Ron Paul's Plan

[Strassia]

@WillFarnaby

Of course not, but this is a flawed analogy. You are assuming that the New Deal was “pumping water” out. It is well known what a water pump does. It is unknown what government stimulus does to an economy ( at least it is debated amongst several different schools of thought ). In fact I cited a poll earlier in the thread that says academic economists are split almost 50-50 on the issue.

Forget that you know how pumps work (I didn’t even tell you what kind of pumps they were). Would the situation described prove that the pumps did not work?

If you read that article you cite, you will see that the economists that think the New Deal made the depression worse are not talking about the spending programs. They are talking about price and wage fixing and anti business rhetoric. Those aren’t things any one in this thread is proposing.

ETA: Also note that U.S. exports in 1921 went up a lot from 1913, for the same reason they went up after WWII. The U.S. reaped a benefit from the fact that the war was fought somewhere else.

@WillFarnaby

I understand that. Makes sense to me when coupled with the fact that people accumulated large amounts of unspendable savings during the war.

It seems as though people in this thread are going to great pains to ignore my claims about the depression of 1920-21. After WWI spending was cut by more than half according to this chart.

There was no government stimulus required to get us out of that depression and it lasted only a year.

Try this chart (same site, just added a few years). Notice that government spending was double the pre-war levels.

[WillFarnaby]

@Strassia

Forget that you know how pumps work (I didn’t even tell you what kind of pumps they were). Would the situation described prove that the pumps did not work?

No I get what you’re saying. But it also doesn’t prove that the pumps worked. Natural forces (in this case the market) could be responsible.

@Strassia

If you read that article you cite, you will see that the economists that think the New Deal made the depression worse are not talking about the spending programs. They are talking about price and wage fixing and anti business rhetoric. Those aren’t things any one in this thread is proposing.

Were they not part of the New Deal? According to the article the programs you guys are giving credit to for ending the depression were meant as relief more than as recovery

@Strassia

Try this chart (same site, just added a few years). Notice that government spending was double the pre-war levels.

Oh no doubt. It still stands that spending was cut drastically afterwards. I’m just drawing a correlation between cuts in spending and subsequent periods of economic growth.

[Strassia]

@WillFarnaby

No I get what you’re saying. But it also doesn’t prove that the pumps worked. Natural forces (in this case the market) could be responsible.

Were they not part of the New Deal? According to the article the programs you guys are giving credit to for ending the depression were meant as relief more than as recovery

There is no hard line between relief and recovery. The whole point of Keynesian spending is to use government spending to pick up the slack. The more the spending gets others to spend, hire, and invest, the better, but the bottom line is to get people working and spending so the economy can grow to replace the government spending.

@WillFarnaby

Oh no doubt. It still stands that spending was cut drastically afterwards. I’m just drawing a correlation between cuts in spending and subsequent periods of economic growth.

Military spending is incredibly wasteful for economic purposes. Look at this chart. Most of the drop was in defense spending. If Keynes was right, you would expect a mild recession as the government pulls in military spending, but increases in exports and higher base government spending should pull the economy in short order. Which is what happened.

[Strassia]

I feel I should also point out that economies are complex (perhaps even chaotic) systems. Increases or decreases in government spending alone are not enough to tell what is going on. Case in point, if in 2004 the government had set out on a all out infrastructure spree on the New Deal scale it would have probably led to massive inflation as housing and building costs as well as general labor and raw material costs went through the roof. If the did it today, however, it might not even get us back to full employment.

No one is arguing that high government spending is always appropriate. What most rational individuals want is to increase spending when the economy slows and then pay down the debt to an optimal non-zero level when the economy is growing.

The problem is we didn’t do that. Instead during the boom we spent even more than ever, and then when the economy crashed we decided that is the time to bring down deficits. It would be like if I emptied my savings and ran up my cards while I had a good job, and then tried to pay down my debt as soon as I lost my job. That is not how it should work.

[Hentor_the_Barbarian]

Here’s some worthwhile discussion about the Depression of 1920-1921:

http://www.springerlink.com/content/5683j4v650187261/

A series of recent reviews of the depression of 1920–1921 by Austrian School and libertarian economists have argued that the downturn demonstrates the poverty of Keynesian policy recommendations. However, these writers misrepresent important characteristics of the 1920–1921 downturn, understating the actions of the Federal Reserve and overestimating the relevance of the Harding administration’s fiscal policy. They also engage a caricatured version of Keynesian theory and policy, which ignores Keynes’s views on the efficacy of nominal wage reductions and the preconditions for monetary and fiscal intervention. This paper argues that the government’s response to the 1920–1921 depression was consistent with Keynesian recommendations. It offers suggestions for when Austrian School and Keynesian economics share common ground and argues that the two schools come into conflict primarily in downturns where nominal interest rates are low and demand is depressed. Neither of these conditions held true in the 1920–1921 depression.

http://krugman.blogs.nytimes.com/2011/04/01/1921-and-all-that/

@Paul Krugman

Every once in a while I get comments and correspondence indicating that the right has found an unlikely economic hero: Warren Harding. The recovery from the 1920-21 recession supposedly demonstrates that deflation and hands-off monetary policy is the way to go. […]
Brad DeLong has recently written up a clearer version of a story I’ve been telling for a while (actually since before the 2008 crisis) — namely, that there’s a big difference between inflation-fighting recessions, in which the Fed squeezes to bring inflation down, then relaxes — and recessions brought on by overstretch in debt and investment. The former tend to be V-shaped, with a rapid recovery once the Fed relents; the latter tend to be slow, because it’s much harder to push private spending higher than to stop holding it down.

