The Third Depression

Paul Krugman sounds the alarms:

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

[. . . This is] the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

(Emphasis supplied.)

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    Well (5.00 / 2) (#1)
    by jbindc on Mon Jun 28, 2010 at 07:24:37 AM EST
    Now I'm depressed.

    Sean Paul Kelly, commenting on Ian Welsh's blog... (5.00 / 2) (#3)
    by Romberry on Mon Jun 28, 2010 at 07:38:31 AM EST
    ...said something I thought was interesting, mostly because it strikes me as true:

    Repeat after me: austerity is socialism for the rich.

    The Wall Streeters and the banksters and the bondholders got theirs up front, and they will reward those who paid the bill with the imposition of austerity  (which is exactly in line with what Simon Johnson told us to expect over a year ago.)

    The austerity "cure" has been tried before, both at the beginning of the Great Depression and later, in what amounted to an economic laboratory test for the Chicago School boys, in Pinochet's Chile.

    The elite who seek to impose these measures are not stupid. They know what they are doing. They know that they won't be the ones to pay the price.

    Krugman is often called shrill. Today may be the shrillest column he's ever written. But I think that in Krugman's case, "shrill" just means that he's uncomfortably (for the elite) right. And we know what it means to be right -- especially if you are right too soon. It means kiss of death in policy circles.

    Just as the critics of the Iraq war were shut out of the debate after being right, and the war cheerleaders continued to be sought after for advice after having been wrong, so it seems that Krugman and Stiglitz and others who do not seem to have lost their minds are not really welcome at the table. After all, being right isn't the same thing as being "serious."


    What is the entrenched elite which can (none / 0) (#4)
    by observed on Mon Jun 28, 2010 at 07:42:18 AM EST
    oppose the bankers? Our governments are co-opted by the predator class so that resisting austerity, as some countries managed to do with great success in the 90's, is not possible.

    It won't be the elite. (5.00 / 1) (#5)
    by Romberry on Mon Jun 28, 2010 at 07:51:34 AM EST
    Why would it be the elite that oppose these measures? These measures serve their interests.

    Lambert at Corrente had it right. The pitfalls and drawbacks of austerity for the working classes are features, not bugs.

    Anyway, it won't be the current elite that oppose austerity. If it happens at all, it will be the people. And on that count, I am less than optimistic. Too much indoctrination with free market faery dust for too long and without any faery dust antidote being administered by "the party of the people." (Ha!)


    There is a class within the elite (5.00 / 2) (#7)
    by inclusiveheart on Mon Jun 28, 2010 at 08:04:10 AM EST
    that won't survive a real Great Depression in tact.  Of course, many in that group have no clue that they are at risk as well.  That their more modest home down the street from Mr. Big CEO's mansion will suddenly become unaffordable for them.  That their lives will be turned upside down.  That they will lose their elite status.  Because the next round, if it does come to pass will only tighten the circle of how many can be in the elite group even more.  The concentration of wealth will intensify.

    This subject makes my blood pressure (none / 0) (#11)
    by observed on Mon Jun 28, 2010 at 08:07:47 AM EST
    soar. What I find so infuriating is that  the right wing/banker class have been almost completely transparent. The fact they want to eliminate the middle class and turn everyone outside a small, merit-based elite (merit being defined by membership in said elite) has been an explicit goal of the GOP for decades.
    What do people mean when they hear someone like Karl Rove say that they want to return the US to the conditions of the 1890's????

    oops.. turn the rest of the people into (none / 0) (#12)
    by observed on Mon Jun 28, 2010 at 08:09:50 AM EST
    a politically neutered working class bloc, I meant to say. The working class, having to work too many hours, will not be able to spend time on politics, except to watch TV and see who they should vote for.

    I knew that we were going to end up here (none / 0) (#33)
    by Militarytracy on Mon Jun 28, 2010 at 09:52:15 AM EST
    And I did not want to but too bad.  We have lived our lives though in the past three years as if this was going to happen and we made our financial decisions as if this were going to happen, but I always argued to avoid it.  Too bad though.  We will get HOLC though eventually.  There will be no other choices, it will be a forced hand and that brings me no joy.

    Much of the liberal elite (none / 0) (#43)
    by Militarytracy on Mon Jun 28, 2010 at 10:21:15 AM EST
    that is always mouthing off and telling the rest of us to go get bent are not employed in the job sectors that will be considered absolutely vital and save worthy.  They are so screwed.  Sort of cracks me up.

    Me too (none / 0) (#68)
    by Ga6thDem on Mon Jun 28, 2010 at 11:17:09 AM EST
    We are sort of sick and twisted (none / 0) (#71)
    by Militarytracy on Mon Jun 28, 2010 at 11:23:50 AM EST
    but I'm tired of all those very serious liberals telling all the rest of us to go get bent.  They deserve to be unemployed.

    The people are powerless. I take that (none / 0) (#9)
    by observed on Mon Jun 28, 2010 at 08:04:52 AM EST
    as an axiom, especially  in the modern, industrialized world.
    Change comes through conflict between elites.

    There is not one elite. The problems (none / 0) (#14)
    by observed on Mon Jun 28, 2010 at 08:11:56 AM EST
    at hand currently are  the provenance of the banking class elite.
    The structure of our economy has changed so that banking/financial services is a huge chunk----people getting rich off of absolutely useless, unproductive shuffling of paper assets.

    That portion of the economy is (none / 0) (#44)
    by Militarytracy on Mon Jun 28, 2010 at 10:23:34 AM EST
    tightening quickly.  The fed has been juicing them stupidly and blindly.  When the rest of us don't have any money or jobs, they don't have anyone to scalp though.  Being predators is just about all over for them because there is no prey.

    Well, as long as the job market... (5.00 / 1) (#16)
    by mike in dc on Mon Jun 28, 2010 at 08:22:25 AM EST
    ...for law school grads remains unaffected, I can rest easy, right?


    Oh well, back to drawing up those "will litigate for food" signs...

