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    Default a Tale of Three ( Economic ) Wizards

    For what it's worth - from


    (snip)"Once upon a time (today), in a land not so far away (USA), there lived a trio of economic wizards (economists), whose names shall remain anonymous (Paul Krugman, Greg Mankiw, Ben Bernanke).

    A fourth wizard, Murry Rothbard, is no longer among the living but resides in the netherworld.

    The above wizards seldom agree with each other because they come from competing schools of wizardry.

    Three Schools of Economic Wizardry

    1.Keynesian School of Fiscal Voodoo and Witchcraft
    2.Monetarist School of Monetary Voodoo and Witchcraft
    3.Austrian School of Sound Money, Sound Economic Principles and Common Sense.

    "Dark Arts" Wizardry

    The first two wizardry schools belong to a class of wizardry promoted to aspiring wizards as the "Dark Arts".

    Philosophical Beliefs

    •Keynesian wizards believe governments can spend their way to economic health and although fiscal deficits may matter at some point in time, they never matter now, in practice.
    •Monetarist wizards believe money will cure any and every problem if enough is dropped from helicopters and interest rates held low.
    •Austrian wizards believe that economic problems are created by unsound money, haphazard loans, excessive debts, and government manipulations.
    •Keynesian and Monetarist wizards believe in the voodoo principle "the problem is the solution if only you do more of it". The former relies primarily on fiscal voodoo, the latter relies primarily on monetary voodoo.
    •Austrian wizards do not believe "the problem is the solution", no matter how many times it is repeated.

    Grand Poobahs

    1.Paul Krugman is the economic "Grand Poobah" of the Keynesian wizards.
    2.The "Grand Poobah" of Monetarist Voodoo is Fed chairman Ben Bernanke.
    3.Murray Rothbard, no longer alive, was the last great proponent of school of Sound Money, Sound Economic Principles, and Common Sense.

    "Dark Arts" Schools Overflowing With Students

    The "Dark Arts" are very enticing to modern day wizards-in-training because nearly everyone likes money from helicopters and deficit spending (even when they claim they don't). In response to demand for voodoo economists, the "Dark Arts" schools for voodoo economics are overflowing with young wizards all hoping to win a Nobel Prize in Voodooism with "fresh thinking" and new voodoo proposals.

    Voodoo Proposal Example - Purposely Make Money Go Worthless

    Aspiring Grand Poobah Greg Mankiw (Professor of Economic Wizardry at Harvard University) put forth a proposal that caused a stir in both the real world and the world of wizards. Mankiw proposed that purposely making money go worthless over time would be of great economic benefit.

    No Demand for Common Sense

    The average non-wizard, living in the real world, with an education level beyond 2nd grade, would quickly see the ridiculousness of making money go worthless. However, at the highest political levels, there is virtually no demand for common sense, and shockingly high demand for voodoo wizardry. For example, if you ever expect to make chairman of the president's Council of Economic Advisers or become an economic adviser to Mitt Romney (Wizard Mankiw did both), then common sense must go out the window. Aspiring wizards hoping for careers in politics better quickly learn that politicians never want to hear they cannot spend money. Instead, politicians want to hear economic voodoo.

    "Dark Arts" Feuds

    Given Keynesian and Monetarist wizards both believe in voodoo, one might think the two schools would get along reasonably well. One would be wrong. There have been numerous public squabbles between Mankiw and Krugman but the mother of all verbal wizardry battles came when Krugman went so deep into fiscal voodoo theory that Bernanke Called Krugman "Reckless"

    Ivory Towers and Academic Wonderland

    Unlike non-wizards, modern-day economic wizards do not live in the real world, in real cities. Instead, they live in ivory towers in secret villages for wizards only, typically tucked away in obscure corners of major U.S. universities. Collectively, these secret villages are known as "Academic Wonderland". "Academic Wonderland" is strictly off limits to non-wizards with the exception of "Dark Arts" wizards-in-training. It is even off limits to those few aspiring wizards who believe in Sound Money, Sound Economic Principles, and Common Sense.

    Real World Experience

    "Dark Arts" wizards of the Keynesian and Monetarist schools generally have never worked in the real world. Instead, they sit in their ivory towers and devise empirical formulas as to how they expect the real world to behave. Occasionally the "Dark Arts" wizards surface in the real world, primarily to explain their mathematical formulas as to how the world functions. It is seldom of concern to economic wizards if the real world does not follow their mathematical formulas.

    Decision Making at Night

    "Dark Arts" wizards are very concerned about such nebulous concepts as the "Decision Making at Night". Here is set of equations from an aspiring wizard-in-training.



    "Decision making at night" is of course different from "decision making in the day". Both are distinctly different than "decision making with no news".

    Voodoo Wizards Like Secrecy

    The voodoo wizard-in-training making the above proposal is a big proponent of secrecy, believing that Grand Poobahs need to keep what they are doing a big secret lest it change real-world decision making processes of non-wizards during the day or night.

    Austerity

    No "Dark Arts" wizard worth his weight in salt would ever propose that any country live within its means. For a recent example, Paul Krugman, the Grand Poobah of the Keynesian School of Fiscal Voodoo and Witchcraft writes about Estonian Rhapsody. Since Estonia has suddenly become the poster child for austerity defenders — they’re on the euro and they’re booming! — I thought it might be useful to have a picture of what we’re talking about. Here’s real GDP, from Eurostat:



    So, a terrible — Depression-level — slump, followed by a significant but still incomplete recovery. Better than no recovery at all, obviously — but this is what passes for economic triumph?

    Left Unsaid

    Here's what Grand Poobah Krugman failed to say about the Booming Estonia Economy.

    Sixteen months after it joined the struggling currency bloc, Estonia is booming. The economy grew 7.6 percent last year, five times the euro-zone average. Estonia is the only euro-zone country with a budget surplus. National debt is just 6 percent of GDP, compared to 81 percent in virtuous Germany, or 165 percent in Greece. Shoppers throng Nordic design shops and cool new restaurants in Tallinn, the medieval capital, and cutting-edge tech firms complain they can’t find people to fill their job vacancies.

    Estonia’s achievement is all the more remarkable when you consider that it was one of the countries hardest hit by the global financial crisis. In 2008-2009, its economy shrank by 18 percent. That’s a bigger contraction than Greece has suffered over the past five years. How did they bounce back? “I can answer in one word: austerity. Austerity, austerity, austerity,” says Peeter Koppel, investment strategist at the SEB Bank.

    Estonia vs. Fantasyland

    Estonia is not Nirvana. Estonia is not "Academic Wonderland" either.

    In contrast, Krugman is in "Academic Wonderland". The Grand Poobah clearly believes Estonia would be in better shape with helicopter drops of fiscal stimulus than a very nice partial recovery and no debt, in spite of the fact the eurozone in general is going to hell in a hand basket.

    Debt Never a Problem

    In modern-day ivory towers, with voodoo economics, debt is never a problem. The only thing that matters is GDP. One might think that a Nobel prize winner would figure out that government spending will make GDP rise by definition (government spending is part of the equation) and the debt must be paid back. However, one would be wrong.

    Bear in mind, Japan has tried both Keynesian voodoo and Monetarist voodoo for over 20 years. The result is a nearly unfathomable debt-to-GDP ratio of 220% and rising. Krugman would have you believe still more spending is the answer. Monetarists like Mankiw would propose making the Yen worthless.

    Remember the Voodoo Motto!

    Please remember the voodoo motto: If it doesn't work, keep doing more of it, even if that is what got you in trouble in the first place! Anyone with an ounce of common sense would realize that artificial stimulus will always end, but the debt will remain, hanging like the Sword of Damocles over the economy. Sadly, these modern-day economic wizards do not have the common sense of the average 6th grader who inherently knows that you cannot keep spending what you do not have.

