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Author Topic: Krugman declares this the Third Depression  (Read 4020 times)

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Offline VekseidTopic starter

Krugman declares this the Third Depression
« on: June 28, 2010, 06:27:05 AM »
http://www.nytimes.com/2010/06/28/opinion/28krugman.html

Quote
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

...

I know myself and others have been seeing this coming for more than a decade now. Krugman will also be speaking at the Luxembourg Income Study, showing correlation between the struggle of the middle class and economic instability. Other research is coming out showing that political stability is also correlated with the disposable income of the middle class in the US.

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Re: Krugman declares this the Third Depression
« Reply #1 on: June 28, 2010, 07:08:32 AM »
I was actually discussing something similar with a friend the other day: I don't understand how some people can be recovering and doing all right while others are still in desperate need. It hasn't felt like a recovery lately so much as just luck. I've been pretty lucky; others, not so lucky. I understand market forces and economics only superficially, but it seems to me that Congress doesn't know what to do, so they have just been doing the same thing they've always done. Fiscal responsibility is a laudable goal, certainly, but there are so many facets to that one beast that treating it like one issue is pretty lethal - and that's what I'm seeing.

Offline Shoshana

Re: Krugman declares this the Third Depression
« Reply #2 on: June 28, 2010, 07:10:19 AM »
I don't feel qualified to comment on whether we are or aren't in a depression, but I do wonder what effect a respected economist like Krugman will have on people. He should call it as he sees it, no question--but will people panic, stuff more money into mattresses and hurt the economy even more upon hearing the news? Or is there so much panic already from words like recession and depression that it doesn't make a difference?

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Re: Krugman declares this the Third Depression
« Reply #3 on: June 28, 2010, 08:38:13 AM »
Hell I'm only 27 but I saw this coming 3 years ago. all it took was the rise in gas prices to tell you something was up.

Offline alxnjsh

Re: Krugman declares this the Third Depression
« Reply #4 on: June 28, 2010, 04:35:08 PM »
I'm fiscally liberal, but also am a realist and understand that we live in a pluralistic society there are all types and we need to find common ground. However, it seems to me that States should not be hell bent on cutting services, freezing wages, and discussing the impending doom of our federal government.

I think perhaps one of the issues is that there are too many voices. We can't choose one path and stick to it.

Offline consortium11

Re: Krugman declares this the Third Depression
« Reply #5 on: June 28, 2010, 06:05:07 PM »
I never know quite what to make of Krugman. On some things he is completely right... his work debunking the idea that it was speculation and not consumption that drove the oil price boom is exemplary, his work in the early 90's on international trade is brilliant and his half-political/half-economic analysis of the health care debate and what would happen was born out by reality. On the other hand he gets some stuff incredibly wrong: his analysis of Freddie and Fanny's role in the collapse was weak... and quickly taken apart and his views on securitization are completely wrong sided.

On this I think he misses a key point. Government spending isn't the whole problem... spending and revenue are the problems. Put simply there's too much of one and not enough of the other. I'm no fan of Keynesian theory but the simple aspects of it make sense: take money out in the good times and put it back in the bad. The issue in this situation is that governments continued to put it in during the good times, running up huge deficits when they should have been cutting down spending to give themselves, in colloquial terms, a rainy day fund. As it stands... and as the ex-treasury secretary infamously put on a note for his successor in the UK... "I'm afraid there's no money left." Which leaves large scale government spending in an awkward position reliant as it is on nervous bond markets.

Offline Synecdoche17

Re: Krugman declares this the Third Depression
« Reply #6 on: June 28, 2010, 07:48:56 PM »
Which leaves large scale government spending in an awkward position reliant as it is on nervous bond markets.
But the government should still spend on a large scale even if it has to go deep into debt - unlike a corporation, a government does not need to turn a profit, nor does it go bankrupt. Government spending on job programs gives struggling people income and dignity, keeps workers from falling into career-killing unemployment gaps, and provides local tax revenue to keep municipalities and states running. When the economy recovers (I'm pegging it around 2013), *then* the government should start plowing serious cash into shrinking the deficit.

Offline Serephino

Re: Krugman declares this the Third Depression
« Reply #7 on: June 28, 2010, 08:35:14 PM »
I've been saying we were in a depression for a while.  This is definitely the worst it's been that I can remember, and it has lasted for several years.  There seems to be little bits of recovery here and there, but it never lasts.  If things stay the way they are I don't see things improving much.

