
Krugman: Debt Is Good - bpolania
http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html
======
albertop
“With war looming, it’s time to be prepared. So last week I switched to a
fixed-rate mortgage. It means higher monthly payments, but I’m terrified about
what will happen to interest rates once financial markets wake up to the
implications of skyrocketing budget deficits. From a fiscal point of view the
impending war is a lose-lose proposition. If it goes badly, the resulting mess
will be a disaster for the budget. If it goes well, administration officials
have made it clear that they will use any bump in the polls to ram through
more big tax cuts, which will also be a disaster for the budget. Either way,
the tide of red ink will keep on rising.”—Paul Krugman, New York Times, March
11, 2003

~~~
UnWiseM4n
I'm new here, so maybe I'm missing something, but how is this comment a
substantial contribution? Are you calling him a hypocrite?

A specialist in the field changed their mind after 12 years? The inputs were
much different 12 years ago. Brink of invading a country, still in a meh state
after the dot bomb...

A wise person, given sufficient evidence to do so, will change their mind.

In the new article he clearly states reasons for having this new opinion.

Things change.

~~~
zaitcev
Krugman is a specialist in the field of licking a certain kind of bottom.

~~~
cryptoglyph
Absolutely. He's a charlatan.

------
digi_owl
Always with the government debt, when the real devil is private debt. Private
debt is what puts the economy to a halt, when it has been used for asset
speculation rather then investment in expanded production capacity.

------
rebootthesystem
It's a good article for a topic that needs to be discussed from a factual
perspective at all levels. Yet that is precisely where this article fails to
some degree. It presents a sensible take on the value of debt. Namely, you can
use debt to do great things. Krugman says:

"issuing debt is a way to pay for useful things"

And that is absolutely true.

However, he, through the rest of the article, absolutely ignores the elephant
in the room:

Issuing debt (or accepting debt) should be the absolute last resort and one
that demands operating efficiently before and after taking-on debt.

Taking on debt to pay for billion dollar websites (pick a number, anything
north of low 10^6 is obscene), stupid wars, nation building and, to lump it
all together, government waste, is not just wrong, it's dumb and
irresponsible. Plug the leaks first before borrowing money to buy more water.

To put it in HN terms, it's like taking VC money and utterly wasting a huge
chunk of it by throwing parties, buying boats, giving out exorbitant salaries
and, rather than doing the work in-house for a reasonable cost, outsourcing
all of the coding to really bad coders who proceed to burn all the VC money
you got. And then, after that, you go out to raise more money (more debt, in
the context of the national discussion) and justify it by claiming it is "to
pay for useful things".

I would be blown away if anyone would look at such a hypothetical scenario and
concluded this was a good way to run your life, startup, business or the
nation. In fact, it goes without saying that no VC would give money (for
equity or a loan) to a group who proved to be irresponsible about the
utilization of funds prior to their request for further funding. In other
words, in the real world this would not happen because nobody would give such
fools a dime. Let's ignore the age of "irrational exuberance", during which
the earth's poles might as well have been inverted.

When you add that metric to the question of debt being good or not --whether
it is in a personal, entrepreneurial or national context-- the answer has to
be very different from Krugman's:

Yes, debt is good provided it is well justified and the person, organization
or nation make smart decisions and efficient use of capital.

Case in point: California's ridiculous high speed train. I don't think I need
to explain that further. If you live in California and are aware of what's
going on you should be horrified of the waste and lack of common sense being
exhibited.

I like the article, but I wish it weren't so one-sided by means of excluding a
very important side of the financial equation which is a metric representing
the efficiency of the organization and the use of capital. I have no clue how
wasteful our governments are (from local to federal). I would not be surprised
if the number is somewhere between 35% and 65%. That they are wasteful is
absolutely uncontested fact. It's only a matter of the degree. And it is going
to be a large number.

~~~
biehl
_Taking on debt to pay for billion dollar websites (pick a number, anything
north of low 10^6 is obscene), stupid wars, nation building and, to lump it
all together, government waste, is not just wrong, it 's dumb and
irresponsible. Plug the leaks first before borrowing money to buy more water._

It seems to me that spending on those things are dumb financed by debt or
not...and therefore not really relevant to whether debt itself is sensible.

~~~
rebootthesystem
The question here was "Is debt good?". My observation was that debt is
acceptable --and even good-- if, and only if, the person or organization has a
historical track record and culture of efficient use of capital and will, in
fact, continue to use capital efficiently after incurring further debt.

The examples I provided are but a few from a huge list showing we are not
efficient. In that context, yes, the examples are absolutely relevant. I have
personally been involved in several government contract bids where I saw how
government actors, systems and procedures managed to pay twice as much than
market rate for items being procured. The waste present in government spending
is likely to be of staggering proportions.

It's like borrowing money to buy a truck for your business and paying twice
market rate for the truck. The reality is that this hypothetical business
probably wouldn't have needed extra cash had it been responsible about capital
utilization throughout it's history.

------
jakeogh
It is fundamentially wrong to spend the money (and therefore time) of people
who are not born.

~~~
rsanders
How are the people who are not born going to pay the currently existing for
their use of infrastructure you suggest we wholly pay for now?

~~~
jakeogh
What's wrong with living within our means? Can we not build a road without
taking from people who can't yet have a say in it?

Most people accept that we don't owe the debts of our ancestors, but for some
reason, the most corrupt organizations somehow get a pass. A baby today in the
US is born owing north of $40k to banks she has never done business with. If
she does not like it, that money will be taken with the threat of force.

~~~
the_why_of_y
Not only does the newborn _owe_ $54k share of public debt on average, the baby
also _owns_ (directly or indirectly) $54k worth of government bonds on
average.

~~~
jacquesm
The debt is public, the bonds are held in a non-public fashion so there is a
definite asymmetry there.

