Austerity policies based on flawed research?

KyussBishop

carpejugulum wrote: »

Private sector is much more efficient than the public sector. Widespread property and financial speculation is the result of government policies.

That's trying to shift all blame away from banks/finance; it was the private banking industry that pumped all that credit into a housing/property boom, and it is finance that engages in speculation.

Trying to build an argument, on the premise of banks/finance being squeaky-clean and free from fault, is not going to gain a lot of credibility with most people outside of banking/finance.

Tipp Man

Cody Pomeray wrote: »

So what, we pay off the national debt, is it?

What?? How on earth could we ever hope to pay off this national debt?? Certainly not in the next 20-30 years

I'm talking about not adding any more to it - it's already on the very edge of what is sustainable - in fact we are probably over it if we were honest with ourselves

Rightwing

Tipp Man wrote: »

Irish people don't want a well run country

They just want to keep government spending and spending and spending - they aren't really bothered where it comes from

And we are not alone, almost the entire western world wants the same. Hence, they are nearly all bankrupt.

Cody Pomeray

Tipp Man wrote: »

Irish people don't want a well run country

They just want to keep government spending and spending and spending - they aren't really bothered where it comes from

Rightwing wrote: »

Austerity doesn't work if:

you want someone else to pay the bills while you eat the cake.

Austerity works if:

you want to see deficits coming down.

Now, a well run country like Norway won't need austerity.

This is descending into slogans.

are you not interested in engaging with the economic arguments being put forward about structural investment and production capacity at all.

KyussBishop

Tipp Man wrote: »

Some simple facts that you don't need to be a Nobel winning economist, work for the IMF, or think you are some kind of keyboard economic genius to understand

1: The Irish government is in debt up to its neck, so much debt that for a while nobody would lend us any more money (thankfully)

2: For a good few years now the irish government has been spending way beyond its means - it's budget deficit is completly unsustainable


Now people (at the risk of getting a warning i am going to call them idiots) who think that we have any other option other than to dramatically cut government expenditure AND take action to stop the increase in government debt (hopefully start to reduce it a bit) are living in cloud cuckoo land

WE HAVE NO OPTION BUT TO REDUCE GOVERNMENT SPENDING AND STOP BLOODY BORROWING MORE AND MORE

Are people really in that much denial that they are completly unwilling to accept the complete and utter mess the public finances are in??

Wake up for god's sake

Read the thread. You won't find anyone denying Ireland's inability to engage in anything other than austerity, without the help of Europe; if you have already read the thread, then you must be ignoring what has been said, for the sake of spouting the usual austerity rhetoric, without care to fact that you're basing it on an issue which has already been acknowledged and addressed.

Tipp Man

Rightwing wrote: »

And we are not alone, almost the entire western world wants the same. Hence, they are nearly all bankrupt.

And that's why democracy is a fundamentally flawed concept.

How can a financially astute party be elected when their opposition is offering the moon and stars in the form of government spending and giveaways? People (mostly I believe anyway) are always going to vote for what makes them better off in the short term - that's all they care about

Cody Pomeray

Tipp Man wrote: »

And that's why democracy is a fundamentally flawed concept.

ah jesus here we go !

View

schnitzelEater wrote: »

War is the best stimulus package out there, look what WW2 did for the US.

Well, it meant that spending by the US Federal government soared from circa 10% of US GDP to just under 50% of US GDP just as WW1 increased it from less than 3% of GDP to over 24% of GDP.

While those figures did drop back in peacetime, overall it meant that the US Federal govenment spending increased from an average of 2% of US GDP in the 19th Century (a bit bigger than EU spending as a % of EU GDP today) to in excess of 20% of US GDP at the end of the 20th Century - a 10-fold increase which of course came with a corresponding increase in Federal taxation on US citizens.

Now, we could, of course, repeat that here in the EU - the EU budget is small in comparasion to that of the total budget spend of the member states' governments (even if larger than our own) - but be under no illusions that it will almost certainly lead to an EU that is MUCH larger (and centralised) than today's.

Do you really want that? And, if so, how far are you willing to go?