Offline Jude

Re: Krugman declares this the Third Depression
« Reply #8 on: June 28, 2010, 09:32:42 PM »
I couldn't agree more with Krugman on this issue, then again I have no problem with Keynesianism.  It's worked in the past; it's a technique proven by time.  It just needs to be applied intelligently.  Sadly, we haven't been doing that, because our politicians have been hard at work trying to go down the middle of the road instead of committing to Keynesianism (largely because the American People are not committed to it).

Economists warned Obama before the Stimulus Package even passed that the dollar-circulation-turnaround-rate-thingey was much lower for tax breaks than jobs created by government spending, yet they still packed that bill full of tax cuts.  Didn't deter them because it was all about political compromise, which makes no sense strategically.

They're trying to respect Milton Freidman fanboys and implement Keynesian policy at the same time, but the two are in conflict.  Trying to do both at once, of course, leads to failure.  This is one issue where compromise just doesn't work.
« Last Edit: June 28, 2010, 09:33:51 PM by Jude »

Offline VekseidTopic starter

Re: Krugman declares this the Third Depression
« Reply #9 on: June 28, 2010, 11:06:21 PM »
But the government should still spend on a large scale even if it has to go deep into debt - unlike a corporation, a government does not need to turn a profit, nor does it go bankrupt. Government spending on job programs gives struggling people income and dignity, keeps workers from falling into career-killing unemployment gaps, and provides local tax revenue to keep municipalities and states running. When the economy recovers (I'm pegging it around 2013), *then* the government should start plowing serious cash into shrinking the deficit.

There are several options available to the US and Britain that would not increase the deficit.

1) Printing money. We've done a bit of this - it's inflationary but when faced with deflation it's the most direct option. Of course, 'inflation is a tax'.
2) Propping up healthy community banks by extending them preferential credit. This was floated by liberals and conservatives (as opposed to corporate shills) alike as opposed to the bank bailout.
3) Reigning in health care costs. Many provisions won't go into effect until 2014... this is rather too late. Getting them under control is the key factor in America's continued solvency.
4) Getting out of Afghanistan as well as Iraq and closing our foreign bases.
5) Returning to Ike-era tax policies and establishing a new WPA. Congress would have an aneurysm at the thought of a 94% tax bracket. That it was also the greatest period of growth for the average American's wealth is quietly swept under the rug.
6) Ending Chinese currency manipulation. This might happen in a couple of weeks... we'll see.
7) Removing our dependence on foreign oil, would, combined with the above, restore America's current account deficit.

Offline Asuras

Re: Krugman declares this the Third Depression
« Reply #10 on: June 29, 2010, 12:24:37 AM »
Quote from: Paul Krugman
And both the United States and Europe are well on their way toward Japan-style deflationary traps.

...

But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

The Bank of Japan has, for like...I dunno...twenty years printed money as freely as Gay Pride stickers were handed out this weekend in New York. (I was surprised to discover that unbeknownst to me one had been surreptitiously placed on my ass around Christopher Street on Sunday) Japan has way more debt than even the US does and has been running such deficits for that long that it would make Dennis Kucinich blush (relative to GDP anyway).

And I recall also that they never seem to be able to make it past the number 2 as far as their interest rates are concerned, which is as pretty much as easy as money can possibly come. And that's exactly why everyone who knows what "carry trade" means gets friends in Tokyo and takes all the free, juicy yen they can get over to some place with stupid high deposit rates like...Australia, say. So basically what happens is this: Japan prints money with the idea of promoting growth. It gets shipped to Australia to build a Toyota plant there because the deposit rate is higher. And then sometimes those yen will get invested in US subprime mortgages or Icelandic deposits and...then Japan never sees them again. And they wonder why "easy money" hasn't helped them.

So perhaps I find it perplexing that Mr. Krugman would raise Japan as a dread harbinger of what the future has in store for us, and then recommend what amounts to Japan's glorious failure of a "solution."

Quote from: Vekseid
I know myself and others have been seeing this coming for more than a decade now.

Quote from: Paladin
Hell I'm only 27 but I saw this coming 3 years ago. all it took was the rise in gas prices to tell you something was up.

