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The Austerity Delusion

OpportunityCost said:
Until they do go up. You are assuming perfect Fed control. It is not.
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When has the Fed not controlled the rate? And if the Fed can buy all the bonds issued (and they can), explain how they would lose control of the rate.
 
David_N said:
Most americans don't understand the difference between the "national debt" and household debt. Most americans don't even know what a government bond is, let alone monetary policy/fiscal policy.
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Not that I'm disagreeing with this statement, but what would you say about a state government that has suddenly lost over 70% of its annual revenue, is careening into a recession, and is looking to drastically reduce spending as well as raise taxes? Would you show them this link to Paul Krugman and advise them against austerity?

In other words, there isn't just a difference between national debt and household debt. There's a difference between a monetarily sovereign country's fiat currency-based national debt and basically every single other type of debt that has ever existed. So people can hardly be blamed for not wrapping their minds around the difference. Maybe it shouldn't even be called a national debt. If it doesn't work like all other types of debt, why continue to mislead ourselves?
 
OpportunityCost said:
There are some that believe they have already lost control.

Federal Reserve interest rate increase: can Janet Yellen succeed? - Fortune
The Fed's Window For Hiking Rates Continues To Close | Zero Hedge
Has the Fed lost control? - MarketWatch
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None of these articles says that the Fed is unable to control interest rates. (I didn't even read Zerohedge, because it's always garbage.) They are saying that, because of economic conditions, that the Fed shouldn't raise interest rates (the opposite of your concern). The closest anybody comes to saying that the Fed is unable to control interest rates is the guy who claims that IOR and reverse repos are "untested." Well, offering banks a sure profit seems like a well-tested thing to me.
 
Neomalthusian said:
....Maybe it shouldn't even be called a national debt. If it doesn't work like all other types of debt, why continue to mislead ourselves?
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Because politicians, mostly conservatives, make their living misleading voters. How many Congressmen rail about the dangers of deficits and the national debt when they are trying to get elected or re-elected? Most of them, certainly - pretty much every Republican, plus more than a few Democrats.
 
CanadaJohn said:
Another lie or dishonest narrative from the left that austerity never works.

Canada, mid 90s, was drowning in debt, huge annual deficits, and had lost its favoured credit rating and a Liberal government, at the urging of a center right finance minister at the time, set Canada on a very severe austerity path that saw the country end deficits, start recording surpluses, start paying down the debt, and recovering the top credit rating all within less than a decade.

It can be done and it can be very successful, but only when you have sensible politicians who are more concerned about the health of their nation than their chances in the next election.
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The problem here is, what does austerity mean? You see, in Canada, austerity did not mean that the social healthcare was canceled, or that you let your roads go to ****, or anything like that.

But here in the US of A, that's what some would want austerity to be.
 
lb_on_teh_cb said:
i heard some left of center economist just the other day saying he doesnt take krugman seriously - thats hes just a political hack.
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If you know any other political hacks who have won the Nobel Prize in Economics, then please do let us know.

How about Stiglitz - him too, a political hack? (And also a Nobel Prize winner.

How about Reich - him too, a political hack?

Robert Reich - excerpt from WikiPedia:
In The Work of Nations, he argues that a nation's competitiveness depends on the education and skills of its people and the infrastructure that connects them—rather than on the profitability of companies headquartered within it. Private capital, he says, is increasingly global and footloose—while a nation's people—its human capital—constitutes the one resource on which a nation's future standard of living uniquely depends. He urges policy makers to make such public investments the cornerstone of economic policy.
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They are all for stimulus spending, btw ...
 
KevinKohler said:
The problem here is, what does austerity mean?.
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In the US, when the Austerity Freaks in the HofR first raised their grisly-heads, it was after Obama had stopped the runaway unemployment percentages with Stimulus Spending in 2010.

They were looking forward to the 2012 PotUS elections, and to assure that a Replicant candidate should win, they purposefully embarked upon the inanity of Austerity Budgeting, refusing Obama any new passage of Stimulus Spending. (It is difficult to imagine desiring hardship upon the American people in order to use a political ploy to gain the presidency. But, they were up to it!)

I am not the only one who, therefore, blames them for the extra two-years it took the US to finally get down to "normal" 5% unemployment and an economy that is finally creating all-too-slowly jobs ...
 
David_N said:
Somewhat dated, but the point still stand. Austerity never works.
The austerity delusion | Paul Krugman | Business | The Guardian

Fast forward.. and we see the failure of austerity.

You can object to the government creating more dollars, but the reality is: Greece was a unique example. A country that couldn't create more dollars. Completely tied to the euro.

It's delusional to assume massively cutting (G) will lead to economic growth.