I'd personally suspect many of today's (European) Federalists would be strongly opposed to that idea, never mind the politicians at member state level who would have to take an increasing back-seat as such a transformation occurred.

Tipp Man

KyussBishop wrote: »

Read the thread. You won't find anyone denying Ireland's inability to engage in anything other than austerity, without the help of Europe; if you have already read the thread, then you must be ignoring what has been said, for the sake of spouting the usual austerity rhetoric, without care to fact that you're basing it on an issue which has already been acknowledged and addressed.

Are you actually for real???? That's what the whole bloody thread is about - it opened with the OP saying that austerity was based on flawed research and that stimulus was the answer

Here's 2 posts for starters

20Cent wrote: »

Both the US and UK stimulus packages were not considered enough, the US one worked well but was insufficient.

Anyway what about the op.
The research underpinning Europe's economic policy has been found to be false.

Isn't this a concern!

20Cent wrote: »

German Finance Minister Dr Wolfgang Schauble

http://www.wolfgang-schaeuble.de/index.php?id=24&textid=1554
A permanently stable European currency is an indispensable part of this European growth model. As we discussed in Tokyo, and on several other occasions again and again, our conviction is that an excessive level of sovereign debt poses a risk to sustainability. Therefore I strongly believe in the research of Rogoff and Reinhart, for example, that as soon as you have reached a certain limit of sovereign indebtedness, increasing the deficit and the debt will not create more growth but will actually harm growth. For this reason, we have to know that if we want to achieve sustainable growth, we have to reduce sovereign debt in nearly all advanced economies.


The research he strongly believes in is wrong!

Rightwing

Tipp Man wrote: »

And that's why democracy is a fundamentally flawed concept.

How can a financially astute party be elected when their opposition is offering the moon and stars in the form of government spending and giveaways? People (mostly I believe anyway) are always going to vote for what makes them better off in the short term - that's all they care about

Yes indeed, to quote a famous British PM, 'democracy is certainly flawed,,but the alternatives are far worse'.

Scofflaw

Cody Pomeray wrote: »

What, no US chart?

I admit I would consider the US - a continental sized economy - a poorer comparison for Ireland than the UK...

Cody Pomeray wrote: »

On the UK: Perhaps you're making the error of assuming that QE was instigated in the UK in order to reduce unemployment... or that any failure to actually bring unemployment down implies that it was a failure.

In fact, the argument goes that without QE, the situation could have been much worse. That QE is the buffer that insulates the UK's banking system from its exposure to the Eurozone.

I'm not saying that QE is a magic bullet either in the UK or the US. But I hope nobody is seriously expecting a chart like the above to be an adequate rebuttal to its potential.

Sure - the chart was a specific response to the post it was responding to.

cordially,
Scofflaw

Scofflaw

Cody Pomeray wrote: »

It doesn't necessarily have to mean borrowing on the back of the Treasury or raising taxes.

In fact, the fiscal rules and the sovereign indebtedness make that impossible for pretty much everyone as far as i am aware.

So the additional borrowing would have to be done by an agency of the Eurozone: the ESM or the EIB, for example. The good thing about those agencies is that they only need the initial capital, and then they can raise funds as many multiples of that.

That agency could then invite private financing to join with it in investments, again enlarging the scale of a stimulus.

Obviously, the stimulus should be focused on production and exports.

Hollande has suggested all of this. It;s not particularly imaginative. It's so amazingly boring it might actually work.

I have to agree - I'd certainly favour such a stimulus being run at the European level rather than winding up as a set of national pork barrels.

cordially,
Scofflaw

Tipp Man

Cody Pomeray wrote: »

This is descending into slogans.

are you not interested in engaging with the economic arguments being put forward about structural investment and production capacity at all.

There is no point in even having a discussion about structural investment and production capacity in the context of Ireland because

a) we don't have the money to spend on those investments
b) we can't borrow the money because we already have too much borrowings

so this talk about stimulus is just a complete waste of time -that is the whole point i was trying to make in my initial post. We have no option but to cut expenditure

Anyway government expenditure is probably the most pointless/useless/inefficient method of economic stimulation that there is

Cody Pomeray

Scofflaw wrote: »

I admit I would consider the US - a continental sized economy - a poorer comparison for Ireland than the UK...

