So you've got a Chilean economist talking about completely different recessions.
You are wrong. This,
http://www.minneapolisfed.org/research/sr/SR421.pdf , specifically addresses this recession and the depressions of the 20th century, including the Great Depression. Your clear refusal to even look at it or the other material I offered about Chile is apparent. You can lead a horse to water ...
I can find just as many opinions that disagree with you, and mine will be named.
Go ahead. Let's see your sources.
But this doesn't address the broader point that those countries which dramatically increased right away spending had a milder and shorter depression after 1929, those that took up austerity and cut spending or had only comparably minor increases had a longer and deeper recession.
I have too addressed this. If you are merely going to ignore the details of what I post as you have, then I'm merely going to ignore your regurgitation of what I already showed is logically invalid and clearly not all of the story.
Those countries that switched tactics midway to increase spending improved their economies shortly thereafter.
The sources I've provided clearly prove that the "tactics" that were switched just before recovery began in the countries you named were the gold standard and the ability of the country to export products, not stimulus spending. You appear to be simply hiding from the clear effect of the gold standard being abandoned, the devaluation of the currency that resulted, and changes in export demand as a result of that devaluation and improvements in economies desiring exports elsewhere. The timing of these countries' recovery with changes in these factors has clearly as much to do with their recovery as any stimulus they applied.
In fact, you still haven't proven that the stimulus that they applied sped up the recovery rather than hindered it. If you have graphs or data showing that the rate of growth in GDP or drop in employment increased from what it already was when the stimulus was first applied, then present it. Because as yet you have not proven that the government spending they added into the equation
after the other factors I mentioned had already begun to cause a recovery changed the rate of GDP growth or re-employment.
And, one more thing, even if you can find a clear case of only stimulus being the cause of a recovery, you still are fighting against the probabilities. You still won't have addressed the fact that I've offered ten times as many examples where countries with "no massive stimulus" bettered the rate of recovery of countries with a massive stimulus. So even with an example that you haven't yet actually provided, it would still be a case of you betting your money on a horse that loses 9 times out of 10.
Yes, a whole lot of other factors were involved, that doesn't discount the overwhelming correlation.
Wrong. The only clear correlation in those cases you provided is that recovery had already begun before the massive stimulus was added into the mix. Something else cause that and I think that something was one or all of three things: (1) going off the gold standard, (2) improvement in export sale due to rising demand elsewhere, and (3) the normal recovery processes of the market (which have been seen in recovery after recovery for hundreds of years). Those other factors clearly do have a positive effect. In contrast, you haven't shown any data to actually prove that the rate of growth is correlated with the amount of stimulus. Why not? If what you claim is true, isn't it logical to believe that the rate of recovery would be related to the amount of stimulus? Countries that spend three times as much on stimulus should do better. Do they? Where is the data that actually proves that?
The bottom line is how do you know that ordinary non-stimulus market forces and monetary policies aren't behind recoveries, even in cases with stimulus, when those recoveries had (in all the examples you provided) begun before the stimulus was applied? How can we know that those ordinary market forces that would have happened in any case didn't just overwhelm a negative effect caused by government stimulus? Afterall, I've shown example after example where those cases where no or little stimulus was applied are the cases where recovery from recessions and depressions happened faster than in cases where massive government stimulus occurred. Address that, rather than just ignoring it, CM.
This same pattern continues for the majority of US recessions.
You haven't proven this assertion. In fact, your side hasn't even mentioned ANY specific US recessions other than the Great Depression in this debate (which I've already proven didn't happen the way your side claimed). I think you're just throwing out claims that are unsubstantiated in the hopes you can fool some unsuspecting reader. I think you are just trying to move your goal lines now, having failed to convince using the Great Depression case.
But before I let you move those goallines, let's see if you will acknowledge, for the record, that I have adquately shown that your side's descriptions of what happened during the Great Depression was incomplete, distorted and in some cases outright dishonest? Let's see if you will acknowledge, for the record, that the facts and sources I have presented in this thread clearly prove that FDR's Keynesian policies, if anything, increased the depth and length in the Great Depression? And I'll add these two sources to that stack of proof:
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409
FDR's Policies Prolonged Depression by 7 Years, UCLA Economists Calculate
http://www.usnews.com/articles/business/economy/2008/04/11/did-the-new-deal-work.html
In 1995, economist Robert Whaples of Wake Forest University published a survey of academic economists that asked them if they agreed with the statement, "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Fifty-one percent disagreed, and 49 percent agreed.
