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Let's do the math.
Since the recession began, the U.S. economy has lost 6 ½ million jobs - and as that grim employment report confirmed, it's continuing to lose jobs at a rapid pace. Once you take into account the 100,000-plus new jobs that we need each month just to keep up with a growing population, we're about 8 ½ million jobs in the hole.
And the deeper the hole gets, the harder it will be to dig ourselves out. The job figures weren't the only bad news in Thursday's report, which also showed wages stalling and possibly on the verge of outright decline. That's a recipe for a descent into Japanese-style deflation, which is very difficult to reverse. Lost decade, anyone?
Wait - there's more bad news: the fiscal crisis of the states. Unlike the federal government, states are required to run balanced budgets. And faced with a sharp drop in revenue, most states are preparing savage budget cuts, many of them at the expense of the most vulnerable. Aside from directly creating a great deal of misery, these cuts will depress the economy even further.
So what do we have to counter this scary prospect? We have the Obama stimulus plan, which aims to create 3 ½ million jobs by late next year. That's much better than nothing, but it's not remotely enough. And there doesn't seem to be much else going on. Do you remember the administration's plan to sharply reduce the rate of foreclosures, or its plan to get the banks lending again by taking toxic assets off their balance sheets? Neither do I.
All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren't aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.
So have we failed to learn from history, and are we, therefore, doomed to repeat it? Not necessarily - but it's up to the president and his economic team to ensure that things are different this time. President Obama and his officials need to ramp up their efforts, starting with a plan to make the stimulus bigger.
Just to be clear, I'm well aware of how difficult it will be to get such a plan enacted.
There won't be any cooperation from Republican leaders, who have settled on a strategy of total opposition, unconstrained by facts or logic. Indeed, these leaders responded to the latest job numbers by proclaiming the failure of the Obama economic plan. That's ludicrous, of course. The administration warned from the beginning that it would be several quarters before the plan had any major positive effects. But that didn't stop the chairman of the Republican Study Committee from issuing a statement demanding: "Where are the jobs?"
It's also not clear whether the administration will get much help from Senate "centrists," who partially eviscerated the original stimulus plan by demanding cuts in aid to state and local governments - aid that, as we're now seeing, was desperately needed. I'd like to think that some of these centrists are feeling remorse, but if they are, I haven't seen any evidence to that effect.
And as an economist, I'd add that many members of my profession are playing a distinctly unhelpful role.
It has been a rude shock to see so many economists with good reputations recycling old fallacies - like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment - and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.)
Also, as in the 1930s, the opponents of action are peddling scare stories about inflation even as deflation looms.
So getting another round of stimulus will be difficult. But it's essential.
Obama administration economists understand the stakes. Indeed, just a few weeks ago, Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the "lessons of 1937" - the year that F.D.R. gave in to the deficit and inflation hawks, with disastrous consequences both for the economy and for his political agenda.
What I don't know is whether the administration has faced up to the inadequacy of what it has done so far.
So here's my message to the president: You need to get both your economic team and your political people working on additional stimulus, now. Because if you don't, you'll soon be facing your own personal 1937.
56 Comments so far
Show AllJust wanna say - great thread - wish Krugman could get NYT to print the comments for a less informed public to respond to. Matt Taibbi's Rolling Stone piece on Goldman-Sachs and the Great American Bubble Machine illustrates how screwed we are. If even one or two ideas here would be made law, the rest could start to flow. Enough prople are lots more mad than depressed, that is for sure. For a minute I thought that Arnold would HAVE to legalize pot. Alas, no, CA has hit the iceberg. Privatization anyone?
Currently the federal government borrows 50% of the money it spends. If it just borrows 100% of the money then it can reduce taxes to zero. That should "simulate" the economy.
government borrows or prints money to give to the rich
that shrinks the economy
give the same money to regular people and yes that will stimulate the economy
and by the way edpell
you don't have a clue about economics, you just think you do
Mr. Krugman,
In Psychology the term "depression" is defined as aggression turned inward. Although you are an economist, I suggest you consider a new name for this "greater depression" we are clearly entering; This will be known ans "THE GREAT AGRESSION". Anger ain't goin' ta turn inward this time. I have been reading comments from both the left, right and whatever on the internet for 14 years. I have never seen people so spitting mad. They realize that Patrick Henry was not making a rhetorical statement when he said, "Give me liberty or give me death". You and your corporate chronies offer us death. We'll see you later.
