Excel Error Contributes To Problems With Austerity Study 476
quarterbuck writes "Many politicians, especially in Europe, have used the idea that economic growth is impeded by debt levels above 90% of GDP to justify austerity measures. The academic justification came from a paper and a book by Kenneth Rogoff and Carmen Reinhart. Now researchers at U Mass at Amherst have refuted the study — they find that not only was the data tainted by bad statistics, it also had an Excel error. Apparently when averaging a few GDP numbers in an excel sheet, they did not drag down the cell ranges down properly, excluding Belgium. The supporting website for the book, 'This time it is different,' has lots of financial information if a reader might want to replicate some of the results."
The Excel error is making the rounds as the cause of the problems with the study, but it's actually a minor component. The study also ignores some post-WWII data for countries that had a high debt load and high growth, and there's some fishy weighting going on: "The U.K. has 19 years (1946-1964) above 90 percent debt-to-GDP with an average 2.4 percent growth rate. New Zealand has one year in their sample above 90 percent debt-to-GDP with a growth rate of -7.6. These two numbers, 2.4 and -7.6 percent, are given equal weight in the final calculation, as they average the countries equally. Even though there are 19 times as many data points for the U.K."
Does High Public Debt Consistently Stifle growth? (Score:5, Insightful)
No, finite resources do.
Re:Does High Public Debt Consistently Stifle growt (Score:5, Insightful)
Does High Public Debt Consistently Stifle Economic Growth?
No, finite resources do.
High public debt drains away valuable resources faster than low public debt
Given the same amount of initial resource, a country with high public debt will have smaller chances for recovery
But then again, most economies (other than that of North Korea) are dynamic, and the amount of resource fluctuates
Re:Does High Public Debt Consistently Stifle growt (Score:5, Interesting)
But then again, most economies (other than that of North Korea) are dynamic, and the amount of resource fluctuates
That depends on what you mean by "resources." An MBA Romney-style corporate raider considers "resources" to mean "cash and credit" while someone who isn't a rent-seeking parasite considers things like timber, ore, fuel, and available labor to be resources. The only real resources that fluctuate are labor and renewables.
Resource (Score:5, Insightful)
The only real resources that fluctuate are labor and renewables
I guess you are not in the high tech field
As one in the tech field since the 1970's, one very real resource that I count on is BRAIN-POWER, aka, ideas
Timber can cut into wood for burning, or could be turned into tables and chair by carpenters, or could be used for building a dormitory, or, in the hands of master crafter like Stradivarius, becomes his world famous violins
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Re:Resource (Score:5, Insightful)
"BRAINPOWER" would be included in the "labor" category, just as physical labor is. What is with this idea that those of us who work with ideas do not labor? Of course we do, it's just in a different way from those who do physical labor. All forms of labor require some form of mental capacity, some more than others, but the amount of mental capacity required does not make it more or less labor.
Re:Does High Public Debt Consistently Stifle growt (Score:4)
Re:Does High Public Debt Consistently Stifle growt (Score:5, Insightful)
At some point the country with more debt has had more money than the other one. What matters is what the country is doing with that extra-resource. As a example, in June 1999, Google was 25 millions in debt, a considerably worst shape than my local kebab place.
Debt is just an indicator. That's what's wrong with the current austerity measure in Europe. It does not matter what a Country is doing with its money, Europe only cares about the yearly balance sheet and does not give a damn about the future of the country.
Re:Does High Public Debt Consistently Stifle growt (Score:4, Interesting)
The loans from the USA to the UK after WWII where anything but favourable. They where under incredibly harsh terms that impeded economic growth and lead almost directly to the loss of empire.
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What Greek, Cyprus and others teach us is that once you've surrendered your own money you lose control of your destiny. The practical result of Euro is that countries that are struggling can't let their currency devalue and result in natural rebalancing of imports and exports. It forces all the economies in Europe (well, those who joined it, anyway) to march i
Re:Does High Public Debt Consistently Stifle growt (Score:5, Interesting)
The creation of the USA also had it's problems, because the states were so different. e.g. A civil war due to differences in economies in the south and the north, one symptom of which was the positive and negative views of slavery.
But would you be better off now if you'd remained independent states?
And what of the people who thought the collapse of the US was inevitable?
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This attempt to build an unified Europe is coming to the same end all the previous ones have. The only question is: how chaotic will the collapse be?
It won't be a collapse, it will be a war, actually a civil war similar to the mid-19th century civil war in the United States. The United States of Europe will go through the same thing. The wealthy productive states will impose more and more requirements on the indebted states, the indebted states rebel, the wealthy states resentful that their money would be used to bail out the states that spent more than they had, and it will come to a head.
So which are the wealthy states? Well, at the top is Germany.
Re:Does High Public Debt Consistently Stifle growt (Score:5, Insightful)
The UK has had much higher debt ratios in the past. It equalled 30 years of tax revenue after the war with France and Spain in the early 19th century. It took most of the century to pay it off
So? That was the UK's greatest period of growth and relative prosperity. It's often cited as an example of debt not impeding growth. Similarly the US had federal debt of 125%/GDP after WWII, and post-WWII was our greatest growth period. It helped that the debt was mostly internal (i.e. War Bonds were held by Americans, so paying off the debt meant paying Americans). AFAIK the same was true of the UK after the Napoleonic wars.
