Contributors

Saturday, April 27, 2013

Busted!

Over the course of the last few months, we've seen that austerity measures in Europe aren't working. One would think that they learned their lesson after the worldwide economic depression in the 1930s but they haven't. Neither have conservatives in this country who are so emotionally obsessed with the government spending less money that they really can't see how cuts in spending are harmful. Now we have the proof that not only are they harmful, they are decidedly not beneficial. In short, high public debt does not consistently stifle economic growth.

Thank you, Thomas Herndon!

38 comments:

Anonymous said...

Austerity Is A Consequence — Not A Punishment


But I want to emphasize that The Rogoff and Reinhart paper mentioned above is a later work than their book. To my knowledge, no one is disputing the work in their book. Their book, This Time Is Different, is basically just an analysis of their very large and masterful accumulation of data about sovereign debt crises.

....


You can almost hear the critics wanting to dismiss Rogoff and Reinhart’s entire book, which clearly establishes the , if I remember correctly. The point is that there is no magic number that says “This far and no farther.” There is a mythical line where confidence and trust is lost, but no one knows where that line of demarcation is until it is crossed. And right up until the last minute, there are always those who look for ways to add more debt, who assure us, “This time is different.” But it never is. A country can restore its fiscal house to order, pay back its debt, and grow its way out of the problem over time; there are numerous examples. But continuing to grow that debt-to-GDP number is to court a disaster that looms right in front of you.



RTWT

Anonymous said...

Hmmm, formatting error cut some of that second quote off.

You can almost hear the critics wanting to dismiss Rogoff and Reinhart’s entire book, which clearly establishes the link between excessive debt and sovereign debt crises – a pattern that has played out some 266 times over the last few centuries, if I remember correctly. The point is that there is no magic number that says “This far and no farther.” There is a mythical line where confidence and trust is lost, but no one knows where that line of demarcation is until it is crossed. And right up until the last minute, there are always those who look for ways to add more debt, who assure us, “This time is different.” But it never is. A country can restore its fiscal house to order, pay back its debt, and grow its way out of the problem over time; there are numerous examples. But continuing to grow that debt-to-GDP number is to court a disaster that looms right in front of you.


Mark Ward said...

The mistake of austerity was made during the last major global economic crisis, GD, and the results were the same. Thankfully, we had leaders that were smart enough to not repeat those errors and we are better off for it.

Juris Imprudent said...

One would think that they learned their lesson after the worldwide economic depression in the 1930s

What on earth do you think you are talking about?

Anonymous said...

Didn't bother reading the link did you?

Mark Ward said...

What on earth do you think you are talking about?

If you have a point to make, juris, make it. I'd be careful, though, if I were you.

Mark Ward said...

I read it, GD, and wasn't really impressed. Same stuff along without a lot of extra paragraphs that contained unnecessary information.

As always, I'm more interested in your analysis than a cut and paste job.

Juris Imprudent said...

I'd be careful, though, if I were you.

How about I do as you do and just wildly fling shit around?

You seem to be contending that govt austerity was a contributing factor to the Great Depression. Am I reading you correctly?

Anonymous said...

I'm more interested in your analysis than a cut and paste job.

Just so we're clear, do you consider what you posted up top to be an analysis?

Mark Ward said...

You seem to be contending that govt austerity was a contributing factor to the Great Depression. Am I reading you correctly?

Just so we're clear, do you consider what you posted up top to be an analysis?

You guys just can't offer anything other than questions or, in the case of GD, not even a single word of his own.

Juris Imprudent said...

Am I reading you correctly?

You guys just can't offer anything other than questions

Got it. I should just assume you mean what I want you to mean (no matter how fucking wrong) and lambaste you on that basis, which you must then defend even if it wasn't what you fucking meant.

I would ask "am I right", but I don't want to be accused of only offering questions.

QED (which is a latin acronym for eat shit and die).

Anonymous said...

nice asswipe. Maybe a guy is at work and can't make a big post via phone.

but you'd rather be an asshat.

Larry said...

