Jeffrey Sachs: Time to plan for post-Keynesian era

[Winehole23]

Time to plan for post-Keynesian era

By Jeffrey Sachs



Published: June 7 2010 22:22 | Last updated: June 7 2010 22:22



Mainstream Keynesian economics is facing its last hurrah. The global fiscal stimulus championed last year by the Obama administration is coming undone, repudiated by the same Group of 20 that endorsed it last year (http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html). Now, against a backdrop of a widening sovereign debt crisis (http://www.ft.com/indepth/euro-in-crisis), we need to abandon short-term thinking in favour of the long-term investments needed for sustained recovery.


Keynesian stimulus was premised on four dubious propositions: that it was needed to prevent a global depression; that a short-run fiscal boost would jump-start the economy; that “shovel-ready projects” could combine short-term cyclical and long-term structural agendas; and, last, that the rapid rise of public debt occasioned by stimulus need not be a concern. That these ideas were so widely accepted was a testament to the perennial political attractiveness of tax cuts and spending increases.



In fact, the ubiquitous references last year to the Great Depression were glib; the policymakers had panicked. Adroit central banking could and would prevent depression. The hastily assembled stimulus packages were a throwback to naive Keynesianism. The relevant fact was that the US, UK, Ireland, Spain, Greece (http://www.ft.com/indepth/greece-debt-crisis) and others had over-borrowed for a decade, so a decline in consumption after 2007 was not an anomaly to be fought but an adjustment to be accepted.



Read more... (http://www.ft.com/cms/s/0/e7909286-726b-11df-9f82-00144feabdc0.html)

[Nbadan]

....so 10.00% unemployment is a 'relevant fact' which must be accepted and not an 'anomaly' ....Nuts!

[EVAY]

Time to plan for post-Keynesian era

By Jeffrey Sachs



Published: June 7 2010 22:22 | Last updated: June 7 2010 22:22



Mainstream Keynesian economics is facing its last hurrah. The global fiscal stimulus championed last year by the Obama administration is coming undone, repudiated by the same Group of 20 that endorsed it last year (http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html). Now, against a backdrop of a widening sovereign debt crisis (http://www.ft.com/indepth/euro-in-crisis), we need to abandon short-term thinking in favour of the long-term investments needed for sustained recovery.


Keynesian stimulus was premised on four dubious propositions: that it was needed to prevent a global depression; that a short-run fiscal boost would jump-start the economy; that “shovel-ready projects” could combine short-term cyclical and long-term structural agendas; and, last, that the rapid rise of public debt occasioned by stimulus need not be a concern. That these ideas were so widely accepted was a testament to the perennial political attractiveness of tax cuts and spending increases.



In fact, the ubiquitous references last year to the Great Depression were glib; the policymakers had panicked. Adroit central banking could and would prevent depression. The hastily assembled stimulus packages were a throwback to naive Keynesianism. The relevant fact was that the US, UK, Ireland, Spain, Greece (http://www.ft.com/indepth/greece-debt-crisis) and others had over-borrowed for a decade, so a decline in consumption after 2007 was not an anomaly to be fought but an adjustment to be accepted.



Read more... (http://www.ft.com/cms/s/0/e7909286-726b-11df-9f82-00144feabdc0.html)

But just which political party is going to accept the adjustment that he calls for?

Who do we imagine will make the necessary calls for combining tax increases with entitlement cuts to get us out of this mess?

No one. Period.

[Winehole23]

Nobody wants to take the hit.

[Winehole23]

That's the political pernt.

[Winehole23]

Raise taxes cut services is a crappy campaign slogan, but it's what politicians need to do, starting pretty soon, I hope. I just don't see how we're going to get out of the hole otherwise.

[Winehole23]

The hole could envelop us, like in some crappy second- or third-worldish reality. Us. The USA. Think of it.

[Winehole23]

Bailing out the banking/finance sector was only a foreshadowing of possible troubles....

[Winehole23]

The inevitable correction will take it's toll in contraction, pain and inconvenience.

[Winehole23]

Like a bad tooth, correction can only put if off for so long; it won't be put off forever.

Eventually it will happen contrary to our will and our puny strivings against an essentially objective and implacable fate.

[Nbadan]

Had we not run up debt we would have likely seen unemployment at 20% and a sharp drop in GDP like Estonia, Latvia and Iceland...we've had larger debt before and the world didn't collapse on itself....in fact we had a very prosperous run until Reagan started deficit spending again...however, I agree with you that Obama should just let banks fail and take over the failing banks..

