Krugman Destroyed In Debate

[briansd1]

[quote=Allan from Fallbrook] Brian: The problem is this: NEITHER SOLUTION WORKS. Inherently missing from the Krugman “solution” is this overlooked but oh so salient fact: The Eurozone is built on a false premise and that premise has been exposed.[/quote]

Actually, solution #1 (doing nothing and letting internal deflation run its course) is the right solution if one were to give up on the Euro.

Yes, there are problems with the Euro. Krugman proposed fixing those problems: fiscal union, more power for the ECB and transfer payments from the richer countries to the poorer ones.

Again, Krugman has been right all along. Everything that Krugman suggested, the Europeans are doing but much slower than he suggested.

The markets (speculators) bet against Spain and Italy and expanded the crisis because European leaders dilly dallied and ECB didn’t act forcefully before.

Again, show me how Krugman was “destroyed.” And please show me his detractors’ solutions. Oh, wait, they don’t have any… They just criticize.

[Allan from Fallbrook]

[quote=briansd1]
Again, show me how Krugman was “destroyed.” And please show me his detractors’ solutions. Oh, wait, they don’t have any… They just criticize.[/quote]

Um, Brian, I NEVER said that Krugman got destroyed. I simply said that his solutions, such as they were, were academic in nature and completely failed to account for the realities on the ground in Europe. And, it is those realities that have reared their ugly heads. The Euro idea was bad from the jump, as has now been painfully exposed.

I never took issue with Krugman’s knowledge on subjects he was versed in. I did, however, take issue with Krugman where he was simply pushing a political agenda or where he refused to admit it was humanly possible he was wrong. He’s walked himself into numerous sticky situations wherein he’s attempted to assert he’s both incapable of error or may have his facts wrong. Not exactly the sign of a great thinker.

As to your comment about him “smacking down” his opponents: He’s gotten roughed up nearly as much. He’s also seen quite a bit of his credibility lost in those rather pointless exchanges, too. Which is sad, because I was once a big fan of his work, but have watched it increasingly tainted by shrill, partisan attacks.

[livinincali]

[quote=Allan from Fallbrook]
As to your comment about him “smacking down” his opponents: He’s gotten roughed up nearly as much. He’s also seen quite a bit of his credibility lost in those rather pointless exchanges, too. Which is sad, because I was once a big fan of his work, but have watched it increasingly tainted by shrill, partisan attacks.[/quote]

The problem with economics in a academic setting there’s no possibility of setting up an experiment to prove that a economic model is correct. Krugman can always say he is right because he can always say if you had done it earlier, or bigger, or also implemented this other thing it would have worked.

If you’re going to make that argument than I can just as well make the argument about cutting spending, balancing budgets, restoring individual freedoms would work. Well you didn’t do what I said to do and therefore the problems you’re experiencing now wouldn’t have happened if you did it my way.

Obviously cutting spending and returning to balanced budgets would be painful if we did it now, but it’s always going to be painful and if we keep increasing debt faster than GDP it just becomes more and more painful.

Wouldn’t have it been a lot easy to balance the budget back in 2001 when you could cut spending by 10% and raise taxes a bit. Wouldn’t have it been easier to balance the budget in 2008 when you could cut spending by 20% and raise taxes a bit more. Now we’re looking at cutting 40% of the government budget and no one can fathom that so we have spend more and more and more, until we meet the judgement day when the market realizes you aren’t going to pay us back we won’t loan you anymore. When that day occurs, that dreaded cut in spending that you just needed a little more time to grow your way out of hits you right in the face. You’re bankrupt and you have no plan, good luck. I hope the leader of the military coup is a nice guy.

[briansd1]

linvinincali, you can argue argue that we should cut spending during the good years all you want and you would agree with Keynes.

The fact remains that Bush cut taxes and increased spending.

As SK pointed out earlier, cutting spending will not stimulate the economy. It won’t work.

You can argue that short term pain is necessary for long term prosperity But nobody is proposing pain. Everyone wants to stimulate the economy.

The people on the right are proposing painful measures as if those measures would stimulate. They won’t. That’s hipocrisy right there.

[briansd1]

[quote=Allan from Fallbrook]
As to your comment about him “smacking down” his opponents: He’s gotten roughed up nearly as much. He’s also seen quite a bit of his credibility lost in those rather pointless exchanges, too.[/quote]

Pointless on the part of whom?

Refer to the video where Krugman was “destroyed.” He came to Europe to offer his expertise and to help. He’s greeted with a long winded rant. Who has the patience for that?

Krugman offered good solutions that the Europeans end up belatedly implementing. Pointless dilly dallying while people suffer.

[Allan from Fallbrook]

[quote=briansd1]linvinincali, you can argue argue that we should cut spending during the good years all you want and you would agree with Keynes.

The fact remains that Bush cut taxes and increased spending.

