Krugman's 'End Depression Now' Convincing Call for Stimulus Spending

Nobel Economic Prize Winner Paul Krugman calls for more stimulus spending.


Whether you are a "sort of" New Keynesian or an “Austerian,” after reading Paul Krugman's "End This Depression Now" you will have a better understanding of economics and the arguments for and against more government spending (i.e. stimulus) to get us out of the depression.

While many economists call for austerity - cutting government spending to reduce the deficit - Krugman, winner of the Nobel Prize in Economics, makes a good case for more government stimulus spending when the economy is in a depression. He does not deny we need to cut government spending, but argues that this is the wrong time to do it.

With unemployment high, consumer spending is down. People and businesses become more and more cautious about spending and this stalls the economy even more. Among other recommendations such as mortgage relief, he claims a huge injection of government spending would get people back to work, jump start the economy and put us on the road to recovery. Krugman’s thesis finds support in the Economist magazine in its outlook for Europe. His criticism of Obama is that his stimulus program was not big enough.

Krugman is of the opinion that if the politicians had some courage to act, the problem could be solved quickly. Unfortunately, our political class  (both parties) is mired in polarizing, uncompromising extremism and can’t seem to focus on getting anything accomplished other than raising Super Pac money and getting reelected . They may need a “stimulus” kick from voters. Term limits anyone?

