Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

Krugman Says Austerity Obsession Will Breed Long-Term Problems

Recommended Posts

Any fule can create 'GDP growth' by borrowing money and spending it. The hard part is not crashing the 'GDP' when you stop borrowing money and spending it, because you've created a ******** zombie economy which exists primarily to suck up government spending rather than service real demand, and will collapse when you stop feeding it BRAINS^H^H^H^Hnew debt.

Oh, hang on. That's precisely where we are today.

Any path from here to a real economy has to go through a massive GDP collapse as the zombie jobs and businesses are killed off. Anyone who whines that 'austerity reduces GDP' is just making the problem worse by zombifying more of the economy. They're the guy in the zombie movie who won't shoot the zombie because it used to be his mother, and lets it into the house, where it infects everyone else.

Any fule can create 'GDP growth' by borrowing money and spending it. The hard part is not crashing the 'GDP' when you stop borrowing money and spending it, because you've created a ******** zombie economy which exists primarily to suck up government spending rather than service real demand, and will collapse when you stop feeding it BRAINS^H^H^H^Hnew debt.

Oh, hang on. That's precisely where we are today.

Any path from here to a real economy has to go through a massive GDP collapse as the zombie jobs and businesses are killed off. Anyone who whines that 'austerity reduces GDP' is just making the problem worse by zombifying more of the economy. They're the guy in the zombie movie who won't shoot the zombie because it used to be his mother, and lets it into the house, where it infects everyone else.

Fully agree, and :lol:

Sadly too many anti-austerity types live in the best areas, with high house prices (and some big mortgages). They like it zombie, Gov printing, because they're on the winning side of things.. leaves them untouched and in position. Maintains their asset wealth, and prevents a shakeup of positions in their own area. No austerity so renter-savers can stay in the house price concentration camp of lessors areas.

Share this post


Link to post
Share on other sites

Any fule can create 'GDP growth' by borrowing money and spending it. The hard part is not crashing the 'GDP' when you stop borrowing money and spending it, because you've created a ******** zombie economy which exists primarily to suck up government spending rather than service real demand, and will collapse when you stop feeding it BRAINS^H^H^H^Hnew debt.

Oh, hang on. That's precisely where we are today.

Any path from here to a real economy has to go through a massive GDP collapse as the zombie jobs and businesses are killed off. Anyone who whines that 'austerity reduces GDP' is just making the problem worse by zombifying more of the economy. They're the guy in the zombie movie who won't shoot the zombie because it used to be his mother, and lets it into the house, where it infects everyone else.

Define this "real economy" nirvana of which you speak.

Spending wasn't high prior to the crash. 2.5% budget deficit? Compared to what today? 5.5%? So after 5 years Osborne has managed to run a budget deficit more than twice that prior to the crash and apparently that is the definition of "competence".

What is this obsession with wilfully causing a massive GDP collapse? Who do you wish to "help" by doing so?

How did the loss of output in 2008/9 "help" the economy? Or the debt/gdp ratio? or the lower paid? Or anyone in fact. It's a very puzzling argument frequently made but without any reference to anything apart from Zombie films or some other arbitrary nonsense. Very odd indeed.

Edited by R K

Share this post


Link to post
Share on other sites

Really.

Explain how you would do this whilst continuing to run a deficit.

I think the general idea is that the deficit would be spent on stimulating the economy in a productive way allowing the returns on said investment to grow the economy, thus reducing the debt to GDP ratio.

What in fact happens is the deficit gets spunked on vanity projects and cronyism effectively stopping deficit spending from working. It probably also gets wasted being spent on industry which is obsolete and uncompetitive.

Share this post


Link to post
Share on other sites

Define this "real economy" nirvana of which you speak.

Spending wasn't high prior to the crash. 2.5% budget deficit? Compared to what today? 5.5%? So after 5 years Osborne has managed to run a budget deficit more than twice that prior to the crash and apparently that is the definition of "competence".

What is this obsession with wilfully causing a massive GDP collapse? Who do you wish to "help" by doing so?

How did the loss of output in 2008/9 "help" the economy? Or the debt/gdp ratio? or the lower paid? Or anyone in fact. It's a very puzzling argument frequently made but without any reference to anything apart from Zombie films or some other arbitrary nonsense. Very odd indeed.

there was no loss of output.

there was loss of jobs to global firms.

geddit.