    Invalid Comparisons

    No doubt Krugman will point to the misery in Spain and Greece. The comparison is invalid. Estonia is booming not solely because of austerity but rather because it did a number of common-sense things that Spain and Greece did not fully do.

    1.Slashed public sector wages
    2.Raised the pension age
    3.Reduced job protection
    4.Made it more difficult to claim health benefits

    Keynesian wizards would be against all those things!

    Was Krugman a Housing Bubble Proponent?

    In a 2002 New York Times editorial Krugman said "To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." Krugman claims "that wasn't a piece of policy advocacy, it was just economic analysis."

    When wizards get into trouble they claim they were misquoted, someone did too much, someone did not do enough or any number of other excuses. No, it was not "policy advocacy", it was simply economic voodoo that Krugman condoned.

    Krugman a Panderer to Public Unions

    One of the reasons Estonia is recovering is it had the common sense to slash public sector wages. In contrast, Krugman is a strong backer of public unions as noted in Wisconsin Power Play.

    The reasons Krugman supports unions should be obvious:

    1.Krugman wants to waste as much money as possible (because that is what Keynesian voodoo economics is all about).
    2.There is no better way to waste taxpayer money than overpay for services from public unions.

    Wizards in ivory towers have not completely figured out that money to pay public unions has to come from somewhere (namely taxpayers in general). Of course liberal Keynesian wizards (the worst kind) have an answer for that as well: take from productive members of society and slosh it around to public unions. Never mind that public unions have bankrupted numerous cities and even in economic la-la land (otherwise known as California), backlash against unions is justifiably high and rising.

    Moral of the Story

    The average non-wizard non-union employee has long ago figured out the moral of this story. Those in ivory towers in "Academic Wonderland" have not, so I need to spell it out. It is indeed possible to have a genuine economic debt-free recovery, along with austerity, as long as other sound economic measures are incorporated at the same time. Yes, there will be some short-term pain. However, any attempt to avoid pain via heaps of fiscal and monetary stimulus is nothing but voodoo economics and can-kicking witchcraft.

    Mike "Mish" Shedlock

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    Default Re: a Tale of Three ( Economic ) Wizards

    No surprises about "Krugie". I've been going after his fakery, phoniness and fraudulent methods for years.

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    Default Re: a Tale of Three ( Economic ) Wizards

    In your opinion, if we were to follow suit of Estonia and impliment austerity, would AG and AU still be the better choice in investments? I certainly believe AG will be useful and beneficial no matter what. It is a fantastic industrial metal, as you already know. What about AG, the wealth preserver. Perhaps even the wealth enhancer in some contidions. Some experts believe we have gone too far to begin reversing this disaster. Any comments? I love hearing what you have to say.

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    Default Re: a Tale of Three ( Economic ) Wizards

    IMHO there is a snowball's proverbial chance in hell that 'austerity' and 'sound money' are politially palatable in any major western country. As you point out, that leaves gold as a 'wealth preserver'. China's record purchases of physical gold in recent months are probably the best indicator of where they think the value of their trade surplus US dollars, yen, euros etc. is headed in the future.

    As to silver, that's a far more speculative venture since it is an industrial metal as well as a monetary metal. IMHO silver is oversold right now, but that doesn't mean that silver can rebound in the face of extremely likely future slowdowns in auto production and other industrial industrial operations that are major 'consumers' of silver.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Don't forget platinum as a metal play. It's probably a bit overpriced right now but you can try to buy some on the dips.

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    Default Re: a Tale of Three ( Economic ) Wizards

    ^^^ platinum in particular is highly sensitive to auto industry production levels ( or lack thereof ) since it's #1 industrial use is in catalytic converters. I suspect a better buying opportunity will materialize as automaker 'channel stuffing' by the auto manufacturers has been building LARGE unsold auto dealer inventories in the US, in Europe, and in China.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Melonie View Post
    ^^^ platinum in particular is highly sensitive to auto industry production levels ( or lack thereof ) since it's #1 industrial use is in catalytic converters. I suspect a better buying opportunity will materialize as automaker 'channel stuffing' by the auto manufacturers has been building LARGE unsold auto dealer inventories in the US, in Europe, and in China.
    Partly. That is not the only use for platinum although it is a biggie. I said that it is overpriced at present but I'd keep my eye on it.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Melonie View Post

    Three Schools of Economic Wizardry

    1.Keynesian School of Fiscal Voodoo and Witchcraft
    2.Monetarist School of Monetary Voodoo and Witchcraft
    3.Austrian School of Sound Money, Sound Economic Principles and Common Sense.
    No, Keynesian School is based on logic and common sense. Austrian school is based on magic and witchcraft.

    It is basic logic and common sense, that when the unemployment rate is high, if government increases spending to hire more workers directly, or indirectly through contractors, you have more people working and less people unemployed.

    The Austrian school believes that when the unemployment is high, if government cuts spending, the economy will grow through magic and witchcraft, and unemployment will drop.

    Quote Originally Posted by Melonie View Post

    Here's what Grand Poobah Krugman failed to say about the Booming Estonia Economy.

    Sixteen months after it joined the struggling currency bloc, Estonia is booming. The economy grew 7.6 percent last year, five times the euro-zone average. Estonia is the only euro-zone country with a budget surplus. National debt is just 6 percent of GDP, compared to 81 percent in virtuous Germany, or 165 percent in Greece. Shoppers throng Nordic design shops and cool new restaurants in Tallinn, the medieval capital, and cutting-edge tech firms complain they can’t find people to fill their job vacancies.

    Estonia’s achievement is all the more remarkable when you consider that it was one of the countries hardest hit by the global financial crisis. In 2008-2009, its economy shrank by 18 percent. That’s a bigger contraction than Greece has suffered over the past five years. How did they bounce back? “I can answer in one word: austerity. Austerity, austerity, austerity,” says Peeter Koppel, investment strategist at the SEB Bank.
    Here's what Mike "Mish" Shedlock failed to say about Estonia's economy.

    After implementing austerity measures in 2009, Estonia's GDP fell by more than 13 percent.

    Here is a page showing Estonia's historical unemployment rate:

    http://www.tradingeconomics.com/esto...mployment-rate

    In 2008, before implementing austerity measures, Estonia's unemployment rate was approximately 6 percent.

    Today, Estonia's unemployment rate is 11.5 percent.

    This is considered a great success by Austrian adherent Mike "Mish" Shedlock.

    Also left out is that Estonia's government has invested heavily in scientific education and information technologies, which explains why their tech sector is doing well.

    http://www.cnbc.com/id/47691090/page/2/

    -snip-
    Post-independence governments invested heavily in scientific education and information technologies, successfully attracting investment with the e-stonia label.
    -snip-

    There are reasons why many economists in high level positions are from the Keynesian School, while adherents to Austrian School are writing blogs on right-wing websites.

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    Default Re: a Tale of Three ( Economic ) Wizards

    There are reasons why many economists in high level positions are from the Keynesian School, while adherents to Austrian School are writing blogs on right-wing websites
    Indeed there are reasons ... but they arguably have little to do with the Keynesian economists being 'correct' from the standpoint of real world financial accuracy. But another type of 'correctness' would seem to clearly apply !!! It's no coincidence that Krugman is published by the New York Times.

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    It's important to remember that Keynes always said Govt. in the short term needed to step up for a lack of private sector demand..... The short term is what has been forgotten.

    A time will soon come when we will be unable to remember when we did without things like.... Cash For Clunkers..... Zirp..... Fica Holidays..... Etc.

    Austrian Economics is a call for sound money and capitism...... The trouble is everyone loves capitalism.... Till it hurts them.
    The country has been looted.