That's unfortunate, because any Irish stimulus would be on foot of a Eurozone stimulus.

In the absence of such a package, the UK economy, being heavily exposed to the Eurozone, is clearly going to under-perform. Stimulus or none.

Clearly, using the UK as an example of a potential stimulus is inappropriate.

Rightwing

Scofflaw wrote: »

I have to agree - I'd certainly favour such a stimulus being run at the European level rather than winding up as a set of national pork barrels.

cordially,
Scofflaw

And what if all our competitors used stimulus to boost their production and exports ?

Cody Pomeray

Rightwing wrote: »

And what if all our competitors used stimulus to boost their production and exports ?

well that's already started happening. Eurozone countries are increasing their proportion of their non Eurozone exports.

KyussBishop

Tipp Man wrote: »

Are you actually for real???? That's what the whole bloody thread is about - it opened with the OP saying that austerity was based on flawed research and that stimulus was the answer

Here's 2 posts for starters

You're being obtuse here, in ignoring both what I've said, and your selective reading of the discussion as limited to Ireland, when the discussion has not gotten stuck in revolving around Ireland, but has branched to EU-wide policies which can resolve the crisis through stimulus rather than austerity.

If you want to ignore the wider discussion to put out the usual austerity rhetoric, then it will be pretty easy to show how you are trying to narrow/frame discussion, to try and make it suit the austerity rhetoric, and it will look a lot like you don't have an interest in the wider discussion or in anything other than promoting austerity.

Suryavarman

Rightwing wrote: »

And what if all our competitors used stimulus to boost their production and exports ?

Then Ireland would just start producing and exporting different goods.

Rightwing

Suryavarman wrote: »

Then Ireland would just start producing and exporting different goods.

That's flawed. Not every country will be able to do that. For that to work, only some countries can do it. China is dominant, regardless of what we do. They produce cheaper, so unless and until we drastically reduce our costs we're going nowhere.

Cody Pomeray

we're not competing with china. or india. or bangladesh. we're not trying to.

Suryavarman

Rightwing wrote: »

That's flawed. Not every country will be able to do that. For that to work, only some countries can do it. China is dominant, regardless of what we do. They produce cheaper, so unless and until we drastically reduce our costs we're going nowhere.

It's not flawed. It's reality. It's comparative advantage.

Chinese labour might be cheaper but it is nowhere near as productive as Irish labour.

The reason Ireland is going nowhere at the moment is because of all the uncertainty over policy and future economic condtions in Ireland and the EU.

Rightwing

Cody Pomeray wrote: »

we're not competing with china. or india. or bangladesh. we're not trying to.

That's what M Martin told us afew years back,,,'we don't need manufacturing, we're a smart economy'.

The rest is history.

Cody Pomeray

Rightwing wrote: »

That's what M Martin told us,,,'we don't need manufacturing, we're a smart economy'.

The rest is history.

so you think that if we can't compete with china, we can't have an industrial base?

explain germany.

Scofflaw

Cody Pomeray wrote: »

That's unfortunate, because any Irish stimulus would be on foot of a Eurozone stimulus.

In the absence of such a package, the UK economy, being heavily exposed to the Eurozone, is clearly going to under-perform. Stimulus or none.

Clearly, using the UK as an example of a potential stimulus is inappropriate.

If that happens, it will then be a relevant concern for comparisons, certainly. At the moment, not so much.

cordially,
Scofflaw

Suryavarman

Rightwing wrote: »

That's what somebody told us afew years back,,,'we don't need agriculture, we're an industrial economy'.

The rest is history.

FYP.

Tipp Man

KyussBishop wrote: »

You're being obtuse here, in ignoring both what I've said, and your selective reading of the discussion as limited to Ireland, when the discussion has not gotten stuck in revolving around Ireland, but has branched to EU-wide policies which can resolve the crisis through stimulus rather than austerity.

