Yes, I understand that. My point is that if these countries do obtain a East Asia / Western Europe level of living they are going to be economically far more significant. Which to some degree is going to make the United States far less influential in comparison.
The current growth rates of the developing world is obviously not going to be sustainable once they have reached that point. But merely getting to that point, or even just closer to it, increases their economic muscle relative to the United States. Personally I think this is a good thing, as the implication of this not happening is that a large portion of the world population remains in poverty. I certainly wouldn’t want to condemn these people to poverty for the dubious benefit of the United States remaining king of the hill.
The package is a compilation of 130,000 reports. What do you expect ,they should all have been completely vetted already?
The unemployment rate is slowing down. I am not sure that means any thing at all. I think the program was misdirected. It should have gone to building infrastructure . We have more of the damn trickle down crap where the money lines the pockets of the wealthy. The banks are making token movements toward redoing mortgages or lending to small businesses. Job growth has been in small business the last couple decades. Industry has gleefully laid off workers and told their stock holders how smart they are.
The principal purpose of the stimulus was to close the output gap of the recession, in order to avoid getting stuck indefinitely in a macroeconomic equilibrium far below its potential output level. A stimulus is a large one-time cost, but getting stuck for years and years short of our potential is an extremely large opportunity cost which, worse, compounds year after year. The stimulus was large enough to halt the decline, but apparently not big enough to break the stagnant equilibrium.
Juicing the financial markets was to be a secondary result, following a turnaround in the economy. It was the principal purpose of the TARP and the other Federal Reserve loan programs, not the stimulus, to encourage the financial markets.
Changing gears:
Let’s be up front about this: The economic downturn that we were experiencing was just as severe for its first year as the Great Depression. We were completely on pace to have a repeat. (I’m fudging a bit here, but not much–the world situation was a little worse than the US situation in particular.) And yet instead of having a stimulus large enough to counter this output gap, we had a stimulus that was, in the eyes of many notable economists, too small.
We used a smaller-than-recommended stimulus to fight a bigger-than expected problem.
Their forecast came before the true severity of the downturn was realized.
Unfortunately, you’re right. This is what happened to Japan. But you’re right for the wrong reasons.
Japan, like us, went in with half-ass stimulus instead of going balls-out like we did during the militarization of WWII. We wouldn’t be having these problems if we’d started from the outset with a sufficiently large stimulus. Of course, I shouldn’t complain over much. Without the stimulus we had, we’d likely be looking at 12% unemployment or higher.
Oh. Of course. They’re just “rationalizing” their own opinions when they pointed out from the beginning that the stimulus was too small. Unlike the wise, benevolent, prescient Sam Stone, who’s not rationalizing his own opinions at all. He saw with eyes unclouded from the beginning. I understand now. They’re the ones who can’t do the counter-factual analysis. They should’ve been reading your posts here on the Dope all along to realize what the true counter-factual analysis actually is.
There have been a lot of threads on monetary policy lately, and you haven’t participated in all of them, so I’m going to point out this error one more time. I fervently hope you will remember it in the future. It will be quite unfortunate if you develop a sudden case of amnesia three weeks from now when you open yet another thread and drop this fallacy once again. I’m even going to put it in bold so the message sinks in.
We want to devalue the dollar right now. That’s the Fed’s goal (in addition to keeping the financial markets from dying). That’s their current purpose. They want to create some inflation. The faster we get away from this deflationary trap, the quicker we’ll be on the road to recovery. An expansionary monetary policy is, in fact, even more important than the stimulus. So when you blame deficits for devaluing the dollar, you are citing the cure as part of the disease. You are wrong to do so.
It does not matter if nominal interest rates rise a bit. An increase in inflation will, at first, decrease the real interest rate without touching the nominal rate, precisely because we’re in a liquidity trap right now. So an increase in nominal rates will itself be a sign of recovery.
You also had a post in the other thread that I didn’t have time to deal with several days ago, but is still worth addressing since it’s directly related to this topic:
With respect to the jargon you’re dropping, you have not the slightest clue what you’re talking about here.
The permanent income hypothesis does not deal directly with investment. It’s a hypothesis about consumption. It affects investment only by changing consumption, and therefore the pool of available savings left after consumers have consumed. That might sound like a mere pedantic point, but the error goes deeper than that.
The concerns from crowding out, and the concerns related to the permanent income hypothesis, are mutually exclusive. You have to make up your fucking mind. Or rather, you’d have to make up your mind if you actually realized that these are mutually exclusive choices, if you actually understood the economics that underlies the fancy words that you’re typing. Naturally, you don’t. You rush blindly in, without realizing that you’ve flatly contradicted yourself.
If you’re concerned about crowding out, then you are by definition not concerned about the permanent income hypothesis. If people change their consumption patterns in response to their perceptions of long-term income (as Milton Friedman suggested with the hypothesis), then they will naturally be saving more instead of consuming. And that additional savings will provide a buffer against crowding out. The permanent income hypothesis is related to Ricardian equivalence, the idea that there will be no crowding out from gummint spending. (This is to say that the stimulus is wasteful not because of crowding out, but because any increase in government spending will be offset by a decrease in consumption, which will defeat the pump-priming effect.)