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    Quote Originally Posted by eagle2 View Post
    No, Keynesian School is based on logic and common sense. Austrian school is based on magic and witchcraft.

    It is basic logic and common sense, that when the unemployment rate is high, if government increases spending to hire more workers directly, or indirectly through contractors, you have more people working and less people unemployed.

    The Austrian school believes that when the unemployment is high, if government cuts spending, the economy will grow through magic and witchcraft, and unemployment will drop.



    Here's what Mike "Mish" Shedlock failed to say about Estonia's economy.

    After implementing austerity measures in 2009, Estonia's GDP fell by more than 13 percent.

    Here is a page showing Estonia's historical unemployment rate:

    http://www.tradingeconomics.com/esto...mployment-rate

    In 2008, before implementing austerity measures, Estonia's unemployment rate was approximately 6 percent.

    Today, Estonia's unemployment rate is 11.5 percent.

    This is considered a great success by Austrian adherent Mike "Mish" Shedlock.

    Also left out is that Estonia's government has invested heavily in scientific education and information technologies, which explains why their tech sector is doing well.

    http://www.cnbc.com/id/47691090/page/2/

    -snip-
    Post-independence governments invested heavily in scientific education and information technologies, successfully attracting investment with the e-stonia label.
    -snip-

    There are reasons why many economists in high level positions are from the Keynesian School, while adherents to Austrian School are writing blogs on right-wing websites.
    No. The Austrian School believes that markets and capitalism itself is self-correcting. Rather than have government try to control things and EXTEND recessions ( as FDR did in 1937-8 ) it is better to let the free market do its work. If government stays out of the way, it will do so.

    The issue is how is Estonia's economy doing today ? Nobody said that they, or anyone else, can get to growth without some pain and hardship.

    Your last point is ludicrous. Who did you think Obama was going to appoint ? Walter Williams ? Thomas Sowell ? Peter Schiff ? Steve Forbes ?

    He appointed Summers and Daley and both were neutered and isolated by Valerie Jarrett et. al.

    Austrian School adherents are everywhere ? On Wall St. , at the WSJ , in academia and at conservative think tanks like the Heritage Foundation. So what ?

    Those of us who favor the Austrian School are not opposed to charity and are not in favor of letting anyone starve. We would like to see long term stable growth as we had , more or less, from 1980 to about 1999. How did we do it ? Low tax rates. Moderate regulation. Controlled spending and sound money.

    Krugman outdid himself yesterday in his N.Y. Times column saying that Greece's current problems are not its fault ! I am serious. Read it for yourself. The only time Krugman ever criticized government spending was when a Republican did it. His solution is more spending ; more taxes ; more borrowing and more inflation. As bad as things are now under "austerity" let people have a few months of hyperinflation and they will pine for the days of "austerity".

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    Quote Originally Posted by mikef View Post
    It's important to remember that Keynes always said Govt. in the short term needed to step up for a lack of private sector demand..... The short term is what has been forgotten.

    A time will soon come when we will be unable to remember when we did without things like.... Cash For Clunkers..... Zirp..... Fica Holidays..... Etc.

    Austrian Economics is a call for sound money and capitism...... The trouble is everyone loves capitalism.... Till it hurts them.
    That is because some people insist on trying to create capitalism with only "winners" and no "losers" i.e. a system without risk. There is no such system.

    Communism ? Almost everyone is poor except for a small elite.
    Socialism ? Nobody gets rich and most of the "haves" work for the government.
    No system has created more wealth and eliminated more poverty than capitalism. Has India progressed over the last decade or so by doubling down on socialism ? Has China created so much wealth over the last two decades by becoming more communist ?

    Yes, in Europe especially , they are being presented with the bill for decades of declining population growth coupled with decades of growth in government. There is no free lunch. Somebody has to pay for the contents of the "governmental goodie bag".

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    Quote Originally Posted by Eric Stoner View Post
    No. The Austrian School believes that markets and capitalism itself is self-correcting. Rather than have government try to control things and EXTEND recessions ( as FDR did in 1937-8 ) it is better to let the free market do its work. If government stays out of the way, it will do so.

    The issue is how is Estonia's economy doing today ? Nobody said that they, or anyone else, can get to growth without some pain and hardship.
    Why is it necessary to go through pain and hardship to experience growth? The main purpose of a government should be to make the lives of people better, not worse.

    Quote Originally Posted by Eric Stoner View Post
    Your last point is ludicrous. Who did you think Obama was going to appoint ? Walter Williams ? Thomas Sowell ? Peter Schiff ? Steve Forbes ?
    Which Republican administration appointed any of the above?

    Quote Originally Posted by Eric Stoner View Post
    Those of us who favor the Austrian School are not opposed to charity and are not in favor of letting anyone starve. We would like to see long term stable growth as we had , more or less, from 1980 to about 1999. How did we do it ? Low tax rates. Moderate regulation. Controlled spending and sound money.
    There wasn't controlled spending from 1980 to 1999. Spending increased significantly during the Reagan Administration, and so did our deficits and national debt. Reagan did the opposite of what is being advocated in the original post. In the original article, the author was praising Estonia's budget surplus. Reagan increased deficits. The past year, we have been following Austrian policies of austerity far more than we were when Reagan was President. During previous recessions, hiring of government workers increased. Over the past year, government has been eliminating hundreds of thousands of government jobs. This has made things worse, not better. Below is a chart showing changes in public-sector employment during the current, and previous three recessions:



    Notice the difference in changes in public-sector employment. When government hiring increased during a recession, the recession was much more mild and the recovery stronger, than when government reduced the number of government employees. The above chart clearly shows that Keynesian policies of increasing government spending during a recession are far more successful than the austerity measures we've been following during the past year. Increasing government spending and hiring more workers, instead of reducing workers, during a recession achieves much better results.


    Quote Originally Posted by Eric Stoner View Post
    Krugman outdid himself yesterday in his N.Y. Times column saying that Greece's current problems are not its fault ! I am serious. Read it for yourself. The only time Krugman ever criticized government spending was when a Republican did it. His solution is more spending ; more taxes ; more borrowing and more inflation. As bad as things are now under "austerity" let people have a few months of hyperinflation and they will pine for the days of "austerity".
    There is no danger of hyperinflation. Right now the biggest problems facing our economy are slow economic growth and high unemployment. More "austerity" would only make things worse. Again, as the above charts show, increasing government workers during a recession has led to milder recessions and stronger recoveries than reducing the number of government workers during a recession. Even Mitt Romney acknowledges that massive cuts in government spending would make things worse.

    http://www.youtube.com/watch?feature...&v=C8g8YcCe_io

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by eagle2 View Post
    Why is it necessary to go through pain and hardship to experience growth? The main purpose of a government should be to make the lives of people better, not worse.


    Which Republican administration appointed any of the above?



    There wasn't controlled spending from 1980 to 1999. Spending increased significantly during the Reagan Administration, and so did our deficits and national debt. Reagan did the opposite of what is being advocated in the original post. In the original article, the author was praising Estonia's budget surplus. Reagan increased deficits. The past year, we have been following Austrian policies of austerity far more than we were when Reagan was President. During previous recessions, hiring of government workers increased. Over the past year, government has been eliminating hundreds of thousands of government jobs. This has made things worse, not better. Below is a chart showing changes in public-sector employment during the current, and previous three recessions:



    Notice the difference in changes in public-sector employment. When government hiring increased during a recession, the recession was much more mild and the recovery stronger, than when government reduced the number of government employees. The above chart clearly shows that Keynesian policies of increasing government spending during a recession are far more successful than the austerity measures we've been following during the past year. Increasing government spending and hiring more workers, instead of reducing workers, during a recession achieves much better results.




