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Mad even in their world

by Colman Fri Jun 18th, 2010 at 04:55:40 AM EST

Paul Krugman is getting worried at the growing belief, endorsed yesterday by the ECB, that fiscal austerity will cause growth:

Here’s a list of fiscal turnarounds, which are supposed to serve as role models. What can we say about them?

Canada 1994-1998: Fiscal contraction took place as a strong recovery was already underway, as exports were booming, and as the Bank of Canada was cutting interest rates. As Stephen Gordon explains, all of this means that the experience offers few lessons for policy when the whole world is depressed and interest rates are already as low as they can go.

Denmark 1982-86: Yes, private spending rose — mainly thanks to a 10-percentage-point drop in long-term interest rates, hard to manage when rates in major economies are currently 2-3 percent.

Finland 1992-2000: Yes, you can have sharp fiscal contraction with an expanding economy if you also see a swing toward current account surplus of more than 12 percent of GDP. So if everyone in the world can move into massive trade surplus, we’ll all be fine.

Ireland, 1987-89: Been there, done that. Let’s all devalue! Also, an interest rate story something like Denmark’s.

Sweden, 1992-2000: Again, a large swing toward trade surplus.

Turns out that austerity works if and only if there's something else happening that more than compensates for its deflationary effects. We won't be reducing interest rates by 10% any time soon, it's not obvious how the entire world can run an increasing trade surplus and I don't know where Germany, France or the US are going to get massive external grants from.

This is insane even within reasonably conventional economic wisdom. The pro-austerity people don't seem to have a model or any evidence that stands up to scrutiny.

It's superstition: cut harder and the gods of the free market will reward us.


Display:
Of course, Krugman isn't a serious person.  
by Colman (colman at eurotrib.com) on Fri Jun 18th, 2010 at 05:00:43 AM EST
since he says "controversial" things...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 18th, 2010 at 06:54:42 AM EST
[ Parent ]
Unpersons - Paul Krugman Blog - NYTimes.com (July 8, 2009)
But in a way, the implicit censorship on the stimulus debate is even stranger. During the initial discussion of the stimulus, the debate was framed almost entirely as a debate between Obama and those who said the stimulus was too big; the voices of those saying it was too small were largely frozen out. And they still are -- if it weren't for my position on the Times op-ed page, there would be hardly any major outlet for Keynesian concerns.

And here's the thing: in this case, there isn't any hidden evidence -- you can't argue that the CIA knows something the rest of us don't. And the voices calling for stronger stimulus are, may I say, sorta kinda respectable -- several Nobelists in the bunch, plus a large fraction of the prominent economists who predicted the housing crash before it happened.

But somehow, the pro-stimulus people are unpersons. Who makes these decisions?

Krugman has been an unperson for a year. He thought his Bank of Sweden Prize was a licence to speak, and it lasted him 8 months.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:02:01 AM EST
[ Parent ]
When was he ever one?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:06:04 AM EST
[ Parent ]
Before he started writing for the NYT?

I mean, there was a time when he said things like that Galbraith was "not actually an economist", or he criticised people who took part in the economic policy debate for not being totally precise in their economics.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:11:28 AM EST
[ Parent ]
I think his main criticism of Galbraith was about Galbraith's inconsistency and ideas which wound up being wrong.

Note the fifth paragraph in particular, on the Phillips Curve.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:26:07 AM EST
[ Parent ]
The Unofficial Paul Krugman Web Page
This archaism matters, because Galbraith's continuing adherence to the primitive macroeconomics of his youth leaves him unprepared to confront the real dilemmas facing modern liberalism. Consider, for example, what he has to say about the interlinked issues of monetary policy, saving, and budget deficits. Galbraith, remarkably, regards the Federal Reserve as a largely powerless institution; he dismisses the idea that the Fed can end a recession by cutting interest rates as a "[q]uasi-religious conviction" that "triumphs over conflicting experience." Really? Skepticism about the effectiveness of monetary policy was common 40 years ago, but the Fed's role in sparking recoveries in 1971, 1975, 1982, and 1992--together with impressive demonstrations of the power of monetary policy in many other countries--has put such doubts to rest. Because Galbraith believes monetary policy cannot increase demand, however, he has a sort of Depression-era vision of an economy[cont. on p.58] in which anything that increases spending is good. Should we worry about America's low savings rate or its government deficits? Of course not: These are good things, because they increase demand.
Heh, has Krugman become archaic 10 years later?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:30:37 AM EST
[ Parent ]
Not really, because not all recessions are created equally.  Krugman's discussions today aren't at all unlike what he was saying about Japan 20 years ago.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:33:50 AM EST
[ Parent ]
Skepticism about the effectiveness of monetary policy was common 40 years ago, but the Fed's role in sparking recoveries in 1971, 1975, 1982, and 1992

