Austerity cannot fail. It can only be failed.

On 3 January 2013, the IMF’s chief economist, Olivier Blanchard, released a working paper discussing the austerity strategy that he and the IMF recommended/required back in 2010. The paper is called Growth Forecast Errors and Fiscal Multipliers, and its content can basically be summarised as “Oopsie! We fucked up”.

Peter Martin at the Sydney Morning Herald:

The IMF, on the other hand, solemnly advised the nations of Europe coming out of the financial crisis to raise taxes and wind back government spending. Its commandments had weight. Yes, it had failed to foresee the crisis in the first place, but it was the lender of last resort. They might need it.

And it had modelled what would happen if they did what it said. For every dollar they cut their budgets, their economic growth would suffer just 50¢. Its forecasts said so.

On Friday, in its first working paper of the year, it revealed the full horror of what did happen. Personally authored by the fund’s chief economist, Olivier Blanchard, the paper said for every dollar those nations cut their budgets their economies crumpled something more like $1.50.

Rather than suffering far less than the savings they made on their budgets, the economies suffered far more. As mistaken advice it’s monstrous – like going to see a doctor who tells you the medicine won’t hurt much and finding it lays you low for years.

The fund forecast that if the eurozone took its advice it would grow 1.8 per cent throughout 2011. It grew 0.7 per cent. Italy would climb 1.3 per cent; it slid 0.5 per cent. Spain would surge 1.8 per cent; it grew not at all.

The errors are completely unlike those made forecasting the Australian budget, which were largely the result of unexpected events.

The shocking thing about the incorrect IMF forecasts confirmed by its chief economist is that there were few unexpected events. The global environment was broadly as forecast. The nations of Europe did what was forecast. The consequence was nothing like what was forecast. The fund misunderstood the mechanics.

As Blanchard put it, his forecasters “significantly underestimated the increase in unemployment and the decline in private consumption and investment associated with fiscal consolidation”.

His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢. But the times weren’t normal. European interest rates had been cut to nearly zero, meaning there wasn’t the normal room for authorities to cut further, and households were more heavily indebted than normal, so cuts to their income flowed through more quickly than normal to cuts in their spending. And the starting point was different. The European economies had been in recession, which was far from normal. [Emphasis added]

ETA: Of course, Blanchard’s paper doesn’t include an apology for his monumental fuckup, or indeed any concession that austerity might have fundamental flaws. From the paper’s conclusion:

Finally, it is worth emphasizing that deciding on the appropriate stance of fiscal policy requires much more than an assessment regarding the size of short-term fiscal multipliers. Thus, our results should not be construed as arguing for any specific fiscal policy stance in any specific country. In particular, the results do not imply that fiscal consolidation is undesirable. Virtually all advanced economies face the challenge of fiscal adjustment in response to elevated government debt levels and future pressures on public finances from demographic change. The short-term effects of fiscal policy on economic activity are only one of the many factors that need to be considered in determining the appropriate pace of fiscal consolidation for any single country.

Olivier Blanchard should be forced to spend the next three years cleaning toilets in Athens for minimum wage, while wearing a sign that says “I am personally responsible for your misery”. Fuck him.

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112 replies
  1. 1
    Yutsano says:

    All together now:

    HOOCODANODE??

  2. 2
    catclub says:

    @Yutsano: beat me to it.

  3. 3
    BGinCHI says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢.

    This is stunning. Unfortunately not surprising, but still stunning.

    These “experts” were asked to make policy during what was clearly a crisis to everyone who bothered to think about it and yet they ignored the special circumstances of the time.

    Why?

    Ideology.

    Anyone who reads Krugman’s blog regularly could have explained to anyone why Blanchard and other Austerians failed. When will they be run out of the business?

  4. 4
    David Hunt says:

    I believe Atrios summarizes this phenomenon as “People got no jobs and no money.”

  5. 5
    scav says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢. But the times weren’t normal. European interest rates had been cut to nearly zero, meaning there wasn’t the normal room for authorities to cut further, and households were more heavily indebted than normal, so cuts to their income flowed through more quickly than normal to cuts in their spending. And the starting point was different. The European economies had been in recession, which was far from normal.

    oh shit, thats a doctor saying don’t blame us, we never tested the medicine on sick people level stupidity.

