What's the definition of insanity? http://www.usdebtclock.org/
Bring on the recession. It is a correction after all.
Correction? "Something offered or substituted for a mistake or fault." Yeap, something needs to be fixed.... Just like Greece.
At least something will be fixed unlike what the criminal Barney Frank did to our nation.
Interview with economist Paul Krugman: 'Greece will leave eurozone within 12 months'
BEN CHU WEDNESDAY 30 MAY 2012
New York Times
At last year’s Occupy Wall Street demonstrations in New York a superhero made his debut. He was a bearded figure called “Krug man”, who set about vanquishing the minions of the evil financial services empire with his fearsome “macro mallet”. The unlikely cartoon champion was based on Paul Krugman, the Nobel Prize winning economist.
In America, Krugman is the closest thing the economics profession has to a household name. His New York Times blog – which he uses to excoriate “austerian” politicians, arrogant European elites and economic folly in general – is one of the most popular sites on the web. Loath him or love him – and Krugman’s take-no-prisoners writing style has as many enemies as admirers · it is impossible to ignore him. And this week “Krug man” brought his battle for economic righteousness to the UK.
Speaking to The Independent today he was as forthright as ever. Krugman said he would be “astonished” if Greece managed to stay in the eurozone for longer than a year. The eurozone crisis was inevitable, he said, from the moment the Maastricht Treaty was signed in 1992. David Cameron is indulging in “wishful thinking” if he thinks Britain can cut its way back to growth. Oh, and a statue of Gordon Brown should be erected in Trafalgar Square to thank the former prime minister for keeping the UK out of single currency.
Will Greece leave the euro?
Something has to happen and in the end it does have to be a Greek exit. I’d be astonished if they can go more than two years without leaving. I’d be astonished if they could go even one year. The event that will force an exit is when the European Central Bank (ECB) puts a stop to the emergency lending to Greek banks. Nobody wants to do that but at some point the numbers will make that unavoidable. If I was a Greek depositor I’d be trying to shift money out of the banks because there’s a reasonable probability that, after a long weekend, you’ll find out that it has turned into a new drachma account worth 50 or 30 per cent less.
Would Greece actually be better off out?
The possibilities for a recovery are certainly there if Greece leaves. One of their major exports is tourism. Greece could exits creating a very ugly scene for six months or a year, but after that there’s tons of package tours of British lager louts going to the Greek isles. It sounds awful, but compared with 50 per cent youth unemployment, maybe not so bad. But there’s no certainty. Anyone who says I’m highly confident Greece would do well in the three years following devaluation – I don’t know that. But it’s not as if Greece is on a sustainable path now.
Should the rest of us fear the consequences of a Greek exit?
Greece essentially doesn’t matter except in terms of the knock-on effects on the eurozone. If Greece exits then we know that euro membership is non-irreversible. You then have a run on Spanish and Italian banks. That does not have to lead to an immediate crisis so long as the ECB is willing to supply the euros. But that also raises the question: where is the hope for recovery for those countries? They are also in an unsustainable situation unless there’s a change in policy that gives them a reasonable hope of a recovery in a five year period. So there’s a fork in the road. Will we see more ECB lending plus more expansionary fiscal policy and higher inflation targeting? Or will it be a complete eurozone break up? Both alternatives sound impossible but one of them has to happen. What will Germany in the end choose? It’s not Sophie’s Choice, but Germany’s choice.
Who should be held responsible for the eurozone crisis?
I think that the die was cast and the whole thing was pretty much fated from the moment the Maastricht Treaty [which paved the way for the single currency] was signed in 1992. Practically the entire European elite wanted that. There’s no one person who said: “Full speed ahead let’s do this”. Maybe the original sin goes all the way back to the European Coal and Steel Community [the first institution of European unity from 1952]. It was something that kind of had to happen.
David Cameron says austerity vs growth is a false choice. Is he right?
There is a choice. You could have a policy which is for austerity later but expansion now, but that’s not what he’s saying. No; if the Government is going to join in the private sector deleveraging [rapid deficit reduction] that’s going to harm the economy. The notion that you can somehow fudge that is wishful thinking.
We can all hold various opinions of Mr. Krugman. That's fine.
Scientifically, opinions mean squat. What do studies tell us?
Now, why do the Conservatives get it wrong all the time, but are still considered worth listening to at all? Simple. It's confirmation bias. If you are reading this and are Conservative, chances are, you have already rejected it. It does not match your preconceptions, and therefore must be discounted. Besides it references science- and we all know about that elitist stuff.
On ABC’s “This Week” Sunday, Paul Krugman noted that government spending per capita has gone down to the lowest point since the 1950s, and that as a result the country has actually entered a time of austerity much like what Republicans are calling for. “The bitter irony,” Krugman says, is that in light of the struggling economy, “it may lead to the defeat of this president.”
