Friday, June 3, 2011

Who is to blame for the coming downturn?

When Barack Obama took office, Paul Krugman urged him to emulate Franklin Roosevelt, and it looks as though Obama might just achieve what FDR did: have a depression within a depression.

As the economy begins another long and sad slide, Krugman is claiming that our government just did not spend enough money the past few years, and that is why we are headed south:
Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.
Krugman's retrospective is his usual self-aggrandizing nonsense, the idea being that had Obama borrowed and spent an extra trillion, dollars, Krugman then would have argued for two trillion, and had the administration dumped two trillion, Krugman would have demanded four. And so it goes.

What Krugman does not say is that like FDR, Obama went on a regulatory rampage, and on top of that, the government continues to pursue wars abroad and now openly admits to having CIA-sponsored death squads roaming the globe in search of the "bad guys." Obama has openly demonstrated himself to be quite hostile to private enterprise (of the non-subsidized variety), and the government through the Federal Reserve System is showering the world with dollars, yet he wonders why U.S. business firms do not engage in long-range capital planning and expenditures.

As Robert Higgs notes in this excellent essay, the Roosevelt administration created huge amounts of "regime uncertainty," which led to a slowdown of private investment. It seems that Obama, through his rhetoric, his initiatives, and the brazen hostility of Washington toward private investment, we are seeing a repeat.

Krugman, of course, won't mention this point, and why should he? Keynesians believe that all we need to do is to shower an economy with money and everything else follows. Well, it doesn't.

34 comments:

Anonymous said...

Who owns the fedwww.save-a-patriot.org/files/view/whofed.html

AP Lerner said...

"Krugman's retrospective is his usual self-aggrandizing nonsense, the idea being that had Obama borrowed and spent an extra trillion, dollars, Krugman then would have argued for two trillion, and had the administration dumped two trillion, Krugman would have demanded four. And so it goes."

This is simply false. Krugman stated the stimulus should have been $1T higher. At no point did Krugman demand four trillion, like you claim. He said it should have been $1.8T. He was very clear about this. Please stop making things. Try using a fact checker, like Google, every now and then.

http://www.bizjournals.com/portland/stories/2009/01/26/daily68.html

"and the government through the Federal Reserve System is showering the world with dollars"

The Federal Reserve does not have the ability to 'shower the world with dollars'. That responsibility belongs to the US Bureau of Engraving and Printing, which of course is part of the Treasury. I have already accepted you do not understand banking and monetary operations. This is clear. But you really could do a better job of getting basic facts about your government correct.

http://www.bep.treas.gov/contactus.html

"the Roosevelt administration created huge amounts of "regime uncertainty," which led to a slowdown of private investment."

How come you are not claiming regime uncertainty over this debt ceiling nonsense? That truly is regime uncertainty. That truly is stalling capital investment and hiring.

"Keynesians believe that all we need to do is to shower an economy with money and everything else follows. Well, it doesn't. "

False. Please read this, and read it carefully. Then again. One more time.

http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1891396684/ref=sr_1_1?s=books&ie=UTF8&qid=1307132009&sr=1-1

Isaac "Izzy" Marmolejo said...
This comment has been removed by the author.
Isaac "Izzy" Marmolejo said...

"This is simply false. Krugman stated the stimulus should have been $1T higher. At no point did Krugman demand four trillion, like you claim. He said it should have been $1.8T. He was very clear about this. Please stop making things. Try using a fact checker, like Google, every now and then."

Can you say strawman fallacy? Jeez, read the blog post again. Mr. Anderson never claimed Krugman demanded the government to spend 4 trillion.

“False. Please read this, and read it carefully. Then again. One more time.

http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1891396684/ref=sr_1_1?s=books&ie=UTF8&qid=1307132009&sr=1-1”

Holding the ‘General Theory’ as a guide to what most Keynesians think today is pointless. Keynesians are much more in line with Paul Samuelson’s textbooks, which if you ever bothered to compare the General Theory to his textbooks, they differ in theory.

ekeyra said...

