Austerity debating with Simon Wren Lewis

The debate on austerity continues. Simon thinks that more government spending helps real growth, let's check out the facts, shall we?

Just to make matters short, let's ask Simon if he ever actually looked at what the Federal government spends money on.  Here are changes in government spending, changes in real growth and changes in interest expense; all quarterly. Through out this whole five year period, interest expenses occupied about 11% of the US budget, it is the green line.  It has a variance of about 10%,

That red line is total federal spending , notice that total spending varies about 1%.  All of that variance in spending is due to volatility in interest expenses, all of it.

If these Keynesians had a clue they would think that the differential rate in government spending available for discretionary spending is all taken by interest payment. Do these Keynesians think that stimulating the bond industry is the central idea?  Simon Wren Lewis is clueless because he cannot show a damn thing about government spendign over the period as long as interest expenses consume all the variance.  The null hypothesis has not been rejected, in fact the interest rate volatility hypothesis entirely consumes his data.

This, noticing variance and finding its cause, is what Simon missed out on in statistics class. All things being equal, and they are not really, any lasrge change in government spending would cause a large change in interest expenses. This effect is mainly due to the roll over effect, a  rise in borrowing for current spending causes a rise in spendign for the 2 trillion in debt we roll over each year.

Now the counter argument is QE. But QE has just jammed the Fed into a corner from which it will not escape. (its tanh angle is way to high and loans to savings leave no room for flexibility, hence the deflation.  Go see banker bot, it knows. Folks like Simon are the reason we have to discover the theory of everything, we had to undue generations of badly taught mathematics, and now we know.

Why is it that I, a simple mathematician, can spot these correlations in about a three minutes; yet every single Keynesian, except maybe Roger Farmer, seems absolutely clueless.  Did they all learn from Krugman and the Basket Weavers from MIT?  What skill do I have? Answer: The theory of everything. I get flow constrained, connected finite networks. So, economists, get with the program, the new math is appearing all over your campuses.