AGG
threatening people are we??
what krugman is saying is that economics truly is a science....... and that most economists don't understand their own science
redistributing the wealth in the opposite way george bush did (he redistributed the wealth to the wealthly)
redistributing it to regular people, or calling giving everyone their fair share....... is the only way to get the economy going again
this is mathematically and scientifically proven,
the fact that pseudoscientists like milton friedman, and fox news financial analysts don't have a clue about the real science of economics has confounded people like yourself into believing it is all bs
to the point where you believe krugman is a corporate crony........ krugman is no corporate crony
Time to remember the "Other History". That's the one that says:
"Master never needed a consumer society for Master to rule with impunity."
"A literate middle class with leisure time is the arch-Enemy of every Ruling Class that has ever existed. Literate people with leisure can become informed. Informed people with leisure want to participate in the decisions affecting their lives and the lives of their children. Cannot be allowed in any Authoritarian Patriarchy ruled by feral patrician clans."
BHO is merely the most recent Overseer of Master's Roman Slave Republic with nukes. Overseer got only two jobs: Steam shovel all the wealth of the nation into the hands of the top 1% AND degrade and debase the plebs into compliance, conformity, and obedience...
"Barack is doin' a GREAT job, for Master." Wouldn't you say...?
The implied became predictable then inevitable because unquestioned values have always been the drivers. White people like being degraded, it reinforces their core programming..."Yes Master. I live to serve you Master." Positively kinky. Fortunately, this is a non viable life form and will self-terminate shortly.
Regrettably, the analogy of the 30's is inappropriate. The proper one I think is China after it lost the opium war with the Brits. China was then carved up and raped to death by the "Great Powers". We lost the war with the Oligarchy. Those who reject White Male Supremacy, Gender Slavery, The Rights of Conquest, and Feral Oligarchy - Lost. In fact they got creamed. Never had a chance. Without those core drivers White People have no identity at all and react with hysterical violence. Non viable life form. Sorreeee...wasn't what I wanted but it WAS what White America demanded - demanded a flat earth, racialized patriarchal state where they were loved and well treated by Master and everybody else is Excluded - and if Master needed to eat some humans to restore their hegemony, well, we just looked the other way while Master fed...didn't we, as a people, as a nation, as an empire...and we gave ourselves collective amnesia for the single most salient descriptor of every richfilth animal that has ever existed: "Master DOESN'T share." Like I said, non viable life form.
Peece
The new technology of the 1930's greatly improved our quality of life and was widely supported economic expansion. Much of today's new technology is frivolous, wasteful consumption. Today, our economy will not benefit from new technology that allows the continuation and increase of wasteful consumption.
The world's most damaging and most unsustainable technology today is the automobile, followed closely by other forms of motorized transport -- air travel, oceanic shipping, trucking, RVs, etc. The economies of tomorrow must be designed to significantly reduce motorized travel and transport.
Begining from this standpoint, the economic potential is boundless, job creation in every field is in the tens of millions, wholesale environmental restoration looks promising.
This is not to say motorized will become obsolete; only that our amount of travel and transport and use of heavy machinery must be reduced by at least half, and the remainder made more efficient with hybrid electric road vehicles and rail transit.
It kinda makes you wonder why GM is cancelling Saturn 'hybrids' and promoting 'range extender' Chevy Volt aimed solely at the luxury market; and why GM spent so much time and money developing hydrogen fuel cell, a technology also too expensive and impractical to implement wholesale. The term 'Planned Obsolescence' comes to mind...
All it would take for the few Repugnicans out there with integrity to be convinced of the need for more direct economic aid to hurting families now, as in the economic collapse of the 1920's(farmers) and 1930's, would be for them to consult the common council minutes of their local jurisdictions for the years 1916 through 1936. See the blowhard, judgmental types of those times knew poverty existed because some people enjoyed their hard ships and chose to make themselves and their children suffer. So it served those ne'er do wells right. "They should have played it smart and saved those pennies they never had so they'd have something put aside for the rainy day."
"Prosperity is just around the corner, so we don't need to make sure there are bathroom facilities available in the parks" of towns that would be hit with waves of transient families camping overnight by the creek before leaving in the morning to seek work; the untreated sewage of so many people that exceeded the local population of the town, led to typhus outbreaks. Typhus didn't discriminate between the townies, migrants, rich, poor, employed or unemployed. Whoops.
