Paul Krugman: "Falling Into the Chasm"

you misinterpret his argument, he is not blaming Obama at all.

I agree, but what we were discussing below is that there doesn't seem to e a clear way out of this.

There's not even an assurance that stimulus money, even directed at the right places, would help right now.

Sure it's important that we bring the regulations back, but preventative measures don't matter too much when the disaster has already struck.

How do we get out of this? Can we even get out of this?

Larger questions of the American destiny aside, this might actually be the endgame.

It IS the endgame for America...and the beginning of the endgame for China, since they started playing the same unwinnable game we did.

Unless we are to re regulate Wall Street, it is evident that we must fall, and hard.

Because our representatives in Congress are so enamored by little pieces of paper and ignore the bloodshed of their handy work, the Swine own the place and us....No sympathy for us poor devils;Buy the ticket:Take the Ride.

Great article. I posted it on it's own, I hope you don't mind.

A shit load of downvotes and no responses? That means people read this, disagreed with it and didn't bother to say why?

I'm not ayipsis, if you have something to say I'll listen.

Maybe I touched a sensitive nerve.

I’m game . You should rephrase your question correctly: What Depression became known as the "Great Depression" BECAUSE of inflationary spending?

This is all about KEYNES. Recessions and depressions are a normal part of the business cycles. The boom/bust. It's Keynesian polices like government bailouts, shovel ready jobs, easy credit, artificially low interest rates, that ultimately prolonged the depression (making it the GREAT depression), by preventing a liquidation of bad assets needed before a recovery can begin.

Keynesians are blindly enslaved to some concept of nearly fixed prices, and therefore fear deflation.

Keynesians are the ones who are willing to "create shovel ready jobs" that only exist because federal money is used to create the jobs. Never mind this is a malinvestment that leads to a bubble that bursts once the funding for the program dries up. ( the bubble consisting of a private business that indirectly depends on the program for income. (e.g. shovel manufacturers)

This is going to surprise, you but Hoover was a Keynesian, albeit a mild one compared to his successor . Right after the stock market crash HOOVER pulled a play straight from the keynesian textbook by cutting income tax rates and increasing federal spending by 42% from 1930 to 1932. This led to a deficit of approx. $2.6 billion deficit by 1932.(Yes Hoover believed in the celebrated Keynesian policy of massive deficit spending)

And yes Hoover also feared falling wages in response to market forces, just like Keynesians, and he tried to stabilize them, forcing companies to lay off workers instead of cutting wages.

The Keynesians are also the ones who prop of failing businesses with taxpayer money. BTW How well have the bank bailouts worked for everyone that isn't part of Wallstreet?

Who are the biggest advocates of the FEDERAL RESERVE and Quantitative easing? the Keynesians. They are doing it now, and did in the 1930. The above factors and MASSIVE expansion of credit by the Federal Reserve caused a depression to be prolonged and become known, as "the great depression."

This has nothing to do with Keynes because none of his policies were taken seriously until FDR.

Furthermore, Libertarians like to use what I call the "one drop" analogy to mystify free market failures.

This is the idea that, somehow, because government intervention existed somewhere, it wasn't really a free market and therefore it's statism and therefore it was all tthe government's fault.

I'm well aware that Hoover started the RFC and started implementing some of FDR's ideas before FDR got into office.

Glass-Stiegel (that horrible piece of legislation right?) was his idea mainly.

None of that changes that fact that there was 30% deflation from 1929-1932.

And your "extension" argument is both mystifying and connected back to this one drop fallacy. Even if government spending didn't assist economies, and it's demonstrably false that it doesn't, the free market was just too butthurt from government policy to get it act together and start hiring again? Is that the idea here?

Investment dropped 99% by 1932 and didn't rise again for many years. The government didn't force anyone to not take chances, so the notion that we would have gotten out faster if we just let things be is completely asinine.

And this is further demonstrated by the fact that NO ONE got out of the Depression until the war came along.

Seriously, NO ONE got out of the Depression by free market means. It didn't happen, period.

And considering that there was an attempted coup on Roosevelt from the private sector and a heavy rise in fascist activity in states like California, it's entirely possible that capitalism would have died and never come back were it not for New Deal policies.

I know Libertarians all swallow the same bullshit about the Great Depression so they think they're informed but, they're really not.

No one agrees with you. Not professional economists, not historians, not sociologists, NO ONE. And it isn't because they're biased.

Economic models like Keynes vs. Hayek are largely irrelevant because economics ISN'T a science like physics or biology. Its mathematical principles of free markets rely on asinine assumptions like "free entry and exit to the market," "non-monopoly competition," "equality of products among producers," "perfect information and total rationality for producers and consumers," etc. etc.

You can't very well stand up and proclaim that Hayek's theories are demonstrable fact when they can't even predict the mechanisms and failures that occur all the time.

A more reliable metric of the pulse and motions of economy will always be direct observation.

You don't like the Great Depression of 1929-39? Fine, try the Great Depression of 1877-1896.

Once again, massive deflation caused by the gold standard and ZERO regulation of the free market with the exception of tariffs.

So what's the one drop rule now? What horrific displacement of the free market caused this evil government to inflate the money supply and cause that depression?

