Oh, this is hilarious.
On Monday’s broadcast of “Morning Joe,” New York Times columnist and Nobel Prize-winning economist Paul Krugman argued that “deficit things” aren’t something to be worried about, at least for the time being. But according to Steve Rattner, the Obama administration’s former “car czar,” Krugman’s analysis is the economic equivalent of climate change denial.
On Tuesday’s “Morning Joe,” Rattner reacted to Krugman’s remarks by making the analogy between climate change and the government’s long-term fiscal challenges, and suggested that both are problems requiring immediate attention.
“[T]o me, being a debt denier is the same thing as being a climate change denier,” Rattner said. “We’re putting millions of tons of carbon in our atmosphere every day that we are going to have to deal with, and we’re incurring billions of debt every day we have to deal with.
But which one actually affects people’s lives today? Or, should we just let the grandkids deal with it? Heh. h/t to Chris Horner.
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When Greece, Spain and Italy have problems with their debts, the prescriptions of the international community was to force them into austerity measures —cut government spending, social security, etc and raise taxes even to a point that unemployment went up over 15 per cent and even to 25 per cent and their economies went into recession. Well it is not just those EU countries but Asian and South American countries had received similar prescription to solve their debt and repayment problems. But how come when US faced an automatic spending cut and increase in taxes, the so called “fiscal cliff”, the whole world was taking a long breath that congress could agree to a formula to avoid the fiscal cliff ? Does this have to do with the abandonment of the gold standard and the limitations of the special drawing rights as substitute for gold? Well one US dollar is equal to one US dollar, although the purchasing power of one trillion dollar US debt today could be worth less much less a billion in the next few years even after adding the interest. As one Chinese government official puts it, their holdings in US debts or bonds are like fridges full of spoiled and rotting fish. But China and the rest of the world continue to buy and horde US debts or bonds.
MarkW.
This is what I don’t understand about so called dumping claims in international trade disputes. If China were to truly sell goods to the US at below their own production costs it would harm them more than it harms us because for any good there are more consumers of the good than producers. So by selling us goods at below their own production costs they would in net be subsidizing our economy at the expense of their own.
A) Why would any think they would do something like that?
B) Even assuming they were doing it, using a greater good perspective, why would we want them to stop?
The problem with the national debt is going to be that either interest payments (which are already something like 12.5% of total federal expenditures) will eventually completely overtake the budget if the fed doesn’t stop spending more than it takes in or China runs out of money to loan us.
On the latter point, when China needs to start borrowing money to keep the US economy going where the hell do people expect the money to come from?
“A government that robs Peter to pay Paul can always depend on the support of Paul.”
by George Bernard Shaw
For once, Krugman is right in this. Jobs are what are important. Peter Schiff and Steve Ratner are as bats**t crazy as Michael Mann and his merry band.
Ratner and Schiff, et al, can’t seem to wrap their heads around the idea that we’re not on the gold standard anymore. We have a sovereign fiat currency, and have had, both domestically and internationally, since August 17, 1971. But they don’t know what that means, so they spout leftover laws from the gold standard era about the debt ceiling–the debt ceiling law was enacted in 1917 to keep gold from leaving the country–and the falsehood that we are leaving debt to our grandchildren. As silly as the CO2 left for our grandchildren argument, but as pernicious as an IPCC report.
I’m not up for arguing the case here, so I’ll leave some links, written in simple language that non-economists can understand:
“What Happens When the Government Tightens its Belt?”
