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Peter1469
05-09-2012, 06:20 PM
Here is a very good, but long article explaining how the US and Europe have arrived where we are today, economically speaking.

http://www.foreignaffairs.com/articles/134863/raghuram-g-rajan/the-true-lessons-of-the-recession

According to the conventional interpretation of the global economic recession, growth has ground to a halt in the West because demand has collapsed, a casualty of the massive amount of debt accumulated before the crisis. Households and countries are not spending because they can't borrow the funds to do so, and the best way to revive growth, the argument goes, is to find ways to get the money flowing again. Governments that still can should run up even larger deficits, and central banks should push interest rates even lower to encourage thrifty households to buy rather than save. Leaders should worry about the accumulated debt later, once their economies have picked up again.

Chris
05-09-2012, 06:58 PM
The italicized citation assumes a Keynesian view of what is conventional economics, one that assumes we can borrow without burden because we owe it to ourselves.

To be up front I haven't read the linked article yet. And the second half of my comment draws on Boudreaux on Public Debt (http://www.econtalk.org/archives/2012/03/boudreaux_on_pu.html).

But I promise to read the article soon as possible!

Peter1469
05-09-2012, 07:08 PM
Right. The italicized portion describes the common view of our economic problems.

The first sentence of the second paragraph says:

This narrative -- the standard Keynesian line, modified for a debt crisis -- is the one to which most Western officials, central bankers, and Wall Street economists subscribe today.

Peter1469
05-09-2012, 07:38 PM
It looks like the website wants you to registrar now. If you go to RealClearPolitics.com you can link straight to the entire article.

Chris
05-09-2012, 08:11 PM
And the next sentence says "Keynesian pundits have been quick to claim success for their policies, pointing to Europe's emerging recession as proof of the folly of government austerity." Like Krugman. But so thoroughly false. See Austerity Lives on in Our Minds and Hearts... (http://reason.com/blog/2012/05/07/austerity-lives-on-in-our-minds-and-hear), Show Me the ‘Savage’ Spending Cuts in Europe, Please (http://www.nationalreview.com/corner/299233/show-me-savage-spending-cuts-europe-please-veronique-de-rugy#), which I posted elsewhere, but here's another: Show me the numbers! (http://cafehayek.com/2012/05/show-me-the-numbers.html)
Krugman claims in today’s NYT:
What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.So the idea that “slashing government spending” might be healthy for an overly indebted economy has been “overwhelmingly refuted” by the experience of the past two years.

Show me the numbers, Paul. Come on. Show me the data that proves the first part of your claim, that government spending has been “slashed.” (There’s that word, and claim, again.)

This should be easy. Just show me the data. Please.

It's conventional wisdom got into this crisis.

Chris
05-09-2012, 08:12 PM
And the next: "In fact, today's economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side."

Hey, I like this author! That's what I argued with dagny wherever she ran off to.

MMC
05-09-2012, 08:42 PM
I take it that Krugman.....couldn't show him the money. So to speak.....huh?

Chris
05-10-2012, 05:55 AM
Russ Roberts, economist at Georgetown, who does EconTalk podcasts I listen to, has a long-standing invite for Krugman to appear on his show. Krugman steadfastly ignores it.

Peter1469
05-10-2012, 05:01 PM
Krugman is a political hack. When he is challenged by a non Keynesian on TV he visibly shakes. He doesn't have the spine for TV. He should stick to writing.