I read this quite often that people "saw this coming" and the first thing I ask myself is "why did they not capitalize on their seeing this coming." Because if I could go back in time ten years from now the first thing I would do is buy a ten year at the money call option on SPX and sell it, yea, around 2007.

Quote from: shoshana
I don't feel qualified to comment on whether we are or aren't in a depression, but I do wonder what effect a respected economist like Krugman will have on people. He should call it as he sees it, no question--but will people panic, stuff more money into mattresses and hurt the economy even more upon hearing the news? Or is there so much panic already from words like recession and depression that it doesn't make a difference?

As economists go, Paul Krugman is popular. But even as Paul Krugman goes, no economist today is popular enough to start a panic.

Except for Ben Bernanke but that's because he can destroy ten trillion dollars if he wants to.

Quote from: Vekseid
2) Propping up healthy community banks by extending them preferential credit. This was floated by liberals and conservatives (as opposed to corporate shills) alike as opposed to the bank bailout.

How do you extend preferential credit without increasing the deficit?

Quote from: Vekseid
6) Ending Chinese currency manipulation. This might happen in a couple of weeks... we'll see.

Quote from: Vekseid
7) Removing our dependence on foreign oil, would, combined with the above, restore America's current account deficit.

I think on these two you must ask yourself what it costs us to get them - both in terms of our relationships abroad, and also fiscally to achieve these goals - and compare it to what we actually import from these countries.

Offline VekseidTopic starter

Re: Krugman declares this the Third Depression
« Reply #11 on: June 29, 2010, 12:57:30 AM »
You go back ten years and your first thought is a ten year bond? You're a programmer, for crying out loud. Regardless, note John Stewart's instruction for everyone to buy gold at the start of the Bush presidency. I know my own economics professor took what advantage of things he could. Me, I had 'moral' hangups. I'm not proud of that, but anyway.

Quote
How do you extend preferential credit without increasing the deficit?

Temporarily? That credit is still an asset. And I'm mostly referring to preferential as 'stop lending to junk banks'.

Quote
I think on these two you must ask yourself what it costs us to get them - both in terms of our relationships abroad, and also fiscally to achieve these goals - and compare it to what we actually import from these countries.

Their sum exceeds the current account deficit. China is losing a lot of production to Vietnam, India, the Philippines, Taiwan, Africa...

For oil, I have no idea. To me it doesn't seem like getting a leaner military or establishing say, a new WPA alongside Ike era taxes is any less magical in our current political climate.

Offline OldSchoolGamer

Re: Krugman declares this the Third Depression
« Reply #12 on: June 30, 2010, 12:00:39 AM »
What's going to happen is America is going to take a hard, nasty fall.  We may even see the dissolution of the United States itself...though most likely we will go on as a deindustrialized, hollowed-out ex-superpower. 

The problem is not the economic and energy troubles we're facing.  They're substantial, to be sure, but not death-blows...if we took the necessary remedial action.

The problem is that last part: we're not taking any remedial action.  Obama was so obsessed with his health-care reform idea he didn't seem to notice the ground shifting under his feet.  Don't get me wrong, our health system is a mess, but right now it's really not our biggest problem.  It would have been a great endeavor ten years ago, but right now, it's like rearranging deck chairs on the Titanic

Now we've got the Republicans, who believe the solution to any problem is to make the rich richer.  Trouble is, we're not in the lurch we're in now because the rich aren't rich enough.  Far from it: the rich have been making out like bandits for thirty years now.  If making the rich richer was the answer, we'd have clocked 6% GDP growth last year, unemployment would be around 4% and everything would be peachy-keen.  It's not, and everyone but Republicans can tell giving Bill Gates and T. Boone Pickens an extra LearJet isn't going to materially change anything.  When demand is crashing, supply-side economics is a clear fail.  Yet the GOP is still obsessed with it.

Then you have the Democrats, who think the answer to everything is a new government program.  That is also a wrong answer, given the levels of public-sector debt we have now.  Nothing wrong with Keynesian economics, except we've been doing it wrong.  We've ran deficits during bad times and good.  If we'd gone into this $3 trillion in the hole, you could make a case for burning off a couple trillion to get us out of this mess.  But not only are we spending money we don't have, but it's being spent on the wrong things.  Like bailing out big companies.  Some countercyclical spending, like extended UI and food stamps and tranches to state governments, makes sense, but the corporate bailouts were just a giveaway to the well-connected, nothing more.

