Daily Archives: October 17, 2012

Paul K’s Strange Logic

By Joe Firestone

In an October 12th Post entitled “Foreigners and the Burden of Debt,” Paul Krugman made the following comment.

”. . . we’d all agree that deficits make us poorer if they crowd out investment spending — which they would if the economy were near full employment, but won’t if we’re deeply depressed. All we have to do is realize that net foreign investment — purchases minus sales of assets from and to foreigners — is also a form of investment. Or to put it a bit more simply, sure, budget deficits can make us poorer as a nation if they lead to bigger trade deficits.”

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Public Briefing: Erskine Bowles Determined to Reduce Private Sector Income, Stifle US Economy – Pt. 2

By Michael Hoexter

Bowles Would Have Us Repeat the Errors of the Euro-Zone

That Bowles is currently lionized in Washington policy circles is particularly striking given the slow-motion economic catastrophe occurring within the Euro-Zone.  Bowles’s ignorance or willful disregard of macroeconomic accounting processes and insistence that the US government institute laws that reflect that ignorance, repeats the errors made by the Euro-Zone countries when they signed the Maastricht Treaty in 1992.  With a more than adequate understanding of macroeconomic accounting, Wynne Godley predicted in 1992 that the Euro Zone would not withstand a substantial financial crisis because of the budgetary restrictions required by the Treaty.  The 3% limits in budget deficits to GDP mandated by the treaty indicated to Godley already at the formation of the Euro-Zone that its founders were woefully ignorant of the stabilizing, supporting and leadership role of government in the economy, especially during times of crisis.

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