http://neweconomicperspectives.org/2011/05/what-happens-when-government-tightens.html
“What Happens When the Government Tightens its Belt? (Part II)”
http://neweconomicperspectives.org/2011/06/what-happens-when-government-tightens.html
One of the best to explain the consequence of Americans not understanding their monetary system is Dr. Bill Black:
“Why the World Economic Forum and Goldman Sachs are Capitalism’s Worst Enemies”
http://neweconomicperspectives.org/2013/01/why-the-world-economic-forum-and-goldman-sachs-are-capitalisms-worst-enemies.html
Watch this 90 minute video that is worth every minute. Black talks for about 17 minutes. The rest is Q&A, but it’s all devastatingly smart and informative. Google for more Black:
http://dailybail.com/home/dr-william-k-b….nk-robbery.html
Canada, Australia, Japan, and Great Britain have monetarily sovereign currencies as well, although their central banks have different structures and operating procedures depending on how their governments set them up. For example, the 50,000 shares of the The Bank of Canada are owned by the Canadian Ministry of Finance. In the US, the Federal Reserve is divided in 12 regional banks, whose shares are owned by the banks in that particular region wherein each bank, regardless of size or shares, has only one vote. The US President appoints the governors that run the system as a separate governing body, but Congress enacts the rules and laws that says what it can do. Complicated. (pssst….Mullins, Schauf, and Kah got a lot wrong as a result of the Fed’s lack of transparency and arrogance; namely, the off-repeated falsehood that the US government pays interest to the Fed, when the truth is that all profits from the Federal Reserve system are returned to the US Treasury annually, by law, since 1947, after operating expenses are paid, and stock dividends that amount to about 1.5% to 1.8% of annual profits per annum.)
Whoops, the correct link for the Dr. Bill Black video is
http://dailybail.com/home/dr-william-k-black-the-great-american-bank-robbery.html
Tom J says:
January 29, 2013 at 11:27 am
Forgive my lack of scientific knowledge here. But isn’t the paper in paper money made from forest products? Maybe not….
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No in the USA, Canada and many other countries ‘Money it is debt’, as in mortgages, car loans, student loans, credit card loans, business loans…. Only about 3% of the money supply is actual physical currency. This is why one of the hidden ‘I gotcha’s’ in Obamacare was a one liner requiring all businesses to report EVERY transaction over $500/customer/year to the IRS unless it was via a credit card. Small businesses screamed bloody murder and it was killed thank goodness or we would be choking on red tape by now.
From the article: “It’s like waiting to see after we put a lot of carbon in the atmosphere and see if we can still breathe.” That’s amazing; it’s got to be a new low for ill-informed commentary.
Why hasn’t the well-organized and well-funded denial machine produced more films like this? It’s been, what, four years?
Much of China’s growth has come from subsidizing specific, favored industries and businesses at the expense of all others. They’ve done everything they can to “stimulate” their economy and they’ve run out of stimulus money and things to stimulate.
As for dumping, our consumers aren’t harmed. However, domestic businesses and their workers are harmed. Overall, it’s usually a net gain, as more consumers benefit than employers and workers are harmed by the unfair competition. You may also notice that these dumping complaints come from businesses or labor organizations with political connections.
I’ll add one caveat — it’s possible China will subsidize and industry and dump its products below cost and then raise their prices once their domestic competitors are out of business.
I apologize for that formatting snafu at January 29, 2013 at 2:59 pm.
This is what happens sometimes – especially as people get older, they start to make loose associations on unrelated topics. I have to remind myself about it all the time.
This says it all http://niklowe.blogspot.co.uk/2013/01/that-american-national-debt.html
thelastdemocrat says:
January 29, 2013 at 11:57 am
….Some debt is OK in two ways. First, the “money multiplier” effect. I put $110,000 in a bank for whatever interest. The bank, unregulated, would lend 100% of it. However, they have to hold a portion back to service requests for demand deposits, to civer bad debt, etc.
So, they lend $100,000 of my deposit to someone to buy a home for $100,000. That $100,000 goes partly to title firm, etc., but mostly to home seller
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WRONG!!!!!
You forgot about FRACTIONAL RESERVE Banking. You put $3000 dollars in to saving and the bank then lends out $100,000. Although in actual fact they do not even do that.
EXAMPLE
This is the speech that Senator Aldrich had the cojones to quote at a New York City dinner speech on October 15, 1913 IV Proceedings of the Academy of Political Science #1, at 38 (Columbia University, New York (1914)) after he got the ‘Aldrich Plan’ aka the Federal Reserve Act passed.