The there's the peak oil elephant in the living room.  I'm not going to belabor this one, except to point out that we've got about 3 to 6 years, depending on how global economies recover or flounder, before this one starts to bite down.  That's not much time, especially when you're dealing with an American population divided between embracing servitude to the corporate elite and creating a bigger government.  And once oil depletion bites down, it's going to get ugly, fast.  The kinds of discussions that should be taking place, like how to downsize our society, how to grow food more locally, how to sustainably produce enough energy to keep water, sewerage and some level of electrification for essential applications going, how to manage a decline in our standard of living without creating a huge, dispossessed class having a keen sense of grievance, a ready supply of firearms, and nothing to lose--that discussion is almost unheard out there on the fruited plains.  If we're interested in this enterprise called the United States of America continuing past 2020 or so, we need to have that discussion, and quickly. 

Offline alxnjsh

Re: Krugman declares this the Third Depression
« Reply #13 on: June 30, 2010, 10:57:53 AM »
The problem is that last part: we're not taking any remedial action.  Obama was so obsessed with his health-care reform idea he didn't seem to notice the ground shifting under his feet.  Don't get me wrong, our health system is a mess, but right now it's really not our biggest problem.  It would have been a great endeavor ten years ago, but right now, it's like rearranging deck chairs on the Titanic

I don't ascribe to your doomsday theory that the US will dissolve under the current crisis. If so, then the entire planet will because we're all in the same boat. I would also point out the health care is at the center of the economic troubles. 1/4 of baby boomers will not have adequate income in retirement to afford their rising health and long term care costs, we needed to contain costs. The reform bill was pivotal in beginning to redesign what one noted author calls the "accidental health care system."

Offline OldSchoolGamer

Re: Krugman declares this the Third Depression
« Reply #14 on: June 30, 2010, 02:52:43 PM »
I don't ascribe to your doomsday theory that the US will dissolve under the current crisis. If so, then the entire planet will because we're all in the same boat. I would also point out the health care is at the center of the economic troubles. 1/4 of baby boomers will not have adequate income in retirement to afford their rising health and long term care costs, we needed to contain costs. The reform bill was pivotal in beginning to redesign what one noted author calls the "accidental health care system."

Trouble is, the health care "reform" really has done nothing to control those costs.  Insurance companies, already a big fat resource sink, will just get fatter.  That's why their stocks actually went up after the Obama plan was passed (not that most conservatives noticed in their caterwauling about how Obamacare was the end of American business as we know it).  The Obama plan does broaden the scope of coverage...but Big Insurance will just use that as an excuse to jack up premiums still further.

Until we can get through to the health care industry that it doesn't have a God-given right for its profits to go up at two to four times the rate of inflation every year, nothing will work.

And as far as my "doomsday theory," well, yes, the entire planet will pretty much be in a lurch once cheap oil runs out.  But America most of all.

Offline Serephino

Re: Krugman declares this the Third Depression
« Reply #15 on: June 30, 2010, 09:03:35 PM »
I wouldn't call it a theory.  We're turning into the next Rome.  There are a few similarities I can see anyway; like we think we own/run the world.  Every time there is a problem we think it's our job to fix it with our big military.  Right now we're trying to stamp out terrorism, which will never happen, and they really should just admit they were idiots and bring the troops home.  We have military bases all over the world.  What other country does that?

Our government is unstable.  Like Gamer said, the Republicans want to make the rich richer, and the Democrats want to spend.  They're at each others' throats over it.  Republicans (at least the ones in office or in the media) can't seem to do anything but whine, spread half truths, and drag their feet on actually fixing anything because then they would have to admit it was their policies that screwed us in the first place. 

We are lazy and greedy.  We're all only interested in our own comfort and pleasure.  We're still gulping oil like there's an endless supply because giving it up might mean giving up some modern conveniences.  I've seen people in my town get in their cars and drive one street over to get the mail!  If that person does this every day, think about how much gas she is wasting a month.  People also seem to like to leave their cars running. 

There is a huge gap between classes.  The rich are getting obscenely so, and the poor are getting desperate.  As the unemployment rate goes up there are more people that need government programs like food stamps to survive, but there is less money for it.  Growing up I never saw a homeless person, but I'm seeing lots of them now.

