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Do you feel lucky PREFU?

Written By: - Date published: 7:22 am, October 26th, 2011 - 72 comments
Categories: capitalism, debt / deficit, economy, national - Tags: ,

The PREFU paints a pretty dismal picture of the economy, as many commentators were quick to point out. Here’s Duncan Garner:

Pre-election fiscal update paints bleak picture

The Government has opened the books today in what’s called the pre-election update to give all the parties a look at the true state of the economy. None of it is particularly pretty …

Economic growth will average 3 percent for the next three years on the back of the rebuild – and it fails to peak at 4 percent like Treasury predicted in the budget.

This year’s $18.3 billion deficit will be wiped out within three years, and the Government says it hopes to post a $1.5 billion surplus by 2014/1015 – but only by doing some serious slashing in Government spending. It’s Bill English code for “cuts are coming”. “It’s really been in the last budget that we signalled fiscal tightening,” he says, “and over the next three years you will see a rapid fiscal tightening – the largest New Zealand has seen for some time.” …

So Mr English himself said today hopefully we can muddle through this talk of a second recession – hardly confidence-inspiring stuff.

Two things on slashing spending. (1) It makes things worse, not better. (2) It ignores the elephant in the room, that the government has the alternative option of raising its revenue (e.g. via increases in top tax brackets and broadening the tax base with a CGT, both Labour policies). That’s all business as usual under the Nats of course.  But for some truly scary reading, see Tracy Watkins:

Grim forecast for New Zealand’s finances

After Treasury opened the books on yet another gloomy forecast, it is tempting to ask whether things could get any worse. Well, yes, is the short answer. In a case study presented by Treasury in today’s Pre-election Fiscal Update (prefu) as one extreme scenario, we are caught in a downward spiral that ultimately results in the Government being so bust it can’t pay its bills. …

Under its downside scenario, a failure on the part of Governments to contain the Euro crisis, causes a severe disruption to global funding markets, and a prolonged period of “sub-potential growth” in the global economy. …

In the “one in five” downside scenario painted by Treasury, a protracted global recession sparked by the euro zone crisis, coupled with the limited ability of countries to support their economies through fiscal and monetary policy as they did in 2008, affects exports and tourism, leading to a rapid deterioration in the current account deficit, lower tax revenue and a $14.5 billion hole in tax revenue by 2016. Under this scenario, core crown debt also rises steeply, to 35 per cent of GDP in the year ending June 2016.

Treasury does not overstate the risk of this “downside to the downside” scenario occurring but notes: “Overall historic forecasting performance suggests that there is at least a one in five chance of an outcome worse than that captured in the downside scenario. Indeed there are a number of risks for the economy over and above those captured in the scenario.”

A one in five chance of a Eurozone crisis, which triggers a worst case scenario? I wonder if anyone in Treasury has been keeping an eye on the headlines recently:
Financial crisis has world teetering on the brink
As Greece faces default, where is Europe’s firewall?
Eurozone ‘is heading for recession’
Eurozone recession may have already started
Eurozone crisis is dragging UK into double-dip recession, warns Bank of England expert
Britain in grip of worst ever financial crisis, Bank of England governor fears
Crisis In Europe Puts Global Economy In Danger
Eurozone debt crisis: 5 days to save world economy from catastrophe
And on and on and on it goes. With all due respect to Treasury, their estimate of one in five odds looks like it was made with their heads stuck firmly in the sand. We should be preparing for the worst case scenario now. And we really can’t afford to leave it to these useless, unimaginative, slash and burn Nats to face this challenge.

72 comments on “Do you feel lucky PREFU? ”

  1. Add to that the $ 1.2 quadrillion in Derivatives which are on the verge of collapsing and you have to conclude that apart from John Key who knows damn well what is about to happen as he made his loot with this crap the rest of his government are living in Lala land.

    That and Don Brash getting our marching orders from both our English and American Financial overlords doesn’t bode well for this little country

  2. lefty 2

    When was treasury last within a bulls roar of being correct in their predictions?
    Not within living memory I suspect. They are always too optimistic.

    • Afewknowthetruth 2.1

      +10

    • Draco T Bastard 2.2

      They make their predictions on ideology and ignore the facts. If government policies equate to “free-market” principals then the forecast will be blindingly bright but if they don’t then the forecast will be pessimistic.

    • mik e 2.3

      in the Cullen years they were always under estimating growth

      • burt 2.3.1

        They kept doing that all the way into recession – gosh… how about that.