Common sense, a stimulus is the way to go.

Monetary policy should not be dominant over fiscal policy.
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But what if I don't understand any of this and continue to insist that the US government's budget is just like a household budget and refuse to change my magical thinking? What if I just believe in the magic of neoliberalism? It sounds so good, no?


Sadly the above sentence is how 90% of Americans are going to respond. It's why we keep on doubling down on neoliberalism --the American public has bought into magical thinking, hook, line, and sinker, for decades now.
 
KevinKohler said:
The problem here is, what does austerity mean? You see, in Canada, austerity did not mean that the social healthcare was canceled, or that you let your roads go to ****, or anything like that.

But here in the US of A, that's what some would want austerity to be.
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Well, austerity here in Canada did affect all those things and more. But as a collective people, we understood at the time that it needed to be done and so the government had the support. I'm not sure we could do it again now, considering the mindset of many that believe the government should be the basis for a guaranteed lifestyle. When I see and hear all kinds of people talking about all kinds of new government initiatives that should be implemented, I just shake my head and feel thankful that I'm retired and don't have to find a job and I'll be dead before we ruin the good thing we've enjoyed for the better part of a century.
 
JohnfrmClevelan said:
Because politicians, mostly conservatives, make their living misleading voters. How many Congressmen rail about the dangers of deficits and the national debt when they are trying to get elected or re-elected? Most of them, certainly - pretty much every Republican, plus more than a few Democrats.
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You must have missed the Reagan years and the way the left characterized the deficits then.
 
Lafayette said:
In the US, when the Austerity Freaks in the HofR first raised their grisly-heads, it was after Obama had stopped the runaway unemployment percentages with Stimulus Spending in 2010.
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Nice story, but false. Stimulus did virtually nothing.

They were looking forward to the 2012 PotUS elections, and to assure that a Replicant candidate should win, they purposefully embarked upon the inanity of Austerity Budgeting, refusing Obama any new passage of Stimulus Spending. (It is difficult to imagine desiring hardship upon the American people in order to use a political ploy to gain the presidency. But, they were up to it!)
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And the American economy recovered. So I guess the 'republicant' austerity worked.

I am not the only one who, therefore, blames them for the extra two-years it took the US to finally get down to "normal" 5% unemployment and an economy that is finally creating all-too-slowly jobs ...
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Then you aren't alone in being wrong. Not sure how much comfort there is I that though. Any 'austerity' the congress might have enacted was dwarfed by FED policy to the contrary.
 
Lafayette said:
I am not the only one who, therefore, blames them for the extra two-years it took the US to finally get down to "normal" 5% unemployment and an economy that is finally creating all-too-slowly jobs ...
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Economy is not normal!!! Income is down not up, participation is down, food stamps are up, debt is up, home ownership is down, poverty is up. Libsocialism failed in Cuba USSR and Red China and it fails here for exactly same reason!! It is Marxist anti-business so how on earth can it help jobs and the economy??????
 
James972 said:
Economy is not normal!!! Income is down not up, participation is down, food stamps are up, debt is up, home ownership is down, poverty is up. Libsocialism failed in Cuba USSR and Red China and it fails here for exactly same reason!! It is Marxist anti-business so how on earth can it help jobs and the economy??????
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First, the long-term unemployment-rate is about 5%. It is extremely difficult to get it even lower. Here is thehistory of the UR back to 1990.

Consider this:
*1990/91 was when the Bamboo Curtain came crashing down a unleashed Chinese production capacity upon the world.
*Nothing has been the same since. And yet,
*The US is back to the very same rate of unemployment as in 1990.
*Not all western nations have had the same "luck".

Yes, in terms of average household income, corrected for inflation, it is up at more than three times that of 1990. See the history of media household income since 1985/

So, what are you complaining about? That median household income since its historic high is down from $8000 per year! OK, OK - but who ever promised you that household income would rise inexorably year-after-year at about the same rate?

And that that was a "given"? Moreover, if we as a nation did arrive at the same foolish notion, how did it ever happen.

Nowhere on this earth is a steady growth of household income a "given". Nowhere is its constant growth even "promised".

Most economies demonstrate historically a cyclic nature.

If you want to complain, complain about this: The downturn of household income was more pronounced about the 90Percenter class of people. The 10Percenters were doing just fine, as this research has shown: Piketty's History Top 10Percent Pre-Tax Income Share – Europe and US

Now, think: Why was income of the 10Percenter class so much better off than us 90Percenters?

My answer: Because Income Disparity in the US was almost wholly demonstrated in the 90Percenter class due to the lack of Progressive Taxation in the 10Percenter class* ...