I think health care is important, but they fucked it up.  I understand wanting to phase some things in, but it's going to take too long, and there aren't enough regulations.  The mandatory thing pisses me off. 

If you were to go back in history and look at the fall of every empire, you will find all of these elements.  I know we like to think that since we're in a modern technological age that it can't happen, but it can.  It could still be avoided, but those in charge would really have to get their acts together and stop being two year olds.  Sadly, they don't seem to have any interest in doing that.   

Offline Asuras

Re: Krugman declares this the Third Depression
« Reply #16 on: July 03, 2010, 09:37:53 PM »
Quote from: Vekseid
You go back ten years and your first thought is a ten year bond? You're a programmer, for crying out loud.

A) option != bond
B) We were talking economics, so...the point is kind of irrelevant if I say I want to start Tweeter before...christ, how insulting is it that a 140 character text messaging system written in Ruby is worth millions

Quote from: Vekseid
Regardless, note John Stewart's instruction for everyone to buy gold at the start of the Bush presidency. I know my own economics professor took what advantage of things he could.

Still would have been better off buying the SPX call. And Jon Stewart still has his day job I think.

Quote from: Vekseid
Me, I had 'moral' hangups. I'm not proud of that, but anyway.

You have moral hangups about investing?

Quote from: Vekseid
Temporarily? That credit is still an asset. And I'm mostly referring to preferential as 'stop lending to junk banks'.

So, we'll start simple: how do you get lending to these preferred clients?

If the government does it, they have to borrow money. Deficit.

If the government subsidizes private banks, they have to borrow money. Smaller deficit, but deficit.

Quote from: Vekseid
Their sum exceeds the current account deficit. China is losing a lot of production to Vietnam, India, the Philippines, Taiwan, Africa...

I really don't care about the current account deficit. China has to cash in eventually and for exactly the reason you point out - the Chinese are losing jobs - they'll have to cash in soon. That's precisely why they're revaluing the yuan.

Quote from: Vekseid
For oil, I have no idea. To me it doesn't seem like getting a leaner military or establishing say, a new WPA alongside Ike era taxes is any less magical in our current political climate.

Pretty fucking magical I'd think.

Quote from: OldTimeGamer
Nothing wrong with Keynesian economics, except we've been doing it wrong.  We've ran deficits during bad times and good. 

The interesting thing about this argument is that - while we have been spending heavily in good times and bad - I never really see a convincing argument that where we are now is near some danger zone of debt. The 2-year treasury yield dropped to a record low last week because investors believe that the US government is a safe, reliable borrower. I can give you CDS spreads that say the same thing.

Quote from: Seraphino
I wouldn't call it a theory.  We're turning into the next Rome.

In the first century BC, Rome was the master of the Mediterranean ruled by a (plutocratic) republic. Then there was Julius Caesar, the Empire, and then the Pax Romana. About four hundred years between Scipio Africanus and Marcus Aurelius.

Then in the third century AD there was about a hundred years of civil war (the "crisis of the third century"). They got out of that because a bunch of military dictators (the "dominate" empire) took over and killed everyone that didn't agree with them. The aforementioned dictators so weakened the empire with civil wars that the empire divided in half; the western half - depopulated by civil war after civil war after civil war - was finally overthrown by someone named Odoacer who refused to call himself "emperor" and that's what we call "the end of the Roman Empire."

I don't think it had anything to do with complacency or resources; the Empire was structurally flawed, unsuited to ruling such an area as an autocracy. It's not like the medieval kingdoms that followed five hundred years later were any less complacent or any more responsible with the resources around them. At any rate we haven't had two or three centuries of civil war and military dictatorship, so I'm disinclined to agree that we're the next Rome in any sense.

Offline Jude

Re: Krugman declares this the Third Depression
« Reply #17 on: July 03, 2010, 10:13:22 PM »
If you were to go back in history and look at the fall of every empire, you will find all of these elements.  I know we like to think that since we're in a modern technological age that it can't happen, but it can.  It could still be avoided, but those in charge would really have to get their acts together and stop being two year olds.  Sadly, they don't seem to have any interest in doing that.   
I know exactly what you're saying.  If only the Ancient Greeks didn't drive their gas guzzlers to the Parthenon every day for Kidney Dialysis whilst ignoring their dwindling middle class, we'd all be speaking Latin today.

