Krugman: Spend Now, Save Later

[Akvod]

mrstickball said:

richardhutnik said:

Akvod said:

richardhutnik said:

What exactly is the Fed supposed to do, when it has interest rates set to near zero?  Is it going to run ads that tell people to not save and to borrow more, because it is their patriotic duty?  I think it is time for people to decouple their futures from what the Fed does.  Also, maybe the Federal government can stop lying about what inflation is.  If the government can't figure out what is going on, maybe it can start by not lying to themselves.

If real deflation comes, despite them doing all this, maybe it is a sign that things are systemically broken with the economy.  I am sorry government, but I am not working now.  I can't spend to drive the economy when I have no income.  Maybe you can get me something called... a job?

How are you going to get a job, if consumers don't demand anything? If consumers don't demand, then producers don't supply.

Like I say fucking every single time and get ignored:

Firms won't demand Factor for Proudction (you, labor), if no goods and services (GDP) are being demanded. If consumers won't demand anything, who will?

What is the byproduct of the economy going global and businesses increasingly relying on foreign labor in the likes of China, India and Eastern Europe?  The end result will be an averaging of total costs across the entire system, which means the pressures downward on prices will happen, and the nature pressures are deflationary.  Tell me how you get around this outside of tariffs?

There is the need for the goods and services people can help produce to be genuinely needed in the system, or you won't get them accepted.  Maybe you can get things propped up with faux demand by the government, but that still won't be sustainable.  Factor in increases in efficiencies and productivity demands and you have X units of labor producing more, so there is less need for more labor.  Actually LESS labor is needed, which increases the spiral of labor being let go.  The past 20 years has produced a trendy mindset of increasing profits by laying people off.

See, the thing is, with the reduction of required labor for goods, it can and does result in a deflation of prices, since more goods can be produced for less money. For example, it takes less people to produce an XBLA game than a AAA title, therefore, the price is lower.

What should happen in such a scenario is that excess money should result, allowing for it to be invested in other good and service types that were not initially purchased. For example, the average spending habits of an American 100 years ago was radically different than it is today - more entertainment goods such as music, games and movies are being purchased now as opposed to then. Much of this is due to consumers having much cheaper prices for food as a result in agrucultural gains throughout the 20th century.

So the answer, really, is innovation: What technoligies can be leveraged to create new jobs for people to do. What kind of software can be developed that will require new engineers, ect. For example, in my case, I created a product that has demand that had no one filling the need, therefore its a new innovation causing new consumer spending. The problem with the US is that capital, as well as business regulations, may stiffle such productivity causing fewer jobs than there should be.

So are you saying that this recession was caused due to boredom? What has SIGNIFICANTLY changed before the housing bubble burst and credit crisis?

Nothing.

Perhaps people are simply feeling that they have a low permanent income, and that their wealth decreased due to the housing bubble burst and stock crash? And are spending less?

You're fucking claiming, that the reason why there's such low demand is simply because there's nothing people want. Bull shit. Fucking BULLSHIT. Boredom did not cause one of the biggest recessions. We've had so much innovation these past few years, technology has been increasing at an expotential rate. FUCKING BULLSHIT.