    There is no danger of hyperinflation. Right now the biggest problems facing our economy are slow economic growth and high unemployment. More "austerity" would only make things worse. Again, as the above charts show, increasing government workers during a recession has led to milder recessions and stronger recoveries than reducing the number of government workers during a recession. Even Mitt Romney acknowledges that massive cuts in government spending would make things worse.

    http://www.youtube.com/watch?feature...&v=C8g8YcCe_io
    It is NOT necessary to "suffer for growth" UNLESS years of profligate spending have to paid for. A reason for the increase in government workers in previous recoveries was increased tax revenues on all levels : state, local and Federal. Compared to past recoveries, this one has been anemic. No growth ( 1.9 % ) and high unemployment result in LOWER revenues = no way to pay for more workers. States and cities have had to lay off workers instead of hiring new ones. Businesses are not hiring because of the "Fiscal Cliff" , higher tax rates for 2013 plus all the costs for Obamacare. Uncertainty does not help recovery and we have nothing but various uncertainties.

    Sadly, the Republicans of late have spent irresponsibly. Reagan was so attached to his tax cuts that to get them passed he let Congress run wild with spending. Nonetheless, after increasing, deficits declined as revenues increased. Most of the growth in spending under Reagan was on Defense. Reagan admitted that one of his worst mistakes was raising taxes in exchange for promised spending cuts. Taxes increased but Congress reneged. Bush the Smarter, even more unforgiveably, made the same lousy deal. Despite being an eyewitness to Congressional lying he agreed to raise taxes in exchange for spending cuts. Taxes and spending both went up. He was warned by Gingrich and others that Congress was NOT to be trusted but he listened to Dick Darman instead. He lost in 1992 and so did the country. Bush The Dumber was the WORST of all three and most of the overspending occurred under Tom DeLay and a Republican Congress as they implemented the Karl Rove "Spend to Stay" strategy i.e. they tried to buy a permanent Republican majority. In spite of all that, Obama's deficits are far worse than anything Reagan or the two Bushes gave us.

    We had growth under Reagan and under Clinton. I would like to get back to those policies that gave us solid growth with low inflation. Government spending as a % of GDP was LOWEST under Clinton !

    Government workers do NOT contribute to the overall economy. Private sector workers do. How many times do we have to disprove the "broken window" theory ? Those workers have to be paid for. The money to pay their salaries and benefits has to come from somewhere.

    Isn't it preferable to let the private sector hire PERMANENT workers than have government do it ? Public sector workers today are paid more and get better benefits than private sector workers.

    Government spending as a % of GDP under Obama has done nothing but go up. If the focus had been infrastructure , we'd at least be enjoying some corollary benefits and seeing something resembling a multiplier effect. Instead of repairing and rebuilding what we have, too much money is going to "green" boondoggles and things like new high speed rail.

    We already have inflation. At some point, all the debt we are ringing up will have to be rolled over while the interest gets paid. Who can say that in the future the Fed. and the Government won't do it by revving up the printing presses ? What guarantee is there that such a thing can't or won't happen ?
    Last edited by Eric Stoner; 06-21-2012 at 09:35 AM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Eric Stoner View Post
    It is NOT necessary to "suffer for growth" UNLESS years of profligate spending have to paid for. A reason for the increase in government workers in previous recoveries was increased tax revenues on all levels : state, local and Federal. Compared to past recoveries, this one has been anemic. No growth ( 1.9 % ) and high unemployment result in LOWER revenues = no way to pay for more workers. States and cities have had to lay off workers instead of hiring new ones. Businesses are not hiring because of the "Fiscal Cliff" , higher tax rates for 2013 plus all the costs for Obamacare. Uncertainty does no help recovery and we have nithing but various uncertainties.
    There was not an increase in tax revenue at the Federal level. Tax revenue was down during Reagan's first term. I have stated this multiple times, along with references, yet you keep saying tax revenue increased. Again, here is a chart with federal tax revenues and spending:

    http://www.taxpolicycenter.org/taxfa....cfm?Docid=200

    In constant 2005 dollars, federal tax revenue in 1979 was $1,187.3 billion. In 1984, federal tax revenue was $1,174.3 billion (2005 dollars).

    There is a way to pay for more workers. The federal government can borrow money. People are willing to lend money to the federal government at 2% interest. The Federal and state governments can also raise taxes. Americans are currently paying less tax than at any other time in the past 50 years. This is especially true for the wealthiest Americans. In 2010, Mitt Romney payed approximately 13 percent of his income, of over $20 million, in federal taxes.

    If Federal, state and local governments were hiring workers, like they were in the 1980's, instead of laying off workers, the unemployment rate would probably be the same, or lower than it was in 1984.

    The reason why businesses aren't hiring in greater numbers is because demand is down. If people aren't buying more goods and services, businesses aren't going to hire more people. Consumer spending is still below pre-recession levels.

    http://ycharts.com/indicators/consum...cessions=false

    In industries where demand has been increasing, so has hiring. The auto industry has been hiring more workers since demand has increased. The oil industry has also been hiring, especially in N. Dakota, as a result of the (world-wide) increase in demand for oil.

    The worst-case scenario for a tax increase, is a return to the levels before Bush's tax cuts. Tax rates that high did not stop businesses from hiring plenty of new employees during the 1990's.

    Most businesses will not be heavily affected if health care reform is implemented. Businesses that have fewer than 50 employees will not be affected, and there will not be a major effect on businesses that already provide health insurance to their employees.

    Even if businesses would be heavily affected by health care reform, or a tax increase, they could lay off workers just as easily as they hire them. When taxes were increased in the 1990's, there was no major increase in lay-offs. Business increased their hiring.

    Again, the main reason for the lack of hiring is the simple law of supply and demand. If there isn't an increase in demand for goods and services, businesses are not going to increase the supply. If consumers aren't spending, there is no reason for businesses to hire. The only way to get businesses to hire more employees is to increase demand. If this isn't happening in the private sector, the only way to do this is to increase government spending. It's not rocket science.


    Quote Originally Posted by Eric Stoner View Post
    Sadly, the Republicans of late have spent irresponsibly. Reagan was so attached to his tax cuts that to get them passed he let Congress run wild with spending. Nonetheless, after increasing, deficits declined as revenues increased. Most of the growth in spending under Reagan was on Defense. Reagan admitted that one of his worst mistakes was raising taxes in exchange for promised spending cuts. Taxes increased but Congress reneged. Bush the Smarter, even more unforgiveably, made the same lousy deal. Despite being an eyewitness to Congressional lying he agreed to raise taxes in esxchange for spending cuts. Taxes and spending both went up. He was warned by Gingrich and others that Congress was NOT to be trusted but he listened to Dick Darman instead. He lost in 1992 and so did the country. Bush The Dumber was the WORST of all three and most of the overspending occurred under Tom DeLay and a Republican Congress as they implemented the Karl Rove "Spend to Stay" strategy i.e. they tried to buy a permanent Republican majority. In spite of all that, Obama's deficits are far worse than anything Reagan or the two Bushes gave us.
    No, Obama's deficits are about the same, or lower than Bush 43's last deficit. The 2009 federal government budget was George W. Bush's, not President Obama's.

    http://en.wikipedia.org/wiki/2009_Un...federal_budget

    Quote Originally Posted by Eric Stoner View Post
    We had growth under Reagan and under Clinton. I would like to get back to those policies that gave us solid growth with low inflation. Government spending as a % of GDP was LOWEST under Clinton !
    All else being equal, government spending is always going to be much lower as a % of GDP, during an economic boom than during a recession. During an economic boom, government spending is going to be lower, because government is spending much less on things like unemployment benefits and public assistance programs, than when the economy is doing badly.

