
Too little money flowing from the federal government to people, businesses and state & local governments is the problem. The deficit is the measure of that flow.
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. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 36% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Are you sure you want to pay down the debt?
Too little money flowing from the federal government to people, businesses and state & local governments is the problem. The deficit is the measure of that flow.
5
Did unfunded wars and a tax cut contribute to that borrowing?
The only lesson book the Republicans understand is the Grand Old Propaganda playbook that entails scaring and duping the ignorati with patented falsehoods and rinsing and repeating in order to put a lustrous, ignorant shine over their endless national train robbery of American wages, pensions and national treasury.
The one unmentioned relevancy of the GOP's "We're Greece" chant is the fact that tax evasion is a national sport in Greece AND a bedrock principle of the Republican platform.
Greece would be in much better shape as a country if it enforced its own tax system, but it does not...and when combined with Greece's euro straitjacket and liberal pension rules, weak tax enforcement is toxic to fiscal solvency.
But guess who has been systematically gutting tax rates for the rich and tax receipts at the federal and state level all across America for 35 years and undermining the IRS's ability to collect taxes while putting the future on a credit card instead of paying for it in cash ?
Fiscal train wreck Republicans refuse to pay for the cost of civilization by maintaining a fair tax structure in America as they undermine the country's roads, bridges, airports, public transportation, public education and public research.
America is certainly not Greece, but the Republicans are in fact much like tax-evading Greeks who refuse to admit that paying fair taxes are the cost of a decent civilization.
"We're Greece !" yell the Grand Old Propagandists.
No GOP... you're Greece.
The one unmentioned relevancy of the GOP's "We're Greece" chant is the fact that tax evasion is a national sport in Greece AND a bedrock principle of the Republican platform.
Greece would be in much better shape as a country if it enforced its own tax system, but it does not...and when combined with Greece's euro straitjacket and liberal pension rules, weak tax enforcement is toxic to fiscal solvency.
But guess who has been systematically gutting tax rates for the rich and tax receipts at the federal and state level all across America for 35 years and undermining the IRS's ability to collect taxes while putting the future on a credit card instead of paying for it in cash ?
Fiscal train wreck Republicans refuse to pay for the cost of civilization by maintaining a fair tax structure in America as they undermine the country's roads, bridges, airports, public transportation, public education and public research.
America is certainly not Greece, but the Republicans are in fact much like tax-evading Greeks who refuse to admit that paying fair taxes are the cost of a decent civilization.
"We're Greece !" yell the Grand Old Propagandists.
No GOP... you're Greece.
738
Tax evaders, of every political perusation, don't typically avoid "fair" taxation, they avoid higher taxation. Which is the case in Greece. As taxation became higher to pay the increasing debt cost, the taxation became more oppressive, and incentivized 50% of Greek business activity to move to Cash.
Thanks for pointing out the obvious cause and effect. A flat tax, of a smaller percentage, would therefore generate more revenue by eliminating loopholes, and making the risk/reward not worth it.
What ceases to amaze me is that liberals care more about the appearance of "fair" based on the number of the percentage, instead of total revenue to actually help people.
Thanks for pointing out the obvious cause and effect. A flat tax, of a smaller percentage, would therefore generate more revenue by eliminating loopholes, and making the risk/reward not worth it.
What ceases to amaze me is that liberals care more about the appearance of "fair" based on the number of the percentage, instead of total revenue to actually help people.
Amen, to have not just politicians but party leaders saying over and over how bad taxes are and how bad government is - treason stupidity, irresponsible, are three words that come to mind. Then they double down with nonsensical rhetoric like we heard yesterday about cuts to defense spending being the end of civilization.
And the icing on the cake is the new joint chief of staff dragging the red menace Russian threat out of the closet again.
Solar, wind, efficency, single payer health care, domestic manufacturing. Close half our overseas bases, get rid of the Security Council veto and let the UN police the world. We have a roof to fix.
And the icing on the cake is the new joint chief of staff dragging the red menace Russian threat out of the closet again.
Solar, wind, efficency, single payer health care, domestic manufacturing. Close half our overseas bases, get rid of the Security Council veto and let the UN police the world. We have a roof to fix.
6
I agree that the GOP rabble rousing war cry of "Abolish the IRS" is the height of fiscal irresponsibility & appealing to the greediest instincts of their covetous base. It is also duplicitous behavior to cut the taxes of the wealthiest tax payers to the bone while calling for strict austerity measures for the plebeians. In contrast to Greek politicians, the GOP wants to cut all pension schemes and do away with any overtime pay for workers. The GOP silently endorses illegal immigration by not formulating an articulate policy in order to allow wealthy business people like Donald Trump to hire low wage workers through sub contractors thus removing themselves from responsibility. The battle cry to cut all forms of welfare for the poor including food stamps while simultaneously granting agricultural subsidies & bloated corporate welfare to their monied constituents is antithetical to their supposed adherence to austerity measures to cut the federal deficit. Their refusal to embrace clean technology start ups and alternative energy proposals undermines the economic health of our country as China, Sweden, Latvia, Denmark, Finland & Austria. These countries receive full support from their governments to innovate, & ultimately export, cutting edge clean energy to the world, while the GOP denies climate change & protects coal& fossil fuel CEOs. Cutting off funding to cutting edge research facilities that rely on governmental NIH & NSA monies to fund their research is backwards.
4
"No, there are cases — for example, Canada in the 1990s — of countries that slashed their debt while maintaining growth and reducing unemployment."
Canada;s debt in Billions:
1990 - 411
1999 - 603.
HUH?????????
And during all of the 90's Canada has a trade surplus which added money to their private sector.
This example stinks. Come on Prof, find us an example of a country that had a sustained period of surpluses thus reducing their debt and sucking money out of the private sector that did not have a trade surplus which put money back in, and which proposed.
Certain not any period in US history, All 6 times we had a surplus for more tha 3 years we not only did not prosper, we fell into depression.
Try again, Professor.
Canada;s debt in Billions:
1990 - 411
1999 - 603.
HUH?????????
And during all of the 90's Canada has a trade surplus which added money to their private sector.
This example stinks. Come on Prof, find us an example of a country that had a sustained period of surpluses thus reducing their debt and sucking money out of the private sector that did not have a trade surplus which put money back in, and which proposed.
Certain not any period in US history, All 6 times we had a surplus for more tha 3 years we not only did not prosper, we fell into depression.
Try again, Professor.
3
You forgot to factor in the inflation that PK pointed out was part of the Canadian program. That 603 billion may well have less buying power than the 411 a decade earlier. Such a lack of sophistication about one of the simplest concepts in economics causes me to wonder if you have any idea what you are writing about.
PK said Canada "slashed their debt." Makes me wonder if you need a course in reading comprehension.
Paul, one key parallel between the Greek situation and both the Republican and DLC approach to national economy is that Greece no longer has much of a manufacturing base - and therefore has no choice but to both import everything it needs and depend on its public sector to provide the lion's share of employment. If the free traders in the GOP and DLC get their way, America will also one day also no longer manufacturer much of anything (except perhaps weapons systems), and be compelled to import the lion's share of what its people need from low wage nations.
The other key parallel between the Greek situation and ours is that both the Greeks and Republicans view systematic tax evasion as a heroic act - rather than the unconscionable sabotage of a once great nation.
The other key parallel between the Greek situation and ours is that both the Greeks and Republicans view systematic tax evasion as a heroic act - rather than the unconscionable sabotage of a once great nation.
31
Great point!
Excellent & succinct comparison of Greek/GOP pig headedness. Jeb Bush will probably argue that he propelled educational testing services companies like Pearsons or his personal favorite, the Digital Learning Council, to new heights. What he will neglect to mention is how he made millions off of endorsing their products built off the federal government's No Child Left Behind & Common Core requirements. All of the Corporations that rushed to cash in on the government pork to sell software and hardware aligned with multiple choice testing claiming to boost children's learning have so far failed to produce any solid evidence backing up their claims. According to Diane Ravitch, the accumulating evidence from places like Ohio and Pennsylvania has thus far proven that online virtual schools are driven more by profit than by a desire to produce better education. What they these businesses provide is a drive towards cutting public education and increasing class sizes so virtual schools can collect millions of dollars while teachers have classes of 60:1, 100:1, even 200:1, at bottom of the barrel wages and no job protections.
Bush will also drum up his success at wooing away biotech Companies from other states like Scripps with fat 1.32 billion dollar state corporate subsidies & free land grants, although fail to disclaim that they only produced 1,365 jobs @ that cost the Florida taxpayers roughly $1 million per job to produce.
Bush will also drum up his success at wooing away biotech Companies from other states like Scripps with fat 1.32 billion dollar state corporate subsidies & free land grants, although fail to disclaim that they only produced 1,365 jobs @ that cost the Florida taxpayers roughly $1 million per job to produce.
1
I get the impression you believe the Greeks got themselves into the austerity debacle.
I recall all the speeches in Congress calling for austerity, using that same exact word, austerity, before the Greek meltdown.
It is Congressional Republicans that started the austerity movement that spread around the world years ago.
I recall all the speeches in Congress calling for austerity, using that same exact word, austerity, before the Greek meltdown.
It is Congressional Republicans that started the austerity movement that spread around the world years ago.
3
So now American republicans are responsible for the Greek meltdown... How absurd...the Greeks are responsible, not bankers, not republicans,... Other countries on the euro don't have the same problems so I guess we can thank the democrats for that in PK' s distorted view of the world... Maybe The socialist policies of Greece might have contributed to the crisis .. In its simplest firm if a country spends significantly more than it takes in revenue eventually thre will be a crisis
We should call the accumulation of wealth what it really is: stagnant money. And the money of those who earn and spend: dynamic money.
22
Zero percent interest rate policy stagnates money because it makes stuffing mattresses with cash the safest "investment".
I came out of a premier economics program, and have since worked in the real world. I agree 100% with Professor Krugman. (For whatever one vote is worth.) Too bad Europe won't listen.
11
I agree entirely with Dr. Krugman. Ignoring half of the supply and demand equilibrium is like ignoring gravity when building a skyscraper. The US economy is 75% or so consumer. How can you continue to ignore the demand side? The answer, of course, is to be blinded by ideology and greed.
Let's look at what my parent's generation did after WWII. yes, they cut the budget. mainly by reducing the military after the war.But they made two huge investments: the GI Bills for Homes and college. Then they continued the investments with the interstate highway system and things like the FAA and even the moon shot. They outgrew the deficit by growing the economy not reducing it. But ideologues like the Grandiose Ostrich Party have a way of ignoring history and facts.
Let's look at what my parent's generation did after WWII. yes, they cut the budget. mainly by reducing the military after the war.But they made two huge investments: the GI Bills for Homes and college. Then they continued the investments with the interstate highway system and things like the FAA and even the moon shot. They outgrew the deficit by growing the economy not reducing it. But ideologues like the Grandiose Ostrich Party have a way of ignoring history and facts.
19
One might also add that the Greeks and the Republicans, particularly the Tea Party types, have in common a loathing of taxes; and without taxation we do not have the money to keep up anything of value -- our libraries, our bridges, roads, subways, town halls, scientific research, schools, and so on -- not to mention bare-bones "entitlements" like Social Security and Medicare.
We can't anymore even launch a rocket into space. We can't rehabilitate our coastal marshes and so avoid flooding. Some municipalities "can't" afford to fix their bridges because they won't accept federal funding -- because they don't believe in the federal government -- because they don't like federal taxes.
The Greeks found clever ways to avoid paying taxes, and not just the rich Greeks. Depressing stupid. That goes for us, too.
We can't anymore even launch a rocket into space. We can't rehabilitate our coastal marshes and so avoid flooding. Some municipalities "can't" afford to fix their bridges because they won't accept federal funding -- because they don't believe in the federal government -- because they don't like federal taxes.
The Greeks found clever ways to avoid paying taxes, and not just the rich Greeks. Depressing stupid. That goes for us, too.
8
I agree with Paul.
So...
Greece exits. Prints money.
Lives happily ever after.
So...
Greece exits. Prints money.
Lives happily ever after.
Please comment on the reality in greece that a lot of folks retire very early, live high off the gyro on government handouts, and there is not an entrepreeurial, growing, innovative economy to sustain the programs. They live well on their soil
off a German sacrifice and toil.
off a German sacrifice and toil.
2
Peter, do your homework instead of just repeating the banker's propaganda.
How do the European elite feel about Greece imposing highly progressive income and wealth taxes? I don't think this is part of the elites' plan.
Another thing is that it doesn't cost anything to produce money. To give it away would be fiscal policy, anti-austerity. And costless in an age of deflation.
Another thing is that it doesn't cost anything to produce money. To give it away would be fiscal policy, anti-austerity. And costless in an age of deflation.
