The Dying World of Keynesian Economics

Blogging from an airport lounge and on an Apple as well is new territory but the world is filled with such amazing information that I had to give it a try.

This article from The New York Times on the end of Keynesian economics in Europe is quite worth the read. There is a major shift in the world of macroeconomics before us. The practice of macroeconomic policy has changed before our eyes. Our textbooks are complete junk to the extent that they continue to peddle this Keynesian idiocy.

The article itself, obviously written by someone raised on this dying orthodoxy, merely notes what can no longer be doubted. Public spending as a cure for recession does not work. These deficits have made things only worse. Getting our fiscal house in order as the necessary condition for recovery is finally being embraced.

As a totally related matter, the front page story in the AFR is headlined, “China rate rise rattles markets”. Even in China, with all of its financial resources, there is now a clear need to reverse the spending programs that have been indulged in since the end of 2008.

Who knows what new paradigm will emerge out of this mess? I know what I think but so much of the attention has been focused on side issues like the efficient market hypothesis that it is hard to know. Behavioural economics with a large slice of the economics of happiness might become the new mainstream. Meanwhile, the classical theory of the cycle, where some serious answers may be found, will continue to be ignored as they have been since the 1930s.

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98 Responses to The Dying World of Keynesian Economics

  1. Peter Patton

    This is a brilliant point. So simple, so fricking obvious!

    “In the U.S., central bank memory is ingrained in the Depression, while in the U.K. it is being bailed out by the I.M.F.,” said Michael Saunders, an economist with Citigroup in London. “That gives policy makers different sets of priorities.

  2. TerjeP

    Europe is in a straight jacket. The eurozone countries can’t inflate their way out. And because of this they can’t borrow their way out. They could try and tax their way out of recession but even keynesians find that notion dubious. If the EU was a normal federation then the EU government would borrow and spend but with no tax powers to under write borrowing that option is limited. Rather than a change of thinking I think Europe is simply tied up by the euro and the EU tax restrictions. I think they want to be good keynesians but are forced not to be.

  3. Jc..

    Europe is in a straight jacket. The eurozone countries can’t inflate their way out. And because of this they can’t borrow their way out.

    No it’s not, at least not all. Northern europe is at the beginning of a monetary induced credit expansion brought on by the fact the ECB is forced to run policy directed to the weakest members.

    Germany GDP will fly higher. Germany is inflating .

  4. TerjeP

    p.s. Ironically in the US people take to the streets to protest because the government is spending. In France people take to the streets because the government talks of cutting spending.

  5. Jc..

    In fact before 2011 is done german GDP will register 5% growth and will be talked of as the new european economic tiger…. All brought by an inflaionary boom.

    You need to think a little harder or perhaps give up talking about economics because you really don’t know enough about it.

  6. TerjeP

    Are you claiming that price inflation causes growth?

  7. JC

    No, you dolt, I’m claiming that low interest rates, which in this case are ultra low for Germany, will induce consumer demand and in this case it could be massive as outside of the government business and the consumer are very under leveraged, which offers plenty of room for a credit expansion.

  8. TerjeP

    In any case setting aside whether or not I agree with you on the economic impact the reason Keynesianism is being abandoned in Europe is not because it is unpopular or out of favour. It is because governments have limited choices due to fiscal circumstances and institutional constraints (ie the euro).

  9. TerjeP

    Please don’t start again with the personal abuse. It’s uncalled for.

  10. JC

    What’s uncalled is that you still haven’t apologized for your abuse directed towards me and until you do i will be doing what you did to me but being fair I will only focus on the really stupid things you post.

    I don’t give a shit whether you agree with me or not as that’s neither here or there, but you don’t have any clue about monetary economics, speak about it as though you do and when you get dropped on your head you start bawling like a big baby.

    If you had bothered to look, consumer action is pacing much faster in Germany than any of the regular pundits anticipated and there is no dis-inflationary concern in Germany or the rest of the northern block, so STFU about things you no nothing about.

  11. TerjeP

    JC – you probably have access to better data than me but here is what I have from the back page of The Economist (16th October edition).

    10 year government bond rates
    Germany 2.28%
    Greece 8.77%

    3 month general rates
    Germany 0.99%
    Greece 0.99%

    The government rate isn’t relevant to consumer demand. What seems relevant to your point is the consumer rate. The figures in The Economist may be wrong or I may be misinterpreting the numbers but as it stands using these numbers I’m not seeing your point. Granted there may be a larger spread between official rates and bank rates in Greece but I don’t have that data at hand. Assuming the bank spread is larger in Greece how would you have them address this? Would a devaluation (assuming that was an option) lower this spread or attract credit?