  6. 6
    Cermet says:

    So once more, a medicine that we in the “West” have seen applied to so many thrid world countries since the early fifties is just so much utter and complet bullshit. We damaged so many millions with these asswipes stupid ideas all these years and finally, when Europe is fucked over, they just now ‘see’ the light. Of course, it isn’t their fault because the stupid people who live in these real countries didn’t have economies that operated like these dick head’s model required.

  7. 7
    piratedan says:

    so…. that means that their biggest advice is straight outta Animal House…. “face it, you fucked up, you trusted us!”. If there was a lawsuit, the judge would award damages.

  8. 8
    ALurkerHere says:

    The IMF has never gotten it right!!!

    They have been advocating austerity for more than 20 years in developing countries which led to similar results in those countries…(google “Structural Adjustment Programs”).

    Of course it was easier go get away with their nonsense then because no one except those affected were really paying attention to the impact these programs had on the health, education and social welfare in these countries.

  9. 9
    What Have The Romans Ever Done for Us? (formerly MarkJ) says:

    Atrios and Krugman cannot be right, because they’re raving liberals, and raving liberals are never right, even when they are.

  10. 10
    BGinCHI says:

    Any time the advice regarding growing an economy is “shrink it,” that person should be laughed at and sent to a reeducation camp.

    Are there Physicists who argue that all matter is made up of tine particles of cheese? Because that’s about how wrong these Austerity freaks are.

  11. 11
    Yutsano says:

    @ALurkerHere: It looks like Argentina and Iceland both got this right. They basically told the bankstahs to pound sand while they rebuilt their economies on their own. Greece had to eat it because of the Euro.

  12. 12
    Pooh says:

    @David Hunt: That’s Pierce, not Atrios, but yeah

  13. 13
    BGinCHI says:

    @piratedan: Food King!

  14. 14
    Forum Transmitted Disease says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢.

    I suspect this is utter bullshit too, but there are no economies currently not in recession to try this “theory” out on.

  15. 15
    eemom says:

    Olivier Blanchard

    I am of the view that anyone possessing this name should presumptively go fuck themselves.

  16. 16
    Halcyan says:

    At the very least it is encouraging that they are saying “oopsie”. It’s not a normal position for these people to take.

  17. 17

    I am frequently told that my desire to place the priority on jobs rather then spending is because I am trying at all costs to protect spending/BIG GUBBMENT. Also, Kthug is a big meanie.

  18. 18
    Pooh says:

    @ALurkerHere: To be exceedingly fair to the IMF, deficit spending is more problematic in countries that don’t host the world’s standard currency and credit rating (oops?) At the same time, proscribing chemo for a cold is just bad medicine.

  19. 19
    Brachiator says:

    I have been having fun looking at the World Top Incomes Database.

    An overview:

    However the database has already revealed some interesting findings. Facundo reports: “The share of income received by the top 1 percent varied markedly between 1900 and 2008 both in developed and developing economies. Over the last 30 years, top income shares have increased substantially in English-speaking countries and in India and China but not in continental European countries or Japan. Moreover, the biggest earners changed as well. When the century began, the top 1 percent was dominated by capital owners. By the end of the century the hired hands—the top executives—shared with capital owners the highest part of the income distribution. The increase in recent decades in the share of income going to the top 1 percent in English-speaking countries is due to a partial restoration of capital incomes and, more significantly, to very large increases in compensation for top executives.
    __
    In the United States, for instance, the working rich have joined capital owners at the top of the income hierarchy.”

    When you look at the US in detail, you see that the share of income of the top 10 percent dropped substantially between the 1930s and the 1980s, then has shot up again to pre-1930s levels.

    Wonder how that happened.

  20. 20
    Pooh says:

    I will say that Kthug has to come up with a better phrase than “liquidity trap” though. I mean it’s perfectly accurate, but also perfectly impenetrable to the innumerate.

