Good for some laughs, unless you actually believe this crap

MuyLocoNC said:

Webmasters of that site need to increase the font size and increase the spacing. Hurts my eyes just trying to read it.

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Good News: The Recession is Over!

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A little while ago, the Bureau of Economic Analysis released its wacky waving inflatable arm-flailing GDP report and proudly declared that the American economy had only shrunk by 1% in the second quarter, as long as you didn't count the extra percentage point that was tacked onto the first quarter. The stock market rallied, as the stock market is wont to do lately on any news (good or bad), and CNBC blew up its "New Bull Market" font by another four sizes. At the time, I pointed out that the aforementioned extra percentage point meant that the second quarter had actually been worse than the "consensus" projection, not better. But even accounting for a similar second quarter "revision" when the third quarter numbers are released, it's likely that those numbers will still show that GDP growth exceeded expectations, meaning that, statistically, the economy will be growing and the recession will technically be over.
Why? Well, deep within the bowels of the BEA, where an army of Miltons work tirelessly to staple their cover sheets to their TPS reports, you can find an explanation of exactly how the Bureau comes up with its final numbers. (You can also just look at their website, but where's the fun in that?) What you'll discover is that, along with consumers buying cars and Snuggies and ShamWows, another factor that feeds directly into total GDP is government spending. Now, in a mythical, fantasy-laden universe in which the federal government doesn't spend more money than it takes in (I believe most members of Congress would say that I'm describing a Saturday morning cartoon), this would pretty much make sense. In the real world, however, the feds have never heard of a "spending limit." So whenever they dive into the deficit, what they're actually doing is getting money that's nothing more than a loan from others who are willing to extend said loan. Others like the Chinese. Then that borrowed money gets dumped into the economy and counts as GDP. Man, creating growth is easy, isn't it?
The way I know that the recession is, ahem, "ending" right now is via this handy-dandy little chart:

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Tax receipts are dropping like they're hot, while spending is racing towards new records that will soon require us to make up numbers like "Congrillion." That means that the deficit is now providing for a larger amount of government spending with each passing day; in other words, the government is pumping more and more money that it doesn't actually have into the economy, and then, by virtue of the fact that government spending is considered to be part of GDP, federal economists are turning around and proclaiming, "Hey! Our GDP's a skyrocket in flight! We're so happy we might have some afternoon delight in our offices until five o'clock!"
Given the trends on that graph, it's very likely that our "official" GDP growth numbers are, at this very moment, turning into "growth," thanks to the mathematical magic that the folks over at the BEA work so very hard to maintain. This obviously has absolutely nothing to do with the real creators of growth in a normal, sustainable economy, but hell, if the statistics look good, who am I to argue? The recession is over, compadre - now go collect your unemployment check.
(For more on how the complete bastardization of economic statistics distorts what kind of effects government spending can have on the real economy, you might want to take a look at what happened during the Great Depression and Japan's Lost Decade.)

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Those Who Ignore History...

