Re: Paul Krugman on the myths of austerity

The UK is skirting a consumer recession if not an outright one, the USA is actually in a far worse state that the headline figures suggest and tax rises 2011 may well push it into recession if not outright deflation.
World Bankers are trying to hide the fact that a free lunch is only obtained by ignorance.
Reply to
js.b1
*+-Actually tax rises will make things interesting in 2011.
Oil and commodity prices, esp via China, are more likely to cause a second dip.
The entire supply-side idea was to offset this oil "tax" with a tax cut, balanced by a Tibergen-dichotomous (1971) tightening of money. (See Mundell, Princeton Essays in Intl Fnc, Dollar & Mix 1971).
Except here the dichotomy would instead be to provide liquidity via quantitiative easing mop up of troubled assets by patient capital, but prevent inflation by removing sources of corruption and waste and inflexible markets. (See Bernancke & Reinhart AER 2004 on Japanese ZIRP).
- = - Vasos Panagiotopoulos, Columbia'81+, Reagan, Mozart, Pindus, BioStrategist
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Reply to
vjp2.at
The problem is how do you prevent inflation caused by devaluation? UK is almost certain to use devaluation & resulting inflation to migrate debt to the past; indeed the figures from Lib-Con confirm it. USA is facing a lot of debt refinancing in the next 5yrs and is moving away from index linked debt.
You know, we thought physicists were bad - "just a few billion more and it will work", "but what does it do?". Then they decided to make economics king... "just a few trillion more and it will work", "but what do those dropping off the unemployment count registers do?".
Reply to
js.b1
Heh, still trying to find the recipe for rock soup?
Anyway, explain the economic boom of the fifties and sixties when the federal income tax rate was 70-90% and capgains tax was 50%.
Reply to
liberal
Tax increases on the rich have _NEVER_ had any adverse effect on the real economy (the prosperity of the middle class).
And the intelligent people have been doing all they can do to promote and encourage alternative energy. At this point, the cost of energy will be rising if middle class prosperity is the goal. The sensible people are concerned with managing this problem with an eye toward providing for the general welfare. Those who worship the "market god" will be trying to maximize disruptions so as to enhance the returns from the gambling casino.
That is a marvelous bit of sophistry.
A certain amount of truth in this particular proposition. It is to bail out the crooks and gamblers using NEW money as opposed to BORROWED money. There should have been NO appropriations and NO tax implications of these bailouts. There should also have been only tax implications on the wealthy for the purpose of stimulus. The gamblers and the hucksters (Republicans) caused the devaluation of the currency and the FED and the government is attempting to foist this cost on the people that DID NOT CAUSE IT. In fighting the inflation monster the Fed will be helping the rich at the expense of the middle class.
Reply to
Michael Coburn
Devaluation has only a very minor effect on inflation. If money supply is where it should be, inflation would be controlled. Again, moderate inflation is actually good for many households as it essentially reduces their outstanding debts but retains real asset prices. What is most important here is growth combined with the appropriate money supply. Although some imported goods would increase in price, they would be priced out for many consumers and replaced by local/other lower priced ones.
I am not sure that I understand this but I would not compare physics to economics!!
Reply to
ADR
bail
Be aware of the fine art of scapegoating - a liberal habit. It wasn't the FED or the Republicans who forced idiotic mortgage bankers into offering sub-prime loans to even more idiotic home buyers. Is it anyone's fault other than your own that you are profligate, irresponsible and greedy?
Reply to
J. B.

The fine art of scapegoating is an old conservative ploy and you are doing it here just fine.
There was nothing wrong with subprime mortgages. Nothing. Asking the banks to lend at higher interest to minorities with somewhat troubled credit histories was appropriate. What was wrong was irresponsible mortgages, when they were issued to persons who never had the capability of paying. The only reason these mortgages were put together was in order to derivatize and sell them as quickly as possible. This is one more of the typical conservative lies.
Reply to
ADR
Actually, the capital gains tax was:
capped at 25% during the 50's. Half of Capital gains were excluded from income taxation. So moderate income investors in lower tax brackets got a very good deal on capital gains taxation and the rich people had to pay a MAXIMUM of 25% on such gains.
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----------------------- . In 2005 the median family earned an estimated $67,839. By comparison, in 1955 the median family earned $4,919 (worth about $35,857 in 2005 dollars).
The marginal tax rate on ordinary income of $4,919 in 1955 was 20%. The tax on any capital gains was therefore 10%. Assuming the family income top be 5% from capital gains then the actual tax rate on the family was minimally less than 20%.
If the rich were to derive all their income from investing than they too would realize a tax rate of 20%.
===================================================== In the 1964 the Kennedy tax cuts gave the rich people a break by lowering the income tax on interest and rent income from 91% t0 70% while leaving capital gains taxation as it was. In the 1970's capital gains rates were increased and taxes on EARNED INCOME were capped at 50%. This seems to have created "stagflation".
IN 1979 capital gains taxes were reduced to 28% from their high of 39% in 1976. A VERY GOOD MOVE IF REAL ESTATE WOULD NOT HAVE BEEN GRANTED CAPITAL GAINS STATUS. LAND IS _NOT_ CAPITAL. FACTORIES ARE.
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BUT THE REAL STORY IS THE ABANDONMENT OF THE GOLD STANDARD IN 1973 THAT FLOATED THE US CURRENCY AND EMPOWERED TRUE CHARTALISM (ACTUAL FIAT MONEY). FIAT MONEY IS FINE SO LONG AS THE TAX SYSTEM IS USED TO RECOVER THE SPENT MONEY SO AS TO CONTROL INFLATION. AT PRESENT WE HAVE A PROBLEM WITH DEFLATION. BORROWING FROM THE PRIVATE SECTOR AND THE FOREIGN SECTOR IS PRETTY STUPID.
Reply to
Michael Coburn
It is the _FAULT_ of morons who voted for the deregulating freepers of the Republican persuasion and the fault of those who continue to ignore economics and focus on some sort of protestant work ethic and a religious fixation on _fake_ capitalism.
MONEY IS NOT CAPITAL. FACTORIES, ROADS, BRIDES, TRUCKS, TRAINS, AND AREOPLANES ARE CAPITAL.
Reply to
Michael Coburn


