http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html
... many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.Nicely supported and the better comments are good as well.
Comments
http://thespellmanreport.com/2015/04/05/the-point-of-no-return-for-government-debt/#.VddXaiVViko
"Their research, contained in their book “This Time Is Different,” shows that over many years, for many countries, that the threshold for debt to grow exponentially occurs when the debt-to-income ratio reaches approximately .9 — that is, when a country’s debt is 90 percent of its GDP."
Don't have time to read all of the comments, but; http://www.usdebtclock.org/
Everyone will have to decide for themselves as to how much and what kind of debt is healthy.
L5b, that's the whole point, no need to pay it off. It's not like a household, and never has been. Debt is money we owe chiefly ourselves. It is the whole point of what is totally hilarious about libertarian-man going back to 1835. The only thing that matters is debt as a ratio of GDP or similar. Scary clock is beside the point; we should have clocks showing GDP, or infrastructure failure, or military spending, or contraceptive successes....
Check out graphs here:
http://www.nybooks.com/articles/archives/2013/jun/06/how-case-austerity-has-crumbled/
See also:
http://www.nytimes.com/2015/02/09/opinion/paul-krugman-nobody-understands-debt.html
http://krugman.blogs.nytimes.com/2015/04/07/the-fiscal-future-ii-not-enough-debt/
The "Free Lunch Keynesian Bull**** Theory" will never accept that it is a failure because of the utter garbage excuse of, "Well, gee, it just wasn't enough debt."
Didn't work? Not enough debt. Adds more debt. Ooops, didn't work, not enough debt. Fail. Adds more debt. Hey, I have an idea! Lets add more debt. Hmmm... that didn't work. Monetary theory meets Einstein's theory of insanity.
Politicians love this **** because they can make tons of promises and make their favored cronies rich and then when it falls apart and we're back to square one, by that point it's someone else's problem. Anyone can throw a good party with trillions of dollars and to think that there's no hangover is complete nonsense.
So, when this doesn't work, should we double the debt? When that doesn't work, then what? Who lets us know when there's "just enough" debt? Goldilocks Krugman? This nonsense is infuriating.
" or infrastructure failure,"
We have politicians who could not care less about things like infrastructure, because it's a lot easier to pump up asset prices so that politicians can have something to point to to indicate that everything is a-okay. Tech stocks can go up forever, until they can't. Houses can go up forever, until they can't. Stocks can go up forever, until they can't. Meanwhile, all manner of core problems in the country are ignored and are no better when asset prices erode again and we're back to square one having spent an s-ton for various stimulus. Now things are looking like they are heading South again and we're at ZIRP.
The fact that we have had three QEs and several years of ZIRP and now the market and economy are as shaky as they are should be more than a little concerning. If things get much worse, we probably won't get another QE - we'll likely get next-level policy lunacy.
The Fed is stuck at ZIRP and more debt piled on top to get another unsustainable/brief sugar high will not be the magic pixie dust that makes things better.
Your mind appears fully made up and unamenable.
Still, the data, which always have a liberal bias as everyone knows, show the Keynesian stuff is the opposite of wrong. And others than you can study these:
http://krugman.blogs.nytimes.com/2011/12/26/debt-and-growth-in-the-g7/
http://krugman.blogs.nytimes.com/2015/01/27/the-debt-non-spiral/
@Maurice actually, I have considered it to get free healthcare! Do you know if any of them have golf?
@davidrmoran @Old_Joe just trying to lighten things up on a bad market day and be more diplomatic towards my progressive friends here on the MFO board
He did that in one paragraph only, writing about how borrowing when rates are low makes sense, especially when that money can be put to use on needed infrastructure projects. He could also have appealed to those who feel that the private sector is more fiscally responsible.
Private companies have been borrowing like mad, even though they're not necessarily using that money for capital expenditures (instead using much of the money for financial games like stock buybacks).
US Corporations Rush to Issue Debt Before It's Too Late (Institutional Investor, May 13, 2015)
Regarding R&R ... Even the authors stated that there's no cause and effect between amount of debt and growth rate. (The cause/effect could be the reverse - as economies contract, debt to GDP ratio rises.)
Easy enough to offer links w/o Dr. K:
Bloomberg: FAQ: Reinhart, Rogoff, and the Excel Error That Changed History (April 18, 2013)
Next New Deal: Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems.(April 16, 2013).
