BOOM! There goes the market!

[Boltfan]

Yes, we are all very aware of your debate skills and tactics here TTH.

[Texas Contrarian]

Originally Posted by Boltfan

Yes, we are all very aware of your debate skills and tactics here TTH.

TTH's debate "skills" regarding economic issues are pretty much limited to saying that he agrees with people like Paul Krugman, and his tactics often include childishly insulting anyone with whom he disagrees. I have yet to see him present a coherent, reasoned argument supporting his view.

Originally Posted by TexTushHog

Jesus, let's hope you don't teach economics anywhere.

Well, I guess that's an improvement. It seems to be a much milder insult than when you told me I was "mired in ignorance!"

And I suppose you'll be happy to find that, no, I do not teach economics anywhere. But I'd like for people to think just a little bit about the people who are teaching economics at our major universities, and consider the great damage they've done for which our economy will suffer for many years. None of these people will ever admit that they've been wrong about almost everything for decades.

It would be fun to see a proponent of fiscal "stimulus packages" try to explain either of the below sequences of events in a coherent fashion.

(The following items are excerpts from a couple of my recent blog posts.)

Many academic economists take almost as gospel macro models first designed about 50 years ago that purport to demonstrate fiscal multipliers far greater than 1, and many cases greater than 1.5. As I mentioned earlier, recent robustness analysis suggests that multipliers for things such as social spending (claimed to be about 1.75 by Mark Zandi) tend to be around 0.5. The ECB commissioned some of these studies following questions by several European finance ministers concerning why some of their economies continue to stagnate in the presence of ever-increasing levels of government spending.

(Maybe we should begin considering it correct to refer to a Keynesian fiscal divisor rather than a fiscal multiplier!)

An interesting case to examine is the one involving the domestic policy initiatives of Richard Nixon in the early 1970s. You might recall that Nixon had earlier declared himself a "Keynesian." (Almost everyone was a Keynesian in those days.)

Consider Nixon's 1971 State of the Union Address, where he called for a big boost in government spending to goose the economy. Here's an excerpt:

"The second great goal is to achieve what Americans have not enjoyed since 1957--full prosperity in peacetime.

The tide of inflation has turned. The rise in the cost of living, which had been gathering dangerous momentum in the late sixties, was reduced last year. Inflation will be further reduced this year.

But as we have moved from runaway inflation toward reasonable price stability and at the same time as we have been moving from a wartime economy to a peacetime economy, we have paid a price in increased unemployment.

We should take no comfort from the fact that the level of unemployment in this transition from a wartime to a peacetime economy is lower than in any peacetime year of the sixties.

This is not good enough for the man who is unemployed in the seventies. We must do better for workers in peacetime and we will do better.
To achieve this, I will submit an expansionary budget this year--one that will help stimulate the economy and thereby open up new job opportunities for millions of Americans.

It will be a full employment budget, a budget designed to be in balance if the economy were operating at its peak potential. By spending as if we were at full employment, we will help to bring about full employment."

(End of excerpt.)

Got that?

Nixon was calling for a fiscal stimulus package! And he got it, too, since congress was controlled by Democrats eager to increase social spending, which first surpassed defense spending in 1975.

How did that work out? Well , case you don't remember, it didn't prevent the 1973-75 recession from being the worst (up until that time) since the Great Depression.

Now, by contrast...

Think for just a minute about the deep recession of 1920-21. Most people don't realize that the first year of that downturn was actually worse than the first year of the Great Depression 10 years later. Year-over-year deflation was in the 15% range, the stock markets dropped almost 50%, and industrial production fell off a cliff. If Paul Krugman had been around then, he would undoubtedly have called for massive government stimulus. But Warren Harding did the opposite -- he called for, and got, big cuts in both taxes and spending. Instead of stagnating, the economy took off like a rocket -- and for the rest of the 1920s, we had growth rates higher than at any other time in the last century. People later referred to that decade as the "Roaring Twenties."

