No More Bailouts...

[downzero]

Did the US bail out banks prior to the Great Depression? I didn't realize this.

Not that I know of. But Friedman thought they should have. Friedman didn't get his Ph.D until 1933. He certainly wasn't driving our policy during the depression.

If he was, he might have advocated bank bailouts.

That said, I don't agree with the bailouts personally.

 

[dross]

The Laffer Curve, fact? Really?

What happens when I lower the tax rate from 1% to 0%? Does that increase tax revenue? Does raising it from 0 to 1% decrease revenue?

One would have to be quite ignorant to believe that this is a fact, or anything even close. The Laffer curve is nothing but a joke to anyone with a fundamental understanding of economics.

It's not a joke, and you're misrepresenting it.

At 0% you get no revenue. At 100%, you get no revenue. At X tax rate in between, you maximize your revenue. That's the Laffer curve, not "the more you lower taxes, the more revenue you get."

You often say things as if they are indisputable fact, when they are not.

 

[ATOMonkey]

Economics is not the study of numbers, it's the study of incentives.

You can not explain any economic situation simply by the numbers. Numbers simply tell you how people respond to the incentives.

 

[HighStrung]

One of the few (if not the only) interviews with Bernanke himself on the issue

The Chairman Part 1 - 60 Minutes - CBS News

CBS Videohttp://www.cbs.com/thunder/player/thunder.php?pid=5_u9TzKik5Qw8gZhcTyLM5iB__PQRDRX

 

[ATOMonkey]

1. It is foolish and ridiculous to cut spending during a recession, especially a nasty recession. Any macroeconomist, not just a Keynesian, will tell you this. GDP = C + I + G + NX Cutting G means GDP goes down. That means the recession gets worse. This is not a profound statement, merely a statement of an accounting identity.

I agree with the rest of your post, but this is terribly over simplified and misleading.

While it is an accounting identity, it is not an economic principle.

Cutting government spending only changes the incentives for the people. How they react to that cut in spending determines which way GDP will go.

 

[dross]

I agree with the rest of your post, but this is terribly over simplified and misleading.

While it is an accounting identity, it is not an economic principle.

Cutting government spending only changes the incentives for the people. How they react to that cut in spending determines which way GDP will go.

Exactly. Cutting government expenditure will absolutely lower GDP for a moment in time. But to look at that as the end of the story is simplistic and misleading.

I could also say that everyone should take all their money out of the bank and spend it, because that would raise C. Oh, but it would also lower I. Just as the government can crowd out business with overspending.

If you look at this as a static model, getting out of recession is simple: Just spend and spend. If a trillion is good, why not ten trillion?

The less the government takes, the more is left to the free market, which tends to spend the money a lot more productively, and it is productivity or the lack of it which is felt by the person on the street, because it is productivity which leads to better standard of living.

 

[dross]

Bump.