However, I'm not saying debt isn't important, just that it's not the only or the ultimate evil. Other things can be worse, and can justify increasing the debt.
Excel error? (Score:5, Insightful)
When I read the title, I expected a calculation or rounding issue, or an internal range issue from built in components and not "dumb ass user didn't set the range correctly when averaging". That's not an Excel error, that's a user error - Excel did exactly what it was told to do.
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GDP = 77.1*850
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Not to mention that if you use a reasonably recent version of Excel (at least 2003, which is nearly 10 years old), it'll warn you if you're doing something with a range of cells and it thinks you've missed a bunch of them out.
It's n
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(1) Likely, they didn't use drag-and-drop to copy the cells, but double-clicking on the fill handle (the same widget used for drag&drop copying) which stops extending the range up to but not including the first neighboring empty cell, not at the end of the table. As such it's perfectly possible to not include the entire cell range while realizing that.
(2) Having said that, one would expect that whoever makes a model with that much impact double checks their model a
Re:Excel error? (Score:5, Insightful)
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Re:Excel error? (Score:4, Insightful)
The real news to me is that academic, world-famous, policy-influencing researchers use Excel instead of, say, R or SPSS, etc.
Excel is perfectly capable of adding up a few hundred numbers and making a basic chart out of the results.
Anyway, do you really think that someone who can't copy and paste numbers/formulas on a spreadhseet properly (or, more relevantly, build a model that incorporates some sort of checking of the results to the base data) is going to learn a programming language?
Re:Excel error? (Score:5, Insightful)
Excel marks parameters by drawing coloured borders around the selected range of cells.
I'm not quite sure how one could make it even more obvious without punching the user in the face.
Unless, of course, you expect a strong AI to reside inside Excel which is able to distinguish between what the user wanted and what he actually did.
Re:Excel error? (Score:5, Funny)
Unless, of course, you expect a strong AI to reside inside Excel which is able to distinguish between what the user wanted and what he actually did.
Clippy?
Re:Excel error? (Score:4, Funny)
"It looks like you want to create a database in a spreadsheet application."
Re:Excel error? (Score:5, Funny)
Re:Excel error? (Score:5, Interesting)
I'm not quite sure how one could make it even more obvious without punching the user in the face.
How about by not conflating data, formulae, and layout in the UI? This is an error made by all VisiCalc clones, but not by Improv clones. If you use something like Improv, FlexiSheet or Quantrix then this kind of error is almost impossible to make. If you use something like VisiCalc, 1-2-3, Excel or OpenOffice.org Calc, it is trivial.
Re:Excel error? (Score:5, Informative)
Improv is dead (18 years dead), FlexiSheet is in early Alpha (no binaries available for download). Neither would be appropriate for this situation. It would be like suggesting Hurd over Linux. Quantrix or similar financial modeling software would be more appropriate, but a) they're expensive, b) they're limited in scope.
SPSS and R are very good at statistical analysis. Quantrix, MapleSoft, IBM Algorithmics, and other software is for financial data modeling. None of those is particularly appropriate for sharing data in a useful format with peers. Excel is.
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SPSS and R are very good at statistical analysis. Quantrix, MapleSoft, IBM Algorithmics, and other software is for financial data modeling. None of those is particularly appropriate for sharing data in a useful format with peers. Excel is.
R is extremely appropriate for sharing data in a useful format with peers. It's completely free for one. But more importantly, it saves every single step of your analysis. Send someone an Excel file, and who knows what they've done to the data. Send someone your R proj
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Unless, of course, you expect a strong AI to reside inside Excel which is able to distinguish between what the user wanted and what he actually did.
Unfortunately, that's what MS tries to do and fails badly at it. Most of my frustration with Excel is it attempting to read my mind and failing miserably at it. That said, despite its shortcomings IMO it's still better than Lotus, Corel, or Oo's spreadsheets. Excel is really the only MS product I actually like (and I hate spreadsheets in general).
Contrast that t
Re:Excel error? (Score:4, Funny)
without punching the user in the face.
If anyone feels compelled to research this problem in computational journals, look for the keyword "haptic interfaces".
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That's still Excels fault for: a) making this not obvious to spot, and
Excel typically does a decent job of indicating stuff like this... But it can't do anything when the user ignores it. This is in no way Excel's fault.
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Excel typically does a decent job of indicating stuff like this...
I think you and I have different ideas as to what constitutes decent.
Try accidentely averaging not quite all of an array in any other language (e.g. C++, Octave/MATLAB/ Java, AWK, SQL, Python, Ruby, hell even TCL). You will find that the idiomatic way is always shorter, clearer and correct by comparison.
The big mush o' squares being all variables, data, temporaries and arrays makes excel and its clones hard to write bug free programs in. Mak
Re:Excel error? (Score:4, Insightful)
Try accidentely averaging not quite all of an array in any other language (e.g. C++, Octave/MATLAB/ Java, AWK, SQL, Python, Ruby, hell even TCL). You will find that the idiomatic way is always shorter, clearer and correct by comparison.
That's an easy mistake for a beginner to do:
1) Simply forget that array indices for most languages begin at zero(0) rather than one(1).