In case you don't want to bother, here's hint that will save you some time. The largest Federal Institution at that time was the Postal Service and the only Federal form of spending was pensions for Civil War veterans.

In case that didn't get the message across, I'll make it more simple. There was no government spending in that era.

The Free Market fucked itself, like it always does. Because irrational idiots will always seek a higher profit over a stable but less profitable system.

Not at all, actually I agree with you. Especially the trade deficits, the military and taxing the rich part.

I didn't mean to come off as one dimensional, notice that I was simply refuting a worldview that I'm sick to death of hearing, because it's wrong. I wasn't proposing my own.

I'll be the first to admit that I get heated in discussions like this, but it's only because I get frustrated with people turning to solutions which have been tried and have failed multiple times. Especially considering the new economic realities of the day.

But an initial air of hostility usually leads one to assume their respondent feels the opposite way they do. Let me just clear that up right now by saying I most certainly DON'T feel that way.

That's why I tried to distance myself from Keynes. I am NOT a tax and spend Keynesian, that's not what I believe. I don't think inflation is a good thing nor do I think that it's inconsequential, right now or at any other time.

And I also don't mean to sound naive, I certainly don't think we can open the public treasury, dish out some stimulus and go right back to normal.

I think FDR's policies helped, a hell of a lot. But only a fool would say he ended the Depression. Even the war only brought temporary recovery. I agree with his policies more on a moral level than a fiscal one. I'm not about to propose a whole new series of entitlements. Our budget can't handle it.

In fact, to be honest, I don't think the U.S. is going to recover. We're probably going the way of the Soviets as far as I'm concerned, that is, stagnation and then collapse followed by ineffective reform.

Nor am I a fan of Fed Reserve inflationary policies, since they're all, without a doubt, going to be aimed at industries that will have nothing to do with economic recovery. Maybe they'll hand another couple hundred billion to some European banks, that'll help.

And, in the end, I do agree with you about the government. There is no way that the Federal Government of this country could ever pull its head out its corporate master's ass enough to ever do anything resembling a sane attempt at Social Democracy.

It's just that I know it -could-, and I wish that it would because of how well the model works elsewhere. But I'm not stupid, I know that it won't. Potential does not equal I just want us to get as close as we can without it getting so entangled that its corruption fucks everything up.

I just don't appreciate this purely ideological, naive nonsense that comes out of the likes of ShanklinMike and his crowd. The notion that if we just sat back and let Rome burn the fire would put itself out is, to me, a criminally stupid thing to believe. Especially when so many of these business goons start the fires and collect the insurance money.

Anyway, enough extended metaphors. I think your post said what I wanted to say a lot better than I could have said it.

I voted you up for that. And when I say Libertarian, I'm talking to these Barry Goldwater clones, not about people like you. It's too hard to distinguish between the minarchists and the anarchists and the objectivists from the plain old people who are just skeptical of social programs.

Well, Saladin I somewhat agree with your point of view, although I might have phrased some of those ideas a bit differently.

Of course, merely spending money isn't enough. For instance, if the entire population engages in the habit of buying televisions and computers against credit cards at 25% per annum, then that would be ineffective as a great number of those devices are just wasting assets.

One problem about a New Deal 2.0 is that some of the best ideas for national investment for the future involve the destruction of industries that are politically important today.

High Speed Rail and Maglev threaten the airlines.

Distributed clean energy threatens the utilities.

Dilution of Agribusiness in favour of more distributed less petrochemical intensive agriculture threatens, of course, that huge complex of food and agriculture that also contains an increasingly large portion of the finance industry. Also, of course, centralization of agricultural revenues is one of the main sources of US export earnings. Encouraging more "local" processes, in the beginning, would harm American firms in many related industries.

Also, fiscal stimulus alone, or done in the usual way, would probably not be maximally efficient. Money spent simply domestically, for example, doesn't really create a market for new American products overseas that would ease the trade deficit. The old solution to this problem was either Mercantilism or Colonialism. In the 21st century, these tactics are likely to backfire. A more sophisticated methodology is necessary, one that is fair and legitimate and likely to be accepted globally.

So this fascination with the number, in fact, any number, in connection with either tax cuts or fiscal stimulus, is in my view a distraction. The problem requires a bit of thought that extends well beyond simply addition and subtraction.

That was a very stream A.D.D./ stream of consciousness post.

You go from your private musings on libertarians, to Hoover, to Glass-Stegal, to deflation, to musing about me, to a Coup on Roosvelt, to fascism in California...!????

More importantly you frame an imaginary argument made by someoneelse, and than try to address it and pretend I made it.

Let's calm down and focus this a little bit.

Paul Krugman is an economist from the Keynesian school of economics; there is no getting around that. He (usually) advocates for Keynesian policies.

More importantly the polices talked about in this article are Keynesian polices therefore this article does have to to with Keynesianism (contrary to your original contention it does not).

No Saladin, fewer and fewer agree with you! Keynesian economists are a dieing breed. I could assemble a list of hundreds of economists and historians who now agree that stimulus and other such spending programs during the great depression did not work, probably before the end of the week. But to use your favorite word this exercise would be asinine !

Now about the contention that businesses were "too butthurt from government policy to get it act together and start hiring again,"

Yes FDR also had programs which set wages artificially high, (there is that fear of deflation again) which caused companies too.... LAY OFF WORKERS!

