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In the run-up to 2008, financial regulations in the US were shredded by Republican governments (literally [1]), hardly Keynesian. [1] https://www.propublica.or

by FabHK 6y ago

In the run-up to 2008, financial regulations in the US were shredded by Republican governments (literally [1]), hardly Keynesian. [1] https://www.propublica.org/article/banks-favorite-toothless-regulator-1125 https://www.propublica.org/article/banks-favorite-toothless-...

seaourfreed 6y ago
Republicans like to say they aren't Keynesian, but that is wrong. Keynes says deficit spending should occur when a bubble (business cycle) bursts, in order to force full employment when mass unemployment would happen. But in the USA in the last 50 years, politicians deficit spend every year. They deficit spend in all stages of bubbles. They deficit spend when there is already full employment. "Politician macroeconomics" is far more deficit spending than Keynes. This includes Republicans. They just do it with tax cuts and increased defense spending to create deficit spending.
- FabHK 6y ago
  You’re completely correct that Republicans fret and complain about the deficit when a Democrat president is in office and social spending and aid for the poor is concerned, and then turn around and institute huge gratuitous tax cuts when they’re in power (the deficit be damned), and empirically increase the deficit more than Democrat presidents. I’d call that hypocrisy though, not principled and appropriate Keynesianism. Remember for example the opposition to the Obama stimulus after the financial crisis, which promptly resulted in a stimulus package that was too small and needlessly slowed recovery, followed by Trump’s tax cut for corporations and the wealthy. Keynes calls for anti cyclical spending, not indiscriminate one.
CryptoPunk 6y ago
In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences: https://www.city-journal.org/html/trillion-dollar-bank-shakedown-bodes-ill-cities-12096.html https://www.city-journal.org/html/trillion-dollar-bank-shake... Government sponsored enteprises, which underwrite 50% of the entire US mortgage market, started massively increasing their subprime loan guarantees at the same time. And then you have Federal Reserve mouthpiece, New York Times columnist Paul Krugman, advocating in this 2002 article that the Federal Reserve create a housing bubble: https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-di... "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." This revisionist account of the causes of the financial crisis is just these same powerful forces, who are receiving billions in kickbacks from all of this corruption, pinning the blame for the financial crisis on the mythical deregulation-bogeyman.
- FabHK 6y ago
  You are propagating the false narrative money manager Barry Ritholz calls “the Big Lie” (which was an apposite name before Trump’s recent antics), namely the idea that it was government regulation (specifically forcing the poor innocent banks to give mortgages to “those people”) that caused the GFC. I’d say that story has been roundly refuted. https://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html https://www.washingtonpost.com/business/what-caused-the-fina... And for what it’s worth, that Krugman quote is out of context. Krugman is not calling for a housing bubble there, he is explaining Greenspan’s motivation in keeping rates so low for so long. Frankly, I find that disingenuous misrepresentation telling.
  - CryptoPunk 6y ago
    I don't think a group setting out to deceive the public would be: a) planting stories 8 years before the crisis, warning about the far-reaching effects of the Community Reinvestment Act b) recruiting Democrat/Wall-Street/public-sector darling Krugman to plant a story in the NYT 6 years before the crisis, urging the Federal Reserve to "create a housing bubble" via low interest rates (which is exactly what the Fed did) >>And for what it’s worth, that Krugman quote is out of context. It seems pretty clear to me he is strongly endorsing a bubble in that quote, and that's when looked at in context too. Krugman is a major believer in Keynes' demand-side economic theories. Keynes argued that the government planting banknotes in the ground during a recession would be net-positive, because people expending resources to dig them up would create economic activity that would get money circulating: "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing." Krugman argued something similar, when arguing that an announcing a non-existent alien attack would be economically beneficial, for the same reasons Keynes gave: https://business.time.com/2011/08/16/paul-krugman-an-alien-invasion-could-fix-the-economy/ https://business.time.com/2011/08/16/paul-krugman-an-alien-i... When looked at in this context, it's obvious why he'd think a bubble during a recession would be a good policy. But now of course the historical revisionism starts, and Krugman's clear endorsement of a bubble is reintepreted as prediction, so that the public-sector/Democrats' chief economic spokesman is not discredited.