Remember Voodoo Economics, back in the days of Bush1? It has been disproven repeatedly, yet it is considered mainstream economics by the Republican party.
I have neighbors who have absorbed this doctrine from Fox News and other sources and it is utterly impossible to change their minds by presenting facts. These same people are prepared to punish poor people and I think that is the deep emotional reason voodoo economics lives on.
I have neighbors who have absorbed this doctrine from Fox News and other sources and it is utterly impossible to change their minds by presenting facts. These same people are prepared to punish poor people and I think that is the deep emotional reason voodoo economics lives on.
47
I entirely agree. However, I also cannot for the life of me understand just why "those people" are so hot to punish the poor. I'd most appreciate you or someone else educating me as to just what, psychologically, is going on in "their" minds that leads them to want to make the poor suffer.
I agree with Prof Krugman, but his formulation of GOP "wrongness" is perhaps too simplistic. These folks aren't stupid or misinterpreting history--they simply see the ends of government policy differently from PK, and so prescribe different means. While most US citizens want economic justice, the GOP and their billionaire funders want the status quo.
2
The GOP has been wrong on economic policy for as long as I can remember.
Economies do not run join ideology.
Economies do not run join ideology.
6
The photo of the retiree in Greece crying on the sidewalk because he couldn't get pension money from the bank is a poignant reminder of how big economic decisions influence lives of ordinary people.
The 'lesson' Paul Krugman talks about circulating in GOP circles to slash government spending is already happening in state and local governments in the United States and retirees like that Greek pensioner in that dramatic photo are bearing the brunt of this disaster in the making.
However, this inclination to balance budgets on the backs of retirees and public workers isn't just a republican theme as democrats find it tempting to cast public workers, including firefighters, police, teachers, clerical workers, custodians and others as the main reason for state and local pension deficits.
To many governors in blue states like Oregon and Rhode Island, the general public is getting the message that a custodian making $23,000 a year in a defined benefit pension is the result of too much generosity by the state retirement system. Governors like Gina Raimondo(RI) and Kate Brown(OR) have won public acclaim for being tough on pension benefits for public workers.
Greece is already starting to happen for many retirees in the United States and it isn't just the result of policies from republican politicians as democrats are sometimes joining in the call for pension 'reform'.
The 'lesson' Paul Krugman talks about circulating in GOP circles to slash government spending is already happening in state and local governments in the United States and retirees like that Greek pensioner in that dramatic photo are bearing the brunt of this disaster in the making.
However, this inclination to balance budgets on the backs of retirees and public workers isn't just a republican theme as democrats find it tempting to cast public workers, including firefighters, police, teachers, clerical workers, custodians and others as the main reason for state and local pension deficits.
To many governors in blue states like Oregon and Rhode Island, the general public is getting the message that a custodian making $23,000 a year in a defined benefit pension is the result of too much generosity by the state retirement system. Governors like Gina Raimondo(RI) and Kate Brown(OR) have won public acclaim for being tough on pension benefits for public workers.
Greece is already starting to happen for many retirees in the United States and it isn't just the result of policies from republican politicians as democrats are sometimes joining in the call for pension 'reform'.
57
RI is perhaps the best example in the US of how progressive economic and political policies can decimate a state economy. It was the working class people here who said "no more" to increased taxes to support a bloated welfare state. We are already one of the highest taxed states in the nation, highest in per capita spending on fire fighting, near highest in per pupil education spending (with poor results), near highest gas tax (with the worst roads and bridges). The only reason some very modest pension reform for state workers passed (no yearly compounding COLA) was because the alternative was state bankruptcy. Many of our municipalities are going bankrupt do to over generous pensions and there is simply no more money to be taxed from the population. RI is a case study in what happens when democrats dominate all areas of government for decades and the results are dismal. Raimondo spearheading some mild pension reform is just the tip of the iceberg here.
Zero percent interest rate policy has wrecked the income projections of every pension and insurance fund in the world.
Krugman's alternative universe. The Greeks spend like drunken sailors, they can't pay their debts, so their economy collapses. So what should we do? Spend like drunken sailors until we can't pay our debt.
8
Actually, that is not what Dr Krugman says in this piece. Perhaps you need to re-read it.
8
We paid our debt off once in all of our history, in 1835. That was followed by the longest depression in our history.
I ask you, Joseph, when did we pay the huge debt from WWII? We just rolled it over until it became insignificant.
The finances of a huge country that can print its own money and whose debt is in its own currency is very different from you family's finances.
I ask you, Joseph, when did we pay the huge debt from WWII? We just rolled it over until it became insignificant.
The finances of a huge country that can print its own money and whose debt is in its own currency is very different from you family's finances.
Let's shift the burden of European taxpayers bailing out Greece to the investors who lent money to Greeks. We need investors and lenders who encourage speculation, who sell mortgages or bonds to others to have more skin in the game.
Wall Street lent money to Greece and helped them find a way to get around Euro rules to prevent countries with excessive debt from joining. See
http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted...
While that Greek government should be punished, so should irresponsible lending. Make the lenders who took risk share in the success or failure of their investments. Don't shove it on to the taxpayers of other countries!
Wall Street lent money to Greece and helped them find a way to get around Euro rules to prevent countries with excessive debt from joining. See
http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted...
While that Greek government should be punished, so should irresponsible lending. Make the lenders who took risk share in the success or failure of their investments. Don't shove it on to the taxpayers of other countries!
26
I'm usually a fan of Krugman's but in this case he's bringing together disparate opponents to claim hypocrisy - mainstream Republicans say X, Paul Ryan argued for Y, the few who would return to the Gold Standard, etc.. He is also comparing lessons from Canada in the 90s and Greece in the last six years (Greece operating in a currency zone that prevents devaluing their currency) to derive lessons for the US and the dollar. I think the real truth is that the combination of high debt, imposed austerity, domestic politics, and being locked in the currency zone have left Greece floundering. If irresponsible lenders are part of the problem Krugman should applaud those who today will extract constraints if they are to bail out Greece. Is austerity a universal good? - Krugman's done a better job arguing that it is not in other columns - Is austerity good for Greece today? Almost certainly yes, it's way overdue. Should the US impose greater austerity now? I doubt it, but not based on this column or mishmashes comparisons and comparisons to irrelevant cases. Greece needs to lower public employment, lower public services and pensions, enforce tax laws, and discipline their own left understand that, as a derivative economy of the EU or as a loan wolf on the eastern edge of modern commerce, Greece cannot ignore the 21st century.
4
Sorry Todd you are not grasping the Krugman point. GDP and the economy of nations are not set straight by your simple household suggestions. The simpleton logic that debt forgiveness (and economic stimulus that would follow) will reward "bad" Greece is bizarrely hypocritical.
Merkel nation grew only by never repaying its debt. Since the euro can't be adjusted in value to directly benefit Greek exports they are further saddled with an unjust solution.
The Eurozone must forgive massive amounts of this debt by recognizing that they must all accept responsibility for this crisis.
Investment in Greece like infrastructure and factories are the longer term solutions not crushing pensioners.
Merkel nation grew only by never repaying its debt. Since the euro can't be adjusted in value to directly benefit Greek exports they are further saddled with an unjust solution.
The Eurozone must forgive massive amounts of this debt by recognizing that they must all accept responsibility for this crisis.
Investment in Greece like infrastructure and factories are the longer term solutions not crushing pensioners.
1
Of course Greece and everyone else too, should ignore the 21st century. To plagiarize a quote from JM Keynes: "The decadent international but individualistic capitalism in the hands of which we find ourselves is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn't deliver the goods."
Rick Foulkes, I don't disagree - maybe I was inelegant or unclear in my post. I am not saying austerity is a universal good or a universal bad. My take on Greece is they haven't moderated back from the accesses of late-20th-century Europe. Too much of the economy is in the public domain and debt is unsustainable. Krugman's comparison to 1946 US and UK debt to GDP ratios seems like a weak one - those too were unsustainable and clearly so. What I disagree with is Krugman's attempt to paint those who would impose austerity on Greece as hypocritical and then his disjointed extrapolation that "if you really worry that the U.S. might turn into Greece, you should focus your concern on America’s right" - he doesn't prove that point at all. Here in the US I'd argue for greater spending. The right became deficit hawks not when W started two wars on credit - they did so when Obama inherited a broken economy very much in need of deficit spending. Krugman has argued elsewhere that reducing the deficit is a wrong-headed overarching goal conveniently imposed by the GOP to hobble the Obama administration. I agree. But that's for the US. Greece is a different story and must cut spending and cut debt - the household analogy is not as strong as FOXNEWS thinks, but it may be apt for Greece today - you just can't keep spending forever. You may be able to keep investing for a long time, but not spending on things like pensions and inefficient public make work.
It is the few who garner most of the gains of a corrupt, fully financialized neofeudal system and it is these few who fund the election campaigns of the politicos who are so desperate to maintain the perquisites of the Financial Nobility.
Austerity is meted out to debt-serfs while those at the top transfer tens of billions to their private accounts.
There are variations of this basic flow of income from serfs to the nobility, of course; stock market bubbles are inflated by authorities, insiders sell, sell, sell as credulous banana merchants and wage-earners buy, and then when the bubble bursts, these same authorities ban selling by the small-fry bagholders.
But this is not real stability; it is a brittle simulacrum of stability, an illusion that has required the status quo to pursue extremes of policy and debt that are intrinsically incapable of yielding stability.
In effect, the status quo has greatly increased the system's vulnerability, fragility and brittleness--the necessary conditions for catastrophic collapse--all in the name of maintaining a completely bogus facade of stability for a few more years.
Austerity is meted out to debt-serfs while those at the top transfer tens of billions to their private accounts.
There are variations of this basic flow of income from serfs to the nobility, of course; stock market bubbles are inflated by authorities, insiders sell, sell, sell as credulous banana merchants and wage-earners buy, and then when the bubble bursts, these same authorities ban selling by the small-fry bagholders.
But this is not real stability; it is a brittle simulacrum of stability, an illusion that has required the status quo to pursue extremes of policy and debt that are intrinsically incapable of yielding stability.
In effect, the status quo has greatly increased the system's vulnerability, fragility and brittleness--the necessary conditions for catastrophic collapse--all in the name of maintaining a completely bogus facade of stability for a few more years.
5
When will the Fed be able to stop pumping money into the economy? A simple question but one worth asking. If the answer is we cannot see a clear point in time when the Fed can lessen its current policy then we've got real structural problems worthy of bipartisan discussion. There has been a fundamental shift in policy over the last two decades which is designed to make equity investment the fundamental means of savings for average citizens. It has not only exposed them to the inherent risks of the stock market but it also (thru lower interest rates) has denied consumers the ability to make secure investments with reasonable return through banks. Mr. Krugman has cast this as a battle of competing political philosophies when, in fact, both parties have acquiesced in Fed policies which undercut low risk savings for consumers. We need to recalibrate our economic policies without constantly references politics.
3
It was amazing to witness Greeks in a state of euphoria celebrating in the streets after last week's defiant vote, as if they had won some precious victory. They obviously didn't know what they were voting for. This seems to be a central theme in Greek tragedies--not seeing the whole picture. Oedipus, filled with hubris (a Greek invention), believed he had avoided his fate when he answered the Sphinx's riddle to become King of Thebes and marry the queen. All goes well until a plague besets the city. Gradually, Oedipus learns that he himself is the cause of this plague, that he had not seen the whole picture , that he had created his own fate. The Greeks invented "not seeing the whole picture," of delusions and fantasies running into unremitting realities. The money lenders would of course be the Oracle that both contributed to Oedipus's fate and knew exactly how it would turn out.
2
Austerity is an easy sell for Republicans, because it it never applies to their political base, just the working poor and "those people", But rest assured there will be no austerity applied to Big Ag, Big Pharma, war profiteers, welfare ranchers, or the 95% of US corporations who pay zero federal income tax. Nor will their be any austerity applied to the trillion or so in direct corporate subsidies and tax avoidance schemes so beloved by Republican funders, just lots of rhetoric about not punishing the "job creators".
Sure, it's all a fraud, but it's been a very successful one, as witness the current congress. Or who is running the 30 plus Red States.
Sure, it's all a fraud, but it's been a very successful one, as witness the current congress. Or who is running the 30 plus Red States.
249
A very large degree of this awesome debt was deliberately created by the same ex=president who now gives discounted speeches to surviving victims of his most wasteful and fraudulent war in Iraq. Simultaneously giving tax breaks to the wealthy, all to make life more difficult for the masses. What a guy!
29
Then how can you possibly expect Greece to be able to climb its way out of the hole without abandoning the euro? More austerity and window-dressing debt relief amount to the same toxic formula. The economic disaster has gone too far. Greece needs a fresh start, one way (wipe the slate clean) or the other (bankruptcy and a return to the drama). Sooner or later, the lenders will have to face their day of reckoning. If it's later, woe betide the already woebegone Greeks.
