> We’ll never know who is right, though. Most of the world has been following the recommendations of this “economist” for decades.

No, they haven't. No country has passed the kind of budget-busting stimulus packages Krugman has said was necessary. The closest any country came was the US, which passed a stimulus package less than half the size of his recommendations and that consisted largely of tax breaks instead of spending increases.

> Just because it’s a government instead of a household or a business does not making borrowing against your future when you have no capability to pay it back a good idea. This guy is the same type of person that thinks that companies carrying a lot of debt is a good idea

No, he isn't. Unless those companies owe debt in currencies they control.

I've noticed there's a bizarre phenomenon surrounding Krugman where people just refuse to read what he says and instead put all kinds of nonsense into his mouth. It happens to all public figures to some extent, but it just seems really next-level with Krugman (and these particular claims are pretty tame compared with the wild accusations you often see.)

> I've noticed there's a bizarre phenomenon surrounding Krugman where people just refuse to read what he says and instead put all kinds of nonsense into his mouth.

It's because he writes like a Nobel award winning economist. Meaning a dry writing style, and advanced concepts.

Most people hated economics in school (either because they don't understand it, or found it boring - it's basically math that most people see no practical outcomes for) or just strait up don't get it.

See, though, I don't think that's at all the case. Krugman isn't a dry writer at all, at least when it comes to his blog posts and political and economic commentary. To be sure, you find most of the more detail analyses on his blog (since the kind of posts he marks as "wonkish" would not be very popular in his column), but there's usually a lot of color to them and they're pretty accessible even to the layman. His blog (which leads you down a rabbit trail to other blogs written by all kinds of other economists) is what actually spurred my interest in economics. If anything, he gets in trouble for being too colorful.

I disagree with Krugman almost totally politically, but I find his blog worthwhile reading and it's just stunning to see how many people have no understanding whatsoever of what he says and believes. There's a whole cottage industry involved in setting up straw-krugmen and knocking them down.

Krugman is far from a dry writer. He just writes about a topic that too many people find dry and inscrutable, sadly.

He often tries to communicate in layman's terms on his blog.

The proper time for austerity is when things are good. When things are bad, juice it up, especially if you can borrow at rates that are negative when inflation adjusted.

The problem with austerity now to make the long term better is that it's not a zero sum game. Austerity lowers GDP growth, which can offset any move toward solvency. You spend less and surprise, you also take in less. Eventually you recover, but poorer than if you had juiced things a bit and no less in debt.

> The proper time for austerity is when things are good.

Arguably, government fiscal restraint in strong economic times isn't "austerity" in any meaningful sense, but I'd agree that that countercyclical approach is right -- you want the government spending less (as a share of GDP) when the private sector economy is strong, and more when it is weak.

Had the government in the UK run a surplus prior to the financial crisis I suspect the case for a larger Keynesian response from the UK public would have been better received. That is afterall what Keynes originally proposed. Modern Keynesians have disproved it's necessity and yet... public opinion ultimately drives policy, perhaps Keynes requirement of running a surplus in the good times in order to run a deficit in the bad was more about satisfying the psychology of the general public than anything else.

The UK will have a big problem in 10 years when there are still no jobs for young adults.

Austerity in good times? Good luck with that!

Especially with presidents like W – remember the Clinton surpluses? They were austerity in good times.

> Most of the world has been following the recommendations of this “economist” for decades.

He's a Nobel Prize winner. You putting economist in quotes only reflects poorly on yourself.

> Just because it’s a government instead of a household or a business does not making borrowing against your future when you have no capability to pay it back a good idea.

He's not advising borrowing money you can't pay back. US, UK and other major economies absolutely can pay back the money they borrow. It's a ridiculous scare tactic that the far right has been pushing for the past 20 years to say that we are so far in debt we can never pay it back. That premise is only true if you adopt the ridiculous far right policy of lowering taxes to basically nothing on large corporations and ultra wealthy individuals.

> Most of the world has been following the recommendations of this “economist” for decades

That's exactly what they have not been doing.

> Just because it’s a government instead of a household or a business does not making borrowing against your future when you have no capability to pay it back a good idea. This guy is the same type of person that thinks that companies carrying a lot of debt is a good idea. The sign of a healthy business. Bunk.