"We'll sit on our hands and blame the victims of capitalism for all of our woes" until 12 or so years later we realize that it's true...."sometimes circumstances overwhelm the best efforts of ...I,me,me, mine." Lo and behold, even the landlords and business owners started falling like dominoes. Then the aldermen couldn't get things revved up fast enough to suit themselves. After they had increased the pain of the already suffering by rejecting pleas for assistance in the decade prior to 1933. By starting in the notes of 1916, one gets a feel for each politician's initial dogma and can see the progression from robber baron pure free market laissez-faire government to the realization that this time the economy wasn't going to fix itself and better to keep half a capitalist loaf than to see it all crumble without the concessions they were loath to make.
If folks read the actual words of their grandparents and great-grandparents who served as alderpersons or those who appeared before them at Council meetings then and saw those pure capitalists converting to social safety net participants and the hurdles to thinking, planning and funding the county health departments, banks, public works had to overcome to save themselves, their families and communities, they'd never forgive Nixon,Ronnie Ray-gun, the Freidmanites, the Rockefellers Tommy Thompson and Bill Clinton for dismantling it so thoroughly after LBJ left office.
siouxrose- right again. why do people spend 5-10 mil. for a
job that pays 170 180 k a year.look up the definition
of politican in a dictionary. very unflattering at best.
why do people spend 5-10 mil. for a
job that pays 170 180 k a year.look up the definition
of politician in a dictionary. (tell the truth )
I can answer that.... They have this need to serve the people of the United States. (Sarcasm intended)
Look let's legalize and tax marijuna and other recreational drugs, prostitution, and gambling for any state that wants them. Have national 50/50 held on April 16th. open only to taxpayers. Lets take all that surplus military hardware and hold a giant garage sale then with whatever we have left over we can use to bomb whoever bought the stuff. lf we are going to use the Whitehouse as a B&B at least use the money to pay down the national debt. Allow politicians to sell their vote just tax them on it. Maybe the right is on to something, we have to think like business people.
Good plan. Portugal decriminalized all drugs and use has actually dropped.
Michael Hudson is pushing to shift the tax burden to unearned income like land tax and capital gains, let's get behind that.
Pssst, Mr. Krugman, I have news for you. Stimulating the economy will not save your beloved capitalist system. The shit has hit the fan. After decades of increasing the gap between the rich and the working class, the latter are left penniless and in massive unsustainable debt. They can no longer prop up the capitalist class and purchase the goods that the capitalist class is trying to sell them. What is needed is a whole new vision for the world economy and that means an end to monopoly capitalism and a new 21st Century Socialism.
A nation that succumbs to Jacksonitis at a time when "official" unemployment shoots towards the 10% level is doomed to suffer many years of economic depression.
Sioux Rose
You know, at the risk of sounding crude, a stimulus ain't much of a stimulus unless it aims at the right places! The so-called stimulus is to getting that great economic climax what tickling a toe is to good sex. (Sorry if I offend any foot fetish types.) The money went to the banks and the military and the insurance companies are lined up for their next cut. Stimulus? Why don't we just call it what it is, organized crime in high places. As if that sort of stimulus will work. No one needs a degree in economics to see that all the wrong outlets have been "treated," and the wronger they are (and have proven), the greater their treats. This scam will go down in history, IF there is any history left to record it. Maybe Obama believes in End Times, too; and he's just partying on the Titanic, glad that his name accompanied the final phase of the human drama, as much as Bush lent his to "liberating" the cradle of civilization, and ensuring it would start over only if it could overcome a cycle of nearly unparalleled barbarism.
Yes. It's not just a matter of more; it's a matter of where.
I actually do remember the administrations former promises, and while I'm not shocked at the betrayal, I think we're all going to get a reminder of them when the bill comes due.
The problem -- a problem, at least -- is that the folks who claim to be bailing out the boat are crawling up to the Captain's quarters and locking the doors behind them while the galley splits.
I don't think the bail-out was ever referred to as a stimulus- there were two separate programs. It was quite openly a kleptocratic-looting of the treasury. Michael Hudson was on the ball right from the start but even the progressive economists seem to ignore him. If there was a united front of progressive economists, capitalism never would've gone this far- 70% vote Democrat ( http://www.ingentaconnect.com/content/klu/puch/2006/00000126/F0020003/00007509 ) but you never see any petitions. The right-wing just say it was the borrowers' fault so it's back to business as usual.
And quite frankly, I was a little offended.
