Predict jobs in a double dip recession...or worse Forum

[dresden doll]

I just want to tell you all that I hate you for this thread. ::runs off to cry over the impending OCI doom::

[Posner]

Whoa, now you're changing your argument completely from stimulus doesn't work (presumably because of the potential for malinvestment) to stimulus needs to be targeted effectively to be most efficient (a much more defensible position). And effective stimulus (regardless if it inflates a bubble or keeps bad companies solvent) always comes in the form of tax cuts.

To get the most bang for your buck, yes, stimulus needs to be targeted. But it's ALWAYS going to depend on the state of the economy and the health of each sector. Giving a bank with balance sheet problems a few million dollars isn't going to stimulate anything, since they will hold those funds to cover thier other liabilities.

The CBO has already done an analysis of this:

There was no change in argument. I never said the stimulus will not (or did not) work, but feel free to point out where I did.

I'm responding to your ridiculous talking point assertion that the stimulus was full of pet projects for the left. If anything allocation was biased toward regionalism, not politics. I'd hardly call highway construction and infrastructure projects a leftist agenda. You keep trying to bring this back to politics when it’s always been a question of economics.

Asking an economist whether stimulus works is a bit like asking a physicist if gravity makes things go down. It going to always depend on what you mean by down and where you are in the universe. Of course dumping billions of dollars into an economy will have an effect, it’s lunacy to say it won’t. But if you goal is something other than just stimulus (something political) it’s not really relevant to the question of whether stimulus works.

I never said the stimulus was "full of pet projects for the left". I said "the stimulus bill was used, in part, to push the agenda of the left", and I stand by my comment. Feel free to do a google search on this topic (as I'm growing tired of pointing out obvious facts) - it is not a ridiculous assertion to say that the bill was used in part to push the agenda of the left. It almost goes without saying.

This is a question of politics, because politicians wrote the damn bill. The efficacy of the bill is a question of economics. The crafting and purpose of the bill is political. If you can't see the separation then there's really no point in arguing with you. Policies can be economically sound but politically infeasible or undesirable.

Aren’t you Posner?

I hope this is a joke.

[dresden doll]

Aren’t you Posner?

I hope this is a joke.

I like to think the poster's my fellow U of C-er. At any rate, his screen handle makes me want to petition to have mine changed to Easterbrook.

[Merr]

First, let me say I agree with you about austerity measures, and am surprised at just how many hyper inflation chicken littles are running around these days. My confusion is more in regards to why we are experiencing deflation, or close to it, at the same time as the government is spending so much money relative to what it has spent in the past. That is the paradox that makes this so hard to predict from my perspective.

Basically, the deflationary forces of tremendous wealth destruction - most people's only equity asset of note is their homes - and credit contraction are really just that strong. High unemployment (unemployed tend to drop to subsistence levels of consumption) and massive wealth destruction in the stock market don't help either.

I understand that. In theory however, the vast amounts of money the government is putting into the economy should be staving off deflation since it is to the tune of trillions of dollars. The problem is that doesn't seem to be what is happening.

[mec30]

There was no change in argument. I never said the stimulus will not (or did not) work, but feel free to point out where I did.

Saying we're unable to tell if the stimulus was efficacious (i.e. has the ability to produce an effect) suggests that it's a matter of happening rather than a matter of degree. That's where I got that from.

I never said the stimulus was "full of pet projects for the left". I said "the stimulus bill was used, in part, to push the agenda of the left", and I stand by my comment. Feel free to do a google search on this topic (as I'm growing tired of pointing out obvious facts) - it is not a ridiculous assertion to say that the bill was used in part to push the agenda of the left. It almost goes without saying.

A distinction without a difference? Unless your saying the idea of stimulus itself is leftist, which I hardly think is an obvious fact.

This is a question of politics, because politicians wrote the damn bill. The efficacy of the bill is a question of economics. The crafting and purpose of the bill is political. If you can't see the separation then there's really no point in arguing with you. Policies can be economically sound but politically infeasible or undesirable.

And therefore... I’m not trying to rile you up or insult your intelligence. I just think your taking a far too cynical view.

Aren’t you Posner?

I hope this is a joke.

Honestly, I had no idea who this person was before I looked it up, but I'm also not a big Atlantic reader.

