Paul Krugman on why austerity is a recipe for ten more years of a Depression.

[nebris]

By John Aravosis on 5/28/2012 07:00:00 PM

Krugman says we're still in a classic Depression.

Paul Krugman on Bill Maher:
We are in a depression. We are actually in a classic depression. A depression is when nobody wants to spend. Everybody wants to pay down their debt at the same time. Everybody is trying to pull back, either because they got too

Comments

[sinistertim101]

Yep

The problem is debt even though I get flamed here all the time, but it is so obvious. You can't spend your way out of debt as the recession is caused by debt in the first place. Krugman has been discredited so many times. The economy moves along only as long as you can still spend other people's money. When its gone its payback time and everything contracts with it.

Banks are not loaning not because they are evil but because they are over extended buying treasury bonds in countries like Greece.

Sadly, we spend as much money GDP wise today as we do during WW2. We can't afford to spend anymore and even with all that spending we still can't get out of it because the debt bubble is so huge.

Until the banks start seeing their bonds mature everyone will be poorer. We can't get out of it unless the government prints money and we end up like Weimar Germany. Don't like it? Then stop voting for politicians who spend like drunken sailors. This includes Japan, Italy, Greece, Spain, US, etc.

It is just reality and there is nothing we can do about it.

Here is more info on Krugman

[sinistertim101]

[nebris]

Fuck the banks and the bankers. They got us into the mess and they each need a bullet in the back of the skull and a shallow grave...as does anyone who supports them.

~M~

[sinistertim101]

We discussed this before.

Without banks there is no economy. Lines of credit are needed to make payroll, suppliers, and other things to keep the doors open at your business.

The banks are not evil. They are loaning to only the best qualified because of the lack of funds. Countries are a safer bet than people or businesses. They do not declare chapter 11 bankruptcies, they last for centuries and do not die, they have productive capacities and so on.

This is the result of excess debt and as long as these countries keep auctioning off bonds we all get screwed. That is the point of austerity.

Eventually they will have to loan to us and employers again. Then employers can hire and expand. Especially small business who actually is making money but these cheap banks wont loan the capital for a franchise.

But why do that when you can loan to Uncle Sam where it is in the US Constitution that he can't default?

Do not argue we do not need banks. That is not practical.

[nebris]

We certainly do not need private banks. And given how they DESTROYED OVER FOURTEEN TRILLION DOLLARS OF AMERICA'S WEALTH just three and half years ago, we'd clearly be better off without any of them.

But even though I wrote that in CAPS, I suspect you'll dismiss it because, as I have said before, you're either a paid Corporate shill, or just a drunken sociopath who only cares about his fucking T-Bills.

~M~

...and you're still ducking the hard facts..coward..

[sinistertim101]

I have never met anyone so ignorant before and is PROUD of it.

Why do you even belong to this community then? I wont bother debating you anymore because you have never taken a finance course, or certainly economics, ran a business, or had an even basic understanding how the world runs.

In your perfect Utopia explain how you can buy a car ... assuming 100% down? Banks are evil remember?

I am sure the Honda (or whomever) will not hesitate giving $200,000 worth of cars out to Bob( The dealer) based on his word and hope that he *might* sell all of them. Unless Honda receives 100% cash Bob is out of business. No one will bother to supply him cars. A line of credit from the bank is how Bob pays for his cars. If they all sell within 60 days the bank keeps 5% interest and you go home with a car.

In reality he probably has other terms like 3-60-10 which if I recall from accounting is 3% down for 60 days with 10% annual interest but I could be backwards as it has been a few years in edition to the line of credit. You see Nebris, if the banks go under like in 2008 Bob can not pay back the 3-60-10 in 60 days even if he sells TONS of cars! Finance 101. An accountant can correct me again as it has been 3 years since I have taken these college level courses on the numbering but you get the idea.

I used the car dealership as the simplest analogy. When you buy a product only a small fraction goes towards profits. Walmart only allows 2% to 4% profit per item. It is physically impossible to pay your bills with profit margins like that. You need 96% to 98% of the costs upfront before any product is even sold! Banks as much as you hate them make this possible.

Does that make me this evil sociopathic man? No, its life and I am a realist. I am also passionate about austerity as I worry over my own future. You saw the graph yesterday with debt in GDP red? Compare it to 1930? It is debt.

You have a closed mind and are ideological hellbent on your worldviews and filled with anger and rage. Why? Maybe you are upset you are not wealthy? That shouldn't be anyone else's problem as I am surely not wealthy.