Minsky has a very different take on that. Basically they differ from the current crisis in degree but not in kind. I think each of them was associated (association is not causation, necessarily - but it is a matter of scale, too) with a crash in a financial bubble around some newfangled financial innovation which was then validated by a Fed bailout.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Sat Jun 19th, 2010 at 02:16:59 AM EST
[ Parent ]
Should we worry about America's low savings rate or its government deficits? Of course not: These are good things, because they increase demand.

He has never anything to say about stagnating wages and stagnating disposable incomes of labour, after paying taxes, debts, public utilities, rents and food. If the population cannot consume the economic surplus, where is the demand increase supposed to come?

by kjr63 on Sat Jun 19th, 2010 at 04:13:42 AM EST
[ Parent ]
Krugman sure has. Read his brilliant book The Conscience of a Liberal.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jun 19th, 2010 at 08:08:18 AM EST
[ Parent ]
He sure talks about wages, but offers nothing to change anything. In one interview he said that land rents are 1% of the GDP of USA. I cannot take him seriously.
by kjr63 on Mon Jun 21st, 2010 at 04:33:44 AM EST
[ Parent ]
...adding: I assume we're talking about John and not James.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:28:36 AM EST
[ Parent ]
Yes, Galbraith the Elder.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:31:22 AM EST
[ Parent ]
The comments to that are a riot:

whitespiral makes a good point. I'm not talking just about this blog but the magazine in general. I have recently considered cancelling my subscription (although not very seriously due to lack of good alternatives to The Economist).When and if western economies start growing again at some point next year it will not be due to any multiplier effects. I hate to see people getting so hysterical now that they're ready to advocate all kinds of short-run policies that make absolutely no sense in the long-run.So yeah, I'm a bit uncomfortable seeing The Economist go against Germany, a country that now seems to be the sole voice of reason left.

Dated the end of 2008.

by Colman (colman at eurotrib.com) on Fri Jun 18th, 2010 at 07:42:53 AM EST
[ Parent ]
When and if western economies start growing again at some point next year it will not be due to any multiplier effects.

Voice of reason, indeed.

Ahem.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:55:55 AM EST
[ Parent ]
We are all Gordon Brown now.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 06:55:28 AM EST
[ Parent ]
The horror... xD

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 18th, 2010 at 07:40:26 AM EST
[ Parent ]
Surely you mean: The uh horror!

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:51:56 AM EST
[ Parent ]
Let me get this straight.

The way to increase economic activity is.......errr......to drastically cut economic activity?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jun 18th, 2010 at 05:35:11 AM EST
Obviously, if you're serious. If you're not initiated, it may seem strange, but that's because you don't understand the inner teachings of the True Faith, given only to devout worshippers.
by Colman (colman at eurotrib.com) on Fri Jun 18th, 2010 at 05:58:29 AM EST
[ Parent ]
Yes, because economic activity isn't about spreading wealth or creating wealth, it's about punishing anyone who doesn't earn a million a year for being, like, a total loser and not nearly hungry and well connected enough.

These poor people are parastic leeches who want to steal the money rightly owned by the Randian superbeings who are in charge. So it only serves them right.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jun 18th, 2010 at 06:04:58 AM EST
[ Parent ]
Y = C + I + G + NX

If G falls, and C, I and NX don't offset it, we get recession.  An equation so simple anybody with a third-grade education should be able to make sense of it.

