Comments on: Pile High the Stimulus

By: Mike in Nola

Mike in Nola — Sun, 04 Jan 2009 05:46:18 +0000

Econophile: I wouldn’t consider a 90% drop in the DJI a “fairly common” market crash.

The big thing all these “experts” are missing in comparing today’s enlightened answers to what was done in the 1930’s is that the situation is fundamentally different. On the flip side, we cannot bail ourselves out by doing more of what got us into this.

In 1929, we were the world’s greatest creditor nation as a result of WWI and domination of export markets. Except for ideological constraints, it really wouldn’t have been a big problem to deficit spend to increase domestic consumption to make up for what was no longer being exported because of declining demand oversees. It might have even worked.

Trouble is today, that is China’s situation; it’s the one who needs to use some of its huge currency reserves to stimulate domestic consumption which would have the side effect of stimulating everyone else’s economy without the necessity of everyone else running up huge deficits. But China seems to have the same ideological problem that the US had in the 1930’s: exports are good and what got us here, so let’s do more.

As I never tire of saying, I think Michael Pettis has it right in saying the worldwide collapse is due to global trade imbalances (the West’s overconsumption, China’s overproduction) and that everyone seems to be working hard to make sure imbalances get worse.

http://mpettis.com/2008/12/everyone-is-working-hard-to-increase-global-trade-imbalances/

By: wgb8210

wgb8210 — Sun, 04 Jan 2009 04:43:20 +0000

At a minimum, isn’t it counter intuitive that the way out of this crisis, which was based upon reckless, excessive spending and borrowing, is for the government to jump in and show us how the game is really played? Maybe fiscal stimulus is the way to go, but every time the government spends a dollar, the cost is being paid by someone somewhere (at least I’m pretty sure that is how things work). Not too many people like to talk much about the cost of these wonderful ideas. My opinion is that the solution may lie more in our accepting that a certain amout of sacrifice will be necessary-but alas sacrifice is not something our leaders are willing to recommend, nor is it a word many of us want to hear.

By: Dow

Dow — Sat, 03 Jan 2009 22:45:30 +0000

LOL Steve. Brilliant!

By: Steve Barry

Steve Barry — Sat, 03 Jan 2009 21:34:16 +0000

It’s all a big experiment…they may pile the stimulus so high, we get a pancake collapse…then they’ll say, “wow…didn’t see that one coming.”

By: btowers

btowers — Sat, 03 Jan 2009 21:00:59 +0000

I despise this view.

For the sake of stimulating the economy, the government is going to deficit spend without any defined limit. We have no say in the matter even though it’s our future dollars being spent.

If you oppose the deficit spending, you’re labeled as an ideologue. You apparently aren’t an ideologue if your position is that the rights of individuals are irrelevant. No, in that case you’re just being a pragmatist; just doing what needs to be done.

I frankly don’t care if deficit spending would work or not (I personally think not). The government shouldn’t have the power to do this. Economists are not our masters.

By: Dow

Dow — Sat, 03 Jan 2009 20:11:07 +0000

Why does every article always boil down to the necessity of ’stimulating growth?’ ‘Growth’ seems to be equated solely with financial success and yet so called success seems to carry more problems than benefits in the long term. Maybe it’s time to rethink what exactly constitutes success other than owning a bunch of sh*t.

(why yes, I am having a very cynical day.)

By: Econophile

Econophile — Sat, 03 Jan 2009 19:46:56 +0000

As we all know, Alan Brinkley is an historian, not an economist, so we can excuse his errors for a proper lack of understanding of Keynesian stimulation through massive deficit spending. He and Krugman are correct in that Keynesian theory failed in the New Deal. However, not for the reasons they suggest. Keynesian theory has never been successfully implemented because it is fundamentally flawed. It is very common among the proponents of failed theories, like Krugman, to say things like, “our ideas weren’t implemented properly,” or “it was the wrong version of the theory,” or “unexpected events overcame it,” and the like.

Amity Schlaes is not the only person on the planet who criticizes the way Hoover and FDR handled the economy during the Great Depression. Her comments echo the findings of most free market economists and historians who point out that the Great Depression was actually caused by Hoover’s and FDR’s mismanagement of the crisis. Otherwise, why would a fairly common stock market crash turn into a 20 year economic disaster?

Just because you disagree with her writing doesn’t make Schlaes a “pseudo-historian.”