There is funny school out where you live. Somewhere in California that did a study on how the Keynesian "stimulus policy" prolonged the depression. Ooh Yeah, UCLA and two of its leading economists.

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.as...

Your post to ThatCrazyLibertarian was well formatted, well articulated, well reasoned.

Why would you not post that originally? I find myself agreeing with you more often than not. I have a strong disdain for Keynesian economics, and the Paul Krugman of the last three years, I guess that leads to blanket assumptions about someone. I didn't mean to come across as contrarian for its own sake, it seemed you wanted someone to debate someone thing with.

Definitely some worthwhile thoughts here, I hadn't considered the counter-productive nature of starting up new industries that destroy old ones.

As an extra example, think of the military industrial complex. So much talk has been made of cutting the defense budget to help with the deficit.

But what percentage of GDP is tied up in that industry? Probably more than 10%. Part of the reason no one lowers the budget is because we've been reliant on the military to provide millions of high-paying jobs for areas of the nation which are utterly incapable of having other industries available to them.

If you think about it that way, I don't really see a coherent way out of our problems. We'd have to break ourselves to fix ourselves. And even then, there'd be no guarantees that the new industries would give us the kind of 1950's-60's growth we need to get ourselves on firm footing again.

Just a small point, I don't know that it's correct to say traditional economies used mercantilist tactics, it might be more correct to call them protectionist. Mercantilism is more like the capitalism of kings, it doesn't necessarily have much to do with domestic production as mercantilists believe it is impossible to create wealth. Protectionists, on the other hand, favor domestic production to encourage autonomy, but they wouldn't necessarily be against exports like mercantilists would.

On the topic though, I hadn't considered the international repercussions of heavy handed tactics to deal with the trade deficit.

But on the other hand, I just don't see any other way. Considering that it's very likely that the corporations involved in perpetuating our trade deficit have a vested interest in it, it seems very unlikely to me that a method could be devised that wouldn't rock the boat.

I guess in some sense we've already gone too far, we might be past the point of no return.

"That was a very stream A.D.D./ stream of consciousness post."

It's a bad habit I've developed as a history undergrad unfortunately.

It's impossible for me to see things without the proper historical context because I don't see things as separate elements. It comes across as incoherent to people who don't think the same way.

To you, issues of politics, economics, social, scientific and cultural progress, environmental changes and history might all be independent subjects that you've compartmentalized, but to me they all represent the same phenomena, the development of the human race over time.

For instance, I can't think about free market economics without seeing its historical advocates and their contradictions. To you, the philosophy of people like that and that people themselves are separate. You might even have learned of them at separate times. But not for me. For me the ideology and the personal consequences are the same thing.

All that matters to me is the result, a specific political philosophy's logical proceedings or justifications are largely irrelevant.

And in that case, when someone tells me regulation is bad and fiscal stimulus doesn't work, I don't think about it in a mathematical or political sense. To me I see a denunciation of the tens of millions of people who didn't STARVE because they had the CCC when no one else cared about them. I see Glass-Stiegel because that regulation was specifically designed to prevent the conflict of interest and too big to fail nature of large financial institutions, something even bankers largely agreed with at the time. When someone espuses the free market, all I see is David Rockefeller giving a sermon about capitalism and how Christianity praises it on the same day that his private goons and bought out state militias shot men, women and children who were on strike because of terrible working conditions in mines. Conditions that would NEVER have been improved were it not for things like the Wagner Act and the NLRB which gave unions enough teeth to fight back.

When I support my position, it's irrelevant to me what Keynes or Krugman thinks. I bet they're wrong about a lot of shit and Hayek and Friedman probably have lots of things they're right about.

But as long as you make the argument an abstraction, I can never agree with you.

Find me an example of your Libertarian utopia and then maybe I'll take your claims more seriously. Until then, I've had enough grounding in how badly ambitious Industrialists fucked things up for everyone else to know better than to entrust society to them by default.

That's what I was trying to get at it with my disjointed last post.

As for why I didn't post that in the first place, well, I was pissed off. This isn't a matter of abstract politics and reasoning for me. Peoples' LIVES get fucked up by stuff like this, badly. It's a whole different experience to understand the consequences of an idea than it is to reason out its consistency in your head.

To address the rest of what you said, it's true. I was exaggerating quite a bit when I said no one was on your side. There's so much debate about the causes of the Great Depression that it was criminal of me to say that anything is decided.

To this day, no one really agrees. There are at least 5 major competing theories and they all make at least some valid points.

As for Keynes, I really don't give a shit about him or what he had to say. I don't follow any specific school of economic thought because, like I said earlier, they're not scientific. To follow just the Austrian School or the Keynesian or anyone else is like following psychology while only accepting behaviorism or something. It's sort of a waste of time, you need to pick and choose what you think is best supported.

As for agreeing with me, I don't know that you do. I think we both have an accurate understanding of the fundamental weaknesses in the American economy, the fucked up practices of the Fed and the corporate dominance of our government, but those are clear observations to anyone with an unclouded mind.

It's hard to disagree about what we see. So long as we're looking at the same thing, it's hard to come to different conclusions even with different perspectives.

But that's where our similarities seemed to end. I don't hate free markets and I certainly don't think they should be controlled.