        • Draco T Bastard 2.3.1.1

          And now they’re always over-estimating growth. Gee, could it be that they all faithfully believe in the same failed policies of NAct?

          • burt 2.3.1.1.1

            Draco T Bastard

            Whatever they faithfully believed in during the Cullen years – they were right. Growth was lower than Cullen & Co said it would be. But it’s Treasury that make their predictions on ideology rather than facts – OK.

            • Colonial Viper 2.3.1.1.1.1

              Compared to National’s dark and economically depressed reign, Clark and Cullen oversaw a land of milk and honey.

              • burt

                I’ll just finish that for you;

                Compared to National’s dark and economically depressed reign, Clark and Cullen oversaw a land of milk and honey that sadly turned sour just before Labour secured their legendary fourth term.

                They sold you a pup CV, point to another time in NZ’s past when tax, spend and inflate the public service and increase middle earner welfare hasn’t ended in collapse. Perhaps it’s never been tried before….

                The recession as expected under the perfect productivity eroding aspects of low tax thresholds, high tax rates from relatively low levels of income and substantive and expanding mid-high earner welfare. Perfect storm, just needed an undisclosed mini budget and all would have been OK…

                Oh and Treasury are National lap dogs… yes we heard that all the way into recession last time, lets not take that punt again.

                • Colonial Viper

                  You’re a typical neoliberal.

                  Excusing the failures of a private sector which has been largely sold off overseas, and which can’t be bothered added value in NZ any more – just treating our land, water and people as mines to be exploited for the cheapest price possible.

                  Oh and Treasury are National lap dogs… yes we heard that all the way into recession last time, lets not take that punt again.

                  Treasury are neoliberal lap dogs who still believe in the failure which is Chicago school economics.

                  That is one government department which I agree should be broken up and half its staff fired.

                  • mik e

                    we should sell it off the worst performing govt dept although Treasury warned Key that SCF were putting one over the Govt National could put it under urgency[yeah right they did everything else under urgency] to close down SCF bailout because they thought it couldn’t be stopped bs.

                    • burt

                      yeah, sell them because they warned Labour that Labour polices would stunt growth and lead to recession and they were right. Shit ideology can’t beat reality so lets dismantle reality so ideology can win. year that will work. Glorious socialist state rules so we can all be poor but we will have the glorious ideology in tact and more importantly – the ideology will be unchallenged and never again proven to be a failure.

                • KJT

                  You really do live in an alternate Universe, don’t you Burt?

                  When all the evidence contradicts you. Accuse others of ideology.

                  Socialism worked well enough here.
                  http://kjt-kt.blogspot.com/2011/06/kia-ora-what-happens-if-decide-neo.html

                  And in Norway. And a few other Western European and South American countries.

                  Sweden has gone downhill since they started to head in the same suicidal direction as the USA and UK.

                  Belgium is currently doing better than the rest of Europe. They have no Government at present to impose the Neo-Liberal dogma generous payouts to those who caused the problem and austerity for everyone else.

                  You can even see it in the USA. High taxes and public banking States have weathered the recession much better than the States which have gone for austerity and subsidising the wealthy.

                  New Zealand has gone downhill further, faster than the rest of the OECD in almost all measures since falling for the Neo-Liberal makover much harder and faster than everyone else.

                  Australia did almost none of it. Their wages now 35% higher and increasing.

                  Labour relaxed the Neo-Liberal prescription a bit. Massive improvement in NZ.

                  NACT are re-imposing it. Recession continues as other countries recover. Borrowing and unemployment up. Equality and wages down.

                  We were told in the 80’s that pain now would result in gain later.

                  83% in productivity. 15% increase in wages. Investment in NZ business down by to 1/3 of pre-Rogernomics.

                  You can graph tax rates on wealth over the last 100 years, in almost any country, and see the almost exact correlation between high progressive tax rates and economic/social success. 91% in the USA certainly did not put a brake on their economy.

                  The most effective equal and prosperous economies ever! have been Democratic socialist mixed economies who look after all their people and sensibly regulate externalities.

                  What we need is higher taxes on wealth so it stays here and works for us.

            • Draco T Bastard 2.3.1.1.1.2

              Growth was lower than Cullen & Co said it would be.

              Strange, I recall larger surpluses and higher growth than predicted so have you got anything to back up that BS?

