Paul Krugman: save the economy by staging an alien invasion hoax

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94 Responses to “Paul Krugman: save the economy by staging an alien invasion hoax”

  1. edi says:

    I have found that any sentence starting with “There was a Twilight Zone episode like this…” means whatever you’re talking about is a TERRIBLE idea.

  2. Brainspore says:

    Well it COULD have worked if you hadn’t blown the secret on national television, dummy.

  3. dculberson says:

    I don’t claim to have every episode of the Twilight Zone memorized, but the only episode I remember like that involved a real alien presence, scientists coming up with a plan for world peace hoping to prevent the invasion, when the aliens in fact wanted humans to be more effective warriors.

    Here’s the WP page on that episode:

    http://en.wikipedia.org/wiki/A_Small_Talent_for_War_%28The_Twilight_Zone%29

    Does anyone know if there’s a closer match to what he’s describing?

  4. Dave Chalker says:

    He should have ended the segment with “…and I did it 35 minutes ago.”

  5. Blunderbutt says:

    Not to be confused with Jack Klugman, who merely appeared in several Twilight Zone episodes!

  6. dascritch says:

    SPOILER ALERT
    The very same idea is in «Watchmen»

  7. Alan James says:

    It was the Outer Limits episode “The Architects of Fear” and not the Twilight Zone, but he was close enough I guess.

  8. mystikhate says:

    Hey, Boing Boing..you guys are slacking lately. Every time I try and share one of your posts on facebook…there’s never any thumbnails. That’s really annoying. Especially since it’s really easy to do. 

  9. Chuck says:

    But why would the aliens want to invade Earth?  They’re perfectly content to mine the asteroids and moons in this solar system and steal our resources.

  10. Jack Holmes says:

    Krugman 2012. On this idea alone.
    Just saying.

  11. Volt Ron says:

    It’s an Outer Limits episode. Which in turn, was part of the Watchman plot.

  12. Snig says:

    Reagan, in a perhaps lucid moment, once suggested that it was something that could have united the US and the USSR, us fighting an alien race. 

  13. Max says:

    Hmm, I can’t see it working. You’d have to convince all the world’s governments. And that includes the Chinese, who :
    a) have a reasonable space presence
    b) have the money behind all the debt that America built up

    Bearing in mind that the Chinese probably have a better space presence than the Americans, they would  probably find it easier to pull it off, but they’d just be screwing their own debt repayments.

    Anyway, WW3 is on the way when the PRC reclaim the ROC territory (Taiwan) or whichever acronym is which. Because the Americans have promised to defend Taiwan and the Chinese want it back… So I was told.

    • Guest says:

      Insofar as they have manned space vehicles, yes, they are quite a ways ahead of us now.

    • Nick Gold says:

      I love it when people propagate the idea that the Chinese own all our debt.  Even though it’s more like, oh, 8% or something along those lines.  And most of our debt is owned by Americans, in their pension funds, etc.  But it’s more fun to say OH NOZE, DA CHINESE OWNZ US!!!

      • Rootboy says:

        The other thing that bugs me about the “Chinese have all our debt” thing is, well, so what? If you stop paying your mortgage, the bank is able to kick you out of the house since they have the law, and therefore the power of the state, on their side. If we stop paying the Chinese (and to be clear, we absolutely shouldn’t do that), basically all they can do is complain and start a war, which would be way costlier to them than simply forgiving the debt.

        The real reason to pay back our debts is to keep our reputation up so people will keep lending to us in the future at low interest rates. But it’s not like someone’s going to repossess the country.

    • Nick Gold says:

      Wait, and probably have a better space presence than the Americans?  For reals, man?  Let’s see, we have a gajillion spy satellites, a fully robotic spy spaceship in active service, and who knows what else flying around.  China is really ahead of the USA in the space race?  Yeeeaaaah….

  14. cymk says:

    Conspiracy theorists have talked for years about a faked alien invasion used to unite the world and it peoples. I can’t tell you how many years its been since I first heard the idea being kicked around, but I’m not holding my breath.

