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Title: Krugman's Rightful Victory Lap - Mone Too...
Source:
The NY Times
URL Source: http://www.nytimes.com/2011/06/03/opinion/03krugman.html?_r=1
Published: Jun 3, 2011
Author: Paul Krugman
Post Date: 2011-06-03 12:10:35 by war
Keywords: None
Views: 140890
Comments: 159
Earlier this week, the Federal Reserve Bank of New York published a blog post about the “mistake of 1937,” the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today — with output growing, some prices rising, but unemployment still very high — bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake? Mr. Eggertsson says no, that economists now know better. But I disagree. In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data. To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse. Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then. By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity. This consensus was fed by scare stories about an imminent loss of market confidence in U.S. debt. Every uptick in interest rates was interpreted as a sign that the “bond vigilantes” were on the attack, and this interpretation was often reported as a fact, not as a dubious hypothesis. For example, in March 2010, The Wall Street Journal published an article titled “Debt Fears Send Rates Up,” reporting that long-term U.S. interest rates had risen and asserting — without offering any evidence — that this rise, to about 3.9 percent, reflected concerns about the budget deficit. In reality, it probably reflected several months of decent jobs numbers, which temporarily raised optimism about recovery. But never mind. Somehow it became conventional wisdom that the deficit, not unemployment, was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda. So, here we are, in the middle of 2011. How are things going? Well, the bond vigilantes continue to exist only in the deficit hawks’ imagination. Long-term interest rates have fluctuated with optimism or pessimism about the economy; a recent spate of bad news has sent them down to about 3 percent, not far from historic lows. And the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out. So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment. Yet worse things may soon happen. On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy. Meanwhile, a loud chorus is demanding that the Fed and its counterparts abroad raise interest rates to head off an alleged inflationary threat. As the New York Fed article points out, the rise in consumer price inflation over the past few months — which is already showing signs of tailing off — reflected temporary factors, and underlying inflation remains low. And smart economists like Mr. Eggerstsson understand this. But the European Central Bank is already raising rates, and the Fed is under pressure to do the same. Further attempts to help the economy expand seem out of the question. So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate. Those who refuse to learn from history are condemned to repeat it; we did, and we are. What we’re experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.
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#88. To: mininggold (#81)
That isn't true at all. Over the years the "The Community Reinvestment Act" of 1977 maintained an increasing perspective on local banks portfolios requiring the banks to reinvest at larger rates into their same communities. This, in turn, required lowering the standards for real estate loans (first time home buyers with the idea of their own family occupation). The banks were literally PUSHED into this issue by the federal government even by GWBush.
We aren't broke. The U.S. debt as a percentage of GDP is still lower than many other countries, and given tax rates are historically low (especially compared to the Reagan years) there is plenty of room to raise taxes on incomes above $250k without negatively impacting the economy. Federal tax rates, as a percentage of the economy, are at 60 year lows. Furthermore, interest rates on U.S. bonds don't reflect that anyone investing in U.S. treasuries thinks "we're broke." We're paying 0.68 percent on a two-year note that was at 5.1 percent in 2007. Again, a massive cut in spending now will slow the economy even further, create more unemployed, and further lower the tax base. If you really want to balance the budget, you do it through spurning economic growth, not through massive spending cuts - as we have seen in the UK, Ireland, and here in the U.S. in 1937.
"Thats because your basically and idiot." The banks were literally PUSHED into this issue by the federal government even by GWBush. The CRA didn't cause the financial crisis - private banks seeing the profit potential of making garbage loans to unqualified people, because they could then spin into CDS in an unregulated market caused the financial crisis.
"Thats because your basically and idiot." Right. Lenders, who invest hundreds of millions of dollars in politicians, meekly went along with this oppressive and destructive policy. Sure, I buy that - not.
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
I agree with you about some of the shady bundled re-packaging of the loans. But, that is not the trigger mechanism for the issue. It was CRA that created the requirement of lowering first-time homeowner's qualifications as those same requirements were strictly enforced by both Freddie Mac and Fannie Mae. And others, too, in the private markets. It was an artificial bubble in the housing market that went on and on pushing up demand while simultaneously requiring fewer qualifications of first time home buyers. That demand drove the price valuations to incredible heights. Which in turn gave reason for many existing homeowners to refinance their own homes adding even more fuel to the fire in a latter collapsed market.