  12. .

    “The eurozone countries can’t inflate their way out. And because of this they can’t borrow their way out. ”

    I don’t understand why you would say either of these. If they do bottom out, clear out malinvestments etc, then eventually the credit multiplier would see cash rates of 1.75% as very low – and very inflationary. They could drop it another 0.5% without looking completely crazy (ahem, but they would most probably be). You don’t need to inflate to borrow. But it helps. The ECB could offer an IMF style package to its members and sell a CDO issue!

    Shades of John Law.

    “Ironically in the US people take to the streets to protest because the government is spending. In France people take to the streets because the government talks of cutting spending.”

    The French believe in the lump of labour fallacy. They believe a 35 hour week will increase employment. They beleive that raising the retirement age will put young workers out of work. There is only a small element of truth to these ideas.

    The Tea Partiers are right about fiscal policy but do they understand monetary policy? Hopefully they’ll make an impact because every additional dollar spent is more pressure to adjust the Fed balance sheet and quantitatively ease…more.

    “In fact before 2011 is done german GDP will register 5% growth and will be talked of as the new european economic tiger…. All brought by an inflaionary boom.”

    A rock and a hard place. To fight inflation, they risk bank failures. This could contract money supply yet further.

    Are German banks in better shape? 5% growth is ahrd to envisiage if they have zombie banks hoarding capital, lending to zombie producers, hoarding resources.

    “Are you claiming that price inflation causes growth?”

    It will cause unbalanced, distortionary and temporary growth, taken from future (forced) savings.

    “No, you dolt, I’m claiming that low interest rates, which in this case are ultra low for Germany, will induce consumer demand and in this case it could be massive as outside of the government business and the consumer are very under leveraged, which offers plenty of room for a credit expansion.”

    Yes it will. it is unsettling – what happens to investment? What kinds of investment will people make?

    “In any case setting aside whether or not I agree with you on the economic impact the reason Keynesianism is being abandoned in Europe is not because it is unpopular or out of favour. It is because governments have limited choices due to fiscal circumstances and institutional constraints (ie the euro).”

    Even if all the EU had a coordinated policy, it would not work – the Euro is not a fixed rate regime.

    “consumer action is pacing much faster in Germany than any of the regular pundits anticipated and there is no dis-inflationary concern in Germany or the rest of the northern block”

    Jesus that’s worrying in a long term sense. So where are their savings going to come from? Do they have an ageing population and anti-immigration sentiment as well? Are they willing to cut spending and inefficient taxes? How are they pensions funded?

  13. TerjeP

    JC – on a personal note, and irrespective of whether it moves you one way or the other, I do apologise for telling you to “piss off”. Had I take the time I could have convened my intent more politely and with less angst. I was angry with you and strongly disaproved of your action. We seem to clash often over issues of style (and substance) and whilst I don’t believe I could work closely with you I don’t actually bear you any ill

  14. .

    I reckon Europe has four options:

    1. Reckless QE and supernationalisation of debt – ECB buys out bad debts or subsidises healthy banks and treasuries to do so.

    2. A super EU CDO on all bad debts etc.

    3. Cut spending.

    4. Sell assets.

    Repudiation would see the thing fall apart. Raising taxes would be hard since they’re almost tapped out. They don’t have the money for Keynesianism. You could say they might inflate to do it but then the QE would practically destroy their currency.

  15. TerjeP

    You don’t need to inflate to borrow.

    True. But if the markets won’t lend you any more then inflation / devaluation is one way to continue the spending.

  16. TerjeP

    Mark – I think 3 and 4 are most likely and most desirable. However they are not most likely because the Europeans have given up on Keynesian ideas and decided that selling government assetts is a good thing. But because as you imply there are only a limited number of options.

  17. JC

    1. Reckless QE and supernationalisation of debt – ECB buys out bad debts or subsidises healthy banks and treasuries to do so.

    They’re doing that now, dot. Despite German finance minister’s Weber’s plea to stop the asset purchase program the ECB said that it would continue. I forget how large it is but I think it’s about E800 billion of southern European junk sovereign bonds.

    2. A super EU CDO on all bad debts etc.

    See above

    3. Cut spending.

    That’s happening because they’re tapped out and there’s cutting back in places like Germany.

    4. Sell assets.

    Umm not sure but that could come later, as this is a slower nut to crack.

    Repudiation would see the thing fall apart. Raising taxes would be hard since they’re almost tapped out. They don’t have the money for Keynesianism. You could say they might inflate to do it but then the QE would practically destroy their currency.