AP,

Given that the current economy looks like the tail end of a time lapsed meth addict, this is really all you have to argue anymore isnt it? Petty, nonsensical, objections to things you willfully misinterperet. If you had just shown up here Id give you the benefit of the doubt, but you and I both know what prof anderson meant about krugman claiming 4 trillion dollars. No matter what amount the government decided to spend, krugman would have demanded twice that much and claimed victory when it inevitably failed. Thats his schtick. For as long as you've been here you should be well aware of what prof anderson meant. You purposefully do not apply any critical thinking to what was actually said.

Anonymous said...

AP:

> The Federal Reserve does not have the ability to 'shower the world with dollars'. That responsibility belongs to the US Bureau of Engraving and Printing, which of course is part of the Treasury. I have already accepted you do not understand banking and monetary operations. This is clear. But you really could do a better job of getting basic facts about your government correct.

You quoted him right above this statement: "and the government through the Federal Reserve System is showering the world with dollars"

Aside from being a terribly pedantic criticism, you are totally wrong. THE GOVERNEMENT (through the Federal Reserve System) IS SHOWERING THE WORLD WITH DOLLARS.

Linking to a .gov site just reinforces the original point.

Bob Roddis said...

1. Even if the fiat system "operates" the way AP Lerner claims, Austrian School analysis of its horrendous impact upon catallactic relationships still remains. No MMTer has the slightest understanding of even basic Austrian concepts. Further, stripped of its arcane obsession with "sectors", MMT is just plain old Keynesian aggregate demand management which has no basis in fact or logic. The amount of Krugman’s “gap” to be filled with spending and debt is determined by an unsustainable trend line that collapsed due to prior funny-money induced malinvestments. More spending will only further distort the pricing process and impede recovery. The only reason the MMTers have latched onto the “sectors” garbage is because everyone already knows the Keynesian garbage is preposterous.

2. When is AP Lerner going to explain where all the stuff is going to come from to satisfy the government's unpayable obligations? When is he going to explain his claim that catallactic relationships no longer matter after 1971?

3. APL's major influence is the totalitarian commie Abba Ptachya Lerner:

http://www.blogger.com/profile/10131895292917933329

Read the first two chapter headings from Lerner's book "THE ECONOMICS OF CONTROL" [and he really means it!]:

http://www.flickr.com/photos/bob_roddis/5560086644/in/set-72157626353319778

This is what we're really dealing with here.

Bob Roddis said...

Like AP Lerner, Brad DeLong has no understanding whatsoever of Austrian Theory. He claims that we have been SILENT as to why recalculation has not occurred since 2008. Is he stupid or is he lying?

http://tinyurl.com/3medz44

Jonathan M.F. Catalán said...

For what it's worth, Krugman has argued that radical monetary expansion by part of the Federal Reserve would, in fact, help an economic turn-around. This argument is a facet of Krugman's revision of the Keynesian liquidity trap. The idea is to influence intertemporal expectations and increase the monetary base sufficiently as to persuade consumers that the Federal Reserve is committed to an inflationary policy.

Anonymous said...

Two years ago Krugman was saying that Big Government had saved the day.

http://www.pressdemocrat.com/article/20090811/OPINION/908109930/1042?Title=KRUGMAN-What-saved-us-from-a-replay-of-the-Great-Depression-

Trillions of dollars and three wars later he probably still believes that just a few trillion more printed and wasted will surely fix everything.

Lord Keynes said...

"Krugman's retrospective is his usual self-aggrandizing nonsense,"

It is your post that is nonsense.

Krugman's prediction of the effects of Obama's stimulus and how it would fade out in 2011 are on the public record:

http://krugman.blogs.nytimes.com/2009/12/27/stimulus-timing/

An antidote to your ignorance here:

http://factsandotherstubbornthings.blogspot.com/2011/06/on-paul-krugman.html

David B said...

LK,

If Krugman knew the stimulus was going to "wear off" than he admits that he is simply advocating another bubble to prop up the previous one.

How much more should have spent? Exactly. And on what? And who?

How about $1 trillion? Does that sound like enough? On what should that be spent? What companies get the money, and to do what? How much should people be paid for the services they provide? What services should they provide? What factors of production should be bought? How should they be utilized?

I could go on and on.

Or should we take $1 trillion and throw it up in the air? It doesn't matter where it's going, right? Just GET SPENDING GOING!!

Well, in that case, I nominate myself as the spender. Give me the $1 trillion and let me be the hero. I promise you it will all work out, and if it doesn't, just give me more!

Bob Roddis said...