I believe that EVERYONE thinks that an anarchist frame of mind when it comes to the economy is out of the question. Not even Libertarians really think that. I'm sure none of you would agree with contractual slavery right?

Everyone has limits, and mine are way different from yours.

More specifically, I believe that the economy exists to serve peoples' needs, while people in your train of thought seem to think that property is supposed to have its own rules that must be obeyed, even if it is to the obvious detriment of us all.

A simple example. If a human being were to come into existence who was so talented and so unbelievably gifted as a businessman that they were able to acquire all of the wealth in existence, through purely "non-force" means, should we all accept this person's accomplishments regardless of what it would mean t our individual lives?

If that person owned all the water and all the food and anything else you could think of, would that be a society you would defend? That you would care about? That you would DIE for?

Not me.

I see capitalism and free markets as a transitional economy, one that accurately, if brutally, recognizes how to deal with human untrustworthiness and material scarcity.

In an ideal future, our productive capacity would be so great that it wouldn't even make sense to have anything but basic property laws.

You're already seeing this start to happen with things like agriculture, a business which is so good at making food cheaply (especially corn) that literally they make the NOTION of business obsolete.

Anyway, there's way too much to digest here so I'l stop.

The main thing I'm trying to get across is that this shit is really complicated and it isn't as simple as applying some vague political totality into our political/economic system and expecting everything to work.

No need for apologies, it wasn't an overreaction. It was appropriate. My post was clearly biased and obviously hostile. It didn't have anything in it that would merit a totally dispassionate response.

I know what you mean, that's why these issues get me amped up. To me it's not some abstract, academic notion. People get fucked up when decisions like this go awry, it shouldn't be about petty partisan pissing matches. But that's how things go.

To be totally honest with you though, I wouldn't place any more stock in the recovery of the United States.

It is philosophically, intellectually, financially, economically, socially, politically and ethically bankrupt on so many levels that it's almost guaranteed to fail. All historical precedent I've come across tells me that societies don't bounce back from shit like this, not soon anyway.

The closest parallel I can think of is the Gilded Age, but economic prosperity dominated that era so they had no risk of total collapse.

There was an excellent episode of the Daily Show on the 20th anniversary of the Berlin Wall coming down where they pointed out how many similarities there were between the state of the Soviet Union back then and the state of the U.S. now. They tried to make it funny but, it really wasn't.

Look to Canada or overseas, because nothing short of total catastrophe or utterly indescribable scientific breakthroughs will pull us out of this rut.

The capitalism of kings. Good description. Basically, you export more than you import. In the capital account, you collect hard currencies and lend, creating financial assets. Forcing other countries to buy your products, such as the sale of opium into China, was the apogee of the Mercantilist strategy. Colonial strategies simply draw the target market under the same governing umbrella, which can be troublesome. In the 20th century, the most popular method for creating new markets was "Reconstruction".

Judged by these principles, it's plain that the Asian economies are the new Mercantilists. They export more than they import. They lend to America and Europe, generating financial assets. Now, they face the problem of converting those USD denominated assets into something less volatile, such as SDR's. (Gold unfortunately is too scarce and tool volatile. Conversion to Gold would also cause a massive contraction of global money supply.)

America is an information economy. So, one could suggest the sale of advanced information, which we call technology. However, many technologies of a Green World are in fact primitive, e.g., concentrated solar thermal power, etc. (Just mirrors, high specific density fluid, water, to steam, to electric power.) How do we take these simple ideas and render them proprietary so that they can be distributed in exchange for foreign reserves, which can then be lent out? Genetically modified seed stocks that support a vertical of fertilizers and herbicides is one method for creating dependence, and the cash flows that arise from dependence. Another is simple addiction, as with opium or nicotine or anti-inflammatory medications with only minimal risk of congestive heart failure. Or lace coffee with addictive excitotoxins. Or divert food grains to biofuels, requiring emerging economies to devote land to plantation style cultivation of biofuel stock, such as soya and corn, then sell processed foods into those economies to supply the food that is no longer grown there.

Do you see where this is headed? The legitimacy of these efforts to increase exports will eventually crumble.

So, the method for creating markets and coming to terms with the intertemporal budget constraint in trade is far from easy. However, a gross expenditure on fiscal stimulus is unlikely to produce long-term legitimate results. In fact, the Mercantilist books of the Asian economies can only be improved by those tactics.

A good find on the ucla.edu/portal, I found much the same conclusions from various sources, the Mises Institute being one of the best sources of fact based research among others.

To be sure Economics is not a "hard science", it is a social science, like history. I won't degrade it to an art quite yet though.

All coherent political philosophies stem from some understanding of economics, be that the Austrian school, Chicago school, Keynesian school, Marxist school, and so on .

All of them have weaknesses.You may not consciously advocate for one over the other, but if you examine what you value, you will see that much stems from the ideas and influence of an economist.
Ironically he has been the subject of so much of my posts on this thread, I leave you with his words:

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

---John Maynard Keynes----

so well put....

always appreciate your point of view saladin

As long as you do, I'll keep posting. =)

Thanks incredulous.

