Kasz216 said:
Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
Akvod said:
Kasz216 said:
Which would be great... if you know... the vast majority of economists didn't disagree with you.
Like I said. You have a bad teacher. |
So you deny that increasing G cannot shift the AD curve?
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It can't shift it? No. That the shift will be near useless and lead to large problems in the future, yes?
If you'll go back to New Keynsian beliefs... the most dominate school of Keynsian's at the moment... you'll notice they argue what everyone else argues.
Using expnasive monetary polcies will only lead to inflationary expectations and only store up problems for the future.
You know... like what caused the US Recession. You put off minor recessions and it leads to a big recession.
Your own quoting of Keyenes puts it best "In the long run we'll all be dead." Just with an added "So who cares if our children or grandchildren are screwed." Old Keynsian economics is all about living in the now at the expense of the future.
We're paying the price for that kind of thinking. New Keynsians believe more in altering the inflation rates and minor expansionary policies that lead to longterm benefits... usually only when it's a HUGE external shock.
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Did you take a look at the graph? We're trying to get back to the original price level, not beyond it.
The reason why there was high inflation in the 70s was stagflation, and to combat that either requires lowering inflation but raising unemployment, or vice versa. But yes, there were also a lot of times when government engaged in inflationary policies when we didn't need to, and then the Fed had to cause a recession, in order to keep that inflation in control.
I still don't see how that denies using inflationary policies when there is an aggregate demand shock. I mean, there was fucking deflation in the great depression. Because of disinflation, using expansionary policy is a no brainer. It's stagflation that's a fucking headache.
But yes, there are also long term effects, as well as short term. There's crowding out, there's increased government debt, etc.
But that's why we engage in CONTRACTIONARY policies during EXPANSIONS. We fucking raise taxes, and cut government spending when the economy is doing good. That too, is an Keyensian belief.
Fine, let me even say this:
I am a counter-cyclicalists. I believe that getting the economy in long term output is the number 1 priority. I believe that by engaging in contractionary policy, we will prevent future recessions, or at least mitigate their deepness, and that with inflationary policy, we can prevent a recession from growing deeper, and get the economy back in the shortest and least cost.
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Have I looked at the graph? Yes.
Does that matter? No. .
Does it matter that we're just trying to get back to square? Once again, No.
Being a counter cycalist is fine... the problem is... you aren't doing it right. Even New Keynseian's disagree with you. Your beliefs aren't congruent with economic theory. Counter Cyclaists believe in letting recessions pass without doing anything UNLESS it's cause by huge external forces.
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What do you do when "moderate" monetary policy isn't enough? Well, since you don't want the government to lower the rate even further, or engage in government spending, you prioritize those things over getting back to the long run.
But in fact, have you looked at my graph? If you really just wanted to get stabalized inflation, you will be advocate coutner cyclical, because allowing a recessionary gap is allowing DISinflation.
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There has never been a case where moderate monetary policy is enough. You may as well ask what do we do when water is suddenly poisonous to people.
Pretty much 80% of economists at least disagree with you. Even the Keyneseians. Get over it. You can't have nothing but pure economic growth with their NEVER being a negative cycle.
You can't cancel out negative cycles because it just pushes the problem back, and causes huge recessions, like this one. You CAN prevent external problems because they are external.
There will ALWAYS be recessions, you can't hide them or try to mitigate them within the "bullish" years so there is only positive growth and less positive growth. There will always be and in fact needs to be times of actual shrinking.
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Counter cyclical only tries to make the business cycles smaller. Smaller booms, smaller crashes. It doesn't try to prevent them. That's why there's another aspect of contractionary policy. If we contract the economy, there'll be a smaller effect of the MPC, and when there is a reduction in C+I+G, that effect will be smaller, and there'll be a small recession, which will recover quicker and with less need for fiscal and monetary policy.
So... I don't think you're understanding my point. Counter cyclical obviously acknowledges the business cycle... I mean, without its existence it itself cannot exist...
You can never "cancel" negative cycles, once they already happen. You can make them last shorter, and prevent them from going deeper though. And this recession was caused because the government engaged in inflationary policies when the economy was already in equilibirum, no, probably inflationary gap, and because of the labor economic situation there (beyond what I learned in principles class).
