5 ms·

> 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 t

> 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?
  - dageshi 11y ago
    QE isn't the same as what I'm talking about. QE isn't spent by the government it's money printed by the FED which is then used to buy existing assets from the market, typically US treasury bonds but others as well. The purpose of QE is to push more money into the banks in the hopes that they will go out and lend some of it, but that's not much use if people aren't confident enough to borrow. So you can't finance a tax cut with QE, you can't finance an infrastructure program with QE, you can't do any of the real "Keynesian" things that would make a difference because the Central Bank should never be printing money to finance government spending. QE is complimentary to but not a replacement for a Keynesian response.

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?
- dageshi 11y ago
  QE isn't the same as what I'm talking about. QE isn't spent by the government it's money printed by the FED which is then used to buy existing assets from the market, typically US treasury bonds but others as well. The purpose of QE is to push more money into the banks in the hopes that they will go out and lend some of it, but that's not much use if people aren't confident enough to borrow. So you can't finance a tax cut with QE, you can't finance an infrastructure program with QE, you can't do any of the real "Keynesian" things that would make a difference because the Central Bank should never be printing money to finance government spending. QE is complimentary to but not a replacement for a Keynesian response.