Throughout our history, we've had recessions, depressions, speculative booms & busts, inflation, deflation, and asset bubbles. We always recovered from their consequences, usually very quickly. Only in the 1930s did we begin to get the idea that it's necessary for government to intervene massively in order to attempt to mitigate the severity of downturns in the business cycle. How has that worked out? I think you can see for yourself.

You're no more likely to see fiscal multipliers graeater than 1 working in the real world than you are to see a Tasmanian Tiger.

Why do people still hang on to such obviously discredited economic doctrine? Well, I think the answer is pretty obvious. It offers the "intellectual framework" undergirding arguments made by big spending politicians whose primary goal is to buy votes with other people's money.

Regarding liquidity traps, the Paul Krugman prescription is to throw an almost unlimited amount of new deficit spending at the problem. But that's exactly what Japan's been doing for almost 20 years! With one big spending package after another, they tripled their debt/GDP ratio to a level of about 2.2. And for what? The Japanese economy is still mired in stagnation. If we followed Krugman's recommendations, we'd have an even bigger looming fiscal crisis as well as a stagnating economy. Again on this issue, history is quite clear.

Someone started a thread in the "Diamonds and Tuxedos" forum last year addressed directy at me and my concerns about deficit spending and the phony "stimulus package" of 2009. In several posts, I covered a few of these issues more fully, even including money supply issues as they relate to the economy and our fiscal predicament. I also predicted a downturn in 2011.

Here's the thread:

http://www.eccie.net/showthread.php?t=78038

Whether you agree or disagree, posts by several participants offer interesting food for thought.

And if you're simply not interested in the topic, you might read the thread on your iPad late at night anyway.

It might be an excellent sleep aid!

[TexTushHog]

Oh God!! You Austrians and the Recession of 21 and 22. Don't y'all ever get tired of Young, Murphy, and Khuen. If you'd do your research, you'll find that it really was barely even a recession. Christina Roemer did a paper on it and found that GDP barely declined. Something like 3% over the two years.

Romer, C. 1988. “World War I and the Postwar Depression: A Reinterpretation based on alternative estimates of GNP,” Journal of Monetary Economics 22.1: 91–115.

and

Romer, C. 1989. “The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869-1908,” Journal of Political Economy 97.1: 1–37.

The main cause of the deflation was a resumption in pre-war commodity trading patterns which had been disrupted by WWI and shipping disruptions. This temporary surplus quickly worked itself out and stimulated industrial production, which quickly adjusted to peace time conditions. Finally, interest rates were nowhere near the zero bound, as they typically are when direct financial stimulus is used. In the run up to the recession, the discount rate went from 4% up to 7%, but then was dropped back down to 4.5%, thus providing stimulus through lower interest rates. No liquidity trap ever existed. See Paul Krugman on this point.

http://krugman.blogs.nytimes.com/201...-more-on-1921/

If folks are really interested, Christina Roemer's article is the seminal one. Here are a few pop summaries.

http://socialdemocracy21stcentury.bl...1921-some.html

http://factsandotherstubbornthings.b...on-online.html

Likewise, there is a very cogent monetarist/inflation take on the events of 1921 and 1922 that has bee summarized by Paul Krugman. This information is not inconsistent with the above facts, but is supplementary to these facts. Krugman explicates it well and I would direct those who are interested to this link.

http://krugman.blogs.nytimes.com/201...-and-all-that/

Don't trot out Baro-Ricardian Equivalance next, now. It really would be tedious to have to show all the faulty assumptions that underlie that supposed doctrine.

[Boltfan]

Still condescending, but at least you finally posted a counter point.

[TexTushHog]

If it sounds condescending, it's because the Austrain School economists are like flat earthers. They live in their own world. They read their own journals. They are just a part of the lunatic fringe in the field. With few exception, they don't even significant support in even conservative, right wing economics departments like Chicago Like flat earthers, the reject anything that proves them wrong, explicitly rejecting all statistical, modeling, or individual behavioral research. In other words, they basically reject the scientific methods. They Ludites.