I continue to be astonished that neither Krugman, DeLong, Kuehn, AP Lerner nor Lord Keynes seem to understand the basic Austrian position. If they understand it, they sure do not show it. As I responded to Kuehn and DeLong yesterday regarding Kuehn‘s quote of DeLong:

"When you ask believers in 'recalculation' what pattern of production and trade proved to be unsustainable in 2007, they answer: "building so many houses." When you ask believers why the market economy has been unable to sort out this problem in three years, they answer with nothing--silence. When you say that OK, there were $300 billion of excess houses at the start of 2007 but now construction has been so depressed for so long that there are $1 trillion fewer of houses than trend and why isn't the 2007 pattern of production and trade sustainable again, they answer once again with nothing--silence. That annoys me."

Please. How can recalculation possibly take place without a market-based interest rate, the most important price of them all? DeLong's beloved fiat-based super low rates will continue to impede economic calculation and thus "recalculation". There is no silence on this issue. Low rates have been catastrophic and will continue to be. As Hayek said in a 1975 speech:

“The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured."

We cannot and will not know the equilibrium interest rate because it will not be allowed to come into existence. No one can conceivably know what houses are actually worth because the possibility of any informed long-term economic calculation has been completely distorted by low interest rates with regime uncertainty thrown in for some extra bad effects. There will be no recovery unless and until a market interest rate is allowed to be formulated by market actors.

http://tinyurl.com/3medz44

AS EXPLAINED AND PREDICTED BY AUSTRIAN THEORY, there was, is and will be no “recovery” because ECONOMIC CALCULATION HAS BEEN IMPAIRED BY KEYNESIAN/FIAT MONEY/DEFICIT SPENDING policies. The lack of a recovery certainly is not proof that there exists such a “thing” as aggregate demand or that blowing (spending) a trillion or two more would have made things better. Austrian theory explained everything about the boom/bust AND explained exactly why Keynesian policy is not only deficient, but the CAUSE of the problem.

The Keynesians cannot EVER even state the Austrian position, much less mount a refutation.

Bob Roddis said...

Let's recall the brilliant plans of Krugman from 2001:

DIE ZEIT INTERVIEW WITH KRUGMAN

http://www.pkarchive.org/global/welt.html

"During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?"

Hmmmm. Let's see. Maybe because IT'S THE MOST CATASTROPHIC AND HORRIFIC PRICE CONTROL the government might inflict upon the economy? It will impair economic calculation, especially long term calculation and induce people to invest in long term projects that really make no economic sense? Just maybe, smart guy?

Bob Roddis said...

Even more demands for low interest rates and money dilution:

May 2, 2001 Paul Krugman “And while some of us may have been urging him to move even faster, the Fed's four interest-rate cuts since the slowdown became apparent represent an unusually aggressive response by historical standards. It's still not clear that Mr. Greenspan has caught up with the curve -- let's have at least one more rate cut, please -- but the interest-rate cuts do, cross your fingers, seem to be having an effect.”

2006 Paul Krugman: As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. But by late 2004 he should have seen the danger signs and warned against what was happening; such a warning could have taken the place of rising interest rates. He didn’t, and he left a terrible mess for Ben Bernanke.

http://krugman.blogs.nytimes.com/2006/10/30/credit-where-credit-is-due/

2009 Paul Krugman: GUYS, READ IT AGAIN. IT WASN’T A PIECE OF POLICY ADVOCACY, IT WAS JUST ECONOMIC ANALYSIS. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.

http://krugman.blogs.nytimes.com/2009/06/17/and-i-was-on-the-grassy-knoll-too/

Fine, let’s read it again. Very s-l-o-w-l-y.

1. “[L]et's have at least one more rate cut, please -- but the interest-rate cuts do, cross your fingers, seem to be having an effect.”

2. "GUYS, READ IT AGAIN. IT WASN’T A PIECE OF POLICY ADVOCACY, IT WAS JUST ECONOMIC ANALYSIS. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened".

We all know that there is solid logic and evidence behind the concept of "traction". And we all know that housing bubbles are the fault of Bill Anderson and Ludwig von Mises.

Bob Roddis said...