Extremely relevant.

https://alvaroaltamirano.files.wordpress.com/2010/05/krugman...

HN may know programming but holy shit you're on the same level as the worst subs on reddit when it comes to economics and finance.

I agree that in the long term austerity is necessary.

However, austerity as it’s used in politics[1] is little more than a talking point. The Republicans run on the austerity platform and yet Republicans increase deficits more than Democrats. The US deficit is caused largely by military spending and corporate welfare, and the Republican party refuses to cut military spending (unless it’s to helping veterans). The Democrats also increase deficits, but at least they don’t do so while running on an austerity platform.

The few politicians who I would actually trust to be economically responsible are completely socially irresponsible.

The fact is, whether or not austerity is the right way to go is completely irrelevant to how austerity is actually used in politics. So whether or not austerity is the right way to go is a moot point.

[1] In the US—I don’t know enough about international economics to talk intelligently about them.

Think about it from a business perspective. What makes you more money? Cutting costs, or increasing revenues?

And what is a more sustainable practice to increase revenues: price gouging, or increasing volume/sales?

Now replace these business terms with economic terms. Cutting costs = austerity. Price gouging = raising taxes.

What you want is more people working, more people paying taxes, but keeping taxes at a low enough rate that people still benefit from working, increasing productivity, and keeping their money in the country. It's a maximization curve...

The main problem with austerity is that often the first thing to get slashed is government labour and infrastructure projects, which drastically cuts the size of the workforce, and immediately reduces the amount of taxes coming in, leading to a tax raise, capital flight, and the downward spiral that all economists warn about.

Just like in business there's a certain rate at which loans make sense and a certain rate where they don't. As long as the cost of the loan is less than the interest you'll receive from your investment on said loan (and inflation helps reduce the cost of the loan), you may as well borrow.

"Austerity" in most cases is just a way for predatory lenders to ensure quicker payment, it's by far the worst economic policy.

"Think about it from a business perspective. What makes you more money? Cutting costs, or increasing revenues? And what is a more sustainable practice to increase revenues: price gouging, or increasing volume?"

That assumes you want to run the country/government like a business. I think that's a fairly large assumption.

> That assumes you want to run the country/government like a business. I think that's a fairly large assumption.

The main difference between running a country and a business, is values and also means. Countries value certain qualitative indicators more than a typical business would (quality of life, crime, safety, etc...), and countries have more means to balance the books (things like printing money, ownership of resources, etc...).

Talking about money at small-business scale is more about simplifying the concepts, but to a certain degree, it applies.

The main difference between running a country and a business is that quite possibly the common sense assumptions that work at one scale don't hold at the other.

Economics is often counter-intuitive - especially at a global scale. People extrapolate their intuitions from household economics to national level and beyond. There's no guarantee that any of our assumptions are still valid when you consider the entire world as one closed system.

Well, you can go part way. In a business, there are investments, and there are expenses. Both involve spending money. What's the difference? Investments pay you back, and expenses don't.

There really isn't a problem with government making genuine investments. Needed infrastructure is a great example. They actually do pay even the government back, in the form of increased tax revenue.

The problem is that government often says that something is investment, but it's really just expenses. Bridges to nowhere, and a blizzard of other pork. But government decides where to spend via politics, not rational economic analysis, and so government spending is much less efficient than the label says.

Government should borrow to invest in the country. The problem is getting them not to borrow to throw the money away on political boondoggles.

Given the authoritative way in which you say:

    [L]iving within your means leads to greater stability,
    a market where prices reflect reality, and people that
    save are rewarded.

I'm guessing you can back this up with a few modern examples of where austerity programs have been successful, right?

How about in the U.S. in the past couple years[1]?

[1] http://www.forbes.com/sites/johngoodman/2015/01/13/voodoo-ec...

Krugman doesn't claim that the U.S. has experienced (significant) austerity during the last couple of years, especially compared to Europe. See the chart, which shows that austerity peaked in summer 2011. [1]

[1] http://krugman.blogs.nytimes.com/2014/12/28/the-obama-bounce...