  15. Bevatron Repairman says:

    Only if Krugman lets us build — and test — Orion-style nuclear weapon-propelled spaceships to fight the faux alien menace.  I mean, if we’re serious about fighting aliens, little things like a bit of fallout shouldn’t be too much of a burden…

  16. OgilvyTheAstronomer says:

    Great, now when the real invasion begins, everybody will assume it’s a ploy to kick-start the economy.

    Also, given my nickname, I could hardly refrain from posting in this thread…

  17. hapa says:

    for detailed info, and the actual ‘outer limits’ episode, see http://www.comicsalliance.com/2011/08/15/watchmen-paul-krugman-alien-invasion/

    i am currently promoting a peaceful alternative of building a city-size solar system cruise ship we can all ride in together for US$4,000,000,000,000.

  18. Guest says:

    The clever aliens have found a way to cause the harmless by-products of our industry to react with energy rays from space. Those bastards.

  19. TheAntipodean says:

    Curb your enthusiasm. This concept, of preparation for a non-existent threat is exactly the same ridiculous course that the US has taken over the last few decades, first with wars on Communism in SE Asia, and now with the War Of Terror. This is classic Keynesian nonsense, and is the cause of our current fiscal disaster, not the cure. What happens when the massive national debt generated by preparing for alien invasion comes due for payment? “Stimulate” the economy with more debt by preparing for an invasion from beings from another dimension? Government stimulus of economies by debt-based spending only ever kicks the can down the road.

    • jerwin says:

      This is classic Keynesian nonsense
      Well, it’s classic Keynesian economics. Sure, a non existent alien invasion threat might seem like a waste of money, but it’s better than austerity. Sure, it might be better to stimulate the economy by investing and infrastructure, but the economy is crumbling as we speak. At a certain point, prudence gives way to fear.

      • Chrs says:

        And generally, space spending has had technological dividends.

      • librtee_dot_com says:

        “If we hired every person in army and fleet, we’d have full employment – and nothing to eat.”

        The end goal is to produce things people want. 

        You can employ a whole country by hiring them to dig and refill trenches. And by keynesian economics, this is a sound idea. It doesn’t matter whether it is productive economic activity or waste. It’s utterly divorced from the basic reality that the point of an economy is to satisfy human needs, not to meet GDP targets.

        The problem is that Keynesianism IS nonsense. What it amounts to in the real world is borrowing from our unborn grandchildren to prop up the numbers today. It’s a theory that has been utterly discredited, even by WWII (the economy was expected to crash again in 1946), and it’s utterly baffling that it is still bandied about today.

        Except that it isn’t, because it’s such a fine excuse for largess and waste.

        Highly recommend you watch the well balanced and entertaining videos, ‘keynes vs. hayek’ (particularly #2)

        • Jirka Lahvicka says:

          Look up the authors of the video – you will find that their ideological affiliation is anything but balanced. Funny – yes, balanced – not really.

    • grimc says:

      Puh-lease. This exact same “Keynesian nonsense” was being peddled as one of the reasons why invading Iraq was going to be the Best Idea Ever by wingnut Galtian superheros, too.

      And the cause of our current fiscal has a helluva lot more to do with the decimation of the working and middle classes, and pampering of the ultra rich. Not to mention a stupid, illegal war.

    • porcus says:

      I think you’re missing the point here: our current recession has zero, zip, nada to do with debts and deficits. It comes from the housing bubble popping, after homeowners and banks had leveraged their debt to the hilt. The debt does make it harder to respond to the recession, but it isn’t a causative factor.

      Keynesian stimulus would last long enough to lift the economy out of the recession, and let it grow. Then it would fade out, and the debt would be paid down by taxes levied while the economy was doing well. The higher tax rates during Clinton’s presidency, when the economy was booming, generated a surplus by 2000. Paying off the debt incurred by stimulus spending when the economy is robust doesn’t “kick the can down the road”.

      As a general principle, I think any discussion about Keynesianism should touch on WWII. How *did* the US get out of the Great Depression? What about the decades-long economic boom that came afterwards? What explains our recent economic history?

