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IMF Admits Failure (In Which Tuffalo Reads A Report So You Don't Have To)

Dented said:
oh sorry to hear that. you seem so interested in economics that i thought it would be a good road for you
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Don't cry too much for me, I'd do urban economics if I could do an econ phd. I'll be in the same field, just not at the cutting edge of research. More than happy with how things are working out.
 
Someone correct me if I am wrong but governments that accept IMF loans and the accompanying austerity programs have a terrible record of staying in power - something like 15 of the last 16 beneficiaries of IMF help have quickly been dismissed by the voters. Is this true? And if it is, the austerity programs insisted on by the IMF may be a price too high for many governments to pay.
 
sailordeac said:
Someone correct me if I am wrong but governments that accept IMF loans and the accompanying austerity programs have a terrible record of staying in power - something like 15 of the last 16 beneficiaries of IMF help have quickly been dismissed by the voters. Is this true? And if it is, the austerity programs insisted on by the IMF may be a price too high for many governments to pay.
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I don't know the exact figures, but that sounds about right. The problem is that these countries have already lost the confidence of bondholders, that's why they are going to the IMF in the first place. They obviously can't collateralize the loans, so the only way to ensure that the loans aren't abused is to enforce macroeconomic benchmarks. Of course, the IMF tends to have a very superficial knowledge of how the economies of these emerging market countries operate, and they don't have a very impressive record. All the more reason why I take these "World Economic Reports" with a grain of salt. It is an impressive collection of research to be sure, and I have all the respect in the world for Olivier Blanchard and the team of economists over there, but economics is a dirty, dirty science. Most of the groundbreaking work is done by analyzing old data. Forecasting is a crapshoot. It's more difficult to model than the weather.
 
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TR1982 said:
No, I stopped after the graph. Since you mention it, though, I think it's kind of funny you accuse the IMF of institutional bias. I don't remember hearing such accusations leveled at institutions recommending policy measures you agree with. Seems like a convenient way to dismiss their analysis out of hand.

I'd also be interested in looking at the data series for that graph. Based on what I can see, if you remove the primary outlier (heavily debt-laden Greece) there is hardly any correlation. Also, these are fiscal consolidation projections versus growth projections. These projections are based on the assumption that the multiplier is as large as you say it is, and that it will be the primary exogenous factor for future growth rates for these countries.. Not to say that these assumptions aren't true, but you are begging the question.

And yes, nations in a currency union are pretty different from the U.S. In fact, pretty much every nation is different from the U.S. Which is why it's puzzling to me that you are trying to use this report to prove a point, or that you think Brad DeLong's highly reductive comparison of the British and U.S. economies actually shows anything. The situation is far too nuanced to simply be able to draw the conclusion that stimulus=good, debt reduction=bad.
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Well, the international lender of last resort SHOULD be a fiscal scold. Nobody wants the IMF to be springing in to action a whole lot. That point of view is just always going to be there in their work. I think they're right in the Fiscal Monitor report to talk the way they do about Sweden's model/actions in response to the crisis. It would be vastly preferable to the W/Obama years taken as a whole, and we had budget surpluses at the same time when Sweden started paying down their debts, but in 2008 and 2012 we don't have the option to go back in time and cancel the Bush tax cuts, Medicare Part D, and/or Iraq War. Current policy makers have to play the hand they're dealt.

I'll cop to being an unemployment hawk. If somebody wants to discount what I have to say about anything because of that, they're welcome to. I can't stop it. If you want to call JFK a top 15 President and then castigate any source that does the same thing and build yourself your own little e-Mount Olympus where you cast thunderbolts of hackery accusations, I can't stop that, either.

The chart is small (and also a cutout of a series of charts), but the vertical axis is the error in the growth forecasts, not a measurement of growth itself. The chart isn't based on the larger multiplier, it's the evidence for it.

The US, as a G20 nation, is included in the IMF study. I think it's relevant. I think Cameron is a good-enough analog for Tea Party Republicanism. I think English institutions are similar enough for comparisons. If you think we can't possibly see any natural experiments, whether they're cross-country or with the Great Depression, I question why you'd even care to rebut anything I write with something other than economic nihilism.
 
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TuffaloDeac10 said:
Well, the international lender of last resort SHOULD be a fiscal scold. Nobody wants the IMF to be springing in to action a whole lot. That point of view is just always going to be there in their work. I think they're right in the Fiscal Monitor report to talk the way they do about Sweden's model/actions in response to the crisis. It would be vastly preferable to the W/Obama years taken as a whole, and we had budget surpluses at the same time when Sweden started paying down their debts, but in 2008 and 2012 we don't have the option to go back in time and cancel the Bush tax cuts, Medicare Part D, and/or Iraq War. Current policy makers have to play the hand they're dealt.

The IMF isn't the international lender of last resort, nor should it be. The IMF is under no obligation to extend loans to members that cannot finance their debt. As for the Swedes, I would agree. Reinfeldt received widespread international criticism for being one of the few leaders to refuse to undertake a stimulus program, and yet Sweden came out of the recession better than most countries until the Eurozone crisis hit. The Swedish stimulus you are referring to is only a recent development. In fact, while we are making these comparisons, Sweden reacted pretty much in the opposite manner that the United States did, right up to letting their major auto manufacturer, Saab, fail. There was no Keynesian counterpunch during the recession.