By policies that they and the home construction industry lobbied for.
Often, Fannie Mae and Freddie Mac (both federal entities) purchased the loans, so why not? Do as the government dictates and make a bundle in the process, correct?
I don't think this is true in a general sense. The political environment (especially with Clinton and GWBush) begged for increased home-ownership by minority groups, PROVING THE STRENGTH OF AMERICAN FREEDOM TO THE WORLD. It was a myth. Government has no business dictating how a local bank should manage its own formulas of success unless there are obvious errors by management. Of course, that is why some oversight is supposed to exist in the first place, to ensure the bank's portfolio is justified with respect to law but it is another issue where the federal government forces banks to make loans based on poor qualifications for federal government quota considerations. Today, the folks heading CRA are in fact calling the trends for increased qualifications "racist." How about that?
Assuming that's true - because it's wrong. Why is it wrong? Because lenders in your scenario knew they were screwing others down the line.
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
You just made the case for regulation and oversight.
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
Really? Since all the Congressional investigations of and about the real estate bust, name one player in the markets that is behind bars. The only ramblings I have heard are about are Fannie and Freddie. The rest of banks, loan originators and so forth simply went "bust" or were absorbed by other conglomerates with federal money (FDIC) (TARP) that make up the difference in the absorption costs.
Particularly for and about the US government to lower banking standards so as to achieve some arbitrary quota system as a political feather in someone's hat. I am a strong proponent of laissez-faire. What we saw (and are in fact still experiencing) was government intrusion into the otherwise free markets causing ALL of the problems we see today.
There are no free markets nor have there ever been. And most government intrusion is either lobbied for by one capitalist entity or another, or created by citizen complaint due to poor business practices. Too bad businesses have proven they are unable to police themselves.
That is only a matter of relative degree. By the way, not all banks are federally chartered and did not have to comply with federal CRA rules. Then again, those same banks are often considered "shady" or "risky" to investors. They have their place though in an otherwise free market. But we are discussing CRA requirements that are ludicrous and were the reason for the issues we see today for added federal stimulus or less into the economy. In fact, that is the "tug-of-war" on this thread. More stimulus or less stimulus? Both John Keynes and Arthur Laffer are idiots and they are somewhat at opposites poles of thought.
Yet that tug of war has been going since the founding of this country and probably always will. It's a much surer thing than the actual existence of free 'anything goes' markets.
As I asked war earlier: Please answer the question, particularly since the US federal debt is at an all time high while America is losing confidence from other nations to support that same debt.
Frankly, I doubt that there is a magic bullet number or ratio. We did an amount equal to about 7% of GDP...Japanese around 15%...Germans around 1%. My issues with the stim were a) the tax credits to stimulate demand should have been open ended until we had a real growth rate 10-15% over the recovery point, which is the point at which current $ value of GDP matches $ value GDP at the beginning of the recession and b) the politics of it which was for the Padlock and Boofers of the worlk [read GOP] to promote the FALSE idea that a stimulus should somehow evoke a quick and sharp turnaround in the economy.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." Lie. Yeah, and just how much fucking money do you think we can print? We "printed" more money during your hero's era.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I really have no idea. But I do know that being the world's policeman has it's price, but I'm sure new markets will be opening up momentarily courtesy of our military prowess.
I don't give a damned about your (b) considerations as it leads nowhere to me. With your (a) considerations, how did you arrive at that growth rate and relative value? Why not above 15% or are you saying, that you agree there are limits in the first place? If there are limits, why not below 10% value? You see, your own answer suggests bounds to a theoretical limit. The window you set is arbitrary from my perspective.
That is truly humorous. Thanks!
You seem to have forgotten that this is a chit chat channel.
Don't you have a Hitler Youth event today? /boofer
/boofer It got rained out.
Not at all. But this is a "political chit-chat channel" correct? That term "politics" should infer some seriousness on current events. I don't agree that there are two teams in these channels, either. I don't care how it may be phrased: (conservative vs. liberals) or (bad vs. good) or (left vs right) or (Americans vs. the world) or (red vs. blue) or (dimwit vs. intellectual) or any of the polarizing remarcks; it should be all in good fun. What I like to understand is hypocrisy in poster stance no matter the position held. For some reason I am fascinated by this characteristic in some posters. Once I sense hypocrisy I know the rest of discussion is lost until some form of realistic explanation is created.