    Quote Originally Posted by Eric Stoner View Post
    Government workers do NOT contribute to the overall economy. Private sector workers do. How many times do we have to disprove the "broken window" theory ? Those workers have to be paid for. The money to pay their salaries and benefits has to come from somewhere.
    Government workers DO contribute to the economy. Melonies "disproval" of the "broken window" theory is an oversimplified and faulty analogy. Government workers do not simply repair something that is broken. If government workers do not contribute to the overall economy, please explain this for me. If government workers build an airport in one city, and a private business build an airport in another city, how is the airport built by a private business contributing to the economy, but the airport built by the government isn't?

    Isn't it preferable to let the private sector hire PERMANENT workers than have government do it ? Public sector workers today are paid more and get better benefits than private sector workers.

    Quote Originally Posted by Eric Stoner View Post
    Government spending as a % of GDP under Obama has done nothing but go up. If the focus had been infrastructure , we'd at least be enjoying some corollary benefits and seeing something resembling a multiplier effect. Instead of repairing and rebuilding what we have, too much money is going to "green" boondoggles and things like new high speed rail.
    Government spending has gone up because more Americans are on unemployment benefits and public assistance as a result of the economic dowturn President Obama inherited from his predecessor.

    Hardly any money has been spent on high speed rail so far, and money spent on "green" industries is not much relative to overall spending.

    Quote Originally Posted by Eric Stoner View Post
    We already have inflation. At some point, all the debt we are ringing up will have to be rolled over while the interest gets paid. Who can say that in the future the Fed. and the Government won't do it by revving up the printing presses ? What guarantee is there that such a thing can't or won't happen ?
    We have very little inflation. In the housing industry, prices have been falling in a number of markets. It has always been the fed's policy to keep inflation low, and that is what they're doing now. Again, the biggest problems facing our economy now, are unemployment and slow economic growth, not inflation.

    To get back to the original topic, the facts are, in the 1980's government was hiring more workers and economic growth was strong, and the unemployment rate was falling. Currently, government is laying off workers and economic growth is weak, and the unemployment rate is staying high.
    Last edited by eagle2; 06-20-2012 at 11:52 PM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    I could respond but I have already. Numerous times. We've gone over the Federal budget and deficit numbers again and again. You zero in on Reagan's FIRST term and ignore the second. You refuse to accept a very simple basic truth : BEFORE it can be taxed , somebody has to make the money. Tax revenues were down in Reagan's first term thanks to a severe recession. As we recovered and we started to add up to half a million new jobs a month ( near the height of the recovery ) revenues dramatically increased and the deficit as a % of GDP declined. It is there even in YOUR numbers !

    What government workers build airports ? Where ? When ? Name one airport built by the government. Even more to the point, that is INFRASTRUCTURE spending which I SUPPORT. How many times do I have to say it ? I'd prefer that we focus on repair and maintenance of existing infrastructure to assure that bridges don't fall down. Nevertheless the contracts go to PRIVATE companies who issue paychecks to the workers.

    I will say this : While I am not happy with the concept and it runs counter to basic principles , a temporary revival of the CCC ought to be considered. Youth unemployment, especially among Black and Latin youth is shameful. Having them clean up and repair National Park properties for the summer is not the worst idea in the world. A question is : Would they sign up for such a program ? Military discipline , hard work , long hours for low pay ? I don't know but it might be worth a try.

    As for no inflation, please tell that to renters in NYC. The share of income going to rent has gone from 45 % to 51 % just during Obama's term. Why ? Higher real estate taxes , water charges , utilities and energy costs. Been to the supermarket lately ? Now I could be sarcastic and revive "Eagleland" but MOST of us ARE paying higher food prices. While declining now, gas prices are still high. So is clothing.

    The latest employment numbers show higher lay offs and too few new jobs in the PRIVATE sector.

    You obviously subscribe to the Krugman view that the Federal government should borrow another trillion or two ( Krugie never says how much for how long but I don't want to nit pick.) and spend it on who knows what. Krugman has asserted , more than half seriously, that the government could spend it on a program of national preparedness to defend against an invasion of space aliens i.e. it doesn't matter what it gets spent on so long as it gets spent. What does he think the Fed has been doing for the last 4 years or so ? Does he seriously think that the "bomb shelter" building of the 50's was a good thing ? That massive spending on shelters to protect us from alien "death rays" would be a sensible and productive use of BORROWED money ? Remember, if you take issue with this "space alien" idea , please take it up with Krugie. It is HIS proposal , not mine.
    Or would you prefer more "bridges to nowhere" and high speed rail for just a few thousand passengers a day run at a substantial operating deficit ? Also remember that this is just an extension and amplification of the "broken window" theory. While the purposes of such spending are laudable such as lower unemployment there is still a piper that must be paid. If the funds used to pay for such employment programs come from taxes then that money can't be spent, saved or invested in the private sector. If borrowed, interest has to be paid and the national debt increased. Just how much of the budget do you want to see go to pay interest on the national debt ?
    Last edited by Eric Stoner; 06-21-2012 at 11:49 AM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Why is it necessary to go through pain and hardship to experience growth? The main purpose of a government should be to make the lives of people better, not worse.
    With one category of exception, it is impossible for a government to make the lives of all people better. What gov'ts can actually do is make the lives of SOME people better, while at the same time making the lives of OTHER people worse. This is based on the fact that governments cannot create 'wealth' ... they can only forcibly take 'wealth' away from people who are wealth producers, and redistribute that 'wealth' to other people whom the gov't deems in need of 'assistance'. This now essentially holds true for both individuals and for businesses.

    The one category of exception is cases where the government can actually generate new 'wealth' via its own productive assets. This takes place most often when the gov't receives royalty payments for oil / gas / minerals produced from gov't land. This occasionally takes place when gov't 'owned' research results in patent royalties, when hydropower is generated by gov't owned dams, etc. Obviously the USA doesn't have a large amount of new 'wealth' creation via exploiting productive gov't owned assets ... at least compared to countries such as Canada, Australia etc.

    In the absence of a significant amount of productive gov't owned assets providing an ongoing positive source of money to fund gov't spending, a gov't can create the 'appearance' of helping all people for some period of time by borrowing money and spending it in addition to money collected from wealth producers via taxes and money generated by productive gov't owned assets. This of course creates supplementary 'beneficial' gov't spending in the current year, in exchange for reduced 'beneficial' gov't spending in future years, as future gov't money must be 'non-beneficially' spent on debt service. And the 'appropriate' use of gov't debt ( as well as it's sisters currency devaluation and interest rates ) forms the crux of the differences between the various 'Schools' of Economics.

    As exemplified by Greeks now lining up to receive physical food charity handouts, by Greeks being unable to obtain certain medicines at any price,by Greek electricity service being interrupted etc., there are finite limits in regard to the amount of gov't debt that can be accumulated ( relative to the size of a given country's economy ) before the costs of gov't debt service drag the country's economy to it's 'knees'. This is an area of MAJOR difference of opinion between the various 'Schools' of Economics.
    Last edited by Melonie; 06-22-2012 at 06:38 AM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    And let us not forget that the more money the government borrows the less is available for other lending. Let's say there is $100 in circulation available to be lent. If government ( ALL governments , local, state and Federal including all public authorities ) borrow $20 then $80 is available to lend to the private sector. As borrowers, the public and private sectors compete against each other for the same pool of funds. Government can make the interest it pays tax free , sometimes triple tax free. It can increase security for the lender by issuing revenue bonds as opposed to general obligation bonds. In response the private borrowers can increase the interest they are willing to pay. For the most part, there is not much they can do to increase security for the lender except for things like chattel mortgages or other lending with a tangible asset securing the loan. It USED to be that mortgages provided such security but not as much these days. Bondholders used to be guaranteed second place in a bankruptcy right behind governmental creditors. Not so much after the Chrysler and GM bankrupicies.