If you want to ignore the wider discussion to put out the usual austerity rhetoric, then it will be pretty easy to show how you are trying to narrow/frame discussion, to try and make it suit the austerity rhetoric, and it will look a lot like you don't have an interest in the wider discussion or in anything other than promoting austerity.

The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

France? Broke
Italy? More broke
Spain? As broke as Ireland
Uk? Rapidly heading to brokeville
Nobody else big enough

So are you expecting Germany to pay for an entire stimulus package for most of Europe??

As I said, as long as somebody else is paying

What's the problem with getting our own house in order and having the discipline to do it??

Rightwing

Cody Pomeray wrote: »

so you think that if we can't compete with china, we can't have an industrial base?

explain germany.

Germany have low costs. They don't cripple small businesses with red tape, they don't have a grossly overpaid Public sector or welfare.

They believe in austerity.

I'll trust them ahead of ahern/biffo et al

Farmer Pudsey

Tipp Man wrote: »

The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

France? Broke
Italy? More broke
Spain? As broke as Ireland
Uk? Rapidly heading to brokeville
Nobody else big enough

So are you expecting Germany to pay for an entire stimulus package for most of Europe??

As I said, as long as somebody else is paying

What's the problem with getting our own house in order and having the discipline to do it??

Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.

Tipp Man

Farmer Pudsey wrote: »

Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.

Ah I didn't know who I was dealing with

Cody Pomeray

Rightwing wrote: »

Germany have low costs. They don't cripple small businesses with red tape, they don't have a grossly overpaid Public sector or welfare.

They believe in austerity.

I'll trust them ahead of ahern/biffo et al

Hmm. I'm not sure I'd say they believe in austerity.

They believe in industrial wage restraint and investment in infrastructure. If you want to call that austerity, lets go with that.

Our 'red tape' is also pretty much non existent. We have little option but to perpetuate wage restraint here, if not falling real wages. What we're missing is investment in infrastructure. Enter stimulus argument...

KyussBishop

Tipp Man wrote: »

The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

France? Broke
Italy? More broke
Spain? As broke as Ireland
Uk? Rapidly heading to brokeville
Nobody else big enough

So are you expecting Germany to pay for an entire stimulus package for most of Europe??

As I said, as long as somebody else is paying

What's the problem with getting our own house in order and having the discipline to do it??

Again, deliberately ignoring my posts. I made clear, it was not the public debt vs GDP of individual nations that matters if there are to be EU-wide recovery policies, it is the public debt vs GDP of the EU as a whole, which leaves enormous room for financing recovery, and with each individual country being able to sustainably pay back their share of debts in the (potentially very) long run.

Keeping the level of debts sustainable is what matters, if that is the course chosen for ending the crisis; economically that is easily achievable at an EU-level, even if it's unlikely to ever happen politically.

Scofflaw

Rightwing wrote: »

And what if all our competitors used stimulus to boost their production and exports ?

Then we all get richer together. I think you're using the zero-sum mercantilist model rather than thinking about comparative advantage.

cordially,
Scofflaw

KyussBishop

Farmer Pudsey wrote: »

Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.

If you feel it is a topic so easily debunked, try engaging it in argument, rather than this kind of predictable trite response; your unwillingness to, instead engaging in the usual hyperinflation scaremongering, betrays both an ignorance of the topic, and conscious knowledge that you don't have an argument that can debunk it.

Money creation is not a 'belief' either, where do you think all the money comes from in a fiat money system? Private banks create money all the time (a view shared by many, including a leading editor of the Financial Times, plus the Bank of England, and many central banks around the world), yet somehow it is unthinkable that it may be possible for government to as well.


To you, private money creation is 'good', and public money creation is somehow 'bad', yet I would bet you can't explain the difference between them, or how any criticisms you apply to one, do not apply to the other.
It was private banks and money creation after all, which inflated the property bubble which blew up and left us with this mess, and private banks/finance inflating many asset bubbles now, increasing our cost of living; actual real examples of inflation caused by private means, go largely uncriticised.

Where, using money creation, private banks add money to the economy through loans, government can add money using public spending (limited by inflation targets, thus debunking the lazy hyperinflation nonsense); where private banks take money out of the economy through debt repayments + interest, government can take money out through taxes (but without the inherent unsustainability of banks debt-based money).