      • librtee_dot_com says:

        What universe do you live in? Have you ever seen the world?

        What happens is that ‘Keynesianism’ is used as an excuse to raise spending.

        Then, when the economy picks up, all the spending is left in place.

        Next time the economy slumps, hey, more stimulus! More spending is added, on top of the previous rises.

        The problem is that there is NEVER a cut when the economy is good.

        OK, so using accounting tricks that would be illegal in any business, Clinton managed to balance the budget for a year or two. That’s a far cry from paying off any part of the budget.

        We borrow more and more, and we NEVER pay off shit. The debt just keeps building up and up, paying our interest on fresh credit cards, pouring more and more of the budget each year into wasteful interest payments, until something inevitably snaps.

        The great facilitator of all of this is the shameful myth known as keynesian economics.

        • porcus says:

          You’re confounding economics with politics. If spending is left in place when the economy picks up, then that’s a failure of politics, not a Keynesian model. Besides, your premise isn’t even true. Look at WWII again: spending on the war effort dropped significantly after it was over (and we even entered a recession for a couple years).

          Clinton managed to run a surplus for a couple of years… and then what happened? You’re right, we had increased spending through Bush’s tax cuts. But if we had left Clinton’s policies in place, we would have run larger surpluses for longer. In 2000, the CBO was projecting that we would have paid off our debt by now. In 2000, people like Alan Greenspan and Paul Ryan were concerned that we might pay off the debt too quickly (never followed the logic there).

          Then there’s the additional point that a depressed economy actually makes deficits worse, as things like unemployment insurance eat money, and less revenue is raised because fewer people pay taxes. The quicker we get out of this hole, the better.

          Your argument sounds like you’re frustrated with politics (particularly borrow-and-spend conservatives), not Keynesianism proper.

    • tyger11 says:

      It depends on how you describe the threat. If you say we can kick the aliens butts only by rebuilding our infrastructure, and that aliens like a dirty atmosphere, so we can also defeat them by switching to renewable energy sources; and that the aliens approve of tax cuts for the wealthy, then I think you could work it pretty well. Oh, and the aliens love private-only insurance and shitty health care.  :)

  20. MosesMoore says:

    Ack!  no no no!  a hoax invasion will create a short-term solution: money spent on the military, much of which will not be useful in peacetime.  You’ll need to perpetuate the hoax of danger (and fear) to make use of the resources manufactured.

    If you’re going to hoax a disaster, choose one where we must react by manufacturing items we can still use when the disaster is over.  Maybe space-aliens that are vulnerable to well-educated children, or a plague that turns people into grotesque horrors without regular exercise and eating enough fibre.

  21. Finnagain says:

    I’d rather just expose the GOP for the lizard people they are.

  22. PapayaSF says:

    This is a prime example of why libertarian and conservative economists think Krugman is a joke.

    • jerwin says:

      Shouldn’t you be panning for gold?

    • Massive Missive says:

      Even though he’s been right about… EVERYTHING? Christ, what assholes.

      • librtee_dot_com says:

        Right, for instance, in 2001 tirelessly advocating for Fed policies that would fuel a housing bubble, in order to lift the slumping economy.

        “I’ve always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly — that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum. ”

        “Consumers, who already have low savings and high debt, probably can’t contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery….”

        “the Fed’s dramatic interest rate cuts helped keep housing strong even as business investment plunged.”

        All written/spoken in 2001, the period when the seeds of the housing boom/bust were sowed.

        The first quote alone shows the depth of his ignorance. The problem is not the asset bubbles that lead to misallocation of resources, those are great; the problem is just that you have to start lending money again really, really fast once the bubble pops.

        More similar quotes:

        http://blog.mises.org/10153/krugman-did-cause-the-housing-bubble/

    • *whoosh*

      He’s not seriously saying that we should waste money fighting off a non-existent alien menace.  He’s merely saying — with a deliberately absurd example — that our current path (cutting demand in the face of a sagging economy) is self-defeating. 