And the 1920-21 recession was basically an inflation-fighting recession — although the Fed was trying to bring the level of prices, rather than the rate of change, down. What you had was a postwar bulge in prices, which was then reversed:

http://delong.typepad.com/sdj/2011/04/paul-krugman-on-the-macroeconomics-of-warren-harding.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BradDelongsSemi-dailyJournal+(Brad+DeLong's+Semi-Daily+Journal)

@Brad Delong

Let me just add that the economy was way underleveraged at the peak in 1920: the real value of all the debts in the economy had been written down by half because of the World War I-era inflation. Hence the normal channel by which deflation reduces business cash flow so they can no longer repay their debts and leads to bankruptcy which leads to panic which leads to deeper depression was not operating in 1921-1923.

[septimus]

@WillFarnaby

http://money.usnews.com/money/business-economy/articles/2008/04/11/did-the-new-deal-work

My side lost 51-49 fwiw

Citing a popular website’s synopsis of a survey? Why not cite the actual survey itself. That would give us a more nuanced result than “My side lost 51-49 fwiw.”

[QUOTE=Whaples’ 1995 survey]

39. Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression.
    [ul][li] --------- Agree Partial Disagree[/li][li] Economists 27 22 51[/li][li] Historians 6 21 74[/li][/ul]
    [/QUOTE]

Yes, we see why someone rooting for “his side” could report this as
“49% of economists did not disagree with statement 39.”
But (giving equal weight to economists and historians for simplicity) we could report this instead as
Disagreement with statement 39 outnumbered agreement by a 125-to-33 margin.

Frankly, It seems to me that OP is choosing data selectively, and then “moving the goalposts” to retain his prejudice in the face of facts.

On the subject of Great Depression “workfare”, has anyone yet linked to James K. Galbraith’s useful summary.

OP states correctly that there is more to prosperity than employment or GDP. (That he explores this question no further may be because economic distress, inequality, and health care barriers are often cited as detrimental by those who do seek broader measures of “prosperity” or contentment.)

How the otherwise employed are put to work is indeed important, but I find it peculiar that OP deprecates the Depression workfare which
[QUOTE=Galbraith]
… planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.

It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
[/QUOTE]

If I were to deprecate the utility of workers, I might single out the thousands of health insurance workers who pay for their salaries by denying health care to the sick.

[Hentor_the_Barbarian]

@WillFarnaby

Of course not, but this is a flawed analogy. You are assuming that the New Deal was “pumping water” out. It is well known what a water pump does. It is unknown what government stimulus does to an economy ( at least it is debated amongst several different schools of thought ). In fact I cited a poll earlier in the thread that says academic economists are split almost 50-50 on the issue.

I understand that. Makes sense to me when coupled with the fact that people accumulated large amounts of unspendable savings during the war.

It seems as though people in this thread are going to great pains to ignore my claims about the depression of 1920-21. After WWI spending was cut by more than half according to this chart.

There was no government stimulus required to get us out of that depression and it lasted only a year.

Previously, you said that you would return to this topic after considering the new information you have gotten from this thread. Since you are back participating in a debate about the effects of the New Deal, can I take it that you have given due consideration to the new information you have gotten?

So, what was the result of your reconsideration? Have you revised your beliefs in any way?

[WillFarnaby]

@septimus

Citing a popular website’s synopsis of a survey? Why not cite the actual survey itself. That would give us a more nuanced result than “My side lost 51-49 fwiw.”

Yes, we see why someone rooting for “his side” could report this as
“49% of economists did not disagree with statement 39.”
But (giving equal weight to economists and historians for simplicity) we could report this instead as
Disagreement with statement 39 outnumbered agreement by a 125-to-33 margin.

Frankly, It seems to me that OP is choosing data selectively, and then “moving the goalposts” to retain his prejudice in the face of facts.

I appreciate the more nuanced view. I was not selectively choosing my facts. The other numbers weren’t mentioned expressly in the article.

Anyway. Regarding the historian poll, I believe the idolatry of FDR as a personality by that profession negates any credibility they might have had. History has more in common with literature than science.

@septimus

OP states correctly that there is more to prosperity than employment or GDP. (That he explores this question no further may be because economic distress, inequality, and health care barriers are often cited as detrimental by those who do seek broader measures of “prosperity” or contentment.)

How the otherwise employed are put to work is indeed important, but I find it peculiar that OP deprecates the Depression workfare which

If I were to deprecate the utility of workers, I might single out the thousands of health insurance workers who pay for their salaries by denying health care to the sick.

