Friday, July 30, 2010

Stimulation!

No, gentle readers, we're not talking about the kind of stimulation that you get looking at Kim Kardashian's ass - we're talking about stimulating the economy with Paul Krugman! Frequently quoted as saying that the Obama stimulus didn't go far enough, Krugman's new plan is to make us all trillionaires!



Yes, the Krugster plans on giving out $100 trillion to every American. "It worked great in Zimbabwe! There's a country that doesn't listen to racist critics, but goes ahead with macroeconomic enhancement." Krugman was alleged as saying some time or another. "The twin blades of monetary policy and price and wage controls will soon have us spending our way to prosperity!"

Krugman appeared on some show or another, holding samples of the Zimbabwean $100 trillion dollar bills "to be used as a model" for our own growth. Go get 'em, tiger!

And to you, gentle readers, since you've been so good to read through this post, here's a bonus picture of Kim Kardashian's ass:

19 comments:

Pro Libertate said...

Here's a case where I guy throws every principle and bit of reason out of his brain to support his political leanings. Note for the young: If you have to stop thinking and stop behaving honorably to support your cause, there just may be something wrong with your cause.

BakedPenguin said...

Intellectual honesty can be painful. I always think of Darwin, who used to write down any facts he found that seemed to argue against evolution. I doubt I could be that good, but that's the goal.

Krugman is just a hack at this point. I find it interesting that the people who actually argue that the stimulus "should have been bigger" don't follow it to it's logical extreme - but then, my joke picture is pretty much the logical end to that kind of thinking.

BakedPenguin said...

Oh, and I actually have some of those Zimbabwean Trillion dollar bills - $10, 20, 50 & 100 Trillion. My brother asked me to get some for him, and the guy I bought them off of sent a short history of the Zimbabwean hyperinflation. I think the people selling them have relatives in Zimbabwe who were getting a chunk of the money ($10).

Pro Libertate said...

Are you sure they aren't counterfeit?

Ha, ha.

joe said...

Kurgman was saying the stimulus was too small before it passed. Might harsh on someone for being right.

Of course the stimulus was too small, as there was no net stimulus. The federal stimulus was smaller than the state and local cuts.

joe said...

And people with a platform that is particularly ripe for "no roads, no police, no fire department" distortions should be a little more honest with the term "logical extreme."

BakedPenguin said...

joe, taking wealth from those who are creating it and giving it to those who are not is not a way to produce wealth. Yet that is the stimulus in a nutshell.

Admittedly, some functions that do not directly produce wealth (like cops) are very necessary - but that's not where the money went, (and it's not like we exactly have a shortage of cops in this country). The stimulus went to political favorites (the UAW via Chrysler & GM) to produce crap that people wouldn't pay for of their own accord, boondoggle projects that have nothing to do with real infrastructure, and the connected. Krugman and you are wrong, and the only good news is that the idiocy is going to stop when the Democrats get their nuts slammed in the next election.

The bad news is that the Republicans will get more power.

Pro Libertate said...

BP,

You're hitting the problem square on the head. Misbehavior by either party strengthens the other party when it takes power. I could live with a two-party system if the parties didn't view themselves as a dichotomy of party only. In other words, it's not the ideas or the policies that matter, it's just which party is in control.

The stimulus is a good example of what's wrong with the system today. Regardless of whether it could do anything to improve the economy--though I tend to think it's much less efficient than allowing private actors to spend their own money and failed miserably when tried in Japan--the net effect of stimulus spending definitely seems to be to boost interests that support the ruling party. If history is any example, when the GOP is back in power, they'll probably buy some votes with their own stimulus.

joe said...

joe, taking wealth from those who are creating it and giving it to those who are not is not a way to produce wealth.

Is this the part where I cross myself or where I genuflect three times.

I hate to go all "Ekon 101" on you, but demand-replacement by the government during periods of unused capacity is textbook stuff, objectively demonstrable. That you can't even consider the subject except as a moral exercise - "taking wealth for those who created it!" "The stimulus went to political favorites" "boondoggle projects" - is an indication that you have neither knowledge nor inclination to consider this question except as a moral, ideological one.

Well, you're entitled to your opinion about the morality of government. You're not entitled to your own facts. Your position here obviously isn't based on numbers, anyway, so why bother to put for the stalking horse?

joe said...

Oh, btw - a million people didn't get thrown out on the street because of the auto bailouts, and now, contrary to the faith-based certainty you expressed at the time, the government intervention was not just wasted, but actually brought about structural reform in how the car companies were run that turned them into sustainable, successful, profitable, going enterprises going forward.

BakedPenguin said...

Pro Lib - You're right, of course, the R's will be buying their own votes, and they will probably boast about how their stimulus is "prudent" and shows their small government cred.

joe - demand replacement by the government is perfect Keynesianism, along with the distortions and malinvestment it creates. Yup, you have Ekon 101. I have reality and history. (Japan: 1990-2002) Also, I bet I could create a self-sustaining auto company if you gave me $24B. Oh, that's right, they "paid back the loan" - $16B.

BTW, this is the second time in my lifetime that Chrysler has been turned into a "self-sustaining company" by massive government support. But I'll STFU about this, and we'll see what happens with GM and Chrysler.

BakedPenguin said...

Also, I'm very, very, disappointed that no one appreciated the photo of Kim Kardasian.

joe said...

joe, taking wealth from those who are creating it and giving it to those who are not is not a way to produce wealth.