Jobs are going overseas.

but selling their products means low paid jobs for shop workers, order takers and warehouse workers.

Just got myself a job at the NHS....I havent even started yet, but the waste!!!!....but I have already met people in jobs who have no thought, no care about quality, but are paid to be there....is that an economy that will last?...or are we all about to be Chowcheskus orphans...all bedded, all housed, all accounted for and budgeted for, but living in squalor and neglect?

Share this post


Link to post
Share on other sites

Define this "real economy" nirvana of which you speak.

Spending wasn't high prior to the crash. 2.5% budget deficit? Compared to what today? 5.5%? So after 5 years Osborne has managed to run a budget deficit more than twice that prior to the crash and apparently that is the definition of "competence".

What is this obsession with wilfully causing a massive GDP collapse? Who do you wish to "help" by doing so?

How did the loss of output in 2008/9 "help" the economy? Or the debt/gdp ratio? or the lower paid? Or anyone in fact. It's a very puzzling argument frequently made but without any reference to anything apart from Zombie films or some other arbitrary nonsense. Very odd indeed.

The trouble is how much of that spending "bubble" tax revenue? The deficit may in fact be far worse than the numbers indicate, so when the bubble collapses the crash is far worse than it should be.

The debt/GDP ratio can only be fixed by writing off the debt, the claims are impossible to meet but this has huge implications across society.

Share this post


Link to post
Share on other sites

How did the loss of output in 2008/9 "help" the economy? Or the debt/gdp ratio? or the lower paid? Or anyone in fact. It's a very puzzling argument frequently made but without any reference to anything apart from Zombie films or some other arbitrary nonsense. Very odd indeed.

House prices in areas I had been saving to buy in were falling significantly... some value was beginning to emerge... just the occasional house where inheritor/seller wanted to sell.

More people on HPC set to take out mortgages (helping the economy.. banks/revenue for Treasury), who buy in shops.. BTLers getting wiped out...

Instead panic and rates floored, zombification... QE... keeping older winners in position, now more BTL/inheritors renting out again, and more general malinvestment.

Share this post


Link to post
Share on other sites

Yeah, like that was going to happen.

'My policy, if elected, is to raise taxes during this boom to build up savings which the next government can spend in the bust.'

Where the money comes from is less important than how its used. Keynes advocated public sector investment specifically where the private sector is unable or unwilling to provide things efficiently or with a long term view e.g. social housing, infrastructure and other things that would yield some future economic benefit rather than pure monetary easing.

Borrowing to spend on anything that doesn't yield a benefit in excess of the debt servicing costs will eventually lead to the inability to service the debt, its a mathematical certainty, the only variable is how long it takes.

Share this post


Link to post
Share on other sites

Keynes advocated public sector investment specifically where the private sector is unable or unwilling to provide things efficiently or with a long term view e.g. social housing, infrastructure and other things that would yield some future economic benefit rather than pure monetary easing.

If they made any sense, the private sector would be doing them. So Keynes was claiming that government should be spending money on things that make no sense to keep people employed for the sake of employing them.

Japan has been trying that for around thirty years. All they have to show for it is a lot more debt, and a lot more 'infrastructure' that no-one actually wanted.

Share this post


Link to post
Share on other sites

Define this "real economy" nirvana of which you speak.

Real people buying and selling real things for real prices and real reasons. People will still buy food if the government stop subsidizing farmers. No-one will be putting up 'wind farms' when the government stop subsidizing 'wind power'.

Unlike the zombie economy you promote, where governments print money to keep zombie companies operating and zombie workers in zombie jobs, where they compete against real companies with real jobs, and turn them into zombies too.

Edited by MarkG

Share this post


Link to post
Share on other sites

Real people buying and selling real things for real prices and real reasons. People will still buy food if the government stop subsidizing farmers. No-one will be putting up 'wind farms' when the government stop subsidizing 'wind power'.

Unlike the zombie economy you promote, where governments print money to keep zombie companies operating and zombie workers in zombie jobs, where they compete against real companies with real jobs, and turn them into zombies too.

succinctly put. There are no real people in the Keynesian world, only govts.

Share this post


Link to post
Share on other sites

Define this "real economy" nirvana of which you speak.

Spending wasn't high prior to the crash. 2.5% budget deficit? Compared to what today? 5.5%? So after 5 years Osborne has managed to run a budget deficit more than twice that prior to the crash and apparently that is the definition of "competence".