Mental Midget DwarF: Putting aide the aphoristic qualities of that statement, the goal of quantitative easing is not to devalue the currency but to fund an available capital pool. Translation: The goal of QE is not to devalue money, but to print as much as we need to spend. Of course, this devalues the money. Thanks for playing, you pathetic moron. Check-mate.
List of those unable to think: Bumper sticker on DwarF's car: No kidding. Of course, the NYT is effectively bankrupt, too... on a variety of levels. Financially. Intellectually. Morally. That's why DwarF loves them.
List of those unable to think: Bumper sticker on DwarF's car: I don't agree that there are two teams in these channels, either. I don't care how it may be phrased: (conservative vs. liberals) or (bad vs. good) or (left vs right) or (Americans vs. the world) or (red vs. blue) or (dimwit vs. intellectual) or any of the polarizing remarcks; it should be all in good fun. I don't know about the seriousness, since you yourself state it should all be in good fun. Anyway I see politics nowadays as not much more than the marketing of mediocre candidates as anything else. I do agree with your polarization stuff though, since it's obviously a divided we fall ploy.
I never said it was. But it be shortly unless the politicians do something about the debt.
Once you learn how to read, I will respond to again. For now, there is no point.
And the asset reallocation will be into what, Warren?
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." This is what you wrote: In a recession, people won't voluntarily take wage cuts to clear the market price for labor so that businesses will start hiring again. So, people have to be fooled into taking a pay cut through inflation. Prices go up, wages stay the same -- a pay cut has occurred. The market price clears and businesses start hiring again. You are claiming that in an ongoing recession, people won't take a direct pay cut so they are forced into taking one through inflation, i.e. RISING PRICES. I can read fine even though your mind is an absolute mess. A) Rising prices are not necessarily inflation. America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." Many things. There isn't any 1 to 1 correspondence. China has already dumped 97% of their short term U.S. government debt. As their long term U.S. debt come due, they will be dumping that too. Other countries will follow. The BRIC countries have already been proposing alternatives to the dollar as the world's reserve currency. Once that happens, the U.S. will have no choice but to create massive inflation to pay it's bills. It's coming soon because the politicians are too addicted to spending to stop.
Bullshit. TBilll issuance decreased so they rolled it out the curve. I'm a fixed income broker. Go peddle your nonsense somewhere else.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." More bullshit. Good luck getting industrialized nations accepting a currency created by the third world's banker that, wait for it, is funded mostly by the US.* *Poor word choice...the US provides the highest amount of funding.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." I stated that I don't believe that there is a "Magic Bullet" number. Economies suffer dislocation for any number of reasons. Thus, a "recession" in Year A and recovered from in year A+Z may have the characteristics of both its cause and recovery differ markedly from the next recession. Most certainly the recession of 2001 was caused by the decline in business activity and consumer spending associative to the Y2K switch. Most certainly the recession of 2007-2009 was caused by a lack of credit which caused a severe dislocation in real estate.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." The goal of QE2 is to make sure that an adequate pool of capital is available to fund business lending. The last recession was caused, in part, by a virtually unregulated market "creating" money because the Fed had refused to. When the "market" itself took on the role of "banker" and began assessing counter party risk, the game was over. Of course, this devalues the money. Of course, that's absolute nonsense. What actually "devalues" money is when the relative level of production is unable to meet the demand for what is produced. IN other words, a currency is devalued when, systemically, it requires ever increasing amounts of dollars to purchase the same amount of goods.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." We "printed" more money during your hero's era. My "hero"? Assumably Bush? So now your argument is that the Kenyan needs to be more like Bush?