5
When all those who criticize Germany and IMF for their policies are willing to invest their 401K in Greek Government issued debt, I'll begin to listen to their opinions on this subject. The problem is Greece can no longer fund its Government without "charity" and Greeks are surprised such charity isn't readily and endlessly available.
3
Many countries, including Germany, UK, Canada & even the United states, at various points in history, have depended on debt to fund their government spending. Many still do. Many have got bailouts or even debt write downs. Many will. Paul here is merely saying that if the economy were buoyant, perhaps with low interest liquidity, it would have been easier to swim than with hands tied, as is the case now. Personal finance examples do not translate well to public finances.
8
I doubt Krugman's point is lost on anybody here. But many seem to advance the fantasy that governments can print their way to prosperity.
They could, actually, in the Sophomoric make believe world where the ruling powers refrain from squandering the moment by using the temporary aid to buy more power and favors.
They could, actually, in the Sophomoric make believe world where the ruling powers refrain from squandering the moment by using the temporary aid to buy more power and favors.
1
Borrowing has to find productive outlets.
Borrowing to fund a large welfare society is a sure shot recipe for default.
Welfarism is a very small part of a vast American revenue stream coming from an healthy Oil field,Cutting edge Tech sector....
In Greece welfare payments was a large part & the revenue stream very small.
Even with its own currency it would be difficult to sustain an export market based on high prices due to artificially inflated standard of living based on borrowing.
Borrowing needs to be realistic & repayable.
Borrowing to fund a large welfare society is a sure shot recipe for default.
Welfarism is a very small part of a vast American revenue stream coming from an healthy Oil field,Cutting edge Tech sector....
In Greece welfare payments was a large part & the revenue stream very small.
Even with its own currency it would be difficult to sustain an export market based on high prices due to artificially inflated standard of living based on borrowing.
Borrowing needs to be realistic & repayable.
3
Violet we can print our own money and our debt is in our own currency. This is not true for Greece.
From 1946 - 1973, we increased our debt by 75% and started Medicare, built the "Great Society", constructed the interstate highways. GDP growth averaged 3.8% and real median household income surged 74%.
From 1946 - 1973, we increased our debt by 75% and started Medicare, built the "Great Society", constructed the interstate highways. GDP growth averaged 3.8% and real median household income surged 74%.
I understand the Canada situation, but here, isn't Greece's outstanding debt in euro? The consequence being that if Greece breaks away and debases its new currency, any benefits from inflation would also make it harder to reduce the national debt (which is in euro), rather than inflating that debt away.
Perhaps there is just no workable solution here (i.e. Kobayashi Maru). While austerity may be crushing, even if debt relief were provided instead, I just don't see the Greek people dramatically changing their culture by paying taxes, etc. I also don't see established private enterprise (like the U.S. after WWII) ready to rebuild the economy even if the government were able to injecting money into the economy sans austerity.
When there is no real workable solution, it's very easy for the pundits to sit back and criticize.
Perhaps there is just no workable solution here (i.e. Kobayashi Maru). While austerity may be crushing, even if debt relief were provided instead, I just don't see the Greek people dramatically changing their culture by paying taxes, etc. I also don't see established private enterprise (like the U.S. after WWII) ready to rebuild the economy even if the government were able to injecting money into the economy sans austerity.
When there is no real workable solution, it's very easy for the pundits to sit back and criticize.
3
If the Greeks leave the Eurozone they will also default on their debt. It isn't a great solution, but it would at least allow the Greeks to start at 0 rather than at -160. Of course, the fact that the Greeks will default on all the debt has probably motivated the rest of Europe to give some debt relief, it the hope that some of that debt will still be recovered.
2
' Economy Is a Lesson for Republicans in the U.S.'
100 Percent agreed! -
You can't have such Inequality and a Society where the Rich plunder their country on the back of the Poor.
How sad that Prof. Krugman didn't come to this conclusion at the beginning of the Greek crisis - instead of framing it as a problem of austerity!
100 Percent agreed! -
You can't have such Inequality and a Society where the Rich plunder their country on the back of the Poor.
How sad that Prof. Krugman didn't come to this conclusion at the beginning of the Greek crisis - instead of framing it as a problem of austerity!
3
No, it has lessons for Democrats, such as cushy federal retirement policies will need to be paid for someday.
4
Many studies have shown that if you look at total compensation (including pensions) federal employees get LESS than comparable private ones. It is true that pensions are better for federal employees, but that is more than compensated for by lower salaries.
The Federal Compensation Board found that on average, public employees are paid 24% less than comparable private ones. This does not include benefits, but if you take the largest difference in benefits from the other studies (Scheiber's) which is 10.8% and subtract it, you would get a difference of 13.2% less total compensation for public employees.
The Federal Compensation Board found that on average, public employees are paid 24% less than comparable private ones. This does not include benefits, but if you take the largest difference in benefits from the other studies (Scheiber's) which is 10.8% and subtract it, you would get a difference of 13.2% less total compensation for public employees.
Len Charlap, No. If federal payrolls were anywhere close to market there would be turnover similar to the private sector. You're twisting numbers. Federal employees make MUCH more than the private sector. Most of the richest counties in the country are near Washington, D.C.
http://www.cbo.gov/sites/default/files/01-30-FedPay_0.pdf
http://www.cbo.gov/sites/default/files/01-30-FedPay_0.pdf
1
And If I may speak for some of the Europeans on Prof. Krugmans Blog.
Poisoning relations among Europe’s democracies, was done to such an extent
by Anglo-American economists that it will take quite some time to heal that.
And Greece does indeed offer important lessons to the rest of us. But they’re not only the lessons you think, and the use of the American right of Greece as a boogeyman - but also the misguided efforts of American progressives to use the 18 European States as the boogeyman of austerity.
This was an absolute disaster and poisened realtions between European progressives and US progressives in a unacceptable way.
And the refusal of progressive US economists to learn from THEIR mistakes -(they didn't get one single thing right about the Euro Crisis: from the constant apocalyptic messages - that the Euro any minute will desolve - to the stubborness to never accept the Euro as Europeas irreversible currency)
And instead of telling Americans from the beginning that - Greece HAS to reform - and HAS to be changed into a country where even the Rich pay their taxes Aprogressive American economists tried to use the Greece Crisis as an example for anti governmental austerity.
How unbelievable foolish - with the result that now most of Americas crazy Right feels vindicated.
And a last word about Gernany or 'teh Germans'.
We -(EU multinationals) alawys said: Let the French do IT -(to force Greece to reform) - as everybody loves the French: Vive La France!
Poisoning relations among Europe’s democracies, was done to such an extent
by Anglo-American economists that it will take quite some time to heal that.
And Greece does indeed offer important lessons to the rest of us. But they’re not only the lessons you think, and the use of the American right of Greece as a boogeyman - but also the misguided efforts of American progressives to use the 18 European States as the boogeyman of austerity.
This was an absolute disaster and poisened realtions between European progressives and US progressives in a unacceptable way.
And the refusal of progressive US economists to learn from THEIR mistakes -(they didn't get one single thing right about the Euro Crisis: from the constant apocalyptic messages - that the Euro any minute will desolve - to the stubborness to never accept the Euro as Europeas irreversible currency)
And instead of telling Americans from the beginning that - Greece HAS to reform - and HAS to be changed into a country where even the Rich pay their taxes Aprogressive American economists tried to use the Greece Crisis as an example for anti governmental austerity.
How unbelievable foolish - with the result that now most of Americas crazy Right feels vindicated.
And a last word about Gernany or 'teh Germans'.
We -(EU multinationals) alawys said: Let the French do IT -(to force Greece to reform) - as everybody loves the French: Vive La France!
2
GERMAN MORALS? Greece has Germany's hypocrisy to thank for their public humiliation and economic ruin. Germany has conveniently forgotten that it never repaid the debts incurred in losing WW I and WW II. Any claim to morality is a convenient denial of the free ride the Germans were given on their way to becoming the economic miracle of Europe. In fact, that history echoes the claims of the so-called "rugged individualist" millionaires and billionaires of the 1% who have ridden on the backs of the taxpayers in the US, getting a free ride, so they can stash their ill-gotten gains offshore. For example, Walmart, by refusing to pay a living wage, forces employees to depend on food stamps, Medicaid and welfare checks. Germany needs to apologize to Greece, indeed the world, for her hypocrisy and unempathic response to the suffering of others. Had the Allies, especially the US taken that attitude toward German after WW II, they would have made Greece's economic debacle look like a romp on the beach. There is still time for Germany to do the right thing. And for those in the US to stop giving credence to objectors whose only reasoning is that national debt is an inherent evil. Wrong!
11
Keynesianism can only work if you believe that you really can have a free lunch. How much has the US deficit increased by since 2008? How much has the central bank balance sheet expanded? How has the government and central bank through construct and coercion supported the stock market?
All this and it's been the worst "recovery" in the post WW2 era with a wages flat, 2 million fewer full time jobs a labor participation rate plumbing modern lows, still record levels of food stamp recipients, poverty at near all time highs, and pension systems collapsing.
Let me guess...MOAR!
All this and it's been the worst "recovery" in the post WW2 era with a wages flat, 2 million fewer full time jobs a labor participation rate plumbing modern lows, still record levels of food stamp recipients, poverty at near all time highs, and pension systems collapsing.
Let me guess...MOAR!
4
You will be surprised to learn that the deficit since 2008 has actually gone down.
The sky is not quite falling down yet.
The sky is not quite falling down yet.
Actually the worst recovery since WWII was the recovery during George W Bush's administration. Check your numbers.
"In fiscal year 2009, which started almost four months before Obama's presidency began and ended eight months into it, the deficit was 9.8 percent of GDP. The 2014 shortfall is 2.8 percent of GDP -- a DECREASE of 71 percent."
http://www.politifact.com/truth-o-meter/statements/2015/jan/20/barack-ob...
Since the deficit has DECREASED, we can assume that the reason for our slow recovery was austerity.
http://www.politifact.com/truth-o-meter/statements/2015/jan/20/barack-ob...
Since the deficit has DECREASED, we can assume that the reason for our slow recovery was austerity.
Another lack of commonality concerns the size of our governments with respect to GDP. Greece's is MASSIVE by comparison with ours. I've seen numbers indicating it is responsible for up to 60% of payrolls. Our government, by contrast, is under constant threat. (Violent threat, in fact; I'm still repulsed by the "small enough to drown in a bathtub" goal.)
5
The republicans want to reduce government spending EXCEPT when it comes to,
Funding perpetual war,
Subsidising Big Carbon, Big Ag, Big Banks, Big Pharma, and Walmart and the fast food industry.
Funding perpetual war,
Subsidising Big Carbon, Big Ag, Big Banks, Big Pharma, and Walmart and the fast food industry.
290
Nicely said Craig. Prof. Krugman and so many other people keep trying to present the way to a more just world. When the top 1% doesn't get to make the all the rules for their benefit we will feed the poor and have a middle class again. And do all the things we need to do to make this country a leader again. But we have is such a division that looking at the same editorial brings 2 completely different responses. Bernie Sanders, Elizabeth Warren need to be listened to as well as our Proff. History matters.
1
A summary of Krugman's argument today:
Don't worry about US debt levels, we can always debase our currency, if the evil Republicans don't stand in the way.
Some comfort.
Don't worry about US debt levels, we can always debase our currency, if the evil Republicans don't stand in the way.
Some comfort.
4
jb assumes:
"Debt and the deficit are bad. Reducing them is good."
These are historically wrong..
Every time we had a balanced budget for more than 3 years, that period was immediately followed by a depression. This has happened 6 times. Deficits are necessary for prosperity.
Government deficits decrease private sector debt. All of the 11 recessions we had since 1952 have been preceded by an increase in private sector debt. See 3rd graph at http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-...
In 1946 the debt was 121% of GDP--37% higher than we have today. We had deficits for 21 of the next 27 years; debt increased 75%. And we had prosperity. The GDP grew at an average of 3.8%; real household income surged 74%.
On the other hand look at what happened after WWI. We had balanced budget (surpluses) from 1920 - 1930. We reduced the debt by 40%, On October 25, 1929 the debt was only 16% of GDP. AND THEN WHAT HAPPENED?
As another commenter put it, "A growing economy needs a growing money supply or there will be deflation as X amount of dollars chases greater amounts of goods and services. A fiscal surplus destroys money, exacerbating the problem. Accordingly, regularly running surpluses is like bleeding a patient..."
"The definition of insanity is doing the same thing over and over and expecting different results" - source unknown
"Those who don't know history are destined to repeat it." - Edmund Burke or George Santayana
"Debt and the deficit are bad. Reducing them is good."
These are historically wrong..
Every time we had a balanced budget for more than 3 years, that period was immediately followed by a depression. This has happened 6 times. Deficits are necessary for prosperity.
