Friday, June 18, 2010

Doing Go(l)d(man)'s Work to Prevent Going Japanecian

With a growth slowdown at least baked in the cake, ECRI is now admitting the possibility of a double dip. The "stimulus" has not stimulated. Worthy though keeping Medicaid going is, and humanitarian it may be to have extended unemployment benefits, those parts of ARRA (the "stimulus" bill) have no obvious multiplier effect. Paving roads and the like is also of no lasting economic benefit unless said roads were in such bad repair as to have been preventing important commerce from occurring - but that was not the case.

So what are the Krugmanites (and bloggers such as Dr. Mark Thoma and Calculated Risk himself) doing when they talk about job stimulation?

It is past time to talk aggregate demand and other failed Keynesian terms and describe with specificity what it is that people should be doing with their spare (unemployed) time.

I am on record as favoring heavy investment in green technologies of the future for which America has a current competitive advantage, such as biotech.

Certainly to the extent that needed infrastructure has not been kept in good repair, efforts to improve and maintain that should be done; but the heavy pace of municipal finance at least suggests a reasonable ongoing effort in that regard.

Consider again that the average American works perhaps 20+% more hours weekly than the average French worker, and perhaps for more years as well. Perhaps the fact is that most needed work is actually occurring, and the country might be better off if no more aggregate hours were worked in employment than are currently worked.

Printing money is good for Goldman and gold. Deflationary depressions end up creating more work for Goldman but not gold. The U. S. could go Japanese with endless "stimulus" that doesn't stimulate, financed with more and more debt at increasingly impossibly low interest rates. Or, we could go Grecian, wherein the rest of world will not lend except at very high rates, given how close we are already to a debt trap, where money is being borrowed to pay principal and interest to prior lenders.

Avoiding going Japanecian (Grecianese?) is the order of the day.

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