Quote:
Originally Posted by White Rhino
..."Those who look up to him as an economic sage should realize that the neo-Keynesian principles that led him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then."...
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That would be the long and short of it.
Krugman is too stupid to understand the concept of Interest Inflation.
The Laws of Economics set interest rates (via Supply & Demand of Credit), not Krugman, not the Federal Reserve, not Congress, not unions nor anyone else.
Artificially low interest rates for student loans are one reason the price of university tuition keeps rising well beyond the pace of Real Inflation or Natural Inflation.
Artificially low interest rates for housing is the reason why housing prices sky-rocketed...that and government interference in the housing market via government-backed mortgages.
Fixing housing is real simple: The government should get totally out of the housing business.
So, uh, who will guarantee/back the mortgages?
The Free Market will do that.
Banks/Lenders can purchase insurance for each mortgage they issue. The banks/lenders are free to pass the cost of mortgage insurance onto the buyer via fees or higher interest rates, or a combination of both.
Banks/Lenders are also free to pass the cost of mortgage insurance totally onto the buyer, meaning the buyer would have to obtain mortgage insurance before the mortgage is issued.
What kind of stipulations or conditions do you think insurance companies would put in mortgage insurance via banks/lenders? No HELCOs. No 2nd/3rd Mortgages....and if they would be permissible, then the insurers would raise insurance rates accordingly to cover the increased risk.
The majority of defaults were on 2nd/3rd Mortgages, not the primary.
As a taxpayer, how do you feel about getting raped to pay for someone's credit cards (consolidated into a 2nd Mortgage)? Or their Carnival Cruise to the Bahamas (consolidated with credit cards into a 2nd/3rd Mortgage)?
If the Federal Reserve continues to act stupidly and keep interest rates artificially low, then Congress needs to muster up the courage to eliminate the mortgage interest deduction from the Tax Code, or take other actions that will negate the artificially low interest rates, such as raising federal income taxes, or levying fees on home-buyers.
What do you suppose would happen if the idiots in Congress artificially restricted credit card interest rates to 9% or something? The prices of everything would rise....yes they would.
Not to worry, when Austerityâ„¢ comes to the US to take up residence, the government will no longer have those luxuries.
Agreeing...
Mircea
Quote:
Originally Posted by ovcatto
When the truth is Krugman wrote: To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
If the Austrians can't understand something as simple as the difference between a call for increased "household spending" and lowing interest rates to increase home buying, what the hell else to they not understand? |
Uh, there is no difference.
How do you increase household spending?
By increasing the value of homes, which gives home-owners more equity and allows them to borrow against their equity to spend by either increasing the credit limit on their HELOC or giving them the option to consolidate credit card debt into a 2nd/3rd Mortgage, thus freeing up their lines of credit for use.
Any economy that is based on home ownership and having equity to borrow against to sustain the economy is an automatic fail.
Economically...
Mircea
Quote:
Originally Posted by MTAtech
Austerians are freaking out because they realize, at some level, that they’re losing the debate.
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They're aren't losing the debate.
The issue isn't if there will Austerityâ„¢, rather the issue is when will Austerityâ„¢ happen.
Right now, you have a choice as to the austerity measures you may take and how they are implemented. You can study them to determine their effectiveness, and ease such measures into law without harming the economy.
But if you wait until Austerityâ„¢ is knocking on your door, you won't have any time or any choices, and austerity measures will be implemented haphazardly wily-nily causing economic damage.
Quote:
Originally Posted by MTAtech
For five years they've been predicting interest rates to soar;...
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That's probably due to the fact that they expected the Federal Reserve to act rationally...and it hasn't.
Quote:
Originally Posted by MTAtech
... inflation to skyrocket and the dollar to devalue -- none of which has occurred.
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Okay, so they don't know how to calculate the coefficient of absorption and don't understand the US Dollar is used internationally.
You will have Real Inflation....but you have a ways to go before it sets in. Like I've said before, the last time I ran the numbers, the global economy could easily absorb an extra $9 TRILLION to $13 TRILLION in excess US Dollars......you're not even close to that yet, and will still be a few years before you start to get close.
Quote:
Originally Posted by MTAtech
Meanwhile, Keynesian economists like Krugman have been consistently saying that none of those things happen in the special case of a liquidity trap.
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Except Krugman is too stupid to realize that you don't have a liquidity trap.
Quote:
Originally Posted by MTAtech
Wouldn't it be nice to live in a world in which the failure of one's predictions to materialize resulted in a change in viewpoint? Nah, just attack the guy who has been right throughout the crisis.
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He's been wrong the whole time.
Since WW III is not looming on the horizon, there will be a lot historical revising.
Austerely...
Mircea
Quote:
Originally Posted by Redstate1122
Krugman is too stubborn to acknowledge that the policies he supports and advocates are the very reason the recession happened in the first place. Central Bank policies were more influential than "greedy" investors or CRA or other government housing policy or even deregulation. Fed policy of essentially free money is your key. Krugman and Bernanke both support artificially suppressd interest rates (theoretically to increase consumption which is already too high) and Bernanke supports inverting the yield curve which basically told banks to take more risk.....otherwise you're buying high and selling low....not a solid business practice.
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Originally Posted by White House Press Briefing, Office of the Press Secretary (Dec. 8, 1993)
MR. RUBIN: Hi. I'm Bob Rubin, the Assistant to the President for Economic Policy, and I'm going to introduce today's topic.
The President, as you know, has a broad, comprehensive strategy for dealing with the economic problems of the country for putting the country back on the right track for the long-term. A lot of the legislative and executive actions that have taken place in 1993 have been pursuant to that long-term economic strategy of the President's.
So, uh, I guess Clinton's "long-term economic strategy" was to bankrupt the US. He did a fine job.
Quote:
Originally Posted by Redstate1122
I doubt Krugman "wants" another bubble...but the policies he advocates will produce one.
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That's the point others have made, yet so few understand.
Krugman cannot simultaneously advocate such policies and then claim he didn't want another "bubble," precisely because the end-result of such policies is always a "bubble."
Effectively, Krugman is feeding heroin to people and the complaining because those same people became addicted to heroin.
Concurring...
Mircea
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