Government deficits decrease private sector debt. All of the 11 recessions we had since 1952 have been preceded by an increase in private sector debt. See 3rd graph at http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-...
In 1946 the debt was 121% of GDP--37% higher than we have today. We had deficits for 21 of the next 27 years; debt increased 75%. And we had prosperity. The GDP grew at an average of 3.8%; real household income surged 74%.
On the other hand look at what happened after WWI. We had balanced budget (surpluses) from 1920 - 1930. We reduced the debt by 40%, On October 25, 1929 the debt was only 16% of GDP. AND THEN WHAT HAPPENED?
As another commenter put it, "A growing economy needs a growing money supply or there will be deflation as X amount of dollars chases greater amounts of goods and services. A fiscal surplus destroys money, exacerbating the problem. Accordingly, regularly running surpluses is like bleeding a patient..."
"The definition of insanity is doing the same thing over and over and expecting different results" - source unknown
"Those who don't know history are destined to repeat it." - Edmund Burke or George Santayana
Correct, and why would the GOP want to implement such disastrous policies?
Because all they really care about is benefitting hat tiny sliver of big money at the very top for whom they take their marching order from.
If that means throwing the rest of the country under the bus, so be it.
Because all they really care about is benefitting hat tiny sliver of big money at the very top for whom they take their marching order from.
If that means throwing the rest of the country under the bus, so be it.
24
The Illinois state economy is poised to go into a tailspin, faced by a massive revenue shortfall and encumbered with pension obligations, Puerto Rico is all but busted, so why not focus on cleaning up our own Augean stables of corruption and misrule in the USA before picking on poor little Greece?
6
There is a remarkable omission in this column by Prof Krugman.
I don't deny the erudition of his ideas but I don't think there is a complete picture presented here.
Don't the Greeks bear some responsibility for the crisis?
The failure to collect taxes, the number the government employs and the age at which one can collect a pension all contributed as well to this mess.
In a lot of ways, Greece is a 3rd world country that was allowed to be a part of something far more developed than it was - EU.
The real failure was to allow Greece into the EU at all.
Yes, it is ironic that the political and philosophical ideas for Europe came out of Greece.
But Greece is not a golden goose.
With what will it pay its debts?
Tourism and olives? History buffs touring the digs?
Go to Greece.
The failure was to look at Greece in the first place and expect them to pay back debts on industries that, frankly, never existed.
The Germans were gullible. The Greeks were deceitful.
I don't deny the erudition of his ideas but I don't think there is a complete picture presented here.
Don't the Greeks bear some responsibility for the crisis?
The failure to collect taxes, the number the government employs and the age at which one can collect a pension all contributed as well to this mess.
In a lot of ways, Greece is a 3rd world country that was allowed to be a part of something far more developed than it was - EU.
The real failure was to allow Greece into the EU at all.
Yes, it is ironic that the political and philosophical ideas for Europe came out of Greece.
But Greece is not a golden goose.
With what will it pay its debts?
Tourism and olives? History buffs touring the digs?
Go to Greece.
The failure was to look at Greece in the first place and expect them to pay back debts on industries that, frankly, never existed.
The Germans were gullible. The Greeks were deceitful.
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"The Germans were gullible." This is a common misunderstanding. Germany has benefited and continues to benefit from the presence of Greece in the Euro zone. The rulers of Germany were not being naive in letting Greece in and trying to keep it in, they were being clever. Greece helps hold the value of the Euro down with respect to the rest of the world, and that helps Germany maintain its position as "a full employment exporting powerhouse" [Prof. Brad Delong].
The banks that lent so much money to Greece might be thought to have been "gullible", but they, too, are laughing all the way to the European Common Bank and the IMF, who have bailed them out. That "bailout of Greece" mostly bailed out the banks, most of whose Greek debt has been taken on by these quasi-governmental organizations. So the Greeks get hurt, whichever tax payers or other poor countries' workers who actually end up paying for the never-to-be-repaid Greek debt get hurt, but the owners of Germany are not getting hurt, they are just getting richer. Not gullible at all.
The banks that lent so much money to Greece might be thought to have been "gullible", but they, too, are laughing all the way to the European Common Bank and the IMF, who have bailed them out. That "bailout of Greece" mostly bailed out the banks, most of whose Greek debt has been taken on by these quasi-governmental organizations. So the Greeks get hurt, whichever tax payers or other poor countries' workers who actually end up paying for the never-to-be-repaid Greek debt get hurt, but the owners of Germany are not getting hurt, they are just getting richer. Not gullible at all.
3
"The Germans were gullible. The Greeks were deceitful." is exactly the reverse of events. Germany and Goldman Sachs conspired to cook the Greek books. Greece did not qualify to enter the EU, or the euro currency. They have never met the requirements, they have a non-industrial third world economy.
The Germans and Goldman Sachs then pretended that their fraudulent accounting was real, and made loans based on their own fraud. The Greeks were gullible and took the loans. The Germans are deceitful and demand repayment. The lenders were deliberately fraudulent. The frauds are the pariahs.
The Germans and Goldman Sachs then pretended that their fraudulent accounting was real, and made loans based on their own fraud. The Greeks were gullible and took the loans. The Germans are deceitful and demand repayment. The lenders were deliberately fraudulent. The frauds are the pariahs.
6
Krugman admits exactly what you claim he omits stating, "Greece did indeed run up too much debt...." Then you proceed to answer a series of questions, that begin by begging but ultimately answering your own question. The unfortunate reality is that Greece does not have the capacity - at present - to grow and pay down their debts; nor does it appear likely to materialize in the near term. If they privatized every industry, sold every vessel, and nationalized every park, it would not cover their debts. Just run the numbers - they don't lie. Who is the bigger fool? The banker who loans the fool money or the fool who keeps taking the foolish banker's loans? The short answer is it doesn't matter. We've got a scorpion and frog problem here.
4
Agreed, and let us not forget, our currency dropped on a trade weight adjusted basis during the recovery from the 2008/2009 recession. This gave our export market a chance to recover. It began rising over the past year when talk of tightening started and or unemployment rate began to drop. Note that since the dollar began to increase in value versus other currencies our export market has stalled and imports have begun their relentless march to destroy what remains of our manufacturing sector. You want to see manufacturing disappear, raise interest rates. Bye, bye, Miss American Pie made here. Couple that with a cut in federal spending and a tax cut for those who don't need it and the consumption function is gone. What do you have left? Oh, defense, the most wasteful form of spending we have. Read Kuznetts. The greatest macroeconomist of all time suggested defense should be discounted from GDP. So, welcome to a country run by the GOP. Meet the new boss, definitely different from the old boss.
150
You have to wonder about GDP calculations: producing a plastic toy which will be in a landfill within a year may contribute the same dollar value to GDP as a medical device which saves a life. The idea that military spending and, say, school or factory construction spending are counted the same definitely seems bizarre.
'The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes.'
Let's turn to Joseph Stiglitz, 2007, praising Venezuela’s economic policies.
http://venezuelanalysis.com/news/2719
Venezuela basically did in 2007 what you believe greece should do now. So why didn't Venezuela work out ?
Maybe it's because stimulus can help a sound economy, but it can't offset corruption, patronage and dysfunctionality. Maybe your models lack to include a systematic drag, therefore may work on the US (because it's a sound economy) but not on Venezuela.
And just because the republicans just get some things wrong (you can't say they get keynes wrong if they haven't had the chance to get him right), i still doubt keynes is a one size fit it all solution.
And by the way, i was stressing, that people like Stiglitz can be wrong, too.
Let's turn to Joseph Stiglitz, 2007, praising Venezuela’s economic policies.
http://venezuelanalysis.com/news/2719
Venezuela basically did in 2007 what you believe greece should do now. So why didn't Venezuela work out ?
Maybe it's because stimulus can help a sound economy, but it can't offset corruption, patronage and dysfunctionality. Maybe your models lack to include a systematic drag, therefore may work on the US (because it's a sound economy) but not on Venezuela.
And just because the republicans just get some things wrong (you can't say they get keynes wrong if they haven't had the chance to get him right), i still doubt keynes is a one size fit it all solution.
And by the way, i was stressing, that people like Stiglitz can be wrong, too.
3
I think you have Keynes wrong. Keynes prescription depends upon conditions. It is a form of pragmatism.
Economics is dominated by the law of supply and demand, that's it, that's all there is.
When recessions come there are two kinds.
If you have too much demand RELATIVE to supply you get inflationary recessions (arguably US 1980).
If you have too much supply RELATIVE to demand you get deflationary recessions (supply side saturation). You also get investment bubbles and intense pressure to deregulate.
If you have inflationary recession then supply side bias is arguably called for. If you have deflationary recession, then demand side bias is arguably called for. Where you are between the two poles on a sort of sliding scale when recession hits determines the policy prescription.
The problem is political parties, in Anglo-Saxon countries are supposed to pragmatically represent interest groups, who are supposed to pursue their own interest. Since supply side favors the rich, their political retainees only pursue supply side policies and vice-versa for the 99% and their retainees. If you arrive at saturation that means one party has held power and kept policy past its point of efficacy. (The rich will use ideological arguments to try to get a chunk of the masses to vote against their own interest).
So Keynes has got the policy right. The problem is, because of political inertia, the switch in econ policies has to wait on the switch in political eras.
Economics is dominated by the law of supply and demand, that's it, that's all there is.
When recessions come there are two kinds.
If you have too much demand RELATIVE to supply you get inflationary recessions (arguably US 1980).
If you have too much supply RELATIVE to demand you get deflationary recessions (supply side saturation). You also get investment bubbles and intense pressure to deregulate.
If you have inflationary recession then supply side bias is arguably called for. If you have deflationary recession, then demand side bias is arguably called for. Where you are between the two poles on a sort of sliding scale when recession hits determines the policy prescription.
The problem is political parties, in Anglo-Saxon countries are supposed to pragmatically represent interest groups, who are supposed to pursue their own interest. Since supply side favors the rich, their political retainees only pursue supply side policies and vice-versa for the 99% and their retainees. If you arrive at saturation that means one party has held power and kept policy past its point of efficacy. (The rich will use ideological arguments to try to get a chunk of the masses to vote against their own interest).
So Keynes has got the policy right. The problem is, because of political inertia, the switch in econ policies has to wait on the switch in political eras.
You won't get The Professor to argue that Stiglitz can be wrong on occasion, too. There be knives a'swingin' in that Nobel wagon.
1
Paul Ryan and the Republican's budget will pass in the House and the poor and working class will suffer mightily. Their hatred of the poor and of the American government is classic and virulent, and when Republcians are in charge of government, they defund agencies until they are unable to function properly, such as the post office, and then point to how government does not work. Republicans cannot govern.
496
By Law, USPS is supposed to operate without Government subsidy (i.e. cover its costs through revenue), so not subject to Government budget decisions, except now Taxpayers have subsidized some USPS pension obligations. Do you have other examples of agencies suffering budget cuts (defined as real dollar declines in funding not reductions in forecasted growth, what the Left usually calls a reduction)?
I'm pretty sure Paul Ryan and his ilk don't hate the poor. They simply see them as a means to an end. It is the job of the "makers" to convince the rest of us to hate the poor. Once we dehumanize the old, sick and infirm, it will be easy to get us to vote to disenfranchise them.
Flat out stupid comment. Have a look at the voting by county map after the 2012 presidential election, and then tell me that the GOP hates the poor when you see how "red" the voters are throughout the country.
It was not a good idea to let Greece join the Euro. But it's too late to turn back. Going back to the Drachma now would put Greece into worst of all worlds. Money would flee the country. Interest rates would explode. Inflation would be a runaway train. Greeks would seek security by using Dollars and Euros as shadow currencies. The rest of Europe would send third world type relief in food and medicine. Young Greeks would flee the country.
- I'll stop here. Coming up with negative talking points is just too easy.
- I'll stop here. Coming up with negative talking points is just too easy.
2
When a country tumbles into depression its way out is to sell the one thing it has, its poverty. I.e., a cheap currency and willingness to work for less and live with ownership by foreign investors. Recovery can sometimes be rapid. Greeks endure ever deeper poverty but tragically cannot sell it. The Euro is its curse. Germany's tough line is sowing enmity that could last generations.
159
"sowing enmity" - yes, one of the things Germany does best. They should remember their own history. The austerity suffered by Germany following WWI when it staggered under the weight of paying reparations lead to the rise of Hitler.
BTW, the WWI debt was mitigated by the allies in 1932. As Picketty reminded us recently, Germany never paid its own debts.
BTW, the WWI debt was mitigated by the allies in 1932. As Picketty reminded us recently, Germany never paid its own debts.
Germany's tough line is sowing enmity that will, once again, last generations.
