The Fed has engaged in two rounds of quantitative easing and has lowered the discount (?) rate to nearly zero. The economy is growing, but rather reluctantly. Is this as much growth as could be hoped for, or are there policy decisions you feel the Fed should be making to stimulate the economy further?
Thanks,
Rob
To get this debate going, the first thing I would do to stimulate the economy is to show it some porn and give it a handjob.
Seriously though, the first thing I would do is eliminate the DEA and figure out a way to tap into the multi-billion dollar marijuana market.
The Fed doesn’t have anything to do with the DEA or drug enforcement.
Word. You’re right. I don’t know why I thought Fed meant Federal Government.
Another irrelevant comment is to eliminate huge political donations from anyone.
The way forward is not for the government to print money, but to spend money.
It is Congress which can spend money. (The President can unilaterally force spending in a few ways, e.g. by starting a war.) IMO, the reason the Federal Reserve is printing money, rather than spending it, is because that’s all the Fed can do unilaterally.
Don’t blame the Fed. Blame the fact that Congress lacks proper adult leadership.
Congress is spending a rather large amount of money now, is it not?
Which might stimulate the economy, but if so,only in the short run.
If by “spending money” you mean “extending tax cuts for the rich”, yes. But this is not too stimulative, indeed much of this wealth leaves the country seeking returns in growing economies, e.g. in Asia.
The question is, of course, is Congress spending enough money? But we needn’t take a crash course in economics to answer that question; we can listen to experts. Paul Krugman, a Nobel Prize-winning economist, has consistently answered “No” to that question. Others prefer to Google for “blogger Ron Paul Rothschild conspiracy” or some such. Take your pick.
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If by “spending money” you mean “extending tax cuts for the rich”, yes. But this is not too stimulative, indeed much of this wealth leaves the country seeking returns in growing economies, e.g. in Asia.
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Interesting. I must be ‘rich’ then, since IIRC my tax extension also got, er, extended. So did most people’s who pay taxes. If you have a cite however that only the ‘rich’ got such cut extensions, feel free to provide and fight ignorance, however.
Wasn’t his Nobel Prize related to trade? I mean, you should use his other creds if you are going to weigh him in wrt non-trade issues, instead of trying to toss around his Nobel Prize as if that ends the discussion, right? Wouldn’t want to try and do that appeal to authority thingy, right?
No doubt. It’s pretty cut and dried…either you agree with NOBEL PRIZE WINNING ECONOMIST AND ALL AROUND GOOD GUY PAUL KRUGMAN (and are thus on the side of all that is goodness and rightattude), or you are just a blogger conspiracy theorist who agrees with Ron Paul Rothschild and the like. Well, glad that was settled.
What’s for lunch?
-XT
You’re refuting a statement you pretend I made, not the one I did make. But here’s a homework assignment for you: Link to a table showing the breakdown in total value of Bush-era tax benefits by income level.
If you’d wanted to learn about Krugman, Wikipedia could have told you:
Since your approach seems to be to make caricature of others’ views, let me try it on you: You seem to be saying that the opinion of the “Ron Paul Rothschild” blogger is just as valid as Krugman’s because the Swedish Academy didn’t specifically mention macroeconomics.
Here’s a thought experiment that might help you: Who would you rather consult for a lung infection, a top-notch MD specializing in E-N-T, or Joe the Plumber?
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You’re refuting a statement you pretend I made, not the one I did make.RickJay
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Huh…I must have misunderstood your statement here then:
In response to this?
[QUOTE=RickJay]
Congress is spending a rather large amount of money now, is it not?
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Perhaps the words mean something different to you? They seem to me to be saying that ‘extending tax cuts for the rich’ is equivalent to Congress spending money. My own statement merely pointed out that ‘extending tax cuts for the rich’ actually extends to ‘pretty much all tax cuts for everyone have been extended, and perhaps this has something to do with Congress spending money as well’. YMMV of course, and perhaps your statement was actually in a language other than English, but LOOKED like English, thus my confusion.
And I’d want to do that why, exactly? It has what to do with my own point?
Yes…but that has what to do with his Nobel Prize? That he’s ranked high by ‘US economics professors’ is certainly interesting, but it has zero to do with the Nobel Prize he won. So, perhaps in the future you could, you know, say ‘Paul Krugman, top ranked for those under 60 by unspecified but obviously prestigious US economics professors’, instead of trying to pull out his Nobel Prize. Well, unless the discussion is about ‘trade theory, economic geography, and international finance’, in which case the appeal to authority you crave might actually have some merit in shutting down all opposition.
