Please

[Kurt_and_Hunter]

Read these two entries:

http://krugman.blogs.nytimes.com/2009/02/04/about-that-deflation-risk/

http://krugman.blogs.nytimes.com/2009/02/04/shock-and-oy/

Please recognize the import of the information and ideas conveyed.

Thank you.

[donco6]

1. "But, but . . . Krugman's a hack! He hates Obama!"

Blah blah blah.

The Obama cheerleading around here is preposterous. These articles sound a valid warning that should be heeded - by both parties. Sadly, what I expect is that - at the mere rumour of opposition by the Republicans - the Dems will pull everything "stimulating" out of the bill and leave tax cuts and bad bank bailouts.

[Kurt_and_Hunter]

4. Tax cuts and bad bank bailouts aren't the trouble (I wish they were!)

It's scale.

Here's a good starting point, in my opinion:

$500 Billion - repairing the banking system
$500 Billion - Infrastructure
$500 Billion - relief - state grants, unemployment, poverty programs, etc.
$500 Billion - consumer debt refinancing
$500 Billion - VERY short-term tax relief (like tax years 2008-2009 only)

And a whopping tax credit for purchase of existing, not newly constructed, homes.

(The numbers aren't anything specific. Just noting that the overall thing should be over 2 trillion and those things are all priorities)

[EraOfResponsibility]

5. I'm sick of being critized for supporting my President

[Uzybone]

10. It went right over your head

[donco6]

11. Enlighten me. n/t

[BootinUp]

2. I hope Obama reads Krugman nt

[Mojorabbit]

13. So do I nt

[chill_wind]

3. K & R And from the Dept of WTF?

that he linked to:

http://yglesias.thinkprogress.org/archives/2009/02/department_of_wtf.php

[EraOfResponsibility]

6. and I'm also sick of Krugman running his god damned mouth

if he won't join Obama's administration and yet he keeps putting him down.

[Lilith Velkor]

8. Too bad about that pesky First Amendment thingy.

:eyes:

Nobody's forcing you to read anything he writes. Get a fucking grip.

[Doremus]

7. The comments on your second link are excellent.

Have to admit though, I didn't understand a word of the first link.

Care to interpret at a kindergarten level? :)

[Kurt_and_Hunter]

9. Essentially...

The last time we saw this kind of decline in output was the early 1980s during the recession Paul Volker induced (probably correctly, though it was a terrible recession) to wring inflation out of the system when core inflation was driven down from 10% to 4%.

But we are seeming a similar level of contraction in an already economy that had almost no inflation to begin with, suggesting that we may be looking at substantial deflation.

And that's the issue... deflation is why I write all these hair-raising posts. Deflation is what made the depression so bad because once it starts there's no automatic self-correcting mechanism. (It may correct itself but you cannot count on that.)

And where a serious deflation risk exists we have it treat it as a real thing because the downside is so bad. If an asteroid had only a 20% chance of hitting us but to intercept it we need to start a program today to have a chance divert it or blow it up. 80% of the time we will find it was wasted effort but wasting money on the 80% of the time it would have missed us is nothing compared with the costs of the 20% of the time it does. (Just an analogy... we can predict asteroid behavior better than we can predict economic developments.)

So what I'm always saying until everyone here is sick of it is that we cannot wait to have a deflationary spiral confirmed after the fact. We have to try to prevent it while we can even though the price tag is ginormous... much larger than anything anyone in Washington is talking about.

The current stimulus bill is designed to deal with a best case scenario... a sharp but largely self-correcting cyclical event of some sort. There is a large chance this is NOT that kind of event and when we find out it would be too late.

People make decisions like this all the time in oncology. If you take chemo you may die anyway. If you skip chemo you may get well anyway. It gets down to percentages. Most people will take chemo (nasty!) to turn a 10% chance of living into a 20% chance of living even though in the great majority of cases it will have no effect on whether you live or die.

So rather than waiting for economists to confirm a deflationary collapse (at which point it's too late) we have to try to prevent it. Or at least we should. Even though it's crazy expensive.

[Doremus]

14. Thanks! What does the chart measure?

I couldn't make heads or tails of it and apparently it's of great concern to Krugman.

Once again thanks.

[Thrill]

12. Why? Krugman has become a troll.

[BeyondGeography]

15. I like this comment directed at Krugman

"He’s got enough smart people in the economic sphere — Christina Romer, Larry Summers, Tim Geithner, and Ben Bernanke too is available. You certainly liked them when they were nominated. Is it possible that they just disagree with your view of what’s needed for the economy and the financial institutions??!! And it isn’t actually politics at all?"