As SK pointed out earlier, cutting spending will not stimulate the economy. It won’t work.

You can argue that short term pain is necessary for long term prosperity But nobody is proposing pain. Everyone wants to stimulate the economy.

The people on the right are proposing painful measures as if those measures would stimulate. They won’t. That’s hipocrisy right there.[/quote]

Brian: Here we go again. As to the hipocrisy (sic) on the right, you’re leaving large sections of the argument out to bolster your (incorrect) point. Absent from your discussion re: spending cuts is the painful reality that, if we fail to cut spending, debt service and entitlement outlays will essentially consume the entire US budget and sooner rather than later.

This is from CBO, so there is no accusation of partisanship: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/102xx/doc10297/06-25-ltbo.pdf

Also, the stimulus wasn’t so stimulative and largely because only 1/3 of the stimulus dollars were actually tasked for that specific purpose (the remaining 2/3 were comprised of tax cuts, emergency unemployment benefits and non-stimulus items like Pell Grants, S&T research grants, etc. Source is WashPost, which is centrist/left: http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html) Of the 1/3 tasked, a good chunk has been either wasted (like when states use ARRA to replace state funding on highway projects and don’t put it to active use) or has yet to be deployed (the not-so-shovel-ready projects that the US public works system still has to digest and process.)

You can attempt to argue that more stimulus is needed (a la Krugman’s academic reasoning), but the reality is that the gubment cannot, due to systemic and bureaucratic issues, deploy the funds fast enough to achieve their objective. Again, there is a HUGE difference between THEORY and PRACTICAL APPLICATION.

As far as the obstructionist Right: I don’t deny there is validity to this point, but I’d ask to you recall: “Recovery Summer”, the “pivot to jobs”, the “jobs task force” and all of the other Obama Administration “programs” that were specifically designed to improve the jobs picture in the US.

I’m sure I don’t need to ask how all that has worked out…

[Anonymous]

[quote=Allan from Fallbrook]So, Brian, what is the solution? Or, more correctly, what are the solutions? [/quote]

Yup, that’s the only question that matters.

And it’s easy for many to lose the fact that Allan never offers any.

He has nothing but criticism. Eloquent criticism, but nothing more than criticism. Lots of rich vocabulary, and after-the-fact critiques of (selective) politicians. But never any solutions.

What is the solution Allan? Let’s hear your plan. For anything.

Immigration, the economy, pensions, the Middle East. Do you support any specific plan, person, or approach?

Or does everybody just suck? (Obama mostly, but everyone else also.)

Got a plan for the economy, for Europe? (you know it’s not actully Krugman’s job to fix Europe, btw.)

Hell, we don’t even know who you endorse for President, or any political office, or who you’ve voted for in the past (yeah, we know you haven’t “voted GOP since 1996.”)

Always the Monday morning quarterback. Or the armchair quarterback. But never in the game. Never actually offering specifics.

Always talking about someone else’s words/deed/ideas.

So folks, keep this in mind when reading Allan’s posts: He never offers his own ideas. Never takes that chance. Never sticks his neck out.

Lots of critique of Brian, of Obama, of Krugman or whomever. But never provides any of his own ideas. Nothing that can be challenged.

Always standing on the sidelines and calling out names. Hiding behind the fancy vocabulary.

Which candidates does he support?

Will he ever name any names? Nah. Cuz then someone may actually critique his choices.

[scaredyclassic]

wait. that’s my strategy. I just liek to make goofy remarks and not take definite positions. taking definite positions generally ends in me lookig foolish. My position is it’s ill advised to take definite positions.

[livinincali]

[quote=briansd1]linvinincali, you can argue argue that we should cut spending during the good years all you want and you would agree with Keynes.

The fact remains that Bush cut taxes and increased spending.

As SK pointed out earlier, cutting spending will not stimulate the economy. It won’t work.

You can argue that short term pain is necessary for long term prosperity But nobody is proposing pain. Everyone wants to stimulate the economy.

The people on the right are proposing painful measures as if those measures would stimulate. They won’t. That’s hipocrisy right there.[/quote]

I think we should cut spending now. I don’t think we should wait until things get better. I’m not going to make an argument that cutting spending in going to be stimulative in the short term because it certainly won’t. Most likely cutting spending now will result in a short deep depression.

My argument is that although we’ll have to deal with that relatively short deep depression it is good for the long term. Clearing the bad debt, letting those that made bad debts fail, and prosecuting those that committed fraud will cure the economy for the long term. Rather than living through Japan’s up and down sideways economy that constantly needs stimulus and bailouts we’ll be back to an economy that can flourish because it isn’t saddled with a bunch of bad debt.

