kinder, gentler debt ceiling discussion

[Felix]

Long live Supply Side Jesus!!

[Chad]

So, what's everyone doing for a couple weeks in January? I'm free.

[jennypenny]

So, what's everyone doing for a couple weeks in January? I'm free.

[Dragline]

I'll be watching the next showing of Kabuki theater in the nation's capital.

[Felix]

Same time, same channel.

[Felix]

@jacob:

You wanted an explanation of what I mean on a micro-level, what do the individual agents (firms) do in a recession and why.

Here's a good explanation of it with the example of Japan:

http://www.youtube.com/watch?v=HaNxAzLKegU

I hope that's helpful.

[Riggerjack]

why is it that when stimulus fails, that the answer is not enough stimulus?

for 80 years, the Keynesian recession solution has given lackluster results, but we're told "oh, it didn't fail, it woulda been so much worse!"

Felix, your video summed it up nicely. conditions were such that at 0% businessmen didn't want to create new business. that is an economy that needs less f*ing with. stop stimulating, monetary easing, changing the laws. and let a recovery happen, already.

or, let a militaristic nationalist take over... kinda like 80 years ago. i'm not saying Shinzō Abe is the next Hitler, i'm just pointing out a disturbing pattern.

[Felix]

Because that's the correct answer.

This is precisely the time when the government has to step in massively.

If businesses have reached the stage of being deep in debt thanks to an asset crash and won't borrow because of it, you want a great depression?

In a similar vein, how is a depression recovery? Isn't recovery a recovery from depression?

A balance sheet depression happens because of not enough money. That is an artificial constraint. Letting the economy crash because it ran out of dollars is like a carpenter stopping his work because he ran out of inches. It is completely artificial and has little to do with real world constraints of labor, capital, etc.

By not intervening you directly cause a depression. Why would you inflict that on people? Mass unemployment, increase in poverty, rise in the debt to GDP ratio (!), etc.

As an "added benefit" you can get militaristic nationalists as a reaction to a recession (...which would be one reason to prevent it. You can see that in Greece right now, with Golden Dawn.) Why is that better than having a number in a central bank account go up?

For what? What is the benefit you see in it? I only see harm.

It seems like you have defined government intervention as some inherently maximally evil action if it is better than mass unemployment and a new Hitler.

I can't reason against such a position.

I mean, the video shows clearly that when businesses suck money out of the economy and nobody borrows new money, you enter a depression, with the historical examples of the first great depression in the US and Japan. This is precisely the moment when the government has to massively intervene.

The situation only got worse when they removed the stimulus thanks to budget hysteria.

How this video which deliberately argues for government intervention can be seen as an argument against government intervention I simply do not understand.

[vivacious]

I've been repeating that point many times. Austerity made the situation worse almost everywhere it was done. You can look at obvious examples in Europe.

The irony of right wing economics is that it isn't even good for the economy. It may work in the short run but causes significant problems in the long run.

Left economic policies are not only factually and morally better but also empirically function much better. It's inherent in the way the money structure has been made. Right policies eventually will grind it to a halt.

[jacob]

http://www.spunk.org/texts/humour/sp000621.txt

[vivacious]

http://www.youtube.com/watch?v=anwy2MPT5RE

I'm not sure we're talking about economics anymore though haha. But at least philology I guess.

[Felix]

Monty Python break! This is my favorite:
http://www.youtube.com/watch?v=jVygqjyS4CA

[Riggerjack]

yes, there aren't many conversations that monty python can't be interjected to improve...

http://www.youtube.com/watch?v=m_WRFJwGsbY

my point, felix, was that increasing GDP by increasing gov spending works on paper, so long as you think that the economy is a number, subject to central manipulation. If that were the case, our fearless leaders would ensure that we always had a robust economy, and if there had to be a setback, it certainly wouldn't be in an election year!

There is no santa clause, and there is no central director of the american economy. Read the FOMC meeting minutes from early in the last decade. There was no crisis, the housing bubble is still growing. Here are the minds with the fullest incentives and training and experience and capability, dedicated full time to economic manipulation thru monetary policy. and they can't even agree with where we are, let alone where we should be going. read more, during crisis and recession. again, you won't see agreement.

http://www.federalreserve.gov/monetaryp ... orical.htm

Even if the world were as simple as your model would have it, there's nobody with the real time knowledge to do what you say. Look at the "recovery" of the last few years. in what tiny detail has it differed from what you propose? in the last 5 years, we've stimulated ourselves into recovery and growth, can't you feel it in the air?

Gov spending isn't evil, or wrong, it is simply less efficient, it moves money from the taxpayers to the political class. the difference between a private sector recovery and a political sector recovery can be seen in the increasing GDP, without increasing employment, or capital growth.

[Felix]

"Gov spending isn't evil, or wrong, it is simply less efficient, it moves money from the taxpayers to the political class."

No it doesn't.

If the government spends more than it taxes, it is a net payer to the taxpayers. It adds funds and doesn't merely shift them around.

It employs idle resources put aside by an underfunded private sector, making it more efficient than the alternative high unemployment scenario.

[GandK]

If the government spends more than it taxes, it is a net payer to the taxpayers. It adds funds and doesn't merely shift them around.

Please clarify. You mean by inflation/printing more dollars? Or by some other means?

I want to understand how you arrived at your position, even if I can't ever agree with it.

[Felix]

I'll explain it in two parts:

Real economy:

If there is high unemployment and there are idle resources unused by the private sector, the government can use its ability to spend money into existence to hire these idle resources. This is new money in the economy corresponding to new real wealth that has been created by employing previously idle resources.

Money economy:

If the government spends more than it taxes (deficit spends), this money ends up to the penny in private accounts as savings.

[Riggerjack]

GandK, there is a fantastically funny thread here viewtopic.php?f=20&t=425&hilit=woo
Wherein aussierogue tries to explain quantum physics to Jacob. It makes me smile just thinking about it. That was the place I learned the term quantum woo.

I bring it up, because Felix is a disciple of a guru named mosler, who espouses a Modern Monetary Theory, or MMT .
I'll admit that I only skimmed the stuff on his webpage, as it seemed to combine Keynes and money creation theory into a fine economics woo. I'm just too lazy to dissect it myself, so I question Felix. If you lookup his posts or mine, we've gone fairly in depth into his beliefs, and you can judge for yourself.

Full disclosure : I have no formal training in economics. This is simply a hobby for me. I've been tracking mortgage rates and trying to predict them for about 5 years as a side interest in real estate as my retirement plan. That means reading and anticipating economic reports.

This has lead me to have extreme doubts about economic models. Mosler's no more than others.

[Felix]

... just as Riggerjack is the disciple of a guru named Paul (or Schiff) who espouses a gold-based free-market economy. It seems to combine Hayek and barter-money theory into a fine economics woo.

[GandK]

So each man here has his own woo?

[Felix]

Yes, and not just in economics.