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Thread: IMF Officials: We Were Wrong About Austerity

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    IMF Officials: We Were Wrong About Austerity

    By Mark Whitehouse Jan 4, 2013 1:51 PM CT

    Looks like Keynesian theory woulda pulled us out of this recesson a lot sooner if we didn't get on this austerity kick that the Republicans seem to favor whenever a Democrat is in office.

    <
    Sharp spending cuts and tax increases have long played a central role in the International Monetary Fund's prescriptions for governments in financial distress -- most recently for the struggling members of the euro area. Now, officials at the world's primary arbiter of fiscal prudence are recognizing that such austerity can do a lot more damage than previously thought.>


    <
    In a paper presented today at the annual meeting of the American Economic Association, two IMF officials -- chief economist Olivier Blanchard and economist Daniel Leigh -- elaborated on the findings and their implications. The paper contains the boilerplate statement that it "should not be reported as representing the views of the IMF." Nonetheless, given its authors, it provides a good indication of the zeitgeist at the fund.>



    <
    The upshot: Fiscal multipliers can be a lot higher in times of distress than in normal times. The logical conclusion is that Europe's austerity policies were founded on faulty assumptions and should be eased -- something Bloomberg View has advocated. To some extent, that has happened in recent months with the loosening of demands on Greece and with European leaders' tentative discussions of fiscal transfers to stimulate growth in stricken economies.>


    IMF Officials: We Were Wrong About Austerity - Bloomberg
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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    Re: IMF Officials: We Were Wrong About Austerity

    Wrong. The IMF exists for the same reason as the UN, to transfer money to corrupt Third World leaders from others who worked for it.

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Ray410 View Post
    Wrong. The IMF exists for the same reason as the UN, to transfer money to corrupt Third World leaders from others who worked for it.

    It seems that they had a change of mind about austerity; in your opinion were they wrong about their original stance, which was those countries(Greece, Spain et al) should enact severe austerity programs.

    Their current stance, which is “We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. “

    This is economist talk for we ****ed up on the austerity bit. Here is a link to a pdf file if you want to take a peek at what the IMF,s chief economist Olivier Blanchard and economist Daniel Leigh had to say on the subject.


    Growth Forecast Errors and Fiscal Multipliers
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Whipsnade View Post
    By Mark Whitehouse Jan 4, 2013 1:51 PM CT

    [FONT=Arial][COLOR=#333333]Looks like Keynesian theory woulda pulled us out of this recesson a lot sooner if we didn't get on this austerity kick that the Republicans seem to favor whenever a Democrat is in office.
    What austerty kick are you talking about? 5 straight years of trillion dollar deficits is NOT austerity.

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Fletch View Post
    What austerty kick are you talking about? 5 straight years of trillion dollar deficits is NOT austerity.

    I was referring to the group of House conservatives, who announced a proposal last month to pull back $45 billion in stimulus money.That, in my opinion is/was classic austerity. We should be spending that money for what it was appropriated for; stimulating the economy and rebuilding our failing infrastructure.

    Were on track towards getting our economic house in order, all we have to do is prime the pump and were off and running. The prime mover of our debt was two unfunded wars, ill-advised tax cuts. Iraq is in the rear view mirror now and the end to Afghanistan is on the horizon. The tax cuts were answered in a half ass way during the cliff watch but whachagoingtodo. We could probably make up for the rest of the wars, tax-cut debacle, by revisiting the prescription drug plan.
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Whipsnade View Post
    I was referring to the group of House conservatives, who announced a proposal last month to pull back $45 billion in stimulus money.That, in my opinion is/was classic austerity. We should be spending that money for what it was appropriated for; stimulating the economy and rebuilding our failing infrastructure.

    Were on track towards getting our economic house in order, all we have to do is prime the pump and were off and running. The prime mover of our debt was two unfunded wars, ill-advised tax cuts. Iraq is in the rear view mirror now and the end to Afghanistan is on the horizon. The tax cuts were answered in a half ass way during the cliff watch but whachagoingtodo. We could probably make up for the rest of the wars, tax-cut debacle, by revisiting the prescription drug plan.


    LOL, the IMF, really? First of all it is NOT the IMF that endorses this viewpoint, it's two nutty economists that have as much cred as our very own Kugman, so spare us. Secondly, who does the priming, and to what pump are you referring to?