OR maybe, Mark, just maybe, you can clearly make your point so that someone not living inside your head can understand it. Or if you prefer, we can all just jump to any wild-ass conclusion that your annoyingly vague and incomplete statements allows us to. Even that's better than the stuff you regularly pull out of your nether regions as "loose blank-verse interpretation by a crack-addled ferret" of our usually straightforward statements. We can try, if you really want, OR you can just fucking say exaxtly what you mean so that someone other than yourself can understand it. That's a skill that used to be important for teachers, you know. Maybe not, anymore?

Mark Ward said...

That's a skill that used to be important for teachers,

The most valuable skill for a teacher to have is to be a good listener:)

Juris Imprudent said...

The most valuable skill for a teacher to have is to be a good listener:)

Your poor students. Or are you claiming that you listen better than you read? Dammit - another question.

Anonymous said...

Ok, analysis.


Mark buys a Farmhouse and then complains that the roof over the house is a failure because it doesn't let in enough light and rain to grow crops under.

Silly? Yep. But that's what happens when you do not understand what problem a solution is supposed to solve and therefore judge it's success based upon your incorrect assumption of what you think it is supposed to do.

Hence we have Mark's pronouncement that austerity is a failure. A failure at what? That's hard to tell exactly, as he himself fails to explain. Since we are apparently unable to question Mark in order to clarify his vagueness I am left to make some assumptions based upon prior statements by Mark.

Mark says "In short, high public debt does not consistently stifle economic growth." and he seems to be a believer in Keynesian economics (at least partly - as he only places importance on the half of the Keynesian equation that involves government spending). With this in mind I tend to think that Mark is measuring the success or failure of austerity utilizing the measure of economic growth.

The problem is austerity is not designed to create economic growth. Austerity is a solution designed to prevent or mitigate a sovereign debt crisis. Such a crisis is economically devastating, despite Mark's past poo-pooing of such.

Speaking of poo-pooing, I posted a link that if Mark had actually read and understood would have told him all of this - but Mark cannot and will not accept information that is outside his bubble.

Mark Ward said...

Contrary to the voices in my head, juris, I don't spout my views during class nor do I indoctrinate children into communist ways. My job, in addition to passing on enduring understandings, is to inspire and motivate. That requires a lot of listening.

Mark Ward said...

Hence we have Mark's pronouncement

as he himself fails to explain

we are apparently unable to question Mark

based upon prior statements by Mark.

Mark says

and he seems to be a believer

as he only places

I tend to think that Mark is measuring

despite Mark's past poo-pooing

I posted a link that if Mark

understood would have told him all of this

but Mark cannot


How many "Marks" is that? I count seven with 5 other references to me. This would be why I don't answer your questions most of the time, GD, because you focus on me and skip out on doing any real analysis of your own. This, coupled with the usual heading off at the pass comment that Mark doesn't know what he is talking about, betrays a great deal of laziness. juris is also lazy. You live to criticize and personally attack but can't offer any real analysis of your own, hence the cut and paste. Even if you were at work, a few sentences would be better than the obsessiveness with yours truly.

Something like...I disagree with Thomas Herndon because of a, b, c. Later, when you had more time, you could posted some evidence supporting your assertions. juris could have offered a few points as to why he thinks that the austerity measures taken by Europe in the 1930s did not make the Depression worse.

But you don't do that. You continue to ask questions and attack me personally. Honestly, it looks like neither one of you guys know what you are talking about and, when you take the course you do, you come off as overly emotional and intransigent.

Juris Imprudent said...

That requires a lot of listening.

For the sake of your students I honestly hope you do that better than you demonstrate reading comprehension here.

Wheew. Made it without a question.

Juris Imprudent said...

You live to criticize and personally attack but can't offer any real analysis of your own

Yes, how dare I actually try to make sure that I am criticizing something you meant and not just what I want to criticize. I really should just assume away and rant at will, or Mark as the case may be. It is absurd to ask a question of clarification before criticizing - after all I must already know what you meant. And if I didn't - fuck you, you should defend what I criticized even if it isn't what you meant.

I prefer to do things my way rather than your way.

Anonymous said...

because you focus on me and skip out on doing any real analysis of your own

Bullshit.

