“If governments would let today’s unsustainable debt collapse and then apply stimuli, I’d swing to your view. But they are not doing that – they are doubling down. They are trying to avoid current debt destruction by promising more future debt to be added to it.”

I see your view, but I still think the big difference is between those who have done their homework on immigration and fertility and those who haven’t.

Those who will have larger and younger workforces in 2020 can afford to take on more debt now than those who won’t, and its as simple as that I think. Those who only have ageing and declining populations in front of them really are in a very tight fix, since they really can’t switch that much debt around inter-temporally. At least not without placing an intolerable burden on future cohorts of young people, and possibly risking that they leave en masse, they can’t.

Yes, I understand what you are saying. However, I still believe there is an absolute limit to debt (money) based on the realistic capability of a population to produce in the future. You cannot promise more than that or confidence colapses… and it makes no difference who does the promising. Government can no more guarantee 110% of your future capacity than you can.
If governments would let today’s unsustainable debt collapse and then apply stimuli, I’d swing to your view. But they are not doing that – they are doubling down. They are trying to avoid current debt destruction by promising more future debt to be added to it.

The UK has had a peristent current account deficit for the past 17 years. USA is even worse. Now it is all falling down with frightening speed.

“and to summarize keynesisim is reduced to “in the long run we’re all dead”. he was an old, childless, bitter man when he said that.
you go figure.”

Didn’t he write this in the Tract on Monetary Reform (1923), one of his earlier works, and one of my personal favourites. The next sentence is even better (I actually use it as a masthead on my East Europe blog:

“Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past, the ocean is flat again.”

Pity you don’t like either Krugman or Bernanke, they are definitely my two favourite macro economists. Still, there are products to suit all tastes.

never heard krugman explain who’s gonna pay for the trillions he’s pushing. or maybe, just maybe he’s hoping his former boss, bernanke will get him a cushy job too if he does a great job? dirty mind i have.

and to summarize keynesisim is reduced to “in the long run we’re all dead”. he was an old, childless, bitter man when he said that.
you go figure.

“krugman is an ego-maniacal sham who can’t grasp basic economic concepts.”

Well, there’s an interesting idea. I must say I had never considered that possibility. That must make two of us.

“I will put to you the same comment I left on Krugman’s blog: why do you assume that the GDP numbers are even real?”

Because I do. I think I have no better answer than that. I think you need to make certain assumptions to get the game started, like in chess or conversation. I look at very large quantities of data every day, and I see lots of problems, but not the ones that worry you. Sorry I can’t be more helpful.

“Oh wait there is no solution, other than driving rates to zero and hoping you can impoverish and create enopugh chaos around the world to make yourself a relative winner.”

Well, I may have many ambitions in life, but I must say I never thought of the above as one of them. Chaos, eh?

“My view is a bit different. I think the ratio of debt (ie: money) to potential debt (ie: available future work) is critical to credit stability and an imbalance is the cause of this debt deflation. Government ’stimulus’ merely piles up debt in a different column – it is future taxpayer earnings substituted for future taxpayer earnings, when you analyze it right to the core.”

Well you are certainly entitled to your view, and I basically agree with the above. I disagree with this bit though:

“In other words, it is neutral”

Basically it isn’t, because it moves demand around intertemporally. So the final path of GDP growth is higher if you do this sensibly. This is the core of the 1930s argument Krugman is using, and in this I very much agree with him. Some people always did, and still do, take another view.

Basically, if you move demand around from when an economy is moving close to capacity (some point in the future, the point at which you pay down debt and cool and overheating economy via fiscal surpluses) to when it is operating massively below capacity (now, for example), you can increase total GDP considerably, since you leave less resources idle, and indeed you can produce quite a few things more cheaply (since energy, raw materials, productive capacity and wages are all cheaper now than they are at the height of a boom).

Basically this was Keynes’s insight. What I think he hadn’t twigged, and that we can now see, is this situation becomes far more complicated under an ageing and declining population scenario (since you have less people working in the future to pay down the debt). Which is why France and the US for example, have a lot more leeway than Germany or Japan do.