You know, I think America needs a sovereign wealth investment infrastructure. Similar to China, America needs to secure supplies to commodities and grow distribution into foreign export markets. A sovereign wealth investment methodology also has the upside of not involving the use of guns in the context of an expensive and bloody invasion that evolves into a siege that becomes an occupation that becomes a reason to hate America.

Of course, investment would still entail ethical considerations; and investing equitably and justly and with some view towards the long-term accretion of that undervalued asset known as "happiness" would require great effort and oversight from the public. It could even go all wrong. But trying to find "some" alternative to more aggressive methods for securing distribution of American products abroad is, in my view, absolutely essential. There are enough dystopian forces at work in the world. We'll still get to see Bladerunner in real life if we get rid of some limited quantum of the potential for unfairness and global ugliness. A New Deal 2.0 can't be Colonialism 3.0.... because the colonized are going to push back very hard this time.

But the America of this century has used up most of its domestic natural resources, so what kind of investment could we make that we could successfully export anywhere and receive a net benefit from?

It's almost like America has been on life support since the 1970's. Without us having Wall Street and the ability to manipulate foreign currencies, I feel like our collapse would have happened a long time ago maybe.

And if the New Deal invested in roads, levees, schools, dams and bridges, what will our next project invest in?

We could fix what we have, as much of it is crumbling. Maybe we could build and repair our fleet of nuclear reactors, which are falling apart, or work on high-speed trains or more efficient power plants or better internet infrastructure. But will those really help in the long-run like schools and roads and rural electrification did?

I think you're thinking about a New Deal 1.0. You're thinking historically. The problem is the trade deficit and having borrowed so much from the emerging Asian economies. This can only continue for a limited time. There's an intertemporal budget constraint. At some stage, exports have to exceed imports, and borrowings have to become lendings on the capital account.

In order to operate and produce for export one needs basic commodities, such as energy, metal ores and food. One sovereign investment plan to help secure access to, say, rare earths would be the joint venture purchase of Central Asian mining interests. America provides funding, plus intellectual property, in the exploration of Central Asia for rare earth minerals. The sovereign investment is housed in a joint venture with large international private equity firms. The joint venture has the degree of local investment in Central Asia as may be required by local law. The sovereign investment permits the enterprise to proceed where private interest alone would be unable to accept the economic risks or coordinate the provision of national intellectual skills sets, e.g., satellite mapping and geological surveys.

Growing foreign markets is more complex. However, investment in shipping and distribution--all those things that undergird the "push" of products to consumers--might be able to secure the distribution of American products in a fashion biased towards exports, that is, of goods made in America or which contain American intellectual property subject to licensing and royalty fees.

However, the overarching issue of minimising resort to practices that encourage unreasonable "dependence" would remain. What changes is that the exercise in growing export markets enters the public sphere to a certain extent whereas today it is left entirely to private interests. Once it's in the public domain, the activities become subject to review and oversight with the objective of maintaining international legitimacy. Issues like equity and social justice enter the equation rather than being left entirely behind.

Having said this, there are those who would argue that the mechanisms of public investment in export market growth already exist. We call it the IMF and the World Bank. However, these observations point out sub silentio activities, not transparent disclosed activities. An explicit sovereign investment scheme has the advantage of transparency.

Indeed, and it certainly wouldn't hurt to start requiring humanities and ethics classes in our science, engineering and business curriculum. I think the growing de-emphasis on the liberal arts has in many ways produced the type of MBA attitude currently ruling the world...the divorce between the hard sciences and liberal arts has produced an education that emphasizes a disassociated perfection of technique, without taking into account global history, culture, literature or people. Ironically, economics sits quite stable amongst the hard sciences, but even economics needs to understand not just its own history, but its history in the context of the world in the particular and the general. We are no longer producing educated human beings in Western civilization, we are producing technocrats, and wonderfully insightful scientists who are incapable of connecting the work they do to the lives they impact.

Yes, I think fixing all of those things will help the blue collar sector of the population by providing much needed jobs, but more importantly, I think we are overlooking American ingenuity, and in spite of everything that is wrong with this country, there are some things that remain right, and in and of themselves encourage the kind of creativity and productivity that continues even today. Science and technology in America are unbelievably booming, in spite of the fact that we had a moron for a past president who went out of his way to stifle scientific creativity, or funnel it into the war machine. I think we are just beginning to realize the possibilities of exporting the results of science and technology as an investment that we could receive a net benefit from, but in order to do that, we have to have a government that can do the sort of investing AsisSuperLoop suggests, and begin to divorce itself from this unproductive, unsuccessful and ugly war machine mentality.

Sensitizing people to ethical problems would be great, along with thinking independently. An interest in social justice, though, probably comes from getting one's ass kicked a couple of times.

ahhh, must we?

perhaps you are right

Ralph Nader theorizes that sometimes it's good for the "enemy" to be in office. Look how much people mobilized against GWB. Since Obama was elected? Not nearly as much activity. Maybe if the GOP takes the House back, those people will be spurred into action again.

That's what everyone was telling Krugman when he was sounding the alarm to this whole mess as far back as 2003-2004. People like you didn't listen and here we are.

At least he won his Nobel Prize for sounding the alarm for so long.