    Agree on all three but as yet I’m uncertain about the destruction of the currency…

    The German/ North European consumers and strangely enough France and Italy’s are not tapped out and these were fairly unleveraged sectors. The risk is I think a major credit expansion in Europe/nothern Europe with the ECB having its hands tied unable to stop it because of the weakness on its southern flanks.

    this is what could eventually break it apart as Germany/northern Europe tell the ECB they can’t handle low interest rates.

  18. JC

    Dot

    The German bank are okish, however the real reserve in terms of spending is their high level of savings.

    We’re starting to see consumer spending perk up in Germany much to the surprise of the analysts.

  19. JC

    oops…… sorry that first bit in the last comment was not meant to be in quotes.

  20. .

    “I forget how large it is but I think it’s about E800 billion of southern European junk sovereign bonds.”

    I actually grimaced reading that. Interesting times & all that.

    I reckon the EU CDO is worth a try. Imagine the poor graduate kid who has to hustle that to fund and thrift managers in the US…

    Now would actually be a ripper time to sell off gold. This kind of political situation which creates high gold prices ultimately threaten such appreciations.

    I’ve seen stuff reporting that the Financial Times are reporting the Italians ARE selling off gold reserves.

  21. .

    “We’re starting to see consumer spending perk up in Germany much to the surprise of the analysts.”

    They’re still saving? Could be import related.

  22. JC

    I’ve seen stuff reporting that the Financial Times are reporting the Italians ARE selling off gold reserves.

    Yea, I read that too, strangely they have large gold reserve which I think may hark back the Fascist days when the finance minister of the time was a hard currency advocate. Dunno.

    Gold a very interesting play on the short side and funnily enough I went out with a hedge fund dude this evening where we talked about gold.

    He thinks we’re going to wake up one day and gold is down 600 bucks.

    It could happen under this scenario.. the US has one decent employment number and the gold bugs ignore it. Another employment stat comes out and it sort opens an eyelid just a little wider. The next month another big number shows up and gold gets crushed as people being to chew on the fact that the Fed will turn.

    This is just an opinion, Dot.. But I’m not hugely pessimistic going into next year and I think 2011 could surprise on the upside.

    It’s a myth to think that even the US consumer is totally and complete tapped out after a few years of them repairing their balance sheets.

    Corporate America is awash with cash and the M&A boom could even accelerate.

    This is just an opinion though… my own and I’m strongly positioned that way.

  23. JC

    My big theme going forward is that Germany is going to rip the eyeballs off their growth rate while US stocks take off.

    Almost every single US tech stock worth a pinch is in M&A play now.

    And I even think that commodities begin to behave as potential threat of Fed tightening sometime next year quells bullish sentiment.

  24. TerjeP

    Germany is inflating

    This isn’t reflected in the price data. Again from the same edition of The Economist (page 97):-

    CPI inflation
    Germany = +1.2
    Greece = +5.5

    From an inflation targeting perspective it is hard to conclude that Germany should have a tighter monetary setting or that Greece needs a looser setting.

  25. .

    “It’s a myth to think that even the US consumer is totally and complete tapped out after a few years of them repairing their balance sheets.

    Corporate America is awash with cash and the M&A boom could even accelerate.”

    I’m sure stuff can happen on balance sheets, the only redeeming feature of their present economy is that things are now cheap, otherwise, where are they going to get savings and capital investment from?

  26. Life on Mars

    you are gutless Sinkers moreover you have no answer to the IMF’s analysis

  27. dover_beach

    I love it when Sinkers gets attacked and he has neither posted or commented on the thread.

  28. Sinclair Davidson

    DB – I saved Homer from a Godwin’s law embarrassment.

  29. Pingback: Club Troppo » Keynesian economics dying?

  30. Jc..

    Homes

    Steve kates wrote the thread.

    Do you think you should apologize to sinc, or don’t you do apologies.

  31. John Bayley

    It’s a myth to think that even the US consumer is totally and complete tapped out after a few years of them repairing their balance sheets.

    I envy your optimism, JC.

    Alas, it is hard to see where the good news could potentially come from.

    Many State and City governments in the US are essentially bankrupt. So are the public sector pension schemes. Huge layoffs in the goverment sector are inevitable.

    Housing is crashing again, with “Foreclosuregate” adding further uncertainty about the banks’ true balance sheets; the banks are largely insolvent anyhow, but having been able to use “mark-to-fantasy” approach to accounting, they’ve been able to extend and pretend. Millions of American households are in default, and this is going to get worse before it gets better.