    The more governments borrow from the hypothetical $100 , the less is available for other borrowers. Since government does not create wealth ( it just moves it around ), private sector borrowing is much more likely to generate greater economic activity. If private borrowers have to pay higher interest to keep up with government borrowers, then they have less money to pay in salaries and dividends and less with which to buy plant, equipment, supplies and to pay for various services.

    The "Krugie Plan" is to borrow what ? , another trillion dollars and spend it on something. Presumably something laudable and REAL like high speed rail , not on a pipeline God forbid ! I'm assuming he is being facetious with his "Space Alien Defense Act" idea. O.K., that is a trillion dollars that will NOT be invested anywhere else. It can't be. It was lent to Uncle Sam. That is another trillion dollars sloshing around the economy with no immediate increase in supply of anything which results in .... wait for it... I N F L A T I O N. Now to his credit, "Krugman The Creep" has ADMITTED that this is exactly what will happen and he claims that it will somehow be beneficial. Nobody ever asks him and he never bothers saying what magical apparatus is in place that will put the genie back into the bottle after we get this demand driven recovery which he claims will inevitably result. In other words, Krugie doesn't have a clue how we could possibly have a "controlled burn" with inflation. We've never had one before. Neither has anyone else. Historically , the only way to control it is to contract the money supply , usually by raising short term interest rates too high. Those are the ONLY rates that the Fed and other central banks have any control over. That creates an inverted yield curve which results every time in a ... wait for it ... a R E C E S S I O N. We have experience with this. We saw it in 1930 - 1939 ; we saw it in Germany in the 1920 ' s, Israel in the 1980's , Brazil , Argentina etc. etc. The Germans remember which is a BIG reason why they refuse to take Krugie's advice and go along with his prescriptions.

    With a recession, ALL the people who got hired and put to work to help spend the borrowed trillion get laid off. Just like the defense contractors laid off thousands of workers starting in 1945 at the same time as millions of guys were being discharged from the military. That was economic Nirvana for Krugie - borrowing greater than GDP , something like half of GDP spent by the government, wage and price controls , rationing and very high tax rates. We had similar experiences with the multiple recessions of the 1950s's and 1970's. And yet Krugie et. al insist on repeating the failures of the past.

    Just a couple other things to keep in mind about Creepy Krugie : He has NEVER spent a day in the PRIVATE sector. His entire career has been spent in academia EXCEPT for when he was a highly paid consultant for ... wait for it... ENRON ! This is the pair of dirty shorts that Krugie tries desperately to bury and which he makes a point to leave off his resume. What was at the roots of Enron's collapse ( besides the fraudulent bookeeping ) ? BORROWING !

    I suppose he wants to do for the country what he helped do for Enron.
    Last edited by Eric Stoner; 06-22-2012 at 07:56 AM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Eric Stoner View Post
    I could respond but I have already. Numerous times. We've gone over the Federal budget and deficit numbers again and again. You zero in on Reagan's FIRST term and ignore the second. You refuse to accept a very simple basic truth : BEFORE it can be taxed , somebody has to make the money. Tax revenues were down in Reagan's first term thanks to a severe recession. As we recovered and we started to add up to half a million new jobs a month ( near the height of the recovery ) revenues dramatically increased and the deficit as a % of GDP declined. It is there even in YOUR numbers !
    The recession ended before 1984, yet tax revenue was still below what it was in 1979. How do you explain this, if Reagan's tax cuts didn't reduce tax revenue?

    Quote Originally Posted by Eric Stoner View Post
    What government workers build airports ? Where ? When ? Name one airport built by the government. Even more to the point, that is INFRASTRUCTURE spending which I SUPPORT. How many times do I have to say it ? I'd prefer that we focus on repair and maintenance of existing infrastructure to assure that bridges don't fall down. Nevertheless the contracts go to PRIVATE companies who issue paychecks to the workers.
    INFRASTRUCTURE is paid for by the government. What is the difference between government paying a contractor to do work, and the contractor using the money from the government to pay workers, and the government paying workers directly?

    Airports are funded and operated by the government.


    Quote Originally Posted by Eric Stoner View Post
    I will say this : While I am not happy with the concept and it runs counter to basic principles , a temporary revival of the CCC ought to be considered. Youth unemployment, especially among Black and Latin youth is shameful. Having them clean up and repair National Park properties for the summer is not the worst idea in the world. A question is : Would they sign up for such a program ? Military discipline , hard work , long hours for low pay ? I don't know but it might be worth a try.

    As for no inflation, please tell that to renters in NYC. The share of income going to rent has gone from 45 % to 51 % just during Obama's term. Why ? Higher real estate taxes , water charges , utilities and energy costs. Been to the supermarket lately ? Now I could be sarcastic and revive "Eagleland" but MOST of us ARE paying higher food prices. While declining now, gas prices are still high. So is clothing.
    Taxes are not inflation.

    Overall, inflation is not high. These are the official numbers from the Bureau of Labor Statistics.

    http://www.bls.gov/news.release/cpi.nr0.htm

    As of the end of May:

    Food is up 2.8%
    Energy is down -3.9%
    Gasoline is down 4%
    Electricity is up .2%
    Utility (piped) gas is down -14.9%


    Quote Originally Posted by Eric Stoner View Post
    The latest employment numbers show higher lay offs and too few new jobs in the PRIVATE sector.
    No, the private sector has been increasing the number of jobs. It is the government sector where jobs are being lost. Again, during previous recessions, government hiring increased. During the current recession, government has been eliminating jobs. Which has gotten better results?

    Quote Originally Posted by Eric Stoner View Post
    You obviously subscribe to the Krugman view that the Federal government should borrow another trillion or two ( Krugie never says how much for how long but I don't want to nit pick.) and spend it on who knows what. Krugman has asserted , more than half seriously, that the government could spend it on a program of national preparedness to defend against an invasion of space aliens i.e. it doesn't matter what it gets spent on so long as it gets spent. What does he think the Fed has been doing for the last 4 years or so ? Does he seriously think that the "bomb shelter" building of the 50's was a good thing ? That massive spending on shelters to protect us from alien "death rays" would be a sensible and productive use of BORROWED money ? Remember, if you take issue with this "space alien" idea , please take it up with Krugie. It is HIS proposal , not mine.
    Or would you prefer more "bridges to nowhere" and high speed rail for just a few thousand passengers a day run at a substantial operating deficit ? Also remember that this is just an extension and amplification of the "broken window" theory. While the purposes of such spending are laudable such as lower unemployment there is still a piper that must be paid. If the funds used to pay for such employment programs come from taxes then that money can't be spent, saved or invested in the private sector. If borrowed, interest has to be paid and the national debt increased. Just how much of the budget do you want to see go to pay interest on the national debt ?
    Ask Paul Krugman. He doesn't speak for me.

    There are plenty of places where bridges or tunnels need to be built or repaired, but aren't. One example would a new train tunnel from New Jersey to New York City. New York City is not "nowhere". High speed rail can carry a lot more than a few thousand passengers a day.

    This has nothing to do with the "broken window" theory. The "broken window" theory makes no sense at all.

    If we weren't running up trillions of dollars of debt when the economy wasn't in recession, we would have such high interest payments now.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by eagle2 View Post
    The recession ended before 1984, yet tax revenue was still below what it was in 1979. How do you explain this, if Reagan's tax cuts didn't reduce tax revenue?


    INFRASTRUCTURE is paid for by the government. What is the difference between government paying a contractor to do work, and the contractor using the money from the government to pay workers, and the government paying workers directly?

    Airports are funded and operated by the government.




    Taxes are not inflation.