Krugman is a bi-polar nut-job.He was correctly "sounding the alarm" in 2003, now he asking for the same thing he was sounding the alarm against in 2003 : massive money creation and deficit spending.

http://blog.scrivener.net/2009/08/krugman-versus-krugman-on-deficits-and.html

He was sounding the alarm when the Republicans were doing it, but it's OK if the Democrats do it.

Republican deficits bad, Democrat deficits good. OK, Paul.

...well actually what he's saying is we have to spend MORE money.

he's not some newcomer pundit, he's won a nobel prize, he's been right in the past; he knows what he's talking about.

free markets are great, but when a small percent of the people hold SUCH a huge percent of the wealth and business and almost have a virtual monopoly... it's bad.

Of course he's saying spend more money, he's a big government statist. And as far as winning a nobel prize, well, all I can say is, so did Obama, so we know what that's worth.

+^d Straight up.

Krugman doesn't seem to realize that the country is essentially bankrupt, and that spending more money will only make it worse. Lets think here for a moment... where are they going to get that money? What we need is more production, and to get that, people first need to save. We actually need this recession to get our act together. But, I guess that would be logical, so it's out of the question. I'll give him one compliment though, he came up with a hell of an excuse: "The stimulus wasn't big enough." That way, when it doesn't work, he can just blame the government for not spending enough rather than having people find out that he was dead wrong the whole time.

so we need the economy to stop so get it going?

saving doesn't produce anything. if no one spends their money in retail ways, then companies don't make products. those factory workers and retail employees are put out of work. since those people don't have money they don't need insurance and can't afford cable so telecom companies and insurance agents lose income. since everyone is losing their jobs we all eat kraft mac n' cheese and farmers and food companies lose revenue.

so... to get the economy going we'll have to count on conagra foods and walmart employing everyone? those would be the only people getting any money, that and wall street people who "trade" electronic money waiting for stuff to go back up in value.

people need money to buy stuff, to create demand, to hire people for new production jobs, to earn money... to buy stuff. that's how an economy gets going.

lets be economically depressed for a decade, then when everyone but a few billionaires, are all at zero, then we can start the economy over again, it'll be our re-industrial age... YAY. good plan!

yea you're right. your vague useless sentences have converted my way of thinking.

oh wait, nobel prizes in sciences and maths are earned (like krugman's) so just because you don't like obama using his (people's subjectively chosen peace prize) as "evidence" that they're worthless is a pretty stupid position.

The truth is that we have to cut while we increase spending. How do we do this?

For one we can follow the British in their example and cut military spending by 30%. By freeing up all our budget from all the wasteful military spending we do perhaps we would be able to spend in a way that could finally give us a chance to emerge from the recession - without having us fall into the trap of eroding investors' and creditors' confidence in our ability to pay back our debt.

The alarms are being run by Republicans about our debt - but the fact remains that even with the debt we have, the United States is still considered the safest investment in the entire world by creditors and investors worldwide. Greece and other countries in Europe do not have the track record and proven reliability that the United States has shown it does.

Furthermore JohnA we also have one big advantage that differentiates us, the fact that we are able to handle our own currency. Some of thes countries in Europe are tied to the Euro and are seeing that they cannot work with it because they can only work with the currency as a whole, which reduces individual countries' ability to direct their own monetary policy - we do not have that problem.

No doubt there are cuts that need to be made, but I do not see Republicans (or I admit Democrats) willing to make the needed cuts in our inflated and bloated military spending that could potentially free up enough money for a proper direction of or energies to a real stimulus plan.

If little is done and no stimulus is prepared then this recession will mirror the one that Japan fell into (and still is in) today. If no action is taken then this recession will not a passing slump, but will come to define the way our economy for the long term and jobs will not quickly recover.

It's ironic that some of you here are asking questions like "Where are we going to get this money from?" and yet are willing to argue against the idea of raising taxes.

What needs to be done is to raise taxes - especially on those best able to pay them, the top earners in our country. Second, we need to cut military spending like the British did with their austerity program. We like to point to the Europeans as models to how we should be cutting programs and yet we are unwilling to actually cut anything (And never military spending!). Third, with the new money raised from raising taxes and saved from cutting back on military spending we should pass a REAL stimulus bill that puts millions of Americans to work on infrastructure projects.

The recession is in for the long-haul unless drastic action is taken. Unfortunately, the political will is not there do do these things.

That is true. And that is especially why I agree with you that reining in military spending is so necessary for this country. We cannot continue to play the role of global policeman even as it plunges us deeper and deeper into debt.

It is sad that some of the debates happening in this forum are more serious than some of the debates that our politicians have - while we are talking about this they are talking about banning gays from the military, bringing back "American values" and are busy talking about witches.

There is not a doubt in my mind that this country is fucked...

Oh well, but that's why I'm going to Law School.

Any time politicians talk about spending cuts they mean social spending cuts, which means cutting spending to help the poor. And this is a safe play because most poor people don't vote. The rich,most of who vote, like that their not talking about cutting their benefits so they are cool with it.

Don't you watch the news? the repugs keep telling us that these infrastructure projects are a waste of money. There are much more important things that we can be spending our money on. I mean seriously, don't you understand, we have to have that money so we can fire up the 3rd leg of our "war on terror" and bomb the hell out of Iran!! USA!! USA!!