Why no…I was simply mocking your attempt to portray the situation as either accepting the word (in stone no doubt) of a Nobel Prize Winner™ (on ‘trade theory, economic geography, and international finance’ of course) or some idiotic blogger, and that this is an either or situation.
I’d rather buy straw on sale. Did you, or did you pay full retail price for it? If you shop around, you can usually get it a lot cheaper than that, so I’m just concerned about what you paid. It IS a nice construction though.
-XT
The Fed has bought only instruments with a guaranteed rate of return to date (Treasuries and agency MBS).
What if the Fed bought all housing at 40% LTV or less?
To absorb all housing at historic lows? (In bulk, of course).
As they give out a Nobel Prize in economics every year, could I find one who says the U.S. government shouldn’t spend more money? I can play the appeal to authority game, too. (I also wonder how many of the Krugman-quoting folk on the SDMB ever quote him when it comes to his positions on free trade and globalization.)
It’s interesting that you went straight to tax cuts, which, of course, has nothing to do with it; I asked if the U.S. government wasn’t spending a lot of money now, and you ducked the question. The answer, of course, is that the U.S. federal government is spending a rather staggering amount of money; spending went nuts during the Bush admininstration and hasn’t come down. Federal spending has been increased above inflation, a lot, over the last ten years. So in fact they’re doing exactly what you suggest.
I’d agree tax revenues should be increased to cover the current massive expenditures, but there’s a limit as to how far one can go with that.
The Fed should ditch its ridiculous, counterproductive inflation target and replace it with an NGDP path target. Expected growth of future NGDP should be much closer to the trend line it was following before the crisis in 2008.
That one policy, all by itself, would solve most of the economy’s short-run economic problems. We would then be left only with our much more serious long-run problems to solve.
This is not an important distinction. Both techniques result in the exact same effect: new funds circulate through the economy. The only difference is how the funds are initially injected into the system, and the cost of that injection.
The cost benefit calculation is fairly straightforward. Paying interest on debt is significantly more expensive than running a printing press – or pushing buttons on a computerized bank terminal. Making new money is cheaper and faster than borrowing money. Add to that another problem with fiscal spending, which is the Fed reaction. The positive effect from any additional borrowing by Congress can be offset entirely by a contractionary Fed. An independent central bank can tighten at will to counteract any and all stimulative spending from the legislature. Spending can theoretically work, sure, but in order for it to work, the monetary authority must agree to work along with the plan. They have ultimate veto power on any stimulus. Since the Fed needs to play along anyway, the solution might as well come from them in the first place.
The Fed is where to go on this. Money is still too tight right now, and they’re the ones with power to change that.
Krugman has admitted many times that monetary policy can do the trick if there’s a fundamental change in expectations. He advocates a higher inflation target (which would result in higher NGDP). He just thinks the Fed is too conservative to do the right thing on their own.
His idea is that the Fed is unwilling to do what’s necessary on their own, but they will allow Congress to do what’s necessary, and they won’t veto it, won’t yank back on the chain. His economic analysis is of course correct, but that’s an awful big political assumption, in my view. If the Fed isn’t willing to do the right thing in the first place, I don’t see why people are so confident that they’re going to allow anybody else to do the right thing either. They have the veto on any stimulus. If they’re going to veto their own efforts, why wouldn’t they veto Congress’s efforts, too?
The Fed is where it’s at. Focusing on Congress is likely to be a needless distraction.
I’m not going to answer you point by point. The fallacy in this one “complaint” is similar to the other fallacies in your post.
I did not say or intend to imply that Krugman’s opinion is correct because he won a Nobel Prize. Krugman’s opinion is correct, IMO, because he’s a smart guy, well reasoned … and makes arguments I understand and believe.
Am I allowed to mention his Nobel Prize without posting a long series of other credentials?
If I wrote “I like that red sportscar” would you insist that I like it only because it’s red? It might be reasonable to guess that I think of the redness favorably, but it would be a caricature to pretend to believe the redness is all I care about.
Clear?
You seem to disagree with Krugman. You write “could I find one who says the U.S. government shouldn’t spend more money?” I don’t know. Can you? Do you take your lead from credentialed economists? That seems a fair question here.