[Boltfan]

Sort of like how you do? You reject everything with which you don't agree. Ok, all makes sense now.

You are so close to making a genuine argument without disparaging the opposition. So close. You, Stevie, et all, post with such hate and venom towards the other side. One day the extremes of both sides will wake up. In the meantime those of us in the middle just have to roll our eyes because you folks shout loudest. You are by no means in the majority.

[Texas Contrarian]

Since when is Christina Romer a credible source?

As Omama's chair of the Council of Economic Advisors, she was perhaps the leading cheerleader for the failed $860 billion stimulus package of 2009, boldly stating that it would hold unemployment under 8%. How'd that work out? I can hardly blame her for resigning and going back to Berkeley. Everybody wants to get away from association with abject failure as soon as possible.

In any event, others' estimates of the depth of the downturn were far greater. Some put it at around 7%.

(By the way, GDP peak-to-trough decline in the 1973-75 recession was only about 3%. I don't think all the people who lost jobs and businesses during the period were calling it "barely a recession.")

Whatever the case may be, my basic point was that history clearly shows that you do not need big fiscal spending surges to recover from recessions, as many of you guys seem to believe. That's true whether or not the recession was largely caused by a financial crisis. Ken Rogoff and Carmen Reinhart have done some excellent work on the history of financial crises. I highly recommend their recent book. You might note that Rogoff did not support what he once called a "panicked fiscal surge" in early 2009.

Regarding Krugman's continual obsession with liquidity traps, and his view that it's worth spending an almost unlimited amount of money to try to blast your way out of one, I will only submit (as I said earlier) that that's exactly what Japan tried to do. It didn't work. Japan now has a debt/GDP ratio of about 2.2 and its economy continues to stagnate. Japan's essentially fucked. It has an aging population and a declining savings rate as the elderly have to draw down on their savings to survive. The only potential saving grace for the Japanese is that they export a lot of stuff.

Daniel Kuehn is even less credible than Romer. His bio says that he just got a master's degree in "public policy" (read: big-government interventionism). It also says that he's going to graduate school in economics this fall. Maybe he will actually learn something about economics, but I doubt it. Sounds like he already has his mind made up.

And a blogsite called "social democracy 21st century?" Come on, do you really expect anyone to take that seriously?

As for Krugman, I can certainly tell you that very few people in the investment world take him seriously. I know a very successful fund manager who says it's too bad he doesn't offer investment advice, since he's usually so spectacularly wrong that he'd serve as a fantastic contrarian indicator.

He always seems eager to attack any perceived economic ill with an almost unlimited amount of fiscal stimulus. Recently he advocated massively increased QE as well, even though the Fed has already expanded its balance sheet by more than $2 trillion for two initial iterations of QE, and it has not worked. (What is it that Einstein reportedly said was the definition of insanity?)

Take a look at this:

http://pragcap.com/krugman-8-10t-qe

Or this video clip:

http://video.cnbc.com/gallery/?video=1614756246

Got that?

Krugman thinks we need $8-10 trillion of QE! This is lunacy. It might give the economy a caffeine and suger high in the short run (if it didn't panic everyone in the world first!) but it would virtually guarantee an eventual collapse.

TTH, in a thread on this topic in Diamonds and Tuxedos, I asked you a simple and direct question: Can you name an instance where a fiscal stimulus package boosted the prosperity of a nation in the presence of an already-large structural budget deficit? As I'm sure you will recall, you could not. (And it's been tried plenty of times.)

For that matter, can you name any instance, irrespective of the current debt/deficit status, where a spending surge can reasonably be credited with boosting the prosperity of a nation?