[Posner]

Saying we're unable to tell if the stimulus was efficacious (i.e. has the ability to produce an effect) suggests that it's a matter of happening rather than a matter of degree. That's where I got that from.

And therefore... I’m not trying to rile you up or insult your intelligence. I just think your taking a far too cynical view.

If you re-read my post, you'll see that I was not saying the stimulus didn't do anything, it did something but maybe not much good. Rather, it will be very difficult to separate the effect of the stimulus from a natural recovery. I was responding to someone's point that because the lack of a faster recovery must mean we needed a larger stimulus package (which was just a silly conclusion...I thought law school taught critical thinking skills?). It's tough to show cause and effect.

There was a substantial amount of money targeted at programs that were not directly aimed at stimulating the economy. It was not the bulk of the bill (hence why I said "in part" and not "full of"). Articles detailing these portions of the bill are easy to google, as I said in my last post. Putting aside allegations of pork and pet projects, greater intervention into the market is leftist by nature. Intervention into the economy may be justified by an economic catastrophe, but this justification doesn't hold up for parts of the bill that did not directly target stimulating the economy.

It's not cynicism, it's realism.

[allidoiswin]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

[nycparalegal]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

You guys are crazy. You think the stimulus made things worst? What planet are you on? Where is your source?

[Merr]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

Not really in the late 1920 and early 1930s the Austrians were running around like chickens with their heads cut off trying to figure why the following were happening.

Prices were declining while demand was also declining.
Wages were declining while employment was also declining.
interest rates were falling, while lending were also falling.

There are things Keynesians cannot answer, like stagflation, but Austrians just don't really do a good job dealing with multiplier effects, particularly ones that defy rational expectations.

Different theories work in different situations. There is no panacea in economics.

[mec30]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on.

HAHAHA. And please, what are the predictions? Hyperinflation as a result of monetary inflation? A second credit bubble? That stimulus only delays a more serious contraction?

We've seen none of that.

[dogmatic slumber]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

How did they do predicting the recent crisis? Serious question; I don't know the answer.

[ravens9111]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

How did they do predicting the recent crisis? Serious question; I don't know the answer.

Just google "Peter Schiff predictions". You will find your answer...

[Posner]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on.

HAHAHA. And please, what are the predictions? Hyperinflation as a result of monetary inflation? A second credit bubble? That stimulus only delays a more serious contraction?

We've seen none of that.

Spoken a little early, don't you think? I'm not saying these predictions will certainly come to fruition, but it's very early to discount them.

[jplayer]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

Not really in the late 1920 and early 1930s the Austrians were running around like chickens with their heads cut off trying to figure why the following were happening.

Prices were declining while demand was also declining.
Wages were declining while employment was also declining.
interest rates were falling, while lending were also falling.

There are things Keynesians cannot answer, like stagflation, but Austrians just don't really do a good job dealing with multiplier effects, particularly ones that defy rational expectations.

Different theories work in different situations. There is no panacea in economics.

Murray Rothbard has given the best blow by blow Austrian account of the Great Depression. If you go to mises.org you can get the book as a free pdf or interesting related audiobooks, also free. He goes into excruciating detail about how Hoover, unlike what we were taught, prevented the recovery by telling bosses to keep wages up and several other disastrous interventions. FDR's New Deal was based largely on what Hoover started. I know, that is not what we were taught, but several members of his administration, including Rexford Tugwell, are on the record stating so.

Here is an interesting lecture on this subject, if you have about 50 free minutes.

As for another poster who asked why we haven't seen the inflation yet, it is because the banks have not started to loan out the massive influx of new money created in such a short time, something like an 80% increase in a few months. When they do, we will see it. To argue otherwise is like trying to argue against the law of gravity.

Another poster mentioned Peter Schiff. He is pretty much considered a superstar by Austrians. He has all kinds of great clips predicting just what we have gotten all over youtube. If you have about an hour, here is an in depth explanation of his thinking.

Overall, I am just trying to say that the Austrian explanation, as well as its a priori methodology is so foreign to what we learn in school that most people just reject it off hand. It rejects the fundamental tenants of mainstream economics, mathematical formulas and econometrics. But that is the point. It is based on the idea of subjective value.

