The economic idiocy of economists
The American Economic Association's annual meeting is red-letter day for 'the dismal science'. And dismal it proved
Mark Weisbrot
guardian.co.uk, Tuesday 10 January 2012 08.30 EST
The American Economic Association's annual meetings are a scary sight, with thousands of economists all gathered in the same place – a veritable weapon of mass destruction. Chicago was the lucky city for 2012 this past weekend, and I had just finished participating in an interesting panel on "the economics of regime change", when I stumbled over to see what the big budget experts had to say about "the political economy of the US debt and deficits".
The session was introduced by UC Berkeley economist Alan Auerbach, who put up a graph of the United States' rising debt-to-GDP ratio, and warned of dire consequences if Congress didn't do something about it. Yawn.
But the panelists got off to a good start, with Alan Blinder of Princeton, former vice-chairman of the US Federal Reserve, describing the public discussion of the US national debt as generally ranging from "ludicrous to horrific". True, that. He asked and answered four questions.
First, is there any urgency (to reduce the deficit or debt)? No. The government can borrow short term at negative real interest rates, and long-term at about zero. The world is paying us to hold their money. That is anything but a debt crisis. The Fed is out of bullets, he said – referring to the fact that the US Federal Reserve had lowered short-term rates to zero and had used quantitative easing to help keep long-term rates low. So we need more fiscal stimulus, preferably spending that focuses on actually creating jobs. Amen.
(More here.)
Mark Weisbrot
guardian.co.uk, Tuesday 10 January 2012 08.30 EST
The American Economic Association's annual meetings are a scary sight, with thousands of economists all gathered in the same place – a veritable weapon of mass destruction. Chicago was the lucky city for 2012 this past weekend, and I had just finished participating in an interesting panel on "the economics of regime change", when I stumbled over to see what the big budget experts had to say about "the political economy of the US debt and deficits".
The session was introduced by UC Berkeley economist Alan Auerbach, who put up a graph of the United States' rising debt-to-GDP ratio, and warned of dire consequences if Congress didn't do something about it. Yawn.
But the panelists got off to a good start, with Alan Blinder of Princeton, former vice-chairman of the US Federal Reserve, describing the public discussion of the US national debt as generally ranging from "ludicrous to horrific". True, that. He asked and answered four questions.
First, is there any urgency (to reduce the deficit or debt)? No. The government can borrow short term at negative real interest rates, and long-term at about zero. The world is paying us to hold their money. That is anything but a debt crisis. The Fed is out of bullets, he said – referring to the fact that the US Federal Reserve had lowered short-term rates to zero and had used quantitative easing to help keep long-term rates low. So we need more fiscal stimulus, preferably spending that focuses on actually creating jobs. Amen.
(More here.)
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1 Comments:
The game changes if/when our interest rates go up. Weisbrot presents a thinly disguised argument for more government. I would like to hear his thoughts on the cost of more individual freedom and liberty, something that our government was designed to protect instead of erode.
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