# How to End the Recession **URL:** \ **Category:** Great Debates\ **Created:** [October 4, 2011, 3:33am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518 "2011-10-04T03:33:59Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [October 6, 2011, 7:47pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/61 "2011-10-06T19:47:07Z")
> [@ReticulatingSplines](#): > > Well, ideally it helps bump us out of the economic trap we’re in, but paying off debt is just not the most productive use of stimulus funds. Imagine someone gets $10,000 of debt forgiven - they’re not going to turn around and put $10,000 in the economy in the next few months. They might put in $150 extra or whatever their loan payment was, but that’s such a poor return on each dollar of stimulus. I agree. Using stimulus money to put people back to work, on infrastructure projects, for example, is much more likely to increase consumption, and to some extent reduces unemployment payments and thus partially is a wash. I believe Bush handed out money in the last recession. I never got any (which I think made sense) but I don’t think it helped very much. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [October 6, 2011, 8:06pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/62 "2011-10-06T20:06:02Z")
> [@Fear\_Itself](#): > > Yes, you would, because you did: > If you want to retract that broad, ambiguous statement, fine. But then you are left with just parroting the “Government is Evil!” nonsense. Whatever, dude. Just keep making things up and pretending I said them. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 6, 2011, 8:39pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/63 "2011-10-06T20:39:27Z")
> [@smiling\_bandit](#): > > Whatever, dude. Just keep making things up and pretending I said them. I quoted you. Doesn’t get simpler than that. ---
**Author:** ![PhillyGuy](https://avatars.discourse-cdn.com/v4/letter/p/ed655f/32.png) [@PhillyGuy](https://boards.straightdope.com/u/PhillyGuy)\ **Post date:** [October 7, 2011, 1:08am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/64 "2011-10-07T01:08:02Z")
> [@Koxinga](#): > > Seriously, though: I’ve heard it said that in a recession, the economy has merely fallen down . . . whereas in a depression, it’s fallen and it can’t get up. Good post. The last US recession was in 2008-9. We are currently out of recession and in a worldwide depression. > [@sparky\_1](#): > > That is actually a very sound idea. I’m going to do my part by telling everyone I see o day that the economy is all better! You are joking, but this is true. The problem, though, is that proclaiming it to everyone you see will not do. You must convince most of the people in the world. Why is this board so US-centric? The so-far mostly mild world-wide depression was triggered by [an oil price spike.](http://www.voxeu.org/index.php?q=node/3664) This burst a housing bubble in a number of countries, notably the US. But just because a lot of the housing problem funneled through US-headquartered financial firms should not obscure the fact that the depression is worldwide. If we haven’t yet seen the worst of the depression, it is because of Euro-related problems no one in the US can control and which have worldwide ramifications. > [@Jackknifed\_Juggernaut](#): > > John Maynard Keynes already gave us the answer decades ago. And it worked! When the private sector isn’t spending or investing, it’s the government’s duty to spend and invest. You really got this from Keynes, or from Krugman? The problem here is that the international depression is liable to go so long that your policy preferences would run up a debt we could never pay down. Now, maybe we already can’t pay it down without some inflation, but your way – massive new debt – will burst the treasury bill price bubble and lead to ruinous inflation. I doubt it, but, just maybe, Krugman and Keynes, all the way from day one, would have worked. It was not fully tried, and will not be fully tried, because people in democracies reasonably feel that when households have to cut back, so should government. I wish I knew the solution the way I feel I know the problems. ---
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [October 7, 2011, 2:43am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/65 "2011-10-07T02:43:26Z")
> [@PhillyGuy](#): > > The so-far mostly mild world-wide depression was triggered by [an oil price spike.](http://www.voxeu.org/index.php?q=node/3664) This burst a housing bubble in a number of countries, notably the US. I hadn’t/haven’t read anything that said that, but it was my impression at the time. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [October 7, 2011, 12:31pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/66 "2011-10-07T12:31:06Z")