Krugman is perhaps the best-known proponent of the view that through the magic of "multipliers" greater than 1.5, you can borrow and print your way to greater prosperity. The idea has failed so many times, in so many places, and in so many ways that it's just amazing anyone still supports it. As I said earlier, the reason big-spending politicians glom onto the idea is that it gives them an excuse to do what they love most -- buy votes with other people's money. And it gives left-wing economists a chance to ingratiate themselves to all their favorite politicians.

People like Paul Krugman are like medievel doctors who practiced bloodletting. When the patient didn't get better, they sometimes thought the problem was that they had not taken enough blood!

[TexTushHog]

Originally Posted by CaptainMidnight

Since when is Christina Romer a credible source?

As Omama's chair of the Council of Economic Advisors, she was perhaps the leading cheerleader for the failed $860 billion stimulus package of 2009, boldly stating that it would hold unemployment under 8%. How'd that work out? I can hardly blame her for resigning and going back to Berkeley. Everybody wants to get away from association with abject failure as soon as possible.

In any event, others' estimates of the depth of the downturn were far greater. Some put it at around 7%.

(By the way, GDP peak-to-trough decline in the 1973-75 recession was only about 3%. I don't think all the people who lost jobs and businesses during the period were calling it "barely a recession.")

Whatever the case may be, my basic point was that history clearly shows that you do not need big fiscal spending surges to recover from recessions, as many of you guys seem to believe. That's true whether or not the recession was largely caused by a financial crisis. Ken Rogoff and Carmen Reinhart have done some excellent work on the history of financial crises. I highly recommend their recent book. You might note that Rogoff did not support what he once called a "panicked fiscal surge" in early 2009.

Regarding Krugman's continual obsession with liquidity traps, and his view that it's worth spending an almost unlimited amount of money to try to blast your way out of one, I will only submit (as I said earlier) that that's exactly what Japan tried to do. It didn't work. Japan now has a debt/GDP ratio of about 2.2 and its economy continues to stagnate. Japan's essentially fucked. It has an aging population and a declining savings rate as the elderly have to draw down on their savings to survive. The only potential saving grace for the Japanese is that they export a lot of stuff.

Daniel Kuehn is even less credible than Romer. His bio says that he just got a master's degree in "public policy" (read: big-government interventionism). It also says that he's going to graduate school in economics this fall. Maybe he will actually learn something about economics, but I doubt it. Sounds like he already has his mind made up.

And a blogsite called "social democracy 21st century?" Come on, do you really expect anyone to take that seriously?

As for Krugman, I can certainly tell you that very few people in the investment world take him seriously. I know a very successful fund manager who says it's too bad he doesn't offer investment advice, since he's usually so spectacularly wrong that he'd serve as a fantastic contrarian indicator.

He always seems eager to attack any perceived economic ill with an almost unlimited amount of fiscal stimulus. Recently he advocated massively increased QE as well, even though the Fed has already expanded its balance sheet by more than $2 trillion for two initial iterations of QE, and it has not worked. (What is it that Einstein reportedly said was the definition of insanity?)

Take a look at this:

http://pragcap.com/krugman-8-10t-qe

Or this video clip:

http://video.cnbc.com/gallery/?video=1614756246

Got that?

Krugman thinks we need $8-10 trillion of QE! This is lunacy. It might give the economy a caffeine and suger high in the short run (if it didn't panic everyone in the world first!) but it would virtually guarantee an eventual collapse.

TTH, in a thread on this topic in Diamonds and Tuxedos, I asked you a simple and direct question: Can you name an instance where a fiscal stimulus package boosted the prosperity of a nation in the presence of an already-large structural budget deficit? As I'm sure you will recall, you could not. (And it's been tried plenty of times.)

For that matter, can you name any instance, irrespective of the current debt/deficit status, where a spending surge can reasonably be credited with boosting the prosperity of a nation?

