Krugman vs. The Austerians. FIGHT!

June 26, 2015 6:56 AM

Krugman battles the Austerians. A little light infotainment for those becoming increasingly frustrated at the counterproductive policies pushed by partisan economists and more disturbingly by whole governments.

While a solid majority of economists view austerity (reducing government spending) as the exact wrong thing to do in a recession/depression some hold doggedly onto the notion that it works in the face of strong prevailing evidence against it.

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Further reading (some of it gets a bit wonkish but most is plain language):

krugman.blogs.nytimes.com - self-explanatory
mainlymacro.blogspot.co.uk - aimed at economists and non-economists alike. Updated almost daily.
coppolacomment.blogspot.co.uk - insight from a ex-City of London worker.
www.pieria.co.uk - compiles articles from writers such as the above

I particularly love Krugman repeatedly punching George Osborne in the face but, then, I am British

posted by Beware of the leopard (34 comments total)

I keep waiting for KRUG LIFE to become a thing.
Perhaps now is finally its moment.
posted by phunniemee at 7:02 AM on June 26, 2015 [10 favorites]

For some reason having to adjust the height of my browser bothers me more than having to adjust the width.
posted by ChurchHatesTucker at 7:19 AM on June 26, 2015 [1 favorite]

Krugman's reaction. Also, I'd assume that most people would assume KRUG LIFE was referring to the champagne; if you're going to get a tat, I'd have one done of Krugsy's smiling face with the legend "FUCK AUSTERITY", and make sure he gets a picture.
posted by Halloween Jack at 7:34 AM on June 26, 2015 [2 favorites]

Fact Checking Paul Krugman's Claim To Be "Right About Everything"
posted by chavenet at 7:38 AM on June 26, 2015

The austerity debate is all about politics, not economics. There are only two questions you need to answer about the economics:

1. Would *you* loan *your* money to the UK?
2. Would *you* loan *your* money to Greece?

if you want extra credit, you could also answer:

3. If you were Saudi Arabia, would you loan money to the UK?
4. If you were Germany, would you loan money to Greece?

Everyone would say "yes" to 1 & 3 and "no" to 2. The answer to 4 is politics.
posted by mikewebkist at 7:43 AM on June 26, 2015

"2. Would *you* loan *your* money to Greece?"

Germany was quite happy to loan *their* money to Greece. The last time I checked, there are two sides of a lending transaction.
posted by tonycpsu at 7:47 AM on June 26, 2015 [13 favorites]

Fact Checking Paul Krugman's Claim To Be "Right About Everything"

Three words into the your link's* content and we scratch off our 1st bingo square "Austrian Economics" on our neoliberal card. I guess "Freedom" also takes a square and with a bit of a stretch the incongruous "Peace".

* The *Mises Institue* it's like you're not even trying ;)
posted by Beware of the leopard at 7:52 AM on June 26, 2015 [19 favorites]

@tonycpsu: yes...Germany was willing to loan money under certain conditions. Greece doesn't like those conditions and everyone yells "austerity!"
posted by mikewebkist at 7:56 AM on June 26, 2015

No, I'm talking about the money that was lent in the run-up to the Eurozone crisis by German bankers happy to ride the bubble on the upswing. When it pops, suddenly it's Greece's fault for taking the loans instead of the bankers for issuing them.
posted by tonycpsu at 7:58 AM on June 26, 2015 [15 favorites]

*gets out popcorn*
posted by Beware of the leopard at 7:59 AM on June 26, 2015

Same as when the American hosting bubble popped it was suddenly the fault of the people who had gown mortgages not the fault of the bankers. And the US government agreed, after all the bailout pad the baskets while leaving the mortgage victims homeless.

And yes, Mike, I'll shout about austerity. Why should poor Geeks be forced to literally starve because the rich are either criminal or mind bogglingly incompetent?
posted by sotonohito at 8:11 AM on June 26, 2015 [11 favorites]

Krugman consistently reviews his past analyses and looks at things he got wrong, and then tries to understand why. His opponents don't do that.