by FabHK 6y ago

seaourfreed 6y ago

Republicans like to say they aren't Keynesian, but that is wrong. Keynes says deficit spending should occur when a bubble (business cycle) bursts, in order to force full employment when mass unemployment would happen. But in the USA in the last 50 years, politicians deficit spend every year. They deficit spend in all stages of bubbles. They deficit spend when there is already full employment. "Politician macroeconomics" is far more deficit spending than Keynes. This includes Republicans. They just do it with tax cuts and increased defense spending to create deficit spending.

FabHK 6y ago
You’re completely correct that Republicans fret and complain about the deficit when a Democrat president is in office and social spending and aid for the poor is concerned, and then turn around and institute huge gratuitous tax cuts when they’re in power (the deficit be damned), and empirically increase the deficit more than Democrat presidents. I’d call that hypocrisy though, not principled and appropriate Keynesianism. Remember for example the opposition to the Obama stimulus after the financial crisis, which promptly resulted in a stimulus package that was too small and needlessly slowed recovery, followed by Trump’s tax cut for corporations and the wealthy. Keynes calls for anti cyclical spending, not indiscriminate one.

CryptoPunk 6y ago

In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences: https://www.city-journal.org/html/trillion-dollar-bank-shakedown-bodes-ill-cities-12096.html https://www.city-journal.org/html/trillion-dollar-bank-shake... Government sponsored enteprises, which underwrite 50% of the entire US mortgage market, started massively increasing their subprime loan guarantees at the same time. And then you have Federal Reserve mouthpiece, New York Times columnist Paul Krugman, advocating in this 2002 article that the Federal Reserve create a housing bubble: https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-di... "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." This revisionist account of the causes of the financial crisis is just these same powerful forces, who are receiving billions in kickbacks from all of this corruption, pinning the blame for the financial crisis on the mythical deregulation-bogeyman.

FabHK 6y ago
You are propagating the false narrative money manager Barry Ritholz calls “the Big Lie” (which was an apposite name before Trump’s recent antics), namely the idea that it was government regulation (specifically forcing the poor innocent banks to give mortgages to “those people”) that caused the GFC. I’d say that story has been roundly refuted. https://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html https://www.washingtonpost.com/business/what-caused-the-fina... And for what it’s worth, that Krugman quote is out of context. Krugman is not calling for a housing bubble there, he is explaining Greenspan’s motivation in keeping rates so low for so long. Frankly, I find that disingenuous misrepresentation telling.
- CryptoPunk 6y ago
  I don't think a group setting out to deceive the public would be: a) planting stories 8 years before the crisis, warning about the far-reaching effects of the Community Reinvestment Act b) recruiting Democrat/Wall-Street/public-sector darling Krugman to plant a story in the NYT 6 years before the crisis, urging the Federal Reserve to "create a housing bubble" via low interest rates (which is exactly what the Fed did) >>And for what it’s worth, that Krugman quote is out of context. It seems pretty clear to me he is strongly endorsing a bubble in that quote, and that's when looked at in context too. Krugman is a major believer in Keynes' demand-side economic theories. Keynes argued that the government planting banknotes in the ground during a recession would be net-positive, because people expending resources to dig them up would create economic activity that would get money circulating: "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing." Krugman argued something similar, when arguing that an announcing a non-existent alien attack would be economically beneficial, for the same reasons Keynes gave: https://business.time.com/2011/08/16/paul-krugman-an-alien-invasion-could-fix-the-economy/ https://business.time.com/2011/08/16/paul-krugman-an-alien-i... When looked at in this context, it's obvious why he'd think a bubble during a recession would be a good policy. But now of course the historical revisionism starts, and Krugman's clear endorsement of a bubble is reintepreted as prediction, so that the public-sector/Democrats' chief economic spokesman is not discredited.