What follows is my reply to Dandoffs assertion regarding my alleged ignorance about some matters.
1) "Poor Wiki. Like timber he does not understand that inflation does not evenly distribute itself across all."
Here professor Dandoff is completely wrong as I fully understand that the phenomenon described as a generalized increase in prices is very selective. In fact, so selective that during the last seven years or so only guldbugs have been systematically affected by a state of ever increasing hyperinflation.
2) "Also, he does not understand the huge battle between debt deflation (caused by too much, unserviceable debt) and asset inflation (caused to much, ZIRP serviceable debt".
Here I have to admit that professor Dandoff is absolutely right because only him could have discovered, probably yesterday for the first time in his life, the ideas of Irving Fisher.
As to the titanic batle between the forces of good, the ones from where a new economy emerges Schumpeter stile, and the forces of evil represented by the zero interest rate policy (a.k.a. ZIRP), I also must admite that I know nothing, except that such tatanic strugle seems to be modelled upon the laws of Physics where the resultant from two opposing forces of the same entensity is zero.
Nevertheless, I would like to ask the professor this: of these four evils: central planning, deficit spending, liquidationism or asset inflation, which one would the professor prefer?
As to bubbles (asset inflation), it has not yet occured to the professor that they maybe the price to pay for living in an economy that entered into a period of secular stagnation?
Again, professor Dandoff is absolutely right as in conformity with the law that bears his own name (Dandoff Law) I could never have grasped such concept plus its underlying cause all the way up to the capitalist mode of production.
“Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.
But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.
Sooner or later, things were bound to go wrong, and eventually they did. Bear Stearns failed; Lehman failed; but most of all, securitization failed . . ."
4) "He does not understand about student loan debt."
Once more professor Dandoff is absolutely correct as I only understand that in conformity with neoliberal ideas studends at the tertiary education level should pay for part of their education as the benefits that personally accrue to them from having a tertiary educated do justify to have them making a co-payment.
5) "He does not understand about real estate bubbles. He does not understand about stock market bubbles."
Needless to say that once more professor Dandoff is absolutely correct as I have to admite that my knowlege about bubbles is limited to the tulip bubble.
6) "He does not understand about debt at all. Because he and Kruggers think debt, free money, is good, good, good."
Well, if debt is free money then I would not mind to be in debt up to my hears nor should professor Dandoff or anybody else for that matter. Besides this I also don't understand if the professor is talking about public or private debt. But knowing his past record I presume that he is talking about national debt.
7) "He does not understand what a Ponzi scheme is."
Unavoiably, the professor is once more absolutely right. Not because I don't know about Mr. Ponzi 's business model , but because I don't know to what Ponzi scheme the professor is refering to. Is it gold? Where higher prices are only sustenable if there is a continuous stream of new entrants into the scheme? Is he refering to any daycare child center that in order to stay afloat needs a constant stream of new kids? Or is he refering to the stock market? Where if there is not a stream of constant buying orders coming in, investors would not be able to get back their capital in full or in part unless the companies where they have invested go into liquidation or dissulotion? Or is he refering to the market for government debt, which works exactely as the stock market ?
8) "Oddly, if one has no understanding of any of the basic premises of current, Keynesian economics, you will understand nothing."
On this one I do only have a question, which is this: does the professor himself understand the basic premises of Keynesian Economics? Here I must confess that I am not sure because to start with neither Fisher was Keynesian nor did Keynes agree 100% with him. Apart from that and as far as i know, Keynes never believed that monetary policy, the ZIRP thing, would be able to quickly get an economy facing a liquidity trap back into full employment. This is the reason why he proposed deficit spending as the only tool.
In conclusion. If Professor Dandoff wants to discuss Keynesian economics including neo-keynesianism, certainly that it would not be a bad idea for him to learn something about it first.
"Government deficit spending is a central point of controversy in economics, with prominent economists holding differing views.[1]
The mainstream economics position is that deficit spending is desirable and necessary as part of countercyclicalfiscal policy, but that there should not be a structural deficit (i.e., permanent deficit): The government should run deficits during recessions to compensate for the shortfall in aggregate demand, but should run surpluses in boom times so that there is no net deficit over an economic cycle (i.e., only run cyclical deficits and not structural deficits). This is derived from Keynesian economics, and gained acceptance (especially in the Anglo-Saxon world) during the period between the Great Depression in the 1930s and post-WWII in the 1950s.[citation needed]
This position is attacked from both sides: Advocates of fiscal conservatism argue that deficit spending is always bad policy, while some post-Keynesian economists—particularly post-Keynesian Chartalists—argue that deficit spending is necessary, and not only for fiscal stimulus.[citation needed]
According to most economists, during recessions, the government can stimulate the economy by intentionally running a deficit.
The deficit spending requested by John Meynard Keynes for overcoming crises is the monetary side of his economy theory. As investment equates to real saving, money assets that build up are equivalent to debt capacity. Therefore, the excess saving of money in time of crisis should correspond to increased levels of borrowing, as this generally doesn't happen - the result is intensification of the crisis, as revenues from which money could be saved decline while a higher level of debt is needed to compensate for the collapsing revenues. The state's deficit enables a correspondent buildup of money assets for the private sector and prevents the break down of the economy, preventing private money savings to be run down by private debt. The monetary mechanism describing how revenue surpluses enforce corresponding expense surpluses, and how these in turn lead to economic breakdown was explained by Wolfgang Stützel much later by the means of his Balances Mechanics. William Vickrey, awarded the 1996 Nobel Memorial Prize in Economic Sciences, commented:
Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level. Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses.
Advocates of fiscal conservatism reject Keynesianism by arguing that government should always run a balanced budget (and a surplus to pay down any outstanding debt), and that deficit spending is always bad policy.[citation needed]
Fiscal conservatism has academic support, predominantly associated with the neoclassical-inclined Chicago school of economics, and has significant political and institutional support, with all of the United States except Vermont having a balanced budget amendment to their state constitution, and the Stability and Growth Pact of the European Monetary Union punishing government deficits of 3% of GDP or greater. Proponents of fiscal conservatism date back to Adam Smith, founder of modern economics. Fiscal conservatism was the dominant position until the Great Depression, associated with the gold standard and expressed in the now outdated Treasury View that government fiscal policy is ineffective.[citation need