It's simple enough (when the right narrative for explaining it is found), and the analogies between how public/private money creation work are pretty clear, yet despite the mechanics of it being so analogous, public money creation is somehow supposed to magically lead to hyperinflation (with the mechanism of that being totally unexplained by anyone making the claim, and despite repeatedly stating public spending would be limited by inflation targets; requiring the most dishonest obtuseness to ignore).


Such trite scaremongering (usually put forward with maximum condescension), shows a total lack of interest in engaging in honest discussion, and shows very conscious knowledge that the arguments you make are dishonest.

View

KyussBishop wrote: »

Where, using money creation, private banks add money to the economy through loans, government can add money using public spending (limited by inflation targets, thus debunking the lazy hyperinflation nonsense); where private banks take money out of the economy through debt repayments + interest, government can take money out through taxes (but without the inherent unsustainability of banks debt-based money).

The problem with that is the (usual) expectation is the bank will make a net profit (I.e. the interest repayments) from their activities and will be able to repay its debts from the debt repayments on its loans.

By way of contrast there are few areas where a government makes anything other than a total loss on its expenditure, hence the activities engaged in almost invariably won't cover the cost of the additional debts it incurs. Building a new hospital may be wonderful and put money into the economy but no one expects that hospital to generate a net (tangible) profit for the government. Presumably that hospital would need to confine itself to carrying out some profitable line of medicine like plastic surgery for the rich and would refuse admission to poor people wanting treatment for non-profitable illnesses.

KyussBishop

View wrote: »

The problem with that is the (usual) expectation is the bank will make a net profit (I.e. the interest repayments) from their activities and will be able to repay its debts from the debt repayments on its loans.

By way of contrast there are few areas where a government makes anything other than a total loss on its expenditure, hence the activities engaged in almost invariably won't cover the cost of the additional debts it incurs. Building a new hospital may be wonderful and put money into the economy but no one expects that hospital to generate a net (tangible) profit for the government. Presumably that hospital would need to confine itself to carrying out some profitable line of medicine like plastic surgery for the rich and would refuse admission to poor people wanting treatment for non-profitable illnesses.

Government would not need debt, or to turn a profit, when it has access to money creation (it would just need to manage inflation); this is why public money creation is so politically powerful:
It allows sustainable government spending (limited by inflation targets) without the need to secure profits, which allows public services to prioritize social values, not profits (and prevents economic trouble, like now, from forcing government to prioritize profits/money at the expense of social values, due to debt burdens - there would be no need for such public debt anymore).

This makes monetary reform probably the most important political/economic game changer in the world at the moment; it will disarm a huge amount of conservative economic narrative in politics (crap which has been holding society/politics back for almost 40 years now), allowing politics to become much more inherently progressive.

View

KyussBishop wrote: »

Government would not need debt, or to turn a profit, when it has access to money creation (it would just need to manage inflation); this is why public money creation is so politically powerful:

It may be politically powerful - that doesn't mean it's economically powerful.

If a company has X amount of shares in issuance, each share is worth 1/Xth of the net wealth of the company. If it increases the number of shares it has in issuance, it doesn't mean the net wealth of the company increases, rather it merely dilutes the value of each share in existence (each share is now worth a decreased 1/(X+Y)th of the company).

Likewise, each unit of money in existence is ultimately worth a fraction of the net wealth of the area that uses it. Issuing more money doesn't increase that net wealth (immediately, altough it may help long term) rather it devalues the value of each unit of money in circulation.

Look at it this way, a Saudi Arabian company is negotiating with you to sell you oil at $100 a barrel. Overnight, the US Federal Reserve doubles the amount of dollars in issuance.

Are the Saudis going to still accept $100 for their barrel of oil? It might be nice if they did accept $100 of the newly devalued dollars because you'd are ultimately using € to pay. Instead though they are going to want the same amount in (Saudi) Riyals, so they will want $200 for their oil. You are not going to buy oil at half-price unfortunately!