  3. ianmac 3

    Just heard the interview on Morning Report Simon Mercep with Phil Goff. Simon supplied all the excuses for National and scathingly challenged Phil to explain the solutions. This was followed by a soft interview with Bill English. Of course Bill was not asked the same solution question that was asked of Phil. Simon and Bill just reach agreement in a pally way. Thank goodness for fair interviews. Ha!

    • tc 3.1

      It’s the tone that speaks volumes, all aggressive and sneering at the non govt folk then all sweetness and light for govt ministers, so obvious.

      Yes and they’ve been following masters orders on the MMP referendum also, RNZ may as well be renamed RNACTNZ until checkpoint at least which seems the only show willing to front up with tough questions.

      • Colonial Viper 3.1.1

        Lets remember that this rot did not set in at RNZ (or TVNZ) in the last ~2 years only. LAB should have fucking dealt with it during their term.

  4. Jum 4

    Ianmac,

    You want ‘fair’ according to The Hollow Men’s rule book?

    Try Paul Holmes on Q and A talking up the National Auckland candidate every time Jacinda Ardern appeared. NActCon (National/Act/Conservative – new neo on the block) must be nervous about her and they’d be ‘right’ to be; Ardern’s streets ahead of the other one and not only in personality. Ardern thinks about the questions and then thoughtfully answers them.

    The Auckland NAct clone just parrots The Hollow Men’s rule book on how to obfuscate and lie.

    That’s the same from Key, English on down or up wherever you think Key and English deserve to be in the NActCon ranking.

    • Draco T Bastard 4.1

      The Auckland NAct clone just parrots The Hollow Men’s rule book on how to obfuscate and lie.

      There’s a documentary about this right-wing obfuscation called Spin. It’s dated now and US centric but well worth watching if you can find it.

  5. vto 5

    The Press this morning outlined the PREFU forecasts alongside the actuals for the last three years. For GDP growth, unemployment and deficits they were surprisingly consistent. Consistent in being 50% over-optimistic.

    PREFU itself has thus established a way to make accurate forecasts thanks to this consistency of theirs…. simply take their forecasts and have them or double them in the negative direction and voila, reality.

  6. prism 6

    This evening on Radionz there is a discussion on MMP with Jim Bolger Rich (freudian slip) Richardson Jeanette Fitzsimons and ?

    Ruth Richardson this morning spoke on RNZ on the advantages of FPP. She used many cliches as would be expected from someone who appears to have had a lengthy period of indoctrination. With FPP you get ‘a broad church’ blah blah. Certainty blah blah. The problem with we humans is how we can weave an invisible armour from our words and arguments that isolate us from reality and its likely consequences.

    And what is holding NZ back from stability and prosperity? Could it be our exchange rate setting method? As soon as NZ does well and makes some money the currency speculators are onto us like fleas sucking on a cat. And of course our part in the worldwide western countries abandonment of their own people in the tactile industries to over-populated countries offering poor people prepared to work for existence wages.

    And the money we have to borrow each week – is that to pay our dues on overseas investors’ kindly input into our country’s business activities? I must try and find what assessment there is of how much passes out annually to distant landlords and investors or remains as liability.

    • Colonial Viper 6.1

      And the money we have to borrow each week – is that to pay our dues on overseas investors’ kindly input into our country’s business activities? (A) I must try and find what assessment there is of how much passes out annually to distant landlords and investors or remains as liability. (B)

      (A) You’ll find there is a net new debt per month figure which is new debt the Government is taking on. Then there is a total borrowed figure per month which is higher because it includes new borrowing purely to pay off old loans coming due. Yes, that really is paying off one credit card with another.

      (B) I believe the balance of payments (current account) statistics gives a clue to this. Usually sits negative at between 3% and 10% of GDP depending on how much our farmers and other exporters are bringing in, and how much our foreign owned banks and corporations are simultaneously pumping out.

  7. queenstfarmer 7

    Two things on slashing spending. (1) It makes things worse, not better.

    The biggest stimulus in history did make things worse. Krugman’s ideological, academic theories have failed. This is reality. And where do you propose teetering countries will get all this extra money to crank up their spending, in order to magically spend their way back to prosperity?