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R Eleveld September 26, 2012 at 06:43 PM
@Jim G., I have read the posts. The problem is once you start to bailout enterprises, any enterprises, there is an expectation of the same, and that creates a moral hazard into the future. Could GM have gone to the union and said let’s get a deal done fast. YES, If they had no other choice. Could they have gone to the banks, etc. YES, if they had no other choice. There is an old adage in banking, when you owe the bank $1,000 you worry, when you owe the bank $1MM the bank worries. That can apply to any business. Once a bailout begins, it becomes expected by all the large players, they lobby for the bailout and it gets to be slippery. That is what happened to Lehman. IT was expected so no one at the table was willing to make a deal because in the end we do not have to. Just watch the “HBO’s Film “Too Big to Fail.” There is no reason to pull back or modify your approach. John Martin I believe wrote extensively with Maria on the negative and corrupting affects the New Deal and its baggage had on the economy in the 1930’s. The desire to help is often not the best approach. Sometime you have to administer an antibiotic, and other times you have to allow the fever to work its course. TBC
R Eleveld September 26, 2012 at 06:44 PM
Cont. We know Government Motors wants out of the government oversight. GM is having trouble hiring talent because of compensation restrictions. They are tired of the moniker I mentioned above and want to be rid of it because it hurts sales. They want US to take a loss on GM shares. The reality is as was stated in a Forbes article recently GM will be bankrupt in the future anyway. We forestalled the inevitable yet again. Government intervention in the late 1970’s set the stage. So a question that should be asked: If Chrysler and GM needed bailouts, and Ford did not, what did Ford do that was better? Also consider the bailouts of GM and Chrysler put Ford in a DANGEROUS position of possibly needing a bailout also!
R Eleveld September 26, 2012 at 07:00 PM
@Spiff, I know someone that was laid off from her company managing a region of a chain restaurant. She was the highest paid employee at that level with a generous and earned bonus pool for the profitable region. The company decided to reduce costs and after trying to find grounds to terminate, all unsuccessful, yes she saw the handwriting on the wall. She got laid off before her last bonus was earned. She decided to collect UEC to the full extent possible. When she was down to 3 months she got off her duff and started looking and landed a job in 30 days. She actually reviewed with me the 3 offers she received in short order. @Rick, your profile is sans information about you or what you did. That is unfortunate because sometimes you never know where good fortune comes from. There are jobs, and yes if you are unemployed for more than 6 months it is more difficult.
R Eleveld September 26, 2012 at 07:18 PM
@Ingimar, they are not horrible places to live. They have very high taxation systems and they are all teetering on the edge of a demographic bubble similar to what we have seen in Japan for the last 20 years. A very sluggish economy. The internal structure of the Euro, questions its ability to last as the primary common currency as I have predicted years ago. With many taking from the system (retirees) and fewer contributing to the system (taxpayers) you see an inverted pyramid, fewer giving and more taking. Immigrants are the only option and then you have the de-Germanization of Germany. The other cultures immigrating change the culture of Germany. That is what is happening all over Europe. The Muslims into France arguing over language. The asylum seekers to Holland. The poles to Germany and it goes on. America is a melting pot, however European countries are not.
Kaptainsteve September 26, 2012 at 07:48 PM
@R Eleveld. Thanks for your response. Right on brother. And in the end, the funny thing is that some of these people look to creators of this gigantic mess to provide us with solutions. They still haven't figured out yet that they've been had. The criminal banksters, the FED and the crooked politicians have taken us for just about everything we've got, and yet most of us still look for them to get us out of this mess. It's like a hazing and getting beat with the paddle and saying "may I have another, sir." We are gluttons for punishment. But the difference between me and these others is that I internalize NO guilt for any of it. Face it everybody, you've been conned and ripped off. So, why would you want to give these criminals even more control and more of your money? You've been taken by the Bushes and the Obama's. You've been hoodwinked by the Republicans and the Democrats. EVerybody was in on the deal. The only thing to do is to let them all fail, crash and disintegrate. There is no such thing as "too big to fail." It's time to let this era come to an end naturally, by doing nothing but watching it come tumbling down, which has already started to do, under it's own weight, right before our eyes. It will be an interesting decade and I doubt we'll learn from it. I think we are just setting ourselves up as the next USSR a gigantic, corrupt, criminal un-free country full of misery and poverty and black markets and underground economies of large scale.
Kaptainsteve September 26, 2012 at 07:49 PM
@Maria, we used to be the country that you said it'd be interesting to find, you know, the one with no income tax and just about no taxes at all.
Kaptainsteve September 26, 2012 at 07:53 PM
@maria; who says; "What about individuals who can afford to pay for their health care or fire services or their children's education, but refuse to do so?" And, your answer is to force others to do what they do not want to do (one where you decide these things they must do of course) . Whether you realize it or not, you have just reinvented the slave-state, of course, for our own good. Making people do what it is that they dont' want to is slavery. There is no other way to explain it and saying that it is for their own good won't do it either.
Rick McDonald September 26, 2012 at 08:14 PM
Spiff's comment; "There are jobs available for those who are willing to go out and find them, and for those willing to work." By this very statement you are saying that those who have been unable to find employment are either not looking or just do not want to work.
Rick McDonald September 26, 2012 at 08:19 PM