I’m not going to answer you point by point either, but I wonder about this.
I’ve already mentioned that some stimulus can easily be diverted overseas by investors, while domestic spending gets … well … spent domestically.
But even setting this obvious point aside, it seems naive to claim that fiscal and monetary stimulus have “the exact same effect.” So naive in fact that, pardon me, I’ll not deign to “refute” it. 
[QUOTE=septimus]
I did not say or intend to imply that Krugman’s opinion is correct because he won a Nobel Prize. Krugman’s opinion is correct, IMO, because he’s a smart guy, well reasoned … and makes arguments I understand and believe.
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Yet trotting out the fact that he is a Nobel Prize winner, while failing to point out that this is irrelevant to the discussion since his prize isn’t in the field he’s expounding on, is a way to appeal to authority.
You are, of course, free to do what you like. The Krugman is a Nobel Prize Winner card has been vastly overplayed, however, and it just annoys me sometimes. I don’t want to derail the thread for a pet peeve, however, and this side discussion probably isn’t relevant to what the OP is asking, so I’ll just let it go. You can do as you like.
You don’t seem to get the point, so, again, I’ll just let it go, with the hope you will go back and look at what I was saying and understand that this paragraph really isn’t in the same ball park.
Well, it is to me.
I’m not an economist of any stripe, nor do I play one on the Straight Dope. I’ll say that sometimes I agree with him, as far as my limited understanding goes, and sometimes I don’t, again within my own limitations wrt economics, which is a pretty wide and highly specialized field. I doubt that you really understand his deeper positions either (or understand the fact that he’s not an expert on every aspect of economics, but instead he has his own niche of expertise, along with a better than average understanding of the broader field, but that this doesn’t mean he knows all and sees all, even if he DOES have a Nobel Prize), based on some of the things you’ve said in this thread, and that if you did you wouldn’t just agree with him either.
Actually, I didn’t write that. I probably could find an expert in the field that says that government spending should be halted or cut. It says something that you don’t seem to believe this is the case, and that only crazy blogger types dispute this, however.
Well sure, but they are automatically trumped by the fact that Krugman is a Nobel Prize Winner, obviously. 
I suppose it is, if the only one you listen to is Krugman, and your opinion is that anyone disagreeing with him is obviously just a crazy blogger or other clueless nutball type.
-XT
I don’t want an interminable debate about nothing, but I’m going to hold up the mirror and hope you can see what impression your screed makes.
I wrote
You’ve devoted considerable effort to discounting the relevance of the Prize. Had I wrote “distinguished” instead of “Nobel Prize-winning” would that have been OK?
My sentence implies some respect for Krugman because of his Prize and I think that’s appropriate, but it’s absurd to pretend that my sentence implies the Prize confers infallibility. Obviously mentioning Krugman’s Prize is some kind of “hot button” for you, but IMO you’ve blown one almost-parenthetical adjective in my post way out of proportion here.
I’ll let it go. After commenting that you did exactly that which you “didn’t want to do.”
No. The “I like that red sports car” analogy was perfect.
In any event, the issue isn’t the Prize, it’s whether Krugman’s viewpoint is correct. You’ve spent at least ten short paragraphs complaining about my one mention of the Prize, without commenting on Krugman’s viewpoint, or mentioning a credentialed economist who shares your view, or, for that matter, even stating your own view. :smack:
This came in the same post as and after your
OK. Got it.
If I cite Krugman, that shows he’s the only one I listen to? Got it.
As for “crazy bloggers” and “clueless nutballs” I don’t know. You’ve made no clueless economic conclusions in this thread becuase you’ve offered no economic views at all. Zero. Your contribution is to complain that Krugman’s Prize was mentioned.
I think that pretty much sums it up.
Monetary policy can emulate fiscal policies in some ways under the requisite circumstances, but we’re well beyond the point at which that might have been true. Just look at the observed money multiplier - it has been less than unitary (one) for years now. Normally, that should be at least at a 2 or 3. This means that money injected by the fed is simply sitting in banks’ excess reserves - which is in fact the case. All that money that the fed has “printed”, has gone to buy securities from banks and from there, it has gone precisely nowhere.
I’m one of those who are less than thrilled that he is so conservative on unregulated trade but lately that’s not such an issue.