Krugman: Beware of ‘The Confidence Fairy’

There are three reason why companies aren’t investing now.
1: Lack of consumer demand, which was mentioned in the above article.
2: Threats inflation or deflation. With the monentary supply increased by the government actions we are at the early stages of a deflationary cycle where our currency will lose a significant amount of its buying power. True that private corporations may be sitting on 2 trillon dollars in cash, but if the value of the currency drops then the buying power of that reserve will be reduced. Also if the Fed increases interest rates to stave off deflation then we will see significant inflation, in which case a financial reserve will aid the company in dealing with increased cost of cost of doing business.
3: Increased interest rates. If the Fed increases interest rates to stave off deflation then we, which they will have to eventually, will see significant inflation, in which case a financial reserve will aid the company in dealing with increased cost of cost of doing business.

???Stimulative spending never worked??? What about after the great depression? Even a rudimentary knowledge of basic history will tell you that it worked. That seems like a hard argument to make. If you want to argue that deficit spending during a recession is dangerous, then fine. But to say that “it is hard to find a time where it ever worked” seems not to make sense.

When are you going to get another view from a conservative economist like Thomas Sowell. Krugman has never had a clue about how to stimulate the economy. His and the administrations idea is like taking water from the deep end of the pool and putting it in the shallow end and expecting the level to rise. Even in the great depression it didn’t work and only extended the problem until well after WW2.

“The business community is afraid of more action from Washington”…what a “crock of you know what”. Here comes the “lies and misinformation” from the wealthy elite and corporatocracy. Small businesses which comprise such a large part of our “consumer run economy” are NOT SPENDING OR ASKING FOR MONEY FRIOM LENDERS for one main reason folks. Too many unemployed people to buy their goods and service. It is NOT that hard to figure out, folks. We need to do whatever we can to get these people back to work…and denying the most needy thgeir unemployment benefits only adds to the problem. Hey Republicans and conservatives DON’T CARE! They want that “misery index” high so they can get “backlash voted back into power” by an “out of touch electorate”. It is way past time to WAKE UP people!

Posted by: Nephron | Jul 5, 2010 11:42:35 PM – “is the economy better now under Obama than it was 18 months ago under Bush?” (from another thread)
From my perspective, a reserved Yes.
This Recession officially started in 2007, a year before Obama took office. By 2009 our economy was shrinking at an annual rate of 6.4%. And employment had already stalled after almost a decade of subsidized outsourcing and the worst job growth on record – only 3 million jobs in 8 years. 18 months later, according to US Dept of Commerce stats, the economy is beginning to grow again.
Obama’s first focus was to recapitalize banks and return the economy to growth. Last month, the Treasury said that taxpayers would realize a $24 billion profit on TARP money lent to banks. And, the mix of the direct assistance to automakers + other incentives to spur demand in the market was a lifeline to industry survival (according to the financial firm Deloitte).
It is delusional to think our economy will return to the fantasy Bush era Bubble created around the housing market. Family Wage jobs and benefits were supposed to trickle down to everyone else. Instead, our nation created a bubble of lopsided wealth and consumer debt that helped push us into this Recession. So today, customers do not have enough money to buy what our economy is capable of selling at full or near-full employment.
At a personal level, our Mom and Pop company let employees go in 2007 as the Recession started to gain speed. We sell nation-wide and internationally. Our customers froze budgets, cut employees, and reduced work weeks. For almost a year our business survived on revenues from product previously ordered and invoiced annually. There were practically no new orders from our target market from the end of 2007 to 2009. Today, our market is beginning to defrost and new orders starting up again. But I cannot justify hiring until DEMAND grows strong enough.
The idea that businesses are waiting to hire because they are afraid of future taxes or future insurance costs is a Conservative planted myth. Small businesses hire when revenues support the cost of more employees.

cnd fox..every business i know, and people i know , are afraid to spend money and hire and the fear of of govt policy does cross their minds.like it or not thats a fact.i agree we need people to work and have jobs. thats what the small business private sector is about. instead of doling out bucks to the uaw and the like:;incentives to hire could be used.ditto for green godess.it takes owning a small business to know one. to many cheifs and not enough indians.get real this experiment didnt work.

Whose confident? Whether we spend like Krugman wants or implement austerity as Peter Schiff advocates, the future looks bleak. Schiff is right when he says “the party is over for the United States”. We have been on a 4 decade spending spree, and now it is time to pay some of the bills.

STIMULATE WHAT ECONOMY?
While Dr. Krugman is a good “read,” after many hundreds of billions of stimulus dollars, look at the result. The U.S. is DEEPER in debt, while the economy continues to falter because Americans do NOT have a strong manufacturing base WHERE THE JOBS USED TO BE!
As long as the U.S. Manufacturing base is sent overseas, the economy of the U.S. will fail. The U.S. needs to emplace tariffs on ALL imported goods and services, and to PRODUCE AMERICAN products here. U.S. citizens need to BUY AMERICAN products. THAT will rebound the economy, not a short-termed “stimulus” that will only place the U.S. deeper into debt. After the stimulus dollars are spent, then what? IT is an artificial way to go deeper into debt.

It’s time to adjust the economy into kilter: tax assistance and government spending should be where more than 60% jobs are created – small businesses.
According to the SBA, help is needed for very small companies – less the 20 employees – who spend 67% more per employee on tax compliance. We small businesses also need those bailed out banks to stop sitting on credit. Federal tax credits to businesses that hire workers would be great. Modifying the tax code to reduce start-up costs for new businesses makes sense. Now is the time for America to re-build build long lasting Family Wage JOBS.
Of course everyone in the country wants lower debt. But today the biggest % of the Federal Deficit isn’t spending. It’s LOSS OF REVENUES. That means we need more healthy tax payers to reduce our deficit, not just Draconian spending cuts.

