It's the early 1930s all over again!

Revolution of CG posted a video claiming that 2009 is like 1979 in terms of economics and blaming Obama for being a repeat of Jimmy Carter. As an economist I felt compelled to dispel this vision in a video reply.

Our current problem is a liquidity trap and deflationary pressures caused by a burst consumer debt bubble, not inflation and a Federal Reserve trying to fight inflation. In the 1930s things started to get better when we hired the unemployed for public works projects like WPA, CCC and TVA. The late '30s also saw a "Great Compression" where income inequality was sharply reduced.

The Reagan revolution not only made growing inequality and median income stagnation possible, but it also created the financial conditions for debt bubbles to form, leading to today's woes. If you want to fix the economy, the answer won't come out of Ayn Rand or Milton Friedman. You're better off looking to Krugman, Stiglitz or Reich.

Category:

News & Politics

Tags:

• bonneromics
• conservative
• liberal
• reagan
• obama
• hoover
• carter
• 1930s
• 1970s
• inflation
• deflation
• inequality
• unions
• new
• deal
• FDR
• WPA
• CCC

[anryth]

sry to say but your wrong. maybe they didnt tell you this while you where in school but in the real world, keynesian economics does not work. our problem is not deflation, the cure is deflation, our problem is inflation. taking money out of the economy and then putting it back in all the wrong the places. i dont think you understand economics very well, artificially propping up an economy with massive deficits is unsustainable.

[KarlBonner1982]

@anryth If you're interested in the real "real world," I suggest you actually look at the numbers. Inflation is almost zero, which is sign of a demand shock. If supply-side issues were the problem the inflation rate would be higher.

Trying to stimulate the economy by cutting spending WILL be counterproductive in a nasty way.

[KarlBonner1982]

@anryth One additional comment. Most of the economists you describe as Keynesians have long ago accepted the limitations of traditional Keynesian fiscal theory - namely, that it only works well in the kind of deflationary liquidity traps that existed in the 1930s and late 2000s. If fiscal stimulus really was futile in all situations, you'd think the economics curriculum would have figured this out by now! It's BECAUSE of real-world evidence that the theory isn't completely dead.

[MrKemskee]

Yes like 1930's except we are no longer on a gold standard, dollar is world reserve currency, record deficits, debt is bought out of fear not confidents ....

[anryth]

@KarlBonner1982 the Keynesian theory is futile in all situations, it didnt work in the 30's and it isnt working now. the reason why it isnt dead is because politicians like its ability to justify giving themselves more power. at least the 30's was a deflationary depression so prices fell along with the economy. the inevitable new great depression (and eventual collapse of the dollar) will be a hyper inflationary depression and prices will be all over the place.

[anryth]

@KarlBonner1982 im assuming your looking at the CPI numbers for inflation, which is a mistake. that would be like standing on train tracks, seeing a train coming, and saying your not going to move until you see the caboose. by that time its too late. if anything the fact that the CPI is staying stable shows that there is inflation. the price of gold and the dollar index tell the whole story, if you think there is no inflation out there then you are in for a surprise.

[kipptumor]

Revolution of CG is no authority on anything but maybe pork rinds and monster burgers.

[ComradeSephiroth]

It is indeed possible to have a highly unequal society with a stable growth pattern, but only if there are no debt bubbles. The problem is that when the bottom 90 percent's income growth rates lag behind the per-capita rate, it will become a political issue unless the working and middle classes can have at least the veneer of growth available. And making it possible for people with stagnating incomes to take out more and more debt is an excellent way to do just that.

[ComradeSephiroth]

It's not that he couldn't comprehend, it's that he's so caught up in the notion that his Hayekian economic attitudes MUST be infallible and thus he can't stomach a rational debate with any opposing views and resorts to yelling instead. At least Jimmybox makes an argument which, while it doesn't explain everything, makes sense from a rational positive economic perspective.

[Da55Moose]

Revolution obviously couldn't comprehend what you said, and you go against his crap so no luck for you.