In talking of austerity Krugman neglects monetary policy[1] ("The key measure you want to look at is the ratio of debt to G.D.P." [2]), yet that chart you reference is inflation-adjusted 2009 dollars. That is to say, it is an apples to oranges comparison if we are going to talk of Krugman's version of austerity.

[1] http://www.forbes.com/sites/realspin/2015/03/12/the-austerit...

[2] http://www.nytimes.com/2013/05/06/opinion/krugman-the-chutzp...

QE is the opposite of austerity. That's what the US is still doing since god knows when.

QE is definitely not the opposite of austerity. Fiscal stimulus is.

QE means that the central bank buy up bonds. The hope is that this lowers interest rates on bonds, making it less attractive for banks to hoard bonds instead of lending money to companies wanting to invest.

And one of the reasons that this isn't having the desired effect is that companies are holding on to far more cash than normal and aren't investing it on future growth.

Australia had a much better idea at the beginning of the GFC, they paid $1000 directly to anyone who had paid at least $1 in taxes the previous year; poor people aren't afraid to spend money...

That's one of the key issues with the current QE process - essentially all the money has gone to the banks / funds etc. in he hope they'd lend it to other producers but the reality is they've used it to make their own profits at others expense.

A better approach might have been to give it to the people to spend, save, pay off debt as they wished.

I'd have given it to people on welfare as well as tax payers.

I'm always suspicious of people like Krugman who claim to know the answer but didn't see the crisis coming.

You might want to check this curated list of people who "predicted" the GFC. Some of the names on the list(s) were a surprise to me. The one person I respect greatly on this list is Steven Keen (he featured highly in both lists).

http://www.investorhome.com/predicted.htm

EDIT: fixed spelling mistake

You're right, but I think you would yourself admit you're being pedantic, the great divide between policies in the US and EU was QE (until recently). It was wrong of the previous poster to paint the US as a country following austerity that was successful.

I see a lot of people in this thread claiming that massive QE equals fiscal profligacy, that it means that the Keynesians have gotten exactly what they want.

I see QE more as a band-aid, used because fiscal stimulus is politically unattainable, since Keynesians are out of power nearly everywhere. Hence my comment - it was not meant as a nickpick.

No, it was not wrong. I am simply using the definition of austerity that Krugman commonly uses (see my above post). UK has used QE since 2009[1], BTW, but only government expenditures goes into Krugman's definition.

[1] http://www.bbc.com/news/business-24614016

your sources are bad and you should stop reading them, I've read both of the links you posted before when they were ripped apart by mainstream economists

And yet you provide no sources for this alleged ripping apart.

EDIT: Furthermore your response demonstrates you do not even understand my point. The purpose of the sources I have referenced are not to show support for economic plan A over economic plan B, rather they demonstrate the inconsistent and politically motivated arguments behind Krugman's anti-austerity stance. He states Europe is dangerously pursuing misguided austerity policy which he defines strictly as a cut to government expenditures. He then correlates that with a lack of GDP growth. Then, slyly, when talking of the US, he purports that austerity took place until 2011 when wiser heads prevailed, reversed the trend and then the economy boomed. The problem is, when evaluating the austerity of the US, his numbers include monetary policy, being adjusted for inflation. Why does he not do the same for Europe?

This is all to say, if Paul Krugman is your source "your sources are bad and you should stop reading them... they were ripped apart by mainstream economists".

To quote what another poster in this thread said:

> I've noticed there's a bizarre phenomenon surrounding Krugman where people just refuse to read what he says and instead put all kinds of nonsense into his mouth. It happens to all public figures to some extent, but it just seems really next-level with Krugman (and these particular claims are pretty tame compared with the wild accusations you often see.)

I've better things to do than argue with a misinformed hater, educate yourself and stop listening to austrian charlatans.

Translation: I cannot counter why Krugman compares apples and oranges in his political crusade against austerity so I will rely upon ad hominem attacks.

Yes, anyone who doesn't worship your god must be an austrian charlatan.

I certainly agree with you. I'm providing an example that fits Paul Krugman's narrow definition of the word.

> Most of the world has been following the recommendations of this “economist” for decades.

Er, no, most of the world has not been following Krugman's advice for decades. In fact, pretty much none of it has.

And the economies that have followed closer have overall done better than the ones that didn't. Go figure. I mean, we now have the actual evidence.