Your points are valid, Bill U., but one might add that the "enmity" sown by Germany grows daily and already extends far beyond the boundaries of Greece,
Greece has also demonstrated the Republican credo to starve its federal government into impotence, though the Greeks do it through an abiding culture of individual tax evasion (another difference between that country and Canada, if we're comparing the two). I know that these days it's dangerous to utter anything that might be construed as 'blaming the victim,' but sometimes the victim really is complicit in his own plight.
6
Compare the following facts regarding GDP growth:
First Christine LaGarde has just announced that the IMF is cutting its estimate of world economic growth for 2015 from 3.5% to 3.3%. See: http://www.usatoday.com/story/money/markets/2015/07/09/imf-outlook-july-...
Second, although GDP growth in China has been around 7% in 2015, even higher in previous years, GDP growth in the eurozone during the period 2010to 2015 has averaged between maybe .3% or less; see http://www.tradingeconomics.com/euro-area/gdp-growth
Economists predicted higher economic growth for Europe in 2009-10, and the shortfall is one of the reasons Greece's economic problems have continued to get worse. This is economists like the head of the IMF and the ECB, not Republicans who made predictions which were too sanguine.
The reason? Unskilled and semiskilled jobs continue to migrate from the US and Europe to China.
When economists argued for "free trade" they pointed out that the more developed countries could simply shift to more HIGH VALUE ADDED JOBS.
That means more training of engineers and physicians, for example.
But NO POLICIES were put in place to make this happen.
Such policies would require sacrifice. Higher standards in education. Controlling population growth so that the US and Europe train fewer children but train them better. Perhaps more emphasis on science and math in HS, less on football.
And lower population growth. Which in the US means an end to illegal immigration.
First Christine LaGarde has just announced that the IMF is cutting its estimate of world economic growth for 2015 from 3.5% to 3.3%. See: http://www.usatoday.com/story/money/markets/2015/07/09/imf-outlook-july-...
Second, although GDP growth in China has been around 7% in 2015, even higher in previous years, GDP growth in the eurozone during the period 2010to 2015 has averaged between maybe .3% or less; see http://www.tradingeconomics.com/euro-area/gdp-growth
Economists predicted higher economic growth for Europe in 2009-10, and the shortfall is one of the reasons Greece's economic problems have continued to get worse. This is economists like the head of the IMF and the ECB, not Republicans who made predictions which were too sanguine.
The reason? Unskilled and semiskilled jobs continue to migrate from the US and Europe to China.
When economists argued for "free trade" they pointed out that the more developed countries could simply shift to more HIGH VALUE ADDED JOBS.
That means more training of engineers and physicians, for example.
But NO POLICIES were put in place to make this happen.
Such policies would require sacrifice. Higher standards in education. Controlling population growth so that the US and Europe train fewer children but train them better. Perhaps more emphasis on science and math in HS, less on football.
And lower population growth. Which in the US means an end to illegal immigration.
8
The reason - Austerity.
You argument falls apart because population growth in Europe is tiny and education is strong and growth is weak.
You argument falls apart because population growth in Europe is tiny and education is strong and growth is weak.
Combining austerity measures with easy money alone, would not solve Greece's problems.
The main set back in the path towards growth has been the fact that, all greek governments since 2009, have been reluctant in implementing much needed radical structural reforms. For at least 40 years, the underlying problem of Greece, was that "its politics is a giant system of patronage, in which politicians seek to create a loyal clientele by the distribution of economically irrational and deleterious privileges, for example, by paying people much more than could be justified economically, by overemployment, by the award of contracts and so forth" as it was very well said by Theodore Dalrymple of The Australian and was also pointed out by Guy Verhofstadt, the leader of the liberal group in the European Parliament.In an excellent speech delivered in the European Parliament earlier this week and adressing Prime Miniter Tsipras, he outlined his plan for reform by proposing the end of privileges in Greece, “The privileges of the ship owners, of the military, of the Orthodox Church, of the Greek islands, and of the political parties, who receive funds from banks who are in fact bankrupt.” He also said that the clientèlist system in Greek politics (i.e. exchange of goods and services for political support) should be brought to an end and that Greece should downsize it's public sector.
The main set back in the path towards growth has been the fact that, all greek governments since 2009, have been reluctant in implementing much needed radical structural reforms. For at least 40 years, the underlying problem of Greece, was that "its politics is a giant system of patronage, in which politicians seek to create a loyal clientele by the distribution of economically irrational and deleterious privileges, for example, by paying people much more than could be justified economically, by overemployment, by the award of contracts and so forth" as it was very well said by Theodore Dalrymple of The Australian and was also pointed out by Guy Verhofstadt, the leader of the liberal group in the European Parliament.In an excellent speech delivered in the European Parliament earlier this week and adressing Prime Miniter Tsipras, he outlined his plan for reform by proposing the end of privileges in Greece, “The privileges of the ship owners, of the military, of the Orthodox Church, of the Greek islands, and of the political parties, who receive funds from banks who are in fact bankrupt.” He also said that the clientèlist system in Greek politics (i.e. exchange of goods and services for political support) should be brought to an end and that Greece should downsize it's public sector.
211
"problem of Greece, was that "its politics is a giant system of patronage, in which politicians seek to create a loyal clientele by the distribution of economically irrational and deleterious privileges, for example, by paying people much more than could be justified economically, by overemployment, by the award of contracts and so forth."
But wait! Isn't that how democracy works?
Our personal income is largely determined by political forces.
But wait! Isn't that how democracy works?
Our personal income is largely determined by political forces.
1
And tragically, quoting Bill U. in part, "the Euro is [Greece's] curse." Even if, they had done all of the things you had said, where would the country find growth. Static budget surpluses alone are not sufficient to remove one from debt. Suppose for instance I run into debt. If I can maintain the income part of the ledger while reducing the expenditure part, then I can show a plan for viable debt-reduction. But, if, as is true with most businesses and governments, my income goes down as my expenditures go down from lack of investment, harvesting of resource, then the only option is growth. Because we know that government income is dynamic in this fashion and not static like most personal incomes, the prevalent avenue for recovery in these situations will almost always be growth to bring an economy back from edges of recesssion.
The story wasn't saying it is. Greece isn't big enough and doesn't have the resources to pull that off. The USA does however.
1
It strikes me that a large number of the Republicans are elementary beings, who have great difficulty understanding even mildly complex ideas. They don't understand, for example, that biological evolution works intergenerationally on the entire distribution of traits in a population and not on an individual during its life. I can see why this might be too subtle for a third grader, but a modern educated adult who has had some exposure to statistics should be able to wrap his head around the concept. But alas, no. Like Marco Rubio, he is not a scientist. Economics is a far more complex subject, so yes, I can see why some one like that would have difficulty getting past the gold standard. I don't know that there is much one can do in such a case, except hope that Professors like Krugman will succeed in educating some fraction of the public.
Keep going, Professor. Don't give up!
Keep going, Professor. Don't give up!
95
Yes, the distinguishing feature of Republicans is they are "Born Yesterdays." Republicans see the world the way they want it to be, rather than the way it is. No candidate that runs on a "common sense" tag line will ever get my vote.
Why the gold standard is a bad idea is not even a new idea. Adam Smith wrote about that in his classic The Wealth of Nations. The father of capitalism would repudiate Paul Ryan and others of his ilk. What these cats really want is a return to Feudalism. Well from this old southern gentleman no thanks.
1
I don't think it's a question of educating Republicans, as much as recognizing that their behavior is entirely devoted to ensuring great wealth for those who already are wealthy - and to cleverly, deceptively selling too many people who are not wealthy but susceptible to "hooks" based in racism or other hatreds and fears that what's good for the wealthy is automatically good for them, too.
The situation of Greece also demonstrate the consequences of concentrated wealth and how it leads to rule by oligopoly (BigMoney) and what it looks like: something Citizen's United (+Arizona Free Enterprise Club) appears to attempt imposing on America.
I don't understand Greece, nor any of the periphery's desire to stay in the Euro currency block. To me it's a bit like joining the mafia/Crips/Bloods, or perhaps even Isis, where by once you are in you can't leave: the punishment for apostasy is death or at least the removal of several fingers.
I hope I am wrong but it appears to me that the pain that the Oligopoly coldly intends to impose upon Greece has nothing to do with Greece. The target audience is Spain, Italy, and Portugal - just in case they're considering defaulting or asking for bailouts in the future.
Call this econo-terrorism. The Troika acting as a would be Isis of sort, seem intent to impose upon Greece the economic equivalent of a beheading for all the world, meaning the rest of the peripheral states to behold. If BigMoney has its way the wayward Greeks are bound for pain that only Grexit could limit.
However 80% of Greeks still prefer remaining in the Euro currency block. None of the periphery states have indicated a desire to leave. States like Poland, similar size in population to Spain, are still trying to get in.
Both the South (after Civil War) & the Dakota's (after WWI) experienced 80 year depressions. I think similar is in store for Greece.
I don't understand Greece, nor any of the periphery's desire to stay in the Euro currency block. To me it's a bit like joining the mafia/Crips/Bloods, or perhaps even Isis, where by once you are in you can't leave: the punishment for apostasy is death or at least the removal of several fingers.
I hope I am wrong but it appears to me that the pain that the Oligopoly coldly intends to impose upon Greece has nothing to do with Greece. The target audience is Spain, Italy, and Portugal - just in case they're considering defaulting or asking for bailouts in the future.
Call this econo-terrorism. The Troika acting as a would be Isis of sort, seem intent to impose upon Greece the economic equivalent of a beheading for all the world, meaning the rest of the peripheral states to behold. If BigMoney has its way the wayward Greeks are bound for pain that only Grexit could limit.
However 80% of Greeks still prefer remaining in the Euro currency block. None of the periphery states have indicated a desire to leave. States like Poland, similar size in population to Spain, are still trying to get in.
Both the South (after Civil War) & the Dakota's (after WWI) experienced 80 year depressions. I think similar is in store for Greece.
188
Greece's Gini Index was 34.7 in 2010. Ours was 41.1. What's that about "concentrated wealth"?
Euro-terroism? I think you mean German terrorism. The EU is a joke. German-owned manufacturing companies, when they build a new plant, write contracts excluding anyone but Germans. I know, I've been in the same room and read the contracts. They do this, not because of a demand for high precision or quality. Germans want to keep the cash flow in Germany. The economic clout Germany has in the EU is too powerful to ignore in Brussels.
The only logical solution is to the Greek crisis is to demand an intervention by the IMF or another agency outside of Europe.
Using the mafia analogy: don't call the state police ----- call the FBI.
The only logical solution is to the Greek crisis is to demand an intervention by the IMF or another agency outside of Europe.
Using the mafia analogy: don't call the state police ----- call the FBI.
I think that PK is right! There is no conspiracy, just a 'conservative dominated compromise' that has embedded critical flaws in the economic fabric of the EU.
This is not unusual. Fear of uncertainty and progress is a natural human reaction that insures that both dangerous moves, and simple truths progress in steps rather than disruptive outbursts.
Call it face saving, protection of entrenched interests, or whatever you will, but the cold, hard, fact is that when the pace of change exceeds our 'evolved ability' to accept change, a logjam builds to fend against progress.
That's why "freeing the slaves", and lowering the flag of war has taken 200 years here in the US, and it's also why the EU is having problems accepting the need to 'take on' the hard job of creating a suitable "economic union".
This is not unusual. Fear of uncertainty and progress is a natural human reaction that insures that both dangerous moves, and simple truths progress in steps rather than disruptive outbursts.
Call it face saving, protection of entrenched interests, or whatever you will, but the cold, hard, fact is that when the pace of change exceeds our 'evolved ability' to accept change, a logjam builds to fend against progress.
That's why "freeing the slaves", and lowering the flag of war has taken 200 years here in the US, and it's also why the EU is having problems accepting the need to 'take on' the hard job of creating a suitable "economic union".
Mr. Krugman gives austerity the blame for the shrinking of Greece's economy. He might think differently if he would visit Greece for a a few weeks and really look at the way Greeks think and behave. Greece has hardly anything in common with western nations like the UK, Canada or the USA. Clientelism, corruption, a lack of taking responsibilty and a staggering bureaucracy are the main factors in ceeating the problems. Do not be fooled by the look of a modern country; that was paid for bij Europe. Raul Castro congratulates the Greeks and they still don't have a re-think.
14
Spot on Ernst! Unfortunately rational voices like mine (see my comment) amount to not more than 5% in Greece and this percentage consists of people who believe in J.F.K's:"ask not what your country can do for you, ask what you can do for your country".
3
Your description of Greece, "Clientism, corruption, a lack of taking responsibility and staggering bureaucracy", all sound like the US. Just change the work Clientism to cronyism, and a lack of taking responsibility to externality and you got it. The claim of staggering bureaucracy is always the bête noir of the plutocrat class, sopped up by the rubes because they know no better.