  21. 21
    EconWatcher says:

    My experience in public agencies is that people don’t admit mistakes, especially really, really big ones like this, that hurt many people. So kudos to the IMF for admitting it, I guess.

    But the second step has to be analyzing why they ignored K-thug and others who got it right, in real time. This wasn’t something that could only be seen in hindsight. Maybe they need to fire some of their economists, and hire different ones.

    That old Maynard Keynes knew a thing or two, and anyone who neglects him should not be calling the shots.

  22. 22
    ThatLeftTurnInABQ says:

    @Halcyan:

    At the very least it is encouraging that they are saying “oopsie”. It’s not a normal position for these people to take.

    So this means they are so very sorry at getting it wrong that they will never ever give out the very same bad advice under similar circumstances ever again, correct?

    In other news, crackheads the world over declare they will give up drugs forever and dedicate the remainder of their productive lives to charity.

  23. 23
    elm says:

    His claim that they would have gotten it right in normal times is not in evidence either.

    Also, doesn’t the IMF principally deal with countries in economic crisis?

  24. 24
    Forum Transmitted Disease says:

    The IMF has never gotten it right!!!

    They have been advocating austerity for more than 20 years in developing countries which led to similar results in those countries…(google “Structural Adjustment Programs”).

    @ALurkerHere: Or read Naomi Klein’s “Shock Doctrine”, which will have you buying a gun, a coil of rope and a lamppost just in hopes that you’ll meet one of these “Austerians” someday.

  25. 25
    jayjaybear says:

    I’m surprised they admitted the error at all. Austrian School economics is about as reality-based as Rapture theology.

  26. 26
    BGinCHI says:

    @EconWatcher: Ideology and/or ego.

  27. 27
    Belafon (formerly anonevent) says:

    @elm: Of course they get it right in normal times: Wealthy western countries benefit immensely when the IMF screws over smaller economies.

  28. 28
    BGinCHI says:

    Krugman’s new post on the 3T coin. Must read.

    http://krugman.blogs.nytimes.c.....-the-coin/

    It’s an accounting fiction. That’s the takeaway.

  29. 29
    Pooh says:

    @BGinCHI: Of course it’s an accounting fiction, it was never actually going to circulate.

  30. 30
    bemused says:

    The comments are pretty interesting. First one up, Hacka, proceeds to say everyone makes mistakes and then gets a lot of blowback. Rather refreshing.

  31. 31
    Gex says:

    @Forum Transmitted Disease: Further, we don’t muck with economies that are running normally. So their “theories” have absolutely zero value even if we grant them that they are 100% correct.

  32. 32

    @Halcyan:

    At the very least it is encouraging that they are saying “oopsie”. It’s not a normal position for these people to take.

    Yeah. Not so much. See my ETA above.

  33. 33
    cat says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢.

    The majority of papers and evidence point to the fact government spending has a positive multiplier. Only the most in the tank economists believe the gov’t multiplier is 1.0 or lower.

    Even the hack economist Mankiw admits its around 1.4.

    Which is firmly inline with what the IMF ‘discovered’, to their shock, happened to Europe.

  34. 34
    hitchhiker says:

    Tangentially related:

    Holy mother of pearl, I just saw Dick Armey on Chris Matthews. That guy looks like hell on a stick and can’t seem to utter a coherent sentence. Kind of amusing to watch the angry old man vote personified as he stumbles into history.

    Go, Dick. I mean, go, dick.

  35. 35
    bemused says:

    @hitchhiker:

    More than once when I’ve seen him on tv, I have thought the skunk must be drunk.

  36. 36
    Emma says:

    I believe Home Depot’s having a special in garden implements, including pitchforks.

  37. 37
    Roger Moore says:

    @What Have The Romans Ever Done for Us? (formerly MarkJ):

    Atrios and Krugman cannot be right, because they’re raving liberals, and raving liberals are never right, even especially when they are.

    FTFY. The probability of getting credit for being right is directly proportional to the fraction of the establishment that was also right.

