deficit spending vs Capt. 00:00

[..]

Originally Posted by CaptainMidnight

(Note: I'm a Libertarian and did not support the Iraq War, and I am no fan of George W. Bush, so please don't compartmentalize like so many around here.)

Let's make an effort to keep things in context, shall we?

The approximately $1 trillion spent on the Iraq War was obviously not positive for the economy; it was clearly not a "stimulus." A major blunder, yes, but no one intended to spend a trillion dollars to "stimulate" the economy.

The stimulus package that Krugman says is too small, by contrast, was an intentional effort to run up more deficit spending

(Note: If i really need to be labeled, consider me as an humble Pyrrhonian Skeptic.)

IMO the > $1 trillion USD Iraq/Afghanistan war game is also intentional deficit spending and it certainly stimulated production in selected areas of the economy.

The American Recovery and Reinvestment Act of 2009 is > $800 billion deficit spending, but includes a lot what needs to be paid anyway (e.g. $86.8 billion for Medicaid is part of this act, plus $19.9 billion for the Food Stamp Program or $14.2 billion for Social Security recipients and Iraq/Afghanistan war game veterans receiving disability and pensions, etc.)

As for Krugman, my only public opinion [0] is that he's a economic pop-star, and that he really has no clue about speculators / traders. In that sense he isn't any better than Margaret Thatcher and her advisors were.

Anyways, Capt. 00:00, I'm curious, what would you suggest to do (instead of deficit spending)?


[0] my private opinions about Krugman are manifested in my trading positions / bets. and are similar to those of Nassim Nicholas Taleb (who's against the current deficit spending) and those of "The Palindrome" ( = Soros, who's for the current deficit spending)

[nevergaveitathought]

Originally Posted by ..

[0] my private opinions about Krugman are manifested in my trading positions / bets. and are similar to those of Nassim Nicholas Taleb

takes a lotta capital to lose every day waiting for the big one

[..]

Originally Posted by ..

As for Krugman, my only public opinion [0] is that he's an economic pop-star, and that he really has no clue about speculators / traders. In that sense he isn't any better than Margaret Thatcher and her advisors were.

to back up this claim, the best line is from Krugman himself:

"Rather oddly, I can't quite figure out what Soros himself thinks we should do. In general, for a businessman his approach seems peculiarly abstract and philosophical: He seems far more concerned with denouncing laissez-faire ideology than with proposing workable ways to regulate markets without strangling them."

source: http://web.mit.edu/krugman/www/soros.html

[..]

Originally Posted by nevergaveitathought

takes a lotta capital to lose every day waiting for the big one

huh!? a hardcover copy of the black swan costs roughly 20 USD, 10% is usual for author royalties, and roughly 2 million sold, so it gives a random number: 5,600,000 USD.

(there are enough suckers out there who pay for such books, which you can get for free via P2P torrents. )

[nevergaveitathought]

Originally Posted by ..

huh!? a hardcover copy of the black swan costs roughly 20 USD, 10% is usual for author royalties, and roughly 2 million sold, so it gives a random number: 5,600,000 USD.

(there are enough suckers out there who pay for such books, which you can get for free via P2P torrents. )

see title

[..]

Originally Posted by nevergaveitathought

see title

... if you know his investment strategy you're a very lucky man

good luck!

[TexTushHog]

Anybody who doubts that Krugman is a serious economist is greatly misinformed. His econometric work on new trade theory was ground breaking in the early and mid 1970's. (I was exposed to it shortly thereafter as an undergrad). It brought econometric verification to older commonsense notions that protection of domestic industries by tariffs could result, in certain conditions, in market share dominance. This was an offshoot of some work on the strength of monopoly market power done by Robert Salow, I think. I studies this in a class on monopolies. The also did some work in economic geography that is considered important, although I'm not at all familiar with it. But his work on domestic industry, tariffs, and resulting market domination alone was probably enough to earn his his Nobel Prize.

[Rudyard K]

For all you economic pundits.

http://www.telegraph.co.uk/finance/e...-stimulus.html

[nevergaveitathought]

Originally Posted by ..

... if you know his investment strategy you're a very lucky man

good luck!

you're the one who said your trading positions/bets were similar to taleb, not me, so you must know his strategy..i know a little of his approach

[Texas Contrarian]

Originally Posted by ..

IMO the > $1 trillion USD Iraq/Afghanistan war game is also intentional deficit spending and it certainly stimulated production in selected areas of the economy.

I don't think the Bush administration had any idea the Iraq War would cost more than a small fraction of what it did. In fact, they were making some very, very low (and unrealistic) cost estimates prior to the invasion. If those guys had any idea it would end up costing as much as $300-500 billion, let alone a trillion, I believe they would have considered it political suicide, especially since they were drawing up plans to add a very expensive (and unpaid for) new entitlement expansion at the same time (the prescription drug plan).

If they had paid attention to what Gertrude Bell said way back about 90 years ago, maybe they would have realized that the war's aftermath might be very difficult to manage.

Originally Posted by ..

The American Recovery and Reinvestment Act of 2009 is > $800 billion deficit spending, but includes a lot what needs to be paid anyway (e.g. $86.8 billion for Medicaid is part of this act, plus $19.9 billion for the Food Stamp Program or $14.2 billion for Social Security recipients and Iraq/Afghanistan war game veterans receiving disability and pensions, etc.)

Items that we can agree are the right things to do (disabled veterans' benefits, increases in unemployment compensation in a severe recession, etc.) could have been done as stand-alones. It wasn't necessary to shovel hundreds of billions of additional dollars into the hands of government employees and other favored constituencies, and into wasteful pork projects which in most cases had nothing at all to do with critical infrastructure needs.

Originally Posted by TexTushHog

Anybody who doubts that Krugman is a serious economist is greatly misinformed.