> [@smiling\_bandit](#): > > Good Lord, the sheer economic ignorance on display here sickens me. Indeed, and thanks for demonstrating this in your follow-up posts. No serious student of economics alive today believes that government cannot, at the very least, reduce the duration and severity of a recession. While I agree that poor fiscal and monetary policy decisions can have a detrimental impact, smart decisions can and do help the economy. The Austrian School of Economics has been proven to be a crock repeatly and the only “economists” that profess to still believe in it are right-wing shills. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [October 7, 2011, 1:20pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/67 "2011-10-07T13:20:41Z")
> [@Jackknifed\_Juggernaut](#): > > Indeed, and thanks for demonstrating this in your follow-up posts. No serious student of economics alive today believes that government cannot, at the very least, reduce the duration and severity of a recession. While I agree that poor fiscal and monetary policy decisions can have a detrimental impact, smart decisions can and do help the economy. And yet, the track record of being able to do this is rather… limited. Somehow, despite all the models and experience and brilliant economists, we’re succeeding more or less no better than blind chance. But hey, I suppose it’s all the right-wing shills just holdin’ ya back, right? > [@](#): > > The Austrian School of Economics has been proven to be a crock repeatly and the only “economists” that profess to still believe in it are right-wing shills. When someone tells me big cetagoricals like this, I sometimes begin to quesiton their objectivity. Sometimes. Just sometimes. Nope, not al the time, nosir. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [October 7, 2011, 4:36pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/68 "2011-10-07T16:36:35Z")
> [@smiling\_bandit](#): > > And yet, the track record of being able to do this is rather… limited… That’s like saying that my car can’t ride smoothly after you’ve slashed the tires and placed speed bumps all along the highway! First of all, you’re making a strawman argument. You’re essentially arguing that fiscal stimulus isn’t always implemented correctly, and not that it doesn’t work. In fact, you seem to acknowledge that it does work in some cases. So the real challenge for the government is to spend and invest wisely. The checks and balances that are inherent to our process (and necessary, in some ways) prevent this from occurring. The Republican Party of today has no interest in taking steps to improving the economy until after November 2012. Their only goal right now is to slash tires and install speed bumps. I suspect that you believe that the private sector is the optimal source of wealth creation, job creation and economic growth in general, through investing in their businesses. My question to you is, what’s the difference whether this is performed by the private sector or the public sector? Does it not have the exact same impact on the economy. Aren’t government spending and government investment also components of GDP (just as consumption and private investment are? In fact, the government (if given the adequate amount of resources and if forced to face a strict auditing process) actually invests and spends far more efficiently than private enterprise, and in a far more utilitarian manner. A Silicon Valley venture capital firm is lucky if 10% of its investments are successful. The government’s success rate is far greater. But the only stories you hear in the mainstream media are the rare Solyndra-like debacles. What we’re dealing with today is a problem sometimes called the paradox-of-thrift. It’s essentially a “tragedy of the commons”-type problem, which is usually the cause of all of society’s economic problems. In short, what’s good for an individual is bad for society, whether it’s an individual person, corporation or jurisdiction. For example, as an individual, it’s beneficial for me to save my money and spend less while the economy is slow. I hope that my discipline will someday allow me to be wealthier (on a relative basis versus others). But if everyone else thinks the same way, and behaves similarly to me, we will all be worse off and poorer. If others don’t buy things, then my company makes less money, pays me less money or, god forbid, lays me off. It’s also in my company’s best interest to spend and invest in a more-disciplined manner. The CFO will respond to a slowdown of the economy by reducing spending by cutting capital expenditures, R&D, advertising and jobs, in hopes that it improves the company’s capital structure in order to survive in the future. But when all companies do that, they all suffer and they are all worse off. In a recent meeting with my CFO, we agreed to cut capex, put R&D on hold and lay off some people. Why? Because our advertising revenues are down and our forecasts show a major slowdown in all revenues. Well, duh! This is because every other company is doing the same damn thing. And they’re all behaving perfectly rationally as individuals. That’s the problem! One can expand these problems to municipalities, counties and states. So how can we possibly fix this problem? We certainly can’t force these individuals and companies to spend and invest, can we? Well not directly. But we can tax them more and do the spending and investing for them. This is the job of the government. And