Offline Serephino

Re: Krugman declares this the Third Depression
« Reply #18 on: July 03, 2010, 11:17:05 PM »
There are differences.  And of course, modern technology makes situations a bit different, but it was the similarities I was pointing out.  We aren't having civil wars, but we've had that war in the Middle East how long?  I was in high school when it started.  What's our national debt now? 

I really love it when people say we need to study History to learn from it, but ignore what's right in front of their faces out of arrogance.  Modern technology and Science won't save shit.  Each and every single empire that has ever fallen had the best technology of the time.  Did that save them?  When a nation tries to do too much at once, or extend its influence too far, it's doomed to implode eventually.  It may not happen in the near future.  We might limp along for a while longer.  We might even see a little recovery for a short while.  I don't know when, or how, but it's coming.  If History teaches us nothing else, at the very least we should learn that nothing is forever. 



Offline VekseidTopic starter

Re: Krugman declares this the Third Depression
« Reply #19 on: July 04, 2010, 12:27:35 AM »
A) option != bond
B) We were talking economics, so...the point is kind of irrelevant if I say I want to start Tweeter before...christ, how insulting is it that a 140 character text messaging system written in Ruby is worth millions

If you have a hundred million to blow on hardware and gateway fees to start with, sure. Starting Blogger (which the Twitter founders originally did) and/or Wordpress would be the easier route. You could scale earlier and better than either of them just by looking into event driven webserving first.

I don't find it insulting, personally. The people in charge of social networks ~10-20 years from now are going to hold an enormous amount of power, and many people with an enormous amount of money right now are very well aware of this.

You can have a say in how that plays out, or bitch about those who do.

Quote
Still would have been better off buying the SPX call. And Jon Stewart still has his day job I think.

John Stewart probably likes his day job, and:
Quote
In 2005, Stewart purchased and moved into a $5.8 million 6,000-square-foot TriBeCa loft penthouse in downtown Manhattan.

He's not exactly hurting.

Quote
You have moral hangups about investing?

Had. There's an entire section of our culture that mistrusts investing. It wasn't until about a year and a half ago before I realized the magnitude of the rift between my grandparents (who are incredibly rich) and my parents over it. So I was told not to invest when I had money, or skip off on the whole dot bomb craze when I could have made a killing (and I was very well aware of just what was going on with them), etc.

Young and stupid.

Quote
So, we'll start simple: how do you get lending to these preferred clients?

If the government does it, they have to borrow money. Deficit.

If the government subsidizes private banks, they have to borrow money. Smaller deficit, but deficit.

Or simply act as a facilitator, securing loans provided straight to the banks, which seems to be the majority of what we're doing now.

Quote
I really don't care about the current account deficit. China has to cash in eventually and for exactly the reason you point out - the Chinese are losing jobs - they'll have to cash in soon. That's precisely why they're revaluing the yuan.

You're not worried. There are members here who are still wondering if they're going to be able to eat next month, one of them in Wal Mart's home town of all places. Yes, China will eventually have to play ball. How soon is soon?

And the disconnect between the Chinese elite and their working class is one of the worst in the world. This won't be the first time they've been pressured into revaluing their currency.

Quote
The interesting thing about this argument is that - while we have been spending heavily in good times and bad - I never really see a convincing argument that where we are now is near some danger zone of debt. The 2-year treasury yield dropped to a record low last week because investors believe that the US government is a safe, reliable borrower. I can give you CDS spreads that say the same thing.

I think many of the people arguing this sort of thing experience debt as a trap, rather than something that aids in liquidity. Another subtle culture division.

Quote
I don't think it had anything to do with complacency or resources; the Empire was structurally flawed, unsuited to ruling such an area as an autocracy. It's not like the medieval kingdoms that followed five hundred years later were any less complacent or any more responsible with the resources around them. At any rate we haven't had two or three centuries of civil war and military dictatorship, so I'm disinclined to agree that we're the next Rome in any sense.

We're not. A lot of the comparison begins with the aspirations of the Founding Fathers, which did echo Rome in many ways down to the plutocratic intent of the Senate.

For us to resemble Rome's fall, you need to look at points of genuine division that involve class separations within individual generations, which doesn't look like it's occurring - if anything, the exact opposite is happening, successive generations are more interconnected and thus more united. But right now we're facing a period of intense suck, so obviously those all end with worldwide chaos and turmoil.