    Dude (5.00 / 1) (#30)
    by jbindc on Mon Jun 28, 2010 at 09:44:43 AM EST
    There's a great place to beg - on the corner of 9th and Penn.  There's a couple of guys there already hitting the tourist market, as well as the workers at the FBI and DOJ.  I think they are out of work lawyers.....

    So, does this mean that the effects of (5.00 / 4) (#20)
    by Anne on Mon Jun 28, 2010 at 08:57:03 AM EST
    whatever Krugman was fed at his last very special meal at the WH have worn off?  Could there be a return visit in his future?

    Sorry to be so snarky, but Krugman has been AWOL for at least a year, giving us Obama-friendly columns, and failing on the economics of health care in a pretty big way.  Now, he's back and making all kinds of sense, but the question is whether it's too little, too late.

    The health whatever fight was the template for everything else that followed, and Krugman - who is probably the most visible and easy-to-understand columnist writing about economic matters - went AWOL when he was most needed.  In that time, plans have been moving forward for deficit reduction at the expense of safety-net spending, and the overall expense of everyone else who is looking for a job, trying to keep a job, and those who are still just one not-so-major problem away from falling into the abyss.

    He's right about what he's saying, but now, instead of being on the leading edge, he's getting on a bandwagon that even most of us without economics degrees have been on for some time.

    Better late than never?  Let's hope not.

    no that's not true (5.00 / 1) (#21)
    by CST on Mon Jun 28, 2010 at 09:13:07 AM EST
    he has been relentlessly critical of the economic policy of this administration all year long.  What I think many ppeople fail to realize is that it's possible for people to have different opinions on subjects (such as healthcare) without being a sellout.

    Krugman has never been an Obama shill.  Maybe he just disagreed with you.

    And he was saying this about the economy and the stimulus over a year ago before it was first passed, he's not "getting on the bandwagon" now.


    My bad, I guess... (5.00 / 2) (#28)
    by Anne on Mon Jun 28, 2010 at 09:41:46 AM EST
    I remember him being critical about the stimulus, but I stopped reading him on a regular basis a while ago because he did - to my eyes, anyway - undergo a shift, becoming much less critical of the administration, and really falling off the edge on the health whatever debate.

    Guess I will assign myself a reading of the Krugman archives...which I should have done before commenting.  Argh.


    Thanks Anne. (none / 0) (#36)
    by prittfumes on Mon Jun 28, 2010 at 10:06:02 AM EST
    Gotta thank you for the absolutely perfect "health whatever".

    I stopped reading him regularly for that reason (none / 0) (#38)
    by Militarytracy on Mon Jun 28, 2010 at 10:12:29 AM EST
    too Anne.  He did warn me though, he was upfront about it.  He wasn't going to literally waste his time arguing for the real solutions in his opinion because they had no hope of even being considered at this time.  He wrote this after meeting with the President in the White House with Joe Stiglitz.  He did say that things would get worse and then the real solutions he was arguing for could probably be heard then.  I had to quit reading him though because I felt like I was wasting my time and when he stopped making the real argument, I was too frustrated with his writings about not much of anything :)

    Actually, no (none / 0) (#82)
    by lambert on Mon Jun 28, 2010 at 12:14:29 PM EST
    Krugman's failure to write on "accounting control fraud" is one of those "Nobelist that did not bark in the night" stories that marks the boundaries of Krugman's "relentlessness," and shows quite clearly how Krugman stays in the limits of permissible discourse.

    Krugman's the best of 'em, no question. But our current plight demands a lot stronger stuff than he's willing to pour.


    I don't think that's entirely fair. (5.00 / 1) (#22)
    by Romberry on Mon Jun 28, 2010 at 09:16:17 AM EST
    Krugman has in some instances been AWOL, but this column today is nothing new. Krugman, in his column and on his blog, has been saying for months now that the inmates seem to have seized control of the asylum, and he's been pointing out how his arguments on the too small stimulus (essentially "Get it now and make it big, because if you don't, it won't work that well, people will say that it failed and there won't be a second chance") has in fact come to pass.

    Paul Krugman is far from perfect. He can be petty. He sometimes lets academic and professional relationships cloud his thinking. But overall, I think he's right far more than he's wrong, and I'm glad that he's on our side...even if he has occasionally been MIA.

    Shifting from Krugman to the president, this article from Reuters (via CNBC) is...well...people should decide for themselves what it is (and what's being said implicitly if not necessarily explicitly):

    Obama Says He's Serious About Tackling Deficits

    President Barack Obama said Sunday he would follow through on a pledge to rein in soaring U.S. budget deficits and said that would involve presenting Americans with "some very difficult choices" next year.


    "I'm doing it because I said I was going to do it," Obama said. "People should learn that lesson about me, because next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I'm calling their bluff."


    Obama said structural budget problems were looming as the aging of the U.S. population pushes up spending for health and retirement programs.

    "Even if we had not gone through this financial crisis, we'd still have to be dealing with these long-term deficit problems," Obama said.

    Anyone find that comforting? I can't say that I do. I take it to mean that retirees are about to take it in the shorts. The president's deficit commission isn't stacked with people who want to cut Social Security and underwritten by Pete Peterson for no reason. Generational theft is at hand. US Treasury securities are solid so long as they are held by foreign governments, central banks and investors. But the US Treasuries that make up the Social Security Trust Fund? "Mere IOU's" which mean "there is no trust fund" has been the talking points for some time.


    Thanks to the (2.00 / 1) (#23)
    by BTAL on Mon Jun 28, 2010 at 09:30:07 AM EST
    Social Security Act of 1965 - thanks a bunch "Oh Great Society" President LBJ.

    But the US Treasuries that make up the Social Security Trust Fund? "Mere IOU's" which mean "there is no trust fund" has been the talking points for some time.

    You are aware... (5.00 / 1) (#26)
    by Romberry on Mon Jun 28, 2010 at 09:38:10 AM EST
    ...that the "they're only IOU's" talking point is utter BS, right? That the special purpose treasuries in the trust fund are backed by the full faith and credit of the United States just like every other treasury instrument which, when held by others, is considered to be the safest investment in the world, right?

