"If this deficit spending were actually going to financial institutions and disappearing (which is happening with much of the fed's lending of late, but primarily because the few borrowers who are qualified are not enamored with leverage at the moment), you would have a point..."
The Fed printing money and giving it to the bank adds to effective over-all spending and so effective deficit spending is going to the banks.
You might idly slice the size of the official Federal deficit any way you wish - high by comparison to earlier GDP ratios, low in comparison to the GDP ratios of other countries (Japan has a public debt of ~100% of GDP - funny how they have the world's highest ratio here despite their huge trade surpluses).
But this slicing doesn't mean much with the Fed and Fannie Mae's activity involving massive shoveling of money into the housing and other sectors.
And it should be clear it doesn't matter if this happens "primarily because the few borrowers who are qualified are not enamored with leverage at the moment". Indeed, the whole point is using money to prop up failing sectors makes it more likely that fewer in the private sector will want to borrow for actual productive investment.
I would agree that Krugman's pushing for larger deficit misses the elephant in the living room that is the bailout. But hey, he complained once and that's more than many did.
Like I said, this is neither Keynesianism nor Monetarism as such but a state "captured" by the various industries which suckle off it (especially defense, financial services, education, health care but also others).
You might idly slice the size of the official Federal deficit any way you wish - high by comparison to earlier GDP ratios, low in comparison to the GDP ratios of other countries (Japan has a public debt of ~100% of GDP - funny how they have the world's highest ratio here despite their huge trade surpluses).
I don't think it's fair to compare the public debt of one country to the annual deficit of another. It is akin to saying "It's alright that I put $8000 on my CC last month because Bob down the street owes $70,000." While Bob may be in dire straits, he probably didn't accumulate all that debt in the last 8 months.
Trifles aside, It's refreshing to see someone with a very different perspective from my own who realizes what is going on.
The Fed printing money and giving it to the bank adds to effective over-all spending and so effective deficit spending is going to the banks.
You might idly slice the size of the official Federal deficit any way you wish - high by comparison to earlier GDP ratios, low in comparison to the GDP ratios of other countries (Japan has a public debt of ~100% of GDP - funny how they have the world's highest ratio here despite their huge trade surpluses).
But this slicing doesn't mean much with the Fed and Fannie Mae's activity involving massive shoveling of money into the housing and other sectors.
And it should be clear it doesn't matter if this happens "primarily because the few borrowers who are qualified are not enamored with leverage at the moment". Indeed, the whole point is using money to prop up failing sectors makes it more likely that fewer in the private sector will want to borrow for actual productive investment.
I would agree that Krugman's pushing for larger deficit misses the elephant in the living room that is the bailout. But hey, he complained once and that's more than many did.
Like I said, this is neither Keynesianism nor Monetarism as such but a state "captured" by the various industries which suckle off it (especially defense, financial services, education, health care but also others).