The Paul Krugman Thread

It's mostly on his blog (which you'd have to trawl through), but to simplify things a bit:

Krugman is against Austerity because how Europe and Republicans are doing it, there's two things he's objecting to:

A) Austerity in practice leads to increased unemployment, which leads to diminished productivity, but more importantly: It leads to ruined lives. People can lose their homes, get very ill and not get treated for it, or get shuffled onto welfare programs, which while useful, it tends to suck to be on welfare?

Basically he's concerned with the human factor that he does not like people being forced to live shittier lives.

B) Austerity tends to be used as an smokescreen by Right Wing Politicians and Businessmen to try and force cuts to the Social Safety Net. The reasons for why tend to differ, such as some just don't like the idea of money and resources being redistributed to those beneath them in the social structure, while some think said nets encourages people to not build themselves into better, stronger people who can pull themselves up by their own bootstraps and seek out their own manifest destiny.

TL;DR: Krugman doesn't like Austerity in recessions and depressions because it leads to increased human suffering, and believes debts should be dealt with, just not while you're in the middle of an economic recession/depression. (Which he feels the U.S. is technically in, or just BARELY holding off.)

I was trying to summarize the principle without the moral factor, but Krugman also notes that austerity under the current circumstances exacts a horrible toll in terms of human suffering, most of which is completely unnecessary. An essential part of modern economic conservatives' doctrine seems to involve inflicting vast amounts of pain on people whose only sin is not having access to capital resources, while placing the blame on their "lack of drive".

edited 9th Jul '13 8:37:13 AM by Fighteer

Thanks for these summaries, guys!

Since we're back on these topics, Krugman discusses more of this "missing white voter" problem by observing that it doesn't actually exist. He also observes that the hoarding of cash — that is, paper money — is a symptom of a dearth of things that are worth investing in.

edited 9th Jul '13 12:46:59 PM by Fighteer

I wonder if that can happen to a Government? It has money, but doesn't know where to spend it.

An earlier point:

They can still run out of money, or be very close to doing so, especially if they have a lack of foreign currency or Balance of Payments issues. If not, why would a country need to get loans from other countries in the first place, just to keep going?

@Greenmantle: We're talking about the difference between a country with its own currency and a country that uses a common currency or a gold standard or similar.

A country that doesn't borrow in its own currency is indeed on a fixed budget, like a household or business. It has little or no flexibility to engage in fiscal or monetary policy reactions to events. It is forced to amass a hoard of cash in order to deal with emergencies, and if that runs out and it's unable to borrow, it's fucked.

If Britain were borrowing in pesos or dollars, yes, it would run the risk of being unable to repay its debts, but it hasn't done that since World War Two. Britain issues debt in pounds, just as the U.S issues debt in dollars. If some unimaginable crisis were to happen and every holder of U.S. bonds decided to take their money out at the same time, the Federal Reserve could spontaneously generate dollars to cover the debts — or, more specifically, it would buy up all the bonds and hold onto them, which is exactly what was done in the various rounds of quantitative easing since 2008. Fully monetizing the debt would cause other problems, but insolvency is not one of them.

The only limit is statutory — e.g., things like the debt ceiling, which was arbitrarily imposed by Congress as an illusion of control over debt issuance despite it being both irrational and counterproductive. It forces us to a "gold standard" when the whole point of getting off it was to avoid arbitrary constraints on the money supply.

edited 9th Jul '13 2:16:04 PM by Fighteer

PBS published an article in which Krugman was critical about their reporting on the unemployment report:

"...He began: "OK, this is really depressing. The PBS Newshour isn't always a good place to get the best analysis, but it's a terrific place to take the pulse of Washington conventional wisdom — and as Baker notes, that conventional wisdom has clearly swung to the view that our high unemployment is 'structural', not something that could be solved simply by boosting demand."

"In short, the data strongly point toward a cyclical, not a structural story," Krugman concluded, "and there is broad agreement, for once, among economists on this point. Yet somehow, it's clear, Beltway groupthink has arrived at the opposite conclusion — so much so that the actual economic consensus on this issue wasn't even represented on the Newshour."

I suspect the reasoning in Wash DC goes something like "if unemployment is structural, there is no reason to provide additional stimulus to the economy" but I'm speculating.