    Tim-
    “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” - P. J. O’Rourke
    “Socialism is great until you run out of someone elses money” Margaret Thatcher

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Whipsnade View Post
    I was referring to the group of House conservatives, who announced a proposal last month to pull back $45 billion in stimulus money.That, in my opinion is/was classic austerity. We should be spending that money for what it was appropriated for; stimulating the economy and rebuilding our failing infrastructure.
    But as you note, it was only a 'proposal' so there is no austerity going on in the US. The fact of the matter is, we are doing $100+ billion in stimulus PER MONTH. And we have been doing it for more than 4 years now. So you really dont have a point here whatsoever.

    Were on track towards getting our economic house in order, all we have to do is prime the pump and were off and running.
    Again, we are 'priming the pump' to the tune of $1,000,000,000,000 per year and yet we are not 'off and running.'
    The prime mover of our debt was two unfunded wars, ill-advised tax cuts. Iraq is in the rear view mirror now and the end to Afghanistan is on the horizon. The tax cuts were answered in a half ass way during the cliff watch but whachagoingtodo. We could probably make up for the rest of the wars, tax-cut debacle, by revisiting the prescription drug plan.
    The Iraq war has been over for a couple of years now, so it is not contributing a penny to the current trillion dollar deficit. As for the tax cuts, 98% of them were retained and made permanent by Obama and the democrats. There are no Bush tax cuts any more. What we have now is permanent tax rates. Rates that, like it or not, vindicate Bush. The deficit is all Obama now. Time to man up and admit that.

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Fletch View Post
    But as you note, it was only a 'proposal' so there is no austerity going on in the US. The fact of the matter is, we are doing $100+ billion in stimulus PER MONTH. And we have been doing it for more than 4 years now. So you really dont have a point here whatsoever.

    Again, we are 'priming the pump' to the tune of $1,000,000,000,000 per year and yet we are not 'off and running.' The Iraq war has been over for a couple of years now, so it is not contributing a penny to the current trillion dollar deficit. As for the tax cuts, 98% of them were retained and made permanent by Obama and the democrats. There are no Bush tax cuts any more. What we have now is permanent tax rates. Rates that, like it or not, vindicate Bush. The deficit is all Obama now. Time to man up and admit that.
    It’s kinda hard to debate someone who evidently thinks that the bills for the Iraq war stoped coming when the war officially ended. AND thinks that “we are doing $100+ billion in stimulus PER MONTH. And we have been doing it for more than 4 years now.“


    But, to get the thread back on track…$45 billion in stimulus spent on infrastructure would be a good start on getting a lot more people working and paying off some of the money that was wasted on Iraq and Afghanistan. Austerity seems to be losing favor of some of the top economist, including the Chief Economist at the IMF,Olivier Blanchard. Who previously had been a big advocate of austerity.
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Whipsnade View Post
    It’s kinda hard to debate someone who evidently thinks that the bills for the Iraq war stoped coming when the war officially ended. AND thinks that “we are doing $100+ billion in stimulus PER MONTH. And we have been doing it for more than 4 years now.“
    Well, I suppose if you had an intelligent response, you would have laid it out there. And no, is not an argument.


    But, to get the thread back on track…$45 billion in stimulus spent on infrastructure would be a good start on getting a lot more people working and paying off some of the money that was wasted on Iraq and Afghanistan. Austerity seems to be losing favor of some of the top economist, including the Chief Economist at the IMF,Olivier Blanchard. Who previously had been a big advocate of austerity.
    $45 billion is about as impactful on a $15 trillion economy as pissing in the ocean is on sea level. Austerity is just living within ones means. It is not without consequence. But then again neither is the endless printing of money.

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    Re: IMF Officials: We Were Wrong About Austerity

    Quote Originally Posted by Fletch View Post
    Well, I suppose if you had an intelligent response, you would have laid it out there. And no, is not an argument.


    $45 billion is about as impactful on a $15 trillion economy as pissing in the ocean is on sea level. Austerity is just living within ones means. It is not without consequence. But then again neither is the endless printing of money.


    <The Congressional Budget Office estimated that because of the Recovery Act, the unemployment rate has been lower each year since 2009 than it otherwise would have been. CBO estimates that in the third quarter of 2012 the unemployment rate was 0.1 to 0.5 percentage points lower than it otherwise would have been and employment was between 0.2 million and 0.9 million jobs greater than it otherwise would have been.>

    Stick that $45 billion In now and watch the jobs take off.
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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