Re: May God - or those of good sense - rescue us from those who would

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Stiglitz' last paragraph is written to cover his intellectual (and
political) behind rather than as an expression of independent thought.
The concept of the longer run comes from the concept of the business
cycle which neo-classic economics accept as natural.  But there is no
reason why a perpetual upward cycle cannot be designed.  Friedman talked
about the steady 3% monetary expansion to achieve steady growth.  The
Taylor rule attempts to set auto adjusting interest rates to fuel a
perpetual expansion. A 3% inflation rate can keep the expansion going
uninterrupted.  There is no reason whatsoever for government to even
incur a budget surplus, except to slow down the economy.  A budget
surplus works only to reinforce the business cycle which then requires a
budget deficit to correct. Even with Clifton's debt bubble, there were
talks of the end of the business cycle, but Summers was seduced by the
political prospect of a surplus and debt reduction while Greenspan was
warning about irrational exuberance.  Well, if you play by the rules of
the business cycle, a budget surplus must be followed by a recession,
which was exactly what happened.  Then Summers came out with his
ridiculous slogan of "Debt reduction creates fiscal space", claiming
that debt reduction can be stimulative. What actually happened was
shifting public debt to private sector debt, which is the ingredient of
bubble. Federal debts do not cause bubbles, only private debts do.

Clinton did not produce a surplus, he merely put a stop to the expansion
and call it a surplus.  Its is the same as corporate profit rose in the
pat few month not because sales has gone up but because layoffs and
halts in investment reduced cost.  The rate of contraction was faster
than the drop in revenue already in stream. And it was book in quarterly
reports as profit.  There is no way a smaller business produces more
profit than a large one.  Government budget surplus works the same way
on a national scale.  A surplus remove money from the economy and
contracts it which will result in deficits down the road.

pdavidso wrote:
> > ===== Original Message From Schulte-baeuminghaus
>
> <schulte.baeuminghaus@xxxxxxxxx> =====
>
> > The article below by Joseph Stiglitz should be read, absorbed and its
>
> teachings applied by all of us in the months and probably years of economic
> and social crisis that lie ahead.
>
>
> Unfortunately, although Stiglitz starts off good -- in a very Post Keynesian
> way in his discusssion regarding independent central banks and his discusssion
> of inflation-- he ends up bad when he argues:
>
>
> > > In the long
> > > run, governments should run balanced budgets, with surpluses in good years
> > > making up for deficits in bad years.
>
> This is sheer nonsense and allowing classical thought in by the back door--
> unless Joe means in the long run when we are all dead!!
>
> Perhaps Joe should read chapter 24 of the General Theory   (and maybe even,
> heavens forbid, he might try reading the first 23 chapters as well ---).
>
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
> home phone and fax # (865)692-0802
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html