[Winehole23]

....in fact we had a very prosperous run until Reagan started deficit spending again...however, I agree with you that Obama should just let banks fail and take over the failing banks..Sour grapes.

That ship already sailed.

[Winehole23]

What more can you say?

[Winehole23]

Obama is an establishmentarian par excellence. His political career testifies well enough to that all on its own I wd think.

[scott]

Once again politicians are several years (in this case, almost 2 decades) behind Economists on... economic matters!!!

[EVAY]

Doesn't it say a great deal about us as a group that this sort of article, discussing this most serious reality facing our nation, gets so little comment from the board members?


We can blame it on politicians of either party, but the bottom line it that it is our fault.

We really want to believe in magic.

[Winehole23]

_-agl0pOQfs
There's magic all up in this bitch.

[EVAY]

_-agl0pOQfs

You are one weird dude, WH.

[LnGrrrR]

If there's one thing we've learned, it's that people who deal in economics have no fucking clue what they're doing. They might as well be tossing darts.

Why should we believe them now when they've repudiated their own words? And they wonder why they get death threats.

[Winehole23]

You are one weird dude, WH.It was the "belief in magic" plank that put me on to this.

Fuckin' magnets, how do they work...

[EVAY]

If there's one thing we've learned, it's that people who deal in economics have no fucking clue what they're doing. They might as well be tossing darts.

Why should we believe them now when they've repudiated their own words? And they wonder why they get death threats.

But your point could also be made about the medical profession, nutritionists, etc., etc.

We all have to sort of operate on what we believe at the time, no? And don't most of us, liberal or conservative or moderate, believe the basic economic axiom that, at some point, you have to pay for what you spend?

[Winehole23]

We all have to sort of operate on what we believe at the time, no? And don't most of us, liberal or conservative or moderate, believe the basic economic axiom that, at some point, you have to pay for what you spend?In the aggregate, our behavior over the last generation or two has *not* been consistent with this belief.

[EVAY]

In the aggregate, our behavior over the last generation or two has *not* been consistent with this belief.

Hence the current mess. I think the last two generations knew, they just wanted to pretend they didn't, because it was easier than confronting reality.

This reality sucks, ya gotta admit.

[LnGrrrR]

But your point could also be made about the medical profession, nutritionists, etc., etc.

We all have to sort of operate on what we believe at the time, no? And don't most of us, liberal or conservative or moderate, believe the basic economic axiom that, at some point, you have to pay for what you spend?

In your hypothetical though, Evay, doctors are working to fix a person, not game a system for a maximum amount of money.

People in the financial systems created byzantine schemes, then funded politicians to support these programs legally, thereby ensuring no fallout when the bottom fell out.

Look, these are the same people who thought they could reduce/eliminate risk with a magical formula. And yet, despite bringing the nation to its knees, despite its monumental list of fuckups and mistakes, many banks/lenders are still raking in money hand over fist.

[LnGrrrR]

Hence the current mess. I think the last two generations knew, they just wanted to pretend they didn't, because it was easier than confronting reality.

This reality sucks, ya gotta admit.

I blame it on the 80's.

[Winehole23]

The bummer universe is a bummer.

[Winehole23]

I blame it on the 80's.We were bad boys and girls all along, excepting the (last?) brief outbreak of fiscal sanity under GHWB.

[EVAY]

In your hypothetical though, Evay, doctors are working to fix a person, not game a system for a maximum amount of money.

People in the financial systems created byzantine schemes, then funded politicians to support these programs legally, thereby ensuring no fallout when the bottom fell out.

Look, these are the same people who thought they could reduce/eliminate risk with a magical formula. And yet, despite bringing the nation to its knees, despite its monumental list of fuckups and mistakes, many banks/lenders are still raking in money hand over fist.

Well, when you're right, you're right.

[EmptyMan]

Politics is all bullshit, no one does anything needed to actually fix the clusterfukk system. It is purely entertainment/team sports for grown ups. That's what makes it so mind-blowing that this country is still standing. Look on the bright side :toast

[Winehole23]

It makes a difference who we pick to do it, however blind, contrived or misguided our choices be.

[Winehole23]

At least for mayor and sheriff and the various other comissioner-regulator type shit stains, it still matters. JMO.

[angrydude]

If there's one thing we've learned, it's that people who deal in economics have no fucking clue what they're doing. They might as well be tossing darts.

Why should we believe them now when they've repudiated their own words? And they wonder why they get death threats.


imagine if you'd said that about scientists...though I agree with your premise