People and governments are just as evil if not worse than the banks and they are just following their word when taking back what is there's. Humans are greedy and I know tragedy with former inlaws who bought 1 million homes bet against their $500,000 retirement savings just to show their aunt how big of a house they have. They are now living with their 80 year mother with no savings unemployed. OUCH. Whose fault was that? People spend way too much money on cars too and do not use their brains. Your parents grew up in the great depression and never did these things or made these risky loans. The fact is people bought these homes to be rich as an investment.

Now go away before I ask the moderators to ban you from this community. I never call people names and you are just making yourself look bad.

Corporatist Sociopath

[nebris]

You're a sociopath because all you see is your so-called 'economics' and willfully refuse to see the human suffering that it causes. All you care about is your own fiscal outcome and if such means millions go homeless and starve, then so be it.

Of course that's your delusion. You're really just some sorry assed White Boy from the Middle Class who sees that the Privilege that he was promised is not going to be delivered because The System is going to fuck you over too. And all the bowing and scraping to it's Idols is not going to change that one bit.

How do I know that? Because you're here, wasting your time in this lil ol' LJ Comm, arguing endlessly with a crazy old man on Disability, and NOT out there Making It. You're just another loser with a big month.

Have a nice day. =D

~M~

Now go away before I ask the moderators to ban you from this community.

[nebris]

Knock yourself out. If you do talk to C, telling him I was trolling another Austrian School wannabe. ;)

~M~

[nebris]

This is a quote from an LJ Friend who is also a lawyer in two states:

"I especially <3 how he's all "clearly you've never run a business," and then all "businesses must get lines of credit from banks or they go under."

Um. Actually, most business "lines of credit" are private deals between them and suppliers only. In his car dealership analogy, the dealer would only need that line of credit from a bank if the manufacturer did in fact require 100% down. It's the fact that manufacturers generally don't require 100% down that creates the private "send me your stuff now, I'll sell it and pay you back within an agreed-upon time" arrangement that drives most businesses that sell goods.

In the real world, the dealer would only need to approach a bank if zie couldn't actually sell the cars in time to pay back the manufacturer by the agreed-upon date. Then the dealership is In Trouble.

I don't know if you've ever run a business, Nebs, but this guy clearly has not."

More proof you're a schmuck.

~M~

Some food for thought

[brittdreams]

None of what you've written justifies the need for private banks, which is what nebris says are no longer needed. The functions that you are describing are already served by formal, direct arrangements made between buyers and suppliers. Moreover, the lack of private banks would not automatically mean that loans are no longer available to the businesses that need them. In fact, it might mean that loans are more readily available, given the reticence of private banks to lend money in the current economy.

You are a liar and a coward.

[nebris]

You are a liar and a coward. You pick and choose the posts where you can gin up some Corporatist spin and ignore those that are impossible to refute, like the latest Morgan debacle or the brutal and illegal predations of the banks and their foreclosure mills.

~M~

[peristaltor]

The economy moves along only as long as you can still spend other people's money.

And here we have the reason many might flame you. See the emboldened section? It proves you either did not understand my criticism of Krugman or willfully ignored how the economy really operates.

Banks do not spend "other people's money." That is a myth. Once you understand the reality, many other things might become clear.

[sinistertim101]

""Banks do not spend "other people's money." That is a myth. ."

?? Why don't you go to www.dictionary.com and look up what a bank is? I will give you a hint. They do not create money at all. Hmmm where does all this money they use come from? Lets think about that one when you deposit your paycheck?

Here is the gripe I have with Krugman

That is what happens when you try to pay off debt with more debt and increase the dollars in the money supply. The same resources are still scarce but now cost more dollars to consume. Your wage is falling and gas prices and health care costs are inflating up because of just that. If Krugman was right we would be in prosperity right now.

[peristaltor]

Dictionary.com is wrong. Sadly, so is the Wiki entry on Fractional Reserve Banking and Money Creation.

I'm not surprised. The party-line you quote about deposits directly becoming loans is so pervasive it's difficult to get a correct perspective.

So, "what happens when you try to pay off debt with more debt and increase the dollars in the money supply?" It's called The Economy. When the level of debt-remember, money creation-increases, times are good. When the level of lending falls, times are bad. This is not a partisan declaration, but one based on the realities of banking. Mis-understand them at your peril.

Tell you what: I usually don't post here much, but will give a few sources just for your benefit.