http://www.nytimes.com/2009/06/01/opinion/01krugman.html?_r=1&partner=rssnyt&emc=rss

 

Thoughts?

What a hack job.. Lots of blame to go around but this article is ridiculous..

Like every other thread here in P&R. Some won't believe it, some will. Some won't want to hear it, some will.

Krugman, as do many, let's his politics get in the way of his economics (although at least this is in the opinion section of the paper).

 

Has anyone been to the mall lately or to a restaurant. Both are packed on the weekends. Restaurants are still running 60+ minute waits for tables on Friday and Saturday night. Sorry but that is a far cry from a depression. Yes the economy is in a recession, and it has slowed, but comparisons to the early 30s are ridiculous and political in nature.

 

The debt fell under the Clinton years due largely to the massive productivity gains from Reagan's cutting taxes on R&D spending by corporations. The profits realized by those corps increased the revenues into the treasury.

Krugman, as do many, let's his politics get in the way of his economics (although at least this is in the opinion section of the paper).

 

Has anyone been to the mall lately or to a restaurant. Both are packed on the weekends. Restaurants are still running 60+ minute waits for tables on Friday and Saturday night. Sorry but that is a far cry from a depression. Yes the economy is in a recession, and it has slowed, but comparisons to the early 30s are ridiculous and political in nature.

 

The debt fell under the Clinton years due largely to the massive productivity gains from Reagan's cutting taxes on R&D spending by corporations. The profits realized by those corps increased the revenues into the treasury.

 

I think the point he is trying to make is that the bubble that has obviously and painfully burst was created in 1980 . Agree or disagree?

Though well-written, it is a well-known fact that Krugman loathes Reagan as evidenced in his many NYT articles over the past several years. And I'm ok with that. But even the most brilliant of people tend to let their personal bias' interfere from time to time. I'll have to spend a little more time digesting this article and doing some research before I come to any conclusions about its merit.

Though well-written, it is a well-known fact that Krugman loathes Reagan as evidenced in his many NYT articles over the past several years. And I'm ok with that. But even the most brilliant of people tend to let their personal bias' interfere from time to time. I'll have to spend a little more time digesting this article and doing some research before I come to any conclusions about its merit.

 

THAT's what I'm looking for. I knew that the combination of the author and the newspaper would be a challenge.

 

BTW, Krugman takes no prisoners with the current admininstration either. I've read a few of his pieces in Rolling Stone and online and he thinks this administration is not doing enough.

I think the point he is trying to make is that the bubble that has obviously and painfully burst was created in 1980 . Agree or disagree?

Disagree. Trying to pin a bubble on a president or a specific policy is a pure politics. The economy is cyclical and attempting to say a republican or a democrat is to blame or is to be commended is spurious at best. There are waaaaaaaaay to many variables in this equation to attempt to pin it on one policy or person. Like I stated in my post, I can only say that it is my opinion that Reagan's decision to cut taxes on R&D spending led to huge productivity gains due to tech companies innovation. I can not say that for sure because there are several other variables in that equation. But is largely attributable? I think so.

There was no question that many segments of the economy flourished under Reagan's presidency, but the then-record deficits he piled up didn't do a whole lot of for this country's long-term economic health.

 

I also agree with the premise that presidents get way too much credit and/or blame for the status of the economy.

I think the point he is trying to make is that the bubble that has obviously and painfully burst was created in 1980 . Agree or disagree?

 

Disagree. The de-reg of the savings and loans started with the Carter administration agencies in an effort to provide Americans financing that they had to deal with during the soaring energy costs of his administration. While the bubble may have burst at the beginning of 1980, the problem giving rise to it was created a few years before. The legislation itself corrected what Krugman calls a "modest problem." Absurd. I lived in California during the 1980's and what you guys may have found to be a "modest problem" was a disaster there and on Wall Street. We called ourselves fortunate if we could get a 16% loan.

 

The current problems, as have been detailed on here many times before, with attached proof, began during the Clinton Administrations removal of regulatory standards in order to make loans available to Americans who had no money. Those regs were put in place by Reagan.

 

Krugman loathes Reagan and loves to shoot from the hip in the hopes that anti-Republicans will take a shot at him. We know better.