You didn't post a cut and paste job of Herndon, you posted your 'analysis' of Herndon. You asked that I do an 'analysis'. I did. You ask that I state what and why I disagree. I did. You just don't like that my analysis is of your 'analysis', and that what I disagree with is you.

I am not posting at Herndon's blog. I am posting at Mark's blog. The proprietor of Mark's blog often makes claims that I disagree with. Perhaps you think I should go to Herndon's place and post an analysis of Mark. But most people would consider that to be fucking stupid. Apparently only here, and with you, is analyzing and critiquing the posted analysis and opinion THAT ORIGINATES HERE considered taboo.

The entire point of the discussion HERE begins due to YOUR posts upon some subject. To whine because the discussion revolves around YOU and YOUR OPINIONS and 'ANALYSIS' is kind of MISSING THE FUCKING POINT.

Mark Ward said...

3 more Marks! And nary a solid point to be made about austerity or the Depression.

I think you are just pissed that I took away your best and, thus far only, debate/discussion tactic.

Juris Imprudent said...

And nary a solid point to be made about austerity or the Depression.

So, apparently you are claiming that austerity was a contributor to the Depression.

That is stupid and wrong. No questions asked.

Anonymous said...

point to be made about austerity

Since you apparently missed it earlier:

austerity is not designed to create economic growth. Austerity is a solution designed to prevent or mitigate a sovereign debt crisis.


Quit focusing on me and address the point I've made!

Anonymous said...

3 more Marks


I suppose if you are going to continue to be so childish as well as idiotic we will have to use some sort of euphemism refer to any point or opinion of yours that we wish to discuss.


Perhaps I should have said:


Hence we have The Childish Idiot's pronouncement

as The Childish Idiot himself fails to explain

we are apparently unable to question The Childish Idiot

based upon prior statements by The Childish Idiot.

The Childish Idiot says

and The Childish Idiot seems to be a believer

as The Childish Idiot only places

I tend to think that The Childish Idiot is measuring

despite The Childish Idiot's past poo-pooing

I posted a link that if The Childish Idiot

understood would have told The Childish Idiot all of this

but The Childish Idiot cannot


Would that take the personal sting out of having your opinion criticized? That's what this is all about isn't it?

Follow through, step by step:

You say something.

I disagree.

In order to present an ANALYSIS of that disagreement I must refer to you and what you said.

Do you not fucking understand that?

Mark Ward said...

So, apparently you are claiming that austerity was a contributor to the Depression

A couple years ago, I took a European History class for CE. This was a question on one of the assignments.

Why did the stock market crash of 1929 have such serious and long lasting effects

This was my answer, which received full credit.

The stock market crash of 1929 had serious and long lasting effects because of a cascading effect that began with the recall of short term loans to other countries and ended with poor economic leadership in the key countries of the world. Like a short row of dominoes that falls over in a matter of seconds, the world economy completely collapsed as millions lost their livelihood.

When American bankers and investors lost their money in the crash of 1929, they turned outward to the rest of the world and asked for the money that was owed to them in the short term. This led to large quantities of gold leaving Europe and coming into the United States. Thus, it became very hard for the citizens of Europe, in particular Germany and Austria, to borrow money. This, in turn, lead to a run on the banks as depositors feared that their money was all going to be shipped to America.

Like oil spilling and spreading out across the ocean, the recall of these loans began to have a toxic and rapidly spreading effect on the rest of the world economy. Prices dropped in many sectors such as agricultural commodities and industrial goods because investors were pulling out to pay back their loans. As prices fell, so did supply and demand in all the major sectors of the economy. Firms were producing less because they couldn’t afford to maintain output and demand was falling off a cliff.

Each country in the world tried to deal with it in autonomously. Britain went off the gold standard in the hopes that the devaluation of their currency would make goods cheaper. Other countries followed suit so there was no real benefit as now all currency was worth less. Raising tariffs, as the United States did, also had the same detrimental effect as other countries followed suit. Many countries also turned to austerity measures which, when combined with the other mistakes, were disastrous. It was a chaotic whirlwind consisting of countries desperately grasping at straws and no real leader among them.

