Your Lying Eyes

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22 June 2010

Krugman's Desperate Plea: Spend, Spend, Spend

You can tell Krugman's desperate, because he avoids invective and name-calling - he sincerely believes we need to have much, much more stimulus spending. But that kind of spending is a huge gamble - we're betting the pot on the effectiveness of stimulus spending to spur growth.

But why can't he see what this recession is. This is not a retrenchment from excessive private sector demand like a classic recession. What we have now is a new reality born out of the destruction of trillions of dollars of wealth. It is as if you were spending money knowing you had so much money saved for retirement, then suddenly found that those savings have disappeared (not that I'd know anything about that). The only thing you can do then is to completely reassess your situation and perhaps remake yourself. Work more, if possible; find a new career; figure out a new strategy for your older years. But continuing the spending as it was is not an option - you've got to cut back.

That's where the U.S. is right now - in that reassessment phase. But no one in charge seems to be doing any re-assessing.


Blogger C. Van Carter said...

The real economy doesn't exist for Krazy Krug and his pals.

June 22, 2010 2:59 PM  
Anonymous Dano said...

Economist's fear deflation will cause the end of the world. Unfortunately in housing prices and wages that is where we are headed.
Come July 1 most States need a new budget and that means layoffs. Lots of them all across the country.
As with the Depression after the initial shock we still have the worst years ahead of us. Bernanke may be a depression expert it doesn't mean he'll be able to change it.

June 24, 2010 7:20 AM  
Blogger ziel said...

Housing will have to go down, unfortunately. Not only is there a glut, but the prevailing prices are too high compared to prevailing wages. Incomes are not going to rise - they'll probably drop in absolute terms, so housing prices have to come down. I've got to believe cars are cheaper, with all the incentives out there right now. Deflation seems inevitable. That's good news for savers, bad news for debtors.

June 24, 2010 10:36 PM  
Anonymous Mr. Anon said...

"Dano said...

Bernanke may be a depression expert it doesn't mean he'll be able to change it."

Ending them, or starting them?

June 27, 2010 11:17 PM  

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