Krugman lying again (Iceland)

[hugolp]

So forced by the circumstances (their currency hyperinflated or almost hyperinflated depending on your definitions) Iceland had to repudiate the debt (tehncially it didnt, it refused to acknowledge the debt). This is what most economist of the austrian school of economics recommend and basically is the classical solution: If someone can not pay the debt it has to default on it. But keynesians and others defend the idea that its better to get rid of the debt through inflation promoting ideas like systemic risk and Too Big To Fail, to justify their rejection of defaults. In fact, Krugman defended the bank bailouts in the USA although he had some (sensible I must say) complains at the way it was done.

Well, unsurprisingly the country that did not follow the keynesian ideas and just refused to pay the debt, Iceland, has been the first country to get out of the depression and the unemployment is going dow to normal levels. The situation is still dire, but all the indicators are improving.

But Krugman has no shame to vindicate this contradiction of his ideas as a triumph, lying to his audience about who defends default as a solution.

hxxp://krugman.blogs.nytimes.com/2011/09/01/iceland-exits/

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[johnyj]

Export based country recovering normally comes from consumption based country in deeper debt

In an island model, A can only save money and get surplus when B's consumption is higher than his production

If A and B are both in debt, they are consuming more than they can produce, their productivity will have to lift to cover the gap
If A and B are both getting surplus, either market is stocking their products or trashing their products (thus taking a capital loss)

[HappyFunnyFoo]

Anyone who thinks we should've just let the entire financial system across the globe collapse has very little grey matter up there... imagine a bank failure rate of 60%.  Imagine unemployment of 30% or more.  We actually have GDP growth - the Austrian alternative is for GDP to contract by up to 40% over the course of a decade, which is a pretty reasonable figure had there been no stimulus or emergency rescue package.

By the way, do you enjoy your $8.50/bitcoin price?  4 TEH LULZ NUBS

Gonna go troll some more posts now.

[cypherdoc]

Anyone who thinks we should've just let the entire financial system across the globe collapse has very little grey matter up there... imagine a bank failure rate of 60%.

i would love to see that.  the more parasites removed the better.  who has the most leveraged amounts to lose?  Banks.  the avg American would be way better off in the long run.

Imagine unemployment of 30% or more.  We actually have GDP growth - the Austrian alternative is for GDP to contract by up to 40% over the course of a decade, which is a pretty reasonable figure had there been no stimulus or emergency rescue package.

WAY over stated.  FUD.

By the way, do you enjoy your $8.50/bitcoin price?  4 TEH LULZ NUBS

Gonna go troll some more posts now.

yeah, thats what you are; a troll.  just wait til when the price explodes.

[johnyj]

As I know, some VIP of the investment banks already run away several months before the financial crisis shaped, so let the bank fail will only punish those left-over bank employees, which will impact heavily on consumption too

[amincd]

Anyone who thinks we should've just let the entire financial system across the globe collapse has very little grey matter up there... imagine a bank failure rate of 60%.

Nothing would have been destroyed. The banks would have gone bankrupt, and been bought by new owners. The shareholders and creditors would have been wiped out, but the economy would have had the same productivity as before, just with better ownership, and hundreds of billions of dollars of capital not being fed to lumbering wasteful giants.

[ineededausername]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

[NghtRppr]

Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?

If the economy can collapse outside of war, famine or plague, isn't that a sign that it needs replacing?

[cypherdoc]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

actually i would do very well.  i have no debt and i've saved lots of cash just waiting for the thing to implode so i could buy assets on the cheap.  do you have any idea how many prudent savvy investors have been waiting for this as well?  lots i would guess.

[hugolp]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

There are sensible ways of managing a bankruptcy of a government regulated banking system like the one we have today. Sweden did it and it worked very well for them.

Also, its important to notice that its not only important to let bankrupt institutions fail, but that removing legal tender laws and allowing peole to pay taxes in whatever they earn is necesary as well, because it would allow for the creation of alternative financial system that could channel savings towards new productive investment.

[johnyj]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

actually i would do very well.  i have no debt and i've saved lots of cash just waiting for the thing to implode so i could buy assets on the cheap. 