“This is real government spending, so it’s federal, state and local combined, deflated, you know, adjusted for population growth and inflation, and it is plunging,” Krugman said, citing cuts on the state and local level are largely to blame for the problem.
We’re actually practicing government austerity on a scale that we haven’t seen in 60 years. It’s not the president’s policy. In effect, we’ve already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.
Krugman: Reagan Was More Keynesian Than Obama
SAHIL KAPUR JUNE 3, 2012, 12:55 PM 541
President Reagan’s policies embraced anti-austerity Keynesian economics to a greater degree than President Obama has, and that’s why Obama is in trouble, argues Nobel Prize-winning economist Paul Krugman.
Appearing Sunday on ABC’s “This Week,” the New York Times columnist and Princeton professor argued that Reagan was able to reduce unemployment after taking office in part because he grew government jobs — unlike Obama, who has significantly cut them.
“If you actually look at the actual track record of government spending, government employment, Reagan is the Keynesian and Obama — mostly because of political constraints, although a little bit of lack of conviction on the part of his own people — has been the anti-Keynesian,” Krugman said. “He’s been the one who’s been doing what Republicans say is the right answer.”
Just over three years into Reagan’s first term, government jobs grew by 3.1 percent; at the same time during Obama’s tenure, they’ve been cut by 2.7 percent. Hundreds of thousands of public sector jobs have been shed in recent years. Government jobs also grew under President George W. Bush, which helped keep unemployment down during most of his two terms.
“After there was a recession under Ronald Reagan, government employment went way up. It went up after the recessions under the first George Bush and the second George Bush,” Obama said last month on the campaign trail. “So each time there was a recession with a Republican president, compensated — we compensated by making sure that government didn’t see a drastic reduction in employment. The only time government employment has gone down during a recession has been under me.”
More broadly, federal spending growth under Obama has been remarkably low by historical standards. The pressure from the GOP and D.C. political elites, who have been hostile to Keynesian economics in recent years, has put the administration in a tough spot.
The Keynesian theory holds that government spending is necessary help lift the economy when it’s under-performing. Data shows that Republicans tend to accept it when they’re in power and that they benefit from it. But they’ve relentlessly attacked Obama’s efforts to stimulate the economy in the wake of the Great Recession, and have led the charge against financially helping cash-strapped states avert layoffs of public employees like teachers and police.
And that has fueled economic struggles across the nation, which were confirmed by the lousy jobs report last Friday which saw the unemployment rate tick up to 8.2 percent.
The irony of the situation wasn’t lost on Krugman.
“We’re actually practicing government austerity on a scale that we haven’t seen in 60 years. It’s not the president’s policy,” he said Sunday. “In effect, we’ve already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.”
This Republican Economy
By PAUL KRUGMAN
Published: June 3, 2012 645 Comments
What should be done about the economy? Republicans claim to have the answer: slash spending and cut taxes. What they hope voters won’t notice is that that’s precisely the policy we’ve been following the past couple of years. Never mind the Democrat in the White House; for all practical purposes, this is already the economic policy of Republican dreams.
So the Republican electoral strategy is, in effect, a gigantic con game: it depends on convincing voters that the bad economy is the result of big-spending policies that President Obama hasn’t followed (in large part because the G.O.P. wouldn’t let him), and that our woes can be cured by pursuing more of the same policies that have already failed.
For some reason, however, neither the press nor Mr. Obama’s political team has done a very good job of exposing the con.
What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War.
How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high.
Over all, the picture for America in 2012 bears a stunning resemblance to the great mistake of 1937, when F.D.R. prematurely slashed spending, sending the U.S. economy — which had actually been recovering fairly fast until that point — into the second leg of the Great Depression. In F.D.R.’s case, however, this was an unforced error, since he had a solidly Democratic Congress. In President Obama’s case, much though not all of the responsibility for the policy wrong turn lies with a completely obstructionist Republican majority in the House.
That same obstructionist House majority effectively blackmailed the president into continuing all the Bush tax cuts for the wealthy, so that federal taxes as a share of G.D.P. are near historic lows — much lower, in particular, than at any point during Ronald Reagan’s presidency.
As I said, for all practical purposes this is already a Republican economy.
As an aside, I think it’s worth pointing out that although the economy’s performance has been disappointing, to say the least, none of the disasters Republicans predicted have come to pass. Remember all those assertions that budget deficits would lead to soaring interest rates? Well, U.S. borrowing costs have just hit a record low. And remember those dire warnings about inflation and the “debasement” of the dollar? Well, inflation remains low, and the dollar has been stronger than it was in the Bush years.
Put it this way: Republicans have been warning that we were about to turn into Greece because President Obama was doing too much to boost the economy; Keynesian economists like myself warned that we were, on the contrary, at risk of turning into Japan because he was doing too little. And Japanification it is, except with a level of misery the Japanese never had to endure.
And thats not even discussing what happened to our economy under President Bush. :)