4 ms·

That's usually true for personal debut. For governments, it's a dangerous misconception. The only problem with personal debt is when it becomes systemic. The f

by pdkl95 11y ago

That's usually true for personal debut. For governments, it's a dangerous misconception. The only problem with personal debt is when it becomes systemic. The fallacy of composition is that what's good for individual is not necessarily good if we all do it at the same time. Normally lowing your price to be more competitive is a useful strategy, but not when it becomes a race to 0. We saw this in the great depression with farmers publicly throwing out their product. As for governments, the austerity meme is class politics in disguise, and tends to lead to nasty social blowback. Governments can change monetary policy and other law, giving them a lot more options.

marcosdumay 11y ago
You know, government debit can grow until it's not sustainable anymore. And seems to be doing exactly that world around for the last couple of decades. I know this disagree with mainstream economics, and almost all niche economics theories. But it's happening again and again, so fuck the theories.
- deleted 11y ago
  [deleted]
  - parasubvert 11y ago
    "Keynesian economics is fundamentally broken" How so, other than you don't like it? The data over the past 9 years seems to have confirmed a Keynesian analysis of the global economy. "but it allows the governments to spend as much as they want" No, that's not how it works. Keynes' theory is about how a general glut can happen, due to the role of money and bonds as a second and third variable in markets (vs the usual supply and demand curve). There are various techniques to get out of it, the only time government should spend money is when we've basically dropped interest rates to 0% - free money! - and companies still aren't spending it. "Furthermore, it devalues the money in our wallet everyday we don't spend" You mean by inflation? The inflation that doesn't currently exist? http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla... Deflation on the other hand, has always been scary, for hundreds of years.
    - dageshi 11y ago
      Correct me if I'm wrong but Keynes also thought you should run a surplus during good economic times so you could run a deficit in the bad. Now I know the necessity to do that has been dismissed by modern economists but actual Keynesian policies still have to be implemented by politicians who get elected. During recessions there tends to be a reluctance on the part of electorates to deliberately take on more debt which IMHO leads to Keynesian responses which are never quite robust enough to do the job they're intended to do. Whereas if you did actually run a surplus during good economic times or at least during some of the good economic times then the public would likely be a lot more likely to back a real Keynesian response.
      - msandford 11y ago
        > Keynesian responses which are never quite robust enough to do the job they're intended to do How much of "normal" GDP should you spend in a crisis in order to avert it? 5%? 10%? 20%? 50%? 100%? 500%? I've never heard a solid answer, mostly just "however much we spent wasn't enough" which seems a little tautological. The only reason I'm picking on you is you said "never quite robust enough" as though you just plug a number into a formula and get an answer.
        dageshi 11y ago
        You don't spend in order to "avert" it, "it" has already happened, you spend afterwards to limit the duration and the depth of the recession which makes sense because during a recession interest rates are at the lowest they'll be during the economic cycle and the government can borrow more for cheaper than at any other point. In terms of how much I would say between 5 and 10% depending on the severity of the recession and that need not all be in the form of government spending per se, it could also be a mix of tax cuts as well.
        msandford 11y ago
        5% of US GDP (which is around $15 trillion) would be $750 billion. 10% would be 1.5 trillion. Through all of QE a total of several trillion was spent on treasury bonds, bank bonds, mortgage backed securities, etc. https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_QE2.2C_and_QE3 https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_... By your own numbers, that should have been enough, and yet you've complained it wasn't. What gives?