    Commercial real estate is a time bomb waiting to go off. Hundreds of billions of dollars worth of CRE loans cannot be rolled over, as they are miles underwater.

    Real unemployment rate is in excess of 20% (as per Shadowstats figures).

    The US share market has had massive consecutive outflows and is sustained by the Fed’s loading billions into it through their POMOs and by the HFT traders. Flash crashes are now almost a daily occurrence.

    In my opinion, the ultimate problem behind all of this is the fact that none of the reasons for the GFC have been addressed in a meaningful fashion. The can’s just been kicked down the road, with the Fed in the process of blowing the next bubble.

    In that context, I think the long term trend in gold will be maintained.

    But, like in your case, this is just my personal opinion.

    Cheers.

    JB

  32. Life on Mars

    I do like Ireland as it has had not one but THREE periods of austerity economics. In the early 80s, late 80s and at present yet it was only in the late 80s that it worked as any Keynesian would have predicted.

    It worked then because it main trading partner was in a boom, it had a large devaluation within the ERM and a large cut in interest rates.

    If we take its latest policy. Ireland had spending cuts and tax increases totalling 4.5% of GDP. ( Mark Hill laughingly called this expansionary).
    did we see Ireland recover as Steve predicts.

  33. .

    JB I think you’ve hit the nail on the head.

    Bad macroeconomics, bad microstrucutre, ageing top heavy demographics – the US needs to restructure.

    Every day they are looking more and more like Japan. Especially now since the US Congressional Democrats are proposing foreclosure moritoria.

  34. .

    “If we take its latest policy. Ireland had spending cuts and tax increases totalling 4.5% of GDP. ( Mark Hill laughingly called this expansionary).”

    Shut up Homer Paxton you imcompetent clown. You called Minesterial salaries “stimulus” and were shown up on the figures to be full of shit.

  35. Life on Mars

    no you said sacking public servants and cutting their pay was stimulatory.

    you said Ireland was indulging in expansionary policy and Poland contractionary policy.

    Yeah Mark always knowledgeable and always wrong

  36. Life on Mars

    oh I forgot our own Marky went and looked at a ratio of Expenditure to GDP. Because it had risen substantially our superb researcher said Ireland had indulged in expansionary policy.
    He did not or probably could not look behind either the Numerator or the denominator ( which had fallen!)

    That’s our Marky

  37. .

    “no you said sacking public servants and cutting their pay was stimulatory”

    As they have a lower productivity rate than the private sector, it is.

  38. .

    “oh I forgot our own Marky went and looked at a ratio of Expenditure to GDP. Because it had risen substantially our superb researcher said Ireland had indulged in expansionary policy.”

    Oh I forgot Homer you dolt that we looked at GDP growth figures and compared them budget figures, you were caught out lying.

  39. .

    Homer, hand back your degree you twit.

  40. .

    More of this Homer Paxton idiot:

    http://clubtroppo.com.au/2010/10/22/keynesian-economics-dying/

    *Moreover Ken chapter 3 of the recent IMF report shows the economic world is very very Keynesian but then Steve has never been noted to produce any evidence to backup his mad theories.*

    Um yeah sure Homer:

    http://scholar.google.com.au/scholar?hl=en&q=steven+kates+rmit&btnG=Search&as_sdt=2000&as_ylo=&as_vis=0

  41. JC

    It’s a myth to think that even the US consumer is totally and complete tapped out after a few years of them repairing their balance sheets.

    I envy your optimism, JC.

    Alas, it is hard to see where the good news could potentially come from.

    Many State and City governments in the US are essentially bankrupt. So are the public sector pension schemes. Huge layoffs in the goverment sector are inevitable.

    US has big problems, sure. I think the consumer is coming back nice and elegantly next year.

    If they furlough public sector employees I don’t see that as ruinous. In fact it a positive.

  42. JC

    Homer, hand back your degree you twit.

    Leave him with it. Coming from where it does, it basically doesn’t matter.

  43. Life on Mars

    Marky you are the idiot who said Ireland undertaking expansionary fiscal policy and Poland contractionary economic policy.

    If you had studied economics you would have never made such idiotic statements

  44. sdfc

    Mark

    That paper like all the discussions on this site ignores the central theme of the GT. That is that investment and hence the demand for labour is basically a function of the pursuit of profits. This is unlikely to occur in a deflationary environment.

  45. JC

    This is unlikely to occur in a deflationary environment.

