Pro-Austerity Camp Debunked By Phd Graduate

arius

Thomas Herndon, the Phd graduate responsible for exposing flaws in a 2010 paper used by various economists to support Austerity was recently interviewed on the Colbert report.

Economists Kenneth Rogoff and Carmen Reinhart, wrongly claimed that when a country's debt surpasses 90% of GDP, growth slows precipitously.

They deliberately omitted Australia, Canada and New Zealand from their data analysis and also didn't account for a simple spreadsheet error.

You can watch Colbert mock the pro-austerity camp like a boss.

https://www.youtube.com/watch?v=2Oa-Bfdkg3w

Interview with Thomas who discovered flaws.

https://www.youtube.com/watch?v=GgMV4KV6Qw0

Herndon showed that even countries with debt surpassing 90% of GDP, their economy grew by 2.2% ...contradicting every argument of those in favour of austerity.

spank_inferno

Irelands economy is growing year on year ...... (a little over 2% this year)

unfortunately government debt is also rising year on year.

It is expected to hit 123% of GDP by the end of 2013.

In 2013 the government will spend 8 billion on just debt interest alone.


So despite that massive debt burden, out economy still manages to grow.
Is that growth stiffled?
Who knows.


..... most important is that we need the Colbert Repor' back on our screens in Ireland!!


(however OP, if your point is to say that the governments policies are failing.... then you are wrong).

arius

spank_inferno wrote: »

(however OP, if your point is to say that the governments policies are failing.... then you are wrong).

This would imply the government have austerity measures in place.
They don't.

They do in the UK however and it's failing miserably.

squod

spank_inferno wrote: »

Irelands economy is growing year on year ...... (a little over 2% this year)

Same rate as inflation

spank_inferno wrote: »

So despite that massive debt burden, out economy still manages to grow.
Is that growth stiffled?
Who knows.

No real signs of growth. At ground level, on the ground.

spank_inferno wrote: »

(however OP, if your point is to say that the governments policies are failing.... then you are wrong).

Ah Shure, they're a massive success. At this rate of growth, inflation and emigration we should be out of this mess just before the entire country has re-located to Australia.

SEPT 23 1989

The domestic economy is dying rapidly

Jawgap

The Beeb have an article on the discovery - I'm not sure if the omission was deliberate or accidental

spank_inferno

arius wrote: »

They do in the UK however and it's failing miserably.

Not so sure about that.

Ireland has cut social welfare spending and public service pay.

Yesterday, welfare recipients in the UK received a 1% increase.
UK public sector workers are furious that they will also be receiving a 'below-inflation-rate' pay increase.
but they are being increased none the less.

The Irish governments public expenditure has contracted much more than the UKs has.

arius

Here is a UK finance minister embarrassing himself on BBC arguing austerity works when the economy is in major trouble.

https://www.youtube.com/watch?v=y03Ue9SQL2E

The pro-austerity camp think a government budget is the same as a household budget ...

anncoates

I love the way the designation PHd Graduate is used as some kind of sacred validation that guarantees omniscience or lack of agenda.

spank_inferno

arius wrote: »

This would imply the government have austerity measures in place.
They don't.

Your are very right about this though.

the government is running a 12 billion annual deficit.

That is not austerity.

arius

spank_inferno wrote: »

Not so sure about that.

Japan's debt to GDP level is 236%

arius

anncoates wrote: »

I love the way the designation PHd Graduate is used as some kind of sacred validation that guarantees omniscience or lack of agenda.

I love the way pro-austerity camp use flawed research from Harvard professors to support their arguments.

Jawgap

arius wrote: »

I love the way pro-austerity camp use flawed research from Harvard professors to support their arguments.

I'll see your Harvard professors and raise you a Nobel Laureate

"So the Reinhart-Rogoff fiasco needs to be seen in the broader context of austerity mania: the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.