If Obama winning a nobel doesn't prove they are strictly political, bent very left, I don't know what would. Economics is not a math, it is opinion. He says unemployment would be worse without the stimulus. There is absolutely no proof of that, nor can there be. No one can no what would have or would not have happened without it. "Jobs saved" is a completey unquantifiable number than cannot be proven one way or another, and who's measurements have been changed by this administration on more than one occastion. There is only one thing we do know for sure about the stimulus, it increased our debt. I am an accountant, that is a math. You cannot spend more than you take in, unless you take on debt. And when your debt load is more than your assets, your company is worthless. And when your company is worthless, no one will loan you anymore money, and then you go into default. This is the road we are on, we cannot keep spending more money than we take in forever, it is unsustainable. It doesn't work for my checkbook or yours, why would we think it would work for our countries?

No. I don't think you understand. Consumerism is what got us into this mess, and it's sure as hell not getting us out of it. Americas problem is that we consume way too much and don't produce enough; case in point is our massive trade deficit. When you find yourself in a hole, it's generally a good idea to stop digging.

"What needs to be done is to raise taxes - especially on those best able to pay them, the top earners in our country."

There is only so much infrastructure work to go around. After a certain point, you might as well just take taxpayer money and throw it on a fire. Why you think people who have more money should be forced pay more taxes is another huge fallacy in itself, but that's another story. Not to mention that if you try and tax them too much, they're just going to leave, and then you'll really be fucked. However, I agree that we do need to cut military spending, but not for the reasons you're suggesting.

I am against any tax increase until and unless Washington shows restraint and promotes sound fiscal policy. When they are willing to audit the Fed, cut out earmarks, reduce costs across the board, and at least look like they are trying to cut spending, I would be in favor of increases to reduce the current debt. But as long as they are going to continue to frivalously waste billions of dollars on one pork project or entitlement after another, higher taxes would just be more of our hard earned money for them to waste, and I do not support that.

So you oppose people saving money? You're beginning to sound like George Bush. If people save money for the future, then they aren't dependent on the government anymore. Maybe that's the part you oppose.

obviously america spent way beyond their means, that's not the concern right now. people need roofs and food and there's less and less ways to get that.

I'm not at all claiming that going back to using our homes as credit cards to buy tv's and cars and boats is going to lead us back to economic prosperity. but there's no reason to look down our noses at people and throw our hands up at the unemployed, "you're just lazy." it's bullshit and if we need to burden ourselves with more debt now to save our economy right now, I think lots of people are ok with it.

is not unquantifiable. states using stimulus money to keep paying emergency first responders and teachers' salaries leads to one pretty clear conclusion -- it saved their jobs.

obviously it doesn't work for our wallet, but the governments' checkbook doesn't work like ours.

If AIG can give themselves a loan, and we can decide "we'll pay for that war later." then I think we can "pay for that program to keep our economy from shutting down" later.

so how exactly does "stop spending" save the economy? We've been having job growth for several months now, in the private sector, it's the public sector where we're losing thousands upon thousands of jobs, and that's during our "wreckless spending." if we just stop spending money on wages for postal workers, police, teachers, social security, that'll do it? no more income for millions? stop spending on programs? grants and loans? which is income for people, which offers people a chance to do something.

let's just wait for the market to fix itself? for "small business" to hire all of america? when no one is lending credit?

What's your solution to this problem? maybe your opinion is worth a nobel prize, mathematician.

not at all.

I just don't think everyone is lazy and purposely not working/saving. Once we get stabilized, get back to a 5 or 6% unemployment, and future isn't so "scary" then savings happen.

also, the non-saving i'm talking about isn't for people, it's for the government, if people can afford to not spend money, by all means, save. but for the millions who have no choice but to spend every dime they earn, and still barely be making it... they're exempt from saving right now, how about that?

The government's wallet doesn't work like mine, that's for sure. I have to pay my bills. The government is not, and should not be, an employment agency. It does not exist so the Teacher's and Postal Worker's Unions can thrive. That is not it's role. The less government jobs the better, the less bereaucrats the better, no more than absolutley necessary. It is our tax dollars paying their salaries, and if they are not needed, they should go, the government does not owe them a job. And public sector jobs will not save the economy, because they themselves increase the debt by their existance, far wiping out any small gains their incomes may add to retail sales. We have to start cutting spending somewhere, I am totally willing to negotiate where we should start, but we have to start somewhere. Farm subsidies, foreign aid, military spending, entitlements, I'm up for cutting any of them, or all of them. The credit crunch is a scapegoat. Banks make their money by making loans, it's what they do. If you have assets and a good credit score, you can get a loan. The only people who can't get a loan now are people who should have never been able to get one in the first place. I cannot believe there is no where in the federal government to cut spending, I don't believe, you're a fool if you do.

I Generally agree with much of what you said.

I add that we need to consolidate and eliminate duplicative administrative agencies. There is so much redundancy and overhead that could be cut in the federal bureaucracy.
Do we need a federal department of education when ever state in the union has its own department of education?
Do we need the C.I.A., NSA, F.B.I. etc. Why not combine them all into one agency?

And its interesting to note that after 9/11 many "security experts" blamed a failure of the agencies to share intelligence as one of the main reasons why Sept. 11 wasn't prevented.