the benefit is that the government can spend it on things that help everyone, and that type of spending is never in the best interests of individuals and corporations. The recent stimulus package was far too small to jump-start the economy. It was designed to fail. This way, the Dems could claim victory by getting it passed and showing the public that they’re trying, but also so that the Republicans can then follow-up by saying: “See? We told you it wouldn’t work!” And poor Bernanke gets caught in the middle of it all. Imagine what a boost to the economy it would be if the government decided to invest in our country’s infrastructure at this time: fixing the electrical grid, improving mass transit nationwide, fixing the highways and roads and clean-up the environment for an approximate $2 trillion would not only create jobs, facilitate consumption and jump-start the economy, but also make the country better for everyone. I suspect this will eventually happen, but not until we’ve taken several more economic falls and the people wisen up and vote for these things. As Churchill once said: “You can always count on Americans to do the right thing - after they’ve tried everything else.” ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [October 7, 2011, 5:02pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/69 "2011-10-07T17:02:31Z")
> [@](#): > > First of all, you’re making a strawman argument. You’re essentially arguing that fiscal stimulus isn’t always implemented correctly No, at no point did I say that. I am saying that human beings and governments as a practical matter don’t have the information and cannot have the information to properly act. I do assume that in theory, a properly motivated superhuman intellect with unlimited information and time could in fact do a superior job than any known human goverment or the free market. But claiming that angels can be angelic isn’t helpful. > [@](#): > > I suspect that you believe that the private sector is the optimal source of wealth creation, job creation and economic growth in general, through investing in their businesses. Not optimal; superior to the alternative. > [@](#): > > My question to you is, what’s the difference whether this is performed by the private sector or the public sector? Does it not have the exact same impact on the economy. Aren’t government spending and government investment also components of GDP (just as consumption and private investment are? However, you are making a huge fundamental mistake: confusing money with value. You are assuming a macroeconmic variable - that the government can invest X dollas, which would be the same as the private market investing X dollars. But it won’t. The one huge advanatge of the private market is greed, and the one minor advantage is limited resources. The private market has all kinda of people sitting there counting their dollars and trying to get more of them. As such, there’s a limit to what gets invested in, and it’s the things which offer the greatest possible returns, or which human knowledge estimates give the greatest possible funds. Government does not do that. It’s concerned with rules, formality, image, bureaucracy, accountability, and above all politics. There are reasons for all of thes, but they don’t maximize profit, and they don’t maximize wealth. Government investment will be done for political purposes. Which won’t, except if we’re absurdly lucky, maximize wealth. Compared to the private market, you can’t win doing this. Nor should the government be trying to maximize profit. > [@](#): > > The government’s success rate is far greater. Well, that’s a nice statement. In fact, it would suggest the government has an infinite money machine. Here’s a plan - go hire some of those government bureaucrats who are getting this huge . If you are correct, you shoudl be able beat the market handily and make a fortune for yourself while making the country wealthier and adding to the tax base for even more government investment. Win, win, win. I won’t really hold my breath, but if you succeed, I’ll glady be willing to try that in government. What about with numbers here? What investments? What’s “success?” > [@](#): > > It’s essentially a “tragedy of the commons”-type problem, which is usually the cause of all of society’s economic problems. That’s the Keynesian view. it hasn’t been very successful at predicting failures or creating recoveries. > [@](#): > > The recent stimulus package was far too small to jump-start the economy. It was designed to fail. This way, the Dems could claim victory by getting it passed and showing the public that they’re trying, but also so that the Republicans can then follow-up by saying: “See? We told you it wouldn’t work!” I should point out two things. First, this is certainly not true by the parties involved. I can assure you that Republicans, despite the fereved conspiracy dreams of citizens such as yourself, do not want the country to fail. Indeed, if we knew how to manage the economy, we could basically attain infinite wealth - any amount we desire over time. I don’t believe that’s possible, but