Austerity is completely political, and failing to understand rudimentary economics, and the evidence and data has consistently shown it to be misguided.
posted by idb at 8:14 AM on June 26, 2015 [16 favorites]

Forget the actual content--those are the coolest illustrations I've ever seen!
posted by mondo dentro at 9:29 AM on June 26, 2015 [3 favorites]

austerity (reducing government spending)

We really need a three-word definition for the relevent sense of "austerity" that isn't that.

austere (comparative more austere, superlative most austere)
1. Grim or severe in manner or appearance. "The headmistress was an austere old woman."
2. Lacking trivial decoration; not extravagant or gaudy. "The interior of the church was as austere as the parishioners were dour."

Use it to refer to a harsh, grim, ill-timed, excessive reduction in government spending; that works. If it just means "reducing government spending" then even John Maynard Keynes himself was in favour of a bit of austerity from time to time.
posted by sfenders at 9:38 AM on June 26, 2015 [1 favorite]

Greece fact of the day - What depresses us is how little attention has been paid to one major area of Greek government spending that seems ripe for the ax: defense spending.
posted by triggerfinger at 9:39 AM on June 26, 2015 [1 favorite]

Use it to refer to a harsh, grim, ill-timed, excessive reduction in government spending; that works. If it just means "reducing government spending" then even John Maynard Keynes himself was in favour of a bit of austerity from time to time.

Yep, you're completely right. Bad wording on my part. Should have been something like you say: excessive/unnecessary/ideological reduction in government net expenditure. (As we should probably include tax increases as a possible way to implement austerity although I don't think any government has gone quite that insane - yet ;)
posted by Beware of the leopard at 9:56 AM on June 26, 2015

Fact Checking Paul Krugman's Claim To Be "Right About Everything"

Wow. When you have to list all the times he's said something "could" happen under certain circumstances as "predictions" that failed to come true you're really proving his point.
posted by yoink at 10:11 AM on June 26, 2015 [14 favorites]

We really need a three-word definition for the relevent sense of "austerity" that isn't that.

I can't do three words. You could just say it's "anti-Keynesian" and be pretty close. Of course, Keynes had a control-theoretic view of things (spending during busts, austerity during booms).

But I think of "austerity" in the current context as just a focus-group tested euphemism for economic policy that favors the financial classes at the expense of everyone else.
posted by mondo dentro at 10:13 AM on June 26, 2015 [4 favorites]

You could just say it's "anti-Keynesian"

But to be that, one would have to acually be following Keynes someplace.

Aren't there supposed to be contractions with the expansions? The expansions exist - where are the contractions?
posted by rough ashlar at 10:29 AM on June 26, 2015 [1 favorite]

This is my favorite thing ever. Macroeconomic theory debate portrayed through the lens of f*cking 16 bit gaming? It hits ALL MY BUTTONS. If school were this fun maybe I would have stuck with economics...
posted by jnnla at 11:02 AM on June 26, 2015 [3 favorites]

Would *you* loan *your* money to Greece?

Well, if they're really that hard up for cash, I could help them out with [takes out wallet and counts] $14; I mean, I'd like to go there someday and it would be a real bummer if they had to bust up the Acropolis to sell as driveway gravel. Heck, I could throw in a couple of cards for free apps that I got from Starbucks, if that helps.
posted by Halloween Jack at 11:48 AM on June 26, 2015 [5 favorites]

Germany was willing to loan money under certain conditions. Greece doesn't like those conditions and everyone yells "austerity!"

Germany feels that because they loaned money to Greece that they can tell Greece how to run their country. I suspect talks now would be going better had that previous advice from German economists worked.

Economies run on spending. As it turns out, they agnostic as to whether that is market driven or government driven - the spending makes the wheel go round.
posted by Pogo_Fuzzybutt at 12:37 PM on June 26, 2015 [8 favorites]

It's kinda weird that they have a big "KRUGMAN WINS" and the end, right after they show him getting his ass kicked by two guys (and the second animation with him cowering in a defensive posture arguably shows him losing by points).
posted by cosmic.osmo at 12:44 PM on June 26, 2015 [1 favorite]

We really need a three-word definition for the relevent sense of "austerity" that isn't that.

Fuck Aggregate Demand.
posted by topynate at 12:54 PM on June 26, 2015 [3 favorites]

cosmic.osmo: he's a winner in his own mind, is the message of the article.
posted by topynate at 12:55 PM on June 26, 2015

When it pops, suddenly it's Greece's fault for taking the loans instead of the bankers for issuing them.

