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Krugman: We are in the early stages of a depression

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Filed: K-3 Visa Country: Russia
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Krugman's piece is interesting and, one hopes, wrong. But the analysis looks very sound. The tendency for inappropriate governmental retrenchment in Europe, especially in Germany and the UK, is very worrisome. The fact that the US Senate seems to be forcing similarly dangerous spending cuts on US state and local governments is also worrisome.

Consumer spending has been surprisingly resilient through this recession, but business investment remains on strike. This is the norm for post-War recessions but it could change if the expansion is sluggish, or if deflation indeed sets in, or if there is another (or especially several) recessionary episodes.

There are industries generating huge profits without corresponding investments that create jobs. Petrochemicals, especially the fuel side of the business, is a case in point. Just two days of probable fines BP (the company formerly known as Beyond Petroleum or British Petroleum, take your pick) will have to pay for their spill ($500-600 million) would provide the entire capital cost needed to build a world-scale, sustainable biorefinery. BP says it has the reserves to pay this and is appears they are correct.

Biorefineries will be relatively labor intensive compared, say, with deep-water drilling which is incredibly capital intensive. Were governments to show some spine and reorient their tax code, these huge, extremely profitable businesses could find it in their interest to make real investments, rather than mere greenwashing tokens, that could help the West move toward a truly sustainable energy economy -- and create many, many jobs along the way.

Could it happen? Sure. Will it happen? Given the nutty political trends in this country and in Europe, probably not.

Let's get ready for another Depression. Not quite a replay of the Great Depression of 1929. But perhaps something more similar to the long 20-year episode (it was called the Long Depression when I was in college, interesting to see Krugman use the same term) following 1873. It looks like its here unless we (1) find a way to stabilize government expenditure and (2) break the strike big business currently holds against investment in the economies on which they rely.


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Filed: K-1 Visa Country: Lesotho
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Paul Krugman Now Laughingstock On Two Continents

Tim Cavanaugh | June 24, 2010

It's always the right time to ignore Paul Krugman, the New York Times columnist, Nobel Laureate and four-time Latin Grammy nominee whose drink-yourself-sober advice on handling the debt crisis is so sharply at odds with reality.

Of late, Krugman has had his Irish up at Europeans who are resisting the Obama Administration's plan to continue spending hundreds of billions on financial stimulus. (Not that he agrees with the administration, which Krugman has been arguing for the last 18 months should be spending trillions, not mere billions, on stimulus.) And in the case of Bundesbank president Axel Weber -- whom Krugman called out recently in the daily Handelsblatt for trying to shore up the falling euro at the expense of government job creation -- it's created a backlash. The Wall Street Journal reports that Krugman's criticism has turned him into the anti-Hasselhoff and boosted Weber's popularity as he pursues the top job at the European Central Bank:

Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”

“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.

Unfortunately, as Krugman notes in his response, Franz managed to find the weakest arguments against the Times' fiscal shaman. Europeans have lost their appetite for digging deeper holes of debt for the same reason Americans have: because they don't have a choice. As Margaret Thatcher predicted would happen, we have all run out of other people's money. That reality explains a lot more than airy references to Germans' anti-inflationary mass psychology.

We're at the tail end of the largest economic intervention since World War II, and even on its own narrow, nebulous terms, it has been a colossal failure. The failure is obvious to working people. It's obvious to unemployed people. It's obvious to kindergarteners, to dogs and cats. Only Paul Krugman persists in thinking good things will happen if we just throw more money on the barbecue.

http://reason.com/blog/2010/06/24/paul-krugman-now-laughingstock

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Filed: Country: United Kingdom
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If a depression is coming, let's deal with it sooner rather than later. More stimulus will just delay

the day of reckoning and make a future depression much, much worse.

"Deflation" is not a problem for those who haven't mired themselves in debt, in fact, it's a good thing

for savers.


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"Deflation" is not a problem for those who haven't mired themselves in debt, in fact, it's a good thing

for savers.

Yes, if they figure out how to not deplete their savings as the depression (if that's what this is) runs its course.

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Filed: K-3 Visa Country: Russia
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"Deflation" is not a problem for those who haven't mired themselves in debt, in fact, it's a good thing

for savers.

Has deflation been good for Japan?


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Filed: K-3 Visa Country: Russia
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Absolutely. Deflation cleans out the rotten companies leaving space for new vibrant companies to form.

Historical facts don't conform so well to your dogma. Deflation in Japan first appeared in about 1992. Since then, thru 2008, their GDP growth rate has has never exceeded 2.7%. For six years, it was under 1% and they've experienced several years of outright recession. From 1965 until 1991, Japan had only two years (1974 and 1983 -- both years of essentially global recession) where their growh rate was under 2%. Deflation has been terrible for Japan as a nation and for the Japanese people.

Maybe this, though, is what you wish for the American people. I don't.