KyussBishop wrote: »

It allows sustainable government spending (limited by inflation targets) without the need to secure profits, which allows public services to prioritize social values, not profits (and prevents economic trouble, like now, from forcing government to prioritize profits/money at the expense of social values, due to debt burdens - there would be no need for such public debt anymore).

This makes monetary reform probably the most important political/economic game changer in the world at the moment; it will disarm a huge amount of conservative economic narrative in politics (crap which has been holding society/politics back for almost 40 years now), allowing politics to become much more inherently progressive.

Dozens of countries around the world have gone down the road of churning our more more in order to create "wealth". It doesn't work because on anything other than a short term basis because the value of the currency drops and the prices of imports from other currency areas increase.

Perhaps more fundamentally though as governments spends their money largely on non-profit activities, they essentially engage in economic value destruction (albeit socially useful activities) on a continual basis (e.g. That local hospital is a drain on the public purse even if highly desirable). That reduces the net wealth of a government and its people. Unless that is counter-balanced by economic value creation - an area governments are notoriously bad at - the result of what you are suggesting is not "sustainable government spending" but unsustainable spending and - ultimately - the hard reality of bail-outs and increasing poverty.

djpbarry

KyussBishop wrote: »

It doesn't have to be done, but it may be hard for the Euro to survive the rest of the decade/crisis without it.

I don't need to put together spending figures etc.; I would see it spend up to the point of a sustainable public debt vs GDP level, and hold steady at that point while the EU economies recover.

Considering so many Eurozone countries have significant unsustainable debt as is, I’m not at all convinced that much can be achieved through an EU-wide stimulus programme before the entire Eurozone accrues unsustainable levels of debt.

Rightwing

Cody Pomeray wrote: »

Hmm. I'm not sure I'd say they believe in austerity.

They believe in industrial wage restraint and investment in infrastructure. If you want to call that austerity, lets go with that.

Our 'red tape' is also pretty much non existent. We have little option but to perpetuate wage restraint here, if not falling real wages. What we're missing is investment in infrastructure. Enter stimulus argument...

What investment in infrastructure would you like to see here?

I see motorways in places there's no need for them. No point spending good money just to have a few lads in work for a few months. That only increases debt.

Cody Pomeray

djpbarry wrote: »

Considering so many Eurozone countries have significant unsustainable debt as is, I’m not at all convinced that much can be achieved through an EU-wide stimulus programme before the entire Eurozone accrues unsustainable levels of debt.

Bond issuance by European Investment Bank, the European Stability Mechanism, or a specially-designed SPV delivered of capital by the Eurozone governments would not adversely affect Eurozone debt dynamics, the "Golden Rule" or any other fiscal constrains beyond the initial capital input. Quite the opposite, it ought to improve Eurozone debt dynamics.

It wouldn't have to be simply a case of the Government raising taxes and spending it 1:1. That would be very irresponsible, imo.

Rightwing wrote: »

What investment in infrastructure would you like to see here?

Specifically I would like to see private banking groups co-operate with the EIB or other agency of the EU/ Eurozone to provide finance for Irish manufacturing, energy and innovation companies. A certain amount of this would have to be infrastructural too, and would be invested in public infrastructure like roads and ports.

That would be replicated in the other programme countries as a 'sweetener' to austerity - but not an end to wage restraint and fiscal responsibility by government.

20Cent

Paper has been cited 450 times, a lot more than just one piece of research fubared.
http://scholar.google.com/scholar?q=GROWTH+IN+A+TIME+OF+DEBT&btnG=&hl=en&as_sdt=0%2C5

Scofflaw

20Cent wrote: »

Paper has been cited 450 times, a lot more than just one piece of research fubared.
http://scholar.google.com/scholar?q=GROWTH+IN+A+TIME+OF+DEBT&btnG=&hl=en&as_sdt=0%2C5

No, ironically that's a very poor use of statistics - a comparable study which independently reaches similar conclusions, one that simply compares contrasting conclusions, or indeed one that refutes their conclusions, will all cite the paper.

It's influential, certainly, but that's not the same as definitive or foundational.

cordially,
Scofflaw

KyussBishop

View wrote: »

It may be politically powerful - that doesn't mean it's economically powerful.

