Expansionary Austerity - a Guide to Killing Zombie Economists

Pondering the puzzle of far too many zombie economists, many of European, English, and American fresh-water origin, I started researching how to REALLY kill a zombie.

The recent tragic British recessionary news motivates this research. Britain receded into a recession in the fourth quarter, making the current depression the longest even considering the prior depression. This NIESR chart is from Jonathan Portes, Director, National Institute of Economic and Social Research, previously, Chief Economist at the UK Cabinet Office. Notice that, in Britain, this depression is also almost as deep as the prior one.


Menzie Chinn, of the University of Wisconsin, Madison, also weighs in with his view which highlights the drastic difference that zombie-supporting political ideologues make in the affairs of nations. Here is his chart:

And Chris Dillow, via Mark Thoma, both have the same question I do (minus the zombie part).

So, I feel I am on solid ground in my quest. The best reference so far for killing zombies (not refereed a.f.a.i.k.), seems to be the Zombie Wiki.

The essential step, though there are many, is destroying the brain of the zombie. That sounds about right to me, though I would hope these charts and the recent IMF studies would destroy the offending brain cells. I think it's way past time that expansionary austerity die its deserved death. Waiting for dark, got my high power flash and brain destroying implements. Off to hunt Zombies.

Can anyone identify the economist in the opening picture?

Update: Here is a link to the IMF Working Paper; the conclusion is at page 30, but take a minute to browse their graphs. Austerity is contractionary.

La vie en foreclose

That's right, not through pink glasses (i.e. rose). Randy Wray, Charles Whalen and Stephen Roach, all in the same page, asking for debt relief as essential for recovery, since most consumers are still de-leveraging from the housing bubble.

Both Keynes and Irving Fisher suggested that debt-deflation was at the heart of the Great Depression, and in that case debt relief for households should be at the center of the recovery. In the 1930s, the New Deal did provide a lot of debt relief for farmers, on top of trying to raise the prices of agricultural commodities (in order to help famers). Now more is needed in the housing front. The figure below shows how much the debt of the non-financial sector has fallen since the beginning of the crisis.

From the peak in 2008, it has fallen around US$ 700 billions. It's likely to continue. The problem is that consumer spending was tied to the ability to obtain credit, i.e. of getting indebted. And mortgages were central for consumers.

I know, I know, I should be grading (or working on my diss), but c'mon Mr. President, 400K jobs a month!

A 1932 Low cartoon via Luke Ashworth via Worthwhile Canadian Initiative.




I promise I am grading, but Ken Rogoff was just sounding like a total idiot (sorry, nothing pejorative intended for those who truly deserve our support) arguing (need I even add badly?) with Paul Krugman on Fareed Zakaria's GPS. So I can't help myself.




We do need to do whatever possible to shake this President out of his torpor. Here is the beginning of a campaign I just posted on Economist's View, and will be posting wherever there are smart readers. Quoting




"C'mon Mr. President!!! 400,000 jobs a month. Private, public, we need them all. If Plouffe and Daley disagree, tell them to get with the program.

Listen to your economists, present and former. Romer in particular is showing the right brand of spunk ... watch her Bill Maher appearance... and has the economics right. Sperling has both the politics and the economics right. 400,000 pragmatic jobs a month. Hell or high water. You're the President. C'mon.

Here's just one of many links to Romer (this one from HuffPo):

Send the kids out of the room."

I am actually beginning to like Christy Romer in spite of past peccadilloes.


Ok, back to grading, but not before I pose a related question: How is that austerity thing going after the riots this week Mr. Prime Minister Cameron?

What ended the Great Depression?

Conventional wisdom contends that fiscal policy was of secondary importance to the economic recovery in the 1930s. The recovery is then connected to monetary policy that allowed non-sterilized gold inflows to increase the money supply. Often, this is shown by measuring the fiscal multipliers, and demonstrating that they were relatively small. This working paper shows that problems with the conventional measures of fiscal multipliers in the 1930s may have created an incorrect consensus on the irrelevance of fiscal policy. The rehabilitation of fiscal policy is seen as a necessary step in the reinterpretation of the positive role of New Deal policies for the recovery.