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greece in a death spiral


dmarc117
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That's pretty much how I see it. Spending on infrastructure is fine. Funding 99 months of unemployment benefits and free health care isn't. We're currently spending $1.4 trillion (of borrowed) dollars a year more than we're collecting in tax revenues. I'd rather see investments in things that generate revenue, rather that programs that just put spending money into people's pockets. It's not like the country doesn't have a massive wish list of things that need building, or services that need to be performed.

 

100% agree on health care. Bad timing.

 

But unemployment in a tiem like this is needed, plus that unemployment $ is taxable and they will spend it generating taxable income. They should crackdown on those who take advantage of this though. Eg, people working off the books and collecting or people not actively trying to find a job.

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100% agree on health care. Bad timing.

 

But unemployment in a tiem like this is needed, plus that unemployment $ is taxable and they will spend it generating taxable income. They should crackdown on those who take advantage of this though. Eg, people working off the books and collecting or people not actively trying to find a job.

 

I'm not going to argue whether or not 99 weeks of unemployment is needed, but I would ask you, who is going to pay for it? Are business owners now going to have to pay more for unemployment insurance for their employees?

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the only metric (focused on in both of your links) by which the initial stages of the current recenssion look anywhere near as bad as the great depression are industrial output/manufacturing. GDP, job losses, unemployment, global exports, deflation -- all staggeringly worse during the great depression than in 2008 and 2009.

You are missing the correct comparison. The links I provided look at how things compared in the early stages of the Great Depression compared to the initial stages of this downturn. You will see that things like world trade and equity markets did drop off more now than they did at the respective point in time during the GD. Heck, in 1930, the unemployment rate was still under 9%.

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But putting money in people's pockets in the case of unemploymnet means they SPEND it, which stimulates the economy, and they also pay taxes on it.

 

We need more ACTIVITY and spending to get the economy moving and growing. inaction is the enemy of recovery.

I have a very hard time believing people are using their unemployment benefits to "stimulate the economy." Most likely, they're just paying their bills.

 

I hate to say it, but TimC might be right for once. It might have been easier and cheaper to just pay people's mortgages off. Lord knows Obama's "mortgage relief" program has sucked ass.

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You are missing the correct comparison. The links I provided look at how things compared in the early stages of the Great Depression compared to the initial stages of this downturn. You will see that things like world trade and equity markets did drop off more now than they did at the respective point in time during the GD. Heck, in 1930, the unemployment rate was still under 9%.

 

I was looking specifically at table 1 (on page 5) from the first paper you linked to. and you might wanna be careful....the more you try and limit the discussion to the "initial stages", the more you make sure all the credit you're trying to concoct goes to bush. :wacko:

 

I mean, what really is the argument here? that in 2008 and early 2009, policy makers weren't as stupid as those during the great depression? I agree with that. there was no moronic smoot-hawley tariff this time around. the fed didn't let money get so tight that you had complete financial paralysis. and I've said all along that, as distasteful as TARP was in so many ways, that sort of targeted action was necessary. so on all of those levels, yeah, the response wasn't as myopic and clueless as it was to the worst recession in modern times. great. but like I said, that's a pretty low bar to set, and seems like a thin basis on which to proclaim vindication. kinda like saying the 2009 lions were better than the 2008 version.

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the more you make sure all the credit you're trying to concoct goes to bush. :wacko:

I have no problem giving credit where credit is due--the bank bailout under the Bush administration likely saved the economy (although I agree that there were some distasteful parts to it (which I blame a whole lot more on Paulson than I do on Bush).

 

I mean, what really is the argument here? that in 2008 and early 2009, policy makers weren't as stupid as those during the great depression? I agree with that. there was no moronic smoot-hawley tariff this time around. the fed didn't let money get so tight that you had complete financial paralysis. and I've said all along that, as distasteful as TARP was in so many ways, that sort of targeted action was necessary. so on all of those levels, yeah, the response wasn't as myopic and clueless as it was to the worst recession in modern times. great. but like I said, that's a pretty low bar to set, and seems like a thin basis on which to proclaim vindication. kinda like saying the 2009 lions were better than the 2008 version.

The argument is that running a big budget deficit during this downturn is probably a whole lot more of a better idea than suddenly trying to balance the budget because of some notion that now is the time we need to enact some sort of austerity plan. The people who are arguing for austerity now seem to have forgotten the lesson of the policy failures during the Great Depression.