Of course, nothing is "taken" from anyone - not even Randian ubermenschen who "created" it with their abiding awesomeness and iron wills - during a Keynesian stimulus. The money is borrowed, or printed. Hence, in the short-term, the stimulus does indeed produce wealth - unless you'd care to argue that several hundred billions of dollars pushed into the economy can vanish without a trace. Perhaps the government contractors and taxpayers simply took the extra money in cash and devoured it on the spot, for instance.

Now, the question is whether the economic activity produced by that wealth, both initially and through the multiplier effect as it is repeatedly turned over within the economy, overtakes the debt + interest necessary to pay it back when the economy is booming.

Even if we're to ignore everything the field of economics teaches us about multipliers and pump-priming, we still have the fact that the government deliberately, as a matter of policy, uses monetary tightening during such expansions in order to cool off the economy, to avoid inflation and bubbles. If the result of paying down the accrued debt is merely to cool off the economy by X%, and the government forgoes tightening that would have reduced GDP growth by X%, then we have lost literally no economic expansion as a result of that stimulus debt, while enjoying the expansion brought about by the spending.

It's also worth noting that stimulus spending takes place when debt is extremely cheap, and labor and materials cheaper as well, so to the extent it just time-shirts infrastructure spending, it works to reduce the cost of that spending.

joe said...

I have reality and history.

No, you don't. You would be hard-pressed to find any economists or economic historians not on the payroll of political organizations who would agree with you.

Also, I bet I could create a self-sustaining auto company if you gave me $24B. Oh, that's right, they "paid back the loan" - $16B.

That's funny - when the auto bailout was actually done, you - you, personally - told us exactly the opposite: that the money would be wasted, and the spending would merely push back the date that those companies failed, while actually serving to discourage the very restructuring necessary to turn them into profitable, but smaller, companies.

You told us this couldn't happen - that not only could the government takeover could not work, but that it would actively prevent the necessary restructuring, because those mean, mean "cronies" and unions would just pocket the money. You made this assertion for exactly the same reason that you're sure stimulus spending couldn't possibly produce wealth - because there is just no way that the allocation of resources by those working for the public interest could increase efficiency.

Not so much, as it turns out.

BTW, this is the second time in my lifetime that Chrysler has been turned into a "self-sustaining company" by massive government support. But I'll STFU about this, and we'll see what happens with GM and Chrysler.

Both are now posting profits - and not just profits inflated by the bailout money. Their operations are now profitable. The case is closed. If their private-sector owners proceed to run them into the ground again in five years, that will tell us nothing about the efficacy of the takeovers. The government turned those companies into going concerns. Turned, past tense. It is done.

joe said...

The problem with Japan in the 1990s was one of an unreconstructed banking sector that wouldn't write off losses in the real estate market. If someone wants to make an argument that our banking sector is similarly unreconstructed, be my guest. Just note that this has nothing to do with the efficacy of fiscal stimulus.

Look, Pro Lib, maybe you're right. Maybe Paul Krugman, who haz Ekon 101 (and the Nobel Prize for Economics, and a lengthy career as an economist in government and academia, and a high level of respect within the economics profession) is wrong to believe the principles of economics as understood by the field. Maybe you understand the economy and the effects of government spending much more than he does.

Nonetheless, his articulation of a position that is uncontroversial among economists and grounded in the state-of-the-art of the economics field, but which flies in the face of your politics, doesn't make him a "hack" who "throws away principle," "stops thinking and stops behaving honorably," find "intellectual honesty...painful," etc.

BP said...

you, personally - told us exactly the opposite: that the money would be wasted, and the spending would merely push back the date that those companies failed, while actually serving to discourage the very restructuring necessary to turn them into profitable, but smaller, companies.

Here's the difference - my company wouldn't have the same contracts with the UAW that GM and Chrysler do. Actually, you're probably right - it would have to, since I'd be beholden to political interests who would demand it. So you're right, I couldn't create such a company.

For that reason, I don't think GM or Chrysler will become self-sustaining. Also, stating that they are good because of one quarter of profitability is BS, and you know it. GM lost almost $10 a share in 4Q 2009. That they made $2 a share in 1Q 2010 is nice, but says little about their long term outlook.

Hence, in the short-term, the stimulus does indeed produce wealth - unless you'd care to argue that several hundred billions of dollars pushed into the economy can vanish without a trace.

That wealth is ultimately taken from everyone else who has dollars. If they could create real wealth that way, Zimbabwe would be rich.

nick m. said...

Who cares about Kim? Let's see some Khloe

joe said...

"Here's the difference - my company wouldn't have the same contracts with the UAW that GM and Chrysler do."

That's not actually a difference, because you made these assertions knowing that those nasty, evil unions had contracts.

"Also, stating that they are good because of one quarter of profitability is BS, and you know it. GM lost almost $10 a share in 4Q 2009. That they made $2 a share in 1Q 2010 is nice, but says little about their long term outlook."

Need I point out that they turned this profit 1) in a quarter when the economy sucked, and 2) that this represents a turnaround? Yes, going from losing money to making money demonstrates a change.

So, why don't you lay down a marker? How many quarters of profitability will it take before you acknowledge that GM is now a going concern, and that you were wrong to say that it would be reformed into one via the bailout?


"That wealth is ultimately taken from everyone else who has dollars."

The key word being "ultimately."

Ultimately, companies who take out loans to expand profitable operations have to pay it back, too.

So?

BakedPenguin said...

They generally do so with the consent of the lenders.

And let's see next quarter's performance for GM. I'm willing to bet $10 that it will be a loss, if you're up for that. I'd bet more, but I can't find a decent job right now...