Krugman is perhaps the best-known proponent of the view that through the magic of "multipliers" greater than 1.5, you can borrow and print your way to greater prosperity. The idea has failed so many times, in so many places, and in so many ways that it's just amazing anyone still supports it. As I said earlier, the reason big-spending politicians glom onto the idea is that it gives them an excuse to do what they love most -- buy votes with other people's money. And it gives left-wing economists a chance to ingratiate themselves to all their favorite politicians.

People like Paul Krugman are like medievel doctors who practiced bloodletting. When the patient didn't get better, they sometimes thought the problem was that they had not taken enough blood!

About to leave town on a business trip so I only have time to respond briefly. But Christina Roemer is a tenured faculty member at one of the top five economics departments in the U.S.

Krugman is light on qualifications, too. He is on the economics faculty at Princeton and won the Nobel Prize in economics.

Have any of your Austrian "economists" won a Nobel Prize? Or are there any of them on the economics faculty of any top economics departments?

[TallGuy6]

Originally Posted by TexTushHog

About to leave town on a business trip so I only have time to respond briefly. But Christina Roemer is a tenured faculty member at one of the top five economics departments in the U.S.

Krugman is light on qualifications, too. He is on the economics faculty at Princeton and won the Nobel Prize in economics.

Have any of your Austrian "economists" won a Nobel Prize? Or are there any of them on the economics faculty of any top economics departments?

Spending your life in Univeristies mostly qualifies you to give speeches. These people haven't started businesses, made payrolls, developed a new products, etc. They don't "know" how business works, they just think they know.

While we don't need business leaders as President, etc....we need LEADERS. Bookworm professors are not leaders. Holding sway over students that pay 3X more for the education than they should (Econ 101) does not make you a leader.

[TexTushHog]

Originally Posted by TallGuy6

Spending your life in Univeristies mostly qualifies you to give speeches. These people haven't started businesses, made payrolls, developed a new products, etc. They don't "know" how business works, they just think they know.

While we don't need business leaders as President, etc....we need LEADERS. Bookworm professors are not leaders. Holding sway over students that pay 3X more for the education than they should (Econ 101) does not make you a leader.

Actually, since the mid 1980's, there has been a lot of back and forth between academia and economics departments on one hand, and the business world on the other. Mostly with folks in econometrics and economic theory. Goldman Sachs has done this a lot as have a lot of quant hedge funds. Most of the work these guys do is in either general forecasting, arbitrage modeling, or Black-Scholes/Merton pricing work (Delta Hedging). Mostly the latter.

The real trick is that Black-Scholes/Merton formulas work perfectly with certain assumptions that don't fully reflect the real world. There are transaction inefficiencies that gum up the works, tail risks at the ends of distributions, lack of constant trading, etc. that you have to work around to make your programs deal with real world issues. Pretty esoteric and technical stuff, but absolutely critical to transforming Black-Scholes/Merton formulas into real programs that don't go berserk when options and derivatives markets hit the ordinary bumps that they do occasionally, but predictably.

But lots of work to be had, as I understand it. And they're paying economists pretty big bucks to move over for a few years since there is so much at stake with these programs. So while your statement may have been true twenty or thirty years ago, I think that is no longer the case.

[Texas Contrarian]

Originally Posted by TexTushHog

But Christina Roemer is a tenured faculty member at one of the top five economics departments in the U.S.

So what?

(And it's Romer, by the way.) That didn't exactly stop her from grossly overestimating the stimulative effects of that $860 billion collection of ineffective political payoffs, did it?

Originally Posted by TexTushHog

Krugman is light on qualifications, too. He is on the economics faculty at Princeton and won the Nobel Prize in economics.

"Ladies and gentlemen of the jury, my client is the recipient of a prestigious prize awarded by a panel of Swedish leftists. That proves that he is a very, very smart person who knows things that few others know. Therefore it follows that anyone who disagrees with him, even on a topic having nothing to with the body of work for which the prize was awarded, must be wrong."