    (2) It ignores the elephant in the room, that the government has the alternative option of raising its revenue (e.g. via increases in top tax brackets and broadening the tax base with a CGT, both Labour policies)

    Fortunately, sane people realise that raising taxes in a recession (in order to “stimulate” the economy, no less) will only make matters worse (I note Labour’s policy this election includes borrowing to fund tax cuts). As for Labour’s CGT “raising revenue”, even Labour itself admits this will take 10 years to fully kick in – if it does at all – and of course it is premised on having capital gains (which it happily ignored for 9 years despite actively fueling the housing bubble and crash), which certainly isn’t likely in the scenarios you think we should be preparing for.

    • r0b 7.1

      The biggest stimulus in history did make things worse

      Bailing out the bankers that caused the problems is not “stimulus”.

      Fortunately, sane people realise that raising taxes in a recession (in order to “stimulate” the economy, no less) will only make matters worse

      Historically the times of highest taxation have also been the times of highest growth.

      • queenstfarmer 7.1.1

        Bailing out the bankers that caused the problems is not “stimulus”.

        Not talking about bailing out banks. Check out the list here (and of course there is much, much more since then):
        https://www.propublica.org/special/the-stimulus-plan-a-detailed-list-of-spending

        Historically the times of highest taxation have also been the times of highest growth

        I would say citation needed, but this is a different point (it’s obvious that an economy undergoing strong growth will sustain higher taxes.) The relevant point is that putting up taxes in a recession is unwise. Barack Obama knows this:

        The last thing you want to do is raise taxes in the middle of a recession, because that would just suck up, take more demand out of the economy and put businesses in a further hole

        Although he is now taking an ideological position due to the election, his comment is correct.

        • prism 7.1.1.1

          The last thing you want to do is raise taxes in the middle of a recession, because that would just suck up, take more demand out of the economy and put businesses in a further hole

          Depends if the taxes are sucking up excess liquidity to that required by that individual or his service to the basic economy through his choice of positioning of that cash. Then if the excess is not advantaging the economy, the higher tax can be used to support the economy in ways that will provide jobs and increase wage earners and so decrease unemployment and waste of human resources, both in unused productivity and in excessive drinking, drugs and other destructive ways of passing unwanted spare time.

        • r0b 7.1.1.2

          Not talking about bailing out banks. Check out the list here

          That’s hardly the biggest stimulus package in history.  I haven’t done the math, but clearly (for example) the New Deal and (given the bizarre way that we measure these things) WW2 were much bigger.

          The Obama stimulus package is too little too late, and I’d be interested (when I have more time) to dig in to it and find out how much of it was just rebranding existing spending (as the Nats have done in NZ).  None the less it has had significant positive effects (CBO = Congressional Budget Office, ARRA = American Recovery and Reinvestment Act of 2009):

          CBO’s Estimates of ARRA’s Impact on Employment and Economic Output

          Looking at recorded spending to date as well as estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies on the economy and using various mathematical models that represent the workings of the economy. On that basis, CBO estimates that in the second quarter of calendar year 2010, ARRA’s policies:

          • Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,

          • Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,

          • Increased the number of people employed by between 1.4 million and 3.3 million, and

          • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

          But too little to late – dwarfed by the useless banking bailouts.

           I would say citation needed

          On the historical relationship between tax and growth see stuff summarised here.

          Edit: I see PB covered much of this already!

          • queenstfarmer 7.1.1.2.1

            The Obama stimulus package is too little too late… None the less it has had significant positive effects

            No-one is denying that spending vast sums of money has some positive effects. If I borrow and spend $10,000 I can’t afford on a party, pretty much everyone will have a great time, and the bar owner will be pretty pleased.

            • Colonial Viper 7.1.1.2.1.1

              irrelevant example.

              Your example is based on dumb consumerism, not on creating productive infrastructure for the economy or the country.

        • Draco T Bastard 7.1.1.3

          (it’s obvious that an economy undergoing strong growth will sustain higher taxes.)

          It’s been linked on here before. After controlling for for as much as possible, growth has always come after tax increases and government spending.

          Barack Obama knows this:

          Obama is an idiot and is just saying what he’s told.

          Although he is now taking an ideological position due to the election, his comment is correct.

          No, it isn’t.

          • queenstfarmer 7.1.1.3.1

            Obama is an idiot and is just saying what he’s told.

            I think Obama’s pretty smart, but politically naiive. But anyway, who told him what to say (presumably his comment I posted above), and when?

            • Colonial Viper 7.1.1.3.1.1

              What Obama wants or how smart he is, is irrelevant. Geithner, Summers, Bernanke etc. were the ones setting the real agenda and pulling the real strings.