    Ummm 19th C Britain saw land prices and general prices drop for the best part of 80 years. It was also one of the most profitable periods we’ve seen with the advent of the Industrial Revolution.

    SDFC, you know little about economics or economic history. When you post at the site you end up getting a clip over the ears running off angry at the people here throwing abuse around at us before you leave casually excusing yourself with some pathetic reason like your friends wife caught her petticoat on the front fence and you have to help release her.

  46. JC

    Actually UK land prices fell from the end of the Napoleonic wars to around 1911, which is close to 100 years.

  47. John Bayley

    “Life on Mars” indeed…

  48. JC

    no you said sacking public servants and cutting their pay was stimulatory.

    Yes it is.

  49. sdfc

    JC

    Have you got any data on UK land prices? It would be good to see the pattern and find out why. Were they rural prices?

    There was a general fall in prices in general as innovation and exploration bore fruit. I know the classicals like their land but really profits is where it’s at.

    Deflation and financial crisis is a killer to an economy with high levels of private debt. What were the private debt levels?

    One episode we know about from the 19th century was 1890s Autralia where financial crisis and high levels of private debt saw the economy enter a deep depression.

    Do you really think deflation is a good idea? Do you really want a cash rate near zero?

  50. JC

    SDFC.

    The point I’m making is that what is important is context. There are points in time when the world did fine with falling prices and other times when it didn’t. It’s a little more complex than how you present it.

    Even though it’s hard to appreciate it but we’re living in a world increasingly dominated by falling prices as an ever increasing component of what we consume, as technology becomes a larger share of our lives. I think you know the rule, right? What is it 18 months doubling of chip power and the prices 1/2ing?

    There’s nothing wrong with falling prices per se, however there is somehting deeply wrong with a material fall in the general level brought on by absolute fall in the money supply. That’s we need to worry about.

    I know the classicals like their land but really profits is where it’s at.

    Dude, land was where it was at in those times. There wasn’t a Walmart, google or a woolies. Get real.

  51. JC

    Do you really think deflation is a good idea? Do you really want a cash rate near zero?

    Well yes of course I don’t provided inflation is extremely tame and the CB is not fucking around with the money supply.

    Historically interest rates have been around 2 1/2 3% I believe which is what i think you’re suggesting by your “near zero” comment, yea?

  52. What is it 18 months doubling of chip power and the prices 1/2ing?

    You’re thinking of Moore’s Law and given some recent research in material physics today’s computers are going to perform like an old 286 processor within about 10 years.

  53. JC

    Sorry John I miss what you’re trying to say. are you saying we’re regressing?

  54. sdfc

    JC

    There is nothing wrong with falling prices as a result of innovation because that implies rising real income.

    Deflationary forces this time are being driven the financial crisis and the slump in private demand.

    The UK was industrialising throughout the 19th C there were business opportunities popping up everywhere.

  55. No, what I am saying is that there is now emerging a new physical basis for creating circuits and memory. These new structures and the increasing potential to use quantum spin for memory purposes open up computational power that will dwarf existing computational technolog by orders of magnitude. Moore’s law will be “exponentiated”!

  56. JC

    The UK was industrialising throughout the 19th C there were business opportunities popping up everywhere.

    Yea it was a veritable silicon valley in the modern context.

    The point is that land prices were are pretty decent indicator of what was happening to the general price level at the time.

    Instead of trying to kick the classicals in the teeth like you did earlier in regards to this point, I suggest you simply concede it, apologize and move on.

  57. JC

    Oh okay thanks John..

    Yea i think you’re right by the looks of things.

    An interesting perspective I read is that straight out modern technology that forms the basis of Moore’s law was running at around $US1 trillion in 08 (when i read it) and compounding at an extremely high rate per year in addition of its effects in other parts of the economy.

    It’s really interesting times.

  58. JC

    Deflationary forces this time are being driven the financial crisis and the slump in private demand.

    Define your terms, SDFC. What do you actually mean by deflation, so that we know exactly what it is you’re talking about.

  59. sdfc

    JC

    We can get into a discussion about the monetary purist definition of deflation. But I tend to look at it from the income point of view. Falling prices mean lower profits, declining business activity and a larger real debt burden.

  60. JC

    Hey Dot…

    Never doubt me… Lol.

    German GDP is going into hyper space and their Germans stocks are a huge hoover.

    Germany’s business confidence index surprisingly increased in October. The indication is that the presumed slowdown in German growth might actually not occur, with confidence at its highest level since May 2007.

  61. TerjeP

    SDFC – I’ve posted an 1800s British price chart for you but it seems to be stuck in moderation.

  62. .