      Now, if the underlying serious point is what causes you to dismiss him as a hack, then I have to say that the hacks are doing a much better job of explaining what’s happening to the economy right now than the Very Serious People.

    • Navin_Johnson says:

      And real life economic history is why we know libertarian and conservative economists are a joke.

    • strangefriend says:

      Rejection of stimulus in  a depressed economy is a prime example of why libertarian and conservative economists are a joke.

  23. Why do we need a fake alien invasion story to justify a mega space project?
    There are plenty of good, economically-sound reasons for a huge space project.  There are $billions in valuable resources just floating around the solar system.  We just need to go get them.  I’m sure SpaceX would be happy to build all the Falcon and Dragon spacecraft to get into orbit, and then get started on the ships to go to lunar orbit, build the lunar base and start sending ships to the asteroid belt.

  24. StCredZero says:

    I was just musing about this, this morning.  There might well be a strong incentive for the powers that be in the western nations to start a war for this very reason.  

  25. lavardera says:

    An asteroid would be more convincing, but Aliens definitely more awesome.

    • cymk says:

      Comet Elenin is headed our way right now, and if you believe the Hopi prophecies…but yes, aliens definitely more awesome.

  26. Mike Meyer says:

    Conservatives are already doing this,  they just call their aliens ‘Muslims’  and ‘gays.’   We don’t have to go to space to create a scary threat of ‘the other.’

  27. I don’t know…the fake terrorist threat doesn’t seem to be working so far.

  28. KWillets says:

    Being Krugman, he probably prefers that the aliens invade rather than try to trade with us.

  29. ill lich says:

    *sigh*  Of course this will become excellent fodder for right-wing talking-point machines to mock those crazy liberals.

    But the thing is, WHAT got the US out of the Great Depression?  Even the most hardcore conservatives admit it was WW2.  And surprise, it wasn’t the act of humans killing each other in huge numbers, it was the fact that suddenly industry was booming again, making bombs and planes and jeeps that went out and got destroyed, leading to more orders for bombs and planes and jeeps.

    In short, massive government spending.

    • cymk says:

      It wasn’t just massive spending, it was the willingness of the American populace to make sacrifices and do without certian things “for the war effort.” Sacrifices were made both home and abroad; that is what got us out of the recession.

      • Antinous / Moderator says:

        It wasn’t just massive spending, it was the willingness of the American populace to make sacrifices and do without certian things “for the war effort.” Sacrifices were made both home and abroad; that is what got us out of the recession.

        You really believe that not spending on a mass scale is a way to get out of a recession? When people don’t spend, the people who sell things go broke. And lay off all their employees.

        • Bad Tux says:

          He apparently is a believer in a magic Austerity Fairy, who creates jobs via application of his magical Wand of Austerity to, err, let’s just say that “bend over” is part of the process. Thereby spreading magic fairy santorum all over the land which causes jobs to just pop up like mushrooms, like mushrooms I say.

          At least, that’s all I can ever get out of the Austerians when I ask them how, exactly, austerity creates jobs. They start mumbling magical incantations and engaging in hand-waving like some deranged Disney evil fairy stepmother claiming that somehow the jobs just magically appear because, well, because. At least the Keynesians like Krugman are willing to give you a plausible mechanism via which their prescriptions create jobs, something the Austerians have never managed.

          • thatbob says:

            I’m sure you mean Austeritans, and not the scholars and devotees of American absurdist Paul Auster.  But I see your point. 

        • cymk says:

          I meant massive spending on a governmental scale; and yes it was a combination of rationing and sacrifice along with spending that got us out of that recession.

        • laukarlueng says:

          The problem I have with what you are saying is that your argument seems to assume that all selling is good and all buying is good. Smashing windows to stimulate spending ignores opportunity costs and how the world is lessened by one less window in the world. Arming ourselves against a nonexistent alien threat could be a massive waste of resources.

          I’m shocked anyone associated with this site would advocate this plan considering all the pro environment talk here (recycling, sustainable resources/energy, carbon release, climate change, etc.). 

