Hacker News Reader

Comment by carmelo5 | Hacker News Reader

Sorry, but even Paul Krugman, as well as every other Nobel Laureate in economics, supported TARP. A collapse to the financial system would've wreaked havoc to the economy (ala The Great Depression). "All we have gotten now" is a stablization to the system that didn't collapse, and didn't cause massive bankruptcies and unemployment.

View on HN

"If we don't do what I want it will be the Great Depression" is an unfalsifiable claim with little evidence to back it up.

The main evidence it has supporting it is the a "post hoc, ergo propter hoc" claim (there was a bank crisis before the great depression). But this ignores a huge number of other factors which also contributed to the GD - massive ecological disaster, huge drops in trade caused by Smoot-Hawley et al, new anti-competitive laws and onerous regulations, new technology making millions of workers obsolete.

The claim that a banking crisis caused the GD is popular mainly because banks are easy to model. It's kind of the economic equivalent of looking for your keys near the streetlamp rather than in the dark alley where you lost them.

The overwhelming cause for the Great Depression was tight monetary policy, and trying to let the market "sort it out" without providing any stimulus (e.g., QEs). When you have a highly illiquid economy with no spending or consumption, you get no growth; that factor prolonged the Depression. That conclusion is supported by economists across the aisle, from Paul Krugman to Milton Friedman, to everyone else in between -- including all living Nobel Laureates in Economics. That premise is the Fed's main justification for the recent QEs.

The government did not try to let the market sort it out. That is simply revisionist history.

Please go read up on the New Deal as well as the Hoover administration (Hoover doubled the budget deficit in an attempt to spur recovery, resulting in FDR calling him a Socialist during the election campaign).

That's absolutely untrue and intellectually dishonest. The Feds, as indicated by Friedman and Krugman, were tight with the money supply. Because money wasn't flowing, the economy wasn't running. Please go and read the causes for The Great Depression on any economist's website (or even Wikipedia).

http://en.m.wikipedia.org/wiki/Causes_of_the_Great_Depressio...

I didn't dispute that the feds were tight with the money supply. I disputed the claim they tried to let the market sort it out. They didn't.

Among other things (since you want to take a 100% Keynesian view), the government created sticky nominal wages and prices (with minimum wages and price floors). Hey, remember why Keynesian economics claims we need to print money?

This is getting a little absurd. First, I'm specifically referring to the Feds in its tight control of the money supply during the Depression. They restricted the money supply. If you have another term for what the Feds did (note the difference between the Feds and the federal government), then so be it.

Loose monetary policy during a drought is not just supported by Keynesians (who really emphasize more expansionary fiscal policy), and is definitely not a 100% Keynesian view. Monetarists, for instance, support it widely. As do other economists. Friedman supported it, as does Bernanke, Greenspan, Summers, Mankiw, et al. To claim that an expansionary monetary policy is 100% Keynesian is just absurd and distorts the positions of other economists.

Let me repeat: I didn't dispute the existence of tight monetary policy. I disputed that the federal government tried to let the market sort it out. Also, when you said "Feds", I assumed you meant people in the Federal Government (including the Federal Reserve, but not limited to it). Typically the Federal Reserve is simply shortened to "the Fed".

Lastly, if you read your own link (to the Wikipedia article on causes of the GD), you'll discover that there are many proposed explanations (including, for example, protectionism).

That's it for me.

Never mentioned is the fact that the government had a fixed exchange rate for gold, yet was inflating the dollar from 1914 on. By 1929, the dollar had nearly halved in value, yet there was the same exchange rate for gold. What this essentially means is you could double your money by exchanging cash for bullion.

This precipitated a run on exchanging dollars for gold, a run that continued to collapse banks until FDR suspended exchanging dollars for gold.

Do you even attempt to check your statements, or do you believe an appeal to consensus will simply make people listen to you?

Nobel laureate: http://en.wikipedia.org/wiki/Joseph_Stiglitz

Dissention: http://www.telegraph.co.uk/finance/recession/5045421/Geithne...

Wait and see. We're not even close to out of the woods yet.

GDP is up. Dow is back to 12,000. Banks are liquid. Output is as high as it's ever been. Krugman and friends, not to mention the more conservative economists, do not share your views. I really don't understand the populist sentiment.

Most of that is government stimulus which cannot last forever. The banks are definitely not liquid. They are basically insolvent. You can tell this because they don't mark their assets to market.

The government stimulus (QEs) can last forever because we have a monopoly on our currency. The Fed can print as much money as it wants. Of course, too much stimulus causes inflation. Banks have the cash, and are lending.

Now I agree with you. The bank bailouts were supported by just about every economist with a brain. They worked, not ideally, but well enough, and better than some expected.

But the populist sentiment comes from that the lowest bracket of society is still not out of the recession. The recession is over in the technical meaning, but tell that to the down-and-out and see how they react. It's also not the case that the financial system is totally repaired, though thankfully it looks like the perverse incentives in home mortgages are going away, at least.

Well, GDP growth doesn't exist in a vacuum. It's spread throughout every demographic. Every demographic is consuming more than it's ever consumed (highest GDP). Now, I'm assuming you might mean high unemployment as your main complaint. We have more funds now than we've ever had to subsidize unemployment checks without affecting inflation rates. The unemployment checks are going out to many and are in abundant supply. Contrary to what you might hear, the most disadvantaged brackets are being taken care of.

>"the lowest bracket of society is still not out of the recession"

If by the lowest bracket you mean "the bottom 80%", then yes.

Reply on news.ycombinator.com