Krugman is a far-left loon who has no idea how the economy works and how the capital markets work in the real world. Although he allows that the stimulus package was very poorly designed, he seems to think the main problem is that it was too small! And as I noted above, he has called for at least $8 trillion of fresh QE. Virtually no one else in the whole world thinks that would be anything other than suicidal.

The problem with people like this is that they seem to think massive government intervention is the answer to almost every perceived economic ill. Of course, that's the default setting for most academic economists, especially at most of what are considered our elite universities. Many of these folks were teaching that the Soviet command-and-control model offered a viable alternative to the Western market-based mixed economy model right up until the time that the Soviet Union collapsed!

About March of 2009, Obama had what was described as a rather icy meeting with German Chancellor Angela Merkel. He tried to persuade the Germans to get on board with a "stimulus" about the size of ours (as a percentage of GDP). Having seen European countries go down the garden path with that kind of nonsense before, Merkel was having none of it. The Germans did agree to a smaller stimulus, but they spent the money more effectively, subsidizing manufacturers and exporters. In fact, Germany undertook a plan to get their (already much smaller than ours) deficits down to very low levels over a five year period. Who looks better now?

Yet Krugman launched a condescending series of statements saying that the Germans were "clueless" and that their economy would suffer for years. This really pissed off the German finance minister, who apparently didn't feel like getting pompously hectored by a clueless American economist who's been wrong about so many things for so many years.

Originally Posted by TexTushHog

The real trick is that Black-Scholes/Merton formulas work perfectly with certain assumptions that don't fully reflect the real world. There are transaction inefficiencies that gum up the works, tail risks at the ends of distributions, lack of constant trading, etc. that you have to work around to make your programs deal with real world issues. Pretty esoteric and technical stuff, but absolutely critical to transforming Black-Scholes/Merton formulas into real programs that don't go berserk when options and derivatives markets hit the ordinary bumps that they do occasionally, but predictably.

Before I started my own funds, I spent a brief period in the 1980s as a quant analyst for one of the major houses, so I have always been fascinated with these models. Although Black-Scholes and a few others were designed to be flexible enough to survive many types of robustness analysis, there are instances where they can and do break down. Without getting into too much esoterica, suffice it to say that that's even more true today with the crazy levels of volatility we now see. When Black-Scholes was designed back in the 1970s, volatility levels were miniscule by comparison.

However...

In almost every way imaginable, these models survive robustness analysis incomparably better than macro models producing fiscal multipliers greater than 1.0 for social spending. (Things such as food stamps, unemployment benefits, etc.)

I was in favor of effective programs that would produce things we need and put people to work; I was just opposed to the sort of political porkfest and vote-buying bonanza that we got. It was designed to be a political stimulus package, not an economic one.

I believe we would be much better off if we had spent half as much money -- but had actually spent it on something we need, like infrastructure maintenance and development. We are doing very poorly in that area. Now that we have squandered resources foolishly, we have hampered our ability to do things we desperately need to do.

Another reason I think the stimulus package was so ineffective is that our problems are structural and of a nature that just pouring out a lot of money and hoping to stimulate some demand doesn't really do very much.

The financial system is essentially a deeply corrupt oligopoly. Nothing has effectively been done about TBTF. The major players can still play "heads we win, tails taxpayers lose" games with other people's money. The Fed has promised ZIRP for two more years. This allows banks to continue fattening up on the carry trade and all sorts of other activities while savers continue to be punished. More credit needs to be extended to producers and exporters and less to large speculators.

China prints renmembi like there's no tomorrow and buys dollars so they can keep their side of the dollar/yuan pair grossly undervalued and exploit trade advantage on an unprecedented scale. They are the biggest neomercantilist power in the history of the world.

We spend close to 3% of GDP on imported oil which we promptly burn up. The consequences of that should be obvious to everyone.