    JC – do you think cofnidence is a lagging or leading indicator?

    In small doeses I’m inclined to say it leads. With a mob, I’d be inclined to say it lags – sell once it’s front page news etc.

    “That is that investment and hence the demand for labour is basically a function of the pursuit of profits. This is unlikely to occur in a deflationary environment”

    Rubbish. Britain had 400% real wages growth in the 19th century, 2-3 deflation p.a and rose from a continental rival to the pre-eminent superpower.

    Now sfdc, why do you insist on such rampant, imprudent, transparent and consistent dishonesty?

    If you’re an honest bloke, we can only assume you’re a lefty ignoramous with a chip on his shoulder that should have never of mixed with reading the crank work of Keynes.

    Because I’m such a good natured fellow, here is a start to your education young man:

    http://business.timesonline.co.uk/tol/business/article5962898.ece

    *Good deflation is the type that Britain enjoyed during the Victorian era. Prices fell for most of the 19th century, thanks to a “virtuous circle” in which higher demand led to greater profits, which led to greater investment, better productivity — mainly due to the spread of railways — and, in turn, lower prices. There was huge industrial expansion, the advance of mass production, the rise of the City of London and the advent of the large corporation as we know it today.

    In the period between 1870 and 1896, wholesale prices fell by 50 per cent, while Britain’s economy grew, on average, by a staggering 4 per cent each year.*

  63. sdfc

    JC

    I don’t have much time so this will be a quick call.

    Apologise for what? My comment about land prices was related to what was generating the decline in land prices. If it was rural prices was it related to the movement of farm labour and capital to industrial centres? Or was it in relation to the opening up of farm land in foreign places like the US, Argentina, Australia etc, reducing the price of farm produce?

    My comment about cash rates at near zero is that it is aa symptom of extremely poor financial conditions and a general lack of credit demand.

    Mark

    I think it might be you who has the chip on his shoulder. I have already commented on the economic conditions that put downward pressure on prices. That is the fall was generated as a result of hte rise in productivity due to innovation and exploration. In other words you are just restating what I have already said.

    The current situation is different and is more akin to periods where deflation was the result if financial crisis. Periods such as 1890s Australia and the US in the early 1930s.

    You seem to want to lump deflationary periods all into one basket. It might be convenient for you but it is ultimately a dead-end.

    This is incomplete but I’m being summoned and have to go.

    Thanks Terje.

  64. .

    “You seem to want to lump deflationary periods all into one basket. It might be convenient for you but it is ultimately a dead-end.”

    Bullshit.

    You said:

    “We can get into a discussion about the monetary purist definition of deflation. But I tend to look at it from the income point of view. Falling prices mean lower profits, declining business activity and a larger real debt burden.”

    You are the one who is pleading for convenience.

  65. sdfc

    Mark

    Of course it’s a dead end. Are you really arguing that the current deflationary environment is being driven by a huge increase in productivity? That’s just fantasy.

    Crying bullshit is a bit extreme isn’t it. A hissy fit almost.

    Who’s pleading for convenience? You can discuss money supply growth all you want, it’s impact on business activity is what matters. Wake up.

  66. ken n

    Is it possible by now to measure some of the effects of the stimulus is Australia? As I understand it (very broadly) Keynesian theory says when aggregate demand drop, government spending can replace declining private demand.
    What has happened to aggregate demand? What effect did the government spending have on underutilised resources?
    Did the spending on BER for instance displace or make more expensive planned private building activity?
    What happened to the cash splash? My impression is that a good part of it went into debt reduction or saving – which is what you might expect. Is this so?

    I am looking for enlightenment here.

  67. .

    “Are you really arguing that the current deflationary environment is being driven by a huge increase in productivity?”

    There is NO deflation, please stop making facts up.

    Again, more BULLSHIT from you.

  68. Sinclair Davidson

    My impression is that a good part of it went into debt reduction or saving – which is what you might expect. Is this so?

    More or less, yes. Ashton de Silva and I have some results that show the increase in savings.

  69. Life on Mars

    Yeah ,

    That record rise in Retail trade turnover was simply coincidence.

    consumers started spending when the trend was about to go negative and when consumer confidence was low.

    they didn’t spend after the cash handouts were well out of the way but consumer confidence was low.

    Mark has never understood that the measurement problem plus higher quality of products means any CPI that is lower than 1% is deflation

  70. .

    “Mark has never understood that the measurement problem plus higher quality of products means any CPI that is lower than 1% is deflation”

    Being the dolt that you are, never understood how the “hedonic” aspect of CPI was misapplied in the 1990s where Moore’s law was substituted for ACTUAL increases in computer driven productivity.

