http://nymag.com/daily/intelligencer/2013/04/grad-student-who-shook-global-austerity-movement.html The academic basis for the lunacy that is austerity, if there ever was one, has been undone by what at best could be seen as a sloppy Excel mistake, what at worst could be seen as academic tampering. Reinhart and Rogoff were the retreats of Paul Ryan et. al whenever they needed something, anything, to prop up their delusions. Now we know that both, sadly, aren't very handy with Excel. This is still ignoring the critical flaw of causality---do high debt-GDP ratios cause slow growth, or does slow growth cause high debt-GDP ratios? Regardless, now that there are severe methodological failures in that study, I don't even think it needs to go through that examination again. There has been a conclusive victory against austerity, to say the least.
Austerity is a failure, but good for duplicate thread starting http://bbs.clutchfans.net/showthread.php?t=237174
the solution to a contractionary fiscal policy that especially hurts your economy in a time of slack demand is to not contract it, and not hurt your economy. This is obvoius to any idiot who can do 1+1 and doesn't think bitcoins are going to replace dollars next year.
Why does it have to be less than 30 words? That's kind of limiting in light of the deep complexity of our economy.
In the euro area? A looser monetary policy. Full stop. What's worse, a) the destruction of the euro and a decade of economic contraction prior to it, or b) 2.5% inflation. You would dimly answer a), because you have been taught by Dr. Paul that it's a morally superior position. This answer, while purportedly morally superior, has the signficant drawback of being completely idiotic.
because any old fool can link to Krugman's latest puff piece and reams and reams of tangentially related articles. It takes work and thought to actually summarize something. I've never seen that from Northside -- he prefers to simply complain and tell us why things WON'T work -- which is much easier than framing a solution.
Oh, I had replied to that thread LOL the title of this thread gets more to the point, and the article is slightly more interesting imo.
If you guys want three key takeaways a la McKinsey (though I personally prefer BCG) 1-Aggressive fiscal and monetary policy 2-Controlling downside of risk of said aggressive policy through stricter regulation of banking sector, spearheading a push towards the real economy rather than the credit/oil economy. Push investment towards tech, and the real creators. 3-Progressive policies designed to attract top talent from around the world, and the continual quality of human capital accumulation. This includes (but does not preclude other possibilities), laxer immigration rules, legalizing gay marriage, and providing good healthcare and education to all.
While I agree that austerity makes no sense, I'm going to have to disagree with you on Abe. I'm really not a fan of what's going on in Japan right now. I have no problem with the a central bank maintaining liquidity in the banking sector. I also have no problem when it performs asset purchases to ensure banks are well capitalized so that there are no problems on the supply-side of private lending. After all private lending is the lifeblood of small businesses, which are in turn the lifeblood of the economy. However, I draw the line when the central bank (and other leaders) of the world's third largest economy comes out and sets explicit targets for their stock market. Can you imagine Ben Bernanke coming out and saying, "We'll buy anything and everything at whatever price...using our endless supply of dollars...to ensure the S&P500 hits 1700 and stays there!" And for what reason? To create a faux wealth effect in the private sector in hopes of jump-starting the economy. That very same wealth effect was the reason Japanese corporations overleveraged in late 80's and resulted in the lost decade(s).
Targeting specific asset prices is just taking central bank communication to another level. I don't particularly think it's a problem, insofar as we know that the FOMC is explicitly targeting asset prices up (we just have no idea what their crucial support levels are). I think Ben might actually be a fan of things like that, as he's made it abundantly clear through his actions and academic papers that he believes clear communication with market agents is the new key to proper central banking. You are right that overleveraging caused the original crisis in the first place (though the BoJ stepping into that bubble too hard didn't help), but I think central banks around the world now are very cognizant of the downside risks of creating too much credit. Witness the Bank of Canada and the government's coordinated actions to try to slow down the real estate bubble that is developing. Liquidity maintenance is, I don't think, an adequate option for the severe downturn Japan faced, or the downturn that threatens America. Yes, there is still a need for structural reforms of both economies (which can be accomplished with a plethora of progressive policies) with a focus on creating human capital and increasing productivity. Credit won't solve everything. But it is a start. And once that start has been sparked, then you work on regulating the downsides of the credit cycle through stronger bank regulations, and investment in the productive side of the economy (think Google, Oracle etc.).
Northside, I guess we'll have to agree to disagree. I just don't think central banks should be targeting asset prices to create an illusory wealth effect for the private sector. It's dangerous when the population's paper wealth exceeds the actual fundamental financial underpinnings of the economy. Those bull markets are far too transient, and the resulting busts can really hurt (i.e. 2001 and 2008). I have no issue with running loose fiscal/monetary policies to help the private sector through the deleveraging process, but pursuing policies to make people "feel" richer so they'll spend more? Not so much...particularly while they're still in the midst of deleveraging.
Fair. With that said, this downturn was created by illusory wealth, and it can only be (in the short-term) realistically solved with illusory wealth. So long as investment and money flows into long-term structural changes, I don't think anyone's worse off. I do see how mismanagement, and letting the credit cycle go too high again would be devastating (and I'm hoping central bankers have a good pulse on that as well.)
I'm for gay marriage. But what does that necessarily have to do with helping the economy? Its cuz gays already are better than average economically even with the prejudices against them. In a round-about way its most of us might need to learn something from gays as well. But I know wedding planners would looooove to have a 5-15% extra business from gay weddings so thats how it'd help some lol. I guess I see it now. Its doing away with any social "de-incentivizer" on anyone, open borders so that its "no talent left behind".