if so it would be a new revolution in human affairs. Second, it’s unfalsifiable. You can always say it was too small. However, proponents of larger stimuli (or maybe, since this is not medicine, stimuluses), want improbably large amounts made available… funds that we may not even be able to borrow. And once borrowde, there’s a real question of whether or not it can be paid back, even if it were successful. I suspect crashing the government and destroying our financial picture would not actually help the economy. And if the unstoppable giant stimulus failed, then we’re screwed. However, I can refute it even better. A smaller stimulus shoudl still be able to have significant positive effects, yet this does not happen. According to the theories you propound, even a moderate stimulus should still have a noticably helpful impact. Yet, we didn’t see that. You see temporary boost which immediately vanish. Yes, you can make a dead body jump if you hit it with enough electricity, but you don’t change it into a live one with more current. Sir, you have accused me of using strawmen. I accuse you of completely unsupported statements that don’t make any coherent sense, and rely on large leaps of faith. I can point to information theory, which suggests that effective economic action by the government is unlikely at best, and numerous economists who gained their fame by studying macroecnomics. I can even point to Keynes, and the numerous ways he would have objected to your plans. ---
**Author:** ![Rune](https://avatars.discourse-cdn.com/v4/letter/r/e68b1a/32.png) [@Rune](https://boards.straightdope.com/u/Rune)\ **Post date:** [October 7, 2011, 5:09pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/70 "2011-10-07T17:09:54Z")
[May I suggest a dwarf tossing stimulus plan](http://www.heraldsun.com.au/news/breaking-news/bring-back-dwarf-tossing-to-provide-job-stimulus-says-us-politician-ritch-workman/story-e6frf7jx-1226160840458) ---
**Author:** ![Clothahump](https://avatars.discourse-cdn.com/v4/letter/c/51bf81/32.png) [@Clothahump](https://boards.straightdope.com/u/Clothahump)\ **Post date:** [October 7, 2011, 7:17pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/71 "2011-10-07T19:17:27Z")
> [@Euphonious\_Polemic](#): > > \*\*How to End the Recession \*\* > > Hope that American corporations stop thinking in the short term and rather look at the bigger picture. They’ll take some of the [record piles of cash on hand](http://online.wsj.com/article/SB10001424052748704312104575298652567988246.html) and use it to hire people on to deal with the [persistent high unemployment rate](http://www.tradingeconomics.com/united-states/unemployment-rate) They won’t do that because of the very first sentence in that article (emphasis mine): > [@](#): > > U.S. companies are holding more cash in the bank than at any point on record, **underscoring persistent worries about financial markets and about the sustainability of the economic recovery** Frankly, I think it would happen if the government would stop dicking around with stimulus and similar bullshit. Let the free market do what it is supposed to do. As it is, every time Obama opens his yap on TV, we can expect a 200+ point drop in the stock market in response to it. ---
**Author:** ![Mosier](https://avatars.discourse-cdn.com/v4/letter/m/7ea924/32.png) [@Mosier](https://boards.straightdope.com/u/Mosier)\ **Post date:** [October 7, 2011, 9:23pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/72 "2011-10-07T21:23:08Z")
> [@Clothahump](#): > > They won’t do that because of the very first sentence in that article (emphasis mine): > Frankly, I think it would happen if the government would stop dicking around with stimulus and similar bullshit. Let the free market do what it is supposed to do. As it is, every time Obama opens his yap on TV, we can expect a 200+ point drop in the stock market in response to it. Sure wish I could have a slice of that pile of “uncertainty” Obama has given to corporations. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 7, 2011, 9:54pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/73 "2011-10-07T21:54:57Z")
> [@Clothahump](#): > > Let the free market do what it is supposed to do. Foment violent revolution? ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [October 7, 2011, 10:44pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/74 "2011-10-07T22:44:50Z")
Step 1: negotiate trade with China. A tariff (up to 300% will be levied upon Chinese goods). This will be in effect until China buys as much from us as we from then-then reduce tariff to zero) Step 2: reinstate Glass-Stegall Step 3: convert USA national debt to consols (purpetual bonds), at fixed 3% interest Step 4: Reduce Federal employment by 5%/year until employee total is 25% of present Step 5: allow US post office to go bankrupt, reorganize with more efficient organization Step 6: remove US bases from Europe, halt Afghan War Step 7: 100% tariff on imported automobiles Step 8: end all foreign aid; any military intervention will be billed to government aided (e.g. no more “free patrolling” of Arabian Sea/ SA and other states will pay for the service) ---