    Overall, inflation is not high. These are the official numbers from the Bureau of Labor Statistics.

    http://www.bls.gov/news.release/cpi.nr0.htm

    As of the end of May:

    Food is up 2.8%
    Energy is down -3.9%
    Gasoline is down 4%
    Electricity is up .2%
    Utility (piped) gas is down -14.9%




    No, the private sector has been increasing the number of jobs. It is the government sector where jobs are being lost. Again, during previous recessions, government hiring increased. During the current recession, government has been eliminating jobs. Which has gotten better results?



    Ask Paul Krugman. He doesn't speak for me.

    There are plenty of places where bridges or tunnels need to be built or repaired, but aren't. One example would a new train tunnel from New Jersey to New York City. New York City is not "nowhere". High speed rail can carry a lot more than a few thousand passengers a day.

    This has nothing to do with the "broken window" theory. The "broken window" theory makes no sense at all.

    If we weren't running up trillions of dollars of debt when the economy wasn't in recession, we would have such high interest payments now.
    Nothing like rehashing and beating dead horses. Reagan's tax cuts were not passed until 1981 ; did not take effect until 1982 and were phased in. They were not fully in effect until 1984. Please LOOK IT UP ! If you look at the revenue numbers after the Tax Reform Act of 1986 that traded a top rate of 29 for doing away with most deductions and credits, they are even more impressive. In 1984 unemployment was going down but we didn't reach full employment type numbers until 1986. Employed people pay a lot more in taxes than those without jobs.

    You never heard of PRIVATE airports ? Nonetheless you are right that most airports are owned and usually run by governments.

    Who said "taxes were inflation" ? I never said that.

    As for private sector employment, it depends on which numbers we use, doesn't it ? Do we count "discouraged workers" ? Part time workers who want to be full time ? Nobody thinks we are creating anything remotely resembling the number of new jobs we need. At a bare MINIMUM we need 250,000 new jobs per month just to tread water and keep pace with population growth. We are far below that rate of job creation.

    As for the rest of your post , I agree with you. I have consistently agreed with you on these basic points and continue to do so. I have consistently supported higher spending on infrastructure. Particularly targeted to repair and maintenance of existing structures and facilities and if necessary replacement. I live in an area where the region is highly dependent on the Tappan Zee Bridge. It was designed and built as a TEMPORARY fix and is already five years older than its "useful life" as originally planned. It is already well beyond obsolete. The new train tunnel is somewhat more problematic. While needed, it was a potential sinkhole for New Jersey. Christie was forced to play "chicken" with the Feds and New York on future funding and everybody lost.

    Nobody has been harder on Bush The Dumber , Rove , DeLay et. al. than me. Especially on fiscal matters. Nobody. I have repeatedly said that Obama inherited a mess not of his making. I have also repeatedly predicted that his policies would do nothing but make things worse and for the most part, they have. Unfortunately, he did not put you and me in charge of the almost trillion dollar stimulus package. Had he done so, we could have oriented it towards infrastructure spending instead of sinecure preservation.

    Either you agree with Krugman or you don't. Krugman says borrow, borrow, spend , spend. Even though NO macroeconomist says that such stimulus spending works. Remember the Brazilian Miracle on the 60's and 70's ? And the inflationary hangover of the 80's. THAT is what I and many others are worried about.
    Last edited by Eric Stoner; 06-25-2012 at 07:19 AM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Eric Stoner View Post
    I have also repeatedly predicted that his policies would do nothing but make things worse and for the most part, they have.
    I can't understand how you can say Obama's policies have made matters worse when since coming into office:

    The DOW increased from 7,000 to 12,700
    500,000 job losses per month turned into avg. 135,000 per month gains
    Over 3 million jobs added
    GM turned from near bankruptcy to #1 Automaker in the world
    Banks close to closing their doors stable and making profits
    Big Business that was close to bankruptcy now has $2 Trillion that THEY refuse to spend

    When Obama came in their was a large amount of panic, there was regular swings of the DOW of 500 points and more. I can't see how you could possibly say the situation we are in now is worse than the one we where in 2.5 years ago. In addition, those job numbers are with massive lay offs of public workers, mostly at the state and local level.

    Unfortunately, he did not put you and me in charge of the almost trillion dollar stimulus package. Had he done so, we could have oriented it towards infrastructure spending instead of sinecure preservation.
    I think you are overlooking the fact that Obama did indeed want a lot of infrastructure work done but was stopped from administering many of his policies because of obstruction:

    "Obama Again Calls for Infrastructure Spending"
    "President Obama will join mayors, governors and current and former transportation secretaries on Monday to argue for a major initiative to repair and modernize the nation’s roads, rails and air systems" http://news.firedoglake.com/2010/10/...ture-spending/

    "Senate GOP Blocks Obama's $60 Billion Infrastructure Plan"
    WASHINGTON – Republicans in the Senate Thursday dealt President Obama the third in a string of defeats on his stimulus-style jobs agenda, blocking a $60 billion measure for building and repairing infrastructure like roads and rail lines.
    http://www.foxnews.com/politics/2011...ructure-plans/

    "Obama to Call for Major Infrastructure Spending"
    "The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a new air navigation system designed to reduce travel times and delays."
    http://www.foxnews.com/politics/2010...#ixzz1yaobhnz5

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  26. #22
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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Eric Stoner View Post
    Nothing like rehashing and beating dead horses. Reagan's tax cuts were not passed until 1981 ; did not take effect until 1982 and were phased in. They were not fully in effect until 1984. Please LOOK IT UP ! If you look at the revenue numbers after the Tax Reform Act of 1986 that traded a top rate of 29 5 for doing away with most deductions and credits, they are even more impressive. In 1984 unemployment was going down but we didn't reach full employment type numbers until 1986. Employed people pay a lot more in taxes than those without jobs.

    You never heard of PRIVATE airports ? Nonetheless you are right that most airports are owned and usually run by governments.

    Who said "taxes were inflation" ? I never said that.

    As for private sector employment, it depends on which numbers we use, doesn't it ? Do we count "discouraged workers" ? Part time workers who want to be full time ? Nobody thinks we are creating anything remotely resembling the number of new jobs we need. At a bare MINIMUM we need 250,000 new jobs per month just to tread water and keep pace with population growth. We are far below that rate of job creation.

    As for the rest of your post , I agree with you. I have consistently agreed with you on these basic points and continue to do so. I have consistently supported higher spending on infrastructure. Particularly targeted to repair and maintenance of existing structures and facilities and if necessary replacement. I live in an area where the region is highly dependent on the Tappan Zee Bridge. It was designed and built as a TEMPORARY fix and is already five years older than its "useful life" as originally planned. It is already well beyond obsolete. The new train tunnel is somewhat more problematic. While needed, it was a potential sinkhole for New Jersey. Christie was forced to play "chicken" with the Feds and New York on future funding and everybody lost.

    Nobody has been harder on Bush The Dumber , Rove , DeLay et. al. than me. Especially on fiscal matters. Nobody. I have repeatedly said that Obama inherited a mess not of his making. I have also repeatedly predicted that his policies would do nothing but make things worse and for the most part, they have. Unfortunately, he did not put you and me in charge of the almost trillion dollar stimulus package. Had he done so, we could have oriented it towards infrastructure spending instead of sinecure preservation.

    Either you agree with Krugman or you don't. Krugman says borrow, borrow, spend , spend. Even though NO macroeconomist says that such stimulus spending works. Remember the Brazilian Miracle on the 60's and 70's ? And the inflationary hangover of the 80's. THAT is what I and many others are worried about.
    If you agree spending on infrastructure is beneficial, do you agree it would be better to increase spending on infrastructure during an economic downturn, to stimulate the economy than it would be to cut government spending?

    We currently have a high unemployment rate with many people looking for work. If you have a bridge in your area that is past its useful life, and obsolete, wouldn't it make sense to take some of those people looking for work, and put them to work building a new bridge?