- vkou 11y ago
  Which of these debt peaks was unsustainable, and why? http://www.mybudget360.com/wp-content/uploads/2010/12/us-public-debt-vs-gdp.png http://www.mybudget360.com/wp-content/uploads/2010/12/us-pub...
  - pdkl95 11y ago
    https://en.wikipedia.org/wiki/Sh%C5%8Dwa_financial_crisis https://en.wikipedia.org/wiki/Sh%C5%8Dwa_financial_crisis Japan (at the time, primarily a few zaibatsu) had serious financial problems when their export bubble popped in the 1920s. Unfortunately, they bought into myth that austerity lowers debts really badly, and decided it was a good idea to cut out 30% (!) of their GDP in two years. When that only made the situation worse, they doubled down and tried to cut another ~10%. The zaibatsu and 37 banks went under in the inevitable bank-run, and quite a few financial leaders were assassinated when the military realized their budget was about the only thing left that could be cut. Compared to that mess, the US has done a relatively good job of inflating away it's debts. Our gridlock blocked most of the austerity "fixes", so while we still have a mess of an economy, at least it isn't slashing a third of our GDP.
  - marcosdumay 11y ago
    I don't think the US government has ever had unsutainable debit levels. At least before 2008 (maybe it is now). You've had your quote of unsustainable private debit, but not public.
- pdkl95 11y ago
  > government debit can grow until it's not sustainable Of course. That doesn't mean governments follow a simple zero-sum model. Government economics is it's own beast, with (hopefully) it's own solutions. re: fsck the theories - you may find this[1] interesting, which is a summary of where we stand right now on many aspects of government economics by econ prof Mark Blyth that he gave at a recent q&a session. It might be one of the most succinct explanations of just how badly we're fscked. [1] https://www.youtube.com/watch?v=iJCcoF5K0SM#t=1160 https://www.youtube.com/watch?v=iJCcoF5K0SM#t=1160
rsync 11y ago
"As for governments, the austerity meme is class politics in disguise, and tends to lead to nasty social blowback." The prevailing neo-liberal (and progressive, at least in the US) notion is that smart people "understand" keynesian counter-cyclical economics and only dopes or rubes ... or bad actors (as you suggest) would advocate for austerity. However, it really needs to be repeated: austerity is only braindead if you insist on ever-increasing aggregate demand. If you are willing to accept stagnant or even decreasing aggregate demand (for whatever reason) then austerity is perfectly reasonable and perhaps a good choice. I'm not saying I'm in that camp, but I really don't like this false dichotomy - that austerity is braindead and only morons would advocate for it ... and leaving unsaid the almost universal assumption that aggregate demand can never, ever, be allowed to drop. EDIT: and I also don't like the condescending, custodial tone that this always takes ... "oh how quaint that you would conflate a national economy with a household economy, here let me mansplain it to you". In fact, there are boundary conditions where they behave exactly the same (see argentina). People aren't as dumb as you think they are.
- inthewoods 11y ago
  "However, it really needs to be repeated: austerity is only braindead if you insist on ever-increasing aggregate demand. If you are willing to accept stagnant or even decreasing aggregate demand (for whatever reason) then austerity is perfectly reasonable and perhaps a good choice." I think the problem is that austerity advocates argue that that aggregate demand will increase in the face of austerity, when we know that doesn't happen. Austerity advocates then often bring up the theory that if debt is lower, then external actors will have more confidence in the country and interest rates will decline. So while I agree with you that no one needs to be condescending, it is challenging to deal with the pro-austerity folks when they seem to be fact-challenged.