5
We are not Greece we are all Greeks, trapped in an economic system that has little or no interest in our well being going into the future. We still believe gold and diamonds have real value.
America is rich because it has a healthy well educated population, a lot of land that can produce more than enough food and more than enough houses and vehicles to keep its economic engines running. America is not Greece because America is buffered from the rapaciousness of international finance because if America dies international finance dies.
When Americans don't pay their debts international financial institutions die when Greeks cant pay their debts Greece's 21st century economy dies.
It is the old story. If you owe the bank a million dollars and can't pay you are in trouble but if you owe the bank a few billion dollars and can't pay the bank is in trouble.
international finance cares nothing about Greeks and their hardships. What we are about to witness is what type of punishment international finance can inflict upon Greece to make sure the other Greeces out there don't vote for freedom and democracy. The great fear we have is not that Greece will fail but that Greece and its people will succeed in their new economy.
America is rich because it has a healthy well educated population, a lot of land that can produce more than enough food and more than enough houses and vehicles to keep its economic engines running. America is not Greece because America is buffered from the rapaciousness of international finance because if America dies international finance dies.
When Americans don't pay their debts international financial institutions die when Greeks cant pay their debts Greece's 21st century economy dies.
It is the old story. If you owe the bank a million dollars and can't pay you are in trouble but if you owe the bank a few billion dollars and can't pay the bank is in trouble.
international finance cares nothing about Greeks and their hardships. What we are about to witness is what type of punishment international finance can inflict upon Greece to make sure the other Greeces out there don't vote for freedom and democracy. The great fear we have is not that Greece will fail but that Greece and its people will succeed in their new economy.
454
"When Americans don't pay their debts international financial institutions die "
When did we ever pay down, let alone off, the huge debt from WWII?
When did we ever pay down, let alone off, the huge debt from WWII?
6
Ya know on second thought, Moe's comment is worse than I thought. Let's suppose the US never incurred foreign debts. Our trade balance was alway in our favor. So dollars would never leave the country.
But the dollar is the world's reserve currency. When Argentina want to buy energy from Brazil, Brazil wants to be paid in dollars. How can this happen if nobody has dollars? Only the US can print dollars and international financial institution depend on us sending them out of the country.
So Moe has it just backward.
But the dollar is the world's reserve currency. When Argentina want to buy energy from Brazil, Brazil wants to be paid in dollars. How can this happen if nobody has dollars? Only the US can print dollars and international financial institution depend on us sending them out of the country.
So Moe has it just backward.
1
Len,
I am sorry to completely agree with you but what does your disagreement with my comment have to do with my comment?
If America ever stops paying its debts the whole house of cards comes tumbling down. Other than the military capability of destroying the planet the ability to destroy the world's economy with a bang so there is no chance of evolving new economies gives me great concern. These are but two of the reasons I am grateful Obama is the President and until the GOP regains its sanity this agnostic will pray that they don't regain the White House.
I am sorry to completely agree with you but what does your disagreement with my comment have to do with my comment?
If America ever stops paying its debts the whole house of cards comes tumbling down. Other than the military capability of destroying the planet the ability to destroy the world's economy with a bang so there is no chance of evolving new economies gives me great concern. These are but two of the reasons I am grateful Obama is the President and until the GOP regains its sanity this agnostic will pray that they don't regain the White House.
4
The Laffer Curve which posits that lower tax rates on the wealthy will spur economic growth has also now been thoroughly repudiated, first in Kansas where massive tax cuts for the wealthiest led to equally massive deficits and next by Greece which failed to collect many taxes from the wealthy in the first place. Until Greece also addresses that issue, their economy will remain mired.
88
Indeed, Jack. We were one of those families who received the present of tax cuts by courtesy of Dubya, The Decider. These very cuts on the quite well off were supposed to create jobs.
After receiving that present, we did not change our spending habits one iota, didn't eat out more often than before, didn't purchase more 'stuff', and the list goes on and on. Ergo, we didn't even help to create one half-time job.
I know that the GOP doesn't like science - and the few that understand science must act ignorant to please their base and the Kochs - but they as well don't understand math and obviously have no common sense whatsoever.
After receiving that present, we did not change our spending habits one iota, didn't eat out more often than before, didn't purchase more 'stuff', and the list goes on and on. Ergo, we didn't even help to create one half-time job.
I know that the GOP doesn't like science - and the few that understand science must act ignorant to please their base and the Kochs - but they as well don't understand math and obviously have no common sense whatsoever.
2
You are right; the U.S. isn't Greece. But Kansas might be.
1
Add our unfunded liabilities to the structural debt and the US debt far out stripes that of Greece. That's the thing with economist. Its a game of three card monty with algebra. When the numbers don't fit your narrative, just change the numbers, move the goal post, "fix" the accounting. Viola, its recovery summer again.
2
Casey can you even define unfunded liabilities, let alone compute them? These are nonsense figures designed to confuse the ignorant.
17
Can you spell voila?
2
Len,
The administrators of Social Security and Medicare can and have. Every year they tell us all that the "Sunami" is coming and every once in a while the Congress does something minor to "kick the can down the road"!
Please note: that is a "Solution" only if you die prior to the "Sunami" arriving and don't give a hoot about anyone or anything else!
The administrators of Social Security and Medicare can and have. Every year they tell us all that the "Sunami" is coming and every once in a while the Congress does something minor to "kick the can down the road"!
Please note: that is a "Solution" only if you die prior to the "Sunami" arriving and don't give a hoot about anyone or anything else!
1
Wow! So the unsustainable (and corruption riddled) cradle-to-grave welfare state model had nothing to do with the problems in Greece? Nor did an unworkable tax collection system? Nor did 50% of the workforce being employed by the government? Of course not. It was just those nasty banks and work obsessed Germans who were so stupid as to actually expect a culturally leftist country like Greece to make a reasonable effort to repay its loans, right? Well, they won't be that stupid again.
9
If you throw in State and Local spending the US is at 40%. We have no problem with cops being pensioned out in their late forties or early fifties after 20 to 25 years. Teachers can bail in their early fifties if they do the 30 years stretch. Military members can retire after a 20 year hitch and get a pension. And a person who has a pension plan can retire in their fifties too, if they put enough away and are lucky enough to take the mkt correctly. Of course almost everyone of them must find a job to pay for health insurance and other costs rising way faster than their pension. My feeling as that these Greek pensioners, who individuals like yourself point a finger at, are doing the same. Scratching around, trying to make ends meet on their "government guaranteed pension". You failed the test. Go back and study some more.
11
None of those pensions are 98% of salary at 52. Maybe you failed the test.
3
I agree with Dr. Krugman, austerity makes the problem worse, not better.
But one subject left unmentioned is the corruption of the Greek government. Austerity is not the answer but what is the answer.
And I could guess that this corruption is one reason the Europeans are taking their moralistic approach. It won't help, but it does explain it.
On the other hand, the ECB seemed perfectly happy to bail out the irresponsible lenders. The German people are paying for that but don't seem to be complaining.
But one subject left unmentioned is the corruption of the Greek government. Austerity is not the answer but what is the answer.
And I could guess that this corruption is one reason the Europeans are taking their moralistic approach. It won't help, but it does explain it.
On the other hand, the ECB seemed perfectly happy to bail out the irresponsible lenders. The German people are paying for that but don't seem to be complaining.
15
GREECE IS A LESSON FOR ECONOMISTS IN THE US
Greece wasn't supposed to happen. Economic "growth" was supposed to repair balance sheets. But the US and Europe have fallen into a period of "secular stagnation." Even the healthy parts of the US and European economies have suffered from stagnation and falling living standards for those in the middle of the distribution.
This is a change from the 20th century and presents a crisis for economics. Economists "have a truly remarkable track record when it comes to economic forecasting: They've been wrong about everything, year after year, but refuse to learn from their mistakes."
The point they're missing was made by the economist Robert Gordon in an essay presented a few year back, "Is US economic growth over?"
But although Gordon described several headwinds, he did not mention the most important: Population growth.
During much of the 20th century, population growth in the developed countries was MORE THAN OFFSET by technological innovation.
Yet over the long term, population growth has a devastating impact on living standards.
Too many people in China and India drive down the cost of unskilled labor, but in a world with freely moving capital than means lower salaries for unskilled workers in the US and Europe.
To maintain living standards in the US and Europe, these regions must limit population growth, even shrink population in some cases, and TRAIN A SMALLER NUMBER OF CHILDREN FOR MORE HIGH VALUE-ADDED JOBS.
Greece wasn't supposed to happen. Economic "growth" was supposed to repair balance sheets. But the US and Europe have fallen into a period of "secular stagnation." Even the healthy parts of the US and European economies have suffered from stagnation and falling living standards for those in the middle of the distribution.
This is a change from the 20th century and presents a crisis for economics. Economists "have a truly remarkable track record when it comes to economic forecasting: They've been wrong about everything, year after year, but refuse to learn from their mistakes."
The point they're missing was made by the economist Robert Gordon in an essay presented a few year back, "Is US economic growth over?"
But although Gordon described several headwinds, he did not mention the most important: Population growth.
During much of the 20th century, population growth in the developed countries was MORE THAN OFFSET by technological innovation.
Yet over the long term, population growth has a devastating impact on living standards.
Too many people in China and India drive down the cost of unskilled labor, but in a world with freely moving capital than means lower salaries for unskilled workers in the US and Europe.
To maintain living standards in the US and Europe, these regions must limit population growth, even shrink population in some cases, and TRAIN A SMALLER NUMBER OF CHILDREN FOR MORE HIGH VALUE-ADDED JOBS.
8
Impact on immigration?
1
Republican economic policy is very difficult to understand. Republicans say they support businesses and job creation, yet they always favor high interest rates, which are bad for business and job creation. They favor cuts to Social Security and Medicare, yet increased spending on military weapons. They favor higher regressive taxes on the poor and middle class, such as sales and property taxes, but reduced income taxes on the rich.
It can all be explained by a parable told to me in the early 90s by an émigré from Russia. Two peasant farmers were neighbors. God said to one of them, I will give you anything you want, but I will give double to your neighbor. After thinking about it for a minute, the peasant said "Lord, take out one of my eyes".
It can all be explained by a parable told to me in the early 90s by an émigré from Russia. Two peasant farmers were neighbors. God said to one of them, I will give you anything you want, but I will give double to your neighbor. After thinking about it for a minute, the peasant said "Lord, take out one of my eyes".
294
The Russians also have another joke: Everything that Marx said about communism was a lie, unfortunately, everything he said about capitalism was true.
America is a lot like Greece already: the Rich (& corporations) skip out on paying taxes. Instead the Government borrows money, the benefits of that too going to the rich (the banks). We privatize the profits and socialize the cost.
America is a lot like Greece already: the Rich (& corporations) skip out on paying taxes. Instead the Government borrows money, the benefits of that too going to the rich (the banks). We privatize the profits and socialize the cost.
39
Now listen to an old greek parable:
Two extremely poor peasants were neighbors.God appeared and promised that will grant each one a sole favor. The first one asked for a goat and he got it. After thinking about it for a minute the other one said "Lord, I want my neighbor's goat DEAD!"
Two extremely poor peasants were neighbors.God appeared and promised that will grant each one a sole favor. The first one asked for a goat and he got it. After thinking about it for a minute the other one said "Lord, I want my neighbor's goat DEAD!"
14
I think it can all be explained by understanding that the Republicans are in the pockets of the richest people and corporations in our country. These high interest rate, low tax, pro-military weapon spending policies are what THEY are paying for.
1
Krugman's column also explains why Grexit is the only viable long-term solution for Greece.
17
If we have learned anything from Prof. Krugman it's that bad
ideas never die. Austerity does not work.
Greece is the word.
ideas never die. Austerity does not work.
Greece is the word.
246
bill - Kansas is also the word, as Dr. K. has often pointed out we don't have to look to far away places for failed experiments; the GOP'ers and Sam Brownback's failed austerity ' experiment ' (Brownback's word) have manifestly savaged a Midwest state's economy:
http://krugman.blogs.nytimes.com/2015/05/31/this-age-of-derp-kansas-edit...
complete with a de-population as people exit Kansas for places that work.
Greece is a case of international banking derpitude and chanting of Marklar, Marklar, Marklar (see South Park episode) by austerians drunk on their cool-aid.
Kansas is the case of home-grown GOP'er Marklar, Marklar, Marklar derpitude.
http://krugman.blogs.nytimes.com/2015/05/31/this-age-of-derp-kansas-edit...
complete with a de-population as people exit Kansas for places that work.
Greece is a case of international banking derpitude and chanting of Marklar, Marklar, Marklar (see South Park episode) by austerians drunk on their cool-aid.
Kansas is the case of home-grown GOP'er Marklar, Marklar, Marklar derpitude.