The fine art of scapegoating is an old conservative ploy and you are doing it here just fine.
There was nothing wrong with subprime mortgages. Nothing. Asking the banks to lend at higher interest to minorities with somewhat troubled credit histories was appropriate. What was wrong was irresponsible mortgages, when they were issued to persons who never had the capability of paying. The only reason these mortgages were put together was in order to derivatize and sell them as quickly as possible. This is one more of the typical conservative lies.
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Whether you or the PP are right about "the process" neither makes it the fault of the politicians which WAS the PP's point that you were replying to
tim
Reply to
tim....

Do you have a breakdown of the income sources for the rich?
I looked at
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, but it's $200,000 income limit seems low.
Reply to
Ron Peterson
It's astonishing how you can be so beyond being clueless. Devaluation and inflation are inexorably linked, inflation is anathema for pension plans and buying power, what imported goods can Greece supply domestically? Feta cheese and olive oil? What about mobile phones, computers, washing machines and the the list goes on?
WTF are you blabbering about again?
Reply to
Nashton
LOL
LOL
Nothing. Asking the
They weren't paying higher interest, clueless. The higher interest kicked in after a few years and made it impossible for these people to make their minimum payments.
What was wrong was irresponsible
The ones you just described.
The only reason these mortgages were put
LOL
Reply to
Nashton
Are you as inane as your comments??? I would suggest that you read the the "Countrywide" prosecutions in the US as a primer of what happened. Learning a thing or two is basic before entering comments. Why would you want to enter a comment if you do not know what is actually going on?
The subprime loans were always a feature of the US lending landscape. If you did not have excellent credit (credit score < 720 or thereabouts), you got a subprime loan. This was going on for decades!!! But the loans were issued according to specific guidelines on contribution to equity (one had to supply 20% of the value of the home as a down payment) and income (the monthly payment should not have been higher than 40% of gross pay). Hundreds of thousands of people (including members of my family) had gotten subprime loans for decades before the onset of totally irresponsible lending (about 2004 - 2005). Yes, they paid higher interest than persons with better credit histories, but it was a matter of choice.
During the period of reckless lending, mortgage units fudged both the rules on equity and income. In fact, in many of the applications, loan officers enter fake income to allow qualification and quality departments did not follow up. This is the core of most of the indictments. The banks were very interested in getting as many loans as possible because they did not stay in their books. They were securitized and derivatized.
The whole issue was covered by the press under the general umbrella of "subprime loans" simply because most of the reckless lending involved poor people with checkered credit histories who did get subprime rates but would not have been approved at all under the guidelines mentioned above before the real estate bubble of 2004 - 2006.
At least, learn the basics before laughing stupidly again.
Reply to
ADR
That would be appropriate as most of his money is derived from capital gains. It is not really that uncommon for CEOs of many successful companies to award themselves only $1.00 in salary and obtain most of their compensation from sales of stock awarded to them by the board. In fact, virtually all CEOs with multimillion compensation packages receive most of their money from capital gains with their salary never exceeding $1,000,000.
Reply to
ADR
Nashton writes:
As so many people found that they could not afford the increased minimum payments when the interest rates rose, would it not have been better for the mortgage lenders, rather than to foreclose en-mass and crash the whole financial system, to defer the interest rate rise and allow the lenders to continue with the payments they were already making (and could afford)?
Reply to
Graham Murray

That would merely have postponed the inevitable and perhaps made things worse. Remember that hand in hand with realising that the borrowers could not afford the interest, goes the realisation that they would never be able to repay the principal either.
AIUI many of these were low-start loans, which meant that the borrowers only had to pay interest at below normal rate for the first year or two, and probably no principal either, and after this introductory period the normal payments would then kick in. Their plan was to sell up before that happened, by which time the property would have risen in value, probably by more than the puny interest they had paid during the initial phase. So they would have had a free lunch (which was all they could ever have afforded in the first place). No-one thought that free lunches couldn't go on forever.
Reply to
Ronald Raygun

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