*Note that the 10Percenter class consists of income above $105K per year, taxed a constant rate of 29/30% annually. [As shown here: Upper-Income Total Effective Tax Rates (after deductions)]
 
Lafayette said:
First, the long-term unemployment-rate is about 5%. It is extremely difficult to get it even lower. Here is thehistory of the UR back to 1990.

Consider this:
*1990/91 was when the Bamboo Curtain came crashing down a unleashed Chinese production capacity upon the world.
*Nothing has been the same since. And yet,
*The US is back to the very same rate of unemployment as in 1990.
*Not all western nations have had the same "luck".

Yes, in terms of average household income, corrected for inflation, it is up at more than three times that of 1990. See the history of media household income since 1985/

So, what are you complaining about? That median household income since its historic high is down from $8000 per year! OK, OK - but who ever promised you that household income would rise inexorably year-after-year at about the same rate?

And that that was a "given"? Moreover, if we as a nation did arrive at the same foolish notion, how did it ever happen.

Nowhere on this earth is a steady growth of household income a "given". Nowhere is its constant growth even "promised".

Most economies demonstrate historically a cyclic nature.

If you want to complain, complain about this: The downturn of household income was more pronounced about the 90Percenter class of people. The 10Percenters were doing just fine, as this research has shown: Piketty's History Top 10Percent Pre-Tax Income Share – Europe and US

Now, think: Why was income of the 10Percenter class so much better off than us 90Percenters?

My answer: Because Income Disparity in the US was almost wholly demonstrated in the 90Percenter class due to the lack of Progressive Taxation in the 10Percenter class* ...

*Note that the 10Percenter class consists of income above $105K per year, taxed a constant rate of 29/30% annually. [As shown here: Upper-Income Total Effective Tax Rates (after deductions)]
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notice you had to change the subject because you could not address any of the points I made that cause 72% of Americans to think we are on the wrong economic path!! That's an all time high. Again, libsocialist marxism is anti business so how could it possibly improve the economy???
 
Fletch said:
Stimulus did virtually nothing.
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I gather therefore that you are blind and could not read the Census Bureau chart of Unemployment Rate that was stopped dead at 10% in 2010 instead of rising to 15% as in the Great Depression.

Which is why we called it, this time around, the Great Recession.

You see, we as a nation have a bad habit of forgetting that when we take the controls off Finance Markets, the banksters mess around frenziedly with market valuations and create market crashes. This occurred in the Stock Market in 1929 and the Debt Securitization Process in 2008/9 ...
 
Fletch said:
And the American economy recovered. So I guess the 'republicant' austerity worked.
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Recovered for who? The banksters who got rich, or that part of the American families who had to wait 6 long years after the onset of the Great Recession, some three years longer than would have been necessary had Stimulus Spending continued after 2010 when the Replicants stopped it dead.

Had stimulus-spending continued beyond 2010, we would have been where we are now (at 5% unemployment) in 2012/13 ...
 
James972 said:
notice you had to change the subject because you could not address any of the points I made that cause 72% of Americans to think we are on the wrong economic path!! That's an all time high. Again, libsocialist marxism is anti business so how could it possibly improve the economy???
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Ho hum ... moving right along ...
 
David_N said:
Somewhat dated, but the point still stand. Austerity never works.
The austerity delusion | Paul Krugman | Business | The Guardian

Fast forward.. and we see the failure of austerity.

You can object to the government creating more dollars, but the reality is: Greece was a unique example. A country that couldn't create more dollars. Completely tied to the euro.

It's delusional to assume massively cutting (G) will lead to economic growth.

Common sense, a stimulus is the way to go.

Monetary policy should not be dominant over fiscal policy.
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8 Trillion over the last 7 years....

What Austerity ???
 
Lafayette said:
I gather therefore that you are blind and could not read the Census Bureau chart of Unemployment Rate that was stopped dead at 10% in 2010 instead of rising to 15% as in the Great Depression.

Which is why we called it, this time around, the Great Recession.

You see, we as a nation have a bad habit of forgetting that when we take the controls off Finance Markets, the banksters mess around frenziedly with market valuations and create market crashes. This occurred in the Stock Market in 1929 and the Debt Securitization Process in 2008/9 ...
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The Govt caused the 2008 Subprime crisis, not the " Bankers ".

We've been through this before.
 
Lafayette said:
First, the long-term unemployment-rate is about 5%. It is extremely difficult to get it even lower.
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if you go to Shadow Stats i think the name is, he says the real unemployment numbers are closer to 20-25%

govt lies, changes who they count as unemployed etc

been unemployed for 6 or 12 months? great we wont count you any more
 
Lafayette said:
Aint gonna happen.