Are you sure that your savings in the bank will not be wiped out if that bank fails? Or you stored greenbacks in your basement 

[Lolcust]

I am not an economist, but wouldn't cash devalue in a global economic collapse as well?

Or did cypherdoc mean "gold brickses" when he said "cash" ?

[hugolp]

I am not an economist, but wouldn't cash devalue in a global economic collapse as well?

It depends on the type of collapse. But usually long term the cash will devaluate.

The thing is that after the pop of a bubble all the contraction of credit (credit crunch) produces deflation increasing the value of cash. Then governments counter-act by printing money but they want to be carefull as to not hyper-inflate and also it takes a while for the new money to appear in the market. So usually after a bubble you see some deflationary presures (a period where cash appreciates) followed by a period of inflation where the deflationary presures have disappeared and the country has to "pay" the money printing (a period where money devaluates).

So the answer is not white or black. It all depends on the moment. Its the same for everything, there are periods to be in cash, there are periods to be in gold and there are periods to be in stocks.

[CurbsideProphet]

Well, unsurprisingly the country that did not follow the keynesian ideas and just refused to pay the debt, Iceland, has been the first country to get out of the depression and the unemployment is going dow to normal levels. The situation is still dire, but all the indicators are improving.

I'm not a Keynesian but I see this comment made rather often.  One problem with Keynesianisn is that we have never tried it. In the business cycle, government is supposed to deficit spend during the bottom part of the business cycle and pay it pack during the good times. We have only borrowed and borrowed and never paid it back. This is not Keynesianism.

All we have is perpetual debt growth.

[hugolp]

Well, unsurprisingly the country that did not follow the keynesian ideas and just refused to pay the debt, Iceland, has been the first country to get out of the depression and the unemployment is going dow to normal levels. The situation is still dire, but all the indicators are improving.

I'm not a Keynesian but I see this comment made rather often.  One problem with Keynesianisn is that we have never tried it. In the business cycle, government is supposed to deficit spend during the bottom part of the business cycle and pay it pack during the good times. We have only borrowed and borrowed and never paid it back. This is not Keynesianism.

All we have is perpetual debt growth.

Well, thats not true. According to Krugman there has been two real keynesian stimulus plans in history. The one the USA made at the Great Depression and the one Japan made after their housing bubble pop. You can see the restults of both, the depression kept going.

But one has to ask if the keynesian plan is even posible. Because if you give the politicians the power to go into debt and spend because all this academics are justifying it, well, surprise surprise, the politicians will go into deb and spend. The theory is wrong at the basic levels, but even accepting it, one should conclude that its impossible to enforce.

[Gabi]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

Why a global economy should collapse without wars, famine or other disasters?

[Steve]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

Why a global economy should collapse without wars, famine or other disasters?

Over leveraged malinvestment and indebtedness enabled and encouraged by a flawed ideology.

[NghtRppr]

Wait wait hold on.
Do I actually hear some of you proclaiming seriously that we should just let all the banks fail and the entire global economy collapse?
"The more parasites removed the better?"  Are you fucking serious?  Would you yourself even survive if the global economy collapsed again?

Why a global economy should collapse without wars, famine or other disasters?

Over leveraged malinvestment and indebtedness enabled and encouraged by a flawed ideology.

But I thought the cure for heroin withdrawal was more heroin? Am I doing it wrong?

[Hawker]

Krugman has consistently supported the Iceland approach including bailouts. 

Here's a 2008 post from him; seems absolutely consistent with his latest: http://krugman.blogs.nytimes.com/2008/09/30/the-850-billion-bailout/

Normally when you accuse someone of lying, you provide a link to both posts.

[hugolp]

Krugman has consistently supported the Iceland approach including bailouts. 

Here's a 2008 post from him; seems absolutely consistent with his latest: http://krugman.blogs.nytimes.com/2008/09/30/the-850-billion-bailout/

Normally when you accuse someone of lying, you provide a link to both posts.

Yes, and I did. Because I am not accusing Kruggy of what you are saying I am accusing him. You might want to read what I wrote again.