Krugman and Baker were criticizing PBS Newshour for not even bringing up the cyclical argument. He's discussed the zombie idea of structural unemployment before and noted that, were it occurring, we'd expect to see extremely high demand and consequent increasing wages for some job categories. Where is it?

Ultimately, this insistence that we have somehow permanently lost the capacity to employ people is little more than a rationalization to ignore fiscal stimulus as a potential solution.

To give some idea of the zombie nature of the structural myth, this is the same rationalization — nearly word for word — that was brought up in the Great Depression as an argument against fiscal policy. What got us out? Unrestricted government spending; i.e., stimulus.

Edit: Anyway, even if it's true, the profits from that increased technology that's replacing our workforce have to be going somewhere. Tax that and use it to guarantee a minimum standard of living, and you can have the best of both worlds.

Otherwise you're being hypocritical: you assert that technology is enabling greater productivity with fewer workers, tell people that rather than job programs, what they really need is better skills and "gumption", then deprive them of the means to acquire said skills.

Let's just call it what it is: a recipe for keeping the poor from rising above their station, while justifying the wealthy swimming around in ever-increasing piles of cash.

edited 16th Aug '13 8:06:41 AM by Fighteer

This response tries to say that Krugman is talking about something different, by saying "Krugman's idea of structural unemployment means the natural rate of unemployment has gone up" and then gives his own explanation of what structural unemployment means, that would have the conclusion that the natural rate has gone up.

People who don't know what they're talking about. le sigh.

Citing Matt O'Brien, Krugman makes an interesting observation: Republican positions on CPI and inflation depend on which political point they are trying to make, a bit like quantum mechanics.

When they want to justify noninterventionist Fed policy on the basis that quantitative easing is causing inflation, they claim that the CPI understates True Inflation. When they want to justify cuts to Social Security, they claim that the CPI overstates it, because they want to chain benefits to the CPI.

Once again, stupid versus evil.

edited 16th Aug '13 12:38:41 PM by Fighteer

It seems the NYT website is down. I can't check Krugman's blog.

This has led me to a state of minor panic!

It's another hack. This time they think a pro-Syrian government group is responsible.

Some Krugman on the more recent developments.

The latter post may be a good insight into why America has never really drawn politicians from the Corporate sector, despite all the public prominence tycoons have enjoyed from the gilded age on forward. While big business has always had its hands in American politics, big business in America has never been *politicized*, much like how our military has never been politicized.

Compare this to the Far East, where Shinzo Abe comes from (i think) Kobe Steel, or the former South Korean president who came from Hyundai. Our President Ford wasn't the Ford you would think of. The only ones who were good at it that I can think of were the Rockefellers (Ford's VP)

From the Krigman article: "...Coming back to the class warfare issue: my working theory is that wealthy individuals bought themselves a radical right party, believing — correctly — that it would cut their taxes and remove regulations, but failed to realize that eventually the craziness would take on a life of its own, and that the monster they created would turn on its creators as well as the little people.

And nobody knows how it ends."

Actually, I think we do, but pointing out the obvious would risk a Godwin.

Paul is confronting his helplessness to affect the outcome of this situation, much like the rest of the sane people of the country.

Happy Halloween from Chez Krugman. Instead of candy you get depressing news about class warfare.

I'm not sure how you make war on the poor while simultaneously generating more poor. It seems we're just stratifying society into extreme blocs, not really oppressing one or the other. A war on non-whites, sure, but there are plenty of poor republicans.

edited 2nd Nov '13 5:55:56 AM by johnnyfog

Krugman thinks it's about race not just class. Aid to the poor disproportionally helps people who vote Democrat- who happen to be poor blacks. It's not complicated.

In today's punnage, may I proudly present the Confidence ... er... just look at it.

It's nice to see that no matter how educated you become or how famous you become or how well-respected you are in your field, you can still retain a deep-seated fondness for truly terrible puns.

Puns are the peanut butter that binds the sandwich of humanity together.

"The Mutilated Economy": Krugman concludes that politically motivated debt-reduction policies are doing irreparible damage to the US economy. Based in part on a presentation of a paper authored by the Federal Reserve's Director of Research and Statistics.