16
and Kansas
3
So why is "Rich" Europe so reluctant to put together some kind of Marshall Plan for "Poor" Europe? The original Marshall Plan preserved stabilty and Democracy in Europe with little regard for how the countries became so impoverished - aiding both our defeated enemies and our allies.
Surely aiding the PIIGS for overborrowing - even if it was somewhat profligate - is less galling than forgiving borrowing used to support a war machine used against you!
lff
Surely aiding the PIIGS for overborrowing - even if it was somewhat profligate - is less galling than forgiving borrowing used to support a war machine used against you!
lff
6
To answer your question: "why is "Rich" Europe so reluctant to put together some kind of Marshall Plan for "Poor" Europe?"
Because, to use your own words:
"The original Marshall Plan preserved stabilty and Democracy in Europe with little regard for how the countries became so impoverished"
Because, to use your own words:
"The original Marshall Plan preserved stabilty and Democracy in Europe with little regard for how the countries became so impoverished"
6
The acceptance of austerity against the will of the Greek people is the rejection of democracy. Sure, countries with elections can vote for and elect their leaders, but policy is in the hands of banks and international actors. I think that Greece should just dissolve its government and refuse to get another one. Let German banks run Greece if they are going to set its policies. Perhaps Plato was right and democracy is a bad idea. When Conservatives claimed the Euro would destroy state sovereignty they were right. In matters of environmental policy the EU has been excellent. Only a trans national organization is immune from the lure of money now from destroying the environment for profit. On economic policy the Euro has been a disaster. Greece should really hand over all politcal power to the EU technocrats. It would just be a recognition of the reality of power in today's world.
84
much as i sympathize with the Greeks, it is not their right to vote in other peoples money. if you live in todays global finance world, you have to live by its rules. you have the option to opt out if you want, however, that would be disastrous. We all harken back to a simpler time, but reality says we live in todays world, for better or worse.
1
Do you have any idea why Greece is in this situation? Anything? It's because their population because world class in 1) not paying any taxes 2) scamming the pension system. Here are 2 good examples. Almost all of the doctors in Greece claim an income of $12,000 a year so they don't have to pay any income taxes. In one area of Greece 80% of the population is claiming disability of blindness so they can get benefits. 45% of their taxes goes uncollected.
5
Democracy isn't a get out of debt free card. You take out loans, you agree to pay back according to terms that you've again agreed to. Greece wasn't forced into anything.
4
There are villains in the Greek drama and they are corrupt bankers and politicians. That is the lesson Americans need to learn. Do you allow yourself and your country to become hostages to the worst kind of people by participating in this economic system? How many times are we going to have to learn this lesson? Rampant financial speculation destroys economies and the lives of innocent people. The financiers, economists, and politicians have rigged the economic system to loot and pillage. The rest of us suffer when our savings evaporates in market crashes. We lose our homes to predatory lenders and illegal foreclosures. All because of debt. Bankers get bailed out. The poor and elderly are destroyed.
Going into debt to buy a car or a house or a college education is always viewed as a good thing. Except by doing so you hand money to predators.
Debt allows a government to fund its activities and invest in important projects. Projects like, you know, war and spying... death and destruction.
Krugman misses the point because he doesn't see the inhabitants of the war machine or the banking system for what they are... predators. They are all quite nice until you make them angry. Then they break your legs.
Going into debt to buy a car or a house or a college education is always viewed as a good thing. Except by doing so you hand money to predators.
Debt allows a government to fund its activities and invest in important projects. Projects like, you know, war and spying... death and destruction.
Krugman misses the point because he doesn't see the inhabitants of the war machine or the banking system for what they are... predators. They are all quite nice until you make them angry. Then they break your legs.
65
I think he does, but he is too polite to bluntly say what you did, or he knows it will be edited out. You made the point and are near the top of the comments list.
5
One way that those of us who are progressives dilute the power of the truth is by allowing our emotion to push us into overstating a good argument, Neildsmith. It makes it easier for the bad guys to dismiss and deflect the argument.
Your writing is impressive, Neildsmith.
Your writing is impressive, Neildsmith.
Prof.....we know your many postings on Greece are really anti austerity lessons for the Repubs, as are most of your points on the EU nations, even the more successful ones.
Greece is an extreme situation with many variables. It’s more useful to compare us to post WW2 US, in more than just a sentence. Then, govt spending wasn’t vilified, and even Gop Ike spent on the Fed Highway project, etc.
We had much higher top tax rates on corporations, and the rich, while business expanded, and consumer demand was high. Union bargaining was accepted as normal, not vilified like today.
Mainly, American jobs were increasing here. No offshoring of millions of jobs and closing of many thousands of factories and businesses.
Salaries were going up, not stagnating. Apprenticeships and low tuition was common. Employee benefits were expanding for h/c and pensions. Thus the retired could live decently without offspring support.
To counter the Gop, Krugman could detail all this, to show the contrast between a prosperous, more secure middle class USA, vs now------downward mobility, insecurity, a generation of grads in high college debt, small union membership, a future retirement crisis, and masses of jobs shipped out of the country.
Other advanced countries off shore fewer jobs, but if they do, they spend on retraining and support of employees. This prevents downward living standards and keeps up consumer demand. That’s the positive lesson we need, closer to home than Greece.
Greece is an extreme situation with many variables. It’s more useful to compare us to post WW2 US, in more than just a sentence. Then, govt spending wasn’t vilified, and even Gop Ike spent on the Fed Highway project, etc.
We had much higher top tax rates on corporations, and the rich, while business expanded, and consumer demand was high. Union bargaining was accepted as normal, not vilified like today.
Mainly, American jobs were increasing here. No offshoring of millions of jobs and closing of many thousands of factories and businesses.
Salaries were going up, not stagnating. Apprenticeships and low tuition was common. Employee benefits were expanding for h/c and pensions. Thus the retired could live decently without offspring support.
To counter the Gop, Krugman could detail all this, to show the contrast between a prosperous, more secure middle class USA, vs now------downward mobility, insecurity, a generation of grads in high college debt, small union membership, a future retirement crisis, and masses of jobs shipped out of the country.
Other advanced countries off shore fewer jobs, but if they do, they spend on retraining and support of employees. This prevents downward living standards and keeps up consumer demand. That’s the positive lesson we need, closer to home than Greece.
121
Post-WWII, we had the only practical industrial base in the world. We were fat and happy while other nations rebuilt. Since the mid-1960s, facing tough international competition, we've withered. Technology has been global since the time of Galileo, if not before. Whining about anti-Union predatory bankers may make us feel better, but it addresses symptoms and not the underlying disease: non-competitive US factors of production.
2
JPE repeats a common myth, the Europe was rubble myth. Look at the graph on Page 60 of Piketty's book. It shows the percent of the world's output from the various regions, America, Europe, Africa, and Asia, from 1700 - 2012. During the the post WWII period Europe's percentage was constant at about 38%. America's went down from slightly more than Europe's to slightly less.
You could also look at our balance of trade which fluctuated a bit around zero. We did not get prosperity off of others.
English and French industries were largely untouched during the war. Of course it would have taken a miracle for Germany to quickly recover, but if you look up :German Miracle" or "Wirtschaftswunder", you can see that was exactly what happened.
You could also look at our balance of trade which fluctuated a bit around zero. We did not get prosperity off of others.
English and French industries were largely untouched during the war. Of course it would have taken a miracle for Germany to quickly recover, but if you look up :German Miracle" or "Wirtschaftswunder", you can see that was exactly what happened.
21
The right in this country still denies reality. The US is the next Greece despite a slow but steady recovery and lower deficit. Just as the CRA caused the crash in 2008 even though they cannot explain the role of the non regulated banks in that arrangement. The climate is no warming even though native villages in Alaska are having to be relocated due to rising sea levels. Deny it all to cover more tax cuts for $Billionaires.
13
The cure for our underperforming economy (currently operating at least a trillion dollars per year below potential) is pretty obvious. What the economy needs is for income distribution to be shifted from the misers who refuse to support it (aka the rich) to those who spend what they have -- if they have anything to spend (aka, the poor). This is called appropriate income distribution. There's an easy way to accomplish this: Tax the Rich Now. What's surprising is that this will be good for everyone -- the rich as well as the poor. Though of course the relative position of the rich might come down a few notches.
50
Actually, it's more like the famed 3 legged stool that holds together ACA. Like insurance cannot be affordable unless the coverage is worth buying and everyone must buy in, the relationship of wages to capital must be taken into account. It's not merely that wages are skimmed off and paid to the wealthy, well it's true but that's not the whole story. Capital holders can choose whether to invest in non-labor means of revenue or employ labor. The only choice is which brings more revenue. So the problem is more how capital is distributed in a world requiring less labor but nonethe less a labor that is building capital. Wages are only a small part of the bigger picture. The solution unfortunately is the more radical one of needing to restructure who benefits from increased capital. Currently the system is existing holders of capital to the entire pool who created that capital so that they will receive the fruits of their contribution. There are few to no measures to include the vast majority of those who create capital to receive any return. This is not communism at all. It's seriously capital based but it as a more sober and open eyed understanding of how capital works, or does not in our economy.
Perhaps a start would be to seriously tax loose cash all too tempting to speculators who create bubbles. They didn't earn or create that capital in the first place until we complete a more extensive reworking of the distribution of capital amongst those who created it.
Perhaps a start would be to seriously tax loose cash all too tempting to speculators who create bubbles. They didn't earn or create that capital in the first place until we complete a more extensive reworking of the distribution of capital amongst those who created it.
7
Michael Epton: Your economic model has been disproven time and time again. The cure for our underperforming economy is to reduce spending, remember we do not have a revenue problem we have a spending problem, and to force other nations to play by the same trade rules as the US. Capital follows the path of least resistance, do you really believe the "rich" will not shelter their funds from greedy government bureaucrats who wish to dole out taxpayer funds to their friends and campaign contributors.
2
I would be interested to know the nature, and security path of lending in Greece.
Who were, and are, the actual lenders to Greece?
What were, and are, the actual purposes of these loans?
When did the fate of these loans become a matter of national interest in, for instance, Germany?
Were irresponsible loans made in the knowledge that failures would be indemnified by a State, and thus more casually made than if the risk had been purely held by the agents of these loans?
Who were, and are, the actual lenders to Greece?
What were, and are, the actual purposes of these loans?
When did the fate of these loans become a matter of national interest in, for instance, Germany?
Were irresponsible loans made in the knowledge that failures would be indemnified by a State, and thus more casually made than if the risk had been purely held by the agents of these loans?
14
Sorry, but the first requirement for learning is a willingness to learn, and the neo-GOP is absolutely AGAINST learning new things. It's gone beyond a pathological inability to acknowledge their own mistakes, but into a sort of insane region of projection, where whatever they accuse their opponents of is more likely to be their OWN characteristic.
The only solution I can imagine is to show them the horrific future they are creating--but they wouldn't believe it if they saw it.
One more point bears repeating: Today's neo-GOP is NOT the Republican Party of Abraham Lincoln, which was progressive and in FAVOR of many major social changes. It is NOT the GOP of rational forward-looking leaders like Teddy Roosevelt or true conservatives like Dwight Eisenhower. It certainly is controlled by big money and ideological extremists, but Abe, Teddy, and Ike could NOT possibly recognize whatever it is that has hijacked their old brand.
The only solution I can imagine is to show them the horrific future they are creating--but they wouldn't believe it if they saw it.
One more point bears repeating: Today's neo-GOP is NOT the Republican Party of Abraham Lincoln, which was progressive and in FAVOR of many major social changes. It is NOT the GOP of rational forward-looking leaders like Teddy Roosevelt or true conservatives like Dwight Eisenhower. It certainly is controlled by big money and ideological extremists, but Abe, Teddy, and Ike could NOT possibly recognize whatever it is that has hijacked their old brand.
509
They're saving anything they have learned until they are back in power. Until then it's anything goes.
2
The GOPers dont need to learn anything ... they just need to follow orders, either from the plutocrats or the likes of Grover Norquist - the ideal president: "Pick a Republican with enough working digits to handle a pen to become president of the United States" so as to just sign legislation that his handed to him/her. Legislation crafted of course by ALEC, and passed by a compliant Congress.
9
The GOP succumbed to a hostile take-over by the libertarians. The Kochs and their cabal bought it with their Astro-turf Tea Party. They are choosing its candidates for elected office, and they are crafting its legislation through ALEC. They manage to write its bills with an army of lobbyists in Congress. (One is supposed to say the lobbyists are "in Washington", but we all know they run both chambers of Congress. So much for democracy!) All that is left of the former GOP is the name.