I don't think anyone said that he isn't a "serious economist." He did some widely respected work on trade theory years ago. It's just that he's gotten a little carried away with enthusiasm for the discredited idea that you can spend your way to greater prosperity with massive public policy initiatives. That worked great in some of the macro models produced in the 1960s and '70s. In the real world? Well, not so much. History is quite clear on that, especially in cases where governments were already running structural deficits.

We were spending like drunken sailors all through the Bush era. Now we're spending like drunken SMU trust fund brats at a strip club! And for what? So that we can accelerate the progress toward a horrific fiscal crisis?

Such crises aren't kind enough to announce their appearance a couple of years in advance so that policymakers can begin to get their houses in order. If we continue along this path without making difficult choices today, we'll keep building up more and more pressure. The lid will blow off sooner or later. Imagine what might happen if a sense of complacency continues for an extended time, but then all of a sudden a Treasury auction goes very badly, sending shock waves around the world. Someone mentioned Black Swan events (not exactly, but he did mention Taleb). The ensuing crisis could be the granddaddy of all Black Swans!

Originally Posted by TexTushHog

...I studies this in a class on monopolies. The also did some work in economic geography...

Let's see, that was posted at 1:43 a.m. -- TTH, I hope that was a damn good bottle of French wine!

[..]

Originally Posted by TexTushHog

Anybody who doubts that Krugman is a serious economist is greatly misinformed.

I do not doubt it - Krugman is a serious economist - but I hold 99.9% of all economists in low esteem.

Originally Posted by Rudyard K

For all you economic pundits.

http://www.telegraph.co.uk/finance/e...-stimulus.html

well I'd be interested, what did you get out of this article?

'cuz to be honest I didn't get anything out of it. The article only talks about M3, and doesn't even tell us how they calculated the M3.

M1 is very roughly an indicator for economic activity. M2 is the money on which the Fed still has some control / influence. M3 is very roughly an indicator for inflation / deflation.

But this is actually only really used by economists. Traders and speculators mostly give a fuck about it.

[pjorourke]

Originally Posted by ..

I do not doubt it - Krugman is a serious economist - but I hold 99.9% of all economists in low esteem.

I'm dying to hear who the blessed 0.1% are

[..]

Originally Posted by pjorourke

I'm dying to hear who the blessed 0.1% are

John Geanakoplos, Peter Diamond, Daniel Kahneman et al.

However, I'm biased, as economics is not my field, unlike econophysics, where I indeed have some expertise and interest.

What is also interesting what amongst the best speculators out there, no one really has a background in economics, while a few have a philosophy, physics, chemistry, statistics or math background.

[Rudyard K]

Originally Posted by ..

well I'd be interested, what did you get out of this article?

M3? It’s really not rocket science to understand the broad concepts. First, M2 is inclusive of M1. M3 is inclusive of both M2 and M1. M3 is the theoretical money supply (inclusive of assets) in the economy from all possible sources.

One first has to understand a balance sheet and its relation to an income statement. If you don’t understand balance sheets and income statements and how they relate?...then you certainly can’t even begin to understand the economic theories.

If you think of the US economy as a big balance sheet, M3 would equate to the Total Assets (TA). As such, it would also relate to the Total Liabilities (TL) plus Total Equity (TE)…since those TL + TE must equal TA.

If M3 is shrinking?...then TA are shrinking…and TL plus TE is shrinking. What does that mean? In short, it means that the company we call the US economy is shrinking. Since all of our ability to earn is based on a return on TA…in the case of a shrinking TA…either our return on TA must increase in proportion to the shrinkage…or our total income will be less. Obviously the latter is happening.

TL is made up of two basic components…debt that industry and people owe…and debt that the Gov owes. TE is almost exclusively equity by industry and people. Therefore, all of the assets that are in TA of the company we call the US economy are basically funded by Gov debt, Industry and People debt and Industry and People equity. Industry and People are going through a deleveraging process (lowering of their Industry and People debt)…and have been for several years. Some of that deleveraging most definitely needed to occur. In its simplest form, the way to deleverage is for the guy who has a house that he paid $100K for (and has it listed as $100K in the TA side of the US economy balance sheet), and he also has a mortgage on that house of $75K (and has that $75K listed in the TL side of the US economy balance sheet) and since today it is only worth $50K…he is going to have to sell it for the $50K, pay off $50K of the mortgage and take $25K of his equity (from somewhere else) to pay off the balance of the mortgage. The buyer puts the house back on the US economy balance sheet as a $50K asset (and assuming the buyer borrowed 100% of the money) a $50K TL. At the end of that transaction, the US economy’s TA has shrunk by $50K, TL has shrunk by $25K and TE has shrink by $25K. That transaction, along with many other much more complicated and larger ones, are happening every day to the tune of billions of dollars.

Gov is today, trying to prop up the TA side of the US economy balance sheet by adding Gov debt to the TL side of the balance sheet. But the assets being added to the TA side of the balance sheet are not really earning assets…much like in a real company might be called “Goodwill”. So, in reality, it has little economic benefit...and they produce little income.

It is however, a fallacy if anyone says that the Fed does not have influence on the M3. Industry’s and People’s perception of the direction of Gov, significantly effects the amount of TE and TL that Industry and People will invest in the US economy. Much like trying to pick up a gal with a good line of BS. She either buys it, or she doesn’t. Right now?...it appears she is yawning.

I’m sure the above is not as simple to follow as I set out for it to be, but it is as simple as I can make it. This explanation is far from all the moving pieces either…the economy is much more complicated and dynamic than the above…as I’m sure all the pundits here will try to tell you. Unfortunately for them, enough of the Industry and People understand the basic concepts…and they’re still yawning.

[nevergaveitathought]

good job RK