Richard Koo AT THE 2011 Argentine Central Bank Conference

[sysFail81]

spot on Koo, all this nuts with their XIX century economics just don't get it

[jeffreyspiers]

@cybersteve2008 Koo is indeed saying that any spending is better than none. And true, politicians are likely to give kickbacks to their friends, but that is a whole other problem. Smart governments would use this opportunity to invest in education and infrastructure, the underpinnings of a viable economy. But for that to take place, voters would need to demand as much from their politicians, which would require a recognition that what is needed is good, not less, government.

[grahamstull]

@edgarvibar,

The govt doesn't have any money to spend, Edgar. It just spends other people's tax money, or their future tax money. In the case of QE, it is taxing people's saving through inflation.

I don't doubt that there are some legitimate market failures which merit govt intervention in the form of a start-up subsidy.

In general though, anything with "green" in the title is likely to be a scam to divert tax money into uneconomic, environmentally unsound and unsustainable schemes.

[edgarvibar]

As the situation in the US continues to get worse while minorities (mostly black families) are losing their homes to foreclosure, it is just a matter of time before social unrest ensues. With another round of Quantitative Easing (QE3) in the offing despite Bernanke's caveats, it will drive oil, food and other commodity prices induced by excess liquidity speculation. Time is running out for the US.

[edgarvibar]

The Japanese people are not stupid to buy JG bonds. They are simply giving their vote of confidence to their government and rallying behind their economy. The 2 lost decades of Japan, from historical economy's perspective, is due to integration of China into the global supply chain suppressing prices and bringing about intermittent deflation in the US. While Elizabeth Warren and Robert Reich of the US have been warning of decling middle class income, exact same reason is in play.

[edgarvibar]

What Koo's advocating is a stopgap measure to keep the GDP up by way of massive government spending in the absence of household and corporate spending. This is not sustainable unless the economy gets fixed, as he admits. Massive spending is meant to buy time for the likes of EU and US to get the fundamentals right. It's not meant for long term. Or just kick the can along and risk the consequences of inaction, which is exactly what's happening in EU and US.

[lucky88375]

@jeffreyspiers

Yields are low because the obedient Japanese people and institutions are stupid enough to give their savings to the government. Considering the ever widening budget deficit, the declining savings rate and the aging population, the Japanese people are assured of an impoverished future as their government will never be in a position to return their savings with anything but devalued yen.

[WillOrng]

@lucky88375 Private sector net savings will fall, consumption will increase, depending on what happens to current account balances, the Japanese deficit will need to and actually be smaller.

[lesboerin]

@lucky88375 Sure, 120 million people are stupid and obedient? You can fool some people all the time, and all people some time. It is however impossible to fool all the people all the time. In particular as they are also able to read the Internet and comments on YouTube and your point has been remarked many times before. Please try to come up with a better explanation, that is not so easily disproved.

[lucky88375]

@lesboerin

The savings of the Japanese people have been squandered by their government, the Japanese people will end up poorer as a result, but like all the other Keynesian clowns out there, you probably believe that, after 20 years of fruitless spending, all the government of Japan needs to do is spend a little more. No wonder the world is in such a mess.

[lucky88375]

Considering Japan's level of public debt, Koo has offered no permanent solution here. Japan is teetering on the edge of bankruptcy after 20 years of Keynesian nonsense. It has a household savings rate that has been in sharp decline since 1998 and a population that's rapidly aging, but Koo thinks all that needs to happen now is for business to just borrow, yeah right. Borrow and do what with it - there is more than enough overcapacity in the world, thanks to the US bubble machine.

[WillOrng]

@lucky88375 There's overcapacity and mass unemployment because the monopoly currency issuer's aren't net spending enough money providing the real effective demand and funds to enable the weak/ill private sector to de-leverage/save and keep sell all the goods and services the economy can at fuller capacity, the economy is being run too cold, too little money life blood. Dollar Monopoly and Understanding Modern Money/Monetary Theory understand this and the real economy solutions needed.

[AnniesEggs]

This is a good analysis. It's a pity that this ground has to be gone over back and forth again and again. That Koo and others have to do this is an indicator of the paucity of economics and politics in the USA and Europe.

[cybersteve2008]

Koo delivers an impassioned defense of Keynesian spending by government. Koo's problem is that he thinks spending, any spending, by government is good. He skates right past the problem of government spending putting money in the pockets of their cronies, and of undermining markets by bailing out losers. He says that the economy would collapse without this spending. Well fine. What he doesn't seem to understand is that this economy (the FIRE economy) NEEDS to collapse. It is unsustainable.

[DavidAKZ]

@cybersteve2008 I wonder why SK wanted to post this then !

[cybersteve2008]

@DavidAKZ That is exactly what I was wondering too and what got me to post my comment. I would have valued Steve's commentary and critique of Koo's presentation. I hate it when he expects me to think for myself. :-)

[AnniesEggs]

@DavidAKZ

Steve Keen's post on Debtwatch of 31/01/2009 called "The Roving Cavaliers of Credit" refers.

[AnniesEggs]

@cybersteve2008

I don't think Keynesians need to provide a solution to the cronyism of political and economic elites. Keynesians do have a set of policy initiatives to address the present macro-economic situation. I'm currently reading Stiglitz's "Freefall" and there is a number of reforms suggested there in addition to counter-cyclical macroeconomic. His analysis deals with issues of market failure in addition.

[lucky88375]

@AnniesEggs

Stiglitz is the Keynesian clown who was advising Greece (search YouTube for: Euro currency crumbling? part2 (09feb10))

He and the rest of his banker friendly ilk are behind our problems, so cannot be relied upon for solutions.

[AnniesEggs]

@lucky88375 "Banker friendly" is simply not an accurate description of Stiglitz.  It's also not an accurate description of many Keynesians most especially of those - who don't come to Keynes through Hicks, e.g. Keen. I also don't consider Keynesian a term of abuse. Austrian, monetarist maybe.

[grahamstull]

@cybersteve2008

Excellent comment, Steve.

The point Keynesians keep missing is that - okay, yes, there is a multiplier - but that just means we should have been more careful in not creating the bubble to begin with. Koo seems to forget that Japan's problem began not in 1990s, but back in the early 80s, with the credit bubble. If the only solution is to re-create the credit bubble all over again,its time to pull the plug on the system and create a sustainable monetary policy architecture.

[edgarvibar]

@grahamstull - Koo's not advocating another round of quantitative easing where the market will be flooded with excess liquidity. He is proposing that government spend more money as the spender of last resort for projects like green technology, rebuilding US highways and creating jobs. They may sound artificial but they get the ball rolling and create a whole cycle of business activity. The QE2 and now to be QE3 are lazy ideas of US Fed of applying liquidity to solvency problem.