What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to." [my emphasis added]

arius

Here's professor Michael Hudson laughing at pro-austerity camp about US government debt and the idea that US borrows dollars from China . . .

https://www.youtube.com/watch?v=RnHIha5FhOw

Those in favour of austerity not only think a government budget is the same as a household budget ...they think the US government has to borrow US dollars from China . . .laughable really.

bhamsteve

Don't come here with your fancy arguments. It's a public service witch-hunt round these parts.

I love the way the designation PHd Graduate is used as some kind of sacred validation that guarantees omniscience or lack of agenda.

What relevance are his political beliefs, he has scientifically debunked a major theory used to justify austerity, in the most obvious, concrete way.

arius

bhamsteve wrote: »

Don't come here with your fancy arguments. It's a public service witch-hunt round these parts.

What relevance are his political beliefs, he has scientifically debunked a major theory used to justify austerity, in the most obvious, concrete way.

There's no relevance at all.

The pro-austerity camp have always cited this flawed piece of research by Rogoff and Reinhart to support their own agenda and now that it's been exposed, they're a bit upset.

Rightfully so..they've been sold a pack of lies.

noodler

Pro-austerity is a bit of a myth.

Ireland can't balance its books so it has to act. If you want to call that austerity then go ahead.


There are some other countries who have other options regarding their deficits during the crisis but we were not one of them.

Nobody ever thought austerity = growth - anyone who claims this is either a liar or ignorant.

The argument was simply that a country will be better able to lend from the private markets if it manages to get its books in order. I have never heard a Government official in any country argue that austerity wouldn't result in short-term pain.

noodler

arius wrote: »

Japan's debt to GDP level is 236%

Jesus Christ.

Do you understand the fundamental difference between Japan's situation and Ireland's?

Japan has a very accommodating central bank for one.

More importantly it can borrow at remarkably low rates from its citizens - we borrow 75% of our debt from abroad.

bhamsteve

Part of me thinks that people are not concerned with economic recovery at all, they just want other people to suffer to increase their own relative wealth. There is no logic to it at this stage, just "us v them".

It's the same on every thread here, "renters v mortgage holders", "private sector v pub sector v unemployed" etc. Whatever else comes of this recession, the legacy will be the social divisions and selfishness it has created.

arius

noodler wrote: »

Jesus Christ.

Do you understand the fundamental difference between Japan's situation and Ireland's?

Japan has a very accommodating central bank for one.

More importantly it can borrow at remarkably low rates from its citizens - we borrow 75% of our debt from abroad.

This part makes absolutely no sense at all.

The Japanese government doesn't need to borrow anything, it creates the money.

You clearly don't understand how money works just like the entire pro-austerity camp.

Here's Michael Hudson explaining how money is created.

https://www.youtube.com/watch?v=uTYqGUGSLDM

Government budgets are nothing like a personal budget.

Chips Lovell

Whatever you're opinion on debt to GDP ratios, in the Irish case at least, austerity has been mainly driven by the fact that if we didn't reduce our deficit, we wouldn't have a snowball's chance in hell of borrowing at anything other than exorbitant rates.

noodler

arius wrote: »

This part makes absolutely no sense at all.

The Japanese government doesn't need to borrow anything, it creates the money.

You clearly don't understand how money works just like the entire pro-austerity camp.

Here's Michael Hudson explaining how money is created.

https://www.youtube.com/watch?v=uTYqGUGSLDM

Government budgets are nothing like a personal budget.

Excuse me, I think you must live on Cloud Cuckoo land.


Japan has been living with significant deficits for years and issue bonds to close the gap in the same way any country does - by issuing bonds. It just so happens there is a huge level of savings in the Japanese economy and therefore Japan has more domestic customers (at lower rates) for their debt.

http://www.bloomberg.com/news/2012-06-05/japan-s-unsustainable-deficit-financing-model.html

Have a read and get back to me.

Robbo

arius wrote: »

There's no relevance at all.

The pro-austerity camp have always cited this flawed piece of research by Rogoff and Reinhart to support their own agenda and now that it's been exposed, they're a bit upset.

Rightfully so..they've been sold a pack of lies.

Think of when the current wave of austerity started in Europe. Then think of the date of publication for the now discredited study.