Edited by wiegie
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The argument is that running a big budget deficit during this downturn is probably a whole lot more of a better idea than suddenly trying to balance the budget because of some notion that now is the time we need to enact some sort of austerity plan. The people who are arguing for austerity now seem to have forgotten the lesson of the policy failures during the Great Depression.

 

I don't hear many people calling for austerity, just stop throwing money away on bandaids, accept that the economy has to adjust to some new realities and that throwing money at failed sectors only makes the problem worse, and maybe come up with some serious plans for reigning in spending in the mid and long term so that consumers and employers aren't freaking out about future tax rates. it's all about future expectations.

 

also, I think the recent example of germany is instructive here, and probably a lot more relevant than the hoover strawman. some good quotes...

 

* "There's a problem: conservative politicians, clinging to an out-of-date ideology--and, perhaps, betting (wrongly) that their constituents are relatively well positioned to ride out the storm--are standing in the way of action. No, I'm not talking about Bob Corker, the Senator from Nissan--I mean Tennessee--and his fellow Republicans. . . . I am, instead, talking about Angela Merkel, the German chancellor, and her economic officials, who have become the biggest obstacles to a much-needed European rescue plan."--former Enron adviser Paul Krugman, New York Times, Dec. 15, 2008

 

* "Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany's finance minister you have to listen to, well, Republicans."--Krugman, New York Times, March 16, 2009

 

* "The euro area economy grew 1 percent in the second quarter of this year, a much better rate than had been expected, as Germany's best quarterly performance since reunification compensated for slow growth in Spain and Italy and a sharp decline in Greece, according to data released Friday."--news story, New York Times, Aug. 14, 2010

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I've posted these two bits before in another thread, but I think they are relevant here:

 

1. Try not to think of macroeconomics in terms of equations or in terms of aggregate demand. Try to learn to think in a new language, rather than translate from the Recalculation language to something you are used to.

 

2. "Economic activity consists of sustainable patterns of specialization and trade." That is the mantra of the Recalculation Story.

 

3. Note how difficult it is to squeeze patterns of specialization and trade into a model of a single representative agent. Robert Solow has more good points.

 

4. If you cook for yourself and I cook for myself, that is not economic activity. If we eat at each other's restaurants, that is economic activity. This is true in the national income accounts, and it is justifiable. It is better to have millions of people working for you to produce your food, computers, health care, and so on than to produce them for yourself.

 

5. Part of the challenge of creating sustainable patterns of specialization and trade can be described as a matching problem. Think of two decks of cards, one with a list of workers with specialized skills and one with a list of occupations that utilize specialize skills. If you draw two cards at random, the chances are that they will not match. The skills of the worker will not match the skills required in the occupation. In that case, the marginal product of the worker in that occupation is very low, and the worker is unemployed.

 

6. The economy's calculation problem is to sort the two decks in ways that match workers to occupations in which they have value. This problem becomes more complicated with each increment of technological progress. The number of occupations has increased, because even as some occupations become obsolete, even more occupations emerge as useful. Also, the amount of human capital needed for many occupations has increased.

 

7. The patterns of specialization and trade are interdependent. In some instances, there is negative feedback. A new pattern that involves automobile production has negative impact on horseshoe makers. In other instances, there is positive feedback. A new pattern that involves automobile production has a positive impact on gasoline refiners.

 

8. Economic profits are what indicate a sustainable pattern of specialization and trade. Ultimately, the way that we know that we have a good set of matches of workers and occupations is that employers are not losing money.

 

9. The sustainability of patterns of specialization and trade is always changing. New opportunities emerge, and some older patterns become obsolete.

 

10. A danger in the economy is that an unsustainable pattern will go unrecognized for a long time. In the recessions of the U.S. between the end of World War II and the 1980's, excess inventories were accumulated. In the most recent episode, excesses in housing construction and mortgage finance went unrecognized for a long time.

 

11. If the excesses are merely short-term inventory problems, the old patterns of specialization and trade can be restored once the inventories are worked off.

 

12. However, if the old patterns of specialization and trade are not sustainable, the economy faces the Recalculation Problem. New patterns of specialization and trade need to be created. While the economy is creating new patterns even in good times, when it faces a Recalculation Problem it cannot create new patterns rapidly enough to prevent widespread unemployment.

 

13. Government can create temporary jobs for the unemployed. However, that is not the same thing as creating sustainable patterns of specialization and trade. For example, if the government subsidizes a firm that builds solar panels and those solar panels are not efficient, then this does not really represent a sustainable pattern of specialization and trade.