While Krugman was demanding creation of a housing bubble to replace the tech bubble, some crank named William L. Anderson wrote:

In recent weeks, the stock market has staged a mild rally. Though the most recent unemployment numbers are well over six percent, Republicans, as well as a few market analysts, are claiming that the long overdue economic recovery has arrived. While I wish that were the case, the facts demonstrate otherwise; this is not a recovery, but simply an unsustainable mini-boom that makes the long-term economic picture even worse.

http://mises.org/daily/1265

Django said...

Recall that in November of 2008 Krugman wrote:

"My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

So the question becomes, will the Obama people dare to propose something on that scale?

Let’s hope that the answer to that question is yes."

Bob Roddis said...

@Django:

Great find! The entire Krugman quote from November 14, 2008 (after the election of Obama) is:

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

So the question becomes, will the Obama people dare to propose something on that scale?

Let’s hope that the answer to that question is yes, that the new administration will indeed be that daring. For we’re now in a situation where it would be very dangerous to give in to conventional notions of prudence.


http://www.nytimes.com/2008/11/14/opinion/14krugman.html

I’m not going to claim the Krugman has been inconsistent. I’m sure he later upped his spending demand because “the gap” turned out to be so much bigger than expected. The problem with Krugman and all Keynesians is that there is no reason in history or logic to think there is such a “thing” as “the gap” or that spending, government debt or funny money dilution is going to cure it.

I do love the phrase “conventional notions of prudence”. More proof that Keynesians of all breeds proudly and opening live in an alternative universe ( that does not exist). When explaining the sheer insanity of Keynesians to average folk, I would pound that point home.

Tel said...

The Krugman, 2009/12/27/stimulus-timing article is very interesting. Particularly the table of Rate, Change & Cumulative figures. Note that Krugman does not explicitly call for a prolonged extension to the "growth" rate, but that's what he implies when he is worried about growth dipping out.

Here is the same table with a hypothetical 12 month extension at 35% growth:

Rate Change Cumulative
2009Q2 35 35 35
2009Q3 80 45 115
2009Q4 115 35 230
2010Q1 150 35 380
2010Q2 185 35 565
2010Q3 220 35 785
2010Q4 250 30 1035
2011Q1 270 20 1305
2011Q2 280 10 1585
2011Q3 280 0 1865
2011Q4 270 -10 2135
2012Q1 240 -30 2375
2012Q2 190 -50 2565
2012Q3 140 -50 2705
2012Q4 90 -50 2795
2013Q1 55 -35 2850
2013Q2 25 -30 2875
2013Q3 0 -25 2875


There are two results here... trying to maintain 35% growth for an extra 12 months costs 2 trillion more dollars at the end of the cumulative column. Also, you have to go through a longer period of negative growth in order to escape from the previous position.

It's just what numbers do, they insist on adding up. There is no clever way to sneak around this by talking faster.

chriswaterguy said...

"Krugman is claiming that our government just did not spend enough money the past few years, and that is why we are headed south"

If this were true, then you'd expect Australia, which had, relative to its economy, a much larger stimulus in 2008, to have recovered much better.

And... that's exactly what's happened. So much so that they've had to take small corrective measures to prevent overheating. Just one bit of data, but it does support the idea that Krugman is right.

Bob Roddis said...

Pater Tenebrarum says that Australia’s Keynesian policies simply kicked the inevitable housing bust down the road. High commodity prices have also helped Australia avoid the inevitable recalculation in the short run but that a housing bust may be imminent:

After the 2008 crisis, Australia's government and central bank did what good Keynesians are supposed to do, namely engage in massive deficit spending and money printing. They have thereby averted a correction in Australia's homegrown housing bubble at the time, which is one of the most egregious such bubbles in all of history.

http://www.acting-man.com/?p=7814

Further, Tenebrarum says that austerity has been tried and has worked in the Baltic countries:

Alas, none of this proves that austerity won't work for the economies concerned. In fact, it appears it has worked in the Baltic nations. They kept their euro pegs, and one of them, Estonia, implemented such a harsh austerity regime that the country was able to join the euro late last year by fulfilling the criteria of the stability pact. Its economy is slated to grow by 5.9% this year. Its fiscal deficit in 2011 will be 0.5% of GDP. How about that? Apparently Estonia has managed to achieve what according to Krugman is 'impossible'. Lithuania and Latvia are close behind, with Lithuania's growth expected to hit 5.6% this year and Latvia's expected to hit 4%. Latvia's economy shrank by 25% when the impoverishment of the boom was unmasked. All these nations have implemented strict austerity measures and vastly reduced government indebtedness – now they are back on a solid growth path. According to Krugman, this is not possible, which may be why he has so far somehow neglected to mention it.

http://www.acting-man.com/?p=7736

These predictions are really beside the point. The point is who has an ECONOMIC THEORY that makes sense? Only the Austrians.

