Can the US economy afford a Keynesian stimulus? (flag)

blogs.ft.com — Economic policy is based on a collection of half-truths. The nature of these half-truths changes occasionally. Economics as a scholarly discipline consists in the periodic rediscovery and refinement of old half-truths. Little progress has been made in the past century or so towards ...

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Willem Buiter Calls for Less US Stimulus, Expects Collapse in Price of Dollar Assets
naked capitalism — ... Buiter takes on another bit of orthodoxy today, and it's a doozy. "Can the US economy afford a Keynesian stimulus?" And the headline is anodyne compared to the text. ...

Pink Picks
FT Alphaville — ... Peter Oppenheimer, a student emeritus of Christ Church, Oxford explains how the Brown boom, because it lasted so much long, meant a correspondingly prolonged overvaluation of sterling and of UK assets. It follows therefore that the most promising development for re-expanding Britain’s economy in the medium term is the decline in the sterling exchange rate. Maverecon: Can the US economy afford a Keynesian stimulus? Willem Buiter writes there is no chance that a nation as reputationally scarred and maimed as the US is today, could extract any true ‘alpha’ from foreign ...

links for 2009-01-05
Economist's View — ... Officials Worry Inflation Rates Could Ease Too Much - RTE Who should get the federal stimulus funds - Ed Glaeser - Boston Globe Obama Eyes $310 Billion Tax Cut - WSJ.com Fed has abandoned monetary policy, critic says - Reuters Financial globalisation and productivity growth - voxeu.org U.S. Monetary Policy Objectives in the Short and Long Run - Janet Yellen Can the US economy afford a Keynesian stimulus? - Willem Buiter What the Yield ...

Against the Big Stimulus
EconLog: Library of Economics and Liberty — After reading Willem Buiter's long piece (pointer from Mark Thoma ), I decided that it is time to come out firmly against a large fiscal stimulus. Instead, I would prefer a small stimulus. The case for a large stimulus appears to be based on the notion that small stimulus might fail completely, while large stimulus might succeed. This might be true if there are increasing returns to fiscal stimulus or there are threshold effects of fiscal stimulus. I think it is fair to say that the case for increasing returns or threshold effects is not well established either ...

US economy needs big stimulus but can it afford one?
The Skeptical Speculator — ... me, he was understating the case. The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression. So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out. But Willem Buiter thinks the US cannot afford the expected stimulus. Given the ...

Faith-based macroeconomics
Paul Krugman — Willem Buiter : My recommendation is to go easy on the fiscal stimulus. The US government is ill-placed financially and fiscally, to engage in short-term fiscal heroics. All they can really do is pray for a stronger-than-expected revival of global demand, without any major stimulus from the US. OK, I’m not being fair; Willem is a smart guy, and he’s raising concerns about the US long-term position that I also have, although not to the same extent. I don’t have time right now for a full numbers post, but here’s the preview: Willem is saying that America’s “exorbitant privilege”, ...

Monday morning links
The Mess That Greenspan Made — ... Day in London as Dollar Strength Saps Demand - Bloomberg Signs point to explosive rise in gold price - Mineweb Abu Dhabi gold jewellery sales fall 40 pc in Dec - Economic Times CGM’s Heebner, Fidelity’s Lange Falter as Markets Claim Victims - Bloomberg 10 resolutions for retirement - MSN Money Portfolio Rebalancing - Don't Ignore Duration - Hussman ECONOMY Obama seeks $310 billion in tax cuts - Reuters Can the US economy afford a Keynesian stimulus? - Financial Times Fighting Off ...

Readings 1/5/09
Paul Kedrosky's Infectious Greed — Despite slide in world share, U.S. science impact still looks strong (ScienceWatch) Deficits, debt and looming U.S. disaster (St. Louis Fed) Can the US economy afford a Keynesian stimulus? (Buiter/FT) Everything But The Sky Falls-in On Spain (afoe) ...

can we afford keynesian remedies?
Decline and Fall of Western Civilization — via yves smith, willem buiter. Given the bad fiscal position of the US Federal government and given the vulnerability of the external position of the US and its growing reliance on foreign funding, the scope for expansionary fiscal policy in the US is much more limited than president-elect Obama’s advisers appear to realise. Underneath the effective demand problem is a deep structural rot, especially in household sector and financial sector balance sheets. Keynesian cyclical policy options that would be open to more structurally sound economies should ...

Big Swinging Stimulus
self-evident — Willem Buiter starts the year off with a bang: Can the US economy afford a Keynesian stimulus? Economic policy is based on a collection of half-truths.  The nature of these half-truths changes occasionally.  Economics as a scholarly discipline consists in the periodic rediscovery and refinement of old half-truths.  Little progress has been made in the past century or so towards understanding how economic policy, rules, legislation and regulation influence economic fluctuations, financial stability, growth, poverty or inequality.  We know that a few ...

And Now, the Counterargument
The Baseline Scenario — ... raise taxes in the future to generate positive balances (I’m sorry to inform Congressional Republicans that cutting spending is not really an option, given the growth of entitlement commitments in the future and our increasing military needs, although cutting the growth rate of spending might be possible), they will conclude that the debt can only be paid off by inflating it away, which will drive interest rates up, the dollar down, and inflation up. Buiter spells this argument here and more recently ...

Rescuing banks, then Treasuries
FT Alphaville — ... : If the benchmark 10-year U.S. Treasury note is sold at a yield above 3 percent at an auction this week, that would increase the chance the Federal Reserve will buy longer-maturity Treasuries, the manager of the world’s biggest bond fund said on Monday. Recommended reading for later this week: The prolific Willem Buiter on whether the US can sustain such a course of action. Related links: ...