TOM THE DANCING BUG: On Re-Fighting The Wrong Wars


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  1. Agree with the first part, but austerity? Tight monetary policy?  That’s not quite how I would describe TARP/ARRA. Misdirected, mismanaged, yes, but I wouldn’t describe federal spending as tight.

    1. Tom’s talking about more recent events.  The genesis of TARP was a Bush-era tactic.  But with the rise of the Tea Party, austerity is all the rage despite a struggling economy and evidence (see Keynesian economics) that spending your way out of a deep recession/depression makes sense.

      1. The “evidence” comes from abstract keynesian economic theory, rather than actual empirical reality.

        1. It’s so weird that sympathizers with the Austrian school, of which one of the founders insisted it is not, cannot be, and should not be subject to empirical verification, all seem to insist that Keynesians need to adduce all this empirical data to demonstrate that it’s true.  Clearly, empirical data is not what you’re looking for if you’re an Austrian, so why make the demand on everyone else?  One suspects they might not be arguing in good faith.

          Not to mention that their general attitude towards the subject strongly suggests that they would never in a million years acknowledge any actual evidence for Keynsianism as valid.  In fact, they’ve already demonstrated this by failing to consider all the empirical evidence for Keynsianism.

          Oh well, no use arguing with religious fundamentalists.

  2. Reasonably accurate. Even rather smart people like Paul Volcker make this mistake. Citing the 70s, he warns us that it is possible have high unemployment and inflation at the same time. That’s true, but we don’t have both now. (Some prices have risen in the last few years, but that does not mean we have inflation. Inflation is a wage/price spiral, and wages are NOT going up. All the higher price of gasoline means is that we are all a bit poorer.)

    But it is important to note that the two errors Bolling describes are not random errors: both are the results of  deliberate disinformation programs created by right-wing ideologues on behalf of the corporate elite.

    1. But he included the Republic of China, Cuba and the old Canadian red ensign.  I don’t think Poland had its own flag in that era, if you know what I mean.

    2. Oooo – my MiL wouldn’t like that. They sent their special forces to Iraq, IIRC. And of course during WWII they had an indomitable spirit.

      Fun story, a friend of mine was stationed in Iraq and he at a little Polish flag on his back pack (his ancestors are from here). The Polish guys saw it and basically adopted him, gave him just the warmest treatment one could ask for in that situation.

  3. I guess I’m thinking more of our fiscal policy than monetary policy,  but the overnight funds rate is at zero and we just tried the Twist again. I don’t know. I’m out of my depth. 

    1. Err, both of those are monetary tools, not fiscal.  If you subscribe to the view that the US economy is experiencing a liquidity trap (as is supported by a zero rate, incidentally), then monetary tools lose their effectiveness under these conditions.  Not that this has stopped one major party from accusing the Fed of treason for attempting expansionary measures, sending letters warning them not to do so, talk about eliminating unemployment from the Fed’s dual mandate, forcing it to focus, by law, exclusively on minimizing inflation, etc. etc.

      Meanwhile, on the fiscal side, there really has been, over the past 2 1/2 years, undue focus on deficit reduction and reducing the size of government that’s very inappropriate for the economic environment and is merely adding to unemployment further.  Of course, a good deal of this focus probably has less to do with fighting the economic fights of the 1970’s, and a great deal more to do with again, one party’s ideological agenda aimed at drastically cutting away government programs, irrespective of the economic impact, for which present economic conditions (for all values of ‘present’) are merely an excuse.

      We did have one round of stimulus shortly after Obama came into office, but it was projected by Obama’s camp to only close about half of the jobs gap that existed at that time, and that was before negotiations watered it down further.

      It is fair, of course, to argue that references to “tight monetary policies and austerity” describe the European response to their economic crises somewhat more cleanly than it does America.

      1. “Err, both of those are monetary tools, not fiscal.”

        Right, which is what the comic was talking about – tight monetary policy.  The Fed’s policy has been the opposite (as has the ECB’s).

        “Meanwhile, on the fiscal side, there really has been, over the past 2 1/2 years, undue focus on deficit reduction and reducing the size of government that’s very inappropriate for the economic environment and is merely adding to unemployment further.”

        I’m not sure in what world an “undue focus on deficit reduction and reducing the size of government” means increasing the deficit and increasing the size of government.  No budgets have been cut; no federal positions have been eliminated; in fact, the opposite has occurred.  While there has been some rhetoric about reducing government, we all should know by now that the vast majority of Republicans have no intention of cutting anything – they just want control of the spending.  So for the United States, there’s been no austerity – in fact, we’ve spent like drunken sailors, borrowing nearly half our yearly budget every year.

        1. “borrowing nearly half our yearly budget every year”  That’s drunken sailors, is it?

          Seriously, could you guys on the right get some new cliches? “drunken sailors” is so ’40’s. I feel like I’m reading my grandpa’s blog.

      2. Yes, there has been focus on reducing the deficit. But there hasn’t been, you know, actual action on reducing the deficit, or the role of government in the US economy.

  4. One could just as easily say that the pacifist movements have been protesting the Vietnam war ever since the 60s – whether or not the current war bares any resemblance to it or not.  For example, almost nothing that the Iraqi insurgents have been doing can be characterised as “guerilla war”.  They seldom bother to attack American forces as they are too busy slaughtering Iraqi civilians.  Ho Chi Minh is spinning in his grave.  Another major difference is that Viet Nam has been a coherent country with one major ethnic group in it for thousands of years.  Iraq is the slapping together of three separate provinces of the old Turkish Empire in order to make a failed state that has to be held together by a strongman supported by someone’s Marine Corps.  (This is not speculation: we have the design notes of the old British Empire and this was the stated and achieved goal.)

