World's Third Depression

[rameumptom]

Paul Krugman is a Keynesian idiot. Still, he believes we are entering into a Depression, and I think he is right (just for different reasons).

Krugman: The Third Depression - The Daily Beast

He thinks we need to spend more money to get out of this Depression. However, recent studies of the last Great Depression suggest that FDR's government spending actually caused the Depression to last several years longer! And this is the direction Krugman wants us to go (which is one reason why he's an idiot).

Our Democratic leadership agrees with him. Most of the rest of the world realizes that we have to cut government spending, so that we free up money for private investment and real growth. That's the consensus at the current G20 summit.

Let's look at examples from Europe. Ireland was considered the worst economy in Europe and ready to crash. But in 2008-2009, they slashed government spending. They are now recovering. Meanwhile, Greece is seeking to borrow money to spend their way out of this recession/depression, and it isn't working as they hoped. Krugman's view will turn the whole world into Greece. Governments can only tax or borrow so much money, before they cause a collapse. And their spending rarely creates long term jobs that stimulate anything in the economy.

So, while I believe we will see a double dip recession, and many parts of the world are suffering from an actual Depression (and so could the USA), we can only fix it by all of us taking our share of the bitter medicine. We all have to get to the point of saying, "cut government, INCLUDING my entitlements."

[bcguy]

It will happen when oil becomes in serious short supply

[talisyn]

Ram, there are a great many people in this country who are already taking their share of the bitter medicine. Public service programs and schools are getting slashed. I submit it isn't the level of spending that is the problem, but the items the money is spent on is the problem. Also, taxes need to be collected from everyone. The Idaho Legislature’s website says 2009 sales tax collections were barely $1.2 billion while $1.7 billion were exempted. You can make the argument that these exemptions are needed so businesses can employ more people...but if so why isn't Idaho's unemployment rate lower?

[Moksha]

Sometimes cuts need to start at the local level. In the area where I live, the citizens in this month's election sprang for school bonding to build a new high school for Draper, Utah. The thing is this new school is totally unneeded since there is already plenty of classroom space throughout the district and will be adequate for a long time.

The catalyst was that one of the Draper politicians became enamoured with a film about a town cheering for its high school football team and wanted that for his immediate area. Sometimes such pressure can cause a school board to request bonding when it is not needed.

I blame Hollywood for implanting this idea in that politico's mind. They should have been feeding him thoughts of huge Japanese dinosaurs attacking Salt Lake and being fended off by full service KFC restaurants instead.

[pam]

Sometimes cuts need to start at the local level. In the area where I live, the citizens in this month's election sprang for school bonding to build a new high school for Draper, Utah. The thing is this new school is totally unneeded since there is already plenty of classroom space throughout the district and will be adequate for a long time.

The catalyst was that one of the Draper politicians became enamoured with a film about a town cheering for its high school football team and wanted that for his immediate area. Sometimes such pressure can cause a school board to request bonding when it is not needed.

I blame Hollywood for implanting this idea in that politico's mind. They should have been feeding him thoughts of huge Japanese dinosaurs attacking Salt Lake and being fended off by full service KFC restaurants instead.

Seriously Moksha do you believe there is plenty of classroom space in the high schools? Funny when my kids went to Alta some of their classrooms didn't even have enough desks for each of the students they were so overcrowded.

[Moksha]

Seriously Moksha do you believe there is plenty of classroom space in the high schools? Funny when my kids went to Alta some of their classrooms didn't even have enough desks for each of the students they were so overcrowded.

Was that prior to the Riverton and new Jordan high schools? Demographically, there are always bubbles of growth that expand with an influx of young families and subside in middle age and older residences.

[pam]

No that was after. Just in the last 2-3 years. The population at Alta will continue to grow with the continual growth in Draper on South Mountain etc.

Edited June 29, 2010 by pam

[bytor2112]

Ram, there are a great many people in this country who are already taking their share of the bitter medicine. Public service programs and schools are getting slashed. I submit it isn't the level of spending that is the problem, but the items the money is spent on is the problem. Also, taxes need to be collected from everyone. The Idaho Legislature’s website says 2009 sales tax collections were barely $1.2 billion while $1.7 billion were exempted. You can make the argument that these exemptions are needed so businesses can employ more people...but if so why isn't Idaho's unemployment rate lower?

Of course you do realize that fully 52% of Americans don't pay federal income tax...don't you? And it IS absolutely the level of spending and the wasteful items that it is spent on that is ultimately going to be our downfall.

The government doesn't create jobs....they spend money, they print money and they waste money. We should be as outraged at our elected leaders, both ® and (D) as we are at the likes of Enron. Funny,the only solution to waste, corruption and largess in the government is yet more government, BUT, in the private sector it's court and jail. If we were to apply the same standard and principle to DC, we would see a huge change....not just empty campaign rhetoric about change.

Oh.....take a look at Canada...they slashed spending and their economy is doing very well. (yeah....Canada)

Edited June 29, 2010 by bytor2112

[rameumptom]

It will happen when oil becomes in serious short supply

Well, everywhere except the Gulf coast....

[rameumptom]

It isn't just "wasteful spending" that will be our downfall. There are several major expenditures that most see as important: welfare, medicare, social security, unemployment, etc. Between Social Security and Medicare, we have unfunded requirements in the tens of trillions of dollars.