    Australia and the US have not posted inflation less than 1% all of this year.

    You dunce.

  71. Life on Mars

    Marky,
    no-one is talking about Asutralia here. We had a very successful stimulus that got us away from any problems as that.

    US has not got near 1%. Hmm CPI less food and energy has been below 1% for some time.

    Oh if you had read anything about the debated on inflation in the early 90s and why we have a target of 1-3% you would have known your Moore’s law example is not applicable.

    It isn’t just computers twit

    Japan shows anybody that periods of disinflation lead to deflation which the Fed has never woken up to.

  72. .

    “Hmm CPI less food and energy has been below 1% for some time.”

    Fudging figures.

    “Oh if you had read anything about the debated on inflation in the early 90s and why we have a target of 1-3% you would have known your Moore’s law example is not applicable.”

    No because it was applied by the BLS etc from the mid-late 1990s.

    “Japan shows anybody that periods of disinflation lead to deflation which the Fed has never woken up to”

    My God, you’re a crank, you’re actually arguing against disinflation as well?

  73. ken n

    One thing we can say for you Homer, you are absolutely consistent, completely predictable and always unsurprising.
    Trouble is, even if you were always correct, that formulation adds up to very boring.
    (My apologies, I am usually innoffensive on the blog, but here I was provoked beyond resistance).

  74. Life on Mars

    almost as boring as people here unable to get basic research correct or writing inaccurate balderdash Ken.

    sinkers actualy bans people who show up his continual inaccuracies and I see Rafe is up to speed on this too.

    Mark,

    What does any self-respecting Central bank do when inflation goes below 1%.

  75. jtfsoon

    Homer
    if I’m not mistaken, the only reason you’ve been banned is for calling Jewish people ‘Goebbels’. Try walking into Harlem and calling everyone within earshot ‘Uncle Tom’ one day

  76. Life on Mars

    No Soony get it right.
    Goebbels is a racist term.

    sorry you very poor on German history so you do not know what he did.
    it is bit like this. you state something you know is not true and do it continually.

    and no it is nothing like calling anyone an uncle tom

    and again you are wrong.

    sinkers wrote about Gillard ‘politcising’ the Afghan trip. However it was pointed out that on that very day the writer who wrote about that had NOT been told on the invitation by the Government but of course that is par for the course here.

    By way of contrast Ken at Troppo who wrote something similar owned up to be completely wrong and changed his article.

  77. .

    “What does any self-respecting Central bank do when inflation goes below 1%.”

    Show me a central bank that hasn’t created an asset bubble.

  78. .

    “sorry you very poor on German history so you do not know what he did.
    it is bit like this. you state something you know is not true and do it continually.”

    You’re the same dude who said “nothing of note” happened to German Jewry in 1938.

    “and no it is nothing like calling anyone an uncle tom”

    No, it’s much worse.

    “sinkers wrote about Gillard ‘politcising’ the Afghan trip”

    …blah blah blah…the Government invitation is precisely the point.

    “By way of contrast Ken at Troppo who wrote something similar owned up to be completely wrong and changed his article.”

    Bullshit. Link it.

  79. C.L.

    Today’s Newspoll shows the public really bought Julia’s Afghanistan smear job, hey Homer?

    Another stunning success.

  80. CL, it’s not a Newspoll, it’s a Nielsen poll. And your meaning is unclear. As Gillard has gone up in preferred PM stakes, but Labor vote has gone down, it would seem to be the case that the public has marked Abbott down over his Afghanistan performance. Which is fair enough; it may just be that the public has more common sense on this issue than most on this blog.

  81. .

    Okay Steve, why has the Afghan episode made labour voters want to give the boot to their regular joe MPs who hold no Ministry?

  82. C.L.

    LOL. Spin worthy of Homer, Steve.

    Gillard’s Labor is on an embarrassing 34 percent primary vote and the Coalition leads the 2PP as well.

    A truly stunning achievement from the Real Julia.

    No wonder Kev bought the ‘Avignon’ mansion in Canberra.

  83. .

    C.L. – that really isn’t that flashy for Canberra.

    It would have been better value if he bought something facing Parliament like on Constitution Ave.

  84. Dot: here’s the link to Ken Parish changing his post after he accepted what Coorey says (that the PM’s office did not leak the Abbott invitation.)

    As for what this poll means – I suspect nothing much at all. This is obviously still a minority government finding its feet.

