Something I hadn’t know but which the FT told me

It wasn’t actually the Reagan tax cuts which blew out the deficit. Rather, the recession caused by Volcker to beat inflation.

I hadn’t known that and am glad that I now do.

13 thoughts on “Something I hadn’t know but which the FT told me”

  1. You get this year’s award for learning something from the FT that wasn’t saturated with partisan hatred of the Republicans.

  2. The FT that’s been telling us how fucked we are in the EU negotiations, that FT?

    Seriously, the amount of schadenfreude those shits are piling up is starting to niggle.
    Somebody might take it seriously because of the FT’s past reputation.

  3. Hang on, doesn’t that rather contradict the wisdom of the “economists” that the “austerity” practised by Osborne and Darling destroyed everything?

  4. bloke in france

    And Barnier, my favourite negotiator, has just admitted that the EU could go bust without our contribution and other countries might want to leave. Hooray!

  5. Maybe Barnier assumes that the EU is as important to us as it is to him, that’s why he thinks we’ll pay so much to support it….

  6. Indeed Rob.. we let our subscription to the economist lapse at renewal as it wasn’t an impartial paper anymore and its look at Brexit was so partial as to be laughable. It merely dismissed the pro-leave arguments by assertion.

    Still have the Spectatork subscription though…

  7. DuckyMcDuckface

    Oddly enough, there was a thread on Reddit about Volcker’s policy a few days ago. /r/AskEconomics, I think.

    I wonder…

  8. “And no, no one has as yet devised a credible scheme by which tax cuts alone are going to cause a recession.”

    It really isn’t that hard to devise a credible scheme. Whether that scheme is actually valid is a different matter. Here is one possibility.

    Our starting scenario is an economy that is chugging along, it doesn’t matter exactly whether we are in a boom or bust. The government decides that it is a good idea to lower capital gains taxes. This changes incentives leading to more capital being invested. The issue is that there is no corresponding increase in demand. In fact consumption can drop as more money is shifted into invested. That investment money is chasing the same amount of profits so a bubble builds. Once it becomes obvious that there isn’t enough demand to support the level of investment the bubble pops and we get a recession.

    At first glance this matches very well with recent recessions. I welcome anyone to explain why excessive capital gains tax reductions appear to be correlated to recessions but actually aren’t.

  9. Haven’t all of these recessions and stagnations taught us that this monetarist analysis of the economy – founded as it is on pure socialist central planning ideology – is pure bunk?

    MV=PQ etc is just as much crap as Keynes’ C+I+G.

    If we have a persistent deficit it’s simply because the government is overspending. The end.

  10. Liberal Yank.

    Doesn’t the price mechanism sort all this out?

    And yes, such a change could result in certain businesses or industries ‘suffering’. But isn’t this what we call The Market System operating as intended?

    Recessions are just another player in the great fiction known as central planning.

  11. James,

    1st response:

    That is kind of what I am saying. The central planning in this case is not government ownership of the means of production though. The argument I am putting forward is the central planners that say tax cuts will definitely lead to economic growth are full of shit. Imbalanced tax cuts do indeed lead to first order growth but the second order effects lead to recessions.

    The recession is the market system dealing with the tax imbalance. We have to consider two sets of demands. The first is demand for stocks. The second is demand for products made by the companies who sell the stock.

    I’d rather not put too much effort into developing this theory. I assume others have noticed the same thing. I also assume the theory they developed has been debunked. At the same time Timmy did say that no one has come up with a credible scheme where tax cuts can cause a recession. This theory seems to fit well with the GR and the tech crash. I’d go back further but that is where I need to start doing research. I was still a teenager for the Bush I crash so I don’t trust my memory. Other things were more important than macroeconomics at that age.

  12. DuckyMcDuckface

    LY- are you looking at the TMT bubble from 97-ish to summer 2001? That stock is common stock, equity, mainly listed, as opposed to stuff for sale in a warehouse?

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