Clint Ballinger — Austerity in a Time of Plenty: : The “domestic default” bogeyman = More bad statistics from Reinhart & Rogoff

R & R are at it again.

Clint Ballinger
Austerity in a Time of Plenty: : The “domestic default” bogeyman = More bad statistics from Reinhart & Rogoff

Brad DeLong — Debt Derangement Syndrome

"We knew it all along."

Project Syndicate
Debt Derangement Syndrome

Brad DeLong | Professor of Economics, UCAL Berkeley

WCEG — Should-Read: Robert Skidelsky: The Advanced Economies’ Lost Decade

The eminent Robert Skidelsky identifies three groups of economists who gave what ex post was clearly bad advice, and bad advice that mattered about fiscal policy, from 2009 on: Alberto Alesina and company with their “expansionary austerity” doctrines, Ken Rogoff and company with their “short-term-pain-for-long-run-gain” doctrines, and Ricardo Haussman and company with the “no choice but austerity” doctrines. All three groups, however, had reasons for their arguments and were thinking hard—albeit, in my view, not as hard and as deeply as they ought to have and had a responsibility to do—and genuinely believed what they were putting forward. There were also three groups of economists giving bad advice who either did not believe what they were saying or had done no thinking at all: Robert Lucas and company with his “nothing to apply a multiplier to” ideological and unfounded claims that fiscal policy could never be effective; John Taylor, Marvin Goodfriend, and company with their Bernanke’s monetary expansion will produce currency debasement and inflation but will not boost employment; and a whole host of professional Republicans who ought to have been backing up Bernanke’s plans for further monetary stimulus and his call for an end to fiscal austerity headwinds, but were instead very quiet, as Elmer Fudd would say, in part at least not to annoy political masters in the Republican Party. I think the economics profession could have played a useful role in helping to manage the recovery if those three groups unmentioned by Skidelsky had not been present....

WCEG — The Equitablog
Should-Read: Robert Skidelsky: The Advanced Economies’ Lost Decade
Brad DeLong

Brad DeLong — Will the U.S. Economy Boom Over the Next Four Years?

The very sharp Ken Rogoff predicts a boom over the next four years: "The biggest missing piece... is business investment, and if it starts kicking in... output and productivity could begin to rise very sharply.... You don’t have to be a nice guy to get the economy going.... It is far more likely that after years of slow recovery, the US economy might at last be ready to move significantly faster..."

I really can't see it as likely.

Grasping Reality
Will the U.S. Economy Boom Over the Next Four Years?
Brad DeLong | Professor of Economics, UCAL Berkeley

Classic Davos panel: A bunch of self-important, narcissistic know-nothings, adored by their fellow elites, loftily describing how it's important to keep everyone else down

These guys are nauseating. I want to puke. They were wrong in the past and wrong now, but they still haul them out there on these panels.

The host, Andy Serwer, a complete idiot, but what a career this guy has put together: Time Inc., now big shot at Yahoo, yet every other word out of his mouth, "um, um, um..."

The Argentina finance minister, a total neoliberal puppet, championing the same, old, destructive, usurping, neoliberal bullshit...deregulation, privatization, yada, yada and of course talking about the "failed policies of the past" (yes, because their asshole leaders never went full ahead with those policies. They always played ball with Wall Street.)

Watch it and puke.

The Arthurian — Antonio Fatas and the Chain of Causality

Another howler from Ken Rogoff, the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University and one of the Very Serious People of the economics profession (rolling eyes).

Fatas says Rogoff "argues that the world economy is suffering from a debt hangover rather than deficient demand." I had to check that. When I read Fatas, I thought he might be misinterpreting Rogoff. He's not. He's right. Rogoff sees secular stagnation as one possibility, and crushing debt as "another possibility".

Rogoff sees the excessive debt explanation as an alternative to the deficient demand explanation.

That's just plain silly. Excessive debt is not an alternative to the "deficient demand" explanation. Excessive debt is the cause of deficient demand. First, the growing cost of growing debt consumes a growing portion of income. So demand atrophies gradually at first. Then, people suddenly come to think of their debt as excessive, and they suddenly cut their borrowing and spending. Demand falls suddenly -- economists call that a "shock" -- and we have "deficient demand".

The New Arthurian Economics
Antonio Fatas and the Chain of Causality
The Arthurian

Two on economics and politics from Brad DeLong

Should-reads if you are into economics and US politics. The significant issues are now being put on the table.

On second thought, make the first one a must-read.

WCEG — The Equitablog
Thursday Musings on Macroeconomic Policy and “The Right”
Brad DeLong

Ken Rogoff Fakes Right, Goes Left, and Heads Down the Sideline Toward Global Social Democracy and a Truly Human World…

Brad DeLong

Merijn Knibbe — Rogoff on Wolf. Some comments or: empowering households made all the difference

In a very readable and insightful review of the new Martin Wolf book (which I haven’t read yet) Kenneth Rogoff plays the revolutionary card:’Let’s get rid of these debts, we’ve got nothing to lose than a deflationary chain of events’. This puts him, in a Eurozone perspective, in the radical left corner of politics (and it’s kind of ironic that he accuses text-book economists like Krugman of being ´hard-left´…).