Okay, Bloomberg mentions Krugman, but only to illustrate that the usual suspects jumped on the errors.
The latter article discusses the UMass paper that found three errors in R&R's work. The article spends about 2-3 paragraphs per error, explaining the problem and its impact on the figures. Nice clear writeup (with links to the R&R and UMass papers, among others).
The private sector arguments are hoary and tiresome and sometimes easy to discredit, and also to credit, but it was novel, maybe, to say that it is not always good comparatively at creation of debt stability and debt instruments.
I am waiting for someone to ask if we really want the private sector to build the ginormous $T wall to keep Messicans out, or the public sector.
Ah, the profound damage Reagan did with his reactionary anti-gov quips, back in the news with Carter's cancer.
Fiscal year 215 - US interest $350.8B @ 2.3%
Double the interest rate and double in interest paid to 701.6B
Get the picture ... Krugman is an idiot.
https://en.m.wikipedia.org/wiki/William_Vickrey
When Vickery died in 1996, I recall viewing a chilling clip of his prophesy regarding U.S. fiscal conservativism. In short, he predicted that if the current obscession repaying the federal deficit continued, the world was headed for a catastrophic financial collapse accompanied by severe deflation. I thought about his warning a lot as '07-'09 unfolded.
Vickery: "Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level. Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses."
https://en.m.wikipedia.org/wiki/Deficit_spending
Eventually there will be a political speech in this country that goes like this:
There is the rub between economic theory and economic reality.
These are, again, worth restudying closely:
http://fatasmihov.blogspot.com/2015/02/those-mountains-of-debt-and-assets.html
http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/
http://www.nytimes.com/2015/02/09/opinion/paul-krugman-nobody-understands-debt.html
[Government debt] does not directly make the economy poorer, and paying it off doesn’t make us richer. True, debt can pose a threat to financial stability — but the situation is not improved if efforts to reduce debt end up pushing the economy into deflation and depression.
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In my humble estimation the US will have stagnating employee wages and a VAT added to deal with the interest on the debt. General misery will ensue. That is the economic reality.
Krugman and his crew will continue to say "I am from the government and here to help you (with debt)." Mostly it is done to make the 'giver' feel good about themselves. While the masses are hurt.
Krugman is an idiot.
I'll score it 5 to 2. Debt okay team wins
But Scott's laughing guy cartoon did make me laugh also. Problem is you could use the same cartoon depicting the side saying QE and QE2 weren't needed.
Was it spent as well as it should have been? Probably not. Was it needed? Probably so. Good debate.
Please quote the poster so there isn't any misunderstandings.
Thanks
Wait, debt interest is, or is going to be, responsible for zero wage growth?
>> Krugman and his crew will continue to say "I am from the government and here to help you (with debt)." Mostly it is done to make the 'giver' feel good about themselves. While the masses are hurt.
lolz, to think that is economists' motive, to feel good. Man, this is wack even for online thinking.
>> Krugman is an idiot.
You said that already, more than once. You got anything substantive, data-based. I mean, spouting is great, speaking of feeling good, but what else you got? On point, please. Evidence etc.
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Falling government debt increases the value of a currency. Its purchasing power increases. This is called "deflation." Deflation increases the true value of debt owed TO individuals. Each successive payment they receive is made using a more and more valuable currency. Lenders win here. Borrowers lose.
You can see this relationship easily in the bond markets. During periods of high inflation bond holders (lenders) lose as bonds depreciate. During periods of low inflation or deflation bond holders win as bonds increase in value.
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Note: Scott incorrectly attributed a passage to me. In fact, credit belongs to 1996 Nobel prize recipient William Vickery whom I merely quoted. (But I wish I was that smart.)
Not to your statements directly; but the inflation/deflation thing, along with how much "growth" is enough in an otherwise stable economy reminds me of a few things that an older fart like myself has commented to the younger ones on this planet.
A most recent discussion/comment was along these lines.................
A current tv ad notes a special savings of $7,100 or so off the MSRP of a Ford pickup truck. The discussion revolved around the fact that this amount of money would have bought 2 fully equipped 1966 Chevy Impalas. Twas just some thoughts along the lines of what changes with money over time.
I recall similar stories when I was a kid. Apparently I listened and retained some of the ideas about money and became an investor.
Take care,
Catch