[Merr]

Paul Krugman and his Neo-Keynesian gravy train have just about reached the end of the line. The "stimulus" made things worse, as predicted by the Austrian economists, along with every other negative consequence of the policies advocated by Krugman and the only slightly better Friedman.

The more interesting question is whether we will throw off the parasites and recover, or go Weimar.

again, +100000. austrians' predictions are almost invariably dead on. then the keynesians get confused when things get/are bad. and try to pull themselves out with exactly the practices that got them into the mess. it'd be comical if the repercussions weren't so painful.

Not really in the late 1920 and early 1930s the Austrians were running around like chickens with their heads cut off trying to figure why the following were happening.

Prices were declining while demand was also declining.
Wages were declining while employment was also declining.
interest rates were falling, while lending were also falling.

There are things Keynesians cannot answer, like stagflation, but Austrians just don't really do a good job dealing with multiplier effects, particularly ones that defy rational expectations.

Different theories work in different situations. There is no panacea in economics.

Murray Rothbard has given the best blow by blow Austrian account of the Great Depression. If you go to mises.org you can get the book as a free pdf or interesting related audiobooks, also free. He goes into excruciating detail about how Hoover, unlike what we were taught, prevented the recovery by telling bosses to keep wages up and several other disastrous interventions. FDR's New Deal was based largely on what Hoover started. I know, that is not what we were taught, but several members of his administration, including Rexford Tugwell, are on the record stating so.

Here is an interesting lecture on this subject, if you have about 50 free minutes.

As for another poster who asked why we haven't seen the inflation yet, it is because the banks have not started to loan out the massive influx of new money created in such a short time, something like an 80% increase in a few months. When they do, we will see it. To argue otherwise is like trying to argue against the law of gravity.

Another poster mentioned Peter Schiff. He is pretty much considered a superstar by Austrians. He has all kinds of great clips predicting just what we have gotten all over youtube. If you have about an hour, here is an in depth explanation of his thinking.

Overall, I am just trying to say that the Austrian explanation, as well as its a priori methodology is so foreign to what we learn in school that most people just reject it off hand. It rejects the fundamental tenants of mainstream economics, mathematical formulas and econometrics. But that is the point. It is based on the idea of subjective value.

Yes he did...in 1963. This is one among many explanations of the great depression (and imho not a very good one). It essentially says the federal reserve, among other things, caused the depression through interventionist policies. This is not very good explanation though considering that serious depressions, deflation and panics were commonplace in the 19th century prior to the creation of the federal reserve and became much less prevalent following to the establishment of the reserve and other interventionist agencies like the FDIC. In fact, I would go further and say that part of the cause of this current crisis was the 1999 repeal of some of the interventionist policies in Glass-Steagall.

[ravens9111]

No wonder we are all in trouble...

http://www.foxnews.com/politics/2010/07 ... eate-jobs/

[romothesavior]

No wonder we are all in trouble...

http://www.foxnews.com/politics/2010/07 ... eate-jobs/

Ah yes... because an unemployment check is going to deter people from working. Yeah right.

[ravens9111]

No wonder we are all in trouble...

http://www.foxnews.com/politics/2010/07 ... eate-jobs/

Ah yes... because an unemployment check is going to deter people from working. Yeah right.

Did you read the article? The main point is to extend unemployment benefits because it is the most effective way to create jobs? You agree with that?

[mec30]

Unemployment checks actually are a great means of fiscal stimulus because it almost always results in spending and not savings. Though you're right that extending unemployment does tend to raise the unemployment rate, the effect is minor - 9.4% without and 10% with says one estimate by the federal reserve.

[ravens9111]

Unemployment checks actually are a great means of fiscal stimulus because it almost always results in spending and not savings. Though you're right that extending unemployment does tend to raise the unemployment rate, the effect is minor - 9.4% without and 10% with says one estimate by the federal reserve.

I don't see the logic in that. Have you ever tried surviving on an unemployment check? Do you know how much it is every two weeks? It is not enough to cover your bills. Not even close. Sure, the money will be spent. Why wouldn't it be? People need to pay rent, food, utility bills, etc. How is that going to CREATE JOBS? We aren't talking about the unemployment rate going up or down temporarily as it did today because 650,000 left the labor force.

