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Politics : View from the Center and Left
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To: bentway who wrote (210942)12/9/2012 10:20:20 AM
From: Steve Lokness1 Recommendation  Read Replies (1) of 541627
 
Bentway; I think the biggest misperception - or maybe difference is a better word - is that Austrian school tells you what to do to not get into an economic collapse while Krugmans whole raisen d'etre is to look for a way out once you are already in collapse. One is preventive and the other reactionary. Thus during the buildup to the housing boom Krugman was silent while Austrians were warning. From your wikedpia site on Austrain; ....... allocated, that the economic " boom-bust cycle" is caused by an artificial and unsustainable expansion of credit by the banks, and that this expansion causes businesses to make bad investment decisions which, in turn, necessarily cause major economic dislocation

Now you can argue that there wasn't an expansion of credit in the housing bubble if you want - but there isn't a serious thinker today on the subject that would agree. That is EXACTLY what happened during the Depression too, except the expansion of credit was soaked up by rapid overleveraging in stocks instead of houses. And the first bulleted item form the Austrian definition; .... The belief that economic events are best explained by a deductive study of human action

Here too is where Krugmanism fails. Who amongst us wasn't caught up in the housing boom? That is where the nature of the human as a mass influence on the economy was so evident. To deny the human role in the economic problems is to stick your head in the sand (Krugman not you). Just as the wave of people jumped on the housing ship of paradise, so did the rats abandon the ship as it went down. Krugman denies this and thinks if you throw enough money at people they will start spending again - but that doesn't happen very easily does it? Austrians again in a position of trying to warn, tell us that you can't force people to borrow more money. That is why interest rates are so low. Everyone pretends as if the "slow" fixes to the economy through stimulus spending has been a success and that even more stimulus would have been even more successful. BUT, we are not at the end game. Like children we pretend we can get this money and there is no downside. That's what Krugman preaches isn't it? There are even those here now who say we don't have to pay the money back - as if that is all right! Do we have no morality any more? We can borrow and spend forever and never pay it back? We can just print more? Well I guess we are coming up on Christmas.
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