Well, interestingly, Rattner got out of the kitchen where I guess he saw books being cooked.
Huge point. One idea I’ve had is for somebody with extra $ or fund raising ability to do Google Adwords or the like and pay to drive people to this video (which shames Al Gore & the IPCC for their key CO2 deception). Do something so that nearly everyone will see at least this video as far as AGW is concerned.
Contact DRUDGE somebody.
See if he’ll link to the video.
RockyRoad says: Grow more plants; quit spending!
Actually that is the perfect solution … applied to all the unnecessary federal employees such as gravy train climate scientists, lying EPA officials, etc. ; take away their salaries and send them all to re-education farms.
Two eminently sensible questions, that unfortunately don’t look behind the “curtain” to see what the wizard is really up to.
If the only effect of dumping by China was to subsidize American lifestyles we’d say “Bring it on!” However, in real life dumping has long term negative consequences for the “dumpee”. Steel is a popular example. Cheap Chinese steel puts pressure on American mills to lower their prices, a good thing all else being equal. When the Chinese government subsidizes Chinese steel by allowing it to be sold for less than the cost of production (dumping), the price may go so low that American mills are forced out of business, or margins are so thin they cannot upgrade to newer technologies and fall further into the competitive hole. Once the major American players have left the stage, the Chinese jack up the price to recover their shortages and then some. Because steel is such a capital-intensive industry, it’s almost impossible for an American manufacturer to emerge and challenge the near monopoly. This, in fact, was exactly how Carnegie became the single most powerful steel magnate the US has ever seen.
Some industries we’ll probably never recover; anything where labor costs are the major driver are likely gone for good except for niche manufacturers. At least until global labor costs equalize (in a couple hundred years or so). Those industries where capital costs are paramount (chemicals, pharmaceuticals, and yes, steel) are more “preserveable” if guarded from predation. Businesses will still go under as a result of stupid decisions by management (and labor; “Hostess,” anyone?) but at least they can have an honest shot at it if we discourage dumping.
Better yet, we’re going billions further into debt because we’re spending a pile to ameliorate a problem that may or may not surface 100 years in the future, instead of investing wisely now in — eventually — in research developing economically feasible and cost effective alternative energy resources (like LFTR) and waiting to see if there will or will not be any problem to solve that is worth the effort and money at some point in the future. LFTR makes sense regardless of global warming and/or CO_2. Even plain old inefficient Uranium makes sense regardless of CO_2. Solar will make sense — eventually — and is worth research investments now. Very little of this is worth wholesale subsidized investment to produce energy at a loss now, and it makes no sense at all to make energy more expensive when it is the fundamental factor limiting not only our prosperity but the prosperity of the whole world.
If Europe hadn’t bought into CAGW fifteen years ago and invested a huge amount of money on inefficient and intermittent power resources instead of developing and maintaining the ones they had, the regional economy wouldn’t be on the edge of disaster across the board. You can’t piss away hundreds of billions of dollars to no effect.
And the most amusing thing of all — no warming over the entire interval where they’ve been spending money like made to prevent — warming. Even as CO_2 has continued to go up.
rgb
So we have Rattner, who has us in the hole for $20B+ for the GM and Chrysler bailouts not to mention his screwing of the bondholders for a sweetheart deal to the UAW, lecturing Krugman about the evil of excessive debts (Rattner actually gets that right). Meantime we have Krugman wearing his “End is Nigh” placards in 2003 from Bush’s “excessive” debt who now suddenly has no problem running deficits in excess of 5% of GDP for the next decade. Essentially Krugman’s argument is that debt is good as long as you can’t pay for it. I’m abusing Keynes, but that economic school of thought is so obviously bankrupt I’m really disappointed at how strongly it persists.
In one way Rattner is right about Krugman being a denialist. Since the Fed manufactures money electronically, all of those trillions of New Dollars are generated primarily from fossil fuels. So the creation of money is truly worse than we thought!