Real-World Economics Review Blog
Rogoff on Wolf. Some comments or: empowering households made all the difference
Merijn Knibbe

David Ruccio — Is there something in the water at Harvard?

Summers, Mankiw, Ferguson and Rogoff?

And people really believe Harvard stands at the pinnacle of the intellectual meritocracy in the United States?

Occasional Links & Commentary
Is there something in the water at Harvard?
David Ruccio | Professor of Economics, University of Notre Dame

Yes, it is embarrassing.

Cross-post: Warren Mosler — Rogoff and Reinhart NYT response

The Center of the Universe
Rogoff and Reinhart NYT response
by Warren Mosler

The intellectual dishonesty continues.


As before, it’s the lie of omission.

R and R are familiar with my book ‘The 7 Deadly Innocent Frauds of Economic Policy’ and, when pressed, agree with the dynamics.

They know there is a more than material difference between floating and fixed exchange rate regimes that they continue to exclude from their analysis.

They know that one agents ‘deficit’ is another’s ‘surplus’ to the penny, a critical understanding they continue to exclude.

They know that ‘demand leakages’ mean some other agent must spend more than its income to sustain output and employment.

They know federal spending is via the Fed crediting a member bank reserve account, a process that is not operationally constrained by revenues. That is, there is no dollar solvency issue for the US government.

They know that ‘debt management’, operationally, is a matter of the Fed simply debiting and crediting securities accounts and reserve accounts, both at the Fed.

They know that if there is no problem of excess demand, there is no ‘deficit problem’ regardless of the magnitudes, short term or long term.

They know unemployment is the evidence deficit spending is too low and a tax cut and/or spending increase is in order, and that a fiscal adjustment will restore output and employment, regardless of the magnitude of deficits or debt.

Carmen’s husband Vince was the head of monetary affairs at the Fed for many years, serving both Alan Greenspan and Ben Bernanke. He knows implicitly how the accounts clear and how the accounting works, to the penny. He knows the currency itself is a case of monopoly. He knows the Fed, not ‘the market’ necessarily sets rates. He knows that, operationally, US Treasury securities function as interest rate support, and not to fund expenditures. He knows it all!

Carmen, Vince, please come home! I hereby offer my personal amnesty- come clean NOW and all is forgiven! As you well know, coming clean NOW will profoundly change the world. As you well know, coming clean NOW will profoundly alter the course of our civilization!

Carmen, Vince, either you believe in an informed electorate or you don’t!?

(feel free to distribute)

New York Times

Debt, Growth and the Austerity Debate

By: Carmen Reinhart and Kenneth Rogoff

Bozo Watch — Bowles-Simpson go on the attack in spite of Reinhart-Rogoff debacle

On April 19, just after I had written about how the key academic research used to bolster austerity policies was exposed by a 28-year-old grad student at U Mass, Amherst, I got a surprise in my email box.

In the email, Erskine Bowles and Alan Simpson giddily announced their new deficit-reduction plan, which includes, among other things, a recommendation to increase the eligibility age for Medicare. Their plan would reduce debt as a share of GDP below 70 percent by 2023 and, as the Washington Postreports, “seeks far less in new taxes than the original, and it seeks far more in savings from federal health programs for the elderly.”

What’s incredible is that over the last week, the study by Harvard economists Carmen Reinhart and Ken Rogoff that famously warned of the dangers of government debt has been proven to be riddled with errors and questionable methodology. To recap: R&R’s paper purported to show that countries with public debt in excess of 90 percent of gross domestic product suffered negative economic growth. Austerity hawks everywhere used it to justify cuts that have cost people jobs and vital services. The original spreadsheet used by R&R was obtained by a U Mass grad student, who found that in addition to the mistakes already noted by several economists, there was a coding error in their Excel spreadsheet that significantly changed the results of their study.

As New York Magazine’s Jon Chait has pointed out, that same discredited research has been used by Bowles and Simpson to formulate their deficit-reducing austerity plans.

Let’s take a look at some ugly chronology.....

AlterNet
Unbelievable! Bowles and Simpson Release New Deficit-Reduction Plan Based on Discredited Austerity Research by Rogoff and Reinhart
Lynn Stuart Parramore

Rates vs. debt...gotta love this chart!

I love this chart so much I had to post it again. Here's the Federal debt (in red, millions $) and here is the rate on the 10yr Treasury (blue).

Hey Schiff, Rogers, Kotkikoff, Rogoff, Reinhart, Greenspan, Walker, Peterson, Simpson, Bowles, and the rest of you...what's your excuse now???