  38. 38
    Mnemosyne says:

    @Halcyan:

    There wasn’t much else they could do once the numbers started rolling in. The only other option would be to disconnect the phone and quietly disappear into the night.

  39. 39
    BGinCHI says:

    @Pooh: Of course a lot of people are hysterical about how it will wreck the economy, as though it were going to be in circulation in some form or fashion.

  40. 40
    scav says:

    and having a paying job at all in Greece at this point is not punishment enough, when economic innocents are going without them. Unpaid, no govt provided tools might be more just.

  41. 41
    Odie Hugh Manatee says:

    @Emma:

    As nice as that sounds I think we need to go with some rusty portable power tools.

    With lots of spare battery packs.

  42. 42
    dollared says:

    @jayjaybear: Wow. Will steal that.

  43. 43
    Roger Moore says:

    @Gex:

    Further, we don’t muck with economies that are running normally.

    That’s not really true. We make government spending decisions all the time when the economy is good. If anything, that’s exactly what the problem is. Most of our data about the appropriate value to use for an economic multiplier is based on government spending when the economy is close to full employment, because that’s where our economies spend most of their time. The big mistake was assuming that the full employment value was still valid for liquidity trap economics.

  44. 44
    SatanicPanic says:

    But when I’m sitting around the kitchen table putting food on my family I don’t get to print trillion dollar coins!

  45. 45
    Omnes Omnibus says:

    @SatanicPanic: If you pulled yourself up by your bootstraps, you could. Fucking moocher.

  46. 46
    Publius39 says:

    @SatanicPanic: You could always barter with the companies over your debts. I’m quite sure AT&T has some pay with a chicken provision on their billing statement. Perhaps you haven’t looked hard enough at it.

  47. 47
    Roger Moore says:

    @SatanicPanic:

    sitting around the kitchen table putting food on my family

    Do you work at a body sushi restaurant?

  48. 48
    SatanicPanic says:

    @Omnes Omnibus: You’re right. I will be selling commemorative coins from the back of my Ford Ranger if anyone needs me.

  49. 49
    mdblanche says:

    The IMF, on the other hand, solemnly advised the nations of Europe coming out of the financial crisis to raise taxes and wind back government spending.

    President Obama’s failure to do this by not going over the fiscal cliff and staying there just goes to show he’s not a True Progressive (TM).

    Finally, it is worth emphasizing that deciding on the appropriate stance of fiscal policy requires much more than an assessment regarding the size of short-term fiscal multipliers. Thus, our results should not be construed as arguing for any specific fiscal policy stance in any specific country. In particular, the results do not imply that fiscal consolidation is undesirable. Virtually all advanced economies face the challenge of fiscal adjustment in response to elevated government debt levels and future pressures on public finances from demographic change. The short-term effects of fiscal policy on economic activity are only one of the many factors that need to be considered in determining the appropriate pace of fiscal consolidation for any single country.

    Remember, the important thing isn’t to get your economy growing faster, the important thing is to reduce your deficit. Reducing your deficit is so important it doesn’t even matter if your deficit reduction strategy somehow makes it bigger instead.

  50. 50
    scav says:

    @SatanicPanic:
    Of course you don’t! You’re too busy hitting the streets and finding a lower paying job and insisting your little Nancy give back some of that food mascara to offset the cost of jetting Jimmy to the emergency room for a liver transplant.

  51. 51
    Mandalay says:

    @Yutsano:

    It looks like Argentina and Iceland both got this right. They basically told the bankstahs to pound sand while they rebuilt their economies on their own.

    Iceland yes, Argentina not so much. Argentina’s economy is not doing well, and all the numbers coming from the government are lies. OTOH, Kirchner tells EVERYONE to go pound sand, so every now and again she has to be right.

    p.s. Nice story about her here:

    Despite tensions with the UK over the Falkland Islands, Argentine President Cristina Kirchner has chartered a British private jet for a four-nation tour amid fears her official aircraft could be seized in a debt dispute, the government said Monday.

    http://www.france24.com/en/201.....bt-seizure
    Britain to Argentina’s rescue! The woman is shameless.