8
Debt increase of 6%????? Greece´s debt rose from 230 billion Euro in 2007 to 320 billion now, with already 60 billion forgiven in between. That amounts to a 68% total increase!!!! And does Mr. Krugman really think that trrowing in another 150 billion would have "saved" Greece by magically turning it into a functioning ecomomy? Any more billions would have disappeared like the rest without deep-going and true organisational reform (like finally taxing the only functioning economic sectors: shipping and tourism or actually following the data to untaxed fortunes hidden abroad), which Greece kept dodging constantly.
6
Krugman's 6% is based on 2009, not 2007.
What is the number from 2009?
What is the number from 2009?
3
Please don't confuse us with facts!
4
I am convinced that full employment is more important than any other single factor. Government spending on labor intense projects like infrastructure has a lower net effect than private spending. It reduces unemployment and other welfare benefits, generates tax revenues and consumer spending. This above the fact that it lowers the anxiety rate among the population, another X factor that few economists, pundits, politicians and other mortals master.
18
Let's say I am a reforming drug addict. I am off my addiction but I need 10 years to make amends for lost opportunities.
What should my family and friends do ? Should they ask for their money back and starve me to death or should they say that I will have to pay for my sins using the sustained recovery that I make ?
Every loan has a risk. But once it is made, then it is in the interest of the lender to make it work, no less than it is of the borrower to save his credit-worthiness.
The Repubs have no place to hide. Let's not worry about them until the Democs show signs of implosion.
What should my family and friends do ? Should they ask for their money back and starve me to death or should they say that I will have to pay for my sins using the sustained recovery that I make ?
Every loan has a risk. But once it is made, then it is in the interest of the lender to make it work, no less than it is of the borrower to save his credit-worthiness.
The Repubs have no place to hide. Let's not worry about them until the Democs show signs of implosion.
6
Greece fell off the wagond repeatedly, and Mom kept giving her money.
Should mom keep enabling the Daughter, condeming her children and siblings to a life of misery, or let daughter swim on her own for once?
Why should Spain, Portugal, Italy & Ireland not now borrow to give their citizens pensions at 50?
What makes you think once 50% of a country can vote itself money, it won't?
Should mom keep enabling the Daughter, condeming her children and siblings to a life of misery, or let daughter swim on her own for once?
Why should Spain, Portugal, Italy & Ireland not now borrow to give their citizens pensions at 50?
What makes you think once 50% of a country can vote itself money, it won't?
3
I accept your logic. And no one says that democracies vote sagaciously. They are self serving just like everyone else, whatever that motivation is. Everyone except the exceptional know there's no free ride to be had anywhere in the world.
The logical progression from the present situation is that Greece will not get the easy ride the voters wanted. Whatever their chosen path, they will have at least 10 years of very hard economic times. But they have to grow out of their dire situation on their own. It has to be a path that offers a hope of better times based on their own strength.
The question will be whether their future governments will cheat their voters or their lenders ( if not their investors ) and take the easy path out.
And we all know what governments are like : they peddle the addictions that the electorate will fall for. Unless their voters choose to forgo their addiction, they can vote for all the addiction they want, no one will be sympathetic.
Even an addict needs to show his reformation to have our sympathy. No one likes junkies.
The logical progression from the present situation is that Greece will not get the easy ride the voters wanted. Whatever their chosen path, they will have at least 10 years of very hard economic times. But they have to grow out of their dire situation on their own. It has to be a path that offers a hope of better times based on their own strength.
The question will be whether their future governments will cheat their voters or their lenders ( if not their investors ) and take the easy path out.
And we all know what governments are like : they peddle the addictions that the electorate will fall for. Unless their voters choose to forgo their addiction, they can vote for all the addiction they want, no one will be sympathetic.
Even an addict needs to show his reformation to have our sympathy. No one likes junkies.
1
I don't know, is there a nice way to say this ? : Are we in a war of the stupid against the frightened ?
Why is it that the frightened are so full of doubt ? Why is it that the stupid are so full of certainty ? And why do the stupid outnumber the frightened ? Or am I wrong about that ?
If there has been any definitive assessment of the exact flaw in the regression since 2009, it has been in this column. I saw a HARDTalk interview on the BBC yesterday in which the EU Commission member said that it was "unfortunate" that the last round of debt relief was wasted.
The EU has only one hand to show now : Will it help or will it hinder Greece's future ?
Why is it that the frightened are so full of doubt ? Why is it that the stupid are so full of certainty ? And why do the stupid outnumber the frightened ? Or am I wrong about that ?
If there has been any definitive assessment of the exact flaw in the regression since 2009, it has been in this column. I saw a HARDTalk interview on the BBC yesterday in which the EU Commission member said that it was "unfortunate" that the last round of debt relief was wasted.
The EU has only one hand to show now : Will it help or will it hinder Greece's future ?
8
It will hinder, and hope that Spain, Italy and Portugal are watching.
10
The EU is key, of course, but it is not alone. The IMF and the World bank have skin in the game.
In Ireland, that was made plain again recently when the ex-Taoiseach (prime minister) gave evidence before a banking inquiry. (He'd not only been Taoiseach at the time of the crash, he'd been minister for finance for ten years before that.) He claims his government was forced into an austerity regime by the Troika. One particularly vocal about the need for austerity was Timothy Geithner!
In Ireland, that was made plain again recently when the ex-Taoiseach (prime minister) gave evidence before a banking inquiry. (He'd not only been Taoiseach at the time of the crash, he'd been minister for finance for ten years before that.) He claims his government was forced into an austerity regime by the Troika. One particularly vocal about the need for austerity was Timothy Geithner!
4
And this is what the fear is. That the creditors just want their money back and not care what happens to Greece.
Let someone tell it like it is. Let Greece not be given an easy exit to its obligations. But let its creditors not throttle its future because of the crimes of those who cheated the books for so many years.
Let someone tell it like it is. Let Greece not be given an easy exit to its obligations. But let its creditors not throttle its future because of the crimes of those who cheated the books for so many years.
Euro interest rates are now zero, as low as in any monetary stimulus Prof. Krugman cites. The problem is that stimulating consumption, or building white-elephant government infrastructure like olympic stadiums or a railway system that has more employees than customers, doesn't increase long-term productivity enough even to service the interest on the debt once interest rates return to normal. Only private-sector investment in export-competitive industry, and government construction at lowest possible cost of basic transport and power infrastructure can possibly pay off the costs of stimulus over the long haul. But Greek regulations make private-sector investment improbable, and Greece, like the US, has ridiculous government procurement practices. Hence, austerity as the only alternative. People won't lend more money to see it consumed for no productive purpose.
4
I would go for improving schools as a long term growth project.
But after that, hard to see what Greece is able to compete with in the private sector other than tourism.
But after that, hard to see what Greece is able to compete with in the private sector other than tourism.
3
The problem with increasing the money supply in the US is that it's implemented as just giving free monies to banks and not doing anything for the average consumer, who were stuck in student loans or bad mortgages. This in turn, caused a political shift and was probably responsible for putting the GOP in charge in the House and Senate.
Example: A bank needs money. Solution: Let them queue up to the Fed Discount Window and get money at essentially 0% interest, all the while everyone else with bad mortgages can't.
As for moving forward, the GOP won't learn anything from Greece, but will only double down on bad policy. It's not a question of 'if' we have another '08 here, but only a question of 'when'.
Example: A bank needs money. Solution: Let them queue up to the Fed Discount Window and get money at essentially 0% interest, all the while everyone else with bad mortgages can't.
As for moving forward, the GOP won't learn anything from Greece, but will only double down on bad policy. It's not a question of 'if' we have another '08 here, but only a question of 'when'.
9
But it doesn't have to be implemented that way. Careful deficit spending would get jobs and money to consumers.
12
Canada prospered because it had vast natural resources to export. The British economy did not fail under Thatcher, because of North Sea oil.
The main problem for Greece is chronic accumulating debt, un- and underemployment, and lack of development. Debt relief and monetary, currency, and trade policy are meaningless and short term when looked at in isolation. Policy is second rate unless there is a holistic policy for national and regional development.
In the last generation, the nations that prospered and ate our lunch, E. Asia and N. Europe, were those which had vigorous development and industrial policies and which took advantage of trade policy.
The great villain of our time is the neoliberal, laissez-faire agenda in politics and economics. Laissez-faire by itself is unstable. It decays into exploitation and domination by oligarchs and war lords. What we need is partnership between 1, policy, and 2, entrepreneurship and a free market.
Sports succeed due to the partnership between policy (which defines the game, rules, and refereeing) and real competition. Many technologies and areas of development followed from government policy and investment. Congress created the interstate highway system. Al Gore was, in fact, the lead Senator responsible for creating the internet. GOP claims that he said he ‘invented’ it were always dishonest. Competent gov’t has always helped pick winners. Prosperous nations were those that managed their affairs well. They were not laissez-faire.
The main problem for Greece is chronic accumulating debt, un- and underemployment, and lack of development. Debt relief and monetary, currency, and trade policy are meaningless and short term when looked at in isolation. Policy is second rate unless there is a holistic policy for national and regional development.
In the last generation, the nations that prospered and ate our lunch, E. Asia and N. Europe, were those which had vigorous development and industrial policies and which took advantage of trade policy.
The great villain of our time is the neoliberal, laissez-faire agenda in politics and economics. Laissez-faire by itself is unstable. It decays into exploitation and domination by oligarchs and war lords. What we need is partnership between 1, policy, and 2, entrepreneurship and a free market.
Sports succeed due to the partnership between policy (which defines the game, rules, and refereeing) and real competition. Many technologies and areas of development followed from government policy and investment. Congress created the interstate highway system. Al Gore was, in fact, the lead Senator responsible for creating the internet. GOP claims that he said he ‘invented’ it were always dishonest. Competent gov’t has always helped pick winners. Prosperous nations were those that managed their affairs well. They were not laissez-faire.
2
A nation in chronic debt and underdevelopment needs vigorous industrial and development policy, currency devaluation (a form of reneging), debt restructuring, and a limited tariff allowed only to nations in chronic trade debt.
The enemy of development is financialization. It’s an excess of laissez-faire. It’s the neoliberal agenda.
It is the large corporations and banks, who seek to financialize and exploit, that fund right wing think tanks to promote the laissez-faire agenda. Financialize: convert legitimate assets and investments into financial assets that can be withdrawn and concentrated in the hands of a few. E.g.:
- Leveraged ‘buy’-outs, or debt-outs.
- Germany invests in appropriate student and worker education. OJT allowed us to ramp up industry for WWII. Then, under the thumb of Wall Street, U.S. corporations wiped out OJT and converted technical education into student debt-with-no-jobs.
- GOP tax cuts for the rich produced the generation of U.S. students with over $1 trillion in school debt. The GOP didn’t like the young generation in the 60s and 70s challenging policy, and thus found a way to promote apathy and help silence them.
- Free trade was originally about efficient production. But pollution, sweatshops, low wages, and worker suicide in China are about political system choice, not efficient production. Shifting assets and production to such nations allows Wall Street to profit. Trade efficiency is thus a false argument. Warning: science follows technology
The enemy of development is financialization. It’s an excess of laissez-faire. It’s the neoliberal agenda.
It is the large corporations and banks, who seek to financialize and exploit, that fund right wing think tanks to promote the laissez-faire agenda. Financialize: convert legitimate assets and investments into financial assets that can be withdrawn and concentrated in the hands of a few. E.g.:
- Leveraged ‘buy’-outs, or debt-outs.
- Germany invests in appropriate student and worker education. OJT allowed us to ramp up industry for WWII. Then, under the thumb of Wall Street, U.S. corporations wiped out OJT and converted technical education into student debt-with-no-jobs.
- GOP tax cuts for the rich produced the generation of U.S. students with over $1 trillion in school debt. The GOP didn’t like the young generation in the 60s and 70s challenging policy, and thus found a way to promote apathy and help silence them.
- Free trade was originally about efficient production. But pollution, sweatshops, low wages, and worker suicide in China are about political system choice, not efficient production. Shifting assets and production to such nations allows Wall Street to profit. Trade efficiency is thus a false argument. Warning: science follows technology
1
Beware a Repub bearing gift,
Austerity in guise of Thrift,
Always sings the same song
One consistently wrong
So give these false prophets short shrift!
Austerity in guise of Thrift,
Always sings the same song
One consistently wrong
So give these false prophets short shrift!
274
Larry,
Let us just be fair!
"Free" from the Government is not there.
We can print and spend.
While hoping it never ends.
As long as you're in it for just you.
It's something you can do.
Even if you're not here when it is due.
That others will be is true!
Let us just be fair!
"Free" from the Government is not there.
We can print and spend.
While hoping it never ends.
As long as you're in it for just you.
It's something you can do.
Even if you're not here when it is due.
That others will be is true!
2
It would be tough for a couple of years in Greece rather than the slow bloodletting now. But if you can prepare in advance with a parallel currency you stand a chance to avoid the chaos of using scrip, cigarettes, or Ouzo for bartering.