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Looking into China's future
Krugman complains that Beijing's weak-currency policy, by displacing the output of foreign producers with its own low-wage goods, is arguably the prime culprit in holding back a robust recovery in global economies.
"In normal times," he writes, "I'd be among the first to reject claims that China is stealing other people's jobs, but right now it's the simple truth."
The theory is ridiculous in normal times and a simple truth in abnormal times? Bizarro Economics!
Here's what Krugman said when Bush was in office.
Well, basically we have a world-class budget deficit not just as in absolute terms of course - it's the biggest budget deficit in the history of the world - but it's a budget deficit that as a share of GDP is right up there.
It's comparable to the worst we've ever seen in this country.
It's biggest than Argentina in 2001.
Here's what Krugman said when Obama was in office.
As I said, deficits saved the world.
The previous deficits were the worst we'd ever seen but these new deficits that are much larger actually saved the world. Bizarro Economics!
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
-
At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
22 comments:
Krugman is a hack whose belief in plitics trumps his economic thinking. I am not sure who annoys me more, Krugman or Bill Gross.
Uh, there is a big difference between running a deficit when the economy is running at full capacity and unemployment is low (Bush) and when there is an output gap of over 30% and unemployment is at 10% (Obama). Krugman got this quite right as an economist.
Stag,
Krugman sure has some bizarre reasoning. As long as American CONsumers are in the process of impoverishing themselves with debt, China's currency CONtrols are NOT a problem.
The minute the bill for the free lunch arrives and American CONsumers can no longer roll over the debts and have to face their insolvency, then the currency CONtrols ARE an issue.
Idiocy!
@ GYSC
I don't recall you ever inviting Krugman to a cage match, so I'm gonna say Bill annoys you more.
Mark
I want to apologize upfront for bringing up the release date for Halo 4, I realize that is privileged information only to be shared with your closest team members.
Once again please accept my apologies.
P.S. Could you at least tell me whether or not it will be using the same engine as Halo 3?
The Halo 3 engine is killer but knowing you I'm sure you've got something even more impressive in store.
Stag,
We have a bizarro eCONomic system so in a way, Krugman is just espousing his views of what good bizarroism look like. In bizzaro world, one bad idea is as good as another.
Bizzaroism starts with the CONcept that deflation is evil. To ward off the evil of falling prices, you need a central bank with infinite resources.
Once the above two CONditions are in place, banksters start to create credit and leverage investments according to the the St. Petersburg Paradox.
http://en.wikipedia.org/wiki/St._Petersburg_paradox
The classical St. Petersburg lottery assumes that the casino has infinite resources. This assumption is often criticized as unrealistic, particularly in connection with the paradox, which involves the reactions of ordinary people to the lottery. Of course, the resources of an actual casino (or any other potential backer of the lottery) are finite.
As long as you are too big to fail and you keep doubling down, the next jack pot is only a coin flip away. What could be better than that?
Wall St. is a giant skimming operation. End the inflation and most of the shams will disappear.
Force banks to produce something besides inflation.
Debt to GDP for the US is fine compared to other countries...
sure the US has the largest debt... it also has the largest GDP. This is a deliberate manipulation of terms...
my 2 cents
Remy
Tom Hickey,
I would hope you aren't pointing to 2004's economy as being healthy. The deficits are what were propping it up in my opinion. In fact, that's the year I turned bearish and exited the stock market.
So don’t fret about this year’s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it’s not because the economy can’t handle the extra debt. Instead, it’s the politics, stupid.
What if the economy never returns to a solid path? What if we now need deficit spending during the illusion of good times and even more deficit spending during the reality of bad times? Will deficit spending save us forever? How is borrowing even more money to buy cheap overseas goods really helping us? How is borrowing more money to solve a debt problem supposed to work?
"In normal times," he writes, "I'd be among the first to reject claims that China is stealing other people's jobs, but right now it's the simple truth."
Normal times don't exist. We stopped behaving normally when we gave up on manufacturing and embraced financing to replace it.
Just opinions of course.
watchtower,
You are dangerously close to me quoting Jimi Hendrix! ;)
I get the feeling that the US is like a kid over at a relatives house. As they do things which at home are not allowed, they get bolder and bolder. Not once in the history of the world has so much government debt been floated as has been in them last year. All seems well so far, but how long until the US goes to far?
That japan disease economics, Government spending and FED money printing IS the eCONomy now.
Kevin
mab,
"The classical St. Petersburg lottery assumes that the casino has infinite resources."
I've used that paradox in the past and never knew its name. Thanks for sharing!
My hypothetical "system" (that system) was to go to Vegas once a week and always bring back winnings. People would see how well I was doing and want in on the action. At some point, the doubling down would break and I'd come back empty handed though.
It is possible to win money the vast majority of times you go to Vegas using that system, but the one time you don't more than makes up for all the times you did win. The pleasure comes weekly, but the pain arrives all at once.
It's a great paradox to describe our economy right now (as it was in 2004 too).
We're very much discounting future economic pain these days, because the stimulus and deficit spending is offering weekly pleasure.
Remy,
If the debt is the position, and the rate of change in the debt is the velocity, and the rate of change in the rate of change of the debt is the acceleration, then this is what I think.
Like you, the position doesn't scare me all that much.
The velocity scares me. If we hit a brick wall it would hurt.