Alas...

WHEEEEEEEEEEEEEEEE!!

[Drew's WHEEEEE™ Technology]

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 07:02:23 AM EST
[ Parent ]
Don't be crass.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:06:30 AM EST
[ Parent ]
European Tribune - Community, Politics & Progress.
it's not obvious how the entire world can run an increasing trade surplus

Listen.

Bob grows tomatoes. Alice grows lettuce. They trade with each other and they both make more money than if they each grew both tomatoes and lettuce.

This is all ye know on Earth, and all ye need to know.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 18th, 2010 at 06:03:15 AM EST

This is insane even within reasonably conventional economic wisdom.

I'm having a hard time getting my head around most of the economic diaries the past few months, not to mention the past  several years.  Unless i try to imagine class war. since the uebermenschen know that resources are running out, or something. since the financial media is driving the framing so hard.

since i learned that in Germany, the police can break down your door for the bill collector if your parking ticket is 2 years old. (didn't happen to me.) since i learned that Minnesota has debtor's prison.

since i learned that Obama doesn't have very much room to move, even IF he was so inclined. (h/t geezer in Paris.) since i learned that hedge fund nerds can dictate international policy, with the blessing of Deutsche Bank.

but please, don't get me started.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Fri Jun 18th, 2010 at 06:24:24 AM EST
"It's superstition: cut harder and the gods of the free market will reward us. "

These people consider the economy a morality play. "Purge the rottenness", "liquidate banks, liquidate farms, liqudate mortages, liquidate everything and everone" etc.

And hopefully all will be well, but far more important: the wicked will suffer.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Jun 18th, 2010 at 07:38:06 AM EST
Not only that, they lie and obfuscate:

Jürgen Stark: Don't Create a Fiscal Crisis - WSJ.com

Regarding confidence, one should note that many euro-area governments failed to use the past boom times to consolidate their public finances. As a consequence, they are entering the current downturn with high deficit and debt ratios. Given the weak growth ahead and the costs of the bank bailouts, these ratios are set to increase. It is very likely that, in a year's time, the deficits in many euro-area countries will be between 5% and 7%, up from around 3% now, while public debt may rise by 10 to 20 percentage points.


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:49:06 AM EST
[ Parent ]
Guilt-edged Bonds - Paul Krugman Blog - NYTimes.com
[in German] Schuld is the word both for debt and for guilt.

Now it all makes sense.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Jun 18th, 2010 at 10:37:01 AM EST
[ Parent ]
"Purge the rottenness", "liquidate banks,...

Depending on how it is done, liquidating zombie banks could actually help. Only bail out account holders up to a certain value, only compensate bond holders up to an even lower value, make certain that the public, via the resolution agency, gets fair value for any bank assets sold instead of making gifts to acquiring institutions of individuals.....

At least this would start to write down the debt in a more systematic way.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 18th, 2010 at 10:50:42 AM EST
[ Parent ]
A few of speculative observations:

  1. The western world over-consumes for the earth capacity (assuming that everybody in the world would rise to western standard).
  2. The current income accrued by the top-brass is unjustified by any means. Clearly they are not worth it.
  3. Middle-class westerns make enough for a decent living. In fact, insisting in more material goods is fueling the greed and consumption mentality. Free time and job/social security should be priority over money. In fact the western middle class probably consumes above Earth's carrying capacity.
  4. Growth (to pay debt) might be impossible because of environmental limits on said growth.
  5. Austerity might be necessary because of carrying capacity.

So, we need a solution to (i) pay debt and (ii) maintain a standard of living that assures food on the table, housing, health and some free time and leisure. iphones, playstations, vacations in Cancun, 2 cars/household are above this.

The solution? Well, there is no need to invent anything new, there are a couple of good old fashioned approaches:

  1. Raise income taxes, FDR (80%+, PROGRESSIVE) style. This will tackle deficit and CURB EXCESSIVE CONSUMPTION.

  2. Wealth tax

How to do this? A mentality change is needed. More money and more consumption as a goal in life should be challenged. Noticed that the left is very complicit of this: by insisting in more salary, more salary, more salary. Above a certain threshold (which middle class Westerns enjoy) the priority should be free time and social security.