2) Make an error when establishing the termination condition, Like: "i <= array.length" rather than "i < array.length", again, due to forgetting that array indices begin at zero and end at n-1.
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You make a good point, but just to be devil's advocate, neither of those are true for Python, where an average is:
sum(data)/len(data)
(In 2.x, there is an integer division error there, but I'm talking 3.x).
Re:Excel error? (Score:5, Funny)
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You say inadvertently, but omitting Belgium could have been a tribute to Douglas Adams.
Re:Excel error? (Score:5, Insightful)
Re:Excel error? (Score:5, Interesting)
There's an arguement that this wasn't ignorance on the part of the person asking the question, rather it was a polite way of asking whether the machine was rigged to give only the answer to the single question it was given.
In short (Score:2)
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Not sure how you draw the conclusion that it has any desire to be physics.
If you want to associate economics with another form of science, then you'd probably best compare it to psychology. For example, something simple like supply and demand play directly into somebody's thought process about what something is worth.
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Wow, what a horrible moderation. Troll? Really? Looks like the idiots from 4chan have mod points today, or maybe a disgruntled MBA. You are entirely correct, I had an undergrad psychology prof say that there isn't a psychologist that there's another calling him a gold-studded liar, the same could be said for economists, who seem to ignore results. Example: Cut taxes on the rich for job creation, ignoring all of history. Even after the Bush cuts (among other mistakes) ruined the economy.
However, rather than
It's not about debt (Score:5, Insightful)
If you spend it on capital goods that allow you to produce more, that's investment.
If you spend it on final use goods, that's consumption
Simple concepts: consumption is not production and not all spending is investment. And yet, look at how Gross Domestic Product is calculated.
GDP = private consumption + gross investment + government spending + (exports - imports)
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More than that: according to his logic, an "investment" should only count as such it is is successful. I'll leave it as an exercise to the reader to determine how you can possibly decide that, and when.
Note the legal disclaimer (Score:3, Informative)
In Holland at least, financial products must carry a legal disclaimer stating that past performance is no indication for the future.
What is this entire flawed study? Trying to predict the future, from past performance.
The Dutch economy is an open economy heavily dependent on the performance of the rest of the world. It doesn't much matter what our leaders do, the rest of the world dictates the state of the Dutch economy. So how do you compare its performance with the rest of world? It doesn't matter what our debt is, it matter how many products Germany ships through Rotterdam. But still, these economists try to compare how The Netherlands fared with X debt against the US which has a totally different economy. How different? The US is one of the bigger countries and is #1 in agri culture. The Netherlands is one of the smallest countries and is #2 in agri culture. Why? Every American black and white cow was created by a dutch boy sticking his arm up a cow. And jerking of a bull. The US exports low value agri cultural products, the Netherlands high value.
But it means the SAME industry, is COMPLETELY different. Baby cow production US style is cowboys and homo sexuality in the prairy. Dutch baby cow production is bestiality and high tech in the desolate north.
It is interesting to note that politicians who claim to want the best for big business are NEVER themselves successful big business owners AND that the successful big business owners never ever agree with them. Wallstreet likes the Republicans supposedly (but the two top financial newspapers advised voting against Romney because even a socialist in the white house would be better) but people like Warren Buffet and Richard Branson sing a very different tune. They think the best way to beat a recession is to spend. Not spend recklessly but invest in the future not in handing out tax cuts to buy votes.
Be wary of any leader who leads out of an ideology and not what is needed right now. Would you go to a doctor whose every answer is "lets amputate"? No? Then why vote for a politician whose every answer is "cut taxes, spend less, except on the pork project I need to get re-elected"? Real leadership is looking at what needs to be done and then do it. Not just have a one size fits all slogan.
Re:Note the legal disclaimer (Score:5, Funny)
" a dutch boy sticking his arm up a cow. And jerking of a bull."
The red light district has changed since I was last there..
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The US is one of the bigger countries and is #1 in agri culture. The Netherlands is one of the smallest countries and is #2 in agri culture. Why? Every American black and white cow was created by a dutch boy sticking his arm up a cow. And jerking of a bull. The US exports low value agri cultural products, the Netherlands high value.
But it means the SAME industry, is COMPLETELY different. Baby cow production US style is cowboys and homo sexuality in the prairy. Dutch baby cow production is bestiality and high tech in the desolate north.
I think the high value of Dutch agricultural products has more to do with the gigantic high-yield flower industry than with jerking of cows. Go over the Dutch border and try to find Dutch cheese. Famous as it is, you will not find the entire dairy island stacked with Dutch cheese outside the Benelux. Visit any flower store in the world, and it's a different picture: you're likely to find a good amount of Dutch flowers. My ghetto neighborhood supermarket sells more packets with Dutch flower seeds than it sel
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They think the best way to beat a recession is to spend.
This is mainly because they subscribe to Keynesian thought. The new deal was probably the greatest example of Keynesian theory being applied, and it didn't benefit anything. The war did because it displaced millions of otherwise non-working Americans overseas, which offset the supply of labor in a way that inadvertently triggered a recovery. Keynesian thought was later shattered when stagflation happened in the 80's, which under Keynesian theory is impossible, and demonstrated rather conclusively that gover
Correlation is not causation. (Score:2, Informative)
"""
Paul Ryan's Path to Prosperity budget states their study "found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."