Disagree. The de-reg of the savings and loans started with the Carter administration agencies in an effort to provide Americans financing that they had to deal with during the soaring energy costs of his administration. While the bubble may have burst at the beginning of 1980, the problem giving rise to it was created a few years before. The legislation itself corrected what Krugman calls a "modest problem." Absurd. I lived in California during the 1980's and what you guys may have found to be a "modest problem" was a disaster there and on Wall Street. We called ourselves fortunate if we could get a 16% loan.

 

The current problems, as have been detailed on here many times before, with attached proof, began during the Clinton Administrations removal of regulatory standards in order to make loans available to Americans who had no money. Those regs were put in place by Reagan.

 

Krugman loathes Reagan and loves to shoot from the hip in the hopes that anti-Republicans will take a shot at him. We know better.

 

So Clinton's admin wasn't just guilty of keeping the problem rolling along? De-reg in the 80s didn't contribute greatly?

 

The current problems, as have been detailed on here many times before, with attached proof, began during the Clinton Administrations removal of regulatory standards in order to make loans available to Americans who had no money. Those regs were put in place by Reagan.

 

 

The party got started under Clinton and kept rolling under GWB. The party was for whole real estate engine from banks to lenders to Fannie and Freddie to credit companies to individuals. All feeding off the rising home prices and cheap credit bubble. It became a global mess with the introduction of derivatives (packaging mortgages into new 'instruments') and unregulated insurance methods (credit default swaps) - and of course the bust of the bubble.

 

The chart from the website shows that things were changing under Reagan but the party got into full swing around 2001.

 

http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/

So Clinton's admin wasn't just guilty of keeping the problem rolling along? De-reg in the 80s didn't contribute greatly?

 

No. I believe the current problems were caused in chief by the removal of administrative regulations by the Clinton Administration. De-reg unbundled the provider, not the product.

No time right now to read the article, but my experience with Krugman is that, while once a brilliant (labor?) economist, he has become a political hack.

 

As for Reagan causing the bubble, I digress. First of all, IMO, the bubble is caused by the Executive Branch using the Federal Reserve as a political tool. Interest rates are the free markets way of adjusting to consumer demand. If consumers are demanding the save now and spend later, the interest rate will decrease (due to an increase in loanable funds), causing long-term investment projects to become more profitable. If consumers are demanding to spend now, then interest rates will increase (due to a decrease in loanable funds) but current consumption will remain high.

 

The Federal Reserve, however, attempts to give us high consumption and high capital investment projects. This is by constantly lowering the interest rate. However, since the market interest rate is a response to consumer demand, artificially lowering it doesn't reflect the consumers' wishes. By trying to keep consumption and capital spending above their natural level, you cause a bubble, which eventually must burst.

 

This constant lowering of rates is due to a tremendous amount of pressure from the political party in power, who aims to keep unemployment and inflation low for purposes of political motivation. Worse so, every time the fed lowers interest rates (by purchasing bonds from the banks using printed money), this causes each and every one of the dollars we hold to become worth less real money. Each American is forced to invest in risky markets to try to provide for their own retirement due to the fact that the dollar has lost so much value (i.e. since the Fed's inception in 1913, it has lost 95% of its value), which causes a plethora of problems.

 

So if the article is saying that Reagan is the only President who lowered interest rates AND the bubble didn't burst for 20 years, then perhaps he is right. Unfortunately for Krugman's political views, this isn't true.

 

Furthermore, the spending under Reagan was A) caused by congressional Democrats retracting on a deal made with the President to limit spending B) tremendous military spending after Carter spent less on the military than any President we've ever had (although I wouldn't mind someone checking this number) and C) is still less than a lot of Presidents has a % of GDP; for example, non-military spending under GWB was highest as a % of GDP since FDR (hey Republicans, don't you just LOVE a large Federal government :lol:).

 

So I have a difficult time placing all the blame on Reagan, who is probably the greatest President of his century. Then again, it would probably help if I actually read the article :lol: (P.S. I sure do feel like LN lately- I can't keep my posts under the length of a John Steinbeck novel)

I think the point he is trying to make is that the bubble that has obviously and painfully burst was created in 1980 . Agree or disagree?

 

What many fail to look at is the 'business cycle". There are good economic times and bad economic times. This cycle can be helped when regulation by government is reduced and when taxes are reduced, which Reagan did. Or government can increase taxes and government regulation, like increasing mileage requirements or not alowing us to drill for our own oil. Yet there are a myriad of other factors that enter into the ups and downs of the 'business cycle' that the government has no contol over. A major reason why government should play a limited role in business, protect the consumer, but do not try to run business.