If a company has X amount of shares in issuance, each share is worth 1/Xth of the net wealth of the company. If it increases the number of shares it has in issuance, it doesn't mean the net wealth of the company increases, rather it merely dilutes the value of each share in existence (each share is now worth a decreased 1/(X+Y)th of the company).

The economy and money isn't analogous to a company with shares; that is a deep misunderstanding of fiat money.

In an economy with idle labour (unemployment) and idle industry/resources, using created money to put the two together, increases GDP and increases the 'economic pie' overall.

View wrote: »

Likewise, each unit of money in existence is ultimately worth a fraction of the net wealth of the area that uses it. Issuing more money doesn't increase that net wealth (immediately, altough it may help long term) rather it devalues the value of each unit of money in circulation.

If you claim a reduction in the spending power of money, you have to describe that in terms of inflation (including of specific goods), and inflation is mostly about supply bottlenecks (i.e. a shortage of a good, making its price increase), which makes economics mostly about resource management.

If you've got the resources at hand (with labour being the most important of them), and you put created money to use with that, then you increase economic activity.

View wrote: »

Dozens of countries around the world have gone down the road of churning our more more in order to create "wealth". It doesn't work because on anything other than a short term basis because the value of the currency drops and the prices of imports from other currency areas increase.

You say it works on a short-term basis here, I agree; that is all it is needed for, to get back to full employment (one of the most important resource bottlenecks in the economy, where if you spend past the point of full employment you do get ever increasing inflation).

View wrote: »

Perhaps more fundamentally though as governments spends their money largely on non-profit activities, they essentially engage in economic value destruction (albeit socially useful activities) on a continual basis (e.g. That local hospital is a drain on the public purse even if highly desirable). That reduces the net wealth of a government and its people. Unless that is counter-balanced by economic value creation - an area governments are notoriously bad at - the result of what you are suggesting is not "sustainable government spending" but unsustainable spending and - ultimately - the hard reality of bail-outs and increasing poverty.

Terms like 'economic value destruction/creation' are deliberately vague terms, used by Austrians to muddy debate, and as a jumping-off point to condescend to people when called out on it; you wont find a succinct definition of terms like that in any of the standard reputable places online (wikis or non-Austrian economic sites), because of that.

You even describe government spending being 'a drain on the public purse', as if we have not been talking about public use of money creation all along (where there is no 'public purse'; expenditure is restrained by inflation targets), and you think government in such a situation should run a profit (i.e. take more money out of the economy than they put in), when they have no need to due to money creation; that's a whole lot of vague nonsense, fast making it seem like you don't have intent for honest discussion.



Again, a really simple way to explain and understand this (and I'd like you to address this, because arguments against have tried a total 'Austrian' reframing of the discussion thus far, instead of addressing things as presented), is just comparing it to private banking and private use of money creation; copying from my previous post:
Private banks create money all the time (a view shared by many, including a leading editor of the Financial Times, plus the Bank of England, and many central banks around the world), yet somehow it is unthinkable that it may be possible for government to as well.

[]
Where, using money creation, private banks add money to the economy through loans, government can add money using public spending (limited by inflation targets, thus debunking the lazy hyperinflation nonsense); where private banks take money out of the economy through debt repayments + interest, government can take money out through taxes (but without the inherent unsustainability of banks debt-based money).

It's simple enough (when the right narrative for explaining it is found), and the analogies between how public/private money creation work are pretty clear, yet despite the mechanics of it being so analogous, public money creation is somehow supposed to magically lead to hyperinflation (with the mechanism of that being totally unexplained by anyone making the claim, and despite repeatedly stating public spending would be limited by inflation targets; requiring the most dishonest obtuseness to ignore).


So again, private banks put money into the economy with loans, take it out with debt repayments and interest; that's perfectly good and fine for you.
Government would put money into the economy through public spending, take it out with taxes; suddenly this is bad, and is magically supposed to lead to hyperinflation.