Soux Rose,
"organized crime in high places"
Exactly. Krugman's premise that Obama wants to "fix" the economy is correct if you know what the "fix" means to President Rahm and Government Sachs chronies. Oh yeah, they want it fixed and they are going to keep making sure the fix is in. The Chicago school of economics has always been about impoverishing more and more people in order to concentrate wealth and resources at the top. When you understand the real agenda, it's nauseatingly predictable to watch the crocodile tears and talk of "mistakes" and a new stimulus. I think Krugman is going to get noisier as this gets worse. He gets it. He's just playing footsie for now. He will change his tune when the enormity of how we are being raped dawns on him.
"...8 1/2 million jobs..."
Once again, PK - like all of his brethren - tell us what we already know without suggesting how such a thing could possible occur.
A second 'stimulus' will create MILLIONS of jobs... how again?
Will it magically recreate our lost-4-ever industrial/manufacturing sector? Aside from that, what nearly 10 million jobs is PK dreaming about?
Here's your answer: PK knows there are no jobs to create, but he simply can't get himself to spit out the truth.
The real question he, and the rest of us need to be resolving is this: jobs are not coming back. So, what's Plan B?
Were there no jobs to create, that would be because we all had what we needed. It has nothing to do with recreating anything.
So that makes no sense.
We don't need manufacture - or not a lot of it or the manufacture we had. We need conversion: education and services and a shorter work week.
You could help to regenerate the manufacturing sector with a massive public works program, beginning with a commitment to create a national high-speed rail system to rival Europe's or China's, along with regional and local mass-transit upgrades. This would create hundreds of thousands of nonexportable jobs--millions with the multiplier effect--and help to combat global warming. Obama made a small start on this, but, as usual, it's not nearly adequate.
No jobs to create?
Mass production of renewable energy? Solar? Wind turbines? Geothermal? A new, decentralized electrical grid for the 21st century? High-speed rail systems nationwide? Mass-produced electric cars? Energy-efficient housing, both retrofitted as well as new? More schools so class loads are smaller, facilitating learning? (I taught for 32 years and smaller class sizes alone would make a huge difference0 More teachers trained and hired? Repaired and rebuilt infrastructure?
A true DEFENSE budget (instead of the obscenely huge WARS FOR EMPIRE budget we now have) forcing economic conversion to a truly unmilitarized economy?
Unless such jobs (and others) are created and our wealth is more fairly re-distributed, our country will be ripe for a popular revolt in the not too distant future because people all over it are getting sick and tired of the looting class and their corporations and Corporate Tools in Congress getting more while the rest of us get screwed.
Of course. And don't think that congress and the administration don't know this. They just don't want to do it because the Chicago school of economics plan is to make the USA competitive with other countries by having the same kind of low wage slaves that China has. Everything else is a smoke screen.
Sioux Rose
ED: Exactly! I could not agree more! How to make the "leaders" get it? Since it's their future and the future of their children/grandchildren at stake, too!
I think the leaders do "get it" and think of their future. That is the future of themselves and their heirs.
They try to ingratiate themselves with the elite and the Corporations so that THEIR own futures are assured.
They could not care less about anybody else. As far as they are concerned the Class war has been won long ago and the Corporatists and moneyed elite have won therefore they are going to make sure they are on the winning side.
As far as they are concerned it better to be a house slave then a field slave and the leavings off the masters table will be a heck of a lot better then what everyone else gets.
In the time of Peter the Great, the most loyal supporters of the Czar were the hangers on. These the folk that hung around the court hoping that They would catch the eye of the Czar due to their loyalty. If they did catch his eye they would be elevated to positions of power, often given grants of land thus ensuring the future of their family.
Its the SAME old game. They could not care less about the serfs even if their family might of once been serfs.
There's plenty of money in the Pentagon budget. Enough to provide all the jobs needed to fix our decaying infrastructure and build high speed trains and green alternative energy.
What's missing is the political courage to revise this priority that eats up half our GDP. Politicians won't act on it until money is taken out of politics or when the entire capitalist system collapses and consumes itself.
I heard Chomsky on Democracy Now today. He stated that the US spends more on their militaty budget than the rest of the world combined...8 times more than China. Disgusting !!
According to wikipedia, military expendatures account for 5% of GDP on military budget. Is this figure not calculated in a meaningful way? Here is the link:
http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
"Where are the jobs?"
- the opportunities are out there. americans just need to be more creative....
