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1) They can indeed create money : wiki "Quantitative Easing" (edit: and reduce it, too! that's the federal reserve's fundamental job) 2) Stagflation is much

by jbooth 17y ago

1) They can indeed create money : wiki "Quantitative Easing" (edit: and reduce it, too! that's the federal reserve's fundamental job) 2) Stagflation is much worse than recessions and bounceback with low interest rates. See: the 1970s. There have been a lot of recessions and a lot of livelihoods ruined over the last 100 years or so to reach our current understanding -- it's likely not perfect, but it is based on experience. 3) That's not what I'm advocating in the slightest, I advocated for targetted government spending to help create/retain jobs, specifically on things that have high externalities for the country. We don't need any more candlesticks or buggy whips, but every state is laying off teachers like crazy and we could certainly use some new bridges and high speed rail. Regarding your last statement -- a lack of sufficient stimulus up front is the most universally agreed upon reason for the protracted nature of BOTH of those downturns. Like, all of the literature says the exact opposite of what you're saying. Maybe they're all wrong, I dunno. I do know that in both cases, decision makers were motivated by feelings of avoiding borrowing as a fundamental value, which is the right approach all of the time except for specifically during a panic or the beginning of a recession.

byrneseyeview 17y ago
1) They can print dollars, reducing the value of existing dollars. 2) The government was growing massively in the 50's, 60's, and 70's. If government growth was the solution, why did we get so much of it before the problem? 3) Is the government more likely to subsidize new, growing industries, or old, stagnant ones? Government subsidies will "save" the most jobs when they target industries with low capital requirements (like the ones that rely on cheap labor) rather than ones with high capital requirements (like high-end manufacturing). Venture capital is a tough job; deciding that some guy in DC is going to do an even adequate job at it is a stretch. It is not "universally agreed." I think we can all agree that both of the cases I cited included an unprecedented level of government spending, coupled with an unprecedented recession. "I was healthy, then I sneezed and you demanded that I start using leeches. I've never been sicker." "It is universally agreed that the problem is insufficient leeches."
- jbooth 17y ago
  You need to quit trying to boil things down to conservative ideology talking points -- the size of government is largely irrelevant to the choices faced in an economic downturn. The only people who care are right-wingers who try to drag it into everything. 1) Oversimplification, read an intro to economics book about how the chain of lending actually creates more dollars and wealth without just printing them 2) Not addressing what I was saying. The size of government is irrelevant here, we're talking about stimulus spending -- totally orthogonal. 3) Not addressing what I was saying in the slightest. It is in fact almost universally agreed that in both of those cases, the government spending was too little too late. By the vast majority of economist who've spent their lives studying this. Maybe your "gut feeling" is smarter than their decades of research. But I'd suggest you read this: http://www.xkcd.com/675/ http://www.xkcd.com/675/ EDIT: I'll add a history lesson so we can all learn something today. 1929 - stock market crashes 29-32 - hoover does nothing, economy spirals downwards 32 - FDR elected, massive counter-cyclical public works projects, economy recovers 37 - FDR raises taxes and cuts back on spending as an austerity measure, too early, double-dip In the case of Japan, similar story except the high savings rate exacerbated it, leading to deflation -- the government printing money and handing it out on a street corner would have been more effective than what they did
  - anamax 17y ago
    > 2) Not addressing what I was saying. The size of government is irrelevant here, we're talking about stimulus spending -- totally orthogonal. Actually, it's not orthogonal. In fact, it's quite on point, as stimulus spending tends to become permanent spending, that is, part of govt. We don't have counter-cyclical spending in the US. We have huge increases during down times and smaller increases during up times. Occasionally the private growth during up times exceeds govt growth. However, it's basically a one-way ratchet.
    - jbooth 17y ago
      Sigh, well if you're determined to bring silly ideology into everything, of course you can find a way to relate it. But it's entirely beside the point, unless we take your assumptions as gospel (they're not). Adding "but I think this will happen" when it is in no way mandated or apparent doesn't change the facts. We do in fact have counter-cyclical spending. You're seeing it now. Obama already announced a spending freeze on domestic programs, so we'll be seeing federal domestic spending decrease in real terms over the next few years. If you're wondering the last time that federal spending decreased in real terms? It's not "never". It's "the 1990s". (protip: inflation is relevant).

by jbooth 17y ago

byrneseyeview 17y ago

1) They can print dollars, reducing the value of existing dollars. 2) The government was growing massively in the 50's, 60's, and 70's. If government growth was the solution, why did we get so much of it before the problem? 3) Is the government more likely to subsidize new, growing industries, or old, stagnant ones? Government subsidies will "save" the most jobs when they target industries with low capital requirements (like the ones that rely on cheap labor) rather than ones with high capital requirements (like high-end manufacturing). Venture capital is a tough job; deciding that some guy in DC is going to do an even adequate job at it is a stretch. It is not "universally agreed." I think we can all agree that both of the cases I cited included an unprecedented level of government spending, coupled with an unprecedented recession. "I was healthy, then I sneezed and you demanded that I start using leeches. I've never been sicker." "It is universally agreed that the problem is insufficient leeches."

jbooth 17y ago
You need to quit trying to boil things down to conservative ideology talking points -- the size of government is largely irrelevant to the choices faced in an economic downturn. The only people who care are right-wingers who try to drag it into everything. 1) Oversimplification, read an intro to economics book about how the chain of lending actually creates more dollars and wealth without just printing them 2) Not addressing what I was saying. The size of government is irrelevant here, we're talking about stimulus spending -- totally orthogonal. 3) Not addressing what I was saying in the slightest. It is in fact almost universally agreed that in both of those cases, the government spending was too little too late. By the vast majority of economist who've spent their lives studying this. Maybe your "gut feeling" is smarter than their decades of research. But I'd suggest you read this: http://www.xkcd.com/675/ http://www.xkcd.com/675/ EDIT: I'll add a history lesson so we can all learn something today. 1929 - stock market crashes 29-32 - hoover does nothing, economy spirals downwards 32 - FDR elected, massive counter-cyclical public works projects, economy recovers 37 - FDR raises taxes and cuts back on spending as an austerity measure, too early, double-dip In the case of Japan, similar story except the high savings rate exacerbated it, leading to deflation -- the government printing money and handing it out on a street corner would have been more effective than what they did
- anamax 17y ago
  > 2) Not addressing what I was saying. The size of government is irrelevant here, we're talking about stimulus spending -- totally orthogonal. Actually, it's not orthogonal. In fact, it's quite on point, as stimulus spending tends to become permanent spending, that is, part of govt. We don't have counter-cyclical spending in the US. We have huge increases during down times and smaller increases during up times. Occasionally the private growth during up times exceeds govt growth. However, it's basically a one-way ratchet.
  - jbooth 17y ago
    Sigh, well if you're determined to bring silly ideology into everything, of course you can find a way to relate it. But it's entirely beside the point, unless we take your assumptions as gospel (they're not). Adding "but I think this will happen" when it is in no way mandated or apparent doesn't change the facts. We do in fact have counter-cyclical spending. You're seeing it now. Obama already announced a spending freeze on domestic programs, so we'll be seeing federal domestic spending decrease in real terms over the next few years. If you're wondering the last time that federal spending decreased in real terms? It's not "never". It's "the 1990s". (protip: inflation is relevant).