The acceleration terrifies me. We don't even have to hit a wall to blackout.
http://www.youtube.com/watch?v=aaDTk0ArbBE
GYSC,
"All seems well so far, but how long until the US goes to far?"
Nothing to worry about. Our economy is one of a kind. There's nothing quite like it in the world.
http://www.youtube.com/watch?v=GETyA4gRQEg&feature=related
(Epic Fail!)
Kevin,
http://www.youtube.com/watch?v=d2XNUBCJN-E
Thanks to mab and Kevin when I am at work I always type the letters CON in capitals and I forget to change them back. People email me and ask why I capitalize those letters!
Hahaha!
Stag,
It is possible to win money the vast majority of times you go to Vegas using that system, but the one time you don't more than makes up for all the times you did win. The pleasure comes weekly, but the pain arrives all at once.
Vast majority? I'd argue that as long as banksters have a central bank with "unlimited" resources willing to spot them the federal reserve notes needed to double down, bankers can always come out ahead. At least while the public doesn't understand the rules and gullibly plays along.
I'm really quite curious to see if Banks can create new credit faster than a "Fed"-up CONsumer can shed debt. Even if the Government fills the void by taking on debt, I suspect the skim will be greatly reduced.
It's not Government debt that makes me pessimistic, it's the fact that ALL facets of our Government seem hell bent on preserving the current usurous financial system. The few lone political voices that speak against the financial machine are ignored or marginalized by our "independent" media. A media which has the same critical "independence" as our Federal Reserve!
In the past, powerful and well known political leaders such as Jefferson, Adams, Jackson, etc. fought hard against the money machine. Today, the silence is deafening (and telling).
mab,
"Today, the silence is deafening (and telling)."
"In space no one can hear you scream." - Tagline for Alien, 1979
Sound has a hard time traveling in a vacuum. In financial space no one can hear us scream either apparently. Same process, different vacuum.
Cash Loans: Deflate the Financial Vacuum Between your Paydays
http://www.streetdirectory.com/travel_guide/178668/cash_loans/cash_loans_deflate_the_financial_vacuum_between_your_paydays.html
You are free to invest the amount received with cash loans on any of your expenses that emerges in your day to day life.
Who knew the power bill could be an investment funded with the cheap financing that payday loans provide?
If there's one thing better than sarcasm these days, it is bonus sarcasm!
Stag,
If there's one thing better than sarcasm these days, it is bonus sarcasm!
You want "bonus" sarcasm, you got it:
Bankers earn their huge bonuses.
CONtrary to the opinion of some, the enormous Wall St. bonuses have nothing to do with the $700 billion TARP, the $1.45 trillion in Fed GSE purchases, the FDIC guarantees on newly issued bank debt, our Governments explicitly stated too big to fail policies, the FDIC's increased bank deposit limits, the Fed's unlimited bank deposit guarantee, the Fed's bailout of the money markets, our trillion dollar deficits, the $180 billion AIG bailout, the ~ $60 billion AIG counterparty pay-off at 100 cents on the dollar, the $200 billion dollar Fannie and Freddie bailouts, The Fannie and Freddie gaurantees, the relaxing of accounting standards, the Fed's 0% interest rates, the Fed's alphabet soup lending facilities, the 100s of billions of guarantees for Citi & BAC "assets", the auto bailouts, the Fed's stated policy of "positive" inflation, cash for clunkers, the first time home buyers tax credit, the tens of billions in illegal tax credits granted to Wells Fargo, etc.
Look, creating and distributing inflation via issuance of trillions in non-eCONomic credit is a LOT harder than it looks.
People just have no appreciation of how hard it is to CONvince tens of millions if Americans that they are prospering when in reality they are being impoverished with debt.
Besides, the CEO of Goldman Sachs, Lloyd Blankfein, says bankers are doing God's work. Do you think that the apostles and disciples of Jesus worked for free?
mab,
You better hope the Elder Things don't impose a new windfall profits tax on bonus sarcasm or you sir, will be wiped clean.
http://en.wikipedia.org/wiki/Elder_Thing
The technology that the Elder Things possessed was not described at length, but was described as being extremely advanced, and At the Mountains of Madness even makes an off-hand mention that they may have had directed-energy weaponry.
Rumor has it that the Elder Things use financial weapons of mass destruction and never ending deficit spending.
Stag,
I've already had a run in of sorts with the Elder Things. No joke. I had a four jobsite office trailers infested (inside and outside) with them:
http://en.wikipedia.org/wiki/Box_elder_bug
Thousands of those buggers appeared out of nowhere every spring. We eventually learned to live with them as they were darn near impossible to exterminate.
Needless to say we were quite relieved to return the trailers to the rental company.
In a way, it was an early version of a toxic asset SIV. ;)
mab,
Imagine the field day I had when earwigs started showing up. My girlfriend was not amused with my vivid imagination and tall tales. They were drawn to a rotting stump in the back yard but some managed to find their way into the house. I'd seen earwigs many times where I grew up. Our basement was damp. My girlfriend hadn't seen them though.
http://en.wikipedia.org/wiki/Earwig
It is a common urban legend that earwigs crawl into the human ear and lay eggs in the brain.[38][39] Finding earwigs in the human ear is rare, as most species do not fly and prefer dark and damp areas (e.g., basements) rather than typical bedrooms.[3]
Shame on me!
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