My area of expertise is Submarine Communications. With the current democrat environment there is little chance a finding work in defense. I have applied for everything from stocking shelves up with literally no offers, just some polite sorry but we are looking for someone else.
Spiff September 26, 2012 at 08:44 PM
No, Mr. McDonald, that is not what I said (read the posts). Everyone is a hard worker, right (or at least everyone thinks they are)? Only you can determine if you are or not. Now, if you really are a hard worker, and you really do want to find a job, you will, you just can't give up! Now, and if you've been reading my posts, you'll note that I also said it may not be the exact job you want, but that could be a stepping stone, or at least a temporary job, until you find the one that suits you best. Unfortunately, finding a job is a full-time job and you have to approach it as such. If you fully apply yourself between the hours of 9 - 5 Monday through Friday, get outside advise from friends, family, job counselors, anyone, and don't give up, you will find a job!!! The key words are, DON'T GIVE UP!!!
Spiff September 26, 2012 at 09:04 PM
Submarine communications, huh? Yeah, I guess there are not too many companies in CT that do that (except for the obvious one). What you have to do is think about how what you did could be applied to another industry. What were the actual tasks you did and the skills required to accomplish those tasks. Break down what you did into subsegments, and then finer segments, and then think about companies or industries where those skills could be applied. An electrical engineer who used to work on sub comms has skills that can be applied to other industries. You will/may have to modify your resume and approach for different industries. You are right, sir, Walmart is probably not going to give a job to you stocking shelves if you're selling yourself as a sub comms engineer. But, a company that makes electronic medical equipment may offer you a job if you sell yourself as an electronic equipment specialist/technician/consultant/whatever! Good luck in your job search, sir, and let me know if there is anything I can do to help!
Jim G. September 26, 2012 at 09:21 PM
I think I finally figured out the major problem with these endless, get-nowhere comment streams: There are two completely different communities of poster here and they may as well be speaking separate languages... except they aren't and neither community can figure out the other's posts. Community 1 is the folks who are looking at the here and now, and discussing changes and solutions that can be implemented here and now, without requiring complete changes of regime, law, policy or structure. Community 2 is the folks who can only see solutions in terms of radical changes, usually in the form of "If _____ were completely different all of our problems would be solved." No judgment on either, but they are two COMPLETELY different discussions. Taking a minute to recognize which one you're reading or participating in might - might - cut down on the endless confusion. Or not.
REVMAN September 26, 2012 at 09:26 PM
I am not better off and if your on a fixed income I KNOW you are NOT better off than you were 4 years ago.As far as all the bailouts they were a failure to big to fail wallstreet businesses and now the FED is going to give(QE3) $40 billion to(big) banks per month untill 2015.This will start SUBPRIME mortages againand cost the tax payer trillions.
REVMAN September 26, 2012 at 09:38 PM
The Kaptain is correct--QE3 has already started--HOW DOES IT WORK? To buy bonds, the Fed essentially creates money from nothing, paying for its purchases by crediting the accounts of banks from which it buys the bonds. That's a clue as to how it works -- as money piles up in their Fed accounts, earning the paltry quarter-of-a-percentage point in interest that the Fed pays, banks may be keener to lend to companies and people.
REVMAN September 26, 2012 at 09:44 PM
If you RE-ELECT the same people this year I'm sure you(everyone) will NOT be better off. If everyone in congress were ousted and new people put in and in two years everyone did the same it would take 4 years to change and might put SOME fear into them.But that will never happen.
Jim G. September 26, 2012 at 10:37 PM
...the other major problem being contributors who never quite bother to read what anyone else posts but see every Reply button as the start of another rant opportunity.
Jim G. September 26, 2012 at 11:40 PM
No, spelling champ, you just confirmed your own genus. Now go away so we can leave you alone.
Rick McDonald September 27, 2012 at 01:02 AM
Perhaps mandate is misleading but I believe under current SEC regulations companies that do not make an effort to maximize profits for the shareholders can and do face financial penalties.
Rick McDonald September 27, 2012 at 01:19 AM
It may not be what you intended Spiff but it is what you wrote. Others can only go by that, we cannot presume to know your intentions. Your wrote "There are jobs available for those who are willing to go out and find them, and for those willing to work". This is the same as saying those who have not found jobs are either 1) Not looking or 2) Not willing to work. You go on to say that is not what you meant but follow it with a story support that that is in fact what you meant by saying that they may think they are looking and willing to work but really aren't. The insinuation is that I think I am willing to work and looking but really am not. Might I suggest that you have someone else read your comment and tell how they would take it it they did not know you?
Rick McDonald September 27, 2012 at 01:21 AM
Was the genus intentional or did you mean to say genius?
Kaptainsteve September 27, 2012 at 01:34 AM
"I think I finally figured out the major problem with these endless, get-nowhere comment streams: There are two completely different communities of poster here." Yep, there are those who believe in freedom for their fellow man and those who don't. There are those who are collectivists and have blind faith in nobody but central planners, and then there's those who want no part of their world and simply want to be left alone. When you think about it, the collectivists can live any way they want to in a world where those who want to be left alone are allowed to be free, but is anyone really free when the collectivists and their central planners run things? How do they implement their view of the world? Simply via force. One of these groups claims to be tolerant yet uses theft, the threat of violence, intimidation and even worse to force their vision on others and they rationalize it using phony self-serving hallow jargon like the good of the "community" and they try to divide us using class-ist and divisive terms like "regime." The other group just wants to be left alone.
