Showing posts with label Great Depression. Show all posts
Showing posts with label Great Depression. Show all posts

Thursday, July 08, 2010

Hurry Up!! Hurry Up!!!

Most of you know that I'm a big fan of Paul Krugman, Nobel prize winning economist and professor at Princeton. For the most part, his take on economic health of our country is the same as mine.

But I have to disagree with him in one of his latest columns entitled The Third Depression. To be honest, his "sky is falling" theme which dominates this piece reminds me quite a bit of the Cult's insistence that they are going to be sent to re-education camps.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

How does he know what is going to happen? I know he is an expert but nearly all of the experts were way off the mark on all economic doings in the last two years.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

With only a small amount of the TARP money spent, why do we need to spend more money? Shouldn't we see what happens when all of it gets spent? The other issue that I'm wondering if Krugman is taking into account is where exactly the money is being spent. It seems to me Krugman is being pretty naive if he thinks that all of it is being spent to bolster our economy.

I guess I'm a little hesitant to accept more spending as the answer especially when it is backed up by such a "hurry up or we're all dead" meme. He is right about one thing, though. Completely going the other direction and embracing our inner Hoovers is also not the answer.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover...Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider...

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

I agree with this point. Comparing us to Greece is ridiculous as I have said before and cutting taxes is certainly not the answer although letting the cap gains tax cuts expire won't amount to much in the way of increased revenue...just less loss...though it will be nice to reverse this complete failure of an idea.

To me, Krugman seems over the top with his call for more spending. I agree that listening to the Cult on what to do about the economy is a very bad idea. That's what got us into this mess in the first place. But going spend happy isn't the solution either. In the final analysis, if people want less government involvement in the corporate world then it's really up to the private sector to unfuck themselves from their casino mentality and start practicing sound business again.

Given human nature, I'm not sure this can happen.