Endless Nonsense From Keynesian Clowns …
October 3, 2010 · Posted in General Economics
And the saga continues, as Nobel Prize-winning economist Joseph Stiglitz calls for second federal stimulus …
Nobel Prize-winning economist Joseph Stiglitz called for another round of federal stimulus dollars to spur the economy. He spoke Sept. 30 to the Society of American Business Editors and Writers (SABEW) at its Fall Workshop.
“We will see in the next two years the real cost of there not being a second round of stimulus,” he said. “We will see the economy slow down at a very high economic cost.”
The Columbia University professor also said that the “new normal” as far as the unemployment rate is concerned may not be the 4 to 5 percent that existed before the financial crisis in 2008, but more like 7 to 8 percent.
Unemployment is about 9.5 to 9.6 percent officially, he said, but many people who are working part-time involuntarily or who have stopped looking but want work are not counted in the official rate.
Congress passed the first stimulus on Feb. 11, 2009, approving a $787 billion bill, the American Recovery and Reinvestment Act.
He said one reason that stimulus has not had more effect is that state and local governments have cut spending, undoing about one-half of the impact of the money that the feds have injected.
He said the stimulus also could have had more effect if more money had been put into making up for the shortfalls of state budgets, stopping layoffs; if less had been put into tax cuts that wary consumers just ended up saving; and if safeguards to prevent waste had not slowed the money from being spent.
Still, he said, “The stimulus absolutely worked.” Without it, unemployment could have peaked at more than 12 percent.
He said that one-fourth of Americans have negative equity in their homes, meaning that they can’t draw on their homes as a piggybank to borrow and live beyond their means. In fact, they are going to have to live below their means to pay off debt accumulated during better times.
“We likely face a marked reduction in standard of living,” he said.
It is truly amazing how the people who didn’t see any of the root problems and were completely unable to predict how an overly crushing debt load would wreck this economy, how the business cycle would inevitably turn south due to a deliberate policy of credit expansion and who don’t bother to seriously identify the root causes of the financial crisis, now boldly step forward to make the most obvious of predictions and think that they are contributing to the debate.
“We likely face a marked reduction in standard of living”
Wow, no shit Sherlock! Did it take all the decades of accumulated economic wisdom to figure that one out when it’s already happening??
And if I got a penny every time these people make up an alternate reality in order to justify their programs … oh well …
“The situation would be worse had it not been for more government spending …”, “the unemployment rate would have been even higher than it is now …” … bla bla bla.
This is perfectly natural. If their policies aren’t defensible in reality, if they can’t specifically explain how more budget deficits and bailouts have actually helped us, then of course they will have to make up a fantasy world.
I mean, they look completely silly doing that, and it’s funny watching it … but please don’t expect me to actually buy that nonsense!
Here’s the statement I made that you always need to keep in mind when you hear people like this guy talk:
Once existing stimulus programs and credit expansion attempts subside, there won’t be much left to pick up the slack. The consumer won’t be able to go back to business as usual unless he goes through a long period of reduced consumption, deleveraging, and savings, a period during which the majority of production and spending inside the US will have to be focused on capital goods, so as to restore a balanced ratio between the production of consumer goods and the production of capital goods.
At the point when these government stimuli wind down, Keynesian clowns will be jumping out of the bushes left and right, and demand that the government take on more debt and spend more money. But at some point their mindless tirades will no longer appeal to an overtaxed and overleveraged populace. Their ivory tower nonsense will be way too far detached from simple realities.
Any temporary recovery we witness now, is likely to be remembered as just that, a temporary phenomenon. All actions taken so far have set the perfect stage for a double dip recession of enormous proportions, the worst possible prolongation of the necessary correction.
If it was our dear government’s objective to repeat the playbook from the Great Depression one by one, then they have indeed succeeded phenomenally.
And here’s of course the long term outlook which you can look back to 10 years from now if you like:
From 1989 on, the Japanese government has launched one stimulus after another to no avail, leaving Japanese taxpayers with the largest public debt per capita of all industrialized nations.
A burden that the US government seems to be more than willing to have its taxpayers shoulder over the years to come unless someone picks up a history book and tries not to feverishly repeat mistakes others made in the past.
Thus the long term outlook for the US economy is the fate Japan took: A long lasting correction supercycle with one failing “stimulus” program after another, and with on and off periods where the economy slips out of and back into recessions from time to time.