    The trust fund is most certainly real. It's made up of the dollars collected in payroll taxes over and above the amount that was needed to meet Social Security's obligations these past 25 years or so. The problem is that the people who spent that money and who benefited from enormous budget busting tax cuts tilted insanely to benefit the best off among us now don't want to pay back what they took out.


    It is not a partisan issue (none / 0) (#39)
    by BTAL on Mon Jun 28, 2010 at 10:14:51 AM EST
    on the spending/general fund issue when one looks at the effective end game status.

    The problem is that the people who spent that money and who benefited from enormous budget busting tax cuts tilted insanely to benefit the best off among us now don't want to pay back what they took out.

    AKA every elected congress-critter in office since 1965.

    The issue is that there are not enough dollars for the Treasury to redeem those most wonderful of wonderful securities.  


    There is as much money... (5.00 / 2) (#52)
    by Romberry on Mon Jun 28, 2010 at 10:34:24 AM EST
    ...in the US Treasury as the US Treasury needs to redeem those bonds, just the same as any other bond. That money can come from the issuance of new debt, from tax increases (on those who were the main beneficiaries of tax cuts paid for with money borrowed from Social Security) or from the printing press of the nation with the world's reserve currency.

    If you are saying that the United States can not redeem bonds that are backed by the full faith and credit of the nation (by law), then why are the Chinese buying our bonds? Why are bond funds like PIMCO buying our bonds? Why can those bonds be redeemed, but not the bonds held by the SS trust fund?

    If the US can't redeem its bonds, we have much more trouble than just Social Security and Medicare.

    The bottom line is that the bonds can be redeemed. All that is required is the political will to stand behind them. The reason that will seems lacking on the part of the elite at the moment is mainly because they don't want to fulfill their end of the bargain. That is to say that they don't want to pay back what they borrowed from workers. They want to steal it. Outright.


    Then no wonderful securities are redeemable (none / 0) (#48)
    by Militarytracy on Mon Jun 28, 2010 at 10:29:10 AM EST
    None of them.  There are enough out of work lawyers around here, I'll make sure that the rule of law is observed here.  Understand, you will never win this B.S. fight.  There are way too many of us out here fully prepared to kick your arse using only facts.

    It IS total B.S. (none / 0) (#41)
    by Militarytracy on Mon Jun 28, 2010 at 10:17:10 AM EST
    and those same IOUs are also U.S. bonds and treasury notes but magically those aren't worthless. Because if those were we would be totally fecked and every existing investor in almost anything and everything with us.  So until treasury notes and bonds are worthless, the IOUs to Social Security cannot be worthless.  It is impossible.

    The why all the fear (none / 0) (#49)
    by BTAL on Mon Jun 28, 2010 at 10:30:51 AM EST
    on the left regarding the gutting of SS?  Why has SS reform been a pressing fiscal issue for decades?

    Once the "trust fund" was rolled into the General Fund, all bets of future solvency were off.

    Grandma can't cash a Treasury Bond that can't be redeemed.  The only way to cover those will be firing up the printing presses to warp speed.  That will result in Krugman's wheel barrow portfolio to skyrocket.

    Go back and review Bernanke's 2002 speech "Deflation: Making Sure It Doesn't Happen Here"

    To quote:

    "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

    The "left" hasn't made... (5.00 / 3) (#56)
    by Romberry on Mon Jun 28, 2010 at 10:42:35 AM EST
    ...SS reform a "pressing issue for decades." The people who want to kill Social Security have made it a "pressing issue"...even though it isn't. Social Security is fully solvent until sometime around 2037-2044 (depending on whether you listen to the trustees or the CBO.)

    What you seem to be doing with your posts is talking in semantic circles. Whether that's from disingenuousness, indoctrination from talking points or ignorance is something I don't know. Regardless, you're chasing your tail.

    If the SS bonds are worthless, then all US bonds are worthless...and we have big, big trouble.

    The only way to cover those will be firing up the printing presses to warp speed.

    Ummm...no. As I said before, debt can be rolled over with the issuance of new debt to cover the redemptions. Taxes can become more progressive (by which I mean that those who benefited from tax cuts that were really loans of borrowed money can pay higher rates.) And finally, you can if necessary fire up the printing presses...which with the dollar being the world's reserve currency is not quite the problem you seem to think that it is.


    Because SS is our money (none / 0) (#54)
    by Militarytracy on Mon Jun 28, 2010 at 10:35:06 AM EST
    And it not less special than investors money.  It is the same money and nobody is stealing this money because I can't fecking afford to take care of the elderly number 1.  I have a disabled child to care for and two grandkids, my butt wiping hands are full up.  Number 2, these people paid and jerks like you will not shake them down and steal their last dime on your little propaganda spree.

    You must be having a bad day (none / 0) (#60)
    by BTAL on Mon Jun 28, 2010 at 10:46:08 AM EST
    with the nasty language that I've never seen in your debates/posts.  I've not attacked your or anyone else here, just attempting to debate an issue of critical importance to our country.

    As for the money paid into SS, all of us are in the same boat.  I didn't spend all the money nor did just the folks on the R side of the aisle.  That is pure partisan talk that has no basis in fact.

    The SS "problem" did not arise in the 8 years of the previous administration.

    As an aside, you might want to review how the FDR DOJ defended the constitutionality of SS at the time.  It was argued in court that the contributions were a tax.  Which BTW, the current DOJ took the same position in a recent filing regarding the HCR mandate.  That is in passing and not an attempt to side track the discussion.


    Just looking for any old loophole (5.00 / 1) (#62)
    by Militarytracy on Mon Jun 28, 2010 at 10:51:05 AM EST
    aren't you?  Too bad jerking something out of the dust bin won't work. You don't get to change the rules for some and not for all others to make stealing money easier.  It isn't going to happen.

    When Krugman posts on the role of fraud... (5.00 / 1) (#55)
    by lambert on Mon Jun 28, 2010 at 10:40:39 AM EST
    ... in the financial collapse, I'll start reading him regularly again.