        • Ari 7.1.1.4

          You should look at what happens when spending is cut in a recession, instead of focusing so much on tax, especially seeing the tax increases proposed would target people who aren’t spending anyway.

        • KJT 7.1.1.5

          Putting up taxes in a recession is wise, if it redirects spending from Hawaii holidays, gambling on US derivatives and making the already wealthy richer, to people who spend all their money locally.

          From election bribes to NACT voters to people who spend and invest in local business.

          The US stimulus was misdirected because it did not go to those who spend and invest in local production.

          As Angela Merkal said to some dopey British politician, who wondered why Germany was doing so much better. “We still make things”.

        • mik e 7.1.1.6

          Q st you obviously haven’t studied much economics go back to the thirties and see the difference between economies that did the right thing and the economies that stagnated and stayed in recession.You will find in NZ that from 1924 till the first labour govt our country was built on debt by right wing governments that were concentrating on Public works just like national is doing now.In the 2000s Funny there was the prediction from treasury that increasing taxes on the better off and increasing the minimum wage would slow down the economy it never happened quite the reverse.

        • mik e 7.1.1.7

          yes qsf you have it wrong again highly taxed states in the US out perform low and flat tax states by a wide margin all low taxed states are in recession sort of blows your theory out the window .George w bush was the first to print and bail out large amounts trillions to be exact at least Obama has kept some industrial capacity for with out it the US would no longer be a super power.Why these sort of bailouts don’t work is that the stimulus is ending up at the top of the food chain instead of going into the main street its going to wall street same reason depression hung around the US 29to38 but opposite solutions only partly effective Nationalizing the banks is a cheaper better value for money option for taxpayer bail outs .Because those banks still give massive bonuses for speculation investments when stimulus needs to be in the productive export sector.Failing banks were let go to the wall in the US NZ we nationalized and stimulated main street and not wall st in that era thats why we came out of recession earlier than other economies.National are copying the same policies as the mid 1920s to early thirties public works schemes , tax cuts for the well off Austerity programs for everyone else keep wage down. same result stagnant economy!it didn’t work then its not working now!

      • Simon Poole 7.1.2

        “Historically the times of highest taxation have also been the times of highest growth.”

        While I am not impressed with National’s solution to the problem, I do wonder if you are putting the horse before the cart with that one, r0b.

        • Pascal's bookie 7.1.2.1

          On tax burdens and economic growth:

          http://www.presimetrics.com/blog/?p=92

          On the size of the StimPak:

          http://www.washingtonpost.com/wp-dyn/content/article/2010/06/18/AR2010061803289.html

          On the success of it:

          http://cboblog.cbo.gov/?p=967

          On this:

          “Krugman’s ideological, academic theories have failed.”

          Citation very much needed, specifically, Krugman endorsing the size shape and implementation of the stimpak and predicting that it would be just what we needed and something like a roaring success. From memory he panned the package and predicted pretty much what happened.

          • Simon Poole 7.1.2.1.1

            PB: Interesting link, cheers. I’ll try and take a closer look at home.

            My main point was that just because we have a history of high growth with high tax rates we can’t assume that raising taxes will increase our growth. I think our solution has to be considerably more nuanced than that, otherwise we might as well just introduce a 90% top bracket and be done with it, yes?

            I think the CGT idea is important to introduce, but it will not be a major source of tax revenue for some time which Labour have duly acknowledged.

            Unfortunately we have a government that is unwilling to engage in a constructive debate about the structural problems facing government finances (which were considerably worsened by a series of ill-considered tax cuts in the last three years).

            • Bored 7.1.2.1.1.1

              Reading the whole thread above what stands out starkly to me is the continuing faith in “growth” as the panacea. We will in future have growth and contraction BUT as Heinberg so eloquently points out total world wide aggregate growth is now going into decline.

              The basis for the decline is that the total available world energy supply has peaked, the availability of other resources that we can plunder is at breaking point. Numbers on conjured on finance companies balance sheets do not equate to growth, neither does a housing price bubble. Its down to resource availability and consumption. That and that alone, we do not live in a “virtual” world, the sooner we realise we live on a limited resource sphere the better.

              A more intelligent debate would focus around how to manage the decline and how to ensure that the available resources and wealth are equitably and effectively distributed.

          • queenstfarmer 7.1.2.1.2

            “Krugman’s ideological, academic theories have failed.”

