Sunday, May 26, 2013

David Rosnick — Reinhart and Rogoff Trip Over Data While Attacking Krugman


Ouch.

CEPR
Reinhart and Rogoff Trip Over Data While Attacking Krugman
David Rosnick



5 comments:

Ralph Musgrave said...

There is a very fundamental bit of false logic at the heart of the R&R thesis, as follows.

Debts incurred so as to escape a recession are OK, as even R&R and many of their supporters admit. Thus even if there has been a tendency thru history for high debt to lead to poor growth, the explanation will at least to some extent be that a number of countries incurred debt for NO GOOD REASON (i.e. other than to escape a recession). That is, politicians sometimes behave irresponsibly and incur debt so as to avoid raising taxes (which tends to make politicians unpopular).

So even if R&R manage to prove their point (and they’re a long way from doing that) probably all they’ll have proved is that politicians sometimes behave irresponsibly.

Revelation of the century!

y said...

when the ratio of public debt gets "too high" politicians start cutting, cutting, cutting, so growth slows.

F. Beard said...

I'll say it again, deficit spending by the monetary sovereign does NOT require borrowing.

And how can providing people a risk-free return (disguised welfare) help an economy? Progress requires risk-taking, not government encouraged money hoarding.

And if investors mess-up and genuinely need welfare, then just give it to them!

Matt Franko said...

y,

Bingo...

But again, the breakdown of this is different if the nation is operating a FFNC system vs metals...

With metals, perhaps those with the metals would not lend them to the nation, and then the nation has to cut back on spending...

Under a system of state currency, a nation has other options...

rsp,

Matt Franko said...

this is interesting from the 1 comment over there from 'brian' (who looks like I assume a metal-lover...):

"I love the way economists look at data in isolation from the real world. A few points: in 1971 Richard Nixon unilaterally took the US off the gold standard, destroying the postwar Bretton Woods exchange system. For two years, the world limped along with a fixed dollar exchange, but it finally collapsed at the end of 1973. Currency started floating against each other. Also at the end of 1973 and into 1974 was the quadrupling of oil prices, which led to a global recession, and inflation at the same time, something Keynesian economics said wasn't possible. Stagflation resulted. Finally, the European Social Model, with employment discouraging, competitive economy destroying effects, was getting into high gear in the early 1970s. That's what led to the debt explosion in Europe, which continues today..."

This guy at least sees the importance of recognizing that we are no longer under the metals (tho dont think he agrees with it but that is the confrontation that needs to take place..) and now operating a FFNC system... at least the guy sees the difference and we can have that argument..

rsp,