    Elite impunity is a big part of the problem, and Krugman doesn't even pussyfoot around it; he ignores it.


    Oh come on. (5.00 / 1) (#59)
    by Romberry on Mon Jun 28, 2010 at 10:45:08 AM EST
    That's ridiculous and not that much different from throwing a tantrum.

    Krugman may not address what you want him to address (though if you aren't reading him, how the hell will you know?), but that doesn't mean that he doesn't have anything to offer.

    I read and link to your posts at Corrente on a pretty regular basis. But this stance of yours does not strike me as well considered.


    Ooooooh, infantilization! (2.00 / 1) (#79)
    by lambert on Mon Jun 28, 2010 at 12:11:35 PM EST
    Always an effective rhetorical tactic! Well done, romberry!

    If you won't listen to me, go read William Black at Bill Moyers on "accounting control fraud." Black was a former prosecutor in the S&L episode of looting, and very successful.

    Then come back here, and answer the question of why Krugman won't post on it.


    Lambert, like I said... (5.00 / 1) (#84)
    by Romberry on Mon Jun 28, 2010 at 12:31:20 PM EST
    ...I read and link to your posts often. I am well aware of Bill Black and what he has to say and I have excerpted and linked to his articles and appearances numerous times...which is to say that I agree with him. What Bill Black has to do with Krugman and what Krugman does or does not write is something that you seem very concerned with but which I consider irrelevant.

    Krugman is far from perfect. I don't know any perfect people. That includes me. And that includes (only be way of your writings) you.

    You call it infantilization? Fine. That's just a dodge...and an imperfect dodge at that. It appears to me you threw it out there to avoid addressing my actual point:

    Krugman may not address what you want him to address (though if you aren't reading him, how the hell will you know?), but that doesn't mean that he doesn't have anything to offer.

    You can address the point or not. I'll still read your posts at Corrente and I'll still link 'em and excerpt 'em. But on this issue, I'll be damned if I understand where you are coming from or what it is you think you're trying to do. In any case, we don't agree.


    Well, I don't know what you'd call verbiage... (none / 0) (#95)
    by lambert on Mon Jun 28, 2010 at 04:18:43 PM EST
    ... like "throwing a tantrum" but infantilization.

    Perhaps you can suggest a more appropriate word?

    * * *

    Here's a major issue: Pervasive fraud at the CEO level. That's what accounting control fraud is, by definition. Can you give me a good reason why a political economist like Krugman wouldn't post on it? Imagine we were in the midst of the Teapot Dome scandal, and the liberal columnist with the largest bully pulpit of that day maintained radio silence. Wouldn't you want to know the answer? Wouldn't you expect an opinion and thought leader to express view? Wouldn't you find the silence resounding?

    And if you don't, why don't you?

    * * *

    What on earth do links have to do with the question? The words are what they are, and the argument is what it is.


    The world's most passive aggressive commenter... (1.00 / 1) (#96)
    by lambert on Mon Jun 28, 2010 at 04:22:04 PM EST
    ... weighs in.

    I rest my case.


    Whoa, too meta (none / 0) (#103)
    by lambert on Thu Jul 01, 2010 at 11:46:51 AM EST

    Once again lambert (none / 0) (#64)
    by Militarytracy on Mon Jun 28, 2010 at 10:55:15 AM EST
    You bring the fact to the table that makes it very clear to me that nobody gets money from me in this political climate and reality except you!  Thank You

    And we know that Krugman reads you (none / 0) (#65)
    by Militarytracy on Mon Jun 28, 2010 at 10:56:31 AM EST
    Second reason today to pay lambert.

    In case anyone wants to catch up (5.00 / 1) (#70)
    by ruffian on Mon Jun 28, 2010 at 11:22:42 AM EST
    here is the Unofficial Paul Krugman archive.

    In just a quick review I find three columns from last August sounding the same alarms he is sounding today, and are critical of the administration.

    It is natural that since he is the most prominent progressive economist, with a national column, we want him to always be as 'shrill' as possible. I wish we had more prominent economic voices to play off each other and pick up balls the other might drop. Robert Reich plays this role on the national stage, but I can't think of anyone else that gets a voice in the MSM. Dang that liberal media.


    Did you miss the sleight of hand? (5.00 / 2) (#24)
    by me only on Mon Jun 28, 2010 at 09:35:12 AM EST
    up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence.

    Yeah, that is what the clamoring of the Tea Party is about, raising taxes.

    The sadder part is that Krugman can write this:

    And it's true that bond investors have turned on governments with intractable deficits.
    and then not understand that is the problem facing several states in the US.  The states in the US facing fiscal problems are doing so because of the structural problems they have.  They have raised spending levels beyond population growth and inflation.  They needed the real estate bubble to continue to finance their budgets.  A bubble cannot be propped up.

    He was talking about European leaders, not (none / 0) (#40)
    by esmense on Mon Jun 28, 2010 at 10:16:27 AM EST
    the Tea Party. Or even the US government. Go back and read it again. He makes a distinction between the remedies proposed and/or followed in Europe and the US. He makes the case that both remedies are wrong-headed, but not because they are exactly the same remedies -- but rather because they are the same in their assumption that econcomic leadership means "being tough" and making "other people" pay.

    Ah, so we are now worrying about (1.00 / 1) (#25)
    by jimakaPPJ on Mon Jun 28, 2010 at 09:35:44 AM EST
    the working class, are we?

    How nice.

    Want to fix things?

    1. Break up OPEC and let oil go to its natural price level of under $10.00. Monopolies aren't tolerated within the country, so why should we tolerate one in the world?

    2. Cut taxes. Immediately. That will get money in the pockets of those who will spend it.

    Next problem?

    Cut taxes? (5.00 / 2) (#27)
    by Militarytracy on Mon Jun 28, 2010 at 09:39:54 AM EST
    Really?  40% of our debt shortfall is there because of the Bush tax cuts.

    Attempting to build a time machine to (5.00 / 1) (#34)
    by observed on Mon Jun 28, 2010 at 09:55:49 AM EST
    change the result of the 1980 election has more chance of success than  his suggestions.