And what did G.W.B. do? Add yet another layer to to the cake, by creating yet another agency, the Department of Homeland security.

I don't think we are that far apart. I don't believe everyone unemployed is lazy and wanting to live off the public dime. I have been unemployed. I was unemployed in October 2008 when the stock market crashed, and I watched it all go down the drain, in one week's time. It will get better. But we have to promote growth, not just spending. Tax and regulation policy that is stable will promote growth, right now businesses don't know what's coming down the line, why would they stick their necks out. And we can't be using tax cuts as social engineering tools, if you buy this you get a tax cut, if you do that you get a tax cut. That is definately the wrong approach. I do believe Americans are ready and willing to work. As Bobby Jindal said after the BP spill, we don't want a government check, we want a job. It will get better, but sound monetary policy, not the reactionary policies of Greenspan/Bernanke that have gotten us to 0.25% interest on our money, is necessary. A stronger dollar, not a weaker one, will lead us out.

Much of what you say is true, however if our govt was even half-way on the ball, they'd ease up on prohibitive regulations that are onerous to further develop new business entities and encourage incentives for redeveloping our manufacturing base, thereby re-invigorating our economy.

Where are they going to leave? This country has one of the lowest taxes in the world.

I am not asking for outrageous tax increases. Some of these tax increases are about 3%-5% increases. This is a legitimate function of our government - the power to levy taxes. People have to pay them.

A multi-millionaire will not be much affected by a tax increase of several percentage points. There are benefits as well as duties of being a citizen of this country and one of those duties entails paying taxes.

JohnA you make a great point. However, I think that it's not even important because we won't even have a chance to see some of these ideas actually ever become reality.

Taxes will not be raised and even less likely is that we will see a meaningful reduction in spending.

Of course taxes will be raised. Do you really think a lame duck session will vote to extend the Bush tax cuts? Why didn't they bring up tax cut extensions before the campaign break? They want the Bush tax cuts to expire and they each want to be able to blame the other side for letting it happen. Oh yeah, taxes are going up, no doubt about it.

Yes, I forgot about that. The funny thing is that apparently the only way that our government can get something done is by doing nothing. But as for raising taxes themselves - as opposed to just allowing the tax cuts to expire is not going to happen.

We're here now, why wait.

If by baling out the banks you mean nationalizing them after frog marching their management out to their long prison terms then reselling them once the economy was stabllized then I agree 100%.

Very well said!

He did right there in black and white with no weasel words. Most of the money from the feds went to state payrolls to avoid massive layoffs and loss of services.

Good point; the stimulus was an all-or-nothing initiative. Not all was given--watered down to the extent of the health care bill. Could have been New Deal 2.0 (which the allied war machine was given the credit--but infrastructure or military production--same thing).

It's going to be a wild ride! The funny thing is even as they tried, the Democrat's should have fought a lot harder and forced the filibuster rule out as soon as the new Congress took it's seats and voted on rules. But to be concise we should agree we have a lot of Democratic Senators in name only. I could see right at the get go when nobody was standing up for Al Franken and his win, because they knew that 60 Senator majority would force them too show their true colors. So they let that recount draw on and on, staying comfortable in their sheep's clothing for however long it drew on. We have maybe 10 Senators that are truly progressive with and Independent in Bernie Sanders leading the way with his progressive ideas. The terrible thing is we missed a perfect political climate to actually solve a lot of the problems our country is experiencing. The facts are so obvious to many of us it is down right a scary time in our country's history because with GOP gains of any size will polarize the Congress even further and the only people that will gain are the rich and ELITE! Keeping people stupid and believing we can make change happen just by voting will not work this time and the only real change that will happen is the ensuing civil unrest! I know your all saying that crazy kennymotown is talking revolution again, but you have to admit the jobs are just not coming back! Soon we will have not only millions without jobs but millions without food and shelter. We already have prisons busting at the seems and state budgets that can no longer support the idea of incarcerating 2% of the population. The people of France and England are experiencing the what we will shortly be experiencing, the only difference is they are more knowledgeable about what is happening. Thirty years of trickle down economics is running out of pee!

The most interesting thing about this is that what Krugman argues - that the stimulus should have been bigger and that we should spend our ways out of a recession - are hardly socialist ideas. These ideas are still within the realm of capitalism and free market economies, but simply under the school of Keynesian economics.

Calling for massive public spending is hardly a repudiation of capitalist economics, rather an embrace of Keynesian ideas of how to deal with a depression. When you think about it, it was not the New Deal that took us out of the Great Depression... it took World War Two to finally get us out of the depression.

It would take a smaller but almost equally big effort to get us out of what we are in now.

Great observation.

America, however, needs a new super-structure for making investments like the New Deal. There's no Sovereign Wealth investment methodology, although of course the Treasury recently made substantial private investments in both MBS and the equity of financial institutions.

A method for sovereign wealth investment is necessary for many reasons. One of them is that the world is highly interconnected now and governed by trade rules. Old style fiscal stimulus looks like a match for a forest fire called protectionism. Sovereign wealth investment would recognize that overseas investments might very well have positive effects domestically in America.

There are other elements of an industrial policy implementation strategy, but throwing cash at taxpayers, or hiring them to produce census data, isn't a long term strategy for doing anything truly brilliant to get out of the current crisis.