Brother, Can You Spare a Dime
They used to tell me I was building a dream, and so I followed the mob, When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead, Why should I be standing in line, just waiting for bread?
Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Why don't you remember, I'm your pal? Buddy, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Say, don't you remember, I'm your pal? Buddy, can you spare a dime?
-lyrics Yip Harburg / music Jay Gorney (1931).
...peace...
...continued....
meanwhile across town (where the recipients of tarp live), the radios may be playing...
"We're in the Money,"
We're in the money, we're in the money;
We've got a lot of what it takes to get along!
We're in the money, that sky is sunny,
Old Man Depression you are through, you done us wrong.
We never see a headline about breadlines today.
And when we see the landlord we can look that guy right in the eye
We're in the money, come on, my honey,
Let's lend it, spend it, send it rolling along!
Oh, yes we're in the money, you bet we're in the money,
We've got a lot of what it takes to get along!
Let's go we're in the money, Look up the skies are sunny,
Old Man Depression you are through, you done us wrong.
We never see a headline about breadlines today.
And when we see the landlord we can look that guy right in the eye
We're in the money, come on, my honey,
Let's lend it, spend it, send it rolling along!
-- lyrics Al Dubin / music Harry Warren (from the film Gold Diggers of 1933, 1933)
...peace...
Someday Krugs is going to get it: you can circulate all the debt in the world to these crapholes but they're not going to increase jobs in the US for crying out loud.
Keynes assumed industrial expansion and growth were seen as what creates capital and profit. that is clearly no longer the case.
if these jokers create jobs, it'll be in sweatshops. if they don't, they'll sit on the cash or play wall st roulete for higher returns.
that money will not get to us. it was never going to get to us.
krugman, go into the light!!!!!
As far as I can tell Cygnus-X1-isaHole below probably offers the best advice of the lot. But in American we no longer have agreement on hardly anything. In other words, there is no agreement on any value system, so how are we going to arrive at workable solutions? We no longer even agree that the Constitution is worth saving. The leadership of both parties are intent on trashing it, many without any sense of guilt or remorse.
Intellectual integrity, the rule of law, and simply telling the honest truth as we in our hearts believe it, are not values that are generally respected anymore. Maybe they never were. I just thought they were because I respected them and assumed that others did too. But now that seems to have been my illusion... so apparantly, most of my life, I was living in a dream world. At the same time, I find some folks on the internet able to inspire me enough that I think of them almost as family, even though I never met them and have no idea where they live or who they are beyond what they express and share.
Scattered across the country are people who think like I do, but I think it's probably a small minority. Very sad.
A total collapse of our economy probably would be good for the world in the long run. There would be so much suffering that one can hardly imagine it, but at least we would have to stop bombing and cheating the rest of the world's inhabitants and many of our own people in order to maintain our own decadent lifestyle. So much of what we buy and how we spend our time is pure foolishness.
Somehow we never quite learned the value of serving others, we just want, want, want... without thinking how it affects the rest of humanity or our own souls. I don't know what it will take for human culture to reach for what is possible and decent rather than be motivated by greed that, as we now see, eventually leads nowhere.
The laws of nature and physics are immutable. We ignore them at our own peril.
http://www.gpln.com/citizen.htm
.
The problem we have now is Reagan's Alzheimer's economics. Giving all the money to the very few in the vain hopes that they will piss it down on you is just plain foolish, and suicidal on a national level. Not to mention that if you know ANY history at all, you know that is is a recipe for economic destruction. I knew it back when Reagan started it, and I'm a trained musician, not any kind of economist.
What we need is a return to trickle UP economics. Constructing a building from the top down NEVER works, but building one from the ground up tends to provide a house that stands. Without a solid foundation, the middle class, you can't have a solid economy.
Without SOMEONE spending, in this case, the gov't, since private business isn't doing it, you have NO economy. The people have no more money, small business is going broke, and big business is too busy moving all our jobs overseas to do it. Big business has been so short sighted to understand that if WE have no money, there is no market here at all, let alone their obsessively worshiped "free market". They have killed not only the golden calf, but the whole herd.
I love how the republicans want to know where the jobs are, seeing is how it was THEIR policies that drove them all out of the country. This will be worse than the 30's. Back then we still had factories and places that we COULD work. Now, all our factories have been sent over to China and our jobs are there and in India. We will have to rebuild those facilities just to be back to where we were in the 30's.