What jobs are being created from extending unemployment? It has been extended for two years now. Are you saying that unemployment would be higher if benefits weren't extended? Or there would be higher job losses? Do you think the grocery store will lay off workers if people on unemployment can no longer buy food? Or your cable/internet/gas/electric company will lay off people if you can't pay your bill? Or if you have a car payment and you can no longer afford to pay, is the bank going to layoff an employee?You can't honestly believe that extending unemployment benefits CREATES jobs, do you?

[Patriot1208]

No wonder we are all in trouble...

http://www.foxnews.com/politics/2010/07 ... eate-jobs/

Ah yes... because an unemployment check is going to deter people from working. Yeah right.

Actually, this may not be the majority, but being from the midwest I have had first hand experience from people who have said they wouldn't look for work as long as they could get unemployment. These people also drove their car around to different houses to avoid the repo man. So it does happen.

[sundance95]

Are you saying that unemployment would be higher if benefits weren't extended? Or there would be higher job losses? Do you think the grocery store will lay off workers if people on unemployment can no longer buy food? Or your cable/internet/gas/electric company will lay off people if you can't pay your bill? Or if you have a car payment and you can no longer afford to pay, is the bank going to layoff an employee?

Um, yeah. That's exactly what is being said.

[mec30]

Unemployment checks actually are a great means of fiscal stimulus because it almost always results in spending and not savings. Though you're right that extending unemployment does tend to raise the unemployment rate, the effect is minor - 9.4% without and 10% with says one estimate by the federal reserve.

I don't see the logic in that. Have you ever tried surviving on an unemployment check? Do you know how much it is every two weeks? It is not enough to cover your bills. Not even close. Sure, the money will be spent. Why wouldn't it be? People need to pay rent, food, utility bills, etc. How is that going to CREATE JOBS? We aren't talking about the unemployment rate going up or down temporarily as it did today because 650,000 left the labor force.

What jobs are being created from extending unemployment? It has been extended for two years now. Are you saying that unemployment would be higher if benefits weren't extended? Or there would be higher job losses? Do you think the grocery store will lay off workers if people on unemployment can no longer buy food? Or your cable/internet/gas/electric company will lay off people if you can't pay your bill? Or if you have a car payment and you can no longer afford to pay, is the bank going to layoff an employee?You can't honestly believe that extending unemployment benefits CREATES jobs, do you?

You’re confusing fiscal stimulus with job creation. Transfer payments (unlike wage increases or general economic growth) are direct contributors to disposable income, in part, becuase it’s not subject to the automatic stabilization measures of the economy (taxes, other welfare aid, ect). This higher spending, taken as a whole, leads to higher aggregate demand, which in turn leads to inflation and higher production. Econ 101. The marginal propensity to spend is higher for the unemployed then it is for people with money who pay into UI. That might mean trouble when you have a large number of savers (as in a depression), but people forget that UI transfers are hedged against future savers, not current ones.

Unemployment raises the reservation wage, the wage at which people are willing to leave unemployment for a job. However, if there is no demand for labor, that effect is irrelevant.

[TheOcho]

Paul Krugman is a leftist jackass. He skews examples, analogies and data to ram his leftist ideology down the throats of his readers. It's generally safe to ignore his opinion.

There may be a double-dip recession, but I wouldn't read Paul Krugman with the hopes of learning why it may occur or the chances of its occurrence.

TITCR

[TheOcho]

Paul Krugman is a leftist jackass. He skews examples, analogies and data to ram his leftist ideology down the throats of his readers. It's generally safe to ignore his opinion.

There may be a double-dip recession, but I wouldn't read Paul Krugman with the hopes of learning why it may occur or the chances of its occurrence.

Krugman is indeed a leftist hack outside economics (just look at his columns during the waning months of the Bush admin.). But, within economics he is really good. And no one can deny that his calling of the housing bubble a long time before anyone else is a feather in his cap and one of the reasons for his nobel. He has been right about the size of the recession all along, while the white house radically underestimated it. He called for a bigger stimulus in order to avoid depression back in November of 08, and he was right--just look around.

Actually, Peter Schiff predicted the housing bubble collapse long before Krugman. He wrote an entire book about it prior to the collapse, and in specific detail to boot.