Lord Keynes said...

"Pater Tenebrarum says that Australia’s Keynesian policies simply kicked the inevitable housing bust down the road."

The "First Home Owners Scheme" that did indeed prevent the deflation of housing prices was a measure separate from the fiscal stimulus in Australia.

The empirical evidence showing how the stimulus prevented recession in Australia is very clear in the sectoral breakdown in the sources of growth:

http://www.debtdeflation.com/blogs/2010/08/18/giving-the-bird-to-the-stimulus/

"Further, Tenebrarum says that austerity has been tried and has worked in the Baltic countries:"

The "success" of austerity in the Baltic states in a sick joke:

“Neoliberal austerity [sc. in Latvia] has created demographic losses exceeding Stalin's deportations back in the 1940s (although without the latter's loss of life). As government cutbacks in education, healthcare and other basic social infrastructure threaten to undercut long-term development, young people are emigrating to better their lives rather than suffer in an economy without jobs. More than 12% of the overall population (and a much larger percentage of its labour force) now works abroad. Children (what few of them there are as marriage and birth rates drop) have been left orphaned behind, prompting demographers to wonder how this small country can survive. So unless other debt-strapped European economies with populations far exceeding Latvia's 2.3 million people can find foreign labour markets to accept their workers unemployed under the new financial austerity, this exit option will not be available.”

http://www.guardian.co.uk/commentisfree/2010/dec/20/latvia-debt-economy-europe-austerity

Yeah, great success!: depression, mass unemployment, 12% of the whole population working abroad, a brain drain, falling birth rates, and mass poverty.

Unemployment in these countries in the double digit figures and will remain high for years. Export-led growth will not cause a proper recovery.

Moroever, austerity Baltic-style is NOT in any way a viable policy for large European states or the US, Canada etc.

Lord Keynes said...

Is this supposed to be the miracle of Baltic austerity?

Latvia

GDP
2008 Q1 -4.1
2008 Q2 -2.4
2008 Q3 -1.1
2008 Q4 -3.1

2009 Q1 -12%
2009 Q2 -2
2009 Q3 -3.7
2009 Q4 0.1%

2010 Q1 0.2%
2010 Q2 0.6%
2010 Q3 1.6%
2010 Q4 1.1%

2011 Q1 0.2%

GDP growth after the massive depression of 2008-2009 has been weak. It has slumped to 0.2% in Q1 2011.

Latvia Unemployment rate
2008 5.70 %
2009 5.30 %
2010 17.10 %
2011 14.30 %
http://www.indexmundi.com/latvia/unemployment_rate.html

Despite the GDP growth, unemployment is a catastrophe: it is projected to be 14.30% this year. The only reason unemployment isn't higher is that many people have been driven to work overseas.

Tel said...

Australia is being supported by the same things that are helping Brazil:

* High prices in minerals, driven by factories in India and Asia

* High prices for food and agricultural produce, driven by worldwide food shortages.


As a short term measure the stimulus was helpful but I point out that the RBA went into 2008 with a base interest rate around 7% while the Fed had US base interest rate sitting below 1% for years. Also, yes the RBA dropped AUstralian interest rates sharply in 2009 but they started lifting those rates back up again soon after.

What this means is that in Australia, our reserve bank takes bubble-fighting seriously as part of their charter, whilst in the USA the Fed has just let those bubbles happen. Back before the crash the RBA even issued statements that it was imposing high interest rates in order to put downward pressure on house prices, and discourage a bubble.

The best way to handle any crisis is to be well prepared before it hits you, not think of something smart after you get into trouble.

Bob Roddis said...

Despite the GDP growth, unemployment is a catastrophe: it is projected to be 14.30% this year.

Reason #57,234 not to have a Keynesian boom followed by a nasty Keynesian bust.

Bob Roddis said...