Anyone else see a correlation between the rise of India's and China's economies while ours has collapsed? We sent our economy THERE. Just incredible. If this had happened under democratic "leadership", people would be in jail right now over it. Under republican "leadership", it's just business. Funny, that sounds like the Godfather. "Nothing personal, it's just business".
"Back then we still had factories and places that we COULD work. Now, all our factories have been sent over to China and our jobs are there and in India. We will have to rebuild those facilities just to be back to where we were in the 30's.
Anyone else see a correlation between the rise of India's and China's economies while ours has collapsed? We sent our economy THERE. Just incredible."
This is too simplistic. Did the US also send its economy to Brazil, whose economy is thriving? The Brazilian economy is considered by quite a few economists to be an economy that is going to be the least affected by the current crash, and the first out of it. The financial industry and the banks in Brazil are very tightly regulated. Did the US also send its economy to Indonesia, whose economy has been thriving since the dead hand of the Suharto dictatorship was thrown off?
The world is a different place in the 30s, and the 50s, usually considered a golden era for the US.
The Keynesian logic of Paul Krugman goes something like this ... if you find yourself in a deep hole and you wish to get out of that hole - keep digging faster. Folks, there is no magic to Keynesian stimulus of the economy. Keynes was just wrong and so is Paul Krugman. Besides, Krugman can't seem to get it through his head that this is not the 1930's when the US was a savings nation with a tough, thrifty population and no world empire to police. Today, most Americans are indulgent, living on credit or broke and possess a sense of entitlement, plus we have a massive world empire to police.
Urging the Federal Reserve to print even more debt and throw it into the money system to re-inflate the bubble economy will make things much worse down the road. And, all those printed trillions does not cause inflation - it is inflation and it will distort everything it touches in time.
The only way out of this economic disaster is to let foreclosures and bankruptcies cleanse the bad debt from the books. And, yes, there will be pain and suffering.
Thanks for this stunning display of callousness and ignorance, Mr. Right-Wing troll. Government spending most certainly CAN create all kinds of economic activity and employment--irrespective of whether U.S. consumers are now savers or debtors.
Shouldn't you be purveying this kook Friedmanite fundamentalism over at the comment line at Human Events?
And it is the responsibility of ALL of us, but especially a ruling class that has profited mightily on the backs of the poor and working class, to mitigate as much as possible that "pain and suffering".
Yes, WE ARE "our brothers/sisters' keepers".
Yes, we MUST be Good Samaritans.
Yes, there IS a Social Contract.
Yes, there IS a Common Good to which we must all be responsible.
Corporate and individual predators who reject their social responsibility should be cast out of human society. If they want to operate and live as though only they matter, while no one else does, let them all go live on an unchartered island so they can be as selfish and narcissistic as they want.
The rest of us will live as we actually are, connected to and responsible for each other, especially the most vulnerable among us. This is the moral imperative underlying any human society and its economy. Read The Theory of Moral Sentiments by Adam Smith, which he wrote before The Wealth of Nations.
Then read the Bible and the Koran, if you still think compassion is just for liberal wimps.
"The Keynesian logic of Paul Krugman goes something like this ... if you find yourself in a deep hole and you wish to get out of that hole - keep digging faster"
That is not Keynesian economics, and you know it. If you are going to disagree with Keynesian economics, at least come up with some honest analogies and legitimate arguments. They exist.
"Urging the Federal Reserve to print even more debt and throw it into the money system to re-inflate the bubble economy will make things much worse down the road. And, all those printed trillions does not cause inflation - it is inflation and it will distort everything it touches in time."
No, it isn't. And no it won't.
"The only way out of this economic disaster is to let foreclosures and bankruptcies cleanse the bad debt from the books. And, yes, there will be pain and suffering."
The only way out of this economic disaster is to let the banks and financial gamblers go bankrupt. And into jail. And, yes, there will be pain and suffering. Especially for the bankers and other assorted financial gamblers and fraudsters.
"And, all those printed trillions does not cause inflation - it is inflation and it will distort everything it touches in time."
"No, it isn't. And no it won't."
Please explain why you take that position. Why won't printing trillions of dollars result in hyperinflation?
"Please explain why you take that position. Why won't printing trillions of dollars result in hyperinflation?"
Because value is relative. The value of money is relative. Yes, even the value of gold is relative. There is no "inherent" value to money. Or gold, at least not they way gold is used as money.
The printing of trillions of dollars MIGHT case (hyper)inflation. It also MIGHT not. It depends on what is happening in the economy. If the economy is deflating at a massive rate at the same time, if the prices of goods and services are not only not stagnant, but dropping, then the flood of money is not inflation.