Keep in mind, that was the response he got from people in a discipline that on average are quite liberal in their politics. How liberal?
http://ideas.repec.org/a/ejw/volone/2006148-179.html
AEA Ideology: Campaign Contributions of American Economic Association Members, Committee Members, Officers, Editors, Referees, Authors, and Acknowledgees
... snip ...
Association members were 5 times more likely to give to Democrats than to Republicans.
What if you polled a group that was less politically biased? What percentage of them would say FDR's policies hurt, rather than helped end, the Great Depression? Far more than 51%?
Whaples went on to say that
Yet most economists, including defenders of the New Deal, do agree that Roosevelt's policies were far from perfect. The National Industrial Recovery Act of 1933, in particular, gets a lot of blame. It created the National Recovery Administration, a federal bureaucracy that limited competition in various industries by setting prices and wages above market levels. The ensuing upward pressure on the price of goods and unemployment may have turned a bad situation worse.
... snip ...
One explanation is that in addition to the harm done by the restrictions imposed by the NRA, the "soak the rich" rhetoric coming from the Roosevelt administration had a chilling effect on economic growth by making people fear for their property rights. Who knows, maybe Uncle Sam would just start wholesale confiscation of the fortunes of America's wealthy or the nationalization of industries—Americans were already observing that going on across the pond with the rise of communism in Russia and fascism in Europe. This uncertainty, along with a jump in the top federal income tax rate from 25 percent in 1931 to 79 percent in 1936, may have deterred investment.
And that's are the same sort of rhethoric and tax policies now coming out of the Obama administration. So tell us CM, why don't the same phenomena as noted in that source about FDR's approach apply now? Could it be they do, and are what has deepened and is now prolonging this recession? Can you really just dismiss that possibility out of hand like you and the other Obama-supporters have been doing here, without looking totally partisan? I don't think so.
Before 1929, most recessions, including the longest we've experienced, were not met with extreme stimulus spending and typically lasted at least a year and a half. After the great depression, most recessions have occaisioned stimulus spending, and very few have lasted longer than a year, with the exceptions being the early 80s recession, which Regan did not address with an immediate strong stimulus. It took a new democratic congress, yes enacting strongly increased spending, to end it.
First of all, it's Reagan, not Regan.
Second, that is loaded with distortions,
at best.
Let's just look at the 1974-75 recession as an example (
http://www.sjsu.edu/faculty/watkins/rec1975.htm ). This was a deep recession (5 quarters of falling GDP … over 6% total) with unemployment climbing to 9% (up 4 percent from where it had been). And there was no spending stimulus applied by the government during this recession. The stimulus that was applied came in the form of tax cuts … tax cuts that some democrats ironically argued would have no stimulative effect. But they did, as supply siders had predicted. And the recession came to an abrupt end, as seen in the figures at that link.
And what appened after that recession is equally instructive:
http://www.ibdeditorials.com/IBDArticles.aspx?id=336780728113767
The election of 1976 replaced the discredited Republican president (Gerald Ford) with a charismatic Democrat (Jimmy Carter) who said that the rich were not paying their fair share in taxes. (BAC - sound familiar?) Moreover, the Congress elected that year was the last one till today's with a filibuster-proof majority in the Senate, and with Democrats enjoying a similar advantage in the House. (BAC - sound familiar?)
As it happened, in 1976, the year after the recession seemed to have ended, the ranks of the jobless did in fact increase dramatically — by 500,000 in the latter half of the year. So the Democrats, with their supermajorities in Congress and new president, went ahead and put together a post-recession fiscal stimulus bill. (BAC - and this one involved not tax cuts but spending increases)
… snip …
The Republicans, in their apparently hapless tiny position in Congress, responded in an interesting way. They put forward an alternative proposal of an across-the-board cut in income-tax rates, of 5% — the first suggestion of an income-tax cut made in Washington in over a decade.
… snip …
Heller's job-training-and-sewer stimulus became law in 1977, as the minority's alternative got steamrolled.
… snip ...
In the five years following the stimulus spending of 1977, consumer prices rose by 60%, unemployment averaged 7% (two points higher than the 20-year average) and growth collapsed with the double-dip recession of 1980-82, a recession that outdid even the 1974-75 experience in all categories.
What I fear will happen now is the same thing that happened then.
