Who can I believe about the economy?

The problems in our economy right now are real, I believe. Tons of people have lost jobs, and my investment accounts also prove it. I guess there’s no debate about that. But the question is, what to do about it.

My observations:

  • Politicians on both sides are equally passionate yet totally contradict each other about what they claim to be ‘facts’.
  • The most glaring one is, for me, “are tax breaks stimulative or is government spending stimulative?
  • I mean this is a case where apparently intelligent adults are calling the sky red and the grass blue.
  • It’s not like they say, “well experts have trouble understanding this but I really believe that the sky is red and the grass is blue”. It’s more like, “every single expert out there agrees with me, and if you don’t you’re a dope.”

What to do? Here’s where I come out:

  • I don’t believe any politician, left or right. They are all lying. Ok, they would call it “framing” but the fact is there are  no facts (I am a little  more inclined to believe the President, but even there…)
  • I know that I can’t personally determine whether tax breaks are stimulative or not, or whether government spending is stimulative or not, let alone whether either one will ‘work’.
  • I decide to believe experts I whose opinion and prescriptions I read in the newspapers and hear on TV. I look for experts who don’t have an axe to grind and seem intelligent, thoughtful, and not a shill for one or the other party.

You may ask, then, what do I read and what do I watch? In the end, the person who I have decided is making the most sense is Paul Krugman. He happens to appear in the papers and tv stations I watch. So I side with his prescriptions:

“A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.” (fromOn the Edge“)

and

“Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive. ” (fromOn the Edge“)

And then in the end I also fall back on the common sense approach: “If you find that you’ve dug yourself into a big hole, the first thing to do is STOP DIGGING“. Let’s face it, we are in a crisis right now, and we know who was in charge and what policies were in charge to get us here, so I guess it’s time to try something else.

0 thoughts on “Who can I believe about the economy?

  1. […] that I made a point about my skepticism about whatever politicians say about the economy (see "Who Can I believe about the economy") here’s some more.One pal told me, nicely, that my appreciation for Paul Krugman was […]

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  2. I like to visit housepricecrash.co.uk/newsblogIt has a lot of contributors who have contrarian views and who collectively help me to make up my mind or at least to see a bigger picture.I think that, in America, spending on health care for poorer people has been criticised a lot. eg. Michael Moore’s film, Sicko. I think your pal’s reference to ‘being a socialist’ is important in deciding which way to displace your economy.Yes, you can give people a decent health care system but your national debt will likely go up [borrowing money to spend money on good health care]. By inflating your currency, your debts become more manageable because debts are of less value in ‘real terms’. But then foreign lenders begin to question the logic of lending money to a country which devalues the loan. You can make America a leaner economic machine by paying off foreign debt and cutting down in quality of life for your citizens (eg. poor medical care). Obama might find that he can either serve the economy and help America in the long term or serve the people who he made socialist promises to, in the short term.Another thing to consider is China and other developing countries. Will America apply protectionism and make it harder for Americans to spend money on cheap imports? The down-side of this is that China is really powerful these days. It holds a lot of US dollars in its treasure chest and it is a major lender to America.Do we want free market globalisation where, as South Park would put it, ‘they took our jobs!’ or to perhaps disrespect the lender country and face the consequences in the long term?

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