Can't Greece just decide to default? The power that other countries have over Greece is not because they have some kind of magical ability to make Greece pay, but because Greece wants to continue to borrow more money. Sure, much of that is going to debt service -- but they must be getting some kind of value out of the new loans other than staving off default.
posted by Slothrup at 1:15 PM on June 26, 2015 [1 favorite]

>> We really need a three-word definition for the relevent sense of "austerity" that isn't that.

> Fuck Aggregate Demand.

Nice.

I can only cheat to make 3.5: Supply-side Über Alles* which I guess amounts to the pretty much the same thing. And really that describe most of the countries' in question's macroeconomic policy since the 80's. Oh, if only Milton Friedman had been a forgotten footnote in history rather than directly ruining the economies of several countries and indirectly those of dozens across the globe.

* Hey, I know what will stimulate more demand: QE. Let's transfer (billions, trillions by now?) of public money to private banks at stupid low interest who will be sure to lend it out in this economy... oh

On abuse of edit: Monetarism Über Alles would be a better fit.
posted by Beware of the leopard at 1:35 PM on June 26, 2015 [3 favorites]

Ok, that's not quite right about QE as interest (in the way I implied) isn't directly a factor when a central bank buys assets from private banks but you get the idea.
posted by Beware of the leopard at 1:53 PM on June 26, 2015

I think we should just go full Barter Town rules:
Bust a deal, face the wheel.

I mean, it would probably hurt the economy a whole lot less than forced reduction of necessary spending.
posted by daq at 2:12 PM on June 26, 2015 [2 favorites]

There are only two questions you need to answer about the economics:

a gov't is not like a person, household or corporation...
a gov't is not like a person, household or corporation...
a gov't is not like a person, household or corporation...
a gov't is not like a person, household or corporation...

esp when it has taxation authority and is a fiat currency issuer and can (usually!) never be liquidated :P

like for a lot of things macroeconomic today, take a look at japan, which among others (like china) is 'running the experiment' on money-financed fiscal stimulus policy with total debt to GDP around 400% and yet is borrowing at 1.5% for 30 years; sure demographics, deflation, and a liquidity trap, but also keep in mind national equity on the asset side of the sovereign B/S...
posted by kliuless at 3:25 PM on June 26, 2015 [10 favorites]

All you guys talking about the financial plight of Greece, which doesn't seem to be mentioned in the top three links on the page here.

Whatever Krugman is saying about it lately, back when I was following that sort of news he was pointing out that Greece was the exception, the one (or one of very few) countries at that time that actually did need some austerity. The needed a severe, drastic, merciless and harsh reduction in government spending relative to the level they were used to. What they were used to could not possibly continue under any scenario. Now they've had some, everyone has opinions over whether it worked, whether it was enough, whether it was too much, whether it was too rapid, whether they now have a primary budget surplus or not.

The way "austerity" got its bad reputation was when such countries as the UK, Ireland, Spain, and even to some extent the USA decided that something resembling austerity was the way to avoid in their countries what had happened in Greece. Some did need long-term cutbacks in government spending, but one thing Krugman is right about is that it's generally not the thing to do during a recession when your interest rates are near zero and falling.
posted by sfenders at 3:44 PM on June 26, 2015 [1 favorite]

Krugman has been pointing out that Greek austerity has had a !major depressing effect on the economy. The German bankers can clamor for more, but Greece is too depressed to make any money for repayment.

Bankers know they have to qualify their loans. They know there is a risk of default. What they refuse to acknowledge is that these loans have gone bad and they are never going to get their money back.
posted by SemiSalt at 3:56 PM on June 26, 2015 [2 favorites]

What they refuse to acknowledge is that these loans have gone bad and they are never going to get their money back.

Well, they certainly won't get it back if they insist on utterly crushing the economy that has been paying it back.
posted by flabdablet at 7:18 PM on June 26, 2015 [2 favorites]

Economic policy has been kidnapped by austerians. Are you a bad enough dude to rescue economic policy?
posted by mcmile at 10:39 PM on June 26, 2015 [9 favorites]