Everyone needs to understand is that at the core, you are defending Keynesian economics (stimulus/deficit spending) and claiming that nothing else has been a major factor in determining the length and depth of recessions … neither before 1929, during it, or after it. So let's examine the validity of those two things with some additional sources (all provided to Obama's supporters on this forum previously but, of course, ignored by them):
http://www.lvrj.com/opinion/40499302.html
"In Keynesian policy, unemployment is never to be corrected by any reduction of money-wage-rates," Mr. Hazlitt summarizes. "Keynes recommends two main remedies. One is deficit spending (sometimes euphemistically called government 'investment'). How good is this remedy? It was tried in the United States (partly because of Keynes' recommendations) for a full decade. What were the results? ... The central and decisive fact is that heavy deficits were accompanied by mass unemployment ..." in the 1930s.
"The other main Keynesian remedy for unemployment is low interest rates, artificially produced by 'the Monetary Authority.' Keynes incidentally admits ... that such artificially low interest rates can only be produced by printing more money, i.e. by deliberate inflation. But we may let this pass for a moment. The question immediately before us is: Did low interest rates prevent mass unemployment? ...
"In sum, over this period of a dozen years low interest rates did not eliminate unemployment. On the contrary, unemployment actually increased as interest rates went down."
Hazlitt proceeds to demonstrate that from 1949 to 1958, when the same policy of artificially pushing down interest rates was tried, "the relationship of unemployment to interest rates is almost the exact opposite of that suggested by Keynesian theory."
http://www.cato.org/pub_display.php?pub_id=9931
The idea of using fiscal policy to boost the economy during a downturn was championed by John Maynard Keynes in the 1930s. Keynes argued that market economies can get stuck in a deep rut and that only large infusions of government stimulus can revive growth. He posited that high unemployment in the Great Depression was due to "sticky wages" and other market problems that prevented the return of full-employment equilibrium. Interestingly, Keynes did not offer any evidence that sticky wages were a serious problem, and later research indicated that wages actually fell substantially during the 1930s.
... snip ...
Keynesians thought that fiscal stimulus would work by counteracting the problem of sticky wages. Workers would be fooled into accepting lower real wages as price levels rose. Rising nominal wages would spur added work efforts and increased hiring by businesses. However, later analysis revealed that the government can't routinely fool private markets, because people have foresight and they are generally rational. Keynes erred in ignoring the actual microeconomic behaviour of individuals and businesses.
The dominance of Keynesianism ended in the 1970s. Government spending and deficits ballooned, but the result was higher inflation, not lower unemployment. These events, and the rise in monetarism led by Milton Friedman, ended the belief in an unemployment-inflation trade-off. Keynesianism was flawed and its prescription of active fiscal intervention was misguided. Indeed, Friedman's research showed that the Great Depression was caused by a failure of government monetary policy, not a failure of private markets, as Keynes had claimed.
... snip ...
It is difficult to find a macroeconomics textbook these days that discusses Keynesian fiscal stimulus as a policy tool without serious flaws, which is why the current $800-billion proposal has taken many macroeconomists by surprise. John Cochrane of the University of Chicago recently noted that the idea of fiscal stimulus is "taught only for its fallacies" in university courses these days. Thomas Sargent of New York University noted that "the calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."
... snip ...
It is not clear whether Keynesian beliefs or political factors are the main driver for the $800-billion stimulus plan. But as Harvard University's Robert Barro noted in disapproval of the stimulus plan, just because the economy is in crisis, it does "not invalidate everything we have learned about macroeconomics since 1936."
http://www.american.com/archive/2009/would-keynes-have-supported-the-stimulus-bill
In the 1960s, Keynesian economics was fully mainstream, enshrined in textbooks. Macroeconomists of that period believed that they could control macroeconomic fluctuations with great precision, based on mathematical equations that were fit to historical data. The statistical techniques produced what were called macroeconometric models, or macro models for short. The precise policy adjustments were known as “fine tuning.”*
... snip ...
This precise, “engineering” view of macroeconomics was attacked from a number of directions. ... snip ... Milton Friedman argued that the macroeconometric models were not nearly reliable enough to support “fine tuning.” He warned, particularly in his 1967 presidential address to the American Economic Association, that attempts to use inflation to reduce unemployment would prove to be self-defeating as workers began to realize the need to demand wage increases in anticipation of higher prices.
Over the 15 years following his address, economic events played out in a way that vindicated Friedman and discredited the fine tuners. First, inflation accelerated. Second, starting in 1971, President Nixon tried to implement the fine-tuners’ solution for inflation, which was wage and price controls. This failed, leading to dreadful economic performance, with both unemployment and inflation at high levels.
And finally this:
http://spectator.org/archives/2008/10/29/its-best-keynes-remain-forgott .