"""
Nope. "has a[n] effect" is a claim of causation. In reality, all they found was a correlation. And by "reality", I of course mean "made up fantasy land where they can't use excel properly".
-- FatPhil (AC, as I'm away from home and don't remember my password)
About the authors: (Score:5, Informative)
Carmen Reinhart: (Chief Economist) Bear Stearns -> IMF -> Harvard
\-> married with Vincent Reinhart: FED -> (Chief US Economist) Morgan Stanley.
famous quote: "Secretary Paulson Makes the Right Call" The Wall Street Journal, Sept. 16, 2008:
"In other words, some government aid might ultimately have to be directed toward financial firms whose failure would otherwise threaten the financial system.
The politicians now running for office should also appreciate that their grand ambitions for new spending programs or tax cuts may have to be tempered by the need to rescue financial firms."
Kenneth Rogoff: IMF -> Harvard
Dubious Proposition (Score:4, Insightful)
I will grant that the 90% debt/gdp trigger is most likely non-existent, but the rest of their book does yeoman's work in cataloging financial crises. It's a useful antidote to the mass psychological amnesia that is perpetually recurring. "Our new investments our safe and returns will never fall" inevitably leads to "what perfidy caused this?" The cycle has been repeated in remarkably similar ways for nearly a millenium now. We should appreciate the detailed financial history they have created, and chide them for the dubious massaging of the data. Just don't overstate its political implications.
Re:Dubious Proposition (Score:4, Informative)
Crises which happened in a world without central banks are profoundly different than those after. In that what was ignorance and foolishness is now malign or incompetence.
If you read the re-analysis of RR, with the correct data, you see that there is nearly no correlation between debt level and growth. And indeed, crises happen randomly, and so do the rise and fall in debt level. sometimes they meet, but it turns out that most of the time it's just bad luck.
Should you pile on any amount of debt? probably not. But you also should not worry much about it.
When you're cooking the data ... (Score:3)
When you're cooking the data, try not to make too many obvious mistakes. Of course, had the original propaganda piece, I mean "study", been peer-reviewed by someone who "could do the math" (obviously NOT any economists), this would have been pointed out as total nonsense in the first place.
Confirmation Bias (Score:5, Interesting)
http://en.wikipedia.org/wiki/Confirmation_bias [wikipedia.org]
The researchers got the result they wanted, so they didn't bother to check if they were actually correct.
And actually, that's being kind.
"fishy" (Score:5, Insightful)
These two numbers, 2.4 and -7.6 percent, are given equal weight in the final calculation, as they average the countries equally. Even though there are 19 times as many data points for the U.K."
Why should the UK be given more weight? There's only one such country, not 19 such countries. And the UK data in question is highly correlated (it all comes from the same debt over the same span of time, not 19 different points in the UK's history).
In addition, the rebuttal ignores two stretches of data:
RR examines three data samples: 20 advanced economies over 1946{2009; the same 20 economies over roughly 200 years; and 20 emerging market economies 1970{2009. We repli- cate the results only from the first sample as these are the most relevant to current U.S. and European policy debates, and they require the least splicing of data from multiple sources. We focus exclusively on their results regarding means because these have generated the most widespread attention. On their website, Reinhart and Rogo provide public access to coun- try historical data for public debt and GDP growth in spreadsheets with complete source documentation.3 However, the spreadsheets do not include guidance on the exact data series, years, and methods used in RR.
It's worth noting here that the rebuttal is willing to take data from the period just after the Second World War where a number of countries had high debt and were transitioning from a total war economy (that is, an economy totally focused on winning a particular war to exclusion of everything else, including economic growth) to a normal one - including the 19 year series of the UK mentioned above, and periods of excluded (excluded that is from the original study for unknown reasons) data from Australia, New Zealand, and Canada. All of these incidentally show high economic growth combined with high debt.
If we're excluding data series due to their irrelevance to current economies, why should these be counted? The US and Europe haven't been in a total war economy since the end of the Second World War. So it is to be expected that one would not see the economic gain (whether or not the debt is present) that one saw in the immediate post-war period.
The original research seems weak for a number of reasons, but I'm not willing to call it "fishy" on the basis of a rebuttal which makes its own "fishy" assumptions.
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and you probably ought to weight the figures relative to the size of the coutrys economy to stop outliers having a disproportionate effect
Unless, of course, the large economy is the outlier. Then you made the disproportionate effect worse.
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At the very least, you should be comparing growth of (1.024^20 * 100 - 100) = ~60% to -7.6%, rather than 2.4% to -7.6%.
Which is even more of an exaggeration than taking the same data point 19 times.
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In fact, NZ is one of the countries where they inexplicable excluded postwar growth
I don't know if the original research actually doesn't bother to explain this or not. But it's quite a reasonable thing to do since the the post-war growth comes from unusual circumstances that don't apply today. The UK was unusual in that its high debt from the Second World War extended well past 1950.
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High debt is bad. (Score:3, Insightful)
It means less flexibility.
More liability.
Less freedom.
More waste.
Say what you will about this study, the governments of the western world are living beyond their means.
The US government for example is spending about 50k per US household.
The median income of US households is about 49k.
That alone should tell you there is a problem.
To paraphrase Emperor Augustus: "things that can't go on forever - don't."