    True (none / 0) (#35)
    by Militarytracy on Mon Jun 28, 2010 at 10:04:59 AM EST
    This type of economic decision though is built into our human conditioning unfortunately.  Mankind is so addictive, we just can't seem to understand that it isn't all or nothing when it comes to money....there is a balance.  But as people begin to suffer, many of them will call for Everything to have a tightened belt and they don't get it that the belt isn't around their waistline, it is around their throat.

    You made a comment the (none / 0) (#88)
    by jimakaPPJ on Mon Jun 28, 2010 at 01:25:52 PM EST
    other day noting that your husband's job is not threatened.

    In the real world jobs are threatened and people are laid off.

    Cutting taxes worked for Kennedy, Reagan and Bush.


    Myth: Reagan cut taxes (5.00 / 2) (#98)
    by waldenpond on Mon Jun 28, 2010 at 06:24:23 PM EST
    The most well known myth of all.

    Reagan cut taxes in year one and then raised taxes repeatedly.  $165 billion in 83 for SS, $100 billion tax reform, gasoline tax and $50 bill to close business tax loop holes.

    Then in 86 progressive restructuring raised corp rates by $120 billion over 5 years and closed corp loopholes for another $300 billion.


    The subject was FIT rates (none / 0) (#100)
    by jimakaPPJ on Mon Jun 28, 2010 at 10:50:56 PM EST
    And in a consumption driven economy that is important.

    Excellent short sweet info (none / 0) (#102)
    by Militarytracy on Tue Jun 29, 2010 at 09:28:19 PM EST
    In this situation it will not (none / 0) (#101)
    by Militarytracy on Tue Jun 29, 2010 at 09:26:52 PM EST
    I'm not going to tell you that tax cuts never work, because that isn't true.  In the current climate though Jim taxes are not what is ailing us.  Taxes aren't strangling corporations at all, they have enormous tax loopholes now and barely pay anything.........and that is part of the deficit problem now.  In this instance, tax cuts will not accomplish anything.  They will not create the jobs that are needed, and soon businesses of every shape and form are going to be hurting because there is nobody to sell goods and services to.  The corporations need to pay their fair share in taxes, that money must go into job creation that is not funneled through anything that is trickle down.  We need large multipliers.  It is really too late though anymore.  I think we have turned a corner where a certain number of jobs have disappeared for at least fifteen years.  And no tax cut is going to help that.  Things should have never been allowed to come to this point.  This is the legacy of the Bush years, and the Bush deregulation and unenforced regulations.  In economics though, knee jerk solutions are like a broken watch....they are right twice in every 24 hours.

    yea (5.00 / 1) (#37)
    by CST on Mon Jun 28, 2010 at 10:06:49 AM EST
    and the lower/lower-middle class isn't paying much in taxes today anyway if they are paying any at all.  Cut taxes for the unemployed?  That will do what exactly?  They need a whole lot more money than that.  One that you get from, oh, a JOB.

    I don't know about that... (none / 0) (#47)
    by kdog on Mon Jun 28, 2010 at 10:26:37 AM EST
    my lower middle arse pays a nut that is nothing to sneeze at to the feds, the state, the county...if I bought cigs with a tax stamp on 'em, forget about it.

    It's a myth that working people pay little to no taxes...I'm sure you pay a nice nut too CST.


    The rich pay very little (none / 0) (#50)
    by Militarytracy on Mon Jun 28, 2010 at 10:31:36 AM EST
    We've had to give families a break or we would have blown everything up much earlier than this.  The single and childless middle class have been a wonderful sector to literally rape.  Sorry.

    Sh*t happens:)... (5.00 / 2) (#57)
    by kdog on Mon Jun 28, 2010 at 10:44:11 AM EST
    call off the mercs and stop calling me criminal and I wouldn't feel so bad about kicking in my 4 large...it's only money.  It's what is done with the dough that gets my goat...funding another guy's protection racket, funding my own demise.

    as a percentage (none / 0) (#61)
    by CST on Mon Jun 28, 2010 at 10:49:05 AM EST
    maybe, but as a total $ amount, it's not enough to turn the economy around.  And it does absolutely nothing for those who make nothing and pay nothing.

    Although I wasn't thinking about sales taxes and the like, mostly just income.

    But when you talk about cutting taxes for people it's a race to the bottom because there is only so much that can help (not enough).  When you talk about jobs, the sky is the limit.


    But the jobs we seem... (none / 0) (#66)
    by kdog on Mon Jun 28, 2010 at 11:05:35 AM EST
    interested in creating are cops, prison guards, collection agents, and don't forget occupiers...to hell with that mess, I'll take a tax cut and give a bush doctor a job stimulus package myself.  

    I wonder if a million working stiffs with 2 grand cash in hand would be a better economic stimuli than a central planner with 2 billion in hand...I tend to think the working stiffs.


    I know you don't like them much (5.00 / 2) (#67)
    by CST on Mon Jun 28, 2010 at 11:12:17 AM EST
    but "central planners (mayors?)" employ a lot of working stiffs, none of whom are cops, prison guards or other types of occupiers.

    Construction workers, engineers, architects.  A lot of the people who got laid off by the housing bust.

    And then there are those who weren't mentioned, like teachers or social workers who are also employed through government funds.


    There is the good stuff too... (none / 0) (#73)
    by kdog on Mon Jun 28, 2010 at 11:26:44 AM EST
    no doubt...why can't we just stick to that?  We'd probably have a little left over for a tax cut too if we sh&t-canned the tyranny sector jobs that cause harm.

    Except (none / 0) (#76)
    by jbindc on Mon Jun 28, 2010 at 11:44:52 AM EST
    Many people (who actually vote) like the idea of more cops and firefighters and such.  Many people who don't like lots of cops et al don't tend to vote.  Who do you think politicians will listen to?

    I think if you put (none / 0) (#81)
    by CST on Mon Jun 28, 2010 at 12:13:17 PM EST
    the war on drugs to a popular vote - even those that regularly make it to the polls might vote to scale it down.