It not only explains the flaws in Keynesian economics but shows a striking comparison in performance, when it comes to inflation and the frequency of recessions, between the Keynesian approach and the approach that Friedman proposed replace it, Monetarism, wherein controlling monetary growth, controls inflation.
The bottom line, CM, is that Keynesian economics is deeply flawed and was widely recognized as being flawed for decades before it suddenly resurfaced during the Obama administration in order to justify his extreme socialist agenda. Nothing the Obama administration has provided in the way of evidence has changed the earlier proof of its flaws. In fact, what we are witnessing right now is the clear failure of Obama's stimulus to achieve it's goals, and the depth and length of this recession will end up as more confirmation of the inadequacies of Keynesian thinking. The evidence proves it was monetarism and tax cuts, not stimulus spending, that changed the length of recessions after the Great Depression. You are simply WRONG. But democrats apparently will NEVER learn, as democrats on this thread are proving once again.
But what the heck. I'm an optimist. I can still hope that some of you *might* start learning. So here's another source. I know it's a source you probably can't stand but it does an excellent job of taking Keynesian economics apart. I'll quote a few of the notable passages from it:
http://nrd.nationalreview.com/article/?q=YzVhZmI5MDAxMDEyZGIzMWVlZTUzZWU1ZDY2ZjExNTQ=
Democrats and their favorite economists spent the past 25 years bemoaning the “twin deficits” of the 1980s and then claimed that the strong economy of the late 1990s was the result of President Clinton’s fiscal restraint — the precise opposite of “fiscal stimulus.” Also working in the anti-Keynesian mode, former treasury secretary Robert Rubin co-authored a 2004 paper with forecaster Allen Sinai and Peter Orzsag of the Brookings Institution, who now has been tapped by Obama to lead the Office of Management and Budget. They argued that “budget deficits decrease national saving, which reduces domestic investment and increases borrowing abroad.” Big budget deficits, warned Rubin, Orzsag, and Sinai, would “reduce future national income” and risk a “decline in confidence [which] can reduce stock prices.”
... snip ...
Many of the economists who repeatedly prophesied in ominous fashion about the dangers of relatively trivial deficit spending during the Reagan and Bush years have inexplicably become enthusiastic supporters of deficits likely to exceed 10 percent of GDP during the Obama administration.
... snip ...
In 1978, future Nobel laureate Robert Lucas Jr. wrote an obituary for these ideas, “After Keynesian Economics,” along with Thomas Sargent of the University of Minnesota. They showed that “Keynesian . . . predictions were wildly incorrect and that the doctrine on which they were based is fundamentally flawed.” The hubris of expert demand-management through fiscal policy should have suffered a permanent loss of credibility 30 years ago. But memory is short.
… snip …
If Keynesian theorists refuse to accept any evidence as contradicting their theory, they are practicing a secular theology, not science.
So how about it, CM? Are you practicing secular theology or science?
Here's something more that is noteworthy from that source:
a 1999 study by Christina Romer showed that the average length of recessions from 1887 to 1929 was 10.3 months — without any Keynesian spending schemes — while the average recession from 1948 to 2000 lasted 10.7 months.
Isn't that completely contrary to what you claimed, CM … that post 1929 recessions have been shorter? Romer is a democrat who works for Obama and was one of the authors of his stimulus. Was she wrong or is she just further proof that democrats in general simply do not learn, even from their own analyses?
Even if Romer is wrong and your Wikipedia article is correct … that the average length of recessions have fallen since 1929, what really is the cause? Is it stimulus spending, or is it the ending the gold standard and the adoption of monetarism? The evidence for the latter reasons is very strong. The evidence for the first reason is tenuous at best (as I've proven). Still others argue (
http://seekingalpha.com/article/101575-u-s-recessions-1900-2008 ) that the reason we are seeing shorter recessions over time is that "faster information flow has allowed companies to quickly adjust activity in order to compensate for shocks to the upside or the downside." That doesn't seem unreasonable, does it? And if the government gets involved in ways that keep companies from quickly adjusting (as they did in 1929 and are now doing), then the result will be longer recessions … or even depressions.
Speaking of which, many economists already fear that what we are seeing is the beginning of a depression. But did things have to end up like this? For the first 10-11 months of this recession (till about August of 2008), market and job losses were tracking with those during the 1973 oil crisis and the 1990s tech crash. Then all of a sudden the losses started tracking more closely those of the crash of 1929. So what happened about August/October of 2008? I'll tell you. The government interfered. Bush signed the $700 billion dollar bailout package and everyone in Washington started talking about the need for massive spending to *stimulate* the economy. Heed history or you are destined to repeat it. That's the pattern that is clear, CM.