Now, I know I’m not going to change the minds of any of the True Believers…those who read all of Reverend Al’s sermons, and say things like, “You know, global warming can mean warmer OR colder, wetter OR drier, cloudier OR sunnier, windier OR calmer, …”. Can I get an ‘amen’??
http://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble `Criticism of mandated loans as the cause of the crisis However, government-mandated loans did not cause the boom in subprime mortgages. [10] More than 84 percent of the subprime mortgages came from private lending institutions in 2006[10] and share of subprime loans insured by Fannie Mae and Freddie Mac also decreased as the bubble got bigger (from a high of insuring 48 percent to insuring 24 percent of all subprime loans in 2006).[10] The Community Reinvestment Act also only affected one out of the top 25 subprime lenders.[10] Despite conservative criticism for government lending programs as the main cause of the crisis,[11][12][13][14] much of the crisis was independent of government home loan programs. In 2008, Federal Reserve Governor Randall Kroszner, said the CRA wasn’t to blame for the subprime mess, "First, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA-related loans appear to perform comparably to other types of subprime loans. Taken together… we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis,". Only 6% of subprime loans were handed out by CRA-covered lenders to lower income people (the people the CRA is responsible for, CRA-covered banks can technically lend subprime loans to anyone).[15] Others have also concluded that the CRA did not contribute to the financial crisis, for example, Federal Deposit Insurance Corporation Chairman Sheila Bair,[16] Comptroller of the Currency John C. Dugan,[17] Tim Westrich of the Center for American Progress,[18] Robert Gordon of the American Prospect, [19] Ellen Seidman of the New America Foundation,[20] Daniel Gross of Slate,[21] and Aaron Pressman from BusinessWeek.[22]
My argument in your case is that you should be quiet more and thus stupid less.
America...My Kind Of Place... "I truly am not that concerned about [bin Laden]..." The loose CRA requirements for home ownership drove the issue. And, on top of that, both Freddie Mac and Fannie Mae (GSEs) competed in the markets for these same loans FURTHER exacerbating the issues. US government intervention created the entire mess, particularly after FED lowered interest rates in response to the 2000 Stock collapse.
Comments (129 - 159) not displayed.
Top • Page Up • Full Thread • Page Down • Bottom/LatestBankers stole the treasury by lending it out according to policies they lobbied for?
#89. To: We The People (#78)
Increasing spending when you're broke will do what?
Badeye posted on 2011-04-29 10:30:22 ET
#90. To: buckeroo (#88)
Over the years the "The Community Reinvestment Act" of 1977 maintained an increasing perspective on local banks portfolios requiring the banks to reinvest at larger rates into their same communities. This, in turn, required lowering the standards for real estate loans (first time home buyers with the idea of their own family occupation).
Badeye posted on 2011-04-29 10:30:22 ET
#91. To: buckeroo (#88)
Over the years the "The Community Reinvestment Act" of 1977 maintained an increasing perspective on local banks portfolios requiring the banks to reinvest at larger rates into their same communities. This, in turn, required lowering the standards for real estate loans (first time home buyers with the idea of their own family occupation).
#92. To: go65 (#90)
The CRA didn't cause the financial crisis - private banks seeing the profit potential of making garbage loans to unqualified people, because they could then spin into CDS in an unregulated market caused the financial crisis.
#93. To: buckeroo (#88)
(Edited)
The banks were literally PUSHED into this issue by the federal government even by GWBush.
#94. To: lucysmom (#91)
Lenders, who invest hundreds of millions of dollars in politicians, meekly went along with this oppressive and destructive policy.
#95. To: mininggold (#93)
By policies that they lobbied for.
#96. To: buckeroo (#94)
Often, Fannie Mae and Freddie Mac (both federal entities) purchased the loans, so why not? Do as the government dictates and make a bundle in the process, correct?
#97. To: buckeroo (#94)
Often, Fannie Mae and Freddie Mac (both federal entities) purchased the loans, so why not? Do as the government dictates and make a bundle in the process, correct?
#98. To: lucysmom (#96)
Assuming that's true - because it's wrong.
#99. To: lucysmom (#97)
You just made the case for regulation and oversight.
#100. To: buckeroo (#99)
Particularly for and about the US government to lower banking standards so as to achieve some arbitrary quota system as a political feather in someone's hat. I am a strong proponent of laissez-faire. What we saw (and are in fact still experiencing) was government intrusion into the otherwise free markets causing ALL of the problems we see today.
#101. To: mininggold (#100)
There are no free markets nor have there ever been.
