Economic Argument for Austerity Based on Excel Error?

[derspiess]

The answer to our problem of spending way too much money is surely to spend a lot more.

Yes.  Spending your way out of a spending problem seems quite logical.

[CountDeMoney]

Nah, it would be much easier to reverse-engineer markets back to the days when bread was 15 cents a loaf or a car only cost $1,600.

[Valmy]

The answer to our problem of spending way too much money is surely to spend a lot more.

Yes.  Spending your way out of a spending problem seems quite logical.

The logical solution is to have the Fed print money to buy all of our debts then print more money to pay it all off.  Problem solved.

[DGuller]

The answer to our problem of spending way too much money is surely to spend a lot more.

Yes.  Spending your way out of a spending problem seems quite logical.

Is spending too much money really what caused the problem? I thought it was over-leveraged speculation.

Besides, even if we buy into the BS premise that spending caused our problems, it still doesn't follow that spending more is such an obviously idiotic solution.  In many dynamic system, reaching one extreme can crash you right into the other extreme (which is when the crisis actually comes to a head), and pushing things back into the direction of the original extreme is a path towards regaining stability.

[Grey Fox]

The answer to our problem of spending way too much money is surely to spend a lot more.

Yes.  Spending your way out of a spending problem seems quite logical.

The logical solution is to have the Fed print money to buy all of our debts then print more money to pay it all off.  Problem solved.

Yes!

[Berkut]

The answer to our problem of spending way too much money is surely to spend a lot more.

Yes.  Spending your way out of a spending problem seems quite logical.

Is spending too much money really what caused the problem? I thought it was over-leveraged speculation.

Besides, even if we buy into the BS premise that spending caused our problems, it still doesn't follow that spending more is such an obviously idiotic solution.  In many dynamic system, reaching one extreme can crash you right into the other extreme (which is when the crisis actually comes to a head), and pushing things back into the direction of the original extreme is a path towards regaining stability.

That could all be correct - but there really isn't any compelling reason to think it is.

I am sticking with common sense. If your problem is that you are spending much, much, MUCH more than you are bringing in, and hence running up a ridiculous amount of debt, the solution probably has something to do with not spending so much.

I know it seems crazy.

[CountDeMoney]

I am sticking with common sense. If your problem is that you are spending much, much, MUCH more than you are bringing in, and hence running up a ridiculous amount of debt, the solution probably has something to do with not spending so much.

I know it seems crazy.

It is crazy when you don't address the "more than you are bringing in" part as part of the solution.

[OttoVonBismarck]

The cause of the recession has nothing to do with whether you should try to limit deficit spending or not. We're 5 years into the "recovery" now and still spending significantly in excess of GDP growth. A deficit that is larger than GDP growth is not sustainable long term, and must eventually be wound down.

[Berkut]

I am sticking with common sense. If your problem is that you are spending much, much, MUCH more than you are bringing in, and hence running up a ridiculous amount of debt, the solution probably has something to do with not spending so much.

I know it seems crazy.

It is crazy when you don't address the "more than you are bringing in" part as part of the solution.

Happy to do so, but that wasn't part of the discussion - discussion was about the apparent faith that the solution to the problem of too much debt has nothing to do with spending OR income...or rather, it has to do with spending...a lot more. And more. And more. And more forevermore more more more more more.

Who cares about income? According to the "ZOMG austerity is bad!" people it doesn't even matter. Hell, if anything we should slash taxes, since debt doesn't matter. Why just spend more when we could spend more and take in less?

[Valmy]

It is crazy when you don't address the "more than you are bringing in" part as part of the solution.

Indeed.  Austerity measures generally have to include both.

[DGuller]

That could all be correct - but there really isn't any compelling reason to think it is.

I am sticking with common sense. If your problem is that you are spending much, much, MUCH more than you are bringing in, and hence running up a ridiculous amount of debt, the solution probably has something to do with not spending so much.

I know it seems crazy.

I'm not sticking with common sense.  Relying on common sense when facing a complicated problem may or may not be crazy, but it is definitely silly. 

Common sense is sufficient if you're facing the question of whether trimming your pubic hair with a blow torch is the best approach.  I would not rely just on common sense if I wanted to know how to perform brain surgery, launch a rocket, or move the economy out of recession.

[Berkut]

That could all be correct - but there really isn't any compelling reason to think it is.

I am sticking with common sense. If your problem is that you are spending much, much, MUCH more than you are bringing in, and hence running up a ridiculous amount of debt, the solution probably has something to do with not spending so much.

I know it seems crazy.

I'm not sticking with common sense.  Relying on common sense when facing a complicated problem may or may not be crazy, but it is definitely silly. 

Common sense is sufficient if you're facing the question of whether trimming your pubic hair with a blow torch is the best approach.  I would not rely just on common sense if I wanted to know how to perform brain surgery, launch a rocket, or move the economy out of recession.

You make a good point.

But instead of relying on common sense, you just go with your political view that spending is good, and hence more spending is better. Under any and all circumstances.

That doesn't strike me as superior to common sense.

[Jacob]

You make a good point.

But instead of relying on common sense, you just go with your political view that spending is good, and hence more spending is better. Under any and all circumstances.

That doesn't strike me as superior to common sense.

I don't think that's an accurate description of DGuller's position.

[DGuller]

You make a good point.

But instead of relying on common sense, you just go with your political view that spending is good, and hence more spending is better. Under any and all circumstances.

That doesn't strike me as superior to common sense.

That doesn't strike me as my stance either. 

My view has been very consistent:  Keynes had it mostly right.  Deficits should be counter-cyclical.  More spending is better when the economy is bad, and less spending is better when the economy is doing well.

[Tamas]

It is crazy when you don't address the "more than you are bringing in" part as part of the solution.

Indeed.  Austerity measures generally have to include both.

I agree with that, but that still doesn't make Berkut wrong.

the PIIGS, and some other countries I am sure (khm, Hungary) has been, or at least were, spending much more than their income was. They spent a significant portion of that overspending not on temporary economy-boost projects, but pretty standard permanent runnings costs, like welfare, healthcare, and pensions.
They were able to do that for decades, because on the scientific basis of "what could happen", they were granted low enough interests rates and/or people kept lending them money no matter what their books looked like.

The trouble is, when you get into an economic environment where people do not give blank checks to crackwhores, willingness to lend to these people dry up. So they end up with an entire nation and economy adopted to the influx of borrowed money, with no money left to borrow.

That's bad, and NOT a long term model for any country.