    That would mean fewer DEA jobs at the least.

    In fact, I'm pretty sure just about every time it's come up in a ballot initiative that's exactly what happens.  The problem is not the voters.

    As for the fact that many people who don't like cops don't vote - the fact is, many people who don't like cops CAN'T vote (former felons) because that right has been taken away from them.


    Chicken or egg I guess (none / 0) (#92)
    by jbindc on Mon Jun 28, 2010 at 02:16:15 PM EST
    Would many of these same people who can't vote because they are felons vote if they weren't felons?  Did they vote before they became felons? My hunch is no - they were not called by a civic duty to vote.

    And you may be right about the question of pot (I don't think all drugs being legalized would do it) - in some areas.  But that doesn't account for the fact that people like police patrolling their neighborhoods, or not being an hour away when they call 911.


    unfortunately (none / 0) (#83)
    by CST on Mon Jun 28, 2010 at 12:25:16 PM EST
    it seems like whenever states run out of funding, teachers, social workers, and other "social programs" are some of the first to go.

    As for why?  You'll have to ask a power greater than me for the answer to that one.


    Now you see... (none / 0) (#86)
    by kdog on Mon Jun 28, 2010 at 01:14:31 PM EST
    why I'm down on central planners, or at least the ones we employ for budgeting.

    They've got power, just not sure about brains or a conscience:)


    Really? (none / 0) (#89)
    by jimakaPPJ on Mon Jun 28, 2010 at 01:28:21 PM EST
    I don't think you are familiar with FIT tax rates.

    I can do math (none / 0) (#91)
    by CST on Mon Jun 28, 2010 at 01:30:44 PM EST
    FIT are significantly less than 50% of your income if you are middle/lower class.  What do you think helps people more - lower taxes or a job?

    Gee (none / 0) (#93)
    by jimakaPPJ on Mon Jun 28, 2010 at 03:17:08 PM EST
    Only 50%????

    Actually the real tax rate on income of around $100K is about $18K.

    That is a lot of people. Cut it to about $12K and you have a real stimulus.


    I am not worried (none / 0) (#94)
    by CST on Mon Jun 28, 2010 at 03:21:49 PM EST
    about those making 100K right now.

    Again - what is more "stimulus", 6K for those making 100K, or a job for someone who's unemployed?


    To be fair, the question also may be (none / 0) (#97)
    by Cream City on Mon Jun 28, 2010 at 04:26:08 PM EST
    about what is more doable, and doable sooner.

    Some tax cuts for the employed to stimulate the economy can be accomplished sooner, in some political readings, and a stimulated economy could begin to create jobs for some of the unemployed.

    That's one way to view it.  Not saying it's the best way, but it has its inherent logic.  And it encompasses both groups, rather than an either/or that continues to pit them against each other -- which the elites already do so well.


    The shortfall exists because (none / 0) (#87)
    by jimakaPPJ on Mon Jun 28, 2010 at 01:22:52 PM EST
    the economy tanked.

    Increasing taxes on everyone, which Obama plans to do next year by letting the Bush tax cuts expire will just drive another stake in the economy's heart.

    The economy tanked because the housing bubble burst. And while the Feds had a handle on that by 4/2008, the increase in oil prices from around $85 a barrel to around $145 by mid July and the resulting $5 diesel and $4.5 gas fueled additional foreclosures.

    The death spiral resumed with appropriate Side Boys of Democrats chanting, "No new drilling."


    Break up OPEC? (none / 0) (#53)
    by ruffian on Mon Jun 28, 2010 at 10:35:02 AM EST
    How, pray tell, do we do that? Best way I can figure is to stop using so much oil, but you would call government intervention to make that happen some kind of a socialist plot.

    Oh, I would start with (none / 0) (#90)
    by jimakaPPJ on Mon Jun 28, 2010 at 01:29:35 PM EST
    diplomacy and go from there.

    Bastille Day is coming up, right? (none / 0) (#2)
    by observed on Mon Jun 28, 2010 at 07:33:46 AM EST

    Krugman must hold a huge position (none / 0) (#6)
    by BTAL on Mon Jun 28, 2010 at 07:58:13 AM EST
    in wheel barrow manufacturing.

    His position ensures every American (and others across the world) will need at least one to transport their worthless fiat Dollars to the supermarket.

    Except this depression (5.00 / 1) (#31)
    by Militarytracy on Mon Jun 28, 2010 at 09:47:01 AM EST
    could be avoided with stimulus.  Then you have new jobs paying new taxes.  Now we are going to destroy existing jobs.  A huge factor in all of this is the problem that corporations make huge profits and pay very little taxes. Of course they were supposed to be creating retirements for people and now we know that isn't happening either.  The corporations will experience this too now, it would be so much easier if everyone just paid their fair share to support the infrastructures that create a civil society for all of us.  It is pointless for me to yak to people like you about it though, you will have to experience it before you can change your mind.....but then it is too late to quickly and easily turn it all around.  So be it though, there isn't anything I can do about it.

    Buy duct tape (5.00 / 1) (#32)
    by jbindc on Mon Jun 28, 2010 at 09:51:23 AM EST
    What new jobs? (none / 0) (#42)
    by EL seattle on Mon Jun 28, 2010 at 10:20:18 AM EST
    My biggest problem with Krugman's line of thinking here is that it seems to ignore the fact that many of those milions of lost jobs aren't just temporary job cycle losses.  They're jobs that been replaced by advances in hardware/software and distribution technology.  These are jobs that have been lost through the closure of newspapers, local travel agencies, independent accounting firms, book and music stores, etc.  These workers now have to change industries, but no one knows for sure where any reliable future demand will be, even if they go back to school for fresh training.

    When Krugman says "some of whom will never work again,"  he  makies it sound like these unemployed folks are physically crippled or something.  I'd rather see him give a list of what he thinks the sustainalble 21st Century growth industries will be at the local level.  


    But a lot of them (5.00 / 1) (#51)
    by jbindc on Mon Jun 28, 2010 at 10:33:04 AM EST
    Are service jobs. How many telemarketers or tech support call centers are based here in the US.  I'm an attorney who does project work - reviewing documents on a computer for complex litigation and government investigation cases - guess where my job is starting to go?  India.

