WC Varones

Don't lend your hand to raise no flag atop no ship of fools

Stupid is as stupid does: Matt Yglesias talks money

One wonders how a political partisan and philosophy major without the slightest understanding of finance got to write the "Moneybox" column at Slate.

And given that such a person was given the column, one would think the novice would have the good sense to refrain from saying exceedingly stupid things and exposing his ignorance.

One would be wrong.

Allow me to introduce Matt Yglesias, a longtime left-wing blogger and more recent mainstream media "progressive" columnist. Not only does Matt not have a clue what he's talking about, he launches baseless attacks on people who do know what they're talking about: in this case, eminent economics researchers Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff.

Yglesias doesn't like Reinhart, Reinhart, and Rogoff's recent NBER paper that shows that high debt levels depress future GDP growth.

Take it away, Matt:
National governments go into debt frequently, and some indebted states suffer growth slowdowns that mechanically increase their debt:GDP ratio. By contrast through what mechanism do these high debt levels cause slow growth? Or think of it this way. Japan has the highest debt:GDP ratio in the world. A huge share of that debt is owed to Japanese households. If a new patriotic fad swept the country in which Japanese households tore up their bonds and relieved their government of its debt obligations, would Japanese GDP growth be supercharged? How? Why? It seems mysterious. By contrast it's obvious that if Japanese growth were to be supercharged that Japan's debt:GDP ratio would fall. How could it not?
Um, no.

If a new patriotic fad swept the country in which Japanese households tore up their bonds and relieved their government of its debt obligations, would Japanese GDP growth be supercharged? How? Why?


If Japanese bond-holders tore up their bonds (or if Japan defaulted 100%), that would be a huge destruction of wealth for the private sector in Japan, and it would crush GDP and plunge Japan into a depression.  Not that such a fantasy is in any way relevant to the paper in the first place.

It seems mysterious.

Only to you, Philosophy Boy.

By contrast it's obvious that if Japanese growth were to be supercharged that Japan's debt:GDP ratio would fall. How could it not?


By contrast it's obvious that if monkeys flew out of my butt, my monkey:butt ratio would rise.  How could it not?

What does that have to do with anything?  Did you even read the paper, Matty?

Yglesias seems to believe, without providing any evidence, that debt is irrelevant and that deficit-fueled central planning can "supercharge" GDP growth, and that if high debt levels tend to be followed by sub-par growth, it can't possibly be that there's a causal relationship.  Never mind that Reinhart, Reinhart, and Rogoff give plenty of discussion to theoretical reasons for a causal relationship.  Matty doesn't even address any of them.


Yglesias' left-wing ally (and Journo-lister) Ezra Klein over at the Washington post, by contrast, had the good sense to keep his mouth shut and report on the story without opining.

3 comments:

Anonymous said...

By contrast it's obvious that if monkeys flew out of my butt, my monkey:butt ratio would rise.

Your "internal" monkey-to-butt ratio would, in fact, decrease... ideally to zero. ☺

Doo Doo Econ said...

Monkey butt Doo Doo Economics... It is alright if lefties don't understand economics. Science and evolution are on the side of big government according to fellow SLOBs blogger Word Warrior: http://wordwarriorsandiego.wordpress.com/2012/06/18/science-demands-big-government/

Dean said...

Nice fisking. Link forthcoming.

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