In truth, the left shares the same assumptions with the right: more wealth, more wealth, more wealth. If more material wealth is the question, then obviously greed is the answer.

by t-------------- on Fri Jun 18th, 2010 at 07:48:28 AM EST
tiagoantao:

there are a couple of good old fashioned approaches:

  1. Raise income taxes, FDR (80%+, PROGRESSIVE) style. This will tackle deficit and CURB EXCESSIVE CONSUMPTION.

  2. Wealth tax
3. Tax inheritances and gifts
  1. Tax land values
  2. Tax limited liability


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:56:10 AM EST
[ Parent ]

  1. The western world over-consumes for the earth capacity (assuming that everybody in the world would rise to western standard).
  2. The current income accrued by the top-brass is unjustified by any means. Clearly they are not worth it.
  3. Middle-class westerns make enough for a decent living. In fact, insisting in more material goods is fueling the greed and consumption mentality. Free time and job/social security should be priority over money. In fact the western middle class probably consumes above Earth's carrying capacity.
  4. Growth (to pay debt) might be impossible because of environmental limits on said growth.
  5. Austerity might be necessary because of carrying capacity.

You have to distinguish between money austerity and resource austerity. Money austerity is the accumulation of promises to hand over resources. Resource austerity is the reduced consumption of resources. The two are not the same, except in certain (neo)classical fantasy worlds.

The masters of the universe are talking about money austerity - resource austerity isn't even on their radar, because they have no vocabulary to talk about it and even less interest in acquiring said vocabulary.

So, we need a solution to (i) pay debt

That's simple:

Don't pay the debts.

Problem solved.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 07:56:14 AM EST
[ Parent ]
That also takes care of (ii) if done properly.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:57:12 AM EST
[ Parent ]
No it doesn't.

Cutting back consumption to a sustainable level requires people to give up conveniences and luxuries they presently enjoy. Telling the money markets to fuck off and die requires people to give up conveniences and luxuries that they were promised the ability to enjoy (or, more properly, to deny other people the enjoyment of) in the future.

Actually, throwing the world into a fifteen-year business depression might impose sustainability due to the collapse of industrial civilisation.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 08:06:16 AM EST
[ Parent ]
I meant

2) The current income accrued by the top-brass is unjustified by any means. Clearly they are not worth it.

not

(ii) maintain a standard of living that assures food on the table, housing, health and some free time and leisure.

My bad.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:15:23 AM EST
[ Parent ]
if a 15-year depression is the only way to reduce our consumption, to sustainable levels, that's what we'll get, whoever is actually in charge.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 18th, 2010 at 08:34:16 AM EST
[ Parent ]
"For a successful technology economy, reality must take precedence over public relations, for nature cannot be fooled."

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 18th, 2010 at 08:38:15 AM EST
[ Parent ]
But it's not the only way to reduce consumption to sustainable levels. If we can reduce consumption to sustainable levels through an uncontrolled implosion in industrial activity, then we can also reduce consumption by a managed decline.

However, that requires the notion of "managed decline" to be present in the public consciousness. And what's more, it requires the notion that the alternatives are worse to be present in the public consciousness.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 09:02:14 AM EST
[ Parent ]
just like gas taxes can only be sold if people believe that prices will continue to go up (in which case it is better that the increase go to our government that to the Saudis') - something they don't.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 18th, 2010 at 03:49:38 PM EST
[ Parent ]
JakeS:
You have to distinguish between money austerity and resource austerity.
Migeru:

Resource austerity would mean to take into account the limits to growth arguments and pay the true cost of resource luxuries. Resource austerity also means more more room for jobs. It also means money inflation.

Money austerity comes from believing money is a real thing that is neither created nor destroyed, only conserved, instead of a consensual token. It is ridiculous that there are both human and physical resources (I'm referring to plant, not raw materials) going idle because of lack of fiat tokens. But that is the situation, and attemting to economize on tokens is only going to result in greater capacity underutilisation. The hoarders of tokens will keep their hoard and may even succeed in safeguarding the exchange value of their hoard, but not only will resource overuse not be checked, but there will be an economic slump. But at least there won't be inflation.