  52. 52
    Roger Moore says:

    @SatanicPanic:

    I don’t get to print trillion dollar coins!

    You can if you really want to. It wouldn’t be strictly legal, but a true Galtian genius wouldn’t let silly government regulations stop him from doing what needs to be done.

  53. 53
    Lizzy L says:

    @David Hunt:
    Actually, it’s Charles Pierce who says that, to whit: “Fk the deficit. People got no jobs. People got no money.” And yeah. But hell, all of the nice rich people Olivier Blanchard knows don’t need to work because they have money.

    They have your money, and your neighbor’s money, and your neighborhood’s money, and your country’s money.

  54. 54
    SatanicPanic says:

    @scav: I resent that. Jimmy is doing just fine sweeping chimneys. You’ve never seen a healthier boy in your life.

  55. 55
    BGinCHI says:

    Has the Fed made a peep about this?

    Has Bernanke said anything about the Platinum Coin Gambit?

  56. 56
    mdblanche says:

    @Mandalay: I have to wonder if Kirchner and Cameron have an understanding to do a bit of saber-rattling over the Falklands whenever one or more of them needs a distraction from bad economic news.

  57. 57
    Omnes Omnibus says:

    @SatanicPanic: I thought that was an emaciated spider monkey.

  58. 58
    Brachiator says:

    @Roger Moore:

    RE: I don’t get to print trillion dollar coins!

    You can if you really want to. It wouldn’t be strictly legal, but a true Galtian genius wouldn’t let silly government regulations stop him from doing what needs to be done.

    I hear they are rolling out trillion dollar coins by the tuckload, using 3D printers, at the CES show in Vegas.

    Maybe we need something more like the Stone Money of Yap.

  59. 59
    SatanicPanic says:

    @Roger Moore: It’s tough work getting my micronation started, plus I want all of my currency to be backed by chickens as Publius39 so helpfully suggested.

  60. 60
    Baud says:

    @BGinCHI:

    Has Bernanke said anything about the Platinum Coin Gambit?

    If they go that route, it’ll be at the very last minute. Announce it too early, and it let’s the GOP off the hook.

  61. 61
    Gex says:

    @Roger Moore: Fair enough. I think I mean at this scale. We tinker constantly. We aren’t tinkering now, it seems bigger than that. But point taken.

  62. 62
    Gex says:

    @SatanicPanic: Yes, but you, just like the government, can just refuse to pay your bills and your cash flow problem fixes itself!

  63. 63
    scav says:

    @Gex: Still, I think the IMF doesn’t tinker much with generally healthy economies so they they should pay more attention to what happens under these ‘non-normal’ conditions.

  64. 64
    Mike in NC says:

    Olivier Blanchard should be forced to spend the next three years cleaning toilets in Athens for minimum wage, while wearing a sign that says “I am personally responsible for your misery”. Fuck him.

    And per the Monty Python skit, after a year they could give him a brush.

  65. 65
    cathyx says:

    We will never ever ever mint a platinum coin worth a trillion dollars. Congress loves using the national debt as a bargaining chip.

  66. 66
  67. 67
    Roger Moore says:

    @scav:
    That seems like a much stronger angle. The IMF has less excuse than anyone for not knowing what austerity does to a sick economy, since they’ve been advising exactly that treatment for sick economies for a long time. That they treat this as some kind of surprise is a sign of incompetence, willful blindness, or flat-out lying.

  68. 68
    Omnes Omnibus says:

    @cathyx: Congress doesn’t really have a say in whether or not the coin gets minted.

  69. 69
    scav says:

    Oh! Can Olivier Blanchard possibly be the legendary boob SP&T promised us? Must admit, although a creditable contender, I was slightly hoping for better.

  70. 70
    pluege says:

    so does this make Krugman is made king of world, and obama and every Vichy Dem shoves their republicanism right up their own arses, and every republican/conservative, tea party A-hole, and corporate media pundit and so-called journalist is laughed at, disparaged, and denigrated for a generation?

    OF COURSE NOT…in repug nation, more of the same please because we’re both stupid as Hell and maliciously insidious at the same time.