Everyone wants expenditures cut, just not the ones that help them, per se. We need to replace our "me" generation with the "greatest" generation concept again. Are we willing to sacrifice like they did during WWII? Are we willing to go without, ration, live well within our means (individually and nationally), and stop expecting the feds to take care of it all?

The reality is, we need to get to the point where we realize that 80 year old people do not get a hip replacement or heart replacement, unless they can personally afford it. Insurance should not pay for Viagra or other unnecessary expenditures. People on welfare should be expected to work hard for it, and it should be a last resort (not a first impulse).

Finally, we need to teach people to be responsible for their own decisions. We can offer them training/schooling, but if they choose not to work hard to accomplish it, then they should experience the consequences of their own choices. Banks should fail, and so should people. Prevent starvation? yes. Provide a lifestyle? no.

[rameumptom]

Ram, there are a great many people in this country who are already taking their share of the bitter medicine. Public service programs and schools are getting slashed. I submit it isn't the level of spending that is the problem, but the items the money is spent on is the problem.

I agree all should pay taxes, or give up the right to vote. If you do not give to the country in some measurable way, you don't have a dog in the hunt, and have no right to tell others how the money should be spent.

The "bitter medicine" comes because people expect their services, etc., to be entitlements, rather than privileges of a strong economy. It amazes me that Greeks are rioting because their government has no choice than to raise the retirement age to 60 in order to stay solvent. If people were self-determined and self-responsible, most would have not spent themselves into bankruptcy, lost their homes, and would have money in the bank for a difficult rainy day. Instead, they now expect government to bail them out of their poor choices. I could have purchased a new beautiful home for $250K or more the last time I bought. Instead, I paid under $100K for a fixer upper. Seven years later, and two periods of unemployment, I'm still in my home, having been able to pay my mortgage and bills through the whole thing by saving, food storage, etc.

I have little compassion for the person who over spent in order to keep up with the Joneses. I have little interest in bailing out a large percentage of those who have purchased homes in the last few years, because they chose to overextend themselves.

I have NO compassion for the banks and other companies that took huge risks and lost. They do not deserve bail outs.

[FunkyTown]

Oh.....take a look at Canada...they slashed spending and their economy is doing very well. (yeah....Canada)

That's not exactly true.

Canada increased it's spending(The automotive bailouts and such) under Harper, but Harper has decided to cut spending the moment after to regain Canadian control over its own economy. It's a pretty brutal spending cut, too. And it's entirely necessary given their careless spending prior to this.

The EU nations, because of the Greece crisis, are in the same boat: Break the back of spending right now. It will be painful, but it will be necessary.

What it comes down to is this:

1) Government spending creates jobs.

2) Jobs mean people spend money.

3) People spending money increases private sector jobs.

4) More private sector jobs increases competition and job wages.

Now, if these were the only factors in spending, it would be a no-brainer. What Obama has to walk as a tightrope are some other factors:

1) Cutting government funding will immediately lose those bonus jobs. With the world changing in economy, there won't be a buffer of economic prosperity to help off-set the job-losses. This will be a reason not to cut.

2) Government borrowing will create inflation - Bad inflation - Which will result in people's money being worth less, meaning that less will be purchased, meaning less will be required, meaning less jobs. This will be a reason to cut spending drastically.

3) Government spending will require taxation, which reduces available income, which reduces spending.

Obama is upset because he's betting on being able to maintain option 1 without option 2 and 3 significantly kicking in as well.

I don't think Obama is correct in this. I think he's gambling with runaway inflation. I think he should learn from what happened to Greece and Iceland this year and cut back on the spending. This year alone, two countries faced economic bankruptcy. Yes, they were small economies. Being big doesn't mean being indestructible.

One of the cuts being done in the UK is preventing the health system being used by immigrants. That means I have to purchase private insurance despite my love of the NHS. I am okay with that. I love this country and having to spend £200 this year extra to benefit from the wonderful health system they have doesn't bother me. I can make sacrifices for the country I'm part of. Maybe it's time Obama took a page from JFK and said 'Ask not what your country can do for you, but what you can do for your country.'

It's time to be cautious and it's time for people to offer to make short term sacrifices for long-term gain.

[NeuroTypical]

Paul Krugman is a Keynesian idiot.

Now, it's not that I wanna defend Keynes or anything like that, but isn't just about everybody? From the vast depths of research I've done on the subject, (which consists of watching

), it seems like Keynes and FunkyTown rule the day, and all the people who are right are in the minority.

LM

Edited June 29, 2010 by Loudmouth_Mormon

[FunkyTown]

Now, it's not that I wanna defend Keynes or anything like that, but isn't just about everybody? From the vast depths of research I've done on the subject, (which consists of watching

), it seems like Keynes and FunkyTown rule the day, and all the people who are right are in the minority.

LM

I'm going to click laugh on this, but I'm cautious. I don't want to seem like I'm misusing the laugh button. I actually thought this was a hilarious slam.

I should, however, point out that I think some government oversight in to the economy is good. In times of plenty, we should lay up our excess to protect the weak in times of famine.

I, however, disagree with the stimulus packages that were passed and have said so on this website on numerous occasions.

I wouldn't say I'm Keynesian so much as Josephian, to coin a phrase.