            Citation very much needed

            Yes Krugman did pan the “stimulus”, because he wanted it to be even bigger (drowning the US in the biggest debt in its history just isn’t enough, apparently). I’m sure no amount of Govt expansion would be too much in his view – he’d probably complain that the Soviet Union was too laissez faire.

            It’s his Keynesian theories that have demonstrably failed. Even President Obama has admitted that the US is no better off, and in fact has much higher unemployment, than pre-“stimulus”. The biggest change is being saddled with record debt.

            • Pascal's bookie 7.1.2.1.2.1

              None of that proves Krugman wrong, though your bluster about what you imagine would satisfy him (the soviet union? really qs?) does seem to show that you don’t know much about Krugman’s work.

              For him to have been proven wrong you would need to show that the stimpak that was passed was what he wanted, that he predicted it would work, and that it didn’t. You don’t seem able to show these things, but instead rely on bluster. Any particular reason for that?

              What the record seems to show is that he said it was badly designed, too small, and would only have a weak effect.

              • queenstfarmer

                You’re reading it wrong. I never made any suggestion about “proving Krugman wrong”, just observed that his theories have demonstrably failed. As I already said, the stimulus wasn’t big enough for Krugman (incredulously), which of course gives him wriggle-room to deny being wrong on that specific point. Which he is free to deny.

                • Colonial Viper

                  Pointless and irrelevant.

                  What is on point is that the entire financial system is now rigged solely as a bonus generating machine for Wall St banking executives.

                  Time to take our economy back from the 0.1%

                • Pascal's bookie

                  Perhaps you could explain the difference between proving someone wrong, and proving that their theories have failed, I’m not seeing one.

                  The fact remains that to demonstrate that someone’s theory has failed, you need to show that the theory has been applied, and not worked.

                  Krugman didn’t get the stimpak he wanted, (and his critiques of it were as much about the form it took as of it’s size) and he predicted that it would only be of minor benefit. That prediction seems to have stacked up pretty well. particularly in comparison to many of his critics who predicted hyperinflation and rapidly rising bond rates.

            • Pascal's bookie 7.1.2.1.2.2

              Oh, and the stimpak is pretty much insignificant as a part of the US debt problem:

              http://www.nytimes.com/2011/07/24/opinion/sunday/24sun4.html

            • Ari 7.1.2.1.2.3

              LOL Keynesian theories being failed, pull the other one, what kind of economists do you think have it right? The ones working from Hayek?

              • queenstfarmer

                Who says anyone has the “dismal science” right? Unless you have a time machine, no-one knows for certain whether a less profligate stimulus would have caused less, or maybe even more, damage than what has been tried.

                • Colonial Viper

                  Then what are you on about.

                  There are US$400T to $600T of outstanding, off balance sheet derivatives in the world financial system today.

                  That’s what is going to fuck us. Weapons of mass financial destruction.

                  Arguing over $0.8T of Main St economic stimulus more or less is pointless and irrelevant.

                • Pascal's bookie

                  You should really read the links people are posting, this one deals with the profligacy of the stimulus.

                  http://www.washingtonpost.com/wp-dyn/content/article/2010/06/18/AR2010061803289.html

                  Short version; although there was a federal stimulus package, at the state level there was fiscal contraction. This meant that overall the amount of govt stimulus was nowhere near as large as what the headline stimpak figure would have you believe.

                  If you are going to argue that the results of this particular stimpak tell you something definitive about the effectiveness of govt stimulus generally, that is something you absolutely have to take into account.

                  Though I am suspecting, once again, that you are not particularly interested in actual facts.

                  Your argument appears to be the ideological response you accuse Krugman of.

        • aerobubble 7.1.2.2

          Money is like blood in a body, it carries oxygen. But govt does not oxygenate
          the blood, it merely insures the vitality of the blood and how much there is.
          Problem, thatcherism expanded the money supply in response to a glut of
          cheap high density fuels. Like they didn’t know it would run dry!!!

          Of course they all did, that’s why we have politicians, too few, too stupid,
          who can look cluesless and often are. Now all I want to know is who
          wins. In a world of economic hurt, who wins? who loses?

          Simple, those who have most to lose, and everyone who wins is in the
          larger group. As can be seen in Libya, sure the dictator can survive
          for a long time but the nation goes backwards. We as a world cannot
          afford a dictator, so its obvious who the losers will be.

          All being obvious National should lose in a landslide.Will it happen
          next month or three years?