If a store is having a 50% sale today, and then a month later, a 70% sale, because absolutely no one is buying anything, because everyone is hanging on to their money, a flood of money is NOT inflation. It MIGHT cause inflation.
Everyone is terrified of (hyper)inflation. They should equally be terrified of (hyper)deflation if they depend on wages for a living. If prices of goods and services are repeatedly falling, wages will fall too.
Thank you for the response. (My question was not intended to be cynical or sarcastic -- I genuinely wanted to read your views/ideas.) I'll study and consider your response. Thanks again.
oldcreditiste: May I comment? Money is of 2 kinds.
Fiat money has the force of law. It is government money. It is printed on metal discs and on paper 'bank notes'. Laws of a sovereign government give it value.
Credit money is the other kind of money. It comes into existence by agreement between men[or women]. It is also printed, or written. Laws of contracts give it force and it thus becomes interchangeable with fiat money.
There is much much more Credit money in circulation than there is Fiat money in circulation in any country that I know of. In Canada there is over 25 Times as much
Credit money circulating as there is Government money [Fiat money] circulating.
The total MONEY SUPPLY determines inflation or deflation.
Most complaints about inflation are from people who say that the 'Government is printing too much money'. In fact the government share of the increase in the money supply is a small fraction of the total. The very largest share of the increase is 'CREDIT MONEY' produced by bank men and women and their customers who borrow and thus create bank deposits which are included in the official definition of the MONEY SUPPLY. From that point the DERIVATIVES and the housing bubble that resulted is too complicated for me to discuss here.
It is my opinion that the Credit Money expansion by the banks was the primary cause of inflation. The cure for this is a tightening of the cash reserve ratio on the banks so that they will actually have, in their vaults, the money that they pretend to have on deposit.
WHY SHOULD ANY SOVEREIGN GOVERNMENT BORROW FROM PRIVATE CORPORATIONS OR INDIVIDUALS SOMETHING THAT IT CAN EASILY CREATE BY ITSELF? WHY SHOULD IT PAY INTEREST ON SUCH MONEY?????
The fall of the stock market precipitated a fear by the banks that they were 'over leveraged' . That caused them th slow, stop, or reverse the money creation business and that leads to the 'recession'. All the banks know that all the other banks are skating as close as they dare to the edge of the thin ice, because that is the way that they get the most profit . The 'credit market' gets all frozen up because each bank knows that every other bank is running what some people would consider a 'con game'. They pretend to have in their vaults enough government [fiat] money to pay all their depositors. I have said enough today but will come back to it later when I have more time.
"Please explain why" "all those printed trillions [do] not cause inflation." Because money is mythical. It is a psychological willingness to exchange, nothing more, not the objective reality your question implies. With collapse of the "bubble economy," trillions of symbols of willingness to exchange disappeared in an instant, poof, because the willingness disappeared. Willingness being phenomenal, and the phenomenal being emergent, it can appear and disappear in an instant. It has disappeared in an instant. There is no crisis concerning paying back this lost money because it has SOCIAL/PSYCHOLOGICALLY vanished.
Deflation is the opposite, the unwillingness to exchange. This is where the public is now. Being here, the assumption is prices will fall. Why buy something now when it will go on sale tomorrow? Since no one is buying now, employees are laid off, decreasing demand. Now prices must be reduced further, giving reason to believe prices will be reduced even further tomorrow, and so on . . . . Scary stuff.
The additional stimulus MUST be matched by other changes. Stimulus alone will not work Mr. Krugman.
* NAFTA must be shredded.
* The minimum wage must be brought up to at least $10/hr.
* The income tax on top earners must be returned to a minimum of 70%
* Tax hedge funds at 35%.
* End corporate personhood.
* Close all business tax loopholes.
* Legislate that executive pay/bonuses be tied to performance over a 5 yr. timeframe.
* Enact a Financial Transaction Tax - a penny or two per trade will raise tens of billions of dollars.
* Cut the Defense Budget by 75% immediately.
* End all occupations and military bases.
* Appropriate trillions of dollars to build wind, solar and thermal energy products and a new grid to deliver the electrons employing millions.
* Appropriate billions through loans and grants to build new carbon-free transportation.
* Shut down the Federal Reserve and incorporate it into the Treasury. Let the government be in control of the money supply.
