Killing time with Robert Skidelsky

Four Fallacies of the Second Great Depression

The Swabian Housewife. “One should simply have asked the Swabian housewife,” said German Chancellor Angela Merkel after the collapse of Lehman Brothers in 2008. “She would have told us that you cannot live beyond your means.” This sensible-sounding logic currently underpins austerity. The problem is that it ignores the effect of the housewife’s thrift on total demand. If all households curbed their expenditures, total consumption would fall, and so, too, would demand for labor. If the housewife’s husband loses his job, the household will be worse off than before.

Robert suffers the fallacy. Robert, how do integrated economies count downward?They don't count down? They do? Only if their is an external leak? If your model on is valid without negative shocks, then tell us. Otherwise explain how an integrated economy counts backwards.

The government cannot spend money it does not have. This fallacy – often repeated by British Prime Minister David Cameron – treats governments as if they faced the same budget constraints as households or companies. But governments are not like households or companies. They can always get the money they need by issuing bonds.

Oh, Robgert. This is the most common fallacy of fallacies. Governments can issue all the bonds they want, but if they want growth, they better be able to pay large interest costs. The fallacy here is that Robert's policies can insure the lowest growth needed to keep the government budget flexible. Voters will disapprove. In the USA, a real growth rate of 3.2% makes interest expenses 30% of the budget.

The national debt is deferred taxation. According to this oft-repeated fallacy, governments can raise money by issuing bonds, but, because bonds are loans, they will eventually have to be repaid, which can be done only by raising taxes.

Tax / interest costs are the thing government looks at every friggin day when growth occurs. Politicians are wanting to spend every last surplus, but growth is causing interest expenses to become 40-50% of the budget. The Senate fails to work, California breaks down, a crash and a new try.

Debt is a burden on future generations. This fallacy is repeated so often that it has entered the collective unconscious.
Boy what a blunder here. In 1980, Reagan bailed out one of the BUsh kids in the Savings and Loan diaster. A huge hit to the debt, just to get Texas out of a jam. That first bailout, the one that started it all, is still on the books, not paid off in either increased taxes nor deceased spending. We have paid off the principal twice, and the interest on that principal continues and applies pressure on the current Cognress, and they were little babies at the time.
Glad to be of service