  71. 71
    antic hue says:

    Olivier Blanchard should be forced to spend the next three years cleaning toilets in Athens for minimum wage

    That would take away a job for a Greek who needs it. More like he should have every penny he made as IMF economist given to some poor Greek families so they can help drive the economy back up.

  72. 72
    aimai says:

    @Forum Transmitted Disease:

    Why would you ever want to cut growth when you are in a recession? Even the “cut 1 dollar (to please the bankers) and that will only produce half as much loss as you might think” sounds nuts.

    aimai

  73. 73
    Mike G says:

    Blanchard fucked up millions of lives while coincidentally making money for a small coterie of insiders. He’ll suffer as many ill consequences for his “failure” as the war criminals of the Bush Assministration, i.e. none.

  74. 74
    aimai says:

    @Forum Transmitted Disease:

    Why would you ever want to cut growth when you are in a recession? Even the “cut 1 dollar (to please the bankers) and that will only produce half as much loss as you might think” sounds nuts.

    aimai

  75. 75
    Emma says:

    @Odie Hugh Manatee: I can sign on to that.

  76. 76
    Tonal Crow says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢.

    So, why would that make austerity OK? The professed purpose is, after all, to *increase* economic growth by stimulating the Confidence Fairy.

  77. 77
    cathyx says:

    @Omnes Omnibus: Ok. But that doesn’t change my opinion that this will, never. happen.

  78. 78
    Odie Hugh Manatee says:

    @Roger Moore:

    Hmmm, I wonder where they keep the tuna.

  79. 79
    Omnes Omnibus says:

    @cathyx: You may well be right. In my view, though, the coin isn’t the point. As long as there is a clean debt ceiling bill and this silly brinksmanship over it stops, I don’t really care what gets us there.

  80. 80
    Viva BrisVegas says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢. But the times weren’t normal.

    If only there was a school of economic theory that had considered this and formulated some appropriate responses for when times aren’t normal.

    Maybe one that came out of the bumbled reponses to the Great Depression and that later lead to a great post war boom.

    I can’t think of one, Keynes you?

  81. 81
    Villago Delenda Est says:

    @What Have The Romans Ever Done for Us? (formerly MarkJ):

    For another example of how raving liberals are never right, even when they are, see the deserting coward’s excellent adventure in Mesopotamia.

  82. 82
    Jay S says:

    @aimai:

    Why would you ever want to cut growth when you are in a recession?

    First of all they were cutting budgets not growth. They firmly believed that cutting budgets and clapping louder would bring the confidence fairy to sprinkle growth dust instead of crippling interest.

  83. 83
    Villago Delenda Est says:

    @Viva BrisVegas:

    The great danger of the postwar economic boon was that the economic elites were in severe danger of no longer being elite.

    So, the idea was, kill this shit before we’re just ordinary shmoes!

  84. 84
    Suffern ACE says:

    @Roger Moore: yep. It’s just that when THOSE people complain about it, we don’t have to take their complaints seriously, for they didn’t study at our good universities and don’t have the title of Director.

  85. 85
    J. Michael Neal says:

    @aimai: Because you do have to pay that dollar back at some point. If the multiplier is as low as 0.5, a pretty good case can be made that the long-term cost of the extra debt isn’t justified by the short-term gain, even in a recession. I think any reasonable person would agree that even under these conditions there comes a point at which the long-term cost of stimulus becomes so great that it’s a bad idea. The question is where that point is.

  86. 86
    Fax Paladin says:

    @Brachiator: Or the Triganic Pu.

  87. 87
    Anthony says:

    All y’all should probably look up the people you want to condemn so harshly…

    Blanchard’s original paper only made conclusions about the size of the government spending multiplier. And he’s argued against austerity for at least as long as I remember.

    http://krugman.blogs.nytimes.c.....y-serious/

    The IMF as a whole was pretty skeptical of austerity plan coming out of Brussels too.

  88. 88
    Another Halocene Human says:

    @Yutsano: Must laugh maniacally now.

