WWW - Posts tagged Keynesian at BloggingStocks

Keynesian posts

NYT's Krugman: Here's a better bank rescue, for the taxpayer

Posted Feb 3rd 2009 7:00PM by Joseph Lazzaro (RSS feed)
Filed under: Politics, Financial Crisis

You have to appreciate the cleverness of this era's financial humor. (Note that I said, appreciate the cleverness, not love, or enjoy. That's because, depending on your perspective, the humor is either on-the-mark, or not that funny. But that is part of the subjective nature of humor.)

One joke making the rounds:

Question: What's the capital of Iceland?
Answer: $25.

Another: In the old days, banks lent money to people. These days, people lend money to banks.

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman discusses bank capital and lending in his most recent column, and argues that the apparent likely Obama administration fix for the banking sector -- a combination of U.S. government purchase of toxic assets and guarantees against losses on other assets, each on terms favorable to the banks -- represents a lousy deal for the U.S. taxpayer, who'll end up "footing the bill for rescuing the banks."

Continue reading NYT's Krugman: Here's a better bank rescue, for the taxpayer

Right now, it's all about breaking the cycle

Posted Jan 15th 2009 5:00PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Recession

This is one cycle the United States, and the world, really, must strive to break, and soon.

The U.S. recession has gone well beyond a correction in the formerly bubble-laden housing sector. The recession is now forcing reductions in commercial operations not because of some flaw in a business model, but simply because demand around companies (their clients and customers) is declining -- the so-called 'vicious cycle' that economists so adamantly and forcefully warn policy makers, executives, and investors about.

Recession: a thief

True, during times like these you'll hear some talk about the 'benefits' of a recession: a review of business models, increased efficiency, the elimination of needless expenses, and enhanced adaptability/resiliency are frequently cited, but keep in mind that these things can occur just as regularly when the economy is expanding, as when it's contracting. In that sense, recessions never offer 'unique' benefits.

What's more, the reality is that recessions end businesses, disrupt the production process, and rob revenue from otherwise perfectly fine operations. They result in lost potential and underutilized capacity. They also cause the loss of hundreds of thousands of jobs, disrupt lives, and of course increase a host of other social costs and ills. In that sense, recessions are never 'good.'

Continue reading Right now, it's all about breaking the cycle

Martin Wolf: Wanted! Economic pragmatists with bold ideas

Posted Dec 31st 2008 6:30PM by Joseph Lazzaro (RSS feed)
Filed under: International Markets, Forecasts, Recession, Financial Crisis

Financial Times columnist Martin Wolf argues that the current financial crisis and global recession is best viewed through a Keynesian lens, and it's the lens of a pragmatist.

Wolf sees three Keynesian themes, or lessons, that policy makers would be wise to heed.

Keynes: Markets are essential, but not perfect

The first: if you expect markets to be self-correcting and self-policing, there's trouble up ahead. Wolf: Mistakes occur, even among those who were following standard operating procedure. A market filled with bankers -- or other participants -- following standard operating procedures that were flawed leads to ... what we have today, pretty much -- a global recession and constrained credit.

The second: It's o.k. for a corporation to become more efficient, but it's not necessarily a good thing if a society or nation (or world) does so all at once. This reinforces one of Keynes's tenets: It's a good thing to have consumers amass savings, but if everyone saves everything all the time it would be a disaster.

Or, for the globalization version of the above, economist Richard Felson told BloggingStocks: "We need people in the United States to save more money, but if people in Europe, China, India, Japan, Brazil and Russia do the same thing simultaneously, the global economy will remain in a recession for a very long time."

Continue reading Martin Wolf: Wanted! Economic pragmatists with bold ideas

Once again, Keynes holds the keys to economic recovery

Posted Oct 29th 2008 3:20PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Recession, Financial Crisis

These days, investors have to search far and wide to find positive data points, let alone a positive outlook, for the U.S. and global economies.

And, without question, the financial crisis and slowing global growth, combined with previously weak economic fundamentals in the U.S., are indeed formidable obstacles to any investor's hope for optimism.

Still, perhaps the real the danger lies in not where we are but in denying where we can be, and that's where John Maynard Keynes comes in.

For those unfamiliar, Keynes, along with Milton Friedman and Karl Marx, are the three major philosophers of modern economics.

In the United States, policy markers since 1981 have favored market absolutism, Friedman's view, peppered by government intervention, Keynes' view, when needed.

More recently, during the current decade, market absolutists appeared to have had free rein. Some of these market absolutists are now arguing that 'the market should run its course' and 'recessions, even deep recessions, are an essential part of the business cycle,' etc. Don't believe any of it for a moment, Keynes would say.

Expansion is the normal condition

It was part of the genius of Keynes that he revealed to us that the natural state of the economy is expansion and that a downturn is "extraordinary imbecility." Further, Keynes also reminds us that recessions, or economic downturns, are not necessarily self-correcting.

Keynes also believed that the market economy, in the form of mixed capitalism, could survive only if it earned the support of the public by raising living standards.