Then think of the stupidity in pointing out others basic mistakes in arithmetic.

Solair

arius wrote: »

This part makes absolutely no sense at all.

The Japanese government doesn't need to borrow anything, it creates the money.

You clearly don't understand how money works just like the entire pro-austerity camp.

Here's Michael Hudson explaining how money is created.

https://www.youtube.com/watch?v=uTYqGUGSLDM

Government budgets are nothing like a personal budget.

They become like a household budget when you're effectively using the rebranded DM and have handed over all fiscal controls to Frankfurt though!

We probably could have printed more IEP and had a more even inflation across the whole economy which would have been significantly less painful, especially since fuel is taxed so heavily that we could counteract price hikes to some degree by softening tax on it.

My concern though is that all these abstract theories will be totally pointless if there's a major political crisis in Spain for example.

The public just won't put up with much more of this and it's likely to end very messily if something much more radical isn't done to solve the problem.

There's the usual Euroscloroisis setting in where the whole decision making process becomes locked.

--Kaiser--

Economics makes my brain sore

KyussBishop

bhamsteve wrote: »

Part of me thinks that people are not concerned with economic recovery at all, they just want other people to suffer to increase their own relative wealth. There is no logic to it at this stage, just "us v them".

It's the same on every thread here, "renters v mortgage holders", "private sector v pub sector v unemployed" etc. Whatever else comes of this recession, the legacy will be the social divisions and selfishness it has created.

I used to not take things this cynically, avoiding assuming the worst in people like that, such as the possibility that they may have agendas revolving around personal motives/gain and don't care about honest argument.

However, the more I engage in discussion on this topic though, and the more I learn about the posters most vociferous in these views, the more cynical I get; in most cases, I am unsurprised to find out posters have an unstated conflict of interest (particularly, coming from industry profiting from this crisis).

I used to be of the opinion "never attribute to malice that which is adequately explained by stupidity", but as time goes on, I can see full well that many people are not stupid enough to believe what they are saying on this topic, and I see that they are fully aware of the disingenousness and dishonesty of their arguments, and they don't give a shít.
It's pretty repulsive, when you look at the logical conclusion of what they promote and what they try to justify, and gradually come to the realization that they are fully aware of it, and that the motives look a lot like greed.

Chips Lovell

KyussBishop wrote: »

However, the more I engage in discussion on this topic though, and the more I learn about the posters most vociferous in these views, the more cynical I get; in most cases, I am unsurprised to find out posters have an unstated conflict of interest (particularly, coming from industry profiting from this crisis).

Care to cite some examples?

KyussBishop

Yes I was specifically calling out posters on conflicts of interest in this thread:
https://www.boards.ie/vbulletin/showthread.php?t=2056932182

Jawgap

Fiscal conservatives argue for a balanced budget and low or minimal debt - intuitively it sounds like a good idea (and definitely not a bad principle to be guided by).

The Rogoff-Reinhart paper argued that "median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower."

That figure of 90% became a shibboleth for these conservatives and the argument that causation might actually run the other way was neglected.

It now seems apparent that while high debt to GDP ratios retard growth, the effect is not nearly as pronounced as earlier suggested - effectively 90% is not a cliff or a tipping point.

The conclusion then is that reducing the debt to GDP ration below 90% is not a pre-requisite to growth, there can be growth while the ratio is brought down. The medicine can be taken by i.v. instead of a single injection!

From the Roosevelt Institute in the US....

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems.

The Time Series of High Debt and Growth in Italy, Japan, and the United States

Chips Lovell

KyussBishop wrote: »

Yes I was specifically calling out posters on conflicts of interest in this thread:
https://www.boards.ie/vbulletin/showthread.php?t=2056932182

That's a twelve page thread. It shouldn't be too hard to point us to which posts where you uncovered these people with "unstated conflicts of interest"

KyussBishop

I don't really want to go naming names tbh, because I'm pretty sure it's against the charter to be directly talking about posters not present/posting in the current thread.