    The only good secure jobs left will be morticians and grave diggers.


    Health services (5.00 / 1) (#58)
    by ruffian on Mon Jun 28, 2010 at 10:44:26 AM EST
    will be big. I'm trying to remember what else was on just such a list I saw earlier this.

    Unfortunately not everyone is cut out for working as a health care provider.


    It will take ten years to turn this (none / 0) (#46)
    by Militarytracy on Mon Jun 28, 2010 at 10:26:12 AM EST
    depression into something that can grow.  It will take years after that to create the jobs that will put us all to work.  So for many, if they must wait 15 years to work again it won't be happening for them.

    Wow (none / 0) (#8)
    by Big Tent Democrat on Mon Jun 28, 2010 at 08:04:39 AM EST
    Fiat. Have heard that word since Bretton Woods.

    Have NOT (none / 0) (#10)
    by Big Tent Democrat on Mon Jun 28, 2010 at 08:04:55 AM EST
    You probably avoid Ron Paul qnd his acolytes (none / 0) (#13)
    by Molly Bloom on Mon Jun 28, 2010 at 08:11:12 AM EST
    For general information (none / 0) (#15)
    by Big Tent Democrat on Mon Jun 28, 2010 at 08:20:25 AM EST
    Meanwhile, to bolster faith in the dollar, the U.S. agreed separately to link the dollar to gold at the rate of $35 per ounce of gold. At this rate, foreign governments and central banks were able to exchange dollars for gold. Bretton Woods established a system of payments based on the dollar, in which all currencies were defined in relation to the dollar, itself convertible into gold, and above all, "as good as gold". The U.S. currency was now effectively the world currency, the standard to which every other currency was pegged. As the world's key currency, most international transactions were denominated in US dollars.

    The U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold. Additionally, all European nations that had been involved in World War II were highly in debt and transferred large amounts of gold into the United States, a fact that contributed to the supremacy of the United States. Thus, the U.S. dollar was strongly appreciated in the rest of the world and therefore became the key currency of the Bretton Woods system.

    Member countries could only change their par value with IMF approval, which was contingent on IMF determination that its balance of payments was in a "fundamental disequilibrium".

    This system failed:

    The Bretton Wood arrangements were largely adhered to and ratified by the participating governments. It was expected that national monetary reserves, supplemented with necessary IMF credits, would finance any temporary balance of payments disequilibria. But this did not prove sufficient to get Europe out of its doldrums.

    Postwar world capitalism suffered from a huge dollar shortage. The United States was running huge balance of trade surpluses, and the U.S. reserves were immense and growing. It was necessary to reverse this flow. Dollars had to leave the United States and become available for international use. In other words, the United States would have to reverse the natural economic processes and run a balance of payments deficit.

    The modest credit facilities of the IMF were clearly insufficient to deal with Western Europe's huge balance of payments deficits. The problem was further aggravated by the reaffirmation by the IMF Board of Governors in the provision in the Bretton Woods Articles of Agreement that the IMF could make loans only for current account deficits and not for capital and reconstruction purposes. Only the United States contribution of $570 million was actually available for IBRD lending. In addition, because the only available market for IBRD bonds was the conservative Wall Street banking market, the IBRD was forced to adopt a conservative lending policy, granting loans only when repayment was assured. Given these problems, by 1947 the IMF and the IBRD themselves were admitting that they could not deal with the international monetary system's economic problems.[8]

    The United States set up the European Recovery Program (Marshall Plan) to provide large-scale financial and economic aid for rebuilding Europe largely through grants rather than loans. This included countries belonging to the Soviet bloc, e.g., Poland. In a speech at Harvard University on June 5, 1947, U.S. Secretary of State George Marshall stated:

    "The breakdown of the business structure of Europe during the war was complete. ...Europe's requirements for the next three or four years of foreign food and other essential products... principally from the United States... are so much greater than her present ability to pay that she must have substantial help or face economic, social and political deterioration of a very grave character."

    Triffin's Dilemma (none / 0) (#17)
    by Big Tent Democrat on Mon Jun 28, 2010 at 08:22:45 AM EST
    After the end of World War II, the U.S. held $26 billion in gold reserves, of an estimated total of $40 billion (approx 60%). As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percent. In 1950, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed, but not acted upon. However, with a mounting recession that began in 1958, this response alone was not sustainable. In 1960, with Kennedy's election, a decade-long effort to maintain the Bretton Woods System at the $35/ounce price was begun.

    The design of the Bretton Woods System was that nations could only enforce gold convertibility on the anchor currency--the United States' dollar. Gold convertibility enforcement was not required, but instead, allowed. Nations could forgo converting dollars to gold, and instead hold dollars. Rather than full convertibility, it provided a fixed price for sales between central banks. However, there was still an open gold market. For the Bretton Woods system to remain workable, it would either have to alter the peg of the dollar to gold, or it would have to maintain the free market price for gold near the $35 per ounce official price. The greater the gap between free market gold prices and central bank gold prices, the greater the temptation to deal with internal economic issues by buying gold at the Bretton Woods price and selling it on the open market.

    In 1960 Robert Triffin noticed that holding dollars was more valuable than gold because constant U.S. balance of payments deficits helped to keep the system liquid and fuel economic growth. What would later come to be known as Triffin's Dilemma was predicted when Triffin noted that if the U.S. failed to keep running deficits the system would lose its liquidity, not be able to keep up with the world's economic growth, and, thus, bring the system to a halt. But incurring such payment deficits also meant that, over time, the deficits would erode confidence in the dollar as the reserve currency created instability.[9]

    All correct history except (none / 0) (#19)
    by BTAL on Mon Jun 28, 2010 at 08:36:00 AM EST
    the follow on events when Germany called the bluff and demanded settlement in actual gold.

    That's when Nixon took us off the gold standard and had Kissinger make the then secret deal with the Saudis.  The deal ensured the continued hegemony of the USD as the default reserve currency of all central banks.