What is this obsession with wilfully causing a massive GDP collapse? Who do you wish to "help" by doing so?

How did the loss of output in 2008/9 "help" the economy? Or the debt/gdp ratio? or the lower paid? Or anyone in fact. It's a very puzzling argument frequently made but without any reference to anything apart from Zombie films or some other arbitrary nonsense. Very odd indeed.

Why do you continue posting? You have been proven correct repeatedly over the past half decade and yet the same old gang pump out the same tired cliches. Genuinely curious.

As someone who has read Keynes I don't recognize the characterisation of his thought on this thread. It is all a bit tiring to read let alone spend time trying to contribute.

Share this post


Link to post
Share on other sites

If they made any sense, the private sector would be doing them. So Keynes was claiming that government should be spending money on things that make no sense to keep people employed for the sake of employing them.

In that case I presume you would argue that having effective solid waste management, clean water, waste water management or public transport in developing countries makes no sense as if it did the private sector would have supplied it already.

Japan has been trying that for around thirty years. All they have to show for it is a lot more debt, and a lot more 'infrastructure' that no-one actually wanted

How do you measure demand for public infrastructure?

Share this post


Link to post
Share on other sites

In that case I presume you would argue that having effective solid waste management, clean water, waste water management or public transport in developing countries makes no sense as if it did the private sector would have supplied it already.

How do you measure demand for public infrastructure?

public infrastructure is provided as a sop to voters to win elections, or as part of a command economy...not many of those last long.

China is a good current example...terrible pollution, and while the stimulus of cheap production keeps the global firms there, a willing people tasting some freedom makes demands on its government.

doesnt mean its going to last...

Share this post


Link to post
Share on other sites

Why do you continue posting? You have been proven correct repeatedly over the past half decade and yet the same old gang pump out the same tired cliches. Genuinely curious.

I've asked the same question before. Can only presume it's because he has some lingering doubt in his position. Unless he's trying to help us from wasting dead-money-renting, fearing we're missing out on the forever HPI.

Also perhaps some of us in the old gang on a site called housepricecrash, expect market conditions to change... rather than your general view in this thread you started (below).

An outcome I resist by not buying at these prices... withholding my spending or directing it in ways which do not assist hpi continuation. Don't come a crying if HPC hits and talk about 'victims'... you can't have it all ways. Although you may be safe from it in a lower-key area of Japan.

[..] I started as a 50% real peak to falls bear but gradually I became of the opinion that the transfer of wealth from the poor to the rich is permanent. The rent seekers have won. I had the money to buy due to savings and inheritance, but I didn't want to hand over that cash to arseholes. I left for Japan (where the wife is from).

[..]The system may still reset in the UK but I don't think so. If we have learnt anything in the last 5 years it is at the governments are in control. The EU has absorbed 50% youth unemployment and has kept going. Everyone seems happy with HTB. The best thing that can happen at this point will be some sort of rinsing of the amateur BTLs with pension companies stepping in to replace and creating secure tenancies. If I was to give advice to anyone it would be to leave the UK. Certainly no young person has any business being the UK. Your country hates you. Get some sellable skills, a foreign language and go.

http://www.housepricecrash.co.uk/forum/index.php?/topic/198873-5-years-on-hpc-some-thoughts/

Edited by Venger

Share this post


Link to post
Share on other sites

public infrastructure is provided as a sop to voters to win elections, or as part of a command economy...not many of those last long.

China is a good current example...terrible pollution, and while the stimulus of cheap production keeps the global firms there

That's not really correct anymore, Chinese wages are not really competitive compared to SE Asia. What keeps production there (currently) is that their infrastructure is far superior to SE Asia where it is largely non existent. What you lose in wages you make up for in being able to ship goods in and out quickly and cheaply. At the moment that is.

Share this post


Link to post
Share on other sites

You completely mistate and/or misunderstand what happened. Presumably for political reasons?

You can reduce debt to gdp over say the next 20-30 years without all this stupid front end loaded political clap trap nonsense.

This idea of "pain" being good for an economy is plain silly. Its pure quackery.

"Pain" is a signal from the brain to stop doing what you are doing because it is harming you. If you ignore that signal you will die or permanently harm yourself.

you mean the pain an addict feels in withdrawal or the pain a drunkard feels when he needs the next drink.. And what is it that will kill them ... The pain?