Sadly, we see this same pattern of errors today. Austerity measures in Europe and Great Britain have made the world economic situation worse. The gold standard has been gone for over 40 years as the value of each country’s currency is now traded in stock exchanges. And countries still engage in protectionism regarding trade in order to protect their own economic interests. One would think that world economic leaders would have learned the lessons of history as the economic crisis of 2008 was pretty much the same problem as the crash of 1929. Apparently, they haven’t.


Now, if you don't agree with this assessment, state why. Try not mention my name or make any personal remarks

Mark Ward said...

In order to present an ANALYSIS of that disagreement I must refer to you and what you said.

No, you don't. You have Herndon's full paper are free to dispute his claims regarding the erroneous conclusion that high public debt does not consistently stifle economic growth. I agree with his conclusion. If you don't explain why with evidence.

You also have this...

http://markadelphia.blogspot.com/2012/04/who-will-take-that-first-step.html

And this...

http://markadelphia.blogspot.com/2013/03/fantasy-feedback-loop.html

And this...

http://markadelphia.blogspot.com/2013/03/anti-spending-anaphylactoids.html

That is more then enough for you to understand what my view is on this matter.

Your turn, GD.

Juris Imprudent said...

A couple years ago, I took a European History class for CE.

So, not even discussing economics. At least that puts it in the proper context.

Your metaphors are not economic reasoning no matter how poetic. You have no description of causation. You don't mention German reparations which triggered the European collapse, the Smoot-Hawley tarriffs in the U.S., the English return to the gold standard. None of it, but you are just so proud of your work, for CE credit, in a non-economics course. That is rather sad. Though it certainly is indicative of the rot at the core of the education system.

Mark Ward said...

So, not even discussing economics. At least that puts it in the proper context. Your metaphors are not economic reasoning no matter how poetic. You have no description of causation. You don't mention German reparations which triggered the European collapse, the Smoot-Hawley tarriffs in the U.S., the English return to the gold standard. None of it, but you are just so proud of your work, for CE credit, in a non-economics course. That is rather sad. Though it certainly is indicative of the rot at the core of the education system.

Try not mention my name or make any personal remarks

I guess that's just not possible, is it juris? Like I have been saying all along, you make a great critic and completely dodge doing any real work of your own. A list of a few terms from the time period is very low level Bloom's. In fact, you could have just pulled those off some web site...how do I know that YOU know what you are talking about?

Oh, and remember that I got an "A" in the economics class I took 27 years ago and the one I took recently. Just because you don't like the facts of economics and austerity doesn't mean they are "liberal."

Or that I am stupid:)

Anonymous said...

You have Herndon's full paper are free to dispute his claims regarding the erroneous conclusion that high public debt does not consistently stifle economic growth. I agree with his conclusion. If you don't explain why with evidence.


I am not arguing with Herndon. Hell I don't even disagree with "high public debt does not consistently stifle economic growth".

BUT...

You said "we've seen that austerity measures in Europe aren't working."

That does not sound like "high public debt does not consistently stifle economic growth". That does sounds like "we've seen that austerity measures in Europe aren't working."

Aren't working at what I'd like to ask - but YOU SAID we can't ask you to clarify your position. With that said I WILL HAVE TO ASSUME your position is consistent with your earlier positions. Which is 'we've seen that austerity measures in Europe aren't working...because they do not result in economic growth'


In which I disagreed - saying "austerity is not designed to create economic growth. Austerity is a solution designed to prevent or mitigate a sovereign debt crisis."

Thus, the measure of success for austerity IS NOT economic growth - but rather prevention of debt crisis.

In short - you are measuring success and failure using the wrong metric.

Mark Ward said...

but rather prevention of debt crisis.

At best, the debt crisis is a middle term problem. It is certainly not a short term problem and we've seen quite clearly that when you cut government spending in such a drastic way, you erode demand and, thus, growth. It's not the wrong metric at all because more growth means more revenue and less debt.