I have been trying (and failing) to find an old Salon item, maybe from late 2007, where some consultancy was telling some executives that there was a big recession coming and that they should do their utmost to protect their net worth. The tactical advice given, considering that these people handle the lever of the real economy, was a recipe for depression, as was commented at the time. And here we are.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:02:27 AM EST
[ Parent ]
Migeru:
I have been trying (and failing) to find an old Salon item, maybe from late 2007, where some consultancy was telling some executives that there was a big recession coming and that they should do their utmost to protect their net worth. The tactical advice given, considering that these people handle the lever of the real economy, was a recipe for depression,

to play devil's avocado here, if they were right to counsel buying gold, for example, to 'protect their net worth', (or farms, or land above paraguyan water tables etc), that was good advice, better than trading $ for € for example, which some were recommending a few years ago, for example.

wasn't the problem that their advice cascaded into the dreaded 'fall in consumer confidence', because if these guys don't believe in endless growthTM, and the long-term viability of the Great Shakedown financial system then why should joe shmoe?

as long as this advice is made public, and not confined to private messaging, isn't it inevitable that this counsel will start to pop bubbles?

surely they know that, but want to give good advice! that's their job.

still confused..

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Jun 21st, 2010 at 12:55:29 PM EST
[ Parent ]
Make this a diary - we really need to put some numbers on these things.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 07:56:38 AM EST
[ Parent ]
I am currently on my way to this (writing on the train):

The steady state economy conference.

I will write a diary with the content above and probably include some insights from the conference.

by t-------------- on Fri Jun 18th, 2010 at 08:09:39 AM EST
[ Parent ]
We'll wait - eagerly :)

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:12:40 AM EST
[ Parent ]
Mentalities doesn't change because we want it so problems can be avoided. Mentalities change because the world changes and we have to adapt our behaviour and mentality to it.

Mentality changes are reactive to outside effects, or to put it another way: not just people but also their mentalities, respond to incentives.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Jun 18th, 2010 at 08:04:00 AM EST
[ Parent ]
That's not entirely true. Propaganda works.

For instance, during the last world war, there was a concerted propaganda effort aimed at real resource austerity, in order to divert those resources to the production and development of devices to kill and maim our fellow man with increasing efficiency and creativity.

I wonder what the result would be if the full force of the modern sovereign state's considerable propaganda apparatus was brought to bear on the problem of getting people to place less value on stuff, without the context of using the conserved raw materials and industrial capacity for the ever more creative immolation of human beings and human accomplishments.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 08:13:17 AM EST
[ Parent ]
You needed the war for a propaganda campaign like that to be succesful. So I argue that it wasn't the actual propaganda that changed people's mentality, but the war itself. Then when people's minds were amendable to suggestions of what to do to help, those government suggestions found fertile soil to grow in.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 18th, 2010 at 08:24:48 AM EST
[ Parent ]
Can you explain how neoliberal ideology became the common wisdom of the last thirty years?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 18th, 2010 at 09:39:15 AM EST
[ Parent ]
Stagflation, Movement Conservatism funded by Koch, and as a coup de grace the fall of the Soviet Union.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 18th, 2010 at 10:31:39 AM EST
[ Parent ]
The fact that it appeals to the pure greed of the successful and the aspiring also doesn't hurt.
by Zwackus on Fri Jun 18th, 2010 at 08:58:32 PM EST
[ Parent ]
Can I blame the left? Ok, just partially?

If the only thing that the left knows to ask is more money, more money, more money (-) then do not find strange that greed and materialism become the underlying assumption. After a certain level of material wealth things like more security, more leisure, more GENEROSITY (sharing work with unemployed) or a MAXIMUM WAGE LIMIT could be fought for instead of more material wealth. I do not understand how it can be considered "lefty" to ask for a salary increase from e.g. a 2.500 Euro salary. I would imagine that a generalized 2.500 salary with its purchasing power is not possible for all human beings (limits to growth, I mean).