According to Statistics Estonia, in April 2011 the production of industrial enterprises grew 32% compared to April of the previous year. The production showed a 30% growth for the eighth month in succession compared to the same month of the previous year.

The growth of production has been mainly influenced by the increase in external demand as previously, but the domestic demand also increased compared to April of the previous year.

In April 2011, the production of manufacturing increased 38% compared to April 2010. Export sales of the manufacturing production grew significantly (62%). About three quarters (73%) of the whole production of manufacturing was sold on the external market.


http://www.stat.ee/49366

Bob Roddis said...

Keynesian policies draw investment and labor into lines of production that falsely appear sustainable only because of the money dilution and government spending and debt. People start to realize that these projects are not going to make money as it had previously appeared they would (despite the braying of the Keynesians who nevertheless continue trying to confuse and to convince them that their own eyes are lying to them). They discover that they are POORER than they had previously believed. It is essential that people get into sustainable lines of production ASAP. It is absurd to think that further money dilution, which only serves to transfer purchasing power around surreptitiously or government debt, which just wastes additional scarce resources, makes any sense whatsoever. At such a point, it’s essential to “to give in to conventional notions of prudence*“. Economic calculation can only then occur by ending the money dilution along with ending the spending and debt so that equilibrium prices, especially interest rates, may appear to guide the way to the future.

*Thanks to Krugie, we can now announce a bright line between “conventional notions of prudence” and Krugmanite “irrational, irresponsible and preposterous notions of waste, theft and indulgence”).

Lord Keynes said...

"Reason #57,234 not to have a Keynesian boom followed by a nasty Keynesian bust.

Typical. You divert attention from the clear refutation of your statement:

"austerity has been tried and has worked in the Baltic countries:"

It hasn't "worked": those nations are mired in severe economic problems. Their export-led growth (slightly higher in Lithuania and Estonia) is unsustainable. Austerity in the rest of Europe - their trade partners - will hit them hard, and derail their recovery.

In the case of Latvia, its growth is weak, and it will have mass unemployment for years.

Bob Roddis said...

As long as most of the world lives under a fiat regime, I really don't expect much in the way of real growth and expect further impoverishment.

I don't generally recommend using historical anecdotes to establish economic principles. Austrian principles do not rise or fall on Tenebrarum's views on Estonia.

I never change the subject. The subject is always that funny money and government debt cause impovershment. Keynesian "ideas" have the entire human race by the throat.

Lord Keynes said...

"As long as most of the world lives under a fiat regime, I really don't expect much in the way of real growth and expect further impoverishment."

Awesome.
You've gone from "austerity has been tried and has worked in the Baltic countries" to "I really don't expect much in the way of real growth and expect further impoverishment."

So now you have NO empirical evidence that austerity leads to successful, sustainable recovery.

Bob Roddis said...

Yes, I don't expect much. I'm pleasantly surprised that Estonia seems to be doing better thanks to “conventional notions of prudence” if only for the sake of the Estonians.

What do you claim is the cause of the alleged Estonian unsustainablity?

Lord Keynes said...

"Doing better". Compared to what?

Unemployment in Estonia stands at
14.4%.

http://www.google.com/publicdata?ds=z9a8a3sje0h8ii_&met_y=unemployment_rate&idim=eu_country:EE&dl=en&hl=en&q=unemployment+estonia

GDP:

3.1% (2010 est.)
-13.9% (2009 est.)
-5.1% (2008 est.)

Anonymous said...

"Unemployment in Estonia stands at
14.4%."

What caused the unemployment? The 'austerity' or the profligacy that caused the boom?

"GDP:

3.1% (2010 est.)
-13.9% (2009 est.)
-5.1% (2008 est.)"

We've been through this before, but falling GDP does not mean people are worse off. Further, a drop in spending is not necessarily bad if it means a return to living within your means. It is in fact great if it happens as a result of the liquidation of boom-time malinvestment. Finally, GDP is a nonsense indicator; noise masquerading as information.

Bala

Anonymous said...

And when will you whatever-Keynesian economic chroniclers stop calling the cessation of (necessarily and inherently) harmful economic intervention as 'austerity'? Only a man who is living way below his means can be said to be austere. When a profligate person returns to living within his means, it is called recovering one's financial/fiscal sanity.

Bala