  89. 89
    Another Halocene Human says:

    @scav: oh shit, thats a doctor saying don’t blame us, we never tested the medicine on sick people level stupidity.

    No, it’s more like the doctor saying, oh, sure, we had a boring generic medicine that was proven to work but we decided to try NewCrapamine on you because the pharma rep offered us p****.

  90. 90
    Another Halocene Human says:

    @ALurkerHere:

    They have been advocating austerity for more than 20 years in developing countries which led to similar results in those countries…(google “Structural Adjustment Programs”).Of course it was easier go get away with their nonsense then because no one except those affected were really paying attention to the impact these programs had on the health, education and social welfare in these countries was white.

    fix’d.

  91. 91
    Another Halocene Human says:

    @What Have The Romans Ever Done for Us? (formerly MarkJ): Atrios and Krugman cannot be right, because they’re raving liberals, and raving liberals are never right, even when they are.

    A stopped liberal is right twice a day!! Argle bargle, and our plans WOULD have worked if it hadn’t been for those meddling kids!

    Now smile HARDER, comrades!

  92. 92
    Another Halocene Human says:

    @Fax Paladin: “From this basic premise it is very simple to prove that the Galactibanks are also the product of a deranged imagination.”

  93. 93
    Another Halocene Human says:

    @Yutsano: Greece had to eat it because of the Euro.

    I detect a fine GoldManSachsian hand in all this, myself.

    eta: wtf, wp?

  94. 94
    Another Halocene Human says:

    @Pooh: To be exceedingly fair to the IMF, deficit spending is more problematic in countries that don’t host the world’s standard currency and credit rating (oops?)

    So is getting rid of protective trade barriers on key industries, privatizing nationalized industries to vulture capitalists, allowing predatory practices by foreign-based companies, etc, etc.

    For example, US might get away with dropping trade barriers as a military and economic strategy (not purely one or the other), but a tiny country might not survive getting dumped with cheapo US grain or cheapo Chinese batteries.

  95. 95
    Another Halocene Human says:

    @cat: The majority of papers and evidence point to the fact government spending has a positive multiplier. Only the most in the tank economists believe the gov’t multiplier is 1.0 or lower.

    Given that most of economics (not all, let me defend my “friends” who study the effects of networks on pricing, which is a nice bit of super obscure and difficult mathematical modeling that corresponds very tightly to real-world micro-economics, not to mention traffic management and other applications, computer chip building, etc) is a bunch of airy-fairy theorizing masquerading as an empirical science, the blunt empiricism of Keynesianism WORKING and Chicago School methods FAILING REPEATEDLY ought to have made such notions rather incontrovertible within the field, but, as you know, never let your facts get in the way of a beautiful theory.

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    Another Halocene Human says:

    @Roger Moore: Why choose just one?

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    Villago Delenda Est says:

    @Another Halocene Human:

    the blunt empiricism of Keynesianism WORKING and Chicago School methods FAILING REPEATEDLY ought to have made such notions rather incontrovertible within the field, but, as you know, never let your facts get in the way of a beautiful theory.

    Ideological correctness is infinitely more important than what actually works.

    See Soviet Union for prime example of this.

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    Another Halocene Human says:

    His defence is that in normal times they would have got it right. In normal times a budget cut of $1 would have cut economic growth by 50¢.

    You’re supposed to cut spending during good times (no, not cut taxes dipshits–cut spending–or raise taxes) according to Keynes! That’s like the first week in the first intro class on econ when they teach you the Keynesian Koolaid that our Austrian Überlords have made obsolete. WHY IS THIS NOW A REVELATION? IS IT BECAUSE OUR CAPEZAS ARE JAMMED FAR UP OUR POSTERIORS TO THE POINT WE SEE DAYLIGHT?!

    ETA: Well, hell if I haven’t second-posted all over this thread with my impertinant emotions and not reading other people’s posts and shit. @Viva BrisVegas:

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    Another Halocene Human says:

    @Villago Delenda Est: Ideological correctness is infinitely more important than what actually works.

    See Soviet Union for prime example of this.