      • ill lich says:

        Good point– not buying things really helps the economy hum right along.  I’m sure rationing gasoline and eating oleo instead of butter were the keys to fixing the economy, if only FDR had figured this out earlier.  Oh wait, weren’t Americans rationing and sacrificing for years already, simply out of necessity?

        • cymk says:

          I was thinking more so the rationing of metal, glass, etc… It put people to work finding scrap to recycle for the war effort. Without a “war” or another great cause, people would not have sacrifices so much/ worked so hard. That is what got us out of that recession; hard work and sacrifice. Sure there was spending going on too. just not the same wanton spending you see in today’s politics.

    • librtee_dot_com says:

      No, many people disagree about what got us out of the depression.

      The contrary view is that the depression was greatly deepened and lengthened by the massive and unprecedented measures taken, first by Hoover, then much more so by FDR, to solve it. Price controls, wage controls, reams of new regulations on all types of business, etc. It was unheard of for a depression to last~15 years, and was a direct result by the shackled and uncertainty put on industry by this new maze of confusing and changing laws.

      In 1946, the lion’s share of these measures were reversed and eliminated, many depression era regulations and rules were lifted off businesses.

      In 1946, when the war spending ran down, the economists from the Keynesian camp were wailing about the coming economic meltdown, the second depression. But as we see, the exact opposite happened.

      • Antinous / Moderator says:

        buddhaflow,

        Was there a reason that you changed your pseudonym? Because if you’re trying for a fresh start, your not doing all that well.

      • ill lich says:

        Well, the argument is that the economy is like a pump, and you have to adequately prime it to get it going again, in this case on a massive scale, and then it will run on its own.  During the Great Depression there were a lot of different policies attempted, some helped, some didn’t, and we shouldn’t lump them all together (I have met old timers who still rave about the CCC, you’d be hard pressed to convince them it was a bad thing, certainly I don’t see how it hurt the economy.)  Nevertheless, the regulations you are talking about were things that took place before hostilities in Europe broke out, so they are outside the realm of this argument; whether or not they extended the depression, it was still the war that ended it.

        In a system as complex as the world economy it’s difficult if not impossible to predict all outcomes (one of the basic tenets of chaos theory.)   Today’s economy is very very different than the economy of the 1940′s, but one of FDR’s ideas was “well, try something and see what works.”  

        I often hear the GOP insist the stimulus package did nothing, but that’s specious reasoning: it may not have done as much as we wanted, but it did something, and how would the economy look if we had done nothing?

  30. Alexander Benenson says:

    This is irrefutable evidence that Krugman is a reptoid double agent, and the aliens are in cahoots with the tea party. Think about it – aliens want to invade, they know they’ve been discovered, so how do they quash any resistance? Why, by having Krug-al go public with this story, thereby neutralizing any possibility of an organized government response. Not only do they get to suck out our internal organs, but they can bring back small government at the same time!

    (And yes, this is sarcasm, in case someone didn’t notice).

  31. lightning says:

    Keynsian stimulus?  Like, say, the entire Cold War?

    Opinions vary on whether the Report is real or not; the Wikipedia editors obviously think it’s fake.  I’m agnostic; on one hand, it makes way too much sense, especially about things like the Francis Gary Powers incident.  On the other hand, it requires far more intelligence on the part of political leaders than they displayed in other areas.

  32. Bad Tux says:

    Krugman is, of course, being sarcastic about the quality of our current leaders, who seem to be unable to respond to current economic problems like, oh, 1/5th of our children being raised in poverty or 1/5th of our population unemployed or underemployed, and instead engage in kabuki theatre of no import. He’s implying that our so-called “leaders” are so stupid and so detached from reality that they’d actually believe the threat of alien invasion and react accordingly. But you have to read Krugman regularly to “get” his sense of humor, which is very, very dark. If Krugman got any more depressing he wouldn’t have an audience, because they’d all go out and hang themselves.

    • Shay Guy says:

      It seems like at least half of Krugman’s blog posts could be summarized with a GIF of him banging his head against the wall. There’s this constant “Why am I surrounded by idiots?” tone.