    While things aren't great right now, in many respects, we're much better off than we were 3 1/2 years ago, when the economy looked like it was about to go off the cliff.

    From what I've read, most economists are in favor of stimulus spending.

    http://www.cepr.net/index.php/public...mulus-package/

    -snip-
    Economists' Letter to Congress in Support of a New Economic Stimulus Package
    AddThis
    November 2008

    This letter, signed by 387 economists, including Nobel Laureates Joseph Stiglitz, Robert Solow, and George Akerlof, urges Congress to move quickly and decisively to pass an effective new economic stimulus package. The economists state that a stimulus package should be in the range of $300 to $400 billion per year and should be geared toward targets that inject capital into the nation's economic system immediately.
    -snip-

    Even most conservative economists support stimulus spending

    http://articles.chicagotribune.com/2...d-job-creation

    -snip-
    WASHINGTON — The $825 billion stimulus proposal that Democrats unveiled last week may encounter stiff opposition from conservatives on Capitol Hill. But it isn't meeting significant resistance from conservative economists.

    While economists might quibble with specifics, the vast majority agree that some kind of massive government spending plan is necessary.

    "Most conservative economists are all for it," said Mark Zandi, a founder of Moody's Economy.com who advised GOP presidential candidate John McCain.
    -snip-

    I agree with Paul Krugman on increasing government spending to stimulate the economy. I do not agree we should be spending money on defense against aliens.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Quote Originally Posted by Melonie View Post
    With one category of exception, it is impossible for a government to make the lives of all people better. What gov'ts can actually do is make the lives of SOME people better, while at the same time making the lives of OTHER people worse. This is based on the fact that governments cannot create 'wealth' ... they can only forcibly take 'wealth' away from people who are wealth producers, and redistribute that 'wealth' to other people whom the gov't deems in need of 'assistance'. This now essentially holds true for both individuals and for businesses.
    It's not very difficult to see how government has made the lives of people better. Not just some of the people, all of the people. Our sewage systems, built by the government, have obviously made the lives of everyone better. Do you think we would be somehow better off if government didn't build sewage systems, and most people had to go without indoor plumbing? Government provides clean safe water to millions of people. In the 1800's, when government more closely followed your ideology, people did not have access to clean drinking water, and cholera and other diseases were common at the time. Most people drank beer instead of water, because water was unsafe. Everyone benefits from public highways. Even people who don't have cars benefit from being able to buy a wide variety of products transported on our public roads and highways. Do you remember when millions of Americans died from Asian bird flu virus? If you don't, it's because it never happened, thanks to the CDC, whose scientists are dedicated to preventing such things from happening. In countries that do not have such agencies, epidemics are far more common. I just do not understand how some people are unable to see how everyone benefits from government. It's true that not everything government does benefits every single person, but it doesn't change the fact that many things government does, do.

    Quote Originally Posted by Melonie View Post
    The one category of exception is cases where the government can actually generate new 'wealth' via its own productive assets. This takes place most often when the gov't receives royalty payments for oil / gas / minerals produced from gov't land. This occasionally takes place when gov't 'owned' research results in patent royalties, when hydropower is generated by gov't owned dams, etc. Obviously the USA doesn't have a large amount of new 'wealth' creation via exploiting productive gov't owned assets ... at least compared to countries such as Canada, Australia etc.

    In the absence of a significant amount of productive gov't owned assets providing an ongoing positive source of money to fund gov't spending, a gov't can create the 'appearance' of helping all people for some period of time by borrowing money and spending it in addition to money collected from wealth producers via taxes and money generated by productive gov't owned assets. This of course creates supplementary 'beneficial' gov't spending in the current year, in exchange for reduced 'beneficial' gov't spending in future years, as future gov't money must be 'non-beneficially' spent on debt service. And the 'appropriate' use of gov't debt ( as well as it's sisters currency devaluation and interest rates ) forms the crux of the differences between the various 'Schools' of Economics.
    The value of a good or service produced by the government is exactly the same as if that good or service was produced in the private sector. You're just arbitrarily selecting an entity and saying it can't create wealth.

    Quote Originally Posted by Melonie View Post
    As exemplified by Greeks now lining up to receive physical food charity handouts, by Greeks being unable to obtain certain medicines at any price,by Greek electricity service being interrupted etc., there are finite limits in regard to the amount of gov't debt that can be accumulated ( relative to the size of a given country's economy ) before the costs of gov't debt service drag the country's economy to it's 'knees'. This is an area of MAJOR difference of opinion between the various 'Schools' of Economics.
    There are plenty of prosperous countries where government spends money to make the lives of its people better. Of course you ignore those countries that are doing well, such as Sweden or Norway, and bring up Greece. The people in Greece are still much better off than the people in countries that follow your ideology, such as Somalia and Haiti, where the government doesn't do anything for most, or all of the people.
    Last edited by eagle2; 06-24-2012 at 03:41 PM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Our sewage systems, built by the government, have obviously made the lives of everyone better. Do you think we would be somehow better off if government didn't build sewage systems, and most people had to go without indoor plumbing?
    Tell that to the tens of millions of Americans who do not have access to gov't funded water and sewer systems ... who must pay out of their own pockets for private well water systems and septic systems ... but whose tax money is spent to 'subsidize' prevailing wage construction costs and union scale wages for gov't employees who nominally maintain municipal water and sewer systems.

    Tell that specifically to the residents of Jefferson County Alabama ...

    (snip)"The day after Harrisburg filed bankruptcy, the Jefferson County, Ala., sewer district board met to consider filing Chapter 9. After defaulting on $3.14 billion in municipal sewer district bonds, JP Morgan had already offered $647 million to settle bribery charges. But even after the settlement, the district would still need to permanently raise local sewer bills from $63 to $395 a month to pay off their municipal bond debt.

    When the county's bankruptcy lawyer, Ken Klee, was asked by Alabama lawmakers what would be the negative if the sewer district filed for bankruptcy, he could not see a negative for the sewer district, but he did believe it “would be like Chernobyl” for other districts’ bond ratings in Alabama. But since the bankruptcy filing, high credit quality issuers in Alabama have already sold billions of new municipal bonds to investors.

    State and local governments have been living in a fantasy world where borrowing money was deemed a responsible way to operate huge organizations. Wealthy local individuals fed that fantasy by lending irresponsible amounts of money to bureaucrats."(snip) from


    And why do wealthy individuals lend irresponsible amounts of money to local gov'ts to construct water and sewer systems whose true costs of operation practically no local resident can afford to pay for ? Because the municipal bonds are exempt from federal, state and local income taxes ... which creates an even greater burden on middle class taxpayers.

    So indeed the wonderful municipal sewer system described above created 'winners' ... the gov't contractors who originally constructed it, the gov't employees who maintain and operate it, JP Morgan et al who profited from the initial muni bond issuance, the rich investors who benefitted from the tax exemptions, low income residents whose sewer and water bills are subsidized by social welfare benefit payments, and of course the local politicians. This wonderful municipal sewer system also created 'losers' ... but it remains to be seen who besides middle class taxpayers will also eventually wind up in the 'loser' category in this particular case. JP Morgan ? ... doubtful, since the FED is still willing to accept bankrupt sewer district bonds at 'face value'. Rich investors who purchased the muni bonds ? ... maybe, but unlikely. AIG or another big insurance house who must pay out upon municipal bond default ? ... doubtful, since the FED is still willing to 'bail out' bond insurers. Nope, in all of the above cases, it would appear likely to circle back around to middle class taxpayers at both the state and federal level !!!!!!!!
    Last edited by Melonie; 06-24-2012 at 07:52 PM.

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    Default Re: a Tale of Three ( Economic ) Wizards

    Ahhhh, Jefferson Alabama..... That story is much more about Wall Street looting.... And corrupt locals than anything else.
    The country has been looted.

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