 

14. The more that patterns of specialization and trade involve government direction of resources, the greater the risk that those patterns are not sustainable.

 

15. It is possible that lower real wages will help to solve the Recalculation problem. However, generally speaking, when you pick a card from the worker deck and a card from the occupation deck, the match is either a good one or it isn't.

 

16. The production process has become more roundabout over the years. Fewer workers are engaged in hands-on production of output. Instead, they are engaged in building what Garett Jones calls organizational capital, as indicated by functions such as marketing communications, management reporting systems, or corporate training. This means that the relationship between output and employment has become looser. It means that patterns of specialization and trade reflect not just what goods and services are produced but how they are produced.

 

IN THE same way as some of the passengers on a railway system will be waiting at the station, in between trains, any labour market will have a number of its active participants in between jobs even when it is working well. Economists often write as though this is a long-run property of the labour market, to be distinguished sharply from cyclical unemployment. Even in ordinary recessions this isn't completely justified, because even ordinary recessions are usually points of discontinuity in the jumpy process of structural change (people are slow to leave declining industries in periods of general growth, although those would be precisely the times when it would make most sense to do so). So even in ordinary recessions you expect to see an increase in the mismatch between the types of job available and the types of skill people have to fill them, a mismatch that declines gradually over time as the economy picks up.

 

But this recession, more than most, seems likely to have produced a great increase in the mismatch, due to the unsustainable patterns of consumption and investment induced by the credit boom that preceded the financial crisis. It's as though the passengers on the rail network need a whole new pattern of travel to different combinations of destinations, for which the connections are no longer optimised and for which there are too many trains in some directions and too few in others. Current unemployment at the state level varies from 3.6% in North Dakota to 14.2% in Nevada, but don't hold your breath waiting for Nevadans to stream to North Dakota in large numbers; the only streaming they'll do is on the internet. Unemployment in US metro areas is still 6% or under in places like Ithaca (NY), Boulder (Colorado), Madison (Wisconsin) and Washington, D.C. It's between 12% and 14% in such places as Fresno (California), Atlantic City (New Jersey), Detroit (Michigan), Riverside (California) and Las Vegas (Nevada).

 

The depth of the recession makes the mismatch worse. Even in the sectors that will have to shrink compared to three years ago (think construction) there are many currently unemployed people who will get jobs back in their old occupations if they are patient; activity levels are down way too far by any reasonable standards and will surely, eventually, pick up again. That encourages many others people to wait longer than they should, instead of retraining in new occupations. The good news must be that the internet makes it easier to search, easier to retrain, easier to rethink the match between your current skills and your future aspirations, than it has ever been in any previous recession. But the macroeconomic signals are very bad: there's too much incentive to try to sit out the recession in Detroit, or Riverside, and hope the employers come looking for you. It's a rational response for the individual, but it will make the recession longer and more painful than it should be. And policy responses (such as Cash-for-Clunkers) that try to freeze activity in certain sectors at their old levels, will only add to the problem. Policy needs to do what it can to encourage economic activity in growing occupations rather than to freeze it in declining ones.

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The links Az provided are pretty useful. One major concern about the labor market adjustments in our current economy is the labor is not nearly as mobile as it normally is during recessions because people are stuck in homes due to drop in housing prices. (I will also note that Michigan has an interesting program in which unemployed workers can get funding to go back to school (not necessarily university or college) to gain skills in industries that are in demand. This type of program seems like a somewhat productive use of government funds.)

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I have a very hard time believing people are using their unemployment benefits to "stimulate the economy." Most likely, they're just paying their bills.

 

I hate to say it, but TimC might be right for once. It might have been easier and cheaper to just pay people's mortgages off. Lord knows Obama's "mortgage relief" program has sucked ass.

 

Paying their bills DOES stimulate the economy . . spending money on bills stimulates the economy by action in the marketplace . . . considering unemploymnet isnt going into "savings" . . it is all getting spent, it ALL goes back into the economy.

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Paying their bills DOES stimulate the economy . . spending money on bills stimulates the economy by action in the marketplace . . . considering unemploymnet isnt going into "savings" . . it is all getting spent, it ALL goes back into the economy.

I'm not following you. How does paying off my VISA card for purchases already made stimulate the economy? Or paying down my mortgage? Or paying off my car? If I get extra cash that's what I'm spending it on, not a new flat screen TV.

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wait. so doing health care in the middle of a recession was a bad idea. but saying it was a bad idea was also a bad idea? :wacko:

 

You noticed that too, huh?