Well we’ll go down in the history books as a more recent Rome. All of those things are spectacular.
The issue is whether or not they got us out of the depression.

[septimus]

@WillFarnaby

I appreciate the more nuanced view. I was not selectively choosing my facts. The other numbers weren’t mentioned expressly in the article.

Anyway. Regarding the historian poll, I believe the idolatry of FDR as a personality by that profession negates any credibility they might have had. History has more in common with literature than science.

I debunked your stat and this is all you have to say? I am pretty sure that if the historian/economist bias were reversed in those stats you’d be talking about how historians “see the big picture” whereas “many of those economists are just Keynesians.”

That a 125-33 split reported in an academic paper can appear as a 51-49 split on an Internet summary should be a wake-up call to you about the variable quality of Internet information sources. We get right-wingers quoting gibberish from right-wing websites all the time, and claiming they found it with Google. Probably true, but they used the Google search string
“taxes on rich are too high liberals suck”

Qin, the bright (but misguided ;)) 10th-grader, admits it when his data is refuted. Will you?

[WillFarnaby]

@septimus

I debunked your stat and this is all you have to say? I am pretty sure that if the historian/economist bias were reversed in those stats you’d be talking about how historians “see the big picture” whereas “many of those economists are just Keynesians.”

That a 125-33 split reported in an academic paper can appear as a 51-49 split on an Internet summary should be a wake-up call to you about the variable quality of Internet information sources. We get right-wingers quoting gibberish from right-wing websites all the time, and claiming they found it with Google. Probably true, but they used the Google search string
“taxes on rich are too high liberals suck”

Qin, the bright (but misguided ;)) 10th-grader, admits it when his data is refuted. Will you?

I said economists. I told you my view on historians. Instead of addressing my cite of a poll of economists, you look up another piece of data.

I mentioned the poll in passing after i read it in the article I posted. Any amount of importance you place on it is your business.

It’s not like I was playing he big joker here. "take that. Less than half of economists agree with ME. "

[Hentor_the_Barbarian]

Is opinion polling really a good way to resolve empirical questions?

[KnightOwl]

In order for a currency to have any value, it has to be backed by something. The current U.S. dollar is backed up by the expectation that the U.S. economy will continue to flourish over time thus allowing us to pay the national debt. When the economic outlook sours enough, the price we pay on loans will increase, the Fed will print more money to pay those loans, aka inflating the currency so it worth less which will sour the economic outlook more… repeat, repeat… until we’re paying for a loaf of bread with a wheelbarrow full of money like the Germans after WWI …

or we can have currency backed by precious metals and periodic recessions which correct themselves. Hmmmm.

Put another way, it isn’t our fault a house of cards was built around us, but at least we can do something to stop adding new layers of cards increasing the imminent collapse.

[Finagle]

@KnightOwl

or we can have currency backed by precious metals and periodic recessions which correct themselves. Hmmmm.

What’s this fascination with precious metals? If we had a currency backed by gold and suddenly someone discovered an enormous untapped vein of gold that doubled the US reserves, would the economy suddenly be doing twice as well?

[Chronos]

Of course a currency must be backed by something. But any single thing you back it with is vulnerable to the fluctuations in that single thing (gold, for instance, varies wildly in value). So clearly, the best thing to back a currency with is everything. But in what proportions? Who decides that? Well, the best decider for economic questions is the free market, right? So let’s have a currency that’s backed by everything, in proportions as decided by the free market. That’s real libertarian money.

Oh, incidentally, guess how our monetary system actually works right now?

[Trinopus]

@Finagle

What’s this fascination with precious metals? If we had a currency backed by gold and suddenly someone discovered an enormous untapped vein of gold that doubled the US reserves, would the economy suddenly be doing twice as well?

Weird, huh? What if China suddenly discovers a vast new vein of ore? It turns economics into a lottery. It drops a huge fortune into the laps of places like Chile and Peru, and penalizes the hell out of Britain and France.

(Of course, oil production is also a lottery, but at least the damn stuff has some actual use.)

I think the real reason for gold fever is based on decades-old hatred for FDR. Heck, a group of industrialists tried to depose him over that issue!

[BrainGlutton]

@Chronos

Of course a currency must be backed by something. But any single thing you back it with is vulnerable to the fluctuations in that single thing (gold, for instance, varies wildly in value). So clearly, the best thing to back a currency with is everything. But in what proportions? Who decides that? Well, the best decider for economic questions is the free market, right? So let’s have a currency that’s backed by everything, in proportions as decided by the free market. That’s real libertarian money.

Oh, incidentally, guess how our monetary system actually works right now?

Now? Currency values and interest rates are manipulated by the International Jews of Zurich. That’s specified in the Treaty of Rome.

[Frank]

@KnightOwl

or we can have currency backed by precious metals and periodic recessions which correct themselves. Hmmmm.

This is the worst recession we have had in 70 years. Previously, while using currency based on precious metals, serious recessions and depressions occurred every twenty years or so. Hmmmm.

You can drive around Colorado at random and find any number of former cities whose economy was based on precious metals.