  33. Fredrik Sund says:

    Y u no just smash windows to create jobs? or encourage a london-style riot? Jeez, broken window fallacy, anyone?

  34. jerwin says:

    Unemployment needs to be at 20% in order for the masses to get it into the their thick skulls that they need to allocate resources intelligently.

    • Bad Tux says:

      What is the mechanism via which this supposed reallocation happens? Does the Austerity Fairy, who looks an awful lot like a hairy tranny or a Mob knee-capper, do it via vigorous application of the magical Wand of Austerity to, err, you know where, thereby spreading magical fairy dust all over the land that makes jobs pop up like mushrooms because, well, just because? Every time I query Austerians on this subject they change the subject to something else. The only mechanism I’ve *ever* seen Austerians propose is the notion that “productive” investment has been “crowded out” by unproductive investment, but when the Fortune 500 is sitting on over $3 TRILLION in cash because there are no investments at all that make any sense given 20% real unemployment, that “crowding out” theory doesn’t pass the laugh and giggle test in *this* universe (as vs. some fictional universe where a hairy tranny Austerity Fairy creates jobs via vigorous waving of the Wand of Austerity). 

  35. cazart says:

    Abortions for some! Tiny American flags for others!

  36. travtastic says:

    Or, I guess maybe, we could try to educate people about how an economy really works.

  37. benjiart says:

    someone seems to think that the fake alien invasion is going to happen sometime in october…
    fast forward to 0:46:26
    http://www.youtube.com/watch?v=kHHZkUiRP30

  38. MachineElf says:

    And before the Outer Limits episode, there was ‘The Flying Saucer’, by Bernard Newman. Published in 1948, about a hoaxed flying saucer crash in New Mexico meant to unite the world. Hmm….

  39. Bob Schader says:

    It was actually an Outer Limits episode he is referring to. It was called “The Architects of Fear :
    http://en.wikipedia.org/wiki/The_Architects_of_Fear

  40. Gordon Stark says:

    Faking is what created the mess…
    It is the truth which corrects it and
    ensures justice upon those faking.

  41. I remember a twillight zone episode with nanorobots, and it saved the life of my unborn kitty : nano goo in our brain, nano goo that leak from our eyes, nano goo in our shit , nano goo to get other nano poo poo super power ( god mod ), and a pair of eyes behind our heads

    This is terrible !

    how can i get some of these ?

    Not to mention the capacity to convert nano poo has amunition to kill alien, terrorist or your mother

  42. Bad Tux says:

    Yah, his tin foil hat is slipping almost as bad as the commenters at that YouTube video, who actually believe Krugman is proposing faking an alien invasion. WTF? Do right-wingers truly have a total inability to understand dark humor? Methinks we need to sit them down in front of a telly and play them the complete works of Monty Python over and over again until they get the point.

  43. gmak says:

    Any “stimulative” spending that does not result in an increase in productive capacity is doomed to fail – space aliens or not.

    The WWII did not end the ongoing recession that came out of the debt-induced depression. It was the return of shell-shocked soldiers having kids and being convinced by propaganda (advertising and marketing) to consume and not save as not generation had ever done before. It’s taken 60 years for the bill to come due, but it has been presented.

    Krugman is intellectually bankrupt and so focused on his equations that he doesn’t see the reality. He is just proposing another version of the broken window fallacy.

    Think of the TRILLIONS of dollars that have been created out of thin air and spent by the .gov so far. Has it helped? No. Why not? Because the economy is beyond the tipping point. Each dollar of debt created generates less than 1 dollar of  GDP – and is not generating any productive capacity. The proof will be when “they” are forcd to admit that the USA is in recession again before the middle of next year.

    Henry Ford was asked how much he pays his employees. He said, enough so that they can buy the cars that they make. We are what we make. If you are not growing something, extracting something from the ground, or making something, then your livelihood is dependent on someone who is. If a dollar of debt is created that increases the “growing, extracting, making” base then it is just slicing that pie into smaller pieces for those who are in the secondary and lower levels of the economy (meaning not part of the “GEM” part).