These governments are spending well beyond their means and the only way they can presume to maintain it even for a time is through massive inflation. Which will harm the economy, raise interest rates, and generally transition any country that chooses this path into a second world country.
And even this won't be enough because having destroyed your credit and dealing with increasingly higher interest rates it will only be a matter of time before you can't inflate the currency fast enough to paper over your debt.
And when that happens... anarchy... blood... social collapse.
People need to stop deluding themselves that they can magic the debt away as if it won't exist if you don't believe in it.
It isn't a six year old's imaginary monster. It's our civilization's very real debt. And it will bring us low if we don't bring it under control.
I also love that they're whining about these austarity measures when many of these countries are still increasing the amount of debt they owe. In many cases, they're simply slowing down... not reversing course.
If a country can at least tread water without building additional net debt then it's got the situation under control.
But many do not. The US does not. We spend more every year and the tax recipes and economic growth are not remotely keeping up.
I know I'm going to get hate mail for this... It's what comes of having an open forum.
But you can't wish the numbers away through denial. It's like arguing with the Sun.
Re:High debt is bad. (Score:5, Informative)
"The US government for example is spending about 50k per US household. The median income of US households is about 49k."
These statements do a great job of conflating median and mean. If you're comparing per household spending to per household income, you don't want median because a small proportion of American households take home a huge amount of income.
The mean per capita income in 2012 was $42,693 [1]. Per capita spending by the federal government was $11,260 [2]. Total spending including state and local government spending was $19,015.7 [2]. This means that the federal government would be fully fundable with only revenue increases, even with lower taxes than much of western europe.
The US has a long-term health care problem. In the short term, the US has a small revenue problem and a very large austerity problem (which is actually causing long term harm to the economy). The US, currently, does not have a spending problem from an economic point of view.
If you want to argue that the US has a moral spending problem like many austerity/deficit hawks, feel free, but don't conflate that with an actual economic argument.
[1] http://bber.unm.edu/econ/us-pci.htm
[2] http://www.usgovernmentspending.com/year_spending_2012USdn_14ds1n_F0#usgs302
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Say what you will about this study, the governments of the western world are living beyond their means.
Interesting assertion. Now, fire up Excel, and prove it.
Re:High debt is bad. (Score:5, Informative)
You're not going to get hate mail. But you will be told you are wrong, because using the simplistic idea that "debt is bad" to plan an economy is ridiculous How would you explain how startups are successful? When they start, their income to debt levels are completely off the mark, but with investment of capital to improve efficiency and drive sales, eventually they can be profitable regardless of how much their debt to income ratio was.
With large economies, the principles are the same. If you borrow money to fight wars, there's very little chance of receiving a return on the initial investment, as the Iraq War has proved: over three trillion dollars spent, and nothing but one million veterans with a lifetime of expensive treatments to care for it. If America had instead spent that money on infrastructure improvements, like renewable energy, fiber-to-the-home, or even an improved commuter rail network and efforts to modernize the government itself, we would all be doing very well just as we did during the Space Race. Even making common sense changes, like decriminalizing harmless drugs and ending our for-profit prison system and replacing it with a reasonable mental health infrastructure would not only save us money through simple budget changes, but it would also have extensive monetary effects by reducing recidivism, which frees up police to focus on actual crimes instead of trying to continue functioning as a moral goon squad.
If you want to understand why America is in such deep trouble financially, all you have to understand is that we lowered taxes for everyone, especially the super wealthy, at a time when we also spent three trillion dollars we did not have on unnecessary wars.
That's why it's so frustrating to see rambling nonsense like yours modded as insightful. Debt it not scary. It's a concept that we have invented and one that we can redefine or simply do away with using a debt jubilee, or a national reorganization as done by Iceland. Paper money only causes anarchic collapse when people go hungry. And even when there is a massive economic collapse, like the Great Depression, America did not devolve into cruelty. FDR told the rich to pay back the money they swallowed up, and they did, and our economy was further assisted by a massive government spending program, including complete takeovers of private industry for a brief period of time. And that's fine because private enterprises are usually massively inefficient hierarchies controlled by internal politics rather than innovation (see: Microsoft).
Nowhere in your diatribe against debt do you make any coherent points with supporting evidence from reality. But that's just libertarian economics in a nutshell, I guess.
and this kids is why (Score:3)
This is sooo Douglas Adams (Score:3)
Excel... Really? (Score:2)
Fun with statisitics (Score:4, Interesting)
post-WWII data for countries that had a high debt load and high growth
It would be hard to not have had high growth after WWII for most of Europe. Given most of those economies had been pounded into next to nothing by the war. If you have a GDP of $1 in 1945 and $2 in 1946, why that is 100% year over year growth!
Next debt load and austerity are not the same thing. The UK had a high debt load post WWII and was also rationing food. So it had high debt AND austerity. Using debt to invest in critical infrastructure like roads and basic sanitation for example you don't have or is no longer workable, and perhaps providing minimal nutrition to the needy is an entirely different proposition than making sure every dope who masters long division gets to hang out for four years at University.
Public debt is not always bad when there is clear ROI on where the revenues for its issuance are being directed. Debt should not be used to fund blue sky efforts, nor should it be used to provide comfort. If 'austerity' today had any relationship what what it meant in the 1940s-1950s than I might be included to agree it would be going to far for the present situation to justify, but as its used today it might as well just be a synonym for 'waste'.