#102. To: buckeroo (#101)
In fact, that is the "tug-of-war" on this thread. More stimulus or less stimulus? Both John Keynes and Arthur Laffer are idiots and they are somewhat at opposites poles of thought.
#103. To: mininggold (#102)
Question for you: is there a theoretical limit to federal stimulus? If there is such a limit, what are the components that limit it? If there is no limit, I want to understand the wonders behind the concept.
#104. To: buckeroo (#86)
(Edited)
Question for you: is there a theoretical limit to federal stimulus? If there is such a limit, what are the components that limit it? If there is no limit, I want to understand the wonders behind the concept.
--GW Bush
#105. To: no gnu taxes (#87)
It did. The downturn happened for different reasons.
--GW Bush
#106. To: buckeroo (#103)
Please answer the question, particularly since the US federal debt is at an all time high while America is losing confidence from other nations to support that same debt.
#107. To: war (#104)
My issues with the stim were a) the tax credits to stimulate demand should have been open ended until we had a real growth rate 10-15% over the recovery point, which is the point at which current $ value of GDP matches $ value GDP at the beginning of the recession.
#108. To: mininggold (#106)
I really have no idea. But I do know that being the world's policeman has it's price, but I'm sure new markets will be opening up momentarily courtesy of our military prowess.
#109. To: buckeroo (#108)
That is truly humorous. Thanks!
#110. To: mininggold (#109)
#111. To: Fred Mertz (#110)
Don't you have a Hitler Youth event today?
#112. To: mininggold (#109)
#113. To: war (#36)
Capitalist Eric: Oh, BTW, you never addressed my point- NO country or empire has ever propelled itself to lasting prosperity, by devaluing its own currency. (What we now call "quantitative easing.")
mcgowanjm, ferret mike, skippy, fartboy/yukko, white sands, bucky, lucys idiot mom, e_type_jackoff, go56, badlie, wreck, calCON, mininggold, war, Banjo Boris, Biff, Godwinson and meguro. If you're on the above list, you're too fucking stupid to hold a real conversation.
#114. To: hondo68, war, DwarF the mental midget (#75)
They don't get any more moon-batty, than the NY Times.
mcgowanjm, ferret mike, skippy, fartboy/yukko, white sands, bucky, lucys idiot mom, e_type_jackoff, go56, badlie, wreck, calCON, mininggold, war, Banjo Boris, Biff, Godwinson and meguro. If you're on the above list, you're too fucking stupid to hold a real conversation.
#115. To: buckeroo (#112)
That term "politics" should infer some seriousness on current events.
#116. To: war (#32)
Money is not fleeing the US.
"Everything that can be invented has been invented."-- Charles Duell, Commissioner of US Patent Office, 1899
#117. To: war (#34)
Inflation is not an indicator or a characteristic of a recession. Want to try again?
"Everything that can be invented has been invented."-- Charles Duell, Commissioner of US Patent Office, 1899
#118. To: jwpegler (#116)
I never said it was. But it be shortly unless the politicians do something about the debt.
--GW Bush
#119. To: jwpegler (#117)
(Edited)
B) Prices don't rise during a recession. A recession is characterized by RECEDING business activity. You just re-wrote the whole theory of pricing by stating that businesses have POSITIVE PRICING POWER during a recession, i.e. a period of receding demand and activity.
--GW Bush
#120. To: war (#118)
And the asset reallocation will be into what
"Everything that can be invented has been invented."-- Charles Duell, Commissioner of US Patent Office, 1899
#121. To: jwpegler (#120)
(Edited)
China has already dumped 97% of their short term U.S. government debt.
--GW Bush
#122. To: jwpegler (#120)
(Edited)
The BRIC countries have already been proposing alternatives to the dollar as the world's reserve currency.
--GW Bush
#123. To: buckeroo (#107)
--GW Bush
#124. To: Capitalist Eric (#113)
(Edited)
The goal of QE is not to devalue money, but to print as much as we need to spend.
--GW Bush
#125. To: war (#105)
Yeah, and just how much fucking money do you think we can print?
#126. To: buckeroo (#101)
#127. To: no gnu taxes (#125)
--GW Bush
#128. To: NewsJunky (#126)
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