But my point is: everybody (left and right) seem to share the underlying, sub-conscious assumption that more wealth is always good. Even when your standard of life is already quite good. If the question is always more money than clearly the prevailing ideology has to be greed-based.

(-) - This is not strictly true, for instance in NL there was the Wassenaar agreement for work sharing.

by t-------------- on Sat Jun 19th, 2010 at 05:59:51 PM EST
[ Parent ]
It is, of course, both. And neither. As a stand-alone, the combination is an inadequate explanation of human motivation and behavior.
A lot of B. F. Skinner's savage psychology emerged from his observations of the war production board's successes. Time (and Chomsky) have pretty well polished off his barbaric drivel in the academic world,, yet it remains as one of the driving myths of the oligarch's world-view.  

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Fri Jun 18th, 2010 at 11:10:58 AM EST
[ Parent ]
Mentalities change because the carriers of the old mentality die off...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:15:08 AM EST
[ Parent ]
A lot of us cocky youngsters thought that, around 1970...
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 18th, 2010 at 09:40:58 AM EST
[ Parent ]
Oh, I have no doubt what so ever that the over-consumption mentality will die off.

My primary concern is with the scale of the collateral damage.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 09:42:54 AM EST
[ Parent ]
Yeh.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Fri Jun 18th, 2010 at 11:11:43 AM EST
[ Parent ]
Mig
Mentalities change because the carriers of the old mentality die off...

...when there is a dominant portion of a younger generation with an alternative view which has equal or greater appeal to the public at that time.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 18th, 2010 at 11:02:32 AM EST
[ Parent ]
I didn't say it's going to die off in the next 50 years...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Sat Jun 19th, 2010 at 01:58:21 AM EST
[ Parent ]
The problem today is that wealth capture has replaced wealth creation. And this has been made possible by smaller and less progressive tax systems.

This can indeed be solved by redistributive policies. But that would be socialism

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 18th, 2010 at 08:32:34 AM EST
[ Parent ]
That's one side of the coin.

The other side of the coin is that I have a feeling we're not in the 20th century anymore.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 08:58:42 AM EST
[ Parent ]
Don't tell Thomas Friedman.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Sat Jun 19th, 2010 at 02:01:51 AM EST
[ Parent ]
What boggles the mind is how many people have known this, and for how long-- and yet it's still heresy.

This very good discussion has hammered a diary I was doing on just this subject.
So be it.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Fri Jun 18th, 2010 at 11:16:10 AM EST
[ Parent ]
I agree but it's impossible to implement, system-wide, Bottom/Up and the Top/Downers are happy with - they built it, after all - the current system.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Fri Jun 18th, 2010 at 12:11:05 PM EST
[ Parent ]
I don't know what to do with this:
EU leaders yesterday (17 June) agreed to curb excessive public debt in the wake of the Greek crisis, with sanctions for rule-breakers set to be based on debt trends rather than absolute figures in order to avoid immediate sanctions for member states like Italy, Belgium, France and Germany.

<sigh>

by Colman (colman at eurotrib.com) on Fri Jun 18th, 2010 at 08:11:00 AM EST
with sanctions for rule-breakers set to be based on debt trends rather than absolute figures in order to avoid immediate sanctions for member states like Italy, Belgium, France and Germany.

Hands up, who's surprised?

We all know perfectly well that the economic indicators have nothing to do with it, nevermind the economic reality.

There are three conditions that must be met to qualify as a target:

  • You must be big enough to be worth going after - so Malta and Cypern are probably safe.

  • You must not be big enough to suffer from imperial phantom limb pain - that might make you cut the banksters off at the knees, and we can't have that.

  • You must be populated by brown people or Russians.

Any country that meets those three criteria is at risk of being attacked by the piranhas. Any country that does not is (probably) safe, unless they do something outrageously, Iceland-level stupid.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 18th, 2010 at 08:18:04 AM EST
[ Parent ]
I give up, I fucking give up.