With the exception of Germany, many of the countries in Europe saw increased public debt to GDP from 2010 to 2011. I'll grant that the deficits have mildly improved but what has happened is GDP had not grown sufficiently to support a decline (improvement) in the debt-to-GDP ratio. Eurostat reported that the debt to GDP ratio for the 17 Euro area countries together was 70.1% in 2008, 79.9% in 2009, 85.3% in 2010, and 87.2% in 2011. Spending less hinders in more ways than just growth.

Thankfully, we have taken a more measured approach here and have not been hit as a hard by these problems. The first quarter of 2013 saw 2.5 percent growth of GDP. Why? Because we have not had the Draconian cuts that Europe has had and we have continued to spend money in such a way that the economy is improving. Some call for increased spending but I don't necessarily agree. True, our recovery has been slower likely due to this but you still do have to measure the feelings and perception about debt against the help that more spending would bring.

Juris Imprudent said...

A list of a few terms from the time period is very low level Bloom's.

Your shallowness and stupidity are not mine.

Since your one class is equal to my entire major - I can't wait for our next discussion of education. You won't be claiming that you have a deeper understanding of pedagogy just because you have a teaching degree, right?

You did not address a single causative factor of the Great Depression. Not one, not according to ANY economist (and there are different theories on the cause from different economists). You didn't go to any of them - just your own metaphors that had no explanatory value. Then you have the brass to accuse me of not offering anything. Why should I? You revel in your ignorance and reject any attempt to actually learn anything. It wouldn't be about you - except you insist on it being about you (and your paper in an irrelevant CE course).

Mark Ward said...

Since your one class is equal to my entire major

That really doesn't matter if you refuse to accept that John Maynard Keynes was right about many things. You may have a degree in the subject but your emotions get in the way of any sort of serious analysis. And that's also why you can't offer a non-Mark response to my assertions on the Great Depression.

Juris Imprudent said...

That really doesn't matter if you refuse to accept that John Maynard Keynes was right about many things.

Not all economists agree about that. So why should I? Because you have a boner for govt 'stimulus'?

Juris Imprudent said...

my assertions on the Great Depression.

You have no assertion, at least not in your 'paper'. Asserting that austerity was a cause is laughable. You have provided no evidence of correlation let alone causation. I provided three well documented causes - though there is debate about how much each factor played.

But you go right ahead defending your stupidity as though it is deep insight. It is pretty amusing.

Mark Ward said...

Actually, what I'm more likely to do is wait for an actual rebuttal from you as opposed to the usual jag...

Juris Imprudent said...

what I'm more likely to do

is ignore anything that you can't (or perhaps just won't) understand.

Anonymous said...

It's not the wrong metric at all because more growth means more revenue and less debt.


Less debt? As in a reduction of debt or less debt created?

Remember your Keynes, the other half of the equation that says one must pay the debt off during good economic times. If that was done then there would not be a debt crisis at all.

Instead, when the debt increases during good times and bad - then when (according to you and Keynes) the access to credit and loans is most needed - then you easily find yourself in a debt crisis.

You've heard how going bankrupt has been described - bankruptcy went slowly, then went fast.


The first quarter of 2013 saw 2.5 percent growth of GDP. Why?

Hah. What is the formula to calculate GDP? What happens to that calculation when you increase gov't spending? Does that calculation reflect a growth in the economy if the only increase within the formula is gov't spending?


But all this is beside the point. It doesn't change that the measure of success for austerity IS NOT ECONOMIC GROWTH. And you've said nothing here that disputes that.

You have, sorta, made an argument that austerity is the wrong step to take to create economic growth. Which, by the way, is still besides the point - because the measure of success for austerity IS NOT ECONOMIC GROWTH.

You have also, somewhat made the point that austerity is not needed given sufficient economic growth to eliminate the need for debt due to sufficient revenue.

This ignores that if the gov'ts that need to consider austerity did not create debt when SUFFICIENT REVENUE WAS AVAILABLE then they would not be in a position where they would have to consider austerity. In other words, they spent too much when times were good, they spent too much when times were bad - and you expect them to restrain spending in the future when times are good again? Laughable if it wasn't so widespread.