    Communism cannot be failed. It can only be failed. If only they could have eliminated the counter-revolutionary elements and instituted right thinking, the natural vigor of the proletariat would have swept away the vestiges of capitalist imperialist domination!

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    Baud says:

    @Another Halocene Human:

    No matter how hard you try, there is always one counter-revolutionary element you miss. C’est la vie.

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    Another Halocene Human says:

    @J. Michael Neal: Really? I mean a lot of great stuff has been built on the backs off all the creditors going broke.

    With a government you can sunset the day of reckoning off into oblivion, greating increasing the scope of what can be done (and realistically seeing the costs be paid off by the dividends of the project).

    Sure, Japan put themselves into a hole covering bad debt, but it was bad debt papering over shitty construction fraud and shit that didn’t generate anything positive for the economy as a whole or even socially.

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    Another Halocene Human says:

    @Baud: Quote the Grand Inquisitor of the Doctrine of the Faith Bloody Mary Robespierre Louis XVIII Pol Pot my dipshit “down with the revolution, man” friends on Facebook

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    Oregon Guy says:

    Sure, Japan put themselves into a hole covering bad debt, but it was bad debt papering over shitty construction fraud and shit that didn’t generate anything positive for the economy as a whole or even socially.

    Not sure I agree with this. My position is purely anecdotal, but I’ve been living in Japan for a while now and the massive infrastructural spending spree (by US standards anyway) continues apace. And they have a lower unemployment and poverty rate than we do.

    And the dollar is already garbage compared to the yen at Y85 = $1US.

    And they have SUPERTRAINS!

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    The Bobs says:

    @Oregon Guy: Shitty construction fraud now in charge of Fukushima clean up.

    Also related, South Korea went full Keynesian stimulus after the economic crises in 2008. They now have 2.9% unemployment. Sorry, no link, but you can look up Krugman and others.

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    AA+ Bonds says:

    As Blanchard put it, his forecasters “significantly underestimated the increase in unemployment and the decline in private consumption and investment associated with fiscal consolidation”.

    Ha ha! Our politicians are criminals for not putting these fucks in jail! Laugh riot! Arrest and jail all capitalist pigs!

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    Narcissus says:

    The IMF is evil.

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    @Anthony:

    Blanchard has certainly made various statements questioning austerity. However, considering the IMF, of which he has been the chief economist since 2008, appears to be all for austerity conditionalities (see Europe, then, and Egypt, right now), he seems to have been singularly ineffective in changing IMF policy for the better.

    http://www.newser.com/article/.....sures.html

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    Sly says:

    The bottom line is that, for a certain class of economic actors, the 1970s was the worst thing to happen to humanity since smallpox and every financial institution in the world needed to guard against a recurrence of high-inflation recessions. Thus fiscal policy had to be entirely abandoned as a means of impacting the business cycle. In other words, keep your budgets in top shape and let the hawks in the central banks to keep inflation low so we never go through that nightmare again. Oh, and we can never forgive the Keynesians for getting it wrong, because they didn’t think that high inflation could accompany deep recessions solely because it never happened before.

    The problem is that fiscal policy (and monetary policy, for that matter) are only weak in the face of stagflation because stagflation always arises from big fluctuations in aggregate supply, specifically in raw industrial inputs and energy commodities, combined with a persistent increase in demand. The Great Recession was never, in the words of Milton Friedman, “too much money chasing after too few goods,” but too little money chasing after too many goods. That’s what happens there’s a demand shock like… oh, I don’t know… a major downturn in home prices.

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    NorthLeft12 says:

    @Halcyan: Agree 100%. The usual story we would hear is one of the following:

    A) Give it time. It will work in another [insert time period here].

    B) You need to do more of it. ie. Surge!!

    C) It is working. You just can’t tell because the liberal media is not reporting the good news as they are focusing on the noisy, dirty, unemployed, poor people.

    D) .

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    What Have The Romans Ever Done for Us? (formerly MarkJ) says:

    @Roger Moore: Thanks for the improvement.

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    Ryan says:

    So essentially, they’re saying they didn’t speed up as much as they were expecting since they weren’t hitting the brake hard enough.

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