No European Country Practices Real Austerity (Score:3, Interesting)
The thing to remember when hearing about all this "austerity" in Europe is that no country in Europe has tried real austerity [battleswarmblog.com].*
Real austerity is cutting spending until outlays match receipts. As the linked chart shows, the overwhelming majority have raised taxes or continued deficit spending. Some have slightly reduced the ratio of deficit spending to GDP and called it "austerity." They're still digging a hole, they're just doing it more slowly.
Politicians are addicted to spending to prop up an unsustainable welfare state. They've seen what the future looks like in Greece and they still refuse to stop spending. And the current government of the United States is right there digging with them.
Austerity hasn't been tried and failed. It's been declared difficult and left untried.
(*with the possible exception of Estonia and one or two other small countries)
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With US defense spending at 23% of the federal budget and welfare 11%, I wonder why you choose to call it a "welfare state" rather than a "military state"?
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You appear to have left out "health care" from the "welfare" part, because the graph you got your numbers from didn't call health care "welfare." If you put health care back in - at least, medicaid type stuff - you get an additional ~$900b. In fact, "Defense" and "Health care" have the same numbers. So, put "health care" into "welfare" and you get 24% defense vs. 35% welfare/health care.
This only includes medical service (seniors) and "vendor payments (welfare)" ... the latter includes things like "grant
Response (Score:3)
The authors of the study have posted a response that refutes these criticisms.
http://www.huffingtonpost.com/mark-gongloff/reinhart-rogoff-research-response_b_3099185.html?utm_hp_ref=tw [huffingtonpost.com]
The real issue here is not the data which seems to be holding up, but the deeper question as to whether correlation implies causation. It clearly does not - that is low economic growth could be causing high deficits just as likely as the reverse.
HOWEVER it does seem pretty unlikely that one can claim that high deficits cause higher economic growth. That is the real take away here.
Re:More Statist Bullsiht (Score:5, Insightful)
Anyone who prefers debt is a fucking idiot and shouldn't be trusted.
That statement is plain daft. It's much too broad. Sometimes debt can be good. For example, getting a mortgage for a home might not be bad. Sure, it would be better to buy with cash and avoid paying all the interest, but if you don't have a pile of cash lying around, you are limited to saving while paying rent. It might actually work out better to get the mortgage.
Also, getting a loan to start a company might be a great way to have enough capital to get to the market quickly and by doing so make a huge profit.
Not all debt is bad. Debt without any plan to pay it off and without evaluating whether the costs of managing the debt outweigh the benefits is bad. The problem is that most political parties these days seem to have a horizon of the next election when it comes to balancing the books. The problem with this sort of debt is that they spend up big and have no real plan to pay it back.
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Actually if you get a mortgage at a low rate and invest the rest of your money over the 30 years you would have made more money then if you were just buy the house, and invest your existing money.
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I agree with you, debt without evaluating the cost and a plan to manage it is bad news.
However you say "it would be better to buy with cash and avoid paying all the interest"
Sure buying with cash avoids paying interest, however it also avoids collecting interest on whatever else you would have invested in. Essentially buying a house with cash can be considered as investing in property at the mortgage rate of interest. If you can beat that in the market (with a suitable level of security/liquidity) then it
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I will answer your rhetorical question.
The government wasn't trying to "increase access to healthcare". Their goal is universal access to healthcare. The difference is that they aren't trying to "increase access" for people who already have and can afford it. They are trying to increase access for people who don't have/can't afford healthcare. Now, these people tend to be people with lower incomes. Maybe you don't follow politics, but this past year Republicans talked a lot about the "49% who don't pay
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Not exactly. You are comparing buying a thing with entering into an agreement in which someone else buys a thing and you pay them to be able to use it for whatever (legal) purposes you like. They are not the same even though a mortgage is called 'buying', it isn't.
I don't know about America but in the UK this isn't the case. When you buy a house with a mortgage you own the house, not the mortgage company.
The mortgage company holds a charge over the property such that should you default they have first dibs
Re:More Statist Bullsiht (Score:4, Insightful)
Debt without any plan to pay it off and without evaluating whether the costs of managing the debt outweigh the benefits is bad. The problem is that most political parties these days seem to have a horizon of the next election when it comes to balancing the books. The problem with this sort of debt is that they spend up big and have no real plan to pay it back.
Therein lies the problem. In my opinion, borrowing should be done to acquire capital for investment; not to simply acquire nice things. I think most people are so used to doing that (e.g. credit card debt,) that they don't really pay attention when the government does it either. Many are even fine with the idea that they can just spend until they are upside down, and then file chapter 7. Governments can't do that (if they did when they do - there will be hell to pay.)
Nice things would be (and this is a classic example libertarians point out) things like national endowment of the arts. If any given artwork isn't worth anything to anybody, then why on earth are we paying somebody to make it? I really don't know if any nice things have come of it, but in the end that is all it is - just a nice thing that we don't actually need in the classical sense, and that money should be going towards paying back debts.
Sadly that is lost among posters like the one just above you, who I think probably constitute a majority. I hear many talk about how a subset of Americans don't want to adopt European policies just for the sake of not being like Europe. Ignoring that the reverse is also true (it certainly is) there is also that subset who want to simply follow Europe's lead just for the sake of doing so. I don't think that is a wise idea given the current Eurozone crisis.