There are some nifty similarities, however. America's finesse with water management, for example.

Offline Jude

Re: Krugman declares this the Third Depression
« Reply #20 on: July 04, 2010, 02:45:56 AM »
There are differences.  And of course, modern technology makes situations a bit different, but it was the similarities I was pointing out.  We aren't having civil wars, but we've had that war in the Middle East how long?  I was in high school when it started.  What's our national debt now? 

I really love it when people say we need to study History to learn from it, but ignore what's right in front of their faces out of arrogance.  Modern technology and Science won't save shit.  Each and every single empire that has ever fallen had the best technology of the time.  Did that save them?  When a nation tries to do too much at once, or extend its influence too far, it's doomed to implode eventually.  It may not happen in the near future.  We might limp along for a while longer.  We might even see a little recovery for a short while.  I don't know when, or how, but it's coming.  If History teaches us nothing else, at the very least we should learn that nothing is forever.
Technology changes everything.  You can bet that if the United States ever falls apart (and it most likely will) what happens in the aftermath will be very different than what happened in the waning days of the Roman Empire.  The existence of Atomic Weaponry pretty much assures that.  If you thought what happened when the Soviet Empire collapsed was bad, just wait, there was another world power around to keep some semblance of order with the defecting Nuclear Scientists and Russia managed to contain things to some degree.  If America ever evaporates, I'd be worried about them taking the rest of the world with them.

But back on topic... Our pressing problems aren't like those the Roman Empire faced.  The energy crisis, reigning in environment devastation, breaking the health care cost curve--all of that can be solved or at least lessened by potential technological advancements.  The ideas are out there too, it's just a matter of waiting for them to be harnessed by the best and brightest amongst us.  One thing no one seems to realize, is that problems are not solved unless they reach a certain threshold of danger where tolerating the status quo is no longer an option.

Relying on oil was always a pain in the ass, but it wasn't until the price got gouged ridiculously several summers ago that searching for a solution to the energy crisis became in vogue politically again.  At the time there was a magazine (I want to say Wired) with a cover of a smiley face made from oil and a caption beneath it that read something like, "How an increase in oil prices is good for America."  The editorial explained that unless we reached a certain point of expense, people would be complacent and willing to continue playing substantial amounts of money (in deceptively small installments) to dictatorships and nations with questionable allies.  Once it becomes a large enough problem, then the willpower to solve it will amass and research to do becomes more economically viable.

Looking through this prism, it isn't at all surprising that the United States hasn't solved much of anything since World War II, because since then, our problems have been relatively few.  You may say the Vietnam war was a big deal, well lets take a quick look at statistics from that era:

Total of US Armed Forces Worldwide:  8,744,000
Deaths from the Vietnam War:  58,236
Injuries from the Vietnam War:  153,452

This comes out to around 2/3s of a percent of our Armed Forces were killed in Vietnam, and the total number of wounded plus killed comes out to less than 3%.

Now lets take a look at the Iraq War for some perspective:

(as of May 28, 2010)
Total number of US Armed Forces:  3,385,400
Deaths from the Iraq War:  4,404
Injured during the Iraq War:  31,827

This comes out to around 1/9 of a percent of our armed forces killed in Iraq (and by the way we have a hell of a lot fewer than we did during Vietnam), and about a percent for the total number wounded and killed.

Both sets of numbers reveal that the wars we've gotten ourselves into really weren't that costly, and things aren't anywhere near as bad as people think they are.  America has been complacent because times have been good.  They've taken a bit of a turn for the worse, but think of it is an auto-correction in the timeline of our country to get us back on course.

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Re: Krugman declares this the Third Depression
« Reply #21 on: July 04, 2010, 08:54:20 AM »
We're not. A lot of the comparison begins with the aspirations of the Founding Fathers, which did echo Rome in many ways down to the plutocratic intent of the Senate.

For us to resemble Rome's fall, you need to look at points of genuine division that involve class separations within individual generations, which doesn't look like it's occurring - if anything, the exact opposite is happening, successive generations are more interconnected and thus more united. But right now we're facing a period of intense suck, so obviously those all end with worldwide chaos and turmoil.

There are some nifty similarities, however. America's finesse with water management, for example.