And it's laughable to say that recessions are "external". Supply shocks can happen naturally, demand shocks can happen naturally.
Again, yes, there will always be recessions, it's in the very definition of "counter-CYCLICAL" (business cycle). You can mitigate them, if you accept that G, I, C is a part of GDP, and that either fiscal or monetary policy can increase them.
It's inevitable to have shrinking, but it's a lot less COSTLY to engage in counter cyclical policy, than to let there be a huge recession, like the great depression. I mean, Friedman agrees that the Great Depression could have been mitigated or prevented with discretionary monetary policy.
The long run is a very long, and painful process. It's absolutely crippling, to have a Great Depression. Crippling. You have a reduction in human capital due to poor education. You have a reduction in population probably. You have increased crime. You have liquidation of capital. You have a liquidity trap due to deflation (disinflation->deflation). You have a reduction of investment.
I mean, we got out of the Great Depression because we had the greatest increase in government spending, World War II.
You don't even need to ask an economist when you ask "What got us out of the great depression?"
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Your missing the point. You CAN'T mitigate the bad times. You can't. By making them shorter you are simply pushing harder times in the future. All contracting booms does is make less economic growth happen.
The "You don't have to ask an economist what got us out of the great depression" line is exactly MY point.
You actually do. You are using the economics of Laymans.
The fact that you don't know what "external" depressionary forces are shows this.
What Economics class are you being taught Macro 1002?
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But it's a lot easier to pay off those debts when the country is actually productive, than to simply go through years of unproductivity.
It's just that the politicians refuse to engage in contractionary policy, and have a budget surplus.
But to go against that is to go against our democratic system of government, and to simply say that there should be no discretionary policy whatsoever. The best that can be done is educating people like you, that expansionary and contracitionary policy work, and to vote accordingly.
*sigh*
I'm absolutely confused at what you're saying. I'm not denying many of the things you're saying. Yes, there are negative consequences to fiscal policy, which make monetary policy a much more favorable approach. First off, it's controlled by the Fed, which is much more removed from politics.
However, what do we do when the interest rates are 0? What monetary policy can we use? If the goal is, close the recessionary gap, but monetary policy doesn't work, you can only turn to fiscal policy. To not do so is to simply go back on your word and say that balancing the budget is the biggest priority.
Look at the EU. It's a fucking mess, because each country can't accordingly change the monetary base (monetary policy), and because they had that stupid fucking rule to balance the budget (fiscal policy).
*sigh*
Let's say that we want to balance the budget. So, what happens when there is a demand shock? Output goes down. What is output? INCOME. Income goes down. Income tax receives less money. You must raise the flat tax, or lower government spending. Both are contractionary.
Do you understand? If you prioritize the fucking budget, you are going to depress the economy even fucking more.
I mean, you're calling me a Layman? All you're simply trumping is that "We have to pay debt later"
Well no shit Sherlock, but the point is that, that cost, is a lot less than fucking depressing the economy even further by trying to fucking balance the budget. The loss to productivity will be huge.
It's by engaging in counter cyclical policy that we can have smaller business cycles (think of two waves, both going around one line [long run growth rate]. One of huge proportions, and one that's very small), which means that we'll not have to use as much, if any, fiscal policy, and we will be having more taxes and less government spending.
I mean, the model is right there. It's fine if you want to dispute the model itself, but all you've been saying is "80% of economists" "Layman", etc.
You've yet to adress whether or not fiscal policy and monetary policy can or cannot return an economy to its original output and inflation levels, incorectly stating that it causes inflation. In a demand shock, inflation isn't the concern. Don't refer to any recessions not caused by a demand shock, but a fucking supply shock. Just look at the graph, and tell me, given you accept the model in common economics textbooks, how expansionary policy, given a recessionary gap, causes inflation, and doesn't close the gap.
Yes, there will be higher debt, and lower investment in the future as a result. Yes there is crowding out, yes this raises the national debt. But in that case, you have to say that you will rather depress the economy further, than get it back to equilibrium and let consumer confidence and investment pick up on their own again.
I've taken Macroeconomics at the University of Michigan, and Neo-Keynesianism is being practiced and advocated by economists hired by the United States of America.