There was a time when the roles were reversed - the US tended to follow Keynesian thought more than Europe. That was the great depression. And as it turns out, the US fared far far worse than Europe.
The great depression wasn't caused by the stock market crash, by the way. The crash simply created a panic, but on its own it didn't cause the mess that followed. After the crash, the unemployment rate was about what it is now - floating between 9 and 10 percent, even showed signs of recovery for a brief period. Things didn't get really bad until the government tried to "fix" things. Smoot-Hawly for example, designed to create jobs, raised domestic prices dramatically and dropped exports by half. Domestic production and exports rise and fall with one another, for those who don't know. That followed by heavy deflation, prohibition, FDR declaring bullion as contraband, the new deal, among a bunch of other things that were supposed to "improve humanity" (the prohibitionists identified themselves as progressives, by the way) and only made things much worse.
Notice below how you see the dow begin to recover up until Smoot-Hawly
https://en.wikipedia.org/wiki/File:1929_wall_street_crash_graph.svg [wikipedia.org]
(Strange world we live in how Republicans wanted tariffs, Democrats did not, and now things are reversed with Unions heavily lobbying for tariffs to protect their jobs.)
What do I know though, I'm just another one of those libertarian whackos who still believe that Keynesian theory was shattered when it proposed that stagflation can't possibly happen, but it did anyways.
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The great depression wasn't caused by the stock market crash, by the way.
Indeed. It was caused by the very same actions that caused the 2008 meltdown. There's an excellent history of the 1920s written shortly after the crash that was required reading in a class I took at SIU about 40 years ago, Only Yesterday. [virginia.edu] It's a good read, and an eye-opener about our own time.
After the crash, the unemployment rate was about what it is now - floating between 9 and 10 percent
I'd be very interested in a citation -- everyt
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I'd be very interested in a citation -- everything I've read (and my grandparents, who were born about the turn of the century) said it was more like 25-35%.
Not six months after the crash. Those high levels of unemployment came later [u-s-history.com] in 1932 and 1933.
Re:More Statist Bullsiht (Score:5, Insightful)
You are entitled opinions, but not facts.
Not much I can add, except that maybe people who use the term, "Libertards" seem universally to be idiots. But that's just an entitled opinion of mine.
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I have yet to meet a libertarian that was not a greedy asshole (the pretend ones) or lived in a parallel universe (the true believers).
I wouldn't expect you to recognize a situation where you had.
Re:More Statist Bullsiht (Score:4, Insightful)
I don't know your political persuasion, but something tells me you are quite generous.... ...with other people's money, and never your own.
Anyways, some of the most well known (in terms of media spotlight) libertarians are very charitable, like Penn Jillette. I call him out in particular because he has some words of wisdom that somebody such as yourself probably will never understand:
It's amazing to me how many people think that voting to have the government give poor people money is compassion. Helping poor and suffering people is compassion. Voting for our government to use guns to give money to help poor and suffering people is immoral self-righteous bullying laziness.
People need to be fed, medicated, educated, clothed, and sheltered, and if we're compassionate we'll help them, but you get no moral credit for forcing other people to do what you think is right. There is great joy in helping people, but no joy in doing it at gunpoint.
People try to argue that government isn't really force. You believe that? Try not paying your taxes. (This is only a thought experiment -- suggesting on CNN.com that someone not pay his or her taxes is probably a federal offense, and I'm a nut, but I'm not crazy.). When they come to get you for not paying your taxes, try not going to court. Guns will be drawn. Government is force -- literally, not figuratively.
I don't believe the majority always knows what's best for everyone. The fact that the majority thinks they have a way to get something good does not give them the right to use force on the minority that don't want to pay for it. If you have to use a gun, I don't believe you really know jack. Democracy without respect for individual rights sucks. It's just ganging up against the weird kid, and I'm always the weird kid.
http://www.cnn.com/2011/OPINION/08/16/jillette.atheist.libertarian/index.html [cnn.com]
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Aside from your arguments amounting to nothing more than ad hom, straw men, and picking at my spelling error, the key thing to take from my post was unsurprisingly lost on you.
No smart person anywhere will ever argue that you should use borrowed money on what basically amount to luxuries.
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I have an uncle who was the finance director for a large oil drilling company and he gave me a useful piece of advice:
"never pay off your debts"
Why pay the mortgage off after 25 years? Why not extend the debt, use the equity, and hopefully die before it's all paid off? Inflation takes care of the payments, hopefully. Locked up equity is no good to anyone apart from the creditor.
It's a game and some of the rules can be decided by the debtor.
I'm on my forth mortgage. I've used the equity to pay fo
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Yes, all interest-bearing debt is BAD.
Muzzie, are you [dailymail.co.uk]?
Re: More Statist Bullsiht (Score:5, Interesting)
As a historical note, christianity used to have nearly identical rules concerning usury; and the deep suspicion of interest-bearing loans is a least as old as Aristotle(who was Not A Fan).