Our stimulus spending is not “priming the pump” like it’s suppose to, instead it’s producing a negative rate of return. If you have a small business that is losing money and subsequent investments don’t turn it around you have to cut your losses at some point. Isn’t better to cut your losses before you lose your house. Isn’t better for the US to cut it’s losses on deficit spending before it’s forced to default or print. The day you resort to unbacked currency emission or default is the day that you can no longer deficit spend, in essence the market forces you to live within your means.

[briansd1]

[quote=livinincali]
My argument is that although we’ll have to deal with that relatively short deep depression it is good for the long term.
[/quote]

It’s fine if you believe that but none of Krugman’s detractors are saying that. They all want new jobs tomorrow. Everyone wants to stimulate the economy right now.

Case in point. Allan was complaining earlier that Germany is dictating austerity to “vassals.” I’m assuming that if not dictating austerity, the alternatives are more money from the EU and more support from the ECB, or doing nothing and let the Euro fall apart.

I don’t agree with you that we need a depression because debt and money are just human creations. Why should we let a bottleneck in the system bring human production and ingenuity to a halt? We can develop ways to overcome a systemic failure and avoid human suffering. That’s where Krugman can offer his expertise.

[Allan from Fallbrook]

[quote=briansd1]

Case in point. Allan was complaining earlier that Germany is dictating austerity to “vassals.” [/quote]

Brian: Who was complaining? I simply pointed out that, at the rate the Eurozone is going, you could expect to see thousands of Greeks, Portuguese and Spaniards toiling away at IG Farben plants throughout Europe.

Deutschland uber alles.

[poorgradstudent]

Increasing government spending during down times and decreasing during good times also makes good fiscal sense. Labor and materials tend to be cheaper during busts, so important government infrastructure projects should be able to be completed at lower cost than they would if done during a boom. Also, borrowing costs are often cheaper during downtimes, so it actually makes a ton of good sense to complete necessary projects during recessions as opposed to trying to do them when things are good.

[livinincali]

[quote=briansd1]
I don’t agree with you that we need a depression because debt and money are just human creations. Why should we let a bottleneck in the system bring human production and ingenuity to a halt? We can develop ways to overcome a systemic failure and avoid human suffering. That’s where Krugman can offer his expertise.[/quote]

I honestly don’t think that solution exists. The Marxism solution of from each by ability to each by need has been tried in countless societies and it’s always ended up in failure. I’ll admit that on paper it sounds like a valid solution but sometimes theories are just theories and don’t work in a practical application.

The human competitive spirit just gets in the way too much. Maybe we can’t control the natural selection/evolution process. Nature is going to pick the winners and losers and we can’t do anything about it. I argue that it’s better to let nature take it’s course rather than preventing it from acting. It’s eventually going to win and the more you do to prevent it the worse it’s rage is.

[Allan from Fallbrook]

[quote=livinincali][quote=briansd1]
I don’t agree with you that we need a depression because debt and money are just human creations. Why should we let a bottleneck in the system bring human production and ingenuity to a halt? We can develop ways to overcome a systemic failure and avoid human suffering. That’s where Krugman can offer his expertise.[/quote]

I honestly don’t think that solution exists. The Marxism solution of from each by ability to each by need has been tried in countless societies and it’s always ended up in failure. I’ll admit that on paper it sounds like a valid solution but sometimes theories are just theories and don’t work in a practical application.

The human competitive spirit just gets in the way too much. Maybe we can’t control the natural selection/evolution process. Nature is going to pick the winners and losers and we can’t do anything about it. I argue that it’s better to let nature take it’s course rather than preventing it from acting. It’s eventually going to win and the more you do to prevent it the worse it’s rage is.[/quote]

WINNER. Spot on post. The Left has argued, ad nauseam, that, in theory, their solutions will work. As you correctly point out, there is a huge gap between theory and practical application.

Lack of realistic policy, combined with lack of political will, has led Europe to the brink. And it’s not over yet.

Poorgradstudent correctly asserts that now would be the time to spend on infrastructure, especially given the cheap cost of funds. But, again, theory meets reality in the sense that the US public works program(s) simply aren’t geared to get projects off the ground that fast and there weren’t sufficient projects (or the right types of projects) in the pipeline to begin with (“those shovel-ready jobs weren’t all that shovel-ready”).

There’s a great expression: “Overtaken by events.” At some point, the various governments will run out of bullets, and the market will fully assert itself. And then, what will happen will happen.

[briansd1]

[quote=poorgradstudent]Increasing government spending during down times and decreasing during good times also makes good fiscal sense. Labor and materials tend to be cheaper during busts, so important government infrastructure projects should be able to be completed at lower cost than they would if done during a boom. Also, borrowing costs are often cheaper during downtimes, so it actually makes a ton of good sense to complete necessary projects during recessions as opposed to trying to do them when things are good.[/quote]

I will try to live by this in my own life. Save during good times and buy assets during the down cycles. It’s a little hard to do because everybody does the opposite. People party during the good years and if you don’t join them you will have few friends.

[Author]

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