If would be helpful to your credibility if you offered one argument that made sense, instead of two idiotic arguments that contradict each other. But of course, you could only do that if you approached the topic honestly for once, instead of rationalizing everything you read to fit your pet ideology.
This is what makes your posts so much worse than the average ignorant one-trick pony who leaves the thread after making an empty irrelevant comment about the broken window fallacy. It actually takes an education in economics to understand the sheer volume of horseshit you manage to mix into otherwise reasonable points.
The difference between you and me is that you see the economy from a theoretical/mathematical point of view, where a stimulus effect can be calculated with some math and a few rules.
I see the economy as being hundreds of millions of people cooperating with each other and constantly signalling their desires and abilities through the price system. Yes, you will get a certain result by injecting money into the system, and it can be reasonably predicted. What is not so easy to predict is what the damage to that finely tuned ecosystem will be because you’re administering electrical shocks to it.
In a pure Keynesian sense, yes you might get a multiplier and you might prevent some productive loss. But in real-world terms, especially over a longer time period than a year or two, you start to cook some real inefficiencies into the system. My own company has yanked people off of worthwhile projects and put them on new rapidly-concocted projects to chase stimulus money. Things get built that we don’t need, then have to be maintained and paid off after the recession is over.
Any time a better company loses to a worse company because the government distorted the market, we lose something valuable.
And the poorest part of the models is the reaction of small business owners to the added uncertainty and debt risk that is built up.
Did you read what I said? I didn’t draw any conclusion at all about whether they were doing it. I just consider it another data point. For all I know, such a survey makes your case - if a lot of former skeptics in the economic community are now believers, that means a lot.
I understand that. And this is exactly the policy that is making China and Germany nervous. Remember all that debt the U.S. has to sell and roll over next year? What makes you think the Fed or anyone else has a free hand in manipulating the dollar?
I understand this. The size of the debt is making this problematic, is the point.
You’re going to have to explain this further. The permanent income hypothesis is about a state of mind. It’s basically saying that people are smart enough to know that their consumption habits need to be set by their expectation of long-term income, not what they’re making today. And no, it won’t have much effect on their safe investments, which are part of their savings. But it will have an effect on tolerance for risk, such as investment in small business. For small businesses, the line between investment and consumption can be fairly blurry.
Okay, how about you explain the contradiction? Because I don’t get this part:
Crowding out is more than just a financial matter. It also occurs if a government agency decides to use stimulus money to employ from within instead of hiring the contractor that would have got the job. It occurs if a company is competing for the same worker with the government or another company, and stimulus money pulls the employee in its direction. Crowding out occurs if the stimulus does not go towards under-utilized resources. Resources include people, physical assets, location, etc.
Okay, I think I see what you’re saying here (didn’t need the history lesson, btw). You’re saying that if government investment does crowd out private investment, then by the permanent income hypothesis consumption will decline until an equilibrium is reached?
If so, then again, I’m talking about more than capital flow.
Yes, that’s Ricardian equivalence. And I’m aware of the criticisms that have been levied against it.
Or perhaps you could, you know, ask me to explain myself rather than descend into ad hominem attack and assumptions of bad faith.
And I hope you’ll speak up every time you see me do it. I don’t have a degree in economics, and it’s always possible that I’ll say something wrong, and I don’t mind being corrected if so. Just be specific about it.
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You seem to be confusing the various bailouts with the stimulus package. The GM/Chrysler bailout was more about preserving an industry than an effective way of keeping jobs - I don’t doubt that as a simple jobs package it would have to be considered very inefficient.
The stimulus package - much of which is targeted to improving infrastructure and being more environmentally efficient, is a different matter entirely. Have an opinion about what the OP asked. (And, BTW, the AIG bailout was not part of the stimulus package either.)
Well, that’s worth a Ph.D. in economics right there. :rolleyes:
Do you have even the slightest idea of what you are talking about? Do you think that people with a six month reprieve would start buying stuff? Do you think the people who run the mutual funds would start buying because the president said to? If they did, they’d probably be sued for incompetence at managing their funds, and quite rightly also.
The one time rebate checks didn’t work all that well, since consumers used it to pay down debt or for savings. Giving people jobs is much more likely to increase their spending than just giving them cash, and also directs the money to those who need it the most. Much as I’d like more money, giving me a rebate is not going to help the economy a heck of a lot.
Actually, he was just using more code words for “tax cuts”, of course.
I almost wonder what I should do about the psoriasis on my right index finger. If only there was something that could cure absolutely any and all problems…
But article doesn’t say the consensus is that the package is working, but rather the consensus is that it contained the correct mix of items.
In a football analogy, they agree that the run/pass ratio was very good. But that doesn’t say anything at all about if the plays actually worked. (if any yards or points were actually gained)
