There are a million things to say about this graph, and I'm pretty sure that everybody who sees it will find some way to shoehorn it into their previously held opinions. So bear with me, please, as I do that very thing.
Here's what I consider themost amazing thingabout this pretty amazing graph. It's not just that the U.S. had the shallowest recession, or the best recovery, among similar countries in Europe and Japan. It's this. We had the shallowest recession and the best recovery primarily because we (a) control our own currency and (b) used aggressive monetary policy to save the banks and lower interest rates while running high deficits.
And yet! Even as we smoked Europe and Japan in the race back to pre-recession GDP, we have actively debated undoing both of the things that clearly made our recovery superior. Weird conservatives have begged us to return to the gold standard at the very moment that an inflexible currency was dooming Europe. Normal conservatives have begged us to cut deficits even as austerity was dooming Europe.
Economics isn't like a science were you can run simultaneous experiments with control groups. But the last five years have been pretty darn close to a global stimulus experiment. Europe has been dabbling with its own 21st-century version of the gold standard while enforcing continent-wide austerity. Meanwhile, we've mostly done the opposite -- with high (if not high enough) deficits and aggressive (if not aggressive enough) monetary policy. The results speak for themselves.
Quoting the very last sentence of the piece, "The results speak for themselves." This is what is unfortunate. Results have little voice in the media today, hence little influence on national policy. Rather than just letting results speak for themselves, people need to speak for the results.
Well, by far the most interesting macro-economic 'experiment' is going on in Japan right now. The trouble with deflationary policies if there is already a high debt burden is that the debt burden becomes bigger in real terms, as nominal GDP rises much slower, or even falls (much of the eurozone is finding out this reality as we speak).
Japan is taking this bull by the horns, at least 15 years too late (which has increased the risks considerably) and are now desperately trying to get nominal GDP (which has essentially been stagnant since 1990) growing again in order to reduce real debt burdens.
The first signs are promising, but jury still out..
If GDP is increased by having the government grow and become much more expensive, but including government expenditures including all the social programs, included in the GDP, isn't that a false positive? Japan is now trying the same failed policies of the West, deficit spending and printing money. Sure, they will increase exports due to a cheaper yen, but, like in the US and elsewhere, the price/cost all this money printing and devaluation of the yen will be shouldered by the people through stealth inflation, which is theft, IMHO.
There are no magic bullets here. It's just a transfer of wealth from the people to the elite and a growth of government.
Then we see, apparently the Fed, shorting hundreds of tons of gold driving the price down. I don't think that will be the long-term result though. Historically, the price of gold seems to hold its purchasing power, more or less. No fiat currency can say the same.
If GDP is increased by having the government grow and become much more expensive, but including government expenditures including all the social programs, included in the GDP, isn't that a false positive? Japan is now trying the same failed policies of the West, deficit spending and printing money. Sure, they will increase exports due to a cheaper yen, but, like in the US and elsewhere, the price/cost all this money printing and devaluation of the yen will be shouldered by the people through stealth inflation, which is theft, IMHO.
There are no magic bullets here. It's just a transfer of wealth from the people to the elite and a growth of government.
Then we see, apparently the Fed, shorting hundreds of tons of gold driving the price down. I don't think that will be the long-term result though. Historically, the price of gold seems to hold its purchasing power, more or less. No fiat currency can say the same.
As far as illusions go, the US illusion is better than most other developed countries, see the chart above. Apart from the stimuls and Obamacare, there hasn't been any increase in public spending (see attachment), in fact, many economist now argue public spending is a drag on growth
There is a significant difference to be considered here, that being between the difference between simple government spending and government investment. Too often the latter is thrown out as the proverbial baby in the bathwater. Feeding the baby helps grow the economy. It's all about the proper diet. There are many things best done on large scale together.
'ArtM72' pid='22629' datel Wrote:There is a significant difference to be considered here, that being between the difference between simple government spending and government investment. Too often the latter is thrown out as the proverbial baby in the bathwater. Feeding the baby helps grow the economy. It's all about the proper diet. There are many things best done on large scale together.
Yes, and in a recession, some public spending goes up automatically, like unemployment benefits and food stamps. But these actually help stabilizing the economy (hence the term automatic stabilizers) and I'm not sure whether the alternative is attractive (that is, leave these people to their own devices).
Also, in recession, tax receipts fall (as income, spending, and profits fall and taxes are proportional to these), so the public deficit automatically increases.
Now that the US economy is recovering the deficit is sinking fast, which is why I was never really that worried about it in the first place.
