There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.
Discuss:
- The merits of competing theories.
- The role of the government in managing the economy.
- The causes of and solutions to our current economic woes.
- Comparisons between the economic systems of different countries.
- Theoretical and existing alternatives to our current market system.
edited 17th Dec '12 10:58:52 AM by Topazan
Blowout soon fellow Stalker
Also it's equally an interesting look at how the traditional "cut taxes" approach to favoring the wealthy can actually harm them,
Oh really when?
Lost in Space
Yes. The loss of home values trickles down through the entire market, and this isn't just about billionaires losing out; it affects a lot of people in that "entry-level rich" bracket where they aren't part of the wealth club but have a drastically reduced safety net. $200k income may seem rich to a lot of people, but in America it puts you in a precarious position policy-wise.
Edited by Fighteer on Nov 29th 2019 at 6:38:55 AM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Is a second economic miracle in Japan possible?
Lost in Space
![[up]](https://static.tvtropes.org/pmwiki/pub/smiles/arrow_up.png "[up]"){kind=icon}
Could you be more specific?
Who Am I?
Possible yes, likely no. The barriers holding back Japan are cultural and political, not economic. An aging population votes it's interests, and uncertainty and risk in the pursuit of innovation and productivity are not their priorities. The number one thing Japan could do to jumpstart it's economy would be to encourage foreign immigration. I'm not holding my breath.
"We learn from history that we do not learn from history."
The Best Worst Psychonaut
In the US Politics thread, I've been asking about what happened to all those recession scares from earlier this year. I'm actually studying business right now but I can't for the life of me wrap my head around economics - but a cursory search of the latest news seems to imply that they somehow 'stopped' this supposed recession from happening or it otherwise just vanished and now everyone's confident that there won't be one.
...Does this mean we should be concerned? I mean, IIRC, nobody saw the 2008 recession coming until it happened, either. :V
"If you think like a child, you will do a child's work."
Captain of the Dead City
People 100% did see the 2008 crash coming. They either warned people about it and were ignored, or made bets that it would happen and made a lot of money.
"...in the end the Shadow was only a small and passing thing: there was light and high beauty for ever beyond its reach."
The Best Worst Psychonaut
Huh. Guess I remembered it wrong. ...Admittedly I was only 13 years old at the time. :V
"If you think like a child, you will do a child's work."
Captain of the Dead City
At the time the media was all WHO COULD HAVE SEEN THIS COMING, but it's not super hard to find the people who saw it coming when looking at it in hindsight.
"...in the end the Shadow was only a small and passing thing: there was light and high beauty for ever beyond its reach."
Lost in Space
There's a meme in economic circles: Economists predicted 50 of the last 3 recessions. It means that it's very easy to predict doom constantly and then trumpet those times when you were right as proof of your amazing genius.
Searching for recession indicators occupies a lot of time among a lot of people, but it's only possible to know for certain who did the best job in hindsight.
What Keynesian economists like Paul Krugman are saying is that some of the indicators are present, and thus we should be wary, but right now the U.S. economy is best described as shuffling along on a sort of cruise control, staying above recession but not showing any signs of breaking out into unrestrained growth.
We can look at a few specifics:
- Trump's tax cuts had a very brief, very small stimulus effect, but that's long since dried up and the promised growth from businesses reinvesting their tax windfall has completely failed to show up... something that was taken as given by everyone not caught up in the right-wing information bubble.
- The additional deficit and debt accrued as a result of the tax cuts have not caused any problems, validating the orthodox belief that sovereign debt is not a catastrophe waiting to happen.
- The abject failure of Congress to pass any significant legislation besides the tax cut has been something of a boon in that it allows for predictable and stable business investment.
- The trade wars, therefore, are the largest unpredictable factor, and are widely blamed for weakness in investment.
- There's nothing in the economy that would seem ripe to burst and trigger a credit-crunch recession. There's noise about subprime auto loans and student debt, but those are a much smaller sector of the credit markets than home mortgages and thus less likely to trigger a crisis.
- Unemployment isn't showing any spikes; there haven't been any spectacular bankruptcies or closures, certainly nothing that the market hadn't already priced in.
- The Federal Funds Rate remains very low, albeit above zero. There's very little room for it to go down to stimulate growth in the event of a downturn, but also no sign of significant inflation to prompt it to be raised.
In other words, we're stalled in a low-growth, low-unemployment period with no clear exit, good or bad.
Edited by Fighteer on Dec 20th 2019 at 12:29:15 PM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Who Am I?
OTOH, unemployment has hit record lows, and wages are staying ahead of inflation.
"We learn from history that we do not learn from history."
Lost in Space
Those low unemployment numbers should be pushing massive growth and corresponding inflation, but what we've seen instead is a remarkable lack of wage pressure, meaning that despite more people having jobs, those people aren't making more money, or certainly not as quickly as they would be expected to. Fully half of U.S. workers routinely see zero wage increases annually, and changing jobs doesn't help because their new employer won't pay them any more.
The orthodox viewpoint is that low unemployment should lead to higher demand for labor, forcing businesses to raise wages to attract people from their competition, but that isn't happening. Certainly it's not happening systemically. So what's the cause of the imbalance?
Some people think it's employer power: many of the jobs are contract or zero-hour work, where the business sets all the terms. They don't care if you quit and work somewhere else because they have nothing invested in you. The unprecedented weakness of organized labor surely doesn't help either.