 

So boy princess, if it was a bad time for HC reform in retrospect, why don't the heffalumps get the credit for saying so? And that this "reform" doesn't fix the fackin' problem of rising costs, at all. In fact, it worsens it.

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Paying their bills DOES stimulate the economy . . spending money on bills stimulates the economy by action in the marketplace . . . considering unemploymnet isnt going into "savings" . . it is all getting spent, it ALL goes back into the economy.

 

What he said.

 

If someone pays off their bills, it is generating for revenue somewhere. I don't understand why it wouldn't stimulate the economy. Anytime $ is in the streets, economy will increase. Everytime money passes hands, there is revenue and taxation.

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If someone pays off their bills, it is generating for revenue somewhere. I don't understand why it wouldn't stimulate the economy. Anytime $ is in the streets, economy will increase. Everytime money passes hands, there is revenue and taxation.

 

the government should go around and hire people to break windows. you create jobs with the window-breakers, plus it creates all kinds of work for window installers, glass makers, security consultants, insurance salesmen, rottweiler breeders, and countless other ancillary industries. and the taxes! talk about stimulating.

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If someone pays off their bills, it is generating for revenue somewhere. I don't understand why it wouldn't stimulate the economy. Anytime $ is in the streets, economy will increase. Everytime money passes hands, there is revenue and taxation.

 

Paying off the bills does not create new jobs, it just transfers debt from one individual to the government which will have to raise money to pay of those bills. In order for the government to pay off it's new bills that it now has for paying yours for you, it now has to increase taxes on those still producing, which limits growth, and possibly will result in more jobs lost. It would be much better if the government feels the need to provide stimulus, to do it in the form of government contracts for new things to be build and manufactured. Then when the additional taxes are levied on those still producing, they can be offset at least in some part by the additional growth in their businesses and by people that have new jobs. This would also create more jobs. The give aways are only holding off the inevitable that must come. Yes letting out a bunch of government contracts will take a little while longer to affect those that are unemployed, but it would be much better for the economy in general and the health of our nation and it's businesses. There are plenty of things the government could be doing that would show a real return on investment, and that would provide long term benefits, such as rebuilding aging bridges, upgrading the lighting and HVAC in government buildings, building more schools etc... Unfortunately what we see are give aways and payoffs to special interests.

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Paying off the bills does not create new jobs, it just transfers debt from one individual to the government which will have to raise money to pay of those bills. In order for the government to pay off it's new bills that it now has for paying yours for you, it now has to increase taxes on those still producing, which limits growth, and possibly will result in more jobs lost. It would be much better if the government feels the need to provide stimulus, to do it in the form of government contracts for new things to be build and manufactured. Then when the additional taxes are levied on those still producing, they can be offset at least in some part by the additional growth in their businesses and by people that have new jobs. This would also create more jobs. The give aways are only holding off the inevitable that must come. Yes letting out a bunch of government contracts will take a little while longer to affect those that are unemployed, but it would be much better for the economy in general and the health of our nation and it's businesses. There are plenty of things the government could be doing that would show a real return on investment, and that would provide long term benefits, such as rebuilding aging bridges, upgrading the lighting and HVAC in government buildings, building more schools etc... Unfortunately what we see are give aways and payoffs to special interests.

 

Paying off bills does not create new jobs? What am I missing here? That is like saying, when consumers purchase they do not help the economy. These bills are most likely from purchases, if business do not collect money from purchases its worst than not selling the product in the first place. If a business does not receive cash from a sold item how will it produce new items to sell?

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the government should go around and hire people to break windows. you create jobs with the window-breakers, plus it creates all kinds of work for window installers, glass makers, security consultants, insurance salesmen, rottweiler breeders, and countless other ancillary industries. and the taxes! talk about stimulating.

 

This is exactly the same as unemployment insurance...good job.

 

I'd quit my job to be a window breaker. I think I am good at it and I love vicious dogs so even if a property has one, I can deal with it.

Edited by MrTed46
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You noticed that too, huh?

 

So boy princess, if it was a bad time for HC reform in retrospect, why don't the heffalumps get the credit for saying so? And that this "reform" doesn't fix the fackin' problem of rising costs, at all. In fact, it worsens it.

 

Because semi-literate moran (cause you like throwing insults) the heffalumps werent saying "its not the right time" at first, they were just saying they didnt want any part of it. If they DID participate, then maybe the cost containmnet could have been addressed and actual reform and savings would have occurred instead of a one way street. The heffalumps were more concerned with their next election chances so they chose to do nothing constructive on the subject, and the left ram-rodded it through anyways to satisfy their electoral base.