5-15-2002 Met, by chance, while I traveled on business

3-15-2005 I-129F
9-18-2005 Visa in hand
11-23-2005 She arrives in USA
1-18-2006 She returns to Russia, engaged but not married

11-10-2006 We got married!

2-12-2007 I-130 sent by Express mail to NSC
2-26-2007 I-129F sent by Express mail to Chicago lock box
6-25-2007 Both NOA2s in hand; notice date 6-15-2007
9-17-2007 K3 visa in hand
11-12-2007 POE Atlanta

8-14-2008 AOS packet sent
9-13-2008 biometrics
1-30-2009 AOS interview
2-12-2009 10-yr Green Card arrives in mail

2-11-2014 US Citizenship ceremony

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Historical facts don't conform so well to your dogma. Deflation in Japan first appeared in about 1992. Since then, thru 2008, their GDP growth rate has has never exceeded 2.7%. For six years, it was under 1% and they've experienced several years of outright recession. From 1965 until 1991, Japan had only two years (1974 and 1983 -- both years of essentially global recession) where their growh rate was under 2%. Deflation has been terrible for Japan as a nation and for the Japanese people.

Maybe this, though, is what you wish for the American people. I don't.

Guess what, Japan had 10 "stimulus programs" in the 1990's alone. Government consumption rose

from 5.9 percent of GDP in 1991 to 7.5 percent in 2003, yet total employment did not increase

at all from 1992 to 2007. At the same time, Japan's public debt rose from from 65% of GDP in 1992

to 180% in 2005. Now it's over 200% of their GDP and still rising.

If that's what you wish for the American people, I sure don't.


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...this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

...who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

They are not working, because Obama and his sycophants in Congress, on the advice of idiots like Krugman, are paying people not to work!

Edited by ##########

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Filed: K-3 Visa Country: Russia
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The Japanese made a lot of errors -- some of which some here strive to replicate. Zombie banks were not closed over there -- at least several of our worst banks were closed or forced out of business. We should have done more of that.

Japanese stimulus programs were timid or worse, and the Japanese government repeatedly tried to remove stimulus prematurely -- giving them the liabilities of stimulus without the benefits.

Interest rates in Japan remain close to zero and deflation there continues. They were hit harder by the current crisis than any other developed country. In these circumstances, there is little the central bank can do. Geithner struggles with the same sort of problem here today.

At this point, the best policy for the Japanese would appear to be liberalized immigration policies, in order to import workers to replace those leaving their workforce. They won't do that -- the prospects for Japan are poor at best.

But to argue, as Mawlinson did, that deflation is good is simply delusional. The Japanese know that. And the europeans are about to find it out.


5-15-2002 Met, by chance, while I traveled on business

3-15-2005 I-129F
9-18-2005 Visa in hand
11-23-2005 She arrives in USA
1-18-2006 She returns to Russia, engaged but not married

11-10-2006 We got married!

2-12-2007 I-130 sent by Express mail to NSC
2-26-2007 I-129F sent by Express mail to Chicago lock box
6-25-2007 Both NOA2s in hand; notice date 6-15-2007
9-17-2007 K3 visa in hand
11-12-2007 POE Atlanta

8-14-2008 AOS packet sent
9-13-2008 biometrics
1-30-2009 AOS interview
2-12-2009 10-yr Green Card arrives in mail

2-11-2014 US Citizenship ceremony

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The next few years will be interesting. I certainly don't think China will fall into a lost decade like Japan did. The next 12 months are crucial for the US, I think by next spring (or even this fall) we'll know our fate. Europe. Yeah I definitely think Europe will fall back into a mild recession that may very well last another 5 years.

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Guess what, Japan had 10 "stimulus programs" in the 1990's alone. Government consumption rose

from 5.9 percent of GDP in 1991 to 7.5 percent in 2003, yet total employment did not increase

at all from 1992 to 2007. At the same time, Japan's public debt rose from from 65% of GDP in 1992

to 180% in 2005. Now it's over 200% of their GDP and still rising.

If that's what you wish for the American people, I sure don't.

My understanding is that Japan is actually better off debt-wise then say the US because its almost entirely domestically held.

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They are not working, because Obama and his sycophants in Congress, on the advice of idiots like Krugman, are paying people not to work!

Yes, I have the same source as you. He was telling me that its all a ruse by Stalin. Stalin is actually alive and his plan is to make Americans believe there aren't many jobs when in fact for every American there are 200 job openings. By hiding this fact Stalin plans on giving Obama the power to rebuild the USSR INSIDE the US.

:rofl:

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My understanding is that Japan is actually better off debt-wise then say the US because its almost entirely domestically held.

that went over my head. can you explain why? i understand the difference between the debt being domestcally held vs. other countries holding the debt. but, i don't understand how they are better off because of it.


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