We have greatly expanded the service sector of our economy and shrunk the goods-producing sector. Some economists maintain that that's a natural progression in a mature technologically advanced economy, but that view fails to consider that a number of services that have no intrinsic uniqueness can be performed by fewer people as technology advances, and in many cases by foreigners. For instance, think of all the Indians manning tech support centers. In my opinion, we desperately need to reindustrialize our economy.

Our educational system is a disaster. We led the world fifty years ago. Now by many measures two or three dozen countries beat us handily, especially in math and science. We need to re-establish loyalty to our kids, not teachers' unions that protect their members no matter how bad a job they do. Why shouldn't we get rid of bad teachers and pay the good ones better?

There are of course many other areas where we fall short, but I'm afraid we're never going to have much of a recovery until we start seriously addressing real problems.

[LazurusLong]

Didn't Barak Hussein Obama get nominated within weeks of winning the election then awarded a Nobel Peace Prize before he even did a single thing other than jam down our throats that failed stimulus package?

Now that really worked out for that Nobel committee didn't it?

[billw1032]

And let's don't forget Al Gore's Nobel Peace Prize (along with the IPCC) for his Climate Change Activism. Whether you agree or disagree with him, I fail to see how his efforts are in any way a leading force for peace in the world. I note that they didn't give him the prize in Physics or Chemistry for this work. It's all politics -- someone wanted to give him a prize and draw attention to his activities and it didn't matter what the criteria was.

Then there is the case of Einstein who did get a Nobel Prize (for the Photoelectric Effect) but didn't get a second one he really deserved (for Relativity).

Not saying a Nobel Prize is trivial, but to my way of thinking it doesn't mean what I used to think it meant.

[TexTushHog]

CaptainMidnight, the difference between Black-Scholes calibrations and trying to accurately calculate exact multipliers (rather than just proving that they exist and are significantly over 1.0), is the simple difference between micro and macro economics. The former is relatively easy to do and the latter is damnably difficult. Still, I think it's clear that multipliers exist and that they are generally in the range of 1.1 to 1.4 in most cases.

[Texas Contrarian]

Originally Posted by TexTushHog

CaptainMidnight, the difference between Black-Scholes calibrations and trying to accurately calculate exact multipliers (rather than just proving that they exist and are significantly over 1.0), is the simple difference between micro and macro economics. The former is relatively easy to do and the latter is damnably difficult.

Completely missing the point!

I merely noted that the Black-Scholes model -- given certain assumptions -- is an example of something that actually has clear validity, which is manifestly not the case with macro models claiming fiscal multipliers greater than 1.0. You were the one who brought it up, not me. The fact that one falls under the domain of macro and the other does not is simply irrelevant to my essential point that the former actually works (at least sort of) and the latter does not.

Earlier in this thread (post #52), I asked TexTushHog a very simple question:

Originally Posted by CaptainMidnight

TTH, in a thread on this topic in Diamonds and Tuxedos, I asked you a simple and direct question: Can you name an instance where a fiscal stimulus package boosted the prosperity of a nation in the presence of an already-large structural budget deficit? As I'm sure you will recall, you could not. (And it's been tried plenty of times.)

For that matter, can you name any instance, irrespective of the current debt/deficit status, where a spending surge can reasonably be credited with boosting the prosperity of a nation?

If he knew of such an instance, don't you think he'd be eager to point it out rather than just move blitheley on? He did not because he cannot. I provided clear examples of failure, but proponents of stimulus by means of large fiscal surges cannot point to a single example of success, even though it's been tried countless times. Falling for this nonsense is not significantly different from falling for Bastiat's broken window fallacy, first explained way back in the mid-1800s. It's tooth fairy economics.

Perhaps one of the best explanations I've seen of why multipliers are significantly less than 1.0 was given by Harvard's Robert Barro:

http://www.economics.harvard.edu/fac...mistsVoice.pdf

We've been damaged enough by purveyors of economic malpractice.

Isn't it about time we got back to classical liberalism and sound economics?