In Class Warfare, Guess Which Class Is Winning - New York Times

"There's class warfare, all right," Mr. Buffett said, "but it's my class, the rich class, that's making war, and we're winning."


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:22:51 AM EST
[ Parent ]
on European Tribune.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Sun Jun 20th, 2010 at 06:23:23 AM EST
[ Parent ]
Cheating, again...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:19:11 AM EST
[ Parent ]
Wait until France and Germany turn out to have increased debt, and they go for the second derivative.
by gk (gk (gk quattro due due sette @gmail.com)) on Fri Jun 18th, 2010 at 08:25:44 AM EST
[ Parent ]
Three times is a charm.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:29:41 AM EST
[ Parent ]
I think we all agree here to say that an increase in debt is not worrying by itself. So this should be considered as good news!
by Xavier in Paris on Wed Jun 23rd, 2010 at 07:56:17 AM EST
[ Parent ]
No, because they're not allowing the other players to cheat. So the smaller economies that desperately need stimulus are screwed.

Think of them as priests standing at the pulpit preaching against "company keeping"* and then going home and having an entirely healthy sexual relationship with their housekeeper.

* Young people of opposite sexes spending time in each others company without proper supervision, even publicly, was apparently a major concern of Irish priests. I have, in my lifetime, stood in awed shock as some fossilised maniac preached against it in a small village behind the back end of nowhere.

by Colman (colman at eurotrib.com) on Wed Jun 23rd, 2010 at 08:04:30 AM EST
[ Parent ]
Migeru:
What we need to point out is how rules don't apply to Germany, in fact they pressure the Council to relax them when they are in violation and to tighten them when others are
Eurostat's Selected Principal European Economic Indicators links to a table with annual time-series data on General government gross debt. This is Germany's:
1997 59.7 1998 60.3 1999 60.9 2000 59.7 2001 58.8 2002 60.4 2003 63.9 2004 65.7 2005 68.0 2006 67.6
2007 65.0 2008 65.9
In 2005, EurActiv reported:
Heads of state and government agreed at the March 2005 Summit to revise the EU's Stability and Growth Pact reform. Under the revised rules, member states must still keep their public deficits under a 3% GDP/deficit ratio and their debts under a 60% GDP/debt ratio.

However, the pact's rules have been made more 'flexible' across a range of areas. For example, member states will avoid an excessive deficit procedure (EDP) if they experience any negative growth at all (previously -2%), can draw on more "relevant factors" to avoid an EDP and will have longer deadlines if they do move into an EDP.

...

In essence, big countries such as France and Germany have won concessions making the pact more 'flexible' in various parts, adding up to a considerable relaxation of the rules. In return, countries such as Austria and Netherlands have won references to "enhanced surveillance, peer support and peer pressure".

The two thresholds - 60% for the debt and 3% for the deficit - remain unchanged.

Gee whiz, when the governments of Germany and France were about to have an "Excessive Deficit Procedure" open against them, they lobbied to change the rules. And this was in 2005, not in the middle of the biggest recession since the 1930's.
(links in the original comment)


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:27:03 AM EST
[ Parent ]
European leaders, faced with the market borg, pretend to give in, while they are really not.

Can we really claim that deficits of 5-8% for several years are hooverian policies? Can we also say that this is something that should not be curbed slowly (which is the most that will happen under current "austerity" plans)?

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 18th, 2010 at 08:36:47 AM EST
[ Parent ]
We're complaining about the fact that rules are only for the PIGS and written by the BIGF(uckers).

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 08:56:18 AM EST
[ Parent ]
European leaders, faced with the market borg, pretend to give in, while they are really not.

...unless it's the Greeks or Spaniards or Portuguese or Irish or....

Can we really claim that deficits of 5-8% for several years are hooverian policies?

The deficit during Hoover's last two years in office was about 5% of GDP.

So, yes, we can say that.

The existence of a deficit doesn't imply that the government is engaging in proper expansionist policies.  You can run huge deficits by gutting public spending and sending the economy into a downward spiral.