Share this post


Link to post
Share on other sites

In terms of budgeting, any fool can create the appearance of being wealthy by simply spending more than they earn. A bit of deft cash flow management together with ducking weaving to borrow from Peter in order to meet repayments to Paul gives the fool the chance to buy all the fancy bling; (in terms of a foolish government, "regeneration" projects, new hospital buildings, new school buildings, an army of social intervention jobs etc).

Unfortunately, there comes a point where it is necessary to repay money that has been borrowed and no one will continue to lend to the fool because they have done a credit check. At that point the high spending life style stalls and the standard of living falls like a stone.

At the heart of the issue is how government spends the money it borrows. The last government spent it on projects that do not and never will repay the cost of finance. Hence borrowing keeps rising. A wise government spends money of creating the conditions for the economy to work, of which the most basic of all is transport infrastructure.

Share this post


Link to post
Share on other sites

That's not really correct anymore, Chinese wages are not really competitive compared to SE Asia. What keeps production there (currently) is that their infrastructure is far superior to SE Asia where it is largely non existent. What you lose in wages you make up for in being able to ship goods in and out quickly and cheaply. At the moment that is.

Exactly, times are a changing, and even Chinas economy cant keep going without props, knowingly false figures and looser lending.

The Global players will be moving along.

Share this post


Link to post
Share on other sites

In that case I presume you would argue that having effective solid waste management, clean water, waste water management or public transport in developing countries makes no sense as if it did the private sector would have supplied it already.

How do you measure demand for public infrastructure?

Opportunity cost , is a phrase left out of the Keynesian lexicon. The seen and unseen consequences of unilateral govt action distorting the economy , a corollery of a parable as described by bastiat in the Broken Window.

Just because govt provides something , you cannot say private enterprise would or would not not have provided it. It exists already by fiat, the opportunity cost is unquantifiable so to make definitive statements about what might have been is folly. Keynesians enjoy folly as a justification.

http://economics.about.com/od/output-income-prices/a/The-Broken-Window-Fallacy.htm

Share this post


Link to post
Share on other sites

Opportunity cost , is a phrase left out of the Keynesian lexicon. The seen and unseen consequences of unilateral govt action distorting the economy , a corollery of a parable as described by bastiat in the Broken Window.

Just because govt provides something , you cannot say private enterprise would or would not not have provided it. It exists already by fiat, the opportunity cost is unquantifiable so to make definitive statements about what might have been is folly. Keynesians enjoy folly as a justification.

http://economics.about.com/od/output-income-prices/a/The-Broken-Window-Fallacy.htm

Since moving to Japan I have become less impressed by these assertions of the Almighty Private Sector. I routinely visit SE Asian countries as part of my work and see the magic of the private sector in action when the govt has little power. The private sector does not, in my experience, automatically step in to solve problems. Take for example a city in SE Asia where septic tanks are poorly constructured/non-existent and are leaking raw sewage into the water table. At what point do we say the private sector is not providing and do something? Before or after everyone has cholera?

Share this post


Link to post
Share on other sites

Since moving to Japan I have become less impressed by these assertions of the Almighty Private Sector. I routinely visit SE Asian countries as part of my work and see the magic of the private sector in action when the govt has little power. The private sector does not, in my experience, automatically step in to solve problems. Take for example a city in SE Asia where septic tanks are poorly constructured/non-existent and are leaking raw sewage into the water table. At what point do we say the private sector is not providing and do something? Before or after everyone has cholera?

probably not demanded...therefore, not supplied.

Just because you live in a hi-tech, clean, sanitary world full of footpaths and motorways, doesnt mean that has to be in demand everywhere.

Share this post


Link to post
Share on other sites

Since moving to Japan I have become less impressed by these assertions of the Almighty Private Sector. I routinely visit SE Asian countries as part of my work and see the magic of the private sector in action when the govt has little power. The private sector does not, in my experience, automatically step in to solve problems. Take for example a city in SE Asia where septic tanks are poorly constructured/non-existent and are leaking raw sewage into the water table. At what point do we say the private sector is not providing and do something? Before or after everyone has cholera?

Sounds like the early Victorian era when the rich refused to build sewers as cholera only killed poor people, it wasn't until they started to get ill that suddenly solving the problem and spending the money became a popular idea. However now the rich can simply ship in water and avoid the problem, so no incentive to fix the infrastructure.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 395 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.