    To the extent that it shows an improvement in Gillard’s preferred PM status of 3%, it probably does reflect on Abbott’s Afghanistan gaffe.

    I find it odd that CL and others seemingly take heart at a loss of Labor primary vote (if it is significant at all) when it goes over to the Greens.

  85. Life on Mars

    the pol means nothing has changed. a 1% change within the MOE is meaningless.

    Marky showing his superior research skills and knowledge about a topic he is talking about AGAIN.

    No Mark German Jews were killed before 1938 because they were Jews by the Government.
    They had other things on their mind.

    Gellately wrote tow chapters on concentration camps in Nazi Germany in his book consent or coercion to show the contrast.

  86. .

    “No Mark German Jews were killed before 1938 because they were Jews by the Government.”

    Homer. I’ve done enough of the Clozapine gag and it is disrespectful to those with alzhimhers.

    Are you retarded?

    http://en.wikipedia.org/wiki/Helmut_Hirsch

  87. Life on Mars

    duh

    Helmut Hirsch (January 27, 1916 in Stuttgart – June 4, 1937 in Berlin) was a German Jew who was executed for his part in a bombing plot intended to destabilize the German Reich. Although a full and accurate account of the plot is unknown, his targets were understood to be the Nazi party headquarters in Nuremberg, Germany, and/or the plant where the anti-Semitic weekly propaganda newspaper Der Stürmer was printed.[1]

    He wasn’t kiled because he was a jew he was killed why?

    Jews were killed before 1938 but because they were members of trade unions, Social democrats ,communist party but then so were a lot of other people.

    Are you really that stupid or is it you cannot even read articles you link

  88. .

    “No German Jews were killed before 1938″

    Right. You heard it here first.

  89. Life on Mars

    that’s right no German Jew was killed beofre 1938 because they were a Jew.

    Indeed you have given us proof of this

  90. .

    “that’s right no German Jew was killed beofre 1938 because they were a Jew.”

    Bullshit.

    Craven legitimisation of the Nazi regime and a disavowment of a right to self defence is the only thing you’ve proven, you monstrous twit.

  91. .

    “No Mark German Jews were killed before 1938 because they were Jews by the Government.”

    http://www.goodreads.com/story/show/32146-the-persecution-of-jews-and-the-testimonies-of-ordinary-germans

    Margarete Leib, a Jew, was born in 1910 and raised in Karlsruhe. Her father, an attorney and former Social Democratic Party Reichstag deputy, was murdered in a concentration camp in 1934. When describing her father’s experiences in the concentration camp in 1933, she relates how the camp soon received a commandant. The name of the commandant was Mohr, and Leib refers to him as a “very decent man,” that she is “still in contact with his wife and daughter” and their family. When asked how the commandant of the camp could be decent, Leib responds very unlike Benson by saying that many individuals were decent, and that you can’t “lump everybody” together. Leib’s notion regarding Germans contradicts the assertion that all Germans possessed a virulent and innate anti-Semitism. Harry Singer, a Jew, born in 1919 and raised in Berlin before escaping to Italy in 1939 and then subsequently immigrating to the United States, also shared Leib’s viewpoint. Singer claims that not all the Germans were bad, “the majority, yes, but you cannot condemn all of them because the majority” were bad, and asserts that anti-Semitism in Germany was there long before Hitler came to power. Singer also claims that those ordinary Germans who were indifferent to the persecution of the Jews are as guilty as the Nazi perpetrators ordered to the task themselves. “If you are indifferent to a wrong,” Singer states, “then you are part of it,” and “if you know about it and you are indifferent, then you become part of it, part of the anti-Semitism” adhered to by the Nazi perpetrators of Jews.

    Piss off you moron.

  92. Life on Mars

    you are as stupid as JC.

    listen numbskull if you wish to disagree with almost any historian on the matter do not bring up material that doesn’t back you up.

    Are you really that stupid

  93. .

    “listen numbskull if you wish to disagree with almost any historian on the matter do not bring up material that doesn’t back you up”

    I’ll ask you a second time.

    Are you retarded?

    Margarete Leib, a Jew, was born in 1910 and raised in Karlsruhe. Her father, an attorney and former Social Democratic Party Reichstag deputy, was murdered in a concentration camp in 1934.

  94. Life on Mars

    ‘former Social Democratic Party Reichstag deputy’

    I will ask again can you read.

    each time you lonk something it shows you up as totally ignorant.

  95. .

    Oh that’s right, he was killed ONLY because he was in the SPD, and NOTHING at all because he was Jewish?

    You are a moral bankrupt and mental degenerate Homer Paxton.

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