Thank you. I'm tired of feeling like the only person saying "We're not Rome... we're not Rome" for similar reasons. It's going through the academic community and the pile of armchair historians you find in the undergrad population as well as through internet folks. Cannot count how often one of the Engineering majors I've had to take classes with has gotten all pompous and historical about it... And it's always guys. Why is it always the guy engineers? Especially since it's usually the electrical engineering majors, not the civil engineers...  ???

Offline OldSchoolGamer

Re: Krugman declares this the Third Depression
« Reply #22 on: July 05, 2010, 12:26:28 AM »
But back on topic... Our pressing problems aren't like those the Roman Empire faced.

I agree.  Well, mostly.  There are some parallels between America and ancient Rome...but also some major divergences, too.   

Quote
The energy crisis, reigning in environment devastation, breaking the health care cost curve--all of that can be solved or at least lessened by potential technological advancements.

Erm...maybe.  You could also make an argument that technology is driving some of these problems.  The energy crisis?  10% of all electricity used in America is used to power the Internet.  Environmental devastation?  Also to an extent an outgrowth of technology.  Consider the plastic garbage patches in the ocean, DDT and other toxic pollution, pollution from old computers and electronics, etc.  Health care costs?  The bleeding edge of technology is darned expensive.

And no, for the record, I'm not advocating Luddism.  More like playing devil's advocate.  I don't think we can just rely on technology to fix all these problems.  It's going to require policy changes and some central planning and coordination.  Further technological advancement certainly has a role to play.[/quote] 

Quote
The ideas are out there too, it's just a matter of waiting for them to be harnessed by the best and brightest amongst us.  One thing no one seems to realize, is that problems are not solved unless they reach a certain threshold of danger where tolerating the status quo is no longer an option.

Trouble is if you wait to change course until the danger is staring you in the face...well, ask the helmsman of the Titanic how well that one worked out.  The trouble with waiting for the market to solve a problem like oil depletion is that the market has a rather myopic view.  It only sees two or three quarterly statements ahead.  Understand that, even if we had an alternative to oil already researched and economically viable right now, we'd be talking a decade or more to retrofit the infrastructure of America (power plants, generators, cars, trucks, airplanes, etc.) to run on it.  Let's look at cars alone.  There are approximately 250M registered cars in America.  Let's say it costs $500 and five man-hours of labor to retrofit each car to run on New Energy.  (I think most engineers would agree that's an almost Pollyanna-ishly optimistic scenario.)  We're talking a cool $125 billion.  A more likely scenario would be that a New Energy car would cost $25,000, thereby raising the total cost to replace the U.S. automobile fleet to $6.25 trillion.  We live in a country where one of the two political parties has no problem with people starving to death rather than $33 billion being spent on extended unemployment benefits.

And that $6.25 trillion only covers passenger cars.  Not trucks.  Not buses.  Not trains.  Not airplanes.  Not power plants.  Not generators.  Nor the infrastructure that services any of these things.  We're talking well over half the annual U.S. GDP.  Money that we'll have to come up when an oil crash is staring us in the face, when we're in a depression, already overleveraged.

Good luck with that.

Offline Revolverman

Re: Krugman declares this the Third Depression
« Reply #23 on: July 05, 2010, 01:21:28 AM »
An Oil Crash is kinda self-defeating since if its too pricey to burn oil and we find other ways to make power/move vehicles, etc, etc, then more then 3/4s the demand for oil vanishes.


honestly, the dumbest thing we can do with oil is burn it.

Offline VekseidTopic starter

Re: Krugman declares this the Third Depression
« Reply #24 on: July 05, 2010, 01:53:41 AM »
An Oil Crash is kinda self-defeating since if its too pricey to burn oil and we find other ways to make power/move vehicles, etc, etc, then more then 3/4s the demand for oil vanishes.

honestly, the dumbest thing we can do with oil is burn it.

The way you put it makes it seem like it will just magically happen. That's a bad trap to get into.

It's not something to be ignored, the production figures show North America supplying only half of its own needs in 2030 with current trends.

So in order to make it self sustaining, a combination of reduced consumption, alternative sources and additional exploration need to make up half of our needs, and the process needs to begin returning results in five or six years.

Buy a bike. I am.

Proclamations of doom are ludicrous and counterproductive. But so is ignoring it.