    • AAMC 7.2

      QSF, please correct me if I’m wrong, wasn’t it the free marketeers Greenspan, Bernanke & Paulson who “stimulated” their banking buddies?

      Krugman endorsed stimulus, please point me to where he endorsed TARP!?

      • queenstfarmer 7.2.1

        See the list I linked to @ 10.13 above. Plenty of other resources showing the direct stimulus programs (which, as you note, Krugman endorsed – albeit he apparently wanted much more of it).

        I don’t know about his view on TARP, but having just googled it he says here that it is “worth passing”. We can decide for ourselves whether or not that is an endorsement.

        • Colonial Viper 7.2.1.1

          qstf still backing the huge money printing exercises which gave banks trillions and Main St nothing.

          That’s what you are calling “stimulus” i.e. stimulus for Jamie Dimon and Lloyd Blankfein’s bankster bonuses.

          • queenstfarmer 7.2.1.1.1

            Complete rubbish, CV. Show me where I said that. You seem to making up a lot of crap recently.

            • Colonial Viper 7.2.1.1.1.1

              you love rubbishing the ineffectiveness of the ‘stimulus’.

              While ignoring the fact that the vast bulk of new stimulus money in the system has been punped into Wall St, not Main St.

              Time for a full scale global debt jubilee, and the cancelling of all dark pool derivatives contracts.

              • queenstfarmer

                Yes, I’m merely observing the empirical evidence that the stimulus programme has failed.

                As for stimulus, I am damn opposed to money printing exercises, corporate bailouts, corporate welfare, corporate tax loopholes, giving taxpayer money to bankers, or any other such shenanigans. Big time capitalists should live by the sword and die by the sword. And if a great many are about to die (in a capitalist sense), then good riddance. And may the authorities prosecute any wrongdoers to the full extent of the law. And kudos to the Govt for finally tightening up the wet-bus ticket securities law that successive govts left languishing for 30+ years.

  8. joe90 8

    http://problembanklist.com/fdic-to-cover-losses-on-trillion-bank-of-america-derivative-bets-0419/

    Potential losses on Bank of America’s massive $75 trillion book of risky derivative contracts has just been dumped onto the FDIC by the Federal Reserve.

    • Colonial Viper 8.1

      Awful. Losing casino bets taken by Bank of America have now been made the problem of the US tax payer.

      In US law, derivatives liabilities must be paid out before savings depositors losses.

      Go figure.

  9. AAMC 9

    @Blingglish – StIglitz Says Austerity Is ‘Suicide Pact’ for Major Economies is.gd/wH1wyL

    • mik e 9.1

      Joe 90 it says Derivatives from Merrill Lynch are so complicated that they cannot be real, [ponzi] using currency trading and hedging derivatives that no doubt John Key Knew about and still knows more than any other kiwi, these are highly toxic derivatives Gambling in disguise with bets on and no way to pay.The word is fraudulent behaviour!

  10. Pascal's bookie 10

    Another couple of interesting links here:

    John Quiggin, tearing apart some ‘expansionary austerity’ work:

    http://crookedtimber.org/2011/10/24/expansionary-austerity-some-shoddy-scholarship/

    and Henry Blodgett reflecting on Krugman’s record after raving lefty David Frum, said

    Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?

    http://www.businessinsider.com/david-frum-paul-krugman-right-2011-10#ixzz1bpkF6cK6

  11. Why was the original post pulled?

    [lprent: The post is pretty much the same as when I saw it this morning (and pushed it to the top). The edits look like typos.

    Perhaps you mean this old one? You know that when they get released from the top they drop down to their date/time position. ]

  12. Draco T Bastard 13

    The Government has opened the books today in what’s called the pre-election update to give all the parties a look at the true state of the economy.

    The big question that needs to be asked is:Why do we only get to see the true state of the economy once every three years?

  13. Bored 14

    I posted above about the true state of the economy…no takers, they are all caught in mainstream fantasy mode. So to answer you question:
    * do we need to know what the idiots think at all even every three years?
    * dont you think they might just discover reality within three years and be worth listening to??? (Obviously not).
    * why have we been paying these goat entrail readers anything at all for the last three years?

    • aerobubble 14.1

      Nationall says dairy saves us, yet now we’re told a collapse of markets
      will hurt diary…. …why did National declare we’re safe…
      …no downgrade promised Key… …double downgrade!!!

      National are either idiots or take us for…

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