R Eleveld September 27, 2012 at 02:15 AM
@Rick, Spiff hit some ideas and his process is a little more exacting than I would have suggested, but he is correct. You might want to modify your resume and adjust it for a position you seek, Your service is appreciated, and I thank you for it. I do not know what help I can be, but it might not hurt to share.
R Eleveld September 27, 2012 at 02:20 AM
An interesting idea, or point of view.
Rick McDonald September 27, 2012 at 01:33 PM
@R, Yes Spiff has valid points and it will probably surprise both of you to know all are being utilized. As for my resume I tailor each submission for the position be applied for.
Kaptainsteve September 27, 2012 at 08:16 PM
"I don't think you can say the Fed's actions have failed because you personally aren't "better off." Ask yourself a simple question, WHO IS BETTER OFF today as a result of the Feds action??? Everyone knows who is NOT better off due to the Feds action; the poor, the middle class and believe it or not, the rich. http://blogs.wsj.com/economics/2012/09/21/fed-action-may-widen-wealth-gap/ The only people to benefit are the uber rich crooked banksters, the cronies of the crooked politicians, & the crooked politicians who almost all become millionaires the results of insider trading & getting kickbacks after hooking up their cronies. Now, do me a favor & don't deny any of this & insult anyone's intelligence. The Fed's actions do not help those who do not receive the new money up front, at the beginning. It's called the "cram-down" effect. The fed prints what amounts to TRILLIONS of counterfeit currency (buying back it's own bonds, mortgage derivatives, etc) & by definition creates inflation or the debasement or devaluation of the dollars. As the worth of the dollars drops, the average and poor people and especially those on fixed incomes get whacked real hard as inflation raises prices and effectively steals from their pensions, savings accts. investments, etc. Wouldn't we be better off if the Fed just gave the money to underwater homeowners, foreclosures or the poor? Why not? Because it's a scam and they'd rather just hook up their cronies that's why.
REVMAN September 27, 2012 at 08:44 PM
Kaptain again yor so right --The announced QE3 news merely commits $40 billion a month of new stimulus funds -- a significant wad of cash. Slightly unexpected was the announced use of that money: to buy Fannie Mae and Freddie Mac bonds.BOTH COMPANIES ARE BANKRUPT,and this isn't called a stimulus or bailout it's called QE3 which will put us in debt for TRILLIONS more.
Andrew Ziemba September 27, 2012 at 09:31 PM
It pains me to say so, but even with super strict term limits, this country is hopeless. Unfortunately this country and it's policies, both foreign and domestic, will only change when our country experiences a total economic collapse through the inflationary destruction of the US Dollar. This will happen relatively soon. The recovery from this collapse will depend greatly on what time and how severe the crash is. There is no stopping it now. It is like we have jumped off the top of a skyscraper. There is nothing we can do now. Do your best to prepare for the worst. Also, don't forget, when all else fails, they take us to war.
Kaptainsteve September 28, 2012 at 02:09 AM
Andrew, you are right on both accounts. The dollar will crash in MONTHS, not years, and war is always an option of misdirection just to make sure we blame the wrong people and not the crooked banks and politician. Most people have no clue a. How corrupt banks like JPMorgan, Citibank, Wells, BofA, MFGlobal and the rest really are and b. How the Fed's policy is complicit in their scams and has guaranteed the imminent crash of the dollar and HYPERinflation. As long as they keep arguing about the "differences" between Obama and Romney and phony arguments like how much to tax each other, they will never wake up and nothing can ever change. They just can't believe it will ever happen to us. Quote; "Deutsche Bank’s report is “Gold: Adjusting for Zero.” It reckons we’re in a situation that is “Zero for growth, yield, velocity and confidence.” It says: “We believe there are nearly zero real options available to global policy-makers. The world needs growth and is willing to go to extraordinary lengths to get it.” It forecasts bluntly that the value of the dollar will plummet in the first half of 2013 to less than a 2,000th of an ounce of gold. It reckons “the growth in supply of fiat currencies such as the USD will remain an important driver.”" http://www.nysun.com/editorials/germany-eyes-gold-standard/87997/ http://rt.com/programs/keiser-report/episode-346-max-keiser/
Kaptainsteve September 28, 2012 at 02:19 AM
Revman, Yes sir, you are right. And the Fed announced $40B, but that's just the starting figure, it can always be increased even more. With the wholesale Fed rate at just about 0%, the effective tax rates due to inflation is in real terms apprx. 90%. Max Keiser explains it here; http://rt.com/programs/keiser-report/episode-346-max-keiser/ They are again, using yet another scheme to transfer wealth from us to them. The uber rich get richer, and everyone else gets indentured servitude. The baby boomers have done it. They've lived the good life, sucked all the wealth from our bones, they're getting their medicare and social security and got to enjoy driving their gas guzzling SUV's, and now the game is just about over except for a little bit of picking off the bones of the carcass of what was once a great country and people. These people never cared about morality or ethics. They just wanted what they wanted and took it, and now everybody else must suffer the hangover for their partying and the worst thing about it all is that all the while they cloked themselves in the phony facade of global warming, the environment, social programs galore and political correctness.
R Eleveld September 28, 2012 at 02:25 AM
The crash of a currency is when the production of currency is on a massive scale. Something like 400B per month ad infinitum. Our currency will have value until some point when no one is willing to accept it with restrictions. We are not close to that option... yet. As for the purchase of GSE bonds, it is a way to pump funds into the economy since the GSE's are effectively backed by the full faith and credit of the US. So it is a shell game by which liquidity, read as cash, is pumped into the market increasing available credit to buy more paper backed by the US Treasury and the taxpayers.


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