    In general Neural Typical Homo Saps are unable to learn through analysis, gestalt or anything else except for experience.  You do exactly what you did last time until extreme pain and suffering causes random responses until one of them works out.  Rinse, repeat.  This is why, when we run up against something that you have to get right the first time because there’ll be no second chance, Mankind is probably a failed evolutionary experiment.

  5. Politicians always fight the war that their corporate sponsors will make the most money from.

    Generals also have a lot to do with how the war is fought.  Most (Old) generals refight the last war… but with better toys and some insight.
    Better generals will end up fighting a newer war and will be more effective.  Old generals tend to have the ear of politicians.

    The same idea can be applied to politics etc.  Some people will retry something that everyone knows doesn’t work… but try again they will.

  6. Um, what? The Fed’s target interest rate is, for all intents and purposes, zero percent.  They’ve dumped trillions of dollars into the U.S. economy via bailouts, quantitative easing, direct asset purchases, and indirectly funding the massive government deficit – which is now larger than the entire government budget was back in the 1970’s.  Monetary policy doesn’t GET any looser than what the government has done in the last three years.

    One can argue about tactics, and strategy, and what to do, but it’s simply preposterous to assert that the government has followed a course of tight monetary policy and austerity since 2008, or that anyone in the government is considering such a course now.

  7. TARP and ARRA injected less than half of the money into the economy that the banking crisis sucked out.  By any standard the stimulus was too small, and we’ll be paying the cost for a decade or more.     

    1. This is a perfect unfalsifiable position, no different than “If you pray hard enough, water will run uphill. Water isn’t running uphill? Well then, I guess you didn’t pray hard enough!”  There is no amount of stimulus that would be enough to disprove the thesis that all we need to solve any economic crisis is more money. The recent audit of the Fed revealed that the Fed pumped $16 trillion into the global economy. That’s over and above ZIRP, TARP, QE1, QE2, and now Operation Twist. Just as the failures of every Soviet 5-year plan were always the results of “wreckers”, the failures of trillions in stimulus are now the result of the Tea Party just talking about austerity.

      We’re “priming the pump” on a dry well. Literally. Global peak oil occurred in 2005. Money is not wealth. Wealth comes from production, and production comes from energy. The “easy” energy is now gone. We’ve got to go to places like the Arctic and the Gulf of Mexico to find it, and that requires a lot more investment (energy in) for what we get back (energy out). You can throw all the money around you want. QE to infinity. That’s not going to make the oil flow any faster or easier.

      At this point, I don’t care. Let’s give the Keynesians all the stimulus they want. We don’t need no water, let the motherfucker burn. Whatever it takes to conclusively disprove it once and for all. And when everybody is satisfied, we can lop 10 zeroes off the currency, stop trying to live in the past, and get down to the business of figuring out what kind of standard of living we can reasonably maintain with the energy we have.

  8. I’ll just chime in on the people WTFing here.  Monetary policy is as loose as it has been in all of history for major economies (examples of looser policy haven’t ended well either).  There is talk of tightening fiscal policy but that’s only just being introduced.  A loose fiscal policy can only ever be extended for so long, at some point people will stop lending you money.

    Just because some loonies talk about returning to the gold standard doesn’t make it government policy

  9. @Matt Drew: Yes, US monetary policy has been very loose, although it’s still not quite what Keynes would call for (he would have the Fed purchase non-government bonds). But fiscal policy has not been used sufficiently, and, as Greg Robinson says above, that’s the key in a liquidity trap.

    One point: when looking at the effect of government spending, you have to look at ALL spending. While the stimulus did temporarily increase federal spending, state and municipal budgets contracted a great deal.  This means there was very little stimulus in total, and we needed a lot.  Pussy-footing does not do the job.  Now that the stimulus has come to an end, overall government spending is going down. This will push us into a second recession.

    Obama not only made the stimulus insufficient, but after only one year, he started calling for austerity, including that absurd statement in his 2010 State of the Union Address: “families across the country are tightening their belts and making tough decisions. The federal government should do the same.” This is simply incorrect economics, and it’s the kind of thing Bolling is satirizing.

  10. A side note. 

    Most people agree, if they think about it, that regulations kill jobs.

    Not financial regulations. Regulations on food and consumer products; ‘in order to sell wooden toys you have to have this and this lab inspection, pay this and this fee, file this and this paperwork.’

    Now, you can argue about the benefit of them. Frankly, I hate regulations more than almost anything government does, because they cause the corporatation of the economy and are generally used as an excuse to bust up small businesses that have pissed off the wrong players. But I digress.

    So, we all spend our timing endlessly arguing over the sanity and efficacy of Keynesian economics. Does it work? Doesn’t it? Does it simply slough the problem off on our children? etc.

    But, it seems it’s never really mentioned…why not boost the economy by removing rules that inhibit business? Why not boost the economy by cutting down the red tape, on local, state, and federal levels, that make business more difficult? It seems the best way without increasing the debt or creating future liabilities. There are loads of regulations out there that are pointless, petty, and hurt small entrepreneurs (while helping established players). Shouldn’t both small-government conservatives/libertarians and anti-corporation liberals all get around removing the load of red tape as a means of boosting the economy? And yet, you never really hear it mentioned…

  11. Remember, Ruben Bolling is a former lawyer and bank cog. He knows what’s he’s talking about when he does these economics-heavy comics. I don’t even know the difference between monetary and fiscal. DO NOT TELL ME THE DIFFERENCE BETWEEN MONETARY AND FISCAL. NO-ONE DO THAT. I DON’T CARE.

  12. I often wonder, where is this generation’s MASH? What would that be like? Are we still capable of that kind of expression about our times, in an age when irony is dead? 

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