June 22, 2009
by Joe Tauke
Paul Krugman - a man who made, shall we say, a boo-boo with his suggested fix for the popping of the tech bubble - frequently argues that President Obama should be sure to keep titillating the economy past the point of early recovery, deficits be damned. Pulling out the government props too soon, Krugman insists, would only send us right back into the second Great Depression.
Perhaps he should spend a bit more of his time studying up on the first Great Depression.
Krugman's main "evidence" for his argument stems from Japan in the 90's and America in the 30's, two painful periods that eventually saw pressure mount for cuts in runaway deficit spending and an end to the constant printing of new currency. National leaders gave into said pressure, and, predictably, both economies regressed, as economies are wont to do when the government stops dumping enormous sums of money it never had into those aforementioned props. Seizing upon these obvious consequences, Krugman declares them to be proof positive that the props were actually solving the fundamental problems which had caused both economic downturns in the first place. (This is similar to his equally-dubious suggestion that when trillions and trillions of taxpayer dollars don't fail to do absolutely nothing, they must therefore be eliminating our current fundamental problems.)
For a glimpse into Krugman's perfect world, we're going to hop into a phone booth with Bill and Ted and go on an excellent adventure through history. Our first stop is the Great Depression, when unemployment spiked all the way up to just under 25% in 1933 before FDR launched the New Deal and devalued the dollar. Over the next four years, unemployment gradually declined to the "less bad" number of 15%. The ancestors of the green shoots crowd were convinced that this change (along with other "less bad" signs) meant that the economy was turning around, and FDR turned off the spigot in 1937. Unemployment jumped to 19% over the next year, and it's here that Krugman uses logic so tortured that it probably spent some time in Gitmo. With the curtains of massive spending pulled back, 1937 revealed that the "real" economy had barely improved at all since 1933. What's more, according to this handy website that's chock-full of budget data, the gradual decline in unemployment between 1933 and 1937 was matched by a gradual increase in the deficit as a percentage of GDP. In other words, to get the decline, FDR had to make up a larger and larger amount of America's overall economic activity every year - a very unsustainable pattern. Yet Krugman somehow comes to the conclusion that improvement in economic statistics is exactly the same as improvement in the economy itself. When the government stopped artificially improving the statistics, America's economy was almost as bad as ever. Some fix.
The graph at the above link also shows that the deficit was an even smaller percentage of the economy in 1938, but unemployment dropped from 19% in 1938 to just over 17% in 1939, which would imply that deficit spending was pretty unnecessary for a gradual decline in "real" unemployment. At that point, World War II began to create a lot of new jobs even before Ben Affleck and Josh Hartnett suffered through Pearl Harbor, so the numbers up to 1945 are relatively useless. Afterwards, however, Krugman would have panicked, because Harry Truman decided to turn off the spigot for good, and the spigot had been enormous during WWII. This sudden, drastic reduction in government spending would be the end of an economy in Krugmanland, especially because things were still only "less bad" during WWII despite extremely low unemployment - an economy with widespread rationing isn't exactly overflowing with prosperity. But then the damnedest thing happened. After a couple years of the predictable regression that comes when there aren't any more money dumps - during which Krugman would have been frantically pulling a Mortimer Duke and screaming at Truman, "Turn those machines back on!" - the country entered one of the greatest boom periods in history.
Before we jump back into the phone booth, there's one last person we should hear from. His name is Henry Morgenthau, and he was FDR's Treasury Secretary. This is what he said in May of 1939:
We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises ... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!

Hmmm. I wish Krugman had come with us and provided the pleasure of watching him argue with FDR's Treasury Secretary about FDR's policies. Sadly, he didn't, so on we go.
Our next stop is the Land of the Rising Sun and Falling GDP - Japan. In 1997, well into the "Lost Decade" (although it's really been the Lost Two Decades), the Japanese government cut back on its spending. Again, a predictable regression occurred, and the government rushed back into its policies. The result? The island nation's economy grew at Lost Decade rates until the current crisis hit, and Japan's GDP is now dropping like it's hot. For a second time, Krugman argues that the fact that Japanese economic statistics were better on deficit spending steroids means that the economic reality was also better. Did Japan experience some pain when its government pulled back the spending curtain? Of course, because that was the actual state of its economy. Has nearly twenty years of "stimulus" led Japan back to strong growth? Nope. It's merely prevented the country from hitting economic bottom and starting to boom again. They don't call the low-level "growth" Japan's experienced since the early 90's the "Lost Decade" for nothing. Artificially enhanced statistics simply don't equate to good times.
If you'd like to see the Japanese deficit pattern since its bubbles burst, here it is in handy-dandy chart form:

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(By the way, Ben Bernanke has been trying as hard as he can to repeat Japan's mistakes step-by-step.)
Once again, I find myself wishing that Krugman had joined us in the phone booth, so he could tell the Japanese that two Lost Decades in a row is actually a smashing economic success. Without him, however, we'll be heading to our final destination - 1923 Germany. These were the days of the Weimar Republic, which is best known for hyperinflation that made its currency almost as worthless as Krugman's articles. We're here to meet another important man of the era, Karl Helfferich, who served as Germany's Minister of Finance and Vice-Chancellor during World War I. As inflation was accelerating in 1923, this is what he had to say:
To follow the good counsel of stopping the printing of notes would mean refusing to economic life the circulating medium necessary for transactions, payments of salaries and wages, etc. It would mean that in a very short time the entire public, and above all the Reich, could no longer pay merchants, employees, or workers. In a few weeks, besides the printing of notes, factories, mines, railways, and post offices, national and local government, in short, all national and economic life would be stopped.
If Krugman had come with us, he probably would have given Helfferich a high five. In fact, Krugman wrote the first stage of the same exact argument just last week:
The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it’s déjà vu all over again — literally.
For this is the third time in history that a major economy has found itself in a liquidity trap, a situation in which interest-rate cuts, the conventional way to perk up the economy, have reached their limit. When this happens, unconventional measures are the only way to fight recession.
Yet such unconventional measures make the conventionally minded uncomfortable, and they keep pushing for a return to normalcy. In previous liquidity-trap episodes, policy makers gave in to these pressures far too soon, plunging the economy back into crisis. And if the critics have their way, we’ll do the same thing this time.
Apparently, Krugman thinks that the Fed's printing press is the only thing standing between us and disaster. Helfferich thought the same thing in 1923. By the end of that year, Germany's hyperinflation had exploded, causing the Weimar government to simply give up on its currency and create a new one.
As we pile into the phone booth for our return to 2009, a bit of reflection is in order. Our trips to the 30's and the 90's showed that the policies of endless spending and printing money didn't actually fix anything in the rest of economy - they only created the illusion that something had been fixed, an illusion that was shattered as soon as those unsustainable tactics reached their respective conclusions. And our trip to the hellhole that was Weimar Germany shows what inevitably happens if a government tries to sustain said unsustainable tactics. When crashes occur, the results of those crashes must be faced, as painful as they might be. There's no other way to get the bad parts of an economy out of its system. No amount of manipulation can change that fact. And after this excellent adventure, you should understand that while pulling out the props will cause some temporary damage, it's the single path towards a new period of real growth.
After all, you wouldn't want to ignore history.

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MuyLocoNC said:

Webmasters of that site need to increase the font size and increase the spacing. Hurts my eyes just trying to read it.

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joempp said:

Well, I'm the owner, founder, and general guy-in-charge of that site, and I'm always looking to get feedback from random visitors, so if you don't mind, could you describe ecxactly what's making your eyes hurt? The font size seems to be about the same as it is on this forum - is it more the alignment of the text, perhaps? (Don't be afraid to be negative - my number one goal is to make the site as good as it can be, and I can't do that if people won't tell me what they would change.)

By the way, thanks to TheBrutalTruth for posting those links. We're a young website, part of a business venture by myself in the desperate hopes of turning this whole thing into a sustainable web outlet for combining political news with cynicism, comedy, and pop culture references. Every little bit helps. Oh, and given the nature of this forum, you might wanna meander on over to MPP and use our search feature to look for previous pieces on the War on Drugs. You can find a lot of useful information there - like how, for example, the FBI demonstrates a strong institutional bias towards gang warfare over marijuana legalization by virtue of its own numbers. We do tackle the drug issue from time to time, and we're very much in the legalization camp.

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joempp said:

Well, I'm the owner, founder, and general guy-in-charge of that site, and I'm always looking to get feedback from random visitors, so if you don't mind, could you describe ecxactly what's making your eyes hurt? The font size seems to be about the same as it is on this forum - is it more the alignment of the text, perhaps? (Don't be afraid to be negative - my number one goal is to make the site as good as it can be, and I can't do that if people won't tell me what they would change.)

By the way, thanks to TheBrutalTruth for posting those links. We're a young website, part of a business venture by myself in the desperate hopes of turning this whole thing into a sustainable web outlet for combining political news with cynicism, comedy, and pop culture references. Every little bit helps. Oh, and given the nature of this forum, you might wanna meander on over to MPP and use our search feature to look for previous pieces on the War on Drugs. You can find a lot of useful information there - like how, for example, the FBI demonstrates a strong institutional bias towards gang warfare over marijuana legalization by virtue of its own numbers. We do tackle the drug issue from time to time, and we're very much in the legalization camp.

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MuyLocoNC said:

Well, first off, greetings Joe.

After I read your request I went back to your site and opened another window to compare the article against other sites I find to be easier to get through. It might not be the actual size of the font as much as it is the style of font, paired with how dense and compact the paragraphs seem to be. It may simply be the restricted width of the article that makes it a tough read for me. And I surf the internet and read articles and forums about 6 hours a day, so I've seen em all.

The only way I can describe it is to say it has an overly condensed, compact feel to it that made it difficult to read smoothly. Either that or I really need to smoke a fatty.

I'll be sure to visit your site often. Good Luck.

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ilkhan said:

So what does it all mean Basil?

My theory is they are inflating another stock market bubble.
That about right?

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ilkhan said:

So what does it all mean Basil?

My theory is they are inflating another stock market bubble.
That about right?

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