**Author:** ![Mosier](https://avatars.discourse-cdn.com/v4/letter/m/7ea924/32.png) [@Mosier](https://boards.straightdope.com/u/Mosier)\ **Post date:** [October 8, 2011, 12:54am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/75 "2011-10-08T00:54:48Z")
> [@ralph124c](#): > > Step 1: negotiate trade with China. A tariff (up to 300% will be levied upon Chinese goods). This will be in effect until China buys as much from us as we from then-then reduce tariff to zero) > Step 2: reinstate Glass-Stegall > Step 3: convert USA national debt to consols (purpetual bonds), at fixed 3% interest > Step 4: Reduce Federal employment by 5%/year until employee total is 25% of present > Step 5: allow US post office to go bankrupt, reorganize with more efficient organization > Step 6: remove US bases from Europe, halt Afghan War > Step 7: 100% tariff on imported automobiles > Step 8: end all foreign aid; any military intervention will be billed to government aided (e.g. no more “free patrolling” of Arabian Sea/ SA and other states will pay for the service) I stopped reading at Step 1: Increase the cost of everything Americans buy by 300% ---
**Author:** ![PhillyGuy](https://avatars.discourse-cdn.com/v4/letter/p/ed655f/32.png) [@PhillyGuy](https://boards.straightdope.com/u/PhillyGuy)\ **Post date:** [October 8, 2011, 1:32am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/76 "2011-10-08T01:32:07Z")
> [@ralph124c](#): > > Step 1: negotiate trade with China. A tariff (up to 300% will be levied upon Chinese goods). . . . Some, not all, of this, sounds like India before the 1991 economic liberalization. It might have been unfair, but the word people tended to use in describing it was socialism. If your plan was adopted, the massive shortages of quality goods, and inflation, would quickly result in the party most associated with it being voted out of office. In its short-time life expectancy, it has similarities to prohibition, except instead of bathtub gin we’d have smuggled in electronics. I might also mention, in case anyone missed it, that your plan calls for a sovereign debt default, with bondholders being given, in lieu of their bonds, near-worthless equity. Three percent? That will be nothing after the hyperinflation from the 300 percent tariff. Two questions: 1. Why limit the massive tax increase to goods from China? What about Malaysia? What about Vietnam? And what about the fact that massive amounts of goods of Chinese origin would be given a quick final assembly elsewhere, or false flagged? 2. Are you thinking that all bondholders will be given the equity, or will there be some kind of exemption for low income/assets? If you plan to fully default all bondholders, stealing from the nation’s grandkids the savings bonds purchased for them by their grandparents, you do understand that your plan requires the government to first be replaced with a dictatorship, right? ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [October 8, 2011, 11:37pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/77 "2011-10-08T23:37:06Z")
> [@Bryan\_Ekers](#): > > Just handing out cash… silliness. One segment of the population ends up better off (i.e. the segment that pays down personal debt and/or invests the money wisely), while a larger segment will stay the same or get worse (i.e. the segment that just spends it and gets nothing lasting as a result). Wait a sec… you’re saying that if I burn all the cash on hookers and blow, instead of investing the money long-term… that would be a _bad_ thing? ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [October 12, 2011, 7:35am UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/78 "2011-10-12T07:35:04Z")
Krugman has 2 points up that explain exactly where the modern Keynesians are coming from. The [first](http://krugman.blogs.nytimes.com/2011/10/09/is-lmentary/) explains the IS-LM (investment-savings,liquidity-money) model and has an explanation of the model as it operates when the Fed has hit the lower bound on interest rates. The [second](http://krugman.blogs.nytimes.com/2011/10/11/why-believe-in-keynesian-models/) post explains the evidence in favor of this model. And really, we have multiple lines in favor of this version of IS-LM (Japan’s lost decade, the various policies tried during the '30s, the WWII economy, Sweden after it’s banking crisis, and most importantly, the US and the Eurozone since the 2008 financial crisis). For example, a few people in this thread have asserted that printing money will lead to rampant inflation. And there are a number of models under which that is true, and there are historical events that we can point to where that has actually happened. But, the US has printed a lot of money since 2008, and we didn’t see a corresponding increase in inflation. The version of IS-LM in Krugman’s post accurately predicted that we shouldn’t see a corresponding increase in inflation. So, if I have to choose between the “print money always = inflation” model and the IS-LM model, I’m going to go with IS-LM, because “print money always = inflation” is clearly not true under certain circumstances. And that model points us to the idea that stimulus will be beneficial, and you can even get a rough estimate of how much stimulus is necessary to push the economy out of recession. The main problem here, of course, is that ideally we would want China, the Eurozone, and the US to all engage in stimulus at the same time. That’s not going to happen. That’s (in part) why the Keynesian crowd is advocating necessary infrastructure projects, since those are things that have to be paid for anyway, it’s currently cheap to borrow to pay for them and that sort of stimulus will have to least likelihood of bleeding out to other countries. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [October 12, 2011, 12:01pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/79 "2011-10-12T12:01:00Z")
> [@BrightNShiny](#): > > For example, a few people in this thread have asserted that printing money will lead to rampant inflation. And there are a number of models under which that is true, and there are historical events that we can point to where that has actually happened. But, the US has printed a lot of money since 2008, and we didn’t see a corresponding increase in inflation. The version of IS-LM in Krugman’s post accurately predicted that we shouldn’t see a corresponding increase in inflation. So, if I have to choose between the “print money always = inflation” model and the IS-LM model, I’m going to go with IS-LM, because “print money always = inflation” is clearly not true under certain circumstances. And that model points us to the idea that stimulus will be beneficial, and you can even get a rough estimate of how much stimulus is necessary to push the economy out of recession. I’ve got nothing against IS-LM as interpreted by Krugman. My problem is IS-LM as interpreted by people who don’t know nearly as much about economics and monetary policy. They falsely interpret “monetary policy” as exclusively interest rate policy, and when the rates hit 0%, they throw up their hands and say monetary policy has “shot its wad” (to use Obama’s phrase as reported by Suskind). That simply is not true. Krugman knows this damn well, which is why he’s always careful to talk about the failure of _conventional_ monetary policy at the zero lower bound. IS-LM can show the effects of fiscal stimulus, but it does not have such an easy time of explaining the effects of higher NGDP/inflation expectations from more money. It’s a one period model and it doesn’t have any place for future expectations to fit in unless the person interpreting the model is [extremely clever](http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/07/an-upward-sloping-is-curve.html). Honestly, we don’t need more debt. Not from more spending projects, and not from an arbitrary tax holiday. I’m not opposed at all to good infrastructure investment, but as for the current output gap, more money could pick up the slack on its own. There is nothing special about zero percent, if the central bank has the big brass reproductive organs to do what needs to be done. They don’t. There is currently no will whatever to do the right thing. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [October 12, 2011, 1:49pm UTC](https://boards.straightdope.com/t/how-to-end-the-recession/598518/80 "2011-10-12T13:49:26Z")
> [@Hellestal](#): > > I’ve got nothing against IS-LM as interpreted by Krugman. My problem is IS-LM as interpreted by people who don’t know nearly as much about economics and monetary policy. I can’t tell if this is directed at me or not. > [@](#): > > They falsely interpret “monetary policy” as exclusively interest rate policy, and when the rates hit 0%, they throw up their hands and say monetary policy has “shot its wad” (to use Obama’s phrase as reported by Suskind). That simply is not true. Krugman knows this damn well, which is why he’s always careful to talk about the failure of _conventional_ monetary policy at the zero lower bound. IS-LM can show the effects of fiscal stimulus, but it does not have such an easy time of explaining the effects of higher NGDP/inflation expectations from more money. It’s a one period model and it doesn’t have any place for future expectations to fit in unless the person interpreting the model is [extremely clever](http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/07/an-upward-sloping-is-curve.html). I would be quite happy if the central banks could commit to unconventional monetary policy. But if they’re not going to do it, and we all know they’re not going to do it, then what tools are available? > [@](#): > > Honestly, we don’t need more debt. The question for me is what are the risks vs. the benefits of more debt. And at the level of debt/gdp that we have right now, I’m not just seeing huge risks for more debt. And if the debt is spent properly, we can see fairly significant short-term and long-term benefits to the economy. Of course, the risk is that it won’t be spent properly. [Previous page](https://boards.straightdope.com/t/how-to-end-the-recession/598518.md?page=3) [Next page](https://boards.straightdope.com/t/how-to-end-the-recession/598518.md?page=5)