Ed Balls

Wheezy_2

From Laura W.'s links:

Krugman:

Evidence has accumulated that the lessons of the past remain relevant, that trying to balance budgets in the face of high unemployment and falling inflation is still a really bad idea

Stiglitz:

It is the classic error made by those who confuse a household's economics with those of a national economy.

If you have a household that can't pay its debts, you tell it to cut back on spending to free up the cash to pay the debts. But in a national economy, if you cut back on your spending, then economic activity goes down, nobody invests, the amount of tax you take goes down, the amount you pay out in unemployment benefits goes up – and you don't have enough money to pay your debts.

Now as to who is more credible: George, Danny & the Tory cheerleaders on MSE....or two Nobel prize winning economists...it's a tough one :think:

chewmylegoff

Labour tried this approach from 1997 to 2010. Borrowing loads of money to "invest" is not much use if the resulting growth from the spending er I mean "investment" is lower than the total debt accumulation. The economic miracle was nothing more than false accounting.

It's a shame the Tories don't have the guts to make swingeing cuts and are continuing to increase spending in real and nominal terms. More interested in a second term than sorting anything out.

Generali

HAMISH_MCTAVISH wrote: »

I think her argument is that less growth leads to a larger deficit.

And it clearly does.

All other things being equal, that is perfectly true. However borrowing to fund current spending just brings consumption forward from tomorrow to today. It fixes nothing unless there is a multiplier effect which brings us to your next point.

HAMISH_MCTAVISH wrote: »

The question then becomes would stimulus spending, done in the right way, create a multiplier effect into the wider economy, kick starting growth and ultimately reducing deficit spending.

I think it could, but as always, the devil is in the details.

When Keynes was writing (and indeed the late C19th economists whose work he built on) welfare was tiny or non-existent. If someone lost their job, their consumption disappeared. That is simply no longer the case. People are already paid for doing nothing in good times and bad.

The trouble now is that many Governments are in debt up to their eyeballs and ran deficits in the good times (or at least didn't pay down debt). It's simply counter-productive to borrow at ever higher rates to prop up a bloated, inefficient public sector. The multiplier effect (if it still exists in any meaningful way which is a moot point) is swamped by the higher costs of borrowing.

hallmark

Wheezy wrote: »

From Laura W.'s links:

Krugman:



Stiglitz:



Now as to who is more credible: George, Danny & the Tory cheerleaders on MSE....or two Nobel prize winning economists...it's a tough one :think:

I don't understand your point (& I suspect you don't either)

We haven't cut back on spending. Historically spending is at an almost all-time high.

Does that inconvenient fact ruin your argument a bit?

Wookster

LauraW10 wrote: »

The Labour Party were right. All the coalition have done is rack up vast amounts of debt and put millions on the dole.

Who knew? Well the following are just a few....


Paul Krugman

http://www.guardian.co.uk/politics/2010/oct/22/paul-krugman-condemns-spending-review

Danny Blanchflower

http://www.newstatesman.com/blogs/david-blanchflower/2011/11/nothing-economics-european

Joseph Stiglitz

http://www.independent.co.uk/news/uk/politics/osbornes-first-budget-its-wrong-wrong-wrong-2011501.html




Useless Tories.

I feel sorry for you Wookster having to be a cheerleader for the government. At least one of the coalition needs to read an economics text book......

My god, where do idiots like you come from?

chewmylegoff

Wookster wrote: »

My god, where do idiots like you come from?

39 Victoria Street, London, SW1H 0HA, I should think.

cogito

Listening to Ed Balls is like an arsonist complaining about the fireman.

LauraW10

And yet what’s happening in Britain now is that depressed estimates of long-run potential are being used to justify more austerity, which will depress the economy even further in the short run, leading to further depression of long-run potential, leading to …
It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.
And the truly awful thing is that Cameron and Osborne are so deeply identified with the austerity doctrine that they can’t change course without effectively destroying themselves politically.
As the Brits would say, brilliant. Just brilliant.

http://krugman.blogs.nytimes.com/2011/11/30/bleeding-britain/

LauraW10

julieq wrote: »

Mind you we are paying less to borrow than Germany, so someone thinks we're on the right track.

Oh don't worry Julie the bond vigilantes will turn their sights on the UK just as soon as they've made a packet in Europe....

LauraW10

Generali wrote: »

NURSE! She's out of bed again.

"Insults are the arguments employed by those who are in the wrong" Jean Jaques Rousseau