This creates a cycle where-by debts don’t get paid off and
still further reduces demand. Krug
argues that more government spending is the only way to get out of this
situation. The other side says we need
to remain focuses on the long-term damage to more government spending but Krug’s
point is that this long-term focus is doing innumerable damage short-term and
creating a longer term issue since nothing is getting better now.
Krug also explains that the reason there is not more
government spending is the lack of it benefits rich people who hold loans on
the rest of society and influential people who have advocated for austerity and
do not want to admit they have been wrong.
Something else he sees is that people believe if the government spends
more now to support the economy then it won’t dial back when the economy
recovers. He offers examples to refute
this. He also explains that the policies
he proposes is not only based on more government spending in down times but
paying off government debt in boom times.
He notes that of the past 10 presidencies all have the reduced debt ratio
except for the last three Republicans.
Krug is his latest column makes the point we are not in a
bond bubble. Bond prices are at historic
highs but he sees a lot of justification for this and doesn’t believe it will
change much in the current years. He
also feels stock prices are not unrealistically high.
Krug’s point through all these posts/columns is very clear –
the Fed and Obama must do everything possible now to ensure unemployment is
reduced – this means more monetary easing and government spending.
Krug has fun calling out people who said 2 years ago there
would be a US government fiscal crisis within 2 years – he points out the deficit
is falling.
Krug has more fun calling to the carpet 8 specific
economists who have been dead wrong over the past four years.
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