I'll cop to being an unemployment hawk. If somebody wants to discount what I have to say about anything because of that, they're welcome to. I can't stop it. If you want to call JFK a top 15 President and then castigate any source that does the same thing and build yourself your own little e-Mount Olympus where you cast thunderbolts of hackery accusations, I can't stop that, either.

And I recall you giving me a good bit of grief for that little oversight. No need to get butthurt when I call you out for dismissing an entire respected economic research group because you don't like what they say. If you are going to disagree with their conclusions, fine, but throw some weight behind it, don't just chalk it up to "institutional bias". I don't go around dismissing the Fed because they are the Fed, or NBER because they are NBER. These are groups that put tens of thousands of man hours into compiling data and producing well thought out research. I don't accuse them of hackery. The people I do accuse of hackery are those who eschew actual research and write 400 word blog posts featuring cherrypicked data points to please their Upper West Side audience.

The chart is small (and also a cutout of a series of charts), but the vertical axis is the error in the growth forecasts, not a measurement of growth itself. The chart isn't based on the larger multiplier, it's the evidence for it.

My mistake. The font is hard to read. At any rate, that's hardly evidence. Greece is a different animal entirely, credit markets there collapsed well before the fiscal consolidation started. All that graph says (with regard to Greece) is that their forecasts overestimated growth, and that the fiscal consolidation was large. There is no reason to believe that one is the causal factor behind the other. So Greece's fiscal consolidation was large. Greece is also in the midst of a total economic collapse. They didn't really put much effort into mitigating confounding variables. The fact of the matter is that greater fiscal consolidation is occurring in nations that were in a more dire economic situation to begin with. As for the rest of the data points, it looks like they generally hit the mark with their forecasts regardless of the size of the fiscal consolidation. Missing by 1% is not that bad, all things considered. Again, I'd like to see the data series for that graph, so I can take out the obvious outliers and rerun the regression.

The US, as a G20 nation, is included in the IMF study. I think it's relevant. I think Cameron is a good-enough analog for Tea Party Republicanism. I think English institutions are similar enough for comparisons. If you think we can't possibly see any natural experiments, whether they're cross-country or with the Great Depression, I question why you'd even care to rebut anything I write with something other than economic nihilism.

No, they aren't. British institutions operate much differently than American institutions. Yes, I can see natural experiments. But I prefer natural experiments that go beyond simply comparing two growth rates and declaring the case closed. That's just bad science.
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I don't want to think or understand. Just to vote for the leader that most convinces me s/he has a plan to solve all our problems. And that it will be painless.

Thank you.
 
TR1982 said:
The IMF isn't the international lender of last resort, nor should it be. The IMF is under no obligation to extend loans to members that cannot finance their debt[SUP]1[/SUP]. As for the Swedes, I would agree. Reinfeldt received widespread international criticism for being one of the few leaders to refuse to undertake a stimulus program, and yet Sweden came out of the recession better than most countries until the Eurozone crisis hit. The Swedish stimulus you are referring to is only a recent development. In fact, while we are making these comparisons, Sweden reacted pretty much in the opposite manner that the United States did, right up to letting their major auto manufacturer, Saab, fail[SUP]2[/SUP]. There was no Keynesian counterpunch during the recession.

And I recall you giving me a good bit of grief for that little oversight[SUP]3[/SUP]. No need to get butthurt when I call you out for dismissing an entire respected economic research group because you don't like what they say. If you are going to disagree with their conclusions, fine, but throw some weight behind it, don't just chalk it up to "institutional bias"[SUP]4[/SUP]. I don't go around dismissing the Fed because they are the Fed, or NBER because they are NBER. These are groups that put tens of thousands of man hours into compiling data and producing well thought out research. I don't accuse them of hackery[SUP]5[/SUP]. The people I do accuse of hackery are those who eschew actual research and write 400 word blog posts featuring cherrypicked data points to please their Upper West Side audience[SUP]6[/SUP].

My mistake. The font is hard to read. At any rate, that's hardly evidence. Greece is a different animal entirely, credit markets there collapsed well before the fiscal consolidation started. All that graph says (with regard to Greece) is that their forecasts overestimated growth, and that the fiscal consolidation was large. There is no reason to believe that one is the causal factor behind the other. So Greece's fiscal consolidation was large. Greece is also in the midst of a total economic collapse. They didn't really put much effort into mitigating confounding variables. The fact of the matter is that greater fiscal consolidation is occurring in nations that were in a more dire economic situation to begin with. As for the rest of the data points, it looks like they generally hit the mark with their forecasts regardless of the size of the fiscal consolidation. Missing by 1% is not that bad, all things considered. Again, I'd like to see the data series for that graph, so I can take out the obvious outliers and rerun the regression.[SUP]7[/SUP]

No, they aren't. British institutions operate much differently than American institutions. Yes, I can see natural experiments. But I prefer natural experiments that go beyond simply comparing two growth rates and declaring the case closed. That's just bad science.
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1 A lender of last resort lends when no one else will. The IMF lends when countries can't finance their debt on markets and the Fund feels comfortable with making the loan. That's the action of a lender of last resort. The Fed didn't have to lend to Bear to set up a "rescue" and not to Lehman to set up a bankruptcy filing, it's still a lender of last resort (yes I know that primary dealers weren't the Fