Put it on the Credit Card Says Krugman

Watermark said:
You're an incredible dumbass USC. Budget = spending. If it's not in the budget it's illegal to spend it.
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NOw that may possibly be the dumbest thing you have ever said.

Ever hear of a half trillion or so in supplemental spending for Iraq ?
Is the bailout in the budget ?
was the tax rebate in the budget ?
I am sure cost overruns on the pill bill are also in the budget ?
on and on.
 
uscitizen said:
NOw that may possibly be the dumbest thing you have ever said.

Ever hear of a half trillion or so in supplemental spending for Iraq ?
Is the bailout in the budget ?
was the tax rebate in the budget ?
I am sure cost overruns on the pill bill are also in the budget ?
on and on.
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Alright. So, in an extremely bad year spending would exceed budget by about 5% or so. Thanks for that nugget.
 
Watermark said:
IT'S ALL FAKE ZOMGZER IT'S ALL FAKZER

I have no doubt that the second chart used the same data as the first chart.
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Not judging from their titles. the second one said spending or some such, indicating actual money spent.

Haven't you learned that in college yet? budgets are just projections and spending is actual.
 
uscitizen said:
Not judging from their titles. the second one said expendatures or some such, indicating actual money spent.
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If spending were doubled or tripled from the actual budget, not adjusting to GDP growth would still be by far the greatest factor in how big the charts were.

And the second graph cites it's source. It's from the "Budget and economic outlook" section. Dumbass.
 
Ok same sorce but the labelling was hosed.

but budget and spending are different things. in govt Budget is virtually always lots under actual spending.
 
Onceler said:
I'm not trying to be annoying here, but what's your suggestion?

We have an economy that is basically reliant on spending (no big surprise there). The indicators are that this is drying up at a VERY alarming rate; to me - and I admit I'm no economist - it seems that this could lead to a very bad cycle where no one spends that much, more businesses suffer, those businesses lay off people & cut back working hours as a result, and even more people spend even less, and so on.

Krugman has been advocating that we can spend our way out of this for the past few weeks; on its surface, it seems insane, because debt is a huge national problem, but the alternative is that spending continues to retract & disappear on both the personal & national level.
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The idea we can spend our way out of this IS insane if you look beyond the immediate effect. Sure an increase in spending would stimulate the economy, increasing demand resulting in increased production, increased employment, etc.

Problem is that is what led to the current crisis in the first place. Since WWII, every time the economy has slowed down the answer was to increase spending to speed it up again. It is a false economy built on a house of cards. When spending reached the limit of median income, laws were passed to increase credit availability so spending would not decrease. But then credit reached its limit with the combine assaults of increased personal bankruptcy, and decreased spending while people started using surplus income (if they had any) to pay down accumulated debt. Again the law stepped in and extended credit into lower income markets. Spending increased again. Laws encouraged the housing market simultaneously into lower income markets, and into investment markets. The immediate result was fast rising value of homes, equity mortgages allowing people to spend more, and a boom in the economy.

But now, as in all time before, relying on credit spending to drive the economy reached its ceiling, and the current crisis is the direct result.

So, prey tell, how the FUCK do you think increasing spending yet AGAIN through artificial stimulation going to do anything more than shove the problem a few more years into the future? In case you've not noticed, each fix is having less effect, and lasting a shorter time. The piper HAS to be paid eventually. My grandchildrens' grandchildren will be paying for our greed, avarice, gluttony, and stupidity.

The sooner we bite the bullet and wean ourselves off an inflated credit economy, and onto a solid pay-as-you-go economy, the faster we will be able to finally recover. Yea, it's going to be tough going. Full fledged depression with high unemplyment, deflation, etc. etc. etc. But that is coming no matter what we do. The longer we use an artificial credit economy to solve the problems of an artificial credit economy, the longer it will take to recover when the last spending increase trick is played, and we are finally forced to face the music.
 
Krugman apparently believes that, in order to get out of this mess, we need to purchase (on credit) our way into inflated home prices and production, which is exactly what got us here in the first place. He seems to suggest that while savings is a good thing (less than 2% for most households and negative for many), don't do it right now because we need to continue with more of the same in order for progress to be made.

Maybe it's not politically correct to say, but the market needs an adjustment. Over-inflated real estate prices, bad debt that needs liquidation, companies that must liquidate or fold, misallocation of resources via needless wars for empire which need to be ended, massive deflation of the dollar through ever-expanding fiat currency which needs to be ceased....and so on. No.......none of that needs to happen. Just keep spending on the fucking credit card and all of our troubles will disappear. Let's clamour for Herbert Hoover after winning the Nobel Prize. For fuck's sake.
 
ironhead said:
Krugman apparently believes that, in order to get out of this mess, we need to purchase (on credit) our way into inflated home prices and production, which is exactly what got us here in the first place. He seems to suggest that while savings is a good thing (less than 2% for most households and negative for many), don't do it right now because we need to continue with more of the same in order for progress to be made.

Maybe it's not politically correct to say, but the market needs an adjustment.
Click to expand...

The market needs an adjustment.




Not a failure.
 
http://mises.org/story/3155

Without further ado, let's examine a hypothetical island economy composed of 100 people, where the only consumption good is rolls of sushi.

The island starts in an initial equilibrium that is indefinitely sustainable. Every day, 25 people row boats out into the water and use nets to catch fish. Another 25 of the islanders go into the paddies to gather rice. Yet another 25 people take rice and fish (collected during the previous day, of course) and make tantalizing sushi rolls. Finally, the remaining 25 of the islanders devote their days to upkeep of the boats and nets. In this way, every day there are a total of (let us say) 500 sushi rolls produced, allowing each islander to eat 5 sushi rolls per day, day in and day out. Not a bad life, really, especially when you consider the ocean view and the absence of Jim Cramer.

But alas, one day Paul Krugman washes onto the beach. After being revived, he surveys the humble economy and starts advising the islanders on how to raise their standard of living to American levels. He shows them the outboard motor (still full of gas) from his shipwreck, and they are intrigued. Being untrained in economics, they find his arguments irresistible and agree to follow his recommendations.

Therefore, the original, sustainable deployment of island workers is altered. Under Krugman's plan for prosperity, 30 islanders take the boats (one with a motor) and nets out to catch fish. Another 30 gather rice from the paddies. A third 30 use the fish and rice to make sushi rolls. In a new twist, 5 of the islanders scour the island for materials necessary to maintain the motor; after all, every day it burns gasoline, and its oil gets dirtier. But of course, all of this only leaves 5 islanders remaining to maintain the boats and nets, which they continue to do every day. (If the reader is curious, Krugman doesn't work in sushi production. He spends his days in a hammock, penning essays that blame the islanders' poverty on the stinginess of the coconut trees.)
"Any talking head on CNBC who doesn't understand capital consumption is going to give horrible policy recommendations."

For a few months, the islanders are convinced that the pale-faced Nobel laureate is a genius. Every day, 606 sushi rolls are produced, meaning that everyone (including Krugman) gets to eat 6 rolls per day, instead of the 5 rolls per day to which they had been accustomed. The islanders believe this increase is due to use of the motor, but really it's mostly due to the rearrangement of tasks. Before, only 25 people were devoted to fishing, rice collection, and sushi preparation. But now, 30 people are devoted to each of these areas. So even without the motor, total daily output of sushi would have increased by 20%, assuming the islanders were equally good at the various jobs, and that there were plenty of fish and rice provided by nature. (In fact, the contribution of the motor was really only the extra 6 rolls necessary to feed Krugman.)

But alas, eventually the reduction in boat and net maintenance begins to affect output. With only 5 islanders devoted to this task, instead of the original 25, something has to give. The nets become more and more frayed over time, and the boats develop small leaks. This means that the 30 fishermen don't return each day with as many fish, because their equipment isn't as good as it used to be. The 30 islanders making sushi are then in a fix, because they now have an imbalance between rice and fish. They start cheating, by putting in smaller pieces of fish into each roll. The islanders continue to get 6 rolls per day, but now each roll has less fish in it. The islanders are furious — except for those who are repulsed by the idea of ingesting raw fish.

