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Would you care to explain why printing money is a bad solution for the current scenario? And since economics is not a science who decides what is good economics

by arijo 16y ago

Would you care to explain why printing money is a bad solution for the current scenario? And since economics is not a science who decides what is good economics? And what about criminalizing speculation against sovereign debt - that is the root cause of what is happening in europe right now.

lionhearted 16y ago
> Would you care to explain why printing money is a bad solution for the current scenario? Sure, housing was overpriced for a few different reasons. There's quite a few causes of it, you probably know a lot of them. But - it was definitely overpriced (in a "bubble"). Now, we're having what's called a "correction" - a correction is where housing prices come back into line with where they'd in a more sensible environment. This is where stupid and reckless people get burned, and people who were sensible and saved their money now buy at the correct market prices. Krugman is saying we should print money, which strips the value of people holding cash via inflation. This transfers money from people holding cash to people holding debt (because during inflation, hard assets like housing increase in price relative to debt - mortgages). That takes money primarily from middle class people who were sensible and cautious, and distributes that money to a mix of middle class people who weren't sensible and to upper class people (who typically have significant debt and hard assets). Krugman's basically saying - "whoa, whoa, whoa, we can't let this correction happen - instead, we should take money from people who didn't play in this mess and give it to people who did" - that is horrific. > And since economics is not a science who decides what is good economics? Economics can have falsifiable hypotheses, so it can be science at times. But you're right, I should have called Krugman's ideas reckless policy instead of economics. It's more policy than economics, yes.
- duncanj 16y ago
  You're essentially saying that anyone who gets hammered by the "correction" necessarily morally deserved it because they must have "played in this mess". Because otherwise, you are arguing that some of the people who didn't play in the mess should give money to others who may or may not have played. This, besides the fact that a correction has already happened, as evidenced by the drop in house prices and the number of homes in foreclosure. If there is another "correction" now, beyond what has already happened, and it causes even more bankruptcies, discharged debts, haircuts, bank runs, and the like, then the entire economy will suffer, not just those who played in the mess. As banks look toward deflationary times, they are holding onto cash reserves. (http://research.stlouisfed.org/fred2/series/EXCRESNS http://research.stlouisfed.org/fred2/series/EXCRESNS) This may be because they fear making loans that will not be paid back 100%, but the result is deflationary because they are all doing it, and they are all keeping that money from the system. It's a self-fulfilling prophecy. A deflationary period, while our country has so much private debt, combined with high unemployment, will likely leave us with more and more bankruptcies and the "dynamo problem" of the great depression. If this is what you're looking forward to to punish a few house flippers, well, I can't agree with your sentiment on that.
- effn 16y ago
  What about entrepreneurs (who are currently getting hurt by inflation falling below the long term trend)? Why do they deserve to be punished while people holding cash don't?
hnal943 16y ago
How would you legally define "speculation?" How could you prove it is different from normal investment? Do you think anyone would buy the debt of a nation that threatened to throw you in jail if you did so in a way they didn't like? What would prevent such a government from jailing its debtors simply to get out of a situation such as what is happening in Europe?
bjnortier_hn 16y ago
Speculation against sovereign debt is the root cause? Have you considered profligate government spending? Using currency swaps to hide deficits with the help of Goldman Sachs? It wasn't speculators who pushed Greece's deficit up to 13%. "Speculators" is the straw man of European politicians, who don't want to admit blame (not something confined to European politicians). Then there is also the fact that when traditionally high interest-rate countries like Spain and Ireland entered the Eurozone, cheap financing was available for the first time. This resulted in a housing/construction boom and then crash. All the taxes from property development and services evaporated, which makes it harder to service debt.

by arijo 16y ago

lionhearted 16y ago

> Would you care to explain why printing money is a bad solution for the current scenario? Sure, housing was overpriced for a few different reasons. There's quite a few causes of it, you probably know a lot of them. But - it was definitely overpriced (in a "bubble"). Now, we're having what's called a "correction" - a correction is where housing prices come back into line with where they'd in a more sensible environment. This is where stupid and reckless people get burned, and people who were sensible and saved their money now buy at the correct market prices. Krugman is saying we should print money, which strips the value of people holding cash via inflation. This transfers money from people holding cash to people holding debt (because during inflation, hard assets like housing increase in price relative to debt - mortgages). That takes money primarily from middle class people who were sensible and cautious, and distributes that money to a mix of middle class people who weren't sensible and to upper class people (who typically have significant debt and hard assets). Krugman's basically saying - "whoa, whoa, whoa, we can't let this correction happen - instead, we should take money from people who didn't play in this mess and give it to people who did" - that is horrific. > And since economics is not a science who decides what is good economics? Economics can have falsifiable hypotheses, so it can be science at times. But you're right, I should have called Krugman's ideas reckless policy instead of economics. It's more policy than economics, yes.

duncanj 16y ago
You're essentially saying that anyone who gets hammered by the "correction" necessarily morally deserved it because they must have "played in this mess". Because otherwise, you are arguing that some of the people who didn't play in the mess should give money to others who may or may not have played. This, besides the fact that a correction has already happened, as evidenced by the drop in house prices and the number of homes in foreclosure. If there is another "correction" now, beyond what has already happened, and it causes even more bankruptcies, discharged debts, haircuts, bank runs, and the like, then the entire economy will suffer, not just those who played in the mess. As banks look toward deflationary times, they are holding onto cash reserves. (http://research.stlouisfed.org/fred2/series/EXCRESNS http://research.stlouisfed.org/fred2/series/EXCRESNS) This may be because they fear making loans that will not be paid back 100%, but the result is deflationary because they are all doing it, and they are all keeping that money from the system. It's a self-fulfilling prophecy. A deflationary period, while our country has so much private debt, combined with high unemployment, will likely leave us with more and more bankruptcies and the "dynamo problem" of the great depression. If this is what you're looking forward to to punish a few house flippers, well, I can't agree with your sentiment on that.
effn 16y ago
What about entrepreneurs (who are currently getting hurt by inflation falling below the long term trend)? Why do they deserve to be punished while people holding cash don't?

hnal943 16y ago

How would you legally define "speculation?" How could you prove it is different from normal investment? Do you think anyone would buy the debt of a nation that threatened to throw you in jail if you did so in a way they didn't like? What would prevent such a government from jailing its debtors simply to get out of a situation such as what is happening in Europe?

bjnortier_hn 16y ago

Speculation against sovereign debt is the root cause? Have you considered profligate government spending? Using currency swaps to hide deficits with the help of Goldman Sachs? It wasn't speculators who pushed Greece's deficit up to 13%. "Speculators" is the straw man of European politicians, who don't want to admit blame (not something confined to European politicians). Then there is also the fact that when traditionally high interest-rate countries like Spain and Ireland entered the Eurozone, cheap financing was available for the first time. This resulted in a housing/construction boom and then crash. All the taxes from property development and services evaporated, which makes it harder to service debt.