Back to “Fred and Yep I said That”…you mean that “paid off lackey”, Thomas Sowell, whose columns are always full of non-substantive conervative soundbites”??? LOL…LOL…

As a democrat, Obama supporter and campaigner and someone who plans to vote for him in 2012, I actually agree with the republicans on one issue. We need some tax cuts for businesses to stimulate job growth

Obama needs to do what Bush senior did and reverse his tax campaign promise.I think he should do that for hiring businesses to stimulate job growth

***Modifying the tax code to reduce start-up costs for new businesses makes sense. Now is the time for America to re-build build long lasting Family Wage JOBS.***
Posted by: green.goddess | Jul 6, 2010 12:41:22 PM
I agree with you, green.goddess. The tax code needs significant work to ease the burden on small businesses, as well as evening out the tax burden on the populace.
If the obama administration would have focused their “stimulus” efforts tax breaks for small business then that bill would have gone much farther to pushing the economy out of the recession. As it stands now 1/3 went to states to keep state employee’s on the roles, 1/3 went to tax breaks for works in the form of the “make work pay” tax credit among others and the rest doled out to stimulus projects with about 200 billion still in reserve.
Instead of the “making work pay” tax credit congress had instead given a payroll tax holiday or reduced the federal income tax burden on the business owners for businesses with fewer than 20-50 employees (depending on how far you can stretch the funds) for a year or two. Such would have broken the credit cruch/freeze that has plagued small businesses since late 2008.

Posted by: TV | Jul 6, 2010 1:07:17 PM posted: “We need some tax cuts for businesses to stimulate job growth.”
I think it’s going to take a combination of focused help for Small Business. We create over 60% of the new JOBS! The US has lost over 8 Million jobs since the recession hit in 2007, and nearly 3 million new people have entered the workforce since then. However, the previous 8 years of tax cuts created a pathetic 3 Million new jobs. Why?
Big corporations actually received tax incentives to move jobs overseas, and those cheap jobs became a sledgehammer for wages here at home. Today our economy needs new healthy Family Wage jobs to bring down the deficit!
In 2007, after years of tax cuts, middle-class family income was LOWER than when GW Bush took office in 2001. Meanwhile, 72% of our nation’s wealth became concentrated in the hands of the richest one tenth. Tax cuts that mostly benefited the wealthiest have created a skewed economy – it’s time for all incentives – tax cuts, stimulus, whatever we can do – to grow jobs again for re-building a strong Middle Class.

Krugman is an ECONOMIST, i.e. he works in the labaryinth of the ivory towers that infest all major cities.
So far he has been a lot less prescient than the late George Carlin, RIP, so I think I will pass on his latest pronouncement.
DG

CND FOX– I agree absolutely — We need Massive Green WPA/Manhattan Projects. During the Depression, the WPA built our infrastructure — We need to retool and need smart Govt. spending…

CND Fox, point to one country in the world where the “wealthy elite” don’t run the show. You guys really think the government’s out to make things “fair” don’t you?

Krugman always puts his religious beliefs before all else; he twists and molds the laws of economics to fit his religion, and his religion is liberalism. Reagan proved as a matter of fact that a lowering of the tax rate is what launches an economy out of a recession, but science and history cannot nudge the faith of a worshiper of liberalism.

dunno what the answer is to the economic woes, but it sure doesnt lie with this Obama laptop named Krugman. the man is insane, more stimulus??? where did the last one get us non union non SEIU hard working tax paying small businessmen? lets face it , these ivy league elite blowhards aint interested in helping the economy- if they were they would learn from europe’s mistakes. they are communists, plain and simple

mayo49 | Jul 6, 2010 4:28:14 PM posted: “where did the last one get us non union non SEIU hard working tax paying small businessmen?”
When Obama took office the economy had been shrinking at an annual rate of 6.4% and employment had already stalled after 8 years of outsourcing and the worst job growth on record. Now you and I may not have liked the way TARP money was spent on Wall Street bonuses, but Obama’s first focus had to be recapitalizing the banks and returning the economy to growth. Even conservatives agree we’d be over a cliff otherwise.
Last month Treasury announced that taxpayers would realize a $24 billion profit on TARP money lent to banks. And, the mix of the direct assistance to automakers + other incentives to spur demand in the market was a lifeline to that industry’s survival (according to the financial firm Deloitte).
So now after a year and a half, it’s past time to focus federal money on building small business jobs. Google the House Small Business Committee to keep up on what’s becoming available to us. The committee is made up of both Democrats and Republicans; none are “communists”.

Capacity is driven by the consumer. The consumer sees the same thing as corporations: higher taxes on the way, an over regulated economy/industries (eventually leads to higher prices), substantially higher energy prices (Obama’s own words), an administration unfriendly to business (not good for employment), a little anti-American admin (scares people), an admin driven by the far left (not good for capitalism) and on and on and on. People don’t trust Obama, this administration or congress.

Rather than worry about ‘The Condifence Fairy’, I think we need to be more concerned about ‘The More Stimulus Fairy’.

Posted by: BubblerDad | Jul 7, 2010 7:56:10 AM posted: “small businessmen…are scared and extremely upset with the Obama Administration’s outright hostility to business.”
I AM a small businessman. Check out the SBA web site – how are these programs somehow “hostile”? Now I’m no fan of Cap and Trade, but it won’t impact my small business anymore than any other bubble market manipulations by Goldman Sachs. And as far as the health care bill, the massively increasing premium costs were killing my employees and my profits, + it’s my understanding that small employers (less than 50) are exempt from penalties for not offering coverage.
NO small business that wants to survive will “put off expansion” when they feel customer demand – otherwise, their competitors will be happy to take the money. Our nation needs JOBS to release that spending demand.