Being a trained economist, Krugman knows what to do. He suggests that 2 of the rice workers and 2 of the sushi rollers switch over to help the fishermen. Now with 34 workers, the islanders are able to catch almost as many fish per day as they were in the previous months, even though they are now using tattered nets and dilapidated boats. Krugman — being very sharp with numbers — moved just enough workers so that the fish caught by the 34 islanders matches up perfectly with the rice picked by the remaining 28 islanders who go to the paddies every day. With this amount of fish and rice, the 28 workers in the rolling occupation are able to produce 556 sushi rolls per day. This allows everyone to consume about 5 and a half rolls per day, with a bonus roll left over for Krugman.

The islanders are a bit concerned. When they first followed Krugman's advice, their consumption jumped from 5 rolls to 6 per day. Then when things seemed to be all screwed up, Krugman managed to fix the worst of the discoordination, but still, consumption fell to 5.5 rolls per day. Krugman reminded them that 5.5 was better than 5. He finally got the crowd to disperse by talking about "Cobb-Douglas production functions" and drawing IS-LM curves in the sand.

Because this is a family-friendly website, we will stop our story here. Needless to say, at some point the 5 islanders devoted to net and boat production will decide that they have to cut their losses. Rather than trying to maintain the original fleet of boats and original collection of nets with only 5 workers instead of 25, they will instead focus their efforts on the best 20% of the boats and nets, and keep them in great shape. At that point, it will be physically impossible for the islanders to prop up their daily sushi output. In order just to return to their original, sustainable level of 5 sushi rolls per person per day, the islanders will need to suffer a period of privation where many of them are devoted to net and boat production. (We can only hope that Professor Krugman has been rescued by the Swedes by this time.)

The 5 people looking for ways to synthesize gasoline and motor oil will have to abandon that task, because it was never appropriate for the islanders' primitive capital structure. The islanders will of course discard the motor brought to the island by Krugman once it runs out of gas.

Finally, we predict that during the period of transition, some islanders will have nothing to do. After all, there will already be the maximum needed for catching fish with the usable boats and nets, and there will already be the corresponding number of islanders devoted to rice collection and sushi rolling, given the small daily catch of fish. There would be no point in adding extra islanders to boat and net production, because then they would end up building more than could be sustained in the long run. Hence, the elders rotate 10 people every day, who are allowed to goof off. They could of course go try to catch fish with their bare hands, or go gather rice that would just be eaten in piles by itself, but everyone decides that this is a waste of time. Given the realities, it is decided that during the transition, 10 people get the day off, even though everyone is hungry. That is just how bad Krugman's advice was.
 
RStringfield said:
http://mises.org/story/3155

Without further ado, let's examine a hypothetical island economy composed of 100 people, where the only consumption good is rolls of sushi.

The island starts in an initial equilibrium that is indefinitely sustainable. Every day, 25 people row boats out into the water and use nets to catch fish. Another 25 of the islanders go into the paddies to gather rice. Yet another 25 people take rice and fish (collected during the previous day, of course) and make tantalizing sushi rolls. Finally, the remaining 25 of the islanders devote their days to upkeep of the boats and nets. In this way, every day there are a total of (let us say) 500 sushi rolls produced, allowing each islander to eat 5 sushi rolls per day, day in and day out. Not a bad life, really, especially when you consider the ocean view and the absence of Jim Cramer.

But alas, one day Paul Krugman washes onto the beach. After being revived, he surveys the humble economy and starts advising the islanders on how to raise their standard of living to American levels. He shows them the outboard motor (still full of gas) from his shipwreck, and they are intrigued. Being untrained in economics, they find his arguments irresistible and agree to follow his recommendations.

Therefore, the original, sustainable deployment of island workers is altered. Under Krugman's plan for prosperity, 30 islanders take the boats (one with a motor) and nets out to catch fish. Another 30 gather rice from the paddies. A third 30 use the fish and rice to make sushi rolls. In a new twist, 5 of the islanders scour the island for materials necessary to maintain the motor; after all, every day it burns gasoline, and its oil gets dirtier. But of course, all of this only leaves 5 islanders remaining to maintain the boats and nets, which they continue to do every day. (If the reader is curious, Krugman doesn't work in sushi production. He spends his days in a hammock, penning essays that blame the islanders' poverty on the stinginess of the coconut trees.)
"Any talking head on CNBC who doesn't understand capital consumption is going to give horrible policy recommendations."

For a few months, the islanders are convinced that the pale-faced Nobel laureate is a genius. Every day, 606 sushi rolls are produced, meaning that everyone (including Krugman) gets to eat 6 rolls per day, instead of the 5 rolls per day to which they had been accustomed. The islanders believe this increase is due to use of the motor, but really it's mostly due to the rearrangement of tasks. Before, only 25 people were devoted to fishing, rice collection, and sushi preparation. But now, 30 people are devoted to each of these areas. So even without the motor, total daily output of sushi would have increased by 20%, assuming the islanders were equally good at the various jobs, and that there were plenty of fish and rice provided by nature. (In fact, the contribution of the motor was really only the extra 6 rolls necessary to feed Krugman.)

But alas, eventually the reduction in boat and net maintenance begins to affect output. With only 5 islanders devoted to this task, instead of the original 25, something has to give. The nets become more and more frayed over time, and the boats develop small leaks. This means that the 30 fishermen don't return each day with as many fish, because their equipment isn't as good as it used to be. The 30 islanders making sushi are then in a fix, because they now have an imbalance between rice and fish. They start cheating, by putting in smaller pieces of fish into each roll. The islanders continue to get 6 rolls per day, but now each roll has less fish in it. The islanders are furious — except for those who are repulsed by the idea of ingesting raw fish.

Being a trained economist, Krugman knows what to do. He suggests that 2 of the rice workers and 2 of the sushi rollers switch over to help the fishermen. Now with 34 workers, the islanders are able to catch almost as many fish per day as they were in the previous months, even though they are now using tattered nets and dilapidated boats. Krugman — being very sharp with numbers — moved just enough workers so that the fish caught by the 34 islanders matches up perfectly with the rice picked by the remaining 28 islanders who go to the paddies every day. With this amount of fish and rice, the 28 workers in the rolling occupation are able to produce 556 sushi rolls per day. This allows everyone to consume about 5 and a half rolls per day, with a bonus roll left over for Krugman.

The islanders are a bit concerned. When they first followed Krugman's advice, their consumption jumped from 5 rolls to 6 per day. Then when things seemed to be all screwed up, Krugman managed to fix the worst of the discoordination, but still, consumption fell to 5.5 rolls per day. Krugman reminded them that 5.5 was better than 5. He finally got the crowd to disperse by talking about "Cobb-Douglas production functions" and drawing IS-LM curves in the sand.

Because this is a family-friendly website, we will stop our story here. Needless to say, at some point the 5 islanders devoted to net and boat production will decide that they have to cut their losses. Rather than trying to maintain the original fleet of boats and original collection of nets with only 5 workers instead of 25, they will instead focus their efforts on the best 20% of the boats and nets, and keep them in great shape. At that point, it will be physically impossible for the islanders to prop up their daily sushi output. In order just to return to their original, sustainable level of 5 sushi rolls per person per day, the islanders will need to suffer a period of privation where many of them are devoted to net and boat production. (We can only hope that Professor Krugman has been rescued by the Swedes by this time.)

The 5 people looking for ways to synthesize gasoline and motor oil will have to abandon that task, because it was never appropriate for the islanders' primitive capital structure. The islanders will of course discard the motor brought to the island by Krugman once it runs out of gas.

Finally, we predict that during the period of transition, some islanders will have nothing to do. After all, there will already be the maximum needed for catching fish with the usable boats and nets, and there will already be the corresponding number of islanders devoted to rice collection and sushi rolling, given the small daily catch of fish. There would be no point in adding extra islanders to boat and net production, because then they would end up building more than could be sustained in the long run. Hence, the elders rotate 10 people every day, who are allowed to goof off. They could of course go try to catch fish with their bare hands, or go gather rice that would just be eaten in piles by itself, but everyone decides that this is a waste of time. Given the realities, it is decided that during the transition, 10 people get the day off, even though everyone is hungry. That is just how bad Krugman's advice was.
Click to expand...

Only a libertarian could make this up.

*sigh*



The sad thing is, I've seen so many things exactly like that. There's a reason these non-scientific praxological arguments are only acceptable in Austrian pseudo-science circles.
 
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