    It's a perfectly fine word. (none / 0) (#18)
    by Romberry on Mon Jun 28, 2010 at 08:35:12 AM EST
    Unfortunately, the word is often used pejoratively (with negative connotation) though in and of itself, fiat currency is not necessarily a bad thing.

    There's some really good history of money, including a section specifically on U.S. money (and a lot of other good stuff...and some not so good) included as part of Chris Martenson's Crash Course.

    The world has had hundreds of fiat currencies. There is nothing new about that. There's also nothing new about the way every single fiat currency has ended. It isn't the working classes who are the root of the destruction of any nation's fiat currency/monetary system. Time and again it's politicians and central bankers, seeking to preserve the status quo in service to established power, that undermine currency.

    Anyway...I don't have an issue with the terms "fiat money" or "fiat currency." They're accurate as far as they go. With fiat money, a nation's currency only has value so long as people have confidence in it. The US has had a great advantage in that our fiat money also happens to be the de facto agreed upon world reserve currency since the time of Bretton Woods. Shifting away from that standard is possible, but it sure ain't easy...and it's hard to think of any viable alternative to US dollars which could possibly serve as a reserve currency for the world at the present. (Lucky for us. Very.)

    <Off topic>

    Quick note about Chris Martenson: I agree with a great deal of what he has to say, and I disagree with a fairly substantial portion too. Overall, I find his Crash Course to be very worthwhile, and though there are people on both sides of politics who despise him -- Republicans because Martenson says nice things about J.M. Keynes and FDR, and Democrats because Martenson says some things that sound as if they might be Republican -- the fact is that his views seem pretty much apolitical if perhaps with a Libertarian bent, and several weeks ago he posted a polite smackdown to his own message board community for the efforts of some to make it partisan.

    I'm not affiliated with Martenson's site. I do encourage people to view/read The Crash Course. It has a few warts, but overall I think it's very, very good.

    </Off topic>


    Latest talkning point (none / 0) (#29)
    by waldenpond on Mon Jun 28, 2010 at 09:44:01 AM EST
    ha.  Why do you listen to Palin?  'fiat' is her latest talking point.

    I don't and can't remember the last time (none / 0) (#45)
    by BTAL on Mon Jun 28, 2010 at 10:24:10 AM EST
    I read or even heard/seen her on the tube.

    History has shown on numerous occasions and in numerous countries the result of govt spending & debt expanding to and above GDP.  

    "The full faith and credit" can be bankrupted.


    If you pay to go to one of her speeches (none / 0) (#63)
    by ruffian on Mon Jun 28, 2010 at 10:52:35 AM EST
    you might be able to hear her explain it. Might be worth the price of admission. Media is not allowed, which is why she has not been on TV much recently. Off making a buck or two. I don't begrudge her that, or anything else that keeps her out of sight.

    Media was at last speech (none / 0) (#77)
    by waldenpond on Mon Jun 28, 2010 at 11:47:12 AM EST
    The reporters covering her latest 'speech' were caught on live mike stating how she didn't finish a statement, that the story was there was no story, it was nothing but randum quotes, "the dumbness doesn't come through in soundbites"  She was, as typical, incoherent.

    ha!  here it is...

    "...I think Obama is kind of flirting with also, some government overreach. We are a rule of laws, not a rule of presidential fiats that I think President Obama would rather have sometimes, it seems."


    Funny (none / 0) (#85)
    by ruffian on Mon Jun 28, 2010 at 01:08:48 PM EST
    I think she is using 'fiat' in a different sense there....but I would not begin to interpret!

    There is no possibility of inflation (none / 0) (#80)
    by cenobite on Mon Jun 28, 2010 at 12:13:08 PM EST
    Any time soon.

    The M3 money supply is shrinking and aggregate demand is way down. Inflation is not possible under those conditions. Deflation, on the other hand, is likely. Krugman's belief that we are headed for a third depression is right on.

    The right size deficit is the one that gives us full employment and price stability, and right now that's a lot higher than the one we're running.

    This austerity campaign is transparently a play by the rich to eliminate as much social spending on the non-rich as possible. You know this is true because nobody is talking about cutting the bloated defense budget. (Even though no cutting is necessary or should be done.)

    The rich (Pete Peterson et al) are using inflation as a scary monster to get everyone to go along with it, and unfortunately it's working.


    Well (none / 0) (#69)
    by Ga6thDem on Mon Jun 28, 2010 at 11:19:03 AM EST
    I'm going to be one of the test mice in the lab as my husband has been told that he's no longer needed after August 15th. It has been one heck of a week around here at my house. I hope everybody else is having a better week than I am.

    oh no, so sorry to hear that (5.00 / 2) (#72)
    by ruffian on Mon Jun 28, 2010 at 11:26:25 AM EST
    Best of luck to him of course, and to you, FWIW.

    Thanks (none / 0) (#78)
    by Ga6thDem on Mon Jun 28, 2010 at 12:00:47 PM EST

    Condolences and well wishes for (5.00 / 1) (#74)
    by BTAL on Mon Jun 28, 2010 at 11:28:10 AM EST
    a quick return for him to the workforce.

    Was it a private or public sector job?  Reason given?

    Apologies for the personal nature of the questions (don't reply if taken that way), just curious as to what is happening to people in first hand experience relative to what is being reported as to the causes.

    Again, good luck in finding something new.


    Private sector (5.00 / 1) (#75)
    by Ga6thDem on Mon Jun 28, 2010 at 11:40:53 AM EST
    job. Reason: loss of business. Thanks for the good luck wishes.

    "New" Dem ideology (none / 0) (#99)
    by waldenpond on Mon Jun 28, 2010 at 06:31:13 PM EST
    Jonathan Alter was just on with Chris Hayes talking about how progressives need to shift... he recommends repealing Davis Bacon to employ more people.

    wuh??  instead of paying one person $80k, pay two people $40K?  That'll put more money in the economy and end the Depression?  hmmm, not seeing how that works, actually.  :)

    On the other hand he did suggest direct employment by the govt might work too.