What I think motivates the Austrian reaction to this, is not any interest in the economic reality of it, but just a knee-jerk anti-government reaction, where they will oppose anything which takes such rent-seeking abilities away from private banks, and gives it to government for social purposes instead; the speed with which such followers jump to disingenuous argument on the topic, always leaves me with the feeling they are fully conscious of it.

KyussBishop

djpbarry wrote: »

Considering so many Eurozone countries have significant unsustainable debt as is, I’m not at all convinced that much can be achieved through an EU-wide stimulus programme before the entire Eurozone accrues unsustainable levels of debt.

There would be a limit, but stimulus will first of all raise GDP, which will then by itself lower the debt-to-GDP ratio (helping sustainability as it goes), and start increasing tax intake, until full employment is reached (which will slowly boost private industry back up over time, lessening the need for public spending).

I don't personally think it could unlock the full potential of economies in Europe (which money creation would be able to), but it would certainly be a big boost to help recovery.

skafish

spank_inferno wrote: »

Ireland is borrowing billions year on year to fund itself
- That is not austerity.

Ireland is borrowing billions year on year to fund itself.
- That is a massive stimulus, as its almost all given in cash to PS workers and social welfare.



(just to counter the mantra of "Austerity isn't working... we need stimulus").
We haven't yet had the former and we are already doing the latter.

Though if a further stimulus was required it should come in the form of considerable tax reductions, not spending increases.

Only took 10 posts in a new thread for the start of the anti PS rant to begin. A new record?

marienbad

skafish wrote: »

Only took 10 posts in a new thread for the start of the anti PS rant to begin. A new record?

Dos'nt change the veracity of the statement though does it. And it is central to the discussion is it not ?

20Cent

Scofflaw wrote: »

No, ironically that's a very poor use of statistics - a comparable study which independently reaches similar conclusions, one that simply compares contrasting conclusions, or indeed one that refutes their conclusions, will all cite the paper.

It's influential, certainly, but that's not the same as definitive or foundational.

cordially,
Scofflaw

450 papers citing the paper that used wrong figures still significant. Others have not reached similar conclusions independently, thats the problem no one has been able to replicate the results. If its a comparative study then its wrong. Only one paper refutes it because they only released the raw data recently. Influential paper is wrong, one thats quoted by the German minister of finance. which he said he strongly believed in.

20Cent

“t is widely acknowledged, based on serious research, that when public debt levels rise about 90% they tend to have a negative economic dynamism, which translates into low growth for many years.” — European Commissioner Olli Rehn.

Cody Pomeray

20Cent wrote: »

450 papers citing the paper that used wrong figures still significant.

That's my problem with it.

Journal editors and others in positions of responsibility seem to have forgotten or overlooked one of the basic instructions passed on to any undergraduate in any scientific or quantitative trial or research:

One piece of research is not enough. Findings must be replicable.

We obviously can't condemn a paper that has cited R&R or Alesina in laying out the land or in passing.

What we can condemn are those who made excessive use of one paper, knowing its findings had not been replicated elsewhere, either to construct "hard facts" or upon which to construct consequential findings, which must now be re-examined.

Based on 20cent's quote, Olli Rehn appears to be an example of the former.

Scofflaw

Both of you are ignoring the fact that a five year old policy cannot possibly be based on a three year old paper. The flaws in this paper (I'm not defending the paper, but R&R have published their defence) are not, therefore, going to change policy, no matter how much people shout and wave it about.

Equally, the debt figure of 90% doesn't feature in any set of targets or treaties I'm aware of. We have the 120% figure generally seen as the limits of sustainability, and the 60% figure the eurozone countries agreed to in the Stability and Growth 20 years ago - which again makes the point that seeing high public as a problem is not something that stems from this paper.

That's what makes nonsense of what's being pretended by many, and forms the title of this thread - austerity policies are not based on this paper.

cordially,
Scofflaw

Cody Pomeray

Scofflaw wrote: »

Both of you are ignoring the fact that a five year old policy cannot possibly be based on a three year old paper.

Woah there horse, who said it was the basis for austerity?

Nobody as far as I can see.

I think it's reasonable to suppose Rehn referred to it in his defence of austerity.

It would be idiotic to say this paper invented the principle of fiscal austerity. Some credit please.