As time went on, though, a number of... increasingly creative... legalisms were hacked together to allow contractual arrangements that were loans at interest in everything but name. In the case of christianity, the charade was so transparent, and the amount of obviously-loan-backed economic activity so significant, by the early modern period, if not earlier, that almost everyone bowed to the inevitable and "usury" stopped meaning 'charging interest' and started meaning 'charging lots and lots of interest'(and even 'lots and lots' has proven to be pretty flexible).
Islam has not (yet) reached the 'eh, fuck it, sure we charge interest' stage; but let's just say that they are doing some downright jesuitical work at the 'So, what sophistry can we spin to make interest not look like interest?' [bbc.co.uk] stage. The range of products dubbed 'islamic finance' won't say 'interest'; but it will look like a duck and quack like one.
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Thank you for using your brain, far too many around here don't bother.
Doesn't anyone who supports big government socialism see that the people encouraging all the debt and deficit spending are *not* the same people paying the taxes, ever? Anyone? Hello?
Good grief.
Re:More Statist Bullsiht (Score:5, Insightful)
Attempting to justify more theft of the public and increased government spending.
It's simple to answer this question, do you want to incur debt or spend money that you have? Anyone who prefers debt is a fucking idiot and shouldn't be trusted.
Wow this brings stupidity to new levels. A report is widely used to justify government cut backs. The report proves to have mistakes in it that would have given a different result - so pointing out the error is "Statist Bullshit"? There would be some justification in arguing that the report does not matter, though for people who previously used it to argue their case this would be hypocritical. But to argue that we should continue to use the incorrect report because correcting it is statist is just dumb.
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Stupid? Really? I see you cleverly avoided answering the question.
My point was that no report is necessary to make the correct conclusion, errors in Excell are not relevant, nor is the report.
Deficit spending is bad, debt is bad, big government statism is bad, unless you are one of the thieves of course.
And you present no argument otherwise, except for calling me stupid. Nice.
Fuck off.
OK so you can know what's good and bad without regard to any facts. I'll let others decide whether that is stupid or clever.
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You want to keep providing substance-free responses I can keep bouncing them back.
Are you actually trying to argue that debt is good like the chain smoker above?
Gwan, we're all waiting.
Fool.
Debt for ongoing regular expenditure is always bad (maybe excepting developing countries in times of crisis). Debt for things like infrastructure projects, research, etc. can be good if the expected payoff is greater than the cost. I think most people would agree that ideally we should not be where we are now. However, whether fixing the problem in the time of recession with unemployment, lower tax incomes, etc is good is another matter. The study was used to justify a reasonably fast pay-back with austerit
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This is beyond the scope of the state Why? Just because you say so? I personally think that helping to ensure the continued existence of life in the universe should be part of the state's scope, so support spending on space exploration. Does that make it so? Of course not. Governments have to do what the people who they purport to rule desire in the aggregate, if not they are replaced. Even kings lost their heads to commoners. Just because your personal religion proclaims that anything beyond ensuring that you get to satisfy your greed at the expense of the rest of society is "beyond the scope of the state" in no way makes your desire into reality.
Even if you exclude the pure research there is a lot of R&D that most people would expect a state to do. Things like epidemiology (tracking diseases etc), defense research, surveying, demographic studies, evaluating allocation of resources - from radio bands to water extraction, pedagogy and other educational studies, traffc flow analysis.
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So you want the government to pay for billions (or trillions) of dollars worth of things by having that cash sitting around in an account all year long in preparation for the bill?
Debt spending is not the same thing as deficit spending. Keep on speaking your mind about it, though! People voicing opinions like yours, above, are reason the libertarian "movement" is so generally laughable.
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I don't know about not reading TFA, you can't even understand TFS.
Re:Austerity doesn't effect the highly educated... (Score:5, Funny)
It's "affect" Mr Highly Educated.
Re:Austerity doesn't effect the highly educated... (Score:5, Insightful)
You know that Germany has relatively low unemployment compared to the rest of Europe because many youth learn trades instead of being jobless? Same for Austria and Switzerland.
Austerity affects everyone. It kill opportunities, it stifles social mobility, it removes funds from research and long term investments. There are no good aspects to austerity, except that at the top you fall less than those at the bottom so you are comparatively better off. But to rejoice in that makes you a horrible person.
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Germany has undergone many years of internal devaluation, partly because of the costs induced by the integration of East Germany, partly because of pure masochism. Life in many parts of Germany is harsher, and the standards of living lower than in Northern Italy, for example. No parts of Europe is truly a hell hole -- this is not the US. It is also the case that the current imbalances in Europe are due in part to this largely pointless German deflationary strategy.
If you look at a GDP/capita map of Europe,
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If you are paying interests below inflation, you should pile up debt, if possible long term, as much as you can. In fact, this is a clever way to cheaply roll over older, more expensive debt.
Also, in a semi-depressed economy, any kind of spending by the government, even on inane things, will turn out to help recovery, provided enough people get to dip in. Of course if you spend on unemployment benefits and on re-training of workers, you get much more immediate returns.
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Yes, because we should be bitter about government not pretending to our misunderstanding of economics. And inflicting massive pain on tens of millions of people is OK. It is for a GOOD cause: decreasing the debt, which is ALWAYS BAD.
Rich economies are rich. One of the side effect of being rich is that you can pile on proportionately more debt. Which is completely fine, and in any case an infinitely better use of money than bullion in vaults.