by pdkl95 11y ago

marcosdumay 11y ago

You know, government debit can grow until it's not sustainable anymore. And seems to be doing exactly that world around for the last couple of decades. I know this disagree with mainstream economics, and almost all niche economics theories. But it's happening again and again, so fuck the theories.

deleted 11y ago
[deleted]
- parasubvert 11y ago
  "Keynesian economics is fundamentally broken" How so, other than you don't like it? The data over the past 9 years seems to have confirmed a Keynesian analysis of the global economy. "but it allows the governments to spend as much as they want" No, that's not how it works. Keynes' theory is about how a general glut can happen, due to the role of money and bonds as a second and third variable in markets (vs the usual supply and demand curve). There are various techniques to get out of it, the only time government should spend money is when we've basically dropped interest rates to 0% - free money! - and companies still aren't spending it. "Furthermore, it devalues the money in our wallet everyday we don't spend" You mean by inflation? The inflation that doesn't currently exist? http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla... Deflation on the other hand, has always been scary, for hundreds of years.
  - dageshi 11y ago
    Correct me if I'm wrong but Keynes also thought you should run a surplus during good economic times so you could run a deficit in the bad. Now I know the necessity to do that has been dismissed by modern economists but actual Keynesian policies still have to be implemented by politicians who get elected. During recessions there tends to be a reluctance on the part of electorates to deliberately take on more debt which IMHO leads to Keynesian responses which are never quite robust enough to do the job they're intended to do. Whereas if you did actually run a surplus during good economic times or at least during some of the good economic times then the public would likely be a lot more likely to back a real Keynesian response.
    - msandford 11y ago
      > Keynesian responses which are never quite robust enough to do the job they're intended to do How much of "normal" GDP should you spend in a crisis in order to avert it? 5%? 10%? 20%? 50%? 100%? 500%? I've never heard a solid answer, mostly just "however much we spent wasn't enough" which seems a little tautological. The only reason I'm picking on you is you said "never quite robust enough" as though you just plug a number into a formula and get an answer.
      - dageshi 11y ago
        You don't spend in order to "avert" it, "it" has already happened, you spend afterwards to limit the duration and the depth of the recession which makes sense because during a recession interest rates are at the lowest they'll be during the economic cycle and the government can borrow more for cheaper than at any other point. In terms of how much I would say between 5 and 10% depending on the severity of the recession and that need not all be in the form of government spending per se, it could also be a mix of tax cuts as well.
        msandford 11y ago
        5% of US GDP (which is around $15 trillion) would be $750 billion. 10% would be 1.5 trillion. Through all of QE a total of several trillion was spent on treasury bonds, bank bonds, mortgage backed securities, etc. https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_QE2.2C_and_QE3 https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_... By your own numbers, that should have been enough, and yet you've complained it wasn't. What gives?
vkou 11y ago
Which of these debt peaks was unsustainable, and why? http://www.mybudget360.com/wp-content/uploads/2010/12/us-public-debt-vs-gdp.png http://www.mybudget360.com/wp-content/uploads/2010/12/us-pub...
- pdkl95 11y ago
  https://en.wikipedia.org/wiki/Sh%C5%8Dwa_financial_crisis https://en.wikipedia.org/wiki/Sh%C5%8Dwa_financial_crisis Japan (at the time, primarily a few zaibatsu) had serious financial problems when their export bubble popped in the 1920s. Unfortunately, they bought into myth that austerity lowers debts really badly, and decided it was a good idea to cut out 30% (!) of their GDP in two years. When that only made the situation worse, they doubled down and tried to cut another ~10%. The zaibatsu and 37 banks went under in the inevitable bank-run, and quite a few financial leaders were assassinated when the military realized their budget was about the only thing left that could be cut. Compared to that mess, the US has done a relatively good job of inflating away it's debts. Our gridlock blocked most of the austerity "fixes", so while we still have a mess of an economy, at least it isn't slashing a third of our GDP.
- marcosdumay 11y ago
  I don't think the US government has ever had unsutainable debit levels. At least before 2008 (maybe it is now). You've had your quote of unsustainable private debit, but not public.
pdkl95 11y ago
> government debit can grow until it's not sustainable Of course. That doesn't mean governments follow a simple zero-sum model. Government economics is it's own beast, with (hopefully) it's own solutions. re: fsck the theories - you may find this[1] interesting, which is a summary of where we stand right now on many aspects of government economics by econ prof Mark Blyth that he gave at a recent q&a session. It might be one of the most succinct explanations of just how badly we're fscked. [1] https://www.youtube.com/watch?v=iJCcoF5K0SM#t=1160 https://www.youtube.com/watch?v=iJCcoF5K0SM#t=1160

rsync 11y ago

"As for governments, the austerity meme is class politics in disguise, and tends to lead to nasty social blowback." The prevailing neo-liberal (and progressive, at least in the US) notion is that smart people "understand" keynesian counter-cyclical economics and only dopes or rubes ... or bad actors (as you suggest) would advocate for austerity. However, it really needs to be repeated: austerity is only braindead if you insist on ever-increasing aggregate demand. If you are willing to accept stagnant or even decreasing aggregate demand (for whatever reason) then austerity is perfectly reasonable and perhaps a good choice. I'm not saying I'm in that camp, but I really don't like this false dichotomy - that austerity is braindead and only morons would advocate for it ... and leaving unsaid the almost universal assumption that aggregate demand can never, ever, be allowed to drop. EDIT: and I also don't like the condescending, custodial tone that this always takes ... "oh how quaint that you would conflate a national economy with a household economy, here let me mansplain it to you". In fact, there are boundary conditions where they behave exactly the same (see argentina). People aren't as dumb as you think they are.

inthewoods 11y ago
"However, it really needs to be repeated: austerity is only braindead if you insist on ever-increasing aggregate demand. If you are willing to accept stagnant or even decreasing aggregate demand (for whatever reason) then austerity is perfectly reasonable and perhaps a good choice." I think the problem is that austerity advocates argue that that aggregate demand will increase in the face of austerity, when we know that doesn't happen. Austerity advocates then often bring up the theory that if debt is lower, then external actors will have more confidence in the country and interest rates will decline. So while I agree with you that no one needs to be condescending, it is challenging to deal with the pro-austerity folks when they seem to be fact-challenged.