The reason why the dollar is a reserve currency is due to its economic viability. The dollar is supported by a dynamic economy. If and when that dynamism should fail, then and only then, will the dollar loose its supremacy as a reserve currency.

There is a major candidate for, not replacement, but sharing the spotlight as a reserve currency. Which economy has the potential to rival the dollar in terms purely of its internal market-economy potential? (After all the key attribute of a reserve currency is the ability to sell it and get out into an alternative investment, if desired or necessary.)

The Euro. Remember, the EU is a combined market-place of more than 652 million consumers - to the 320 in the US. Half the size.

Mind you, Europe has plenty of challenges before that happens. But reserve currency as the ultimate outcome - yes, it has solid potential.
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You are so wrong. It's not the dynamic economy. It's the natural resources which are dominated by Monetary hegemony. Once dollar dominated oil sales (including trades) goes away..

You can't have a "sharing" in Monetary hegemony. You either have it or you don't.

Euro zone is only 19 nations of a population of 330m people. US would never let it the Euro take over and for years since 1999 the US has at every move when Eurozone tried to solidified it's position, undercut that position. Eurozone and Iraq reached a deal in selling Oil in Euros. US invaded Iraq. Iran just said it wanted Euros and not Dollars... wonder what's gonna happen in the next few years. ;)

EU and Eurozone may not be around in a few years. Schengen Agreement is dead and that's only the start. Brexit will take place. Negative interest rates policy is a dangerous game they are play now at the ECB and NOBODY knows how that's gonna end.

You have a better chance of the Swiss Franc being a reserve currency then the Euro in the next 50 years.
 
JohnfrmClevelan said:
The Fed controls interest rates. They won't go up until the Fed wants them to go up.
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Fed controls interest rates on bonds?

T-bonds/bills are separate beast. The Fed has to buy bonds/bills (QE) to control interest rates on bonds by buying bonds to lower interest rates (on Government issued debt) on certain products (mortgages for example). Fed can't have two different polices at once. They can't be 1) increasing money supply (buy bonds) and 2) increasing interest rates. These two things cancel each other out.

So bond buying and low interest rates go together. If the economy heats up bond rates will go up and the Fed will hike. You think the Fed ignores the 1y treasury rising since Jan 2015? Of course not. Hence why we got a hike in December 2015.
 
KevinKohler said:
The problem here is, what does austerity mean? You see, in Canada, austerity did not mean that the social healthcare was canceled, or that you let your roads go to ****, or anything like that.

But here in the US of A, that's what some would want austerity to be.
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And the US didn't do austerity. None. The US just slowed the rate of growth in Government budgets. Europe didn't even do austerity.
 
austrianecon said:
You can't have a "sharing" in Monetary hegemony. You either have it or you don't.

Euro zone is only 19 nations of a population of 330m people. US would never let it the Euro take over and for years since 1999 the US has at every move when Eurozone tried to solidified it's position, undercut that position.
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Only nineteen nations? Only 330 million people (as much as the US)?

What "monetary hegemony" of the dollar? Monetary dominance, that's all.

Dynasties have come and gone. Empires have come and gone. Countries have come and gone. Monies come and go as well.

History goes on, and on, and on.

My point (about reserve currencies): Any market-economy can claim "hegemony" as a reserve-currency, as long as it is dynamically active. The US has proven its ability to stumble, mumble and fall with the SubPrime Debacle. (Thoroughly home brewed.)

When that happens, the world's money reserves move on ... and fast. At the speed of a mouse-click.

The EuroZone, whether you like it or not, has a market-economy potential - by sheer size - double that of the US. Yes, comparative GDP per capita does not show that. The US GDP per capita (PPP) in 2015 was $56.4K versus the EU GDP per capita (PPP) of $35K. Still, the potential is there. (Come to Europe, see for yourself that people live as well if not better than in the US.)

So, the Euro is not about to mount upon the throne of dominant nation in that regard (GDP per capita). Furthermore, one need only look at its position today as a reserve currency: ECB - The International Role
of the Euro https://www.ecb.europa.eu/pub/pdf/other/euro-international-role-201507.en.pdf, page 9 - the breakdown of which (as a reserve currency) is thus:
Dollar: 64%
Euro: 23%
Other: 13%

The role of the dollar as a reserve currency is clearly dominant. But the Euro has only been available as such since 2002, barely 15 years. And it is in the midst of a major economic recession brought upon it by the US Great Recession. (Admittedly, the EU should have known how to grow out of it more quickly, but the EU and the US have very different political structures. The EU-states have budgeting power, since a EU president does not exist, though a legislature is indeed in place.)

Still, what do Euro-currency reserve-holder nations know about the Euro that apparently you do not ... ?
 
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