Which is what we've been talking about all these months.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 18th, 2010 at 09:05:22 AM EST
[ Parent ]
Sensible policy has much more to do with HOW the money is spent than on HOW MUCH money is spent.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 18th, 2010 at 11:14:25 AM EST
[ Parent ]
In Finland a small apartment (double room) cost in 1988 160 000 marks. The average starting salary for an engineer was 8 000 marks a month. Now in 2010 the same apartement costs 160 000 euros and engineers starting salary is 2500 euros. Situation is even worse for those who earn even less.
The land owners have increased their incomes about 750% where the labour has not made much progress at all. The problem is not the government or the banks. It is the land rent. Always been, always will be.
It is just a diversion to make noise about Governments and Banks. They are just tools in the messed up middle class' dreams of getting rich in the property market. They are fooled, or they don't want to believe that it is possible to get wealthy just by hard work. It is a political choice.
by kjr63 on Fri Jun 18th, 2010 at 09:33:53 AM EST
Rule of Thumb: a mortgage should be 4 times yearly salary to provide a cushion when emergency or other unforeseen circumstances arise.  

From the numbers you quote apartment prices are 33% above that.  Removal of the cushion means a shock to their financial condition will cause a collapse in their financial arrangements.  When enough people have been 'shocked' the micro-economic conditions degrade.  Change the micro-economic conditions enough and the macro-economic system (Fitness Landscape) moves to accommodate: recession or depression.

This is the easily understandable: if people can't pay their bills they won't.  Enough people not paying their bills means (1) they will stop buying new products and services - lowering economic activity - and (2) previous carry-over credit purchases won't be paid either.  The first drives consumer businesses to the wall; the second drives the credit suppliers to the wall.  As micro-economic activity decreases the macro-economic conditions (Fitness Landscape) adjusts to create structural Attributes and Properties responding to micro-economic activity and establishing the macro-economic environment FOR lower micro-economic activity.  

Pretty soon nobody can move because everybody is standing on everybody's foot.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Jun 18th, 2010 at 11:57:22 AM EST
[ Parent ]
You don't understand, austerity causes growth and asset values are neutral.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Sat Jun 19th, 2010 at 02:04:37 AM EST
[ Parent ]
Nononono, asset values are correct.

They accurately describe the consensus of judgement of the intelligent multitude who govern that admirable market, the stock exchange.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 19th, 2010 at 04:00:53 AM EST
[ Parent ]
consensus of judgement of the intelligent multitude

"You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right--and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else."

- Warren Buffett

that admirable market, the stock exchange.

"You're dealing with a lot of silly people in the marketplace; it's like a
great big casino and everyone else is boozing."

- Warren Buffett

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jun 19th, 2010 at 08:15:43 AM EST
[ Parent ]
FT.com / US & Canada - Obama urges G20 to boost demand
President Barack Obama on Friday urged other G20 countries to boost domestic demand and increase exchange rate flexibility to encourage global growth and rebalance the world economy.

In what appeared to be a warning aimed at China ahead of next weekend's meeting of G20 heads of government in Toronto, the White House released a presidential letter saying: "I also want to underscore that market-determined exchange rates are essential to global economic vitality."



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Jun 18th, 2010 at 11:52:10 AM EST
The planet CANNOT support 1 billion Chinese at Western levels of consumption.  The planet CANNOT support 1 billion Westerners at the current Western levels of consumption either.

Since it can't, it won't.

Obama's demand "to boost domestic demand and increase exchange rate flexibility to encourage global growth and rebalance the world economy" is straight from La-La Land.

 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Jun 18th, 2010 at 12:07:12 PM EST
[ Parent ]
Here's a list of fiscal turnarounds, which are supposed to serve as role models. What can we say about them?

That, if you're a supply-sider, you'll say fiscal austerity caused growth; whereas, if you're sane, you'll say that growth allowed a public budget surplus.

Did Clinton's drive to balance the budget cause the dot-com bubble or was the monetary bubble associated with the growth of the internet since 1995 that allowed Clinton to balance his budget?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Sat Jun 19th, 2010 at 02:20:27 AM EST


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