    If I make bread, I can exchange it for other food, shelter, clothing etc. In the future, I won’t be able to make bread, so I need to take part of what I make now and set it aside for the future. That means living below my means. I also wonder if I should give that bread that I’m not consuming, to the government to hold for me, or look after it myself?

    We are what we produce, monetarily speaking. Using debt to consume, rather than our own production gives false signals about the state of the economy and leads to growth in production that is really taking away from the future. Your future self is going to curse you for taking their bread and spending it today. The fact that we are not being kicked in the ass by our future selves right now is proof that time travel is indeed impossible.

    • captainboom says:

      gmak, I stumbled upon this post, and don’t want to hijack the thread. Are you posting on any trading sites? I miss your TD analysis.

      • gmak says:

        Thanks for the compliment. No, I’m not posting anymore. I’m not trading until the madness passes and I don’t believe that it’s fair to throw out ideas where I don’t have skin in the game.

        Cheers.

        • captainboom says:

          Thanks for the response. If you are ever interested in having a student of TD analysis, I’d be most appreciative. It’s difficult to find good sources to learn the details, though I find the book by Perl is good. You can find me at andy at my_disqus_name dot com

  44. Bad Tux says:

    Keynes brought up the thing that “classical” economists never did, which was the supremacy of *demand* in a market economy. You’d think that the “classical” economists with their nattering about “supply and demand” would have figured out that their focus on supply (on matching investment money with productive capability) was only half the equation, but apparently not. 

    The aftermath of WW2 was quite interesting, actually. FDR’s administration, via rationing, convinced the majority of people to put their money into war bonds rather than into consumption during the course of the war. This was an effort to explicitly deal with the inflationary nature of government spending because these war bonds were payable *AFTER* the war and their maturation dates were staggered out so they couldn’t just be all redeemed on the day peace was declared. FDR’s administration also passed the GI Bill to deal with the returning servicemen by taking them out of the workforce and putting them into school or vocational training instead, in order to reduce unemployment after the end of the war. The net result: the economy *did* enter a serious recession in 1946 and 1947 due to demobilization and the drastic cut in government consumption of goods and services (so much so that it was assumed that Truman was toast and had no chance of being re-elected in 1948, much as Churchill had been kicked out in Britain for much the same reason — it’s the economy, stupid!), but by filtering off so much of the workforce into college and vocational training, unemployment was much less than during the Great Depression. Furthermore the drastic hyperinflation predicted by the right-wing did not happen because the war bonds came payable at measured rates, meaning there was a lot of pent-up demand due to the WW2 rationing, but people couldn’t just take the thousands of dollars they’d saved during WW2 and go buy and drive up prices way high, they had to wait for their war bonds to mature. The net result of all this is that as the former servicemen exited college and vocational training, they found jobs waiting for them fulfilling the demand that the now-maturing war bonds were unleashing. By November 1948 the economy was clearly on the rebound and the American people rewarded Truman with another term in office, and by the time the first generation of GI Bill college grads left college in 1950 the economy was clearly booming. Then kick in the Korean War spending and Cold War spending in the rest of the 1950′s and you see why the economy entered the period of greatest economic growth ever in this nation’s history — demand for goods and services was high, thus businesses hired to meet that demand, thus unemployment was low, and the victory of the Keynesian economics approach appeared complete.

    Of course then came the 1970′s and stagflation, which the classicists used to claim that Keynesian economics had been “discredited”, but that’s another story.

  45. Bad Tux says:

    Indeed, the drop in GDP in 1946-1947 was significant — GDP went from $2.033T in 1944 to $1.774T in 1947. That’s a drop of over 12% of GDP, in case you’re wondering, far greater than the drop in the current recession. (All statistics courtesy of Bureau of Economic Statistics and are in chained 2005 dollars). And don’t think that this shortfall was made up by increased consumer spending. Consumer spending increased from 1944 to 1947, but not by as much as you’d think — from $942B to $1147B, or far less than required to make up for the collapse of government spending. 