Another possibility is that there's still so much slack in the economy that we need multiple years of extremely low unemployment to push growth back to the pre-2008 trend.
A third is that the consumer economy that we've been accustomed to since the 70s is a mirage, built on consumer debt instead of organic wage growth. We've been putting a big chunk of our economy on the charge card, and we're hitting a wall where that simply can't sustain growth any more.
Edited by Fighteer on Dec 20th 2019 at 3:14:45 PM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Who Am I?
A fourth possibility is conspiratorial in nature: that large employers have been hiring in order to help Republican chances in the 2020 election: it's basically an investment in tax breaks and deregulation for them. But they don't really want to invest in new employees, so they keep wages low. Watch for unemployment to go up as an aftermath of a Republican victory.
I've been reading Paul Krugman's new book, "Arguing With Zombies", a collection of his NYT columns for the last few years, and I highly recommend it. The thing I like best about it is that Krugman finally gets it: one of my biggest frustrations with him in past years has been that he always seemed willing to accept the arguments of conservative spokesmen at face value, even while pointing out how stupid they were (Krugman's take down of the "Laffer Curve" is a classic). He always seemed ready to believe that the others side believed what they said. But now he gets it—he finally realizes that the right wing is not arguing in good faith. He calls the Republican tax cuts a "scam", their attempts to deny climate change is "depraved", and the GOP is "an authoritarian regime in waiting." The only thing missing is a discussion of targeted propaganda messaging on social media.
He now realizes that the Republican party will say or do whatever they have to in order to acquire and keep political power. If only more people did as well.
"We learn from history that we do not learn from history."
Lost in Space
I've been thinking about buying Krugman's book. It looks great.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
My Hair Provides Affordable Healthcare
Some small businesses say more needs to be done as counterfeits continue to eat into their sales.
The Department of Homeland Security reported seizures of counterfeit goods at U.S. borders have increased ten-fold over the past two decades, with nearly 90% of seized products in 2018 arriving from mainland China or Hong Kong.
This is why intellectual property matters, it's not just mega corps screwing each other over, smaller economic actors tend to be even more vulnerable.
"Sandwiches are probably easier to fix than the actual problems" -Hylarn
Who Am I?
And the new book by Thomas Piketty is out! Capital and Ideology
I'm really excited by this, his previous book was a real eye opener for me. It seems to be focused on the political sources of wealth inequality.
Whelp, I guess that's another book to add to the Amazon wishlist.
I swear, it's worse than Steam 
Redmess
In the coronavirus thread, we came across the question of whether or not we are in a recession at the moment, and what the difference is between a recession and depression. And whether or not a depression is likely to happen now that things are escalating around the world.
Optimism is a duty.
Lost in Space
Ooh, this is right up my alley. I was just talking about it in the mod chat.
The danger of a crisis like this is that people and businesses dramatically slow down their spending of money. This in turn leads to calls on debt, triggering bankruptcies and defaults. The economy enters a period of deflation: strong downward pressure on both prices and incomes. The classical antidote is the government acting as a pump to increase total spending, using its exclusive powers to run an unlimited deficit.
Of course, conservatives hate this, and so we see our ultimate dilemma. This crisis is not made by people per se, but it will become much worse because of people, in positions of power, choosing to do the wrong thing for reasons of ideology.
A recession is technically defined as a certain number of consecutive periods (I think it's three fiscal quarters, but don't quote me on that) of negative GDP growth. A depression has no technical definition; it's a "we know it when we see it" sort of thing.
Whether COVID-19 creates the necessary conditions for a global recession and/or depression will depend almost entirely on how governments react to the forthcoming fiscal crisis: businesses closed, income lost, production slowed. If they react intelligently, having learned from the lessons of 2008-2010, then they could come out of this reasonably unscathed. Of course, we all know how likely that is.
For example, a debt holiday, halting all mortgage note , credit card, and student loan payments for three months, would be super helpful.
Edited by Fighteer on Mar 17th 2020 at 1:55:39 PM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
it seems that the coronavirus is also biting austerity in the ass
Bumbleby is best ship. busy spending time on r/RWBY and r/anime. Unapologetic Socialist
Redmess
Yeah, as if the US deficit wasn't bad enough as it is.
Optimism is a duty.
Lost in Space
The worry is that politicians will attempt austerity in response to the recession... again, and fail even worse this time.
Deficits are irrelevant. There, I said it. Now, that is not precisely accurate. However, in a fiscal crisis, such as a recession, governments should run deficits in order to sustain the desired amount of private spending. In the opposite situation (a rising, self-sustaining economy), governments should run surpluses to keep inflation under control. This is Economics 102, right after you learn the basics of supply/demand and trade.
The key insight that contributes to this is that a sovereign currency issuer is not balance-sheet constrained: it does not need to balance its income with its spending. It can create (or destroy) debt as needed. The contrary idea is a popular conservative myth.
Edited by Fighteer on Mar 17th 2020 at 3:15:58 PM
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Redmess
Wouldn't destroying debt come with it's own consequences, though?
Optimism is a duty.
He's saying home values are 4% lower that they would otherwise have been, so obviously the more expensive your home the harder the hit, but it actually affects everyone.
"We learn from history that we do not learn from history."