@MattS
Dumping is used as a temporary measure to attempt to collapse local competitors for your manufacturing output. It was used fairly successfully by the Japanese in the electronics market to move the rest of the US consumer electronics manufacturing oversees.
The biggest problem is people confuse getting out competed with dumping and assume that countries with lower labor and regulatory costs are somehow cheating them out of a cushy job. The only way for us to compete with a lower labor cost market is to make our individual productivity levels cause a massive decrease in per unit costs. We can’t do anything about the regulatory costs except to vote the big government nanny state types out of power!
Owen
eo says:
January 29, 2013 at 2:23 pm
When Greece, Spain and Italy have problems with their debts, the prescriptions of the international community was to force them into austerity measures —cut government spending, social security, etc and raise taxes even to a point that unemployment went up over 15 per cent and even to 25 per cent and their economies went into recession….
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Hate to tell you but the US unemployment is ~ 23% and climbing. link
The only reason most people do not know that is because the government changed how they counted the “unemployed” They now have a new category called the discouraged worker. The Bureau of Labor Statistics (BLS) says if a worker is out of work but hasn’t looked for a job in the past four weeks, he isn’t considered employed or unemployed; he simply isn’t counted as part of the labor force at all.
If you consider the graph in the first link it tells a rather nasty story. The real unemployment is rising while the BLS numbers are declining. This means the number of discouraged workers who “wanted and were available for work,” but have given up looking for a job is increasing -NOT GOOD!
Shadow Statistics graph of year to year changes in Withholding Taxes and Actual Amount Withheld Do not forget the Fed doubled the US money supply in 2008/2009 which effectively halved the value of the dollar. You can see that reflected in the price increase in gas at the pump.
When Obama said the price of energy would skyrocket he also meant the cost of everything else would too as the value of the dollar torpedoed. However thanks to Clinton’s NAFTA and WTO your wages will stay the same or decline. The US Census Bureau released median income, poverty and insurance stats today,… the trends in median income are not encouraging,… the median wage is declining, wages at the top are increasing.
Krugman is right in one sense, the situation is so far gone that a few more zeroes don’t matter.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Von Mises
We are many years past the point where voluntary abandonment is politically possible.
policycritic says:
January 29, 2013 at 2:43 pm
For once, Krugman is right in this. Jobs are what are important….
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If you want to increase jobs it is easy. GET RID OF THE G@ur momisuglyD D@ur momisugly@M RED TAPE and regulations!!!
Forget mucking around with the Federal Reserve. Just quit messing with the heads of small business people. In my case alone the US government KILLED three of my businesses, one of which I was just about to launch.
Over half of new jobs come from small business.
This allows small businesses to hire people (cheap) from India or China or elsewhere instead of locals just like the international corporations and therefore makes them more competitive.
Matthew Parris – a former MP – wrote in the London Times recently (sadly, paywalled) about the recent rhetoric from Argentinian PM De Kirchner concerning the Falkland Islands. His theme was that the 1980’s Falklands war was only a skirmish compared with the acts of the original European settlers, who deliberately exterminated the indigenous population of Argentina in the 19th century after its secession from Spain.
One quote struck me as very telling in the climate debate (Parris attributed the quote to the book “Patagonia Perdida” by Sanchez and Zaffaroni). It is: “There has never been a massacre without what in criminology is described as a neutralisation of values. I neutralise my values by demeaning my victim. I neutralise my values by claiming that my victim is the aggressor.”
While (hopefully!) we are not talking of massacres in the literal sense, in the climate debate it seems to me there is this same “neutralisation of values” being deployed. Examples are warmists freely using the “d-word” as a demeaning term; claiming that sceptics are funded by “big oil”; that sceptics (as aggressors) are seeking to overturn “settled science” – and many more (including as here comparison with “debt deniers”, whatever that term might actually mean).
It might be an interesting project to develop software to scan articles, papers, comments etc and come up with a (normalised) “neutralisation value” score for the item!