    The only two things that kept the Great Depression from resuming at that point was a) the pent-up demands from war bonds, and b) the fact that so much of the workforce had been sucked into vocational training and college by the GI Bill, which prevented the collapse of employment that typified the early days of the Great Depression. Yet *still*, GDP did not reach 1944 levels again until 1951 when GDP *finally* hits $2.159T — i.e., it took FOUR YEARS to recover from the Recession of 1946-1947. 

    Anybody who writes two years of recession and four years of recovery out of existence and claims there was no economic damage caused by the collapse of government spending at the end of WW2 is not to be taken seriously, period.

  46. Bad Tux says:

    Why do libertarian concern trolls pretend that they are liberals? Curious penguins are… curious!

    In case you’re wondering, liberals brought you the ACLU, the civil rights movement, and the greatest economic expansion in U.S. history. Libertarians, AFAIK, have produced nothing other than very bad science fiction filled with wooden characters who spend the majority of the tome standing on a soapbox waving guns while preaching some bizarre philosophy that says that greed is good and selfishness is a virtue, a philosophy that in real life has always produced social unrest and lots of pain, suffering, and misery as well as economic decline. Do you REALLY think that the economy has done better since Reagan made it okay to say “greed is good”, as vs. the prior three decades where the liberal notion of working hard and taking care of one another was the guiding rule? If so, you’re contradicting every stitch of economic data we have. Just sayin’. 

    BTW, the usual Libertarian garbage here is to talk about how the economic boom caused by liberal policies was *really* because the rest of the world was destroyed by WW2. Err… no. According to BES statistics, exports during the liberal boom years were less than 5% greater than imports. Devastated countries simply don’t buy a lot of stuff. But hey, I’m talking facts in the real world, as vs. a world of cardboard characters espousing bizarre philosophies from paper soapboxes, so (shrug).

    • jimdigritz says:

      Of course things haven’t got better… we have simply witnessed a forty year global effort to violate rules of mathematics for economic gain and it is ending in utter failure. If you believe the hype that we have been operating in some neo-con Ayn Randian nightmare you must have been asleep when governments and central banks initiated the mother of all interventions through bailouts (corporate and state), TARP, QE and Zero Interest Rates.

      In fact 2011 is turning into the year when the effects of the largest bubble (credit) in the world’s history collided with the failure to find new sources of growth.

      Growth does NOT equal prosperity, and applying liquidiy solutions to a solvency problem just won’t work.

      We desperately need to understand the fact that we are living in a finite world with an energy inheritance that is being squandered in the name of growth.

      So yes, fuck Krugman and his debt based, GDP holy grail dogma. He is a financial terrorist on a jihad that entails stealing from the future, selling it in the present, and calling it gross domestic product.

  47. Bad Tux says:

    Wow, frothing much? I remember what things were like before the so-called “Reagan Revolution”. You apparently…. not so much. We went from liberalism to a sort of crony capitalism that would have made Mussolini smile, with predictable results. And if you think Krugman’s magic powers of wand-waving had something to do with that despite the fact that a) he’s not been in government any of this time and b) government hasn’t done a blessed thing he’s proposed that it do during this time… dude. Just dude. Put down the crackpipe, That’s all I gotta say.

    And if you think things weren’t better in 1980 than in 1945, or indeed better today than in 1945, you must be white and middle class. Because you certainly aren’t a person of color (who was basically chattel in 1945) or a poor person (most of whom didn’t even have running water, indoor plumbing, or electricity in 1945). Thing is, all these advances came to a slamming halt in 1980, and real per-hour wages have been declining for the bottom 50% of Americans ever since. Hmm, what happened in 1980? Oh wait, I’m talking facts easily obtainable yourself from the Bureau of Economic Statistics and U.S. Census web sites, while you have your frothing superstitions to sustain you. Alrighty, then!

  48. jimdigritz says:

    Frothing? Crack addict? White and middle class?

    Ad hominem attacks, non sequiturs, straw men, and fallacious arguments… your posts have them all.

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