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Politics : View from the Center and Left
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To: Mary Cluney who wrote (178331)12/30/2011 3:09:48 PM
From: Steve Lokness  Read Replies (2) of 543029
 
Here's where Keynes and Krugman are wrong; especially when they rely on the one blip as proof that they are right and everyone else is wrong.

To follow their logic, that means we should have kept stimulating in 1937 and furthermore, most now suggest that it wasn't the stimulus that was the end of the Depression - but rather the further stimulus of the war. So to get to the end of the Depression, we needed the added stimulus of a World War. Sooooo, considering that Krugman thinks of this keynesian spending as a solution - when it took 15 years is just a little weird. We're only three years into our current mess and we're doing better than that!

But here's the thing they miss; for Keynesian to be really fairly used as a predictive tool, we have to have an end point for it's success for the Depression. By that I mean we have to consider what we lose when we pay alllllll that stimulus money back. To use the example of the last Depression, how did we pay that investment for a decade of stimulus and then another almost 5 years of war? .........We got that dividend when we supplied the world with goods BECAUSE we were the only country that didn't have the holy crap bombed out of them. Keynesian - kind of worked - because of a once in a lifetime event (well even less than that really). That will NOT happen again.

ONLY if people somehow believe we don't have to pay the stimulus money back - is it fair to consider it in only the first half when there is a benefit - and not the second half when there is a cost. That cost also of course has to include massive charges for interest payments and it has to consider lost opportunity in the future when people are paying for the cost of that borrowed money instead of the benefit of investing in the present. Krugman never addresses this second part.
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