 

If you actually read some of my posts on health care, it aint in favor of the bill that was passed, cause it doesnt address what needed to be addressed. :wacko:

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Because semi-literate moran (cause you like throwing insults) the heffalumps werent saying "its not the right time" at first, they were just saying they didnt want any part of it. If they DID participate, then maybe the cost containmnet could have been addressed and actual reform and savings would have occurred instead of a one way street. The heffalumps were more concerned with their next election chances so they chose to do nothing constructive on the subject, and the left ram-rodded it through anyways to satisfy their electoral base.

 

If you actually read some of my posts on health care, it aint in favor of the bill that was passed, cause it doesnt address what needed to be addressed. :wacko:

 

Oh, I've read all of your posts. You're almost as good as skins being a "left-leaning libertarian". Yeah, right.

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Paying off bills does not create new jobs? What am I missing here? That is like saying, when consumers purchase they do not help the economy. These bills are most likely from purchases, if business do not collect money from purchases its worst than not selling the product in the first place. If a business does not receive cash from a sold item how will it produce new items to sell?

No, it doesn't.

 

You were paying bills before. Unemployment benefits help you continue to pay those bills. No new jobs have been created. At best, the continued payment of you bills prevented a job loss. Preexisting revenue may be protected. But new economic growth was not "stimulated."

 

Unemployment benefits are tourniquet designed to stop bleeding. But they don't stimulate the economy. Unless you don't know what the word "stimulate" means. And with that, we have now officially begun the semantics portion of our discussion. <yawn>

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No, it doesn't.

 

You were paying bills before. Unemployment benefits help you continue to pay those bills. No new jobs have been created. At best, the continued payment of you bills prevented a job loss. Preexisting revenue may be protected. But new economic growth was not "stimulated."

 

Unemployment benefits are tourniquet designed to stop bleeding. But they don't stimulate the economy. Unless you don't know what the word "stimulate" means. And with that, we have now officially begun the semantics portion of our discussion. <yawn>

 

So you are saying, 100% of the people who collect unemployment are paying old bills and are generating ZERO new revenue for any business? Thats insane.

 

Stop bleeding because its a snow ball affect...I don't get what you are trying to state here. I really do not see your argument. Pre-existing revenue is protected if those have debt but more importantly cash flow is generated. You give people money, they spend it and generates cash flow. Cash flow is very important in EVERY economy.

 

For example, a retired person has an investment property as their only source of income. Let's say their only tenant has lost their job, they are paying the rent using unemployment. This generated cash flow for the retired person who sends spends that money on necessities they require and generates cash flow for the business he/she purchased from. Take that away, you stop a STREAM of cash flow.

 

I am baffled by the argument of unemployment and how it doesnt help the economy...I really am. Wether or not people take advantage of this or this can be disbursed in a better way is another topic. But the pricipal behind unemployment is what we are discussing here.

Edited by MrTed46
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So you are saying, 100% of the people who collect unemployment are paying old bills and are generating ZERO new revenue for any business? Thats insane.

 

Stop bleeding because its a snow ball affect...I don't get what you are trying to state here. I really do not see your argument. Pre-existing revenue is protected if those have debt but more importantly cash flow is generated. You give people money, they spend it and generates cash flow. Cash flow is very important in EVERY economy.

 

For example, a retired person has an investment property as their only source of income. Let's say their only tenant has lost their job, they are paying the rent using unemployment. This generated cash flow for the retired person who sends spends that money on necessities they require and generates cash flow for the business he/she purchased from. Take that away, you stop a STREAM of cash flow.

<sigh> Look up the definition of "stimulate." It means to promote NEW growth. At best, unemployment benefits replace income that you were already receiving. At best, that cash goes to paying for things you were already paying for. At best, unemployment benefits prevent the loss of existing cash flow to your community. That might be a good thing, but that's not the same thing as creating new growth.

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<sigh> Look up the definition of "stimulate." It means to promote NEW growth. At best, unemployment benefits replace income that you were already receiving. At best, that cash goes to paying for things you were already paying for. At best, unemployment benefits prevent the loss of existing cash flow to your community. That might be a good thing, but that's not the same thing as creating new growth.

 

I see what you are saying now.

 

I guess my mentality is wrong, I see it as less negative is positive. however, I do feel its necessary.....especially today.

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