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Considering that his Keynesianism has basically destroyed Japan's future (while at the same time he faults them for not borrowing enough) I'd hope he'd proceed

Considering that his Keynesianism has basically destroyed Japan's future (while at the same time he faults them for not borrowing enough) I'd hope he'd proceed with a bit more caution. The basic problem he has is that he doesn't really understand why we're here. When debt chases bad assets it's a disease that has to be cleared. He ignored some pretty serious depressions in his analysis as well. The panic of 1819 comes to mind as a pretty serious one. People ignored the desires of those long on stocks and real estate to bail them out. They realized the problem was too much debt and just let it work itself out despite the pain it caused them in the short run. Then there is the depression of 1920-21. This depression probably highlights most clearly the Austrian theory of the business cycle and why the Austrian response to the bust is the correct one. There were no interventions in the economy following the bust. It was a very serious contraction by any definition. We live in a world that's consumed by debt. We're taught that debt is good despite our instincts to the contrary. We're taught that being irresponsible is the way to get yourself out of short term pain. Listening to these people seems like madness at this point. The real reason that budget cuts are on the table is that everyone knows we're all broke. After 10 years of this I imagine people are going to get fed up with bailouts and inflation. Krugman will still be crying for more stimulus while a few people might get serious enough to let the banks fail and start over. Our fear of short term pain might be the worst part of the modern political system. We'd rather avoid some of the short term pain even if that means dragging things out for decades.

w00pla 16y ago
That is one thing I don't understand about this whole fiasco. He advocates spending and stimulus to get out of the this. He says "And both the United States and Europe are well on their way toward Japan-style deflationary traps". But didn't Japan spend a shitload of money during the 90ies (making their debt 200% of GDP)? Don't they now sit with that debt, a declining population and still no growth? I'm not an economic expert and maybe I just have a biased for government/personal austerity and saving.
- hga 16y ago
  Well, 192.1% estimated as of last year.... Their apparent recovery from the Lost Decade a few years ago is now realized as being just another external bubble induced bump and they're well into their second Lost Decade. You may not be an economic expert and maybe have a bias against this sort of thing, but most anybody should be able to see that this was a horrible mistake. Almost certainly a terminal one for the Japanese people, or as Kenshiro of Fist of the North Star would say, "omae wa mō shindeiru" ("you are already dead").
kiba 16y ago
Our fear of short term pain might be the worst part of the modern political system. When people realize that they can vote themselves more money, they will. Government will then promise more than it can deliver and proceed to spend money like no tomorrow just like what happens to Greece and California. But it's heresy to suggest that democratic institutions should be scrapped altogether. Everyone thinks democracy equal freedom, but it's really just majority rules.
- hga 16y ago
  Well, that gets into the question of "to whom to you extend the franchise to"? Cut that back (yes, I know, beyond hard), maybe limit it to a new class of Taxpayers, and things could change real fast. Of course the Social Justice types would be ... unhappy. Used to be in many states you had to own some land (one guy owned a doghouse sized plot of land to make a point) or pay a poll tax to vote. The latter's corruption by the Southern segregationists makes that right out for the time being, but ... well, republics tend to last only as long as they have the moral fiber to not vote themselves the treasury. We're obviously way beyond that point, but the game will run out at some point. And with so much of our debt in bonds (1 year or less maturity) is could have very quickly. Probably would already be happening if not for the Eurozone crisis.
- gaius 16y ago
  This is exactly what happened in the UK under New Labour. However now it seems the voters have come to their senses.
- hnal943 16y ago
  When people realize that they can vote themselves more money, they will. I would agree had you said "When people think that they can vote themselves..." because who are they kidding? There is no "Obama Money." The government's money comes from the people, as the residents of Greece and California are discovering. I suppose you can vote yourself more money if you can vote and yet pay no taxes, which might be the true problem. Perhaps in order to have a say in the direction of the country, you need to have skin in the game. I don't think that chucking democracy is really the right reaction. I stand with Winston Churchill: "Democracy is the worst form of government, except for all those other forms that have been tried from time to time."

w00pla 16y ago

That is one thing I don't understand about this whole fiasco. He advocates spending and stimulus to get out of the this. He says "And both the United States and Europe are well on their way toward Japan-style deflationary traps". But didn't Japan spend a shitload of money during the 90ies (making their debt 200% of GDP)? Don't they now sit with that debt, a declining population and still no growth? I'm not an economic expert and maybe I just have a biased for government/personal austerity and saving.

hga 16y ago
Well, 192.1% estimated as of last year.... Their apparent recovery from the Lost Decade a few years ago is now realized as being just another external bubble induced bump and they're well into their second Lost Decade. You may not be an economic expert and maybe have a bias against this sort of thing, but most anybody should be able to see that this was a horrible mistake. Almost certainly a terminal one for the Japanese people, or as Kenshiro of Fist of the North Star would say, "omae wa mō shindeiru" ("you are already dead").

kiba 16y ago

Our fear of short term pain might be the worst part of the modern political system. When people realize that they can vote themselves more money, they will. Government will then promise more than it can deliver and proceed to spend money like no tomorrow just like what happens to Greece and California. But it's heresy to suggest that democratic institutions should be scrapped altogether. Everyone thinks democracy equal freedom, but it's really just majority rules.

hga 16y ago
Well, that gets into the question of "to whom to you extend the franchise to"? Cut that back (yes, I know, beyond hard), maybe limit it to a new class of Taxpayers, and things could change real fast. Of course the Social Justice types would be ... unhappy. Used to be in many states you had to own some land (one guy owned a doghouse sized plot of land to make a point) or pay a poll tax to vote. The latter's corruption by the Southern segregationists makes that right out for the time being, but ... well, republics tend to last only as long as they have the moral fiber to not vote themselves the treasury. We're obviously way beyond that point, but the game will run out at some point. And with so much of our debt in bonds (1 year or less maturity) is could have very quickly. Probably would already be happening if not for the Eurozone crisis.
gaius 16y ago
This is exactly what happened in the UK under New Labour. However now it seems the voters have come to their senses.
hnal943 16y ago
When people realize that they can vote themselves more money, they will. I would agree had you said "When people think that they can vote themselves..." because who are they kidding? There is no "Obama Money." The government's money comes from the people, as the residents of Greece and California are discovering. I suppose you can vote yourself more money if you can vote and yet pay no taxes, which might be the true problem. Perhaps in order to have a say in the direction of the country, you need to have skin in the game. I don't think that chucking democracy is really the right reaction. I stand with Winston Churchill: "Democracy is the worst form of government, except for all those other forms that have been tried from time to time."