There you have it. A simple commonsense blueprint to restore our economy.
Agreed. But I would add a progressive tax on securities transactions profits based on the time a security is held in order to discourage speculation and price manipulation. I.E. the longer you hold a security before selling it, the less tax you pay on profit from 50% for less than six months to zero for more than 5 years. This would also serve to stabilize the world grain markets and keep many poor from starving.
Farmers and grain buyers typically hedge purchases in the futures market for a few months. Adding a 50% tax to any profits would definitely lower grain prices. It would make for a difficult period for farmers as land prices would likely adjust lower.
Excellent summary Cygnus; however commonsense, decency, vision and intelligence are sorely lacking among our ruling elite. If this blueprint is to become reality, there must be massive mobilization of the masses to DEMAND it. Sadly, material conditions will become much worse before anything like that happens.
Krugman, while he seemingly means well, cannot quite get the bigger picture.
* End corporate personhood.
This is one of the most important thing we NEED to do. They are not people by any mentally stable definition used by normal non sociopathic persons.
The ONLY people who regard the Houses of the Holy as people are the Neo Feudalists and other warped people who love royalty and hereditorial rule.
This is without a doubt the single most important thing that has to be done if anyone is intersted in saving this country in something approximating its current form. THe problem is that it will take a constitutional amendment now, and walking to Mars is easier to do.
Once you strip corporate power of constitutional protection and revert it back to its former and original conditional charter status, you might have a chance in hell of saving capitalism (if you're a capitalist--I'm not). Even then, the playing field will be far from level, since money has been declared a form of speech. But there'd be some light at the end of the tunnel.
A good thing to do is work at the state constitutional level, especially in states with referendum mechanisms. You guys could put this on the front page. It would be a worthy project.
See http://www.change.org/ideas/view/end_corporate_personhood
"Enact a Financial Transaction Tax - a penny or two per trade will raise tens of billions of dollars."
NO!! Make it a 6% sales tax on every sale of stocks, bonds, commodities and options on stocks or commodities. That will go a LONG way toward ending financial speculation.
Other than that your economic recovery plan is the best I've read of yet.
The income tax on top earners must be returned to a minimum of 70%!
The people don't really understand the significance and importance of raising taxes on income above a certain level to 70%. With tax deductions for investment in domestic businesses and industry what we do is use the PRIVATE SECTOR to furnish the capital the economy needs to grow. If they don't want to invest then we tax that unused income so the government can use that income to invest in the economy. It is voluntary but uses self interest and the desire not to pay taxes as the driver. The rich don't lose anything, those investments earn income and grow their net worth.
More like 90%; and as long as these lousy wars go on, 99%.
"those investments earn income"
And yet no one will make them unless these investments are a way of evading social responsibilities elsewhere?
I know that Susan Collins (R-Maine) was instrumental in slashing funding to states in the stimulus bill in exchange for her support.
I am wondering if what money was left in the stimulus bill to hwlp states has reached them yet and if that has already been factored into their budget pictures?
Paul Krugman knows a lot more than I do.......Joseph Stiglitz knows a lot more than I do........Yet, neither of them is consulted by anyone in the Obama administration........
There have been no controls on the greed of American Capitalists.....The reward for firing 5,000 employees and increasing profits was a bonus of 25 million dollars or more..
Rush Limbaugh has proposed a "Plan For Failure".....Most of his listeners have bought into that plan.....They use the "N" word behind Obama's back and have control of most of the companies that have fired millions of workers.
Without factories producing goods, the United States will not make a comeback......For five years "Capitalist America" needs to get "Patriotic"....Bring back the factories and run them at cost, no bonuses for CEO's and CEO pay can not go above 40 times that of an average worker in the factory...
Healthcare should not be the responsibility of the employer....single employees should have 5% of their salaries going into "Medicare" and married employees should have 8% going into "Medicare" and "Medicare" becomes their health provider.
For 5 years, the IRS and Politicians need to get "Patriotic". Suspend the current tax system and go to a graduated income tax system......starting at 1% for incomes of $10,000 working up to 60% of incomes over 3 million dollars........No deductions, no credits, no shielding money in foreign bank accounts or companies.....
The United States will not recover continuing the "Occupations of Iraq and Afghanistan.".....those were decisions made by "The Power Elite" and they have all made billions at the cost of 1.5 million lives and 6 TRILLION DOLLARS......
It is time for Politicians to take off their lapel pins and stop pretending that they were "Patriotic"......