First Weicker, now Krugman?

Krugman says we’re applying austerity budgets at exactly the wrong time, and I think he might just be right.

10 Comments

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10 responses to “First Weicker, now Krugman?

  1. cos cobber

    we cant spend our way out of our problems either.

    we need to find a way to curb our trade deficit (bear in mind i’m a free trader too). 1/2 of our deficit is generated by energy imports. permitting nat gas and nuclear as the fuel for the next 30 years while we continue to work on the next thing is what we must do. nat gas is in domestic abundance and electric cars (dont laugh, they could work well in the south where harsh winters wont kill the batteries) could be powered by new nuclear plants.

    Anyways, every dollar we can keep in the US for domestic energy = immediate debt free and tax increase free stimulus.

  2. Anonymous

    Hmm, Chris, I don’t know if you understood Krugman’s argument. He’s saying we need to delay deficit reduction, and focus in the immediate short term on economic recovery. He, and basic economic theory, suggest running short-term deficits and increasing public spending (in the short term) to make up for lagging demand.

    If you agree with him (and the bulk of economists), that’s great — but he’s calling for more stimulus, not less.

  3. Retired IB'er

    The problem is that politicians have shown they have an inability to save in the good times so they can spend in the bad. So now we find ourselves between the rock and hard place having squandered our debt capacity…

  4. Riverside Dog Walker

    http://inflation.us/videos.html

    When you have 54 minutes, watch the Meltup video on inflation. Our own Peter Schiff is among those speaking. I think we are all screwed.

  5. Anon

    There was an opinion from Caterpillar’s CEO on the wsj – May 3, 2010. I couldn’t agree more with him that the budget deficits need to be balanced over the course of the business cycle.

    “Restore fiscal discipline. Simply stated, we must balance the books. This means deciding how much government we want and the best way to generate the tax revenues to pay for it.

    To get there, federal and state governments must be required to use the same transparent accounting standards required of corporations for employee retirement benefits. With baby boomers retiring, we have a ticking time bomb on our hands. Transparency would make it clear to everyone just where the unfunded obligations are and get us on road to begin funding them. Further, we should mandate that federal budget deficits be balanced over a business cycle.

    http://online.wsj.com/article/SB10001424052748704471204575210464156095060.html

  6. Jimbo

    What this idiot doesn’t realize is that government should always practice “austerity” even in good times.

  7. Towny

    Where is the outrage?

    The federal govt/congress, has stolen trillions from the coffers of social security and no one seems to care.

  8. Anonymous

    Jimbo,

    Who’s “this idiot?” Nobel Prize winning economist Krugman, or someone else? Anyway, what Krugman and other liberal economists are arguing is exactly that it’s important for government to practice austerity in good times, and to run short-term deficits to combat down times like recessions and depressions. You’ll remember that it was a Democratic president, Bill Clinton, whose 1993 budget (which, by the way, passed with nary a Republican vote) led to years of balanced budgets and even budgets in surplus.

  9. Priapus

    If you aren’t outraged, you aren’t paying attention.

    Gold=Hold.

  10. out looking in

    Krugman is an inflationist. There is not ONE example where an economic power has borrowed 13% of GDP to finance itself in (relative) peacetime and achieved lasting economic growth. The entire theory is based on what economists think the FED did wrong in the 1930s. japan has tried QE (quantitative easing) for years and what do they have to show for it? A debt to GDP ratio over 130%- luckily for them they are a country of savers PLUS the government forces other government run pension plans to purchase their debt. No such luck in profligate America. So our answer is to force the (prudent ) savers to take massive risks to avoid having their savings evaporate with 0% interest rates, when a lack of domestic savings will prove to be our downfall. The Fed can levitate asset values for years with their shenanigans, but eventually the chickens will come home to roost. That time is coming in no more than three years tops. The Fed will take no prisoners- so don’t drink their koolaid and get caught massively long risk assets at the next top- this is what the want (inadvertantly- since they want everyone buying risk assets). The bottom line is that we are fucked- and we will pay the price as the next phase of deleveraging kicks in when the massively screwed up Fed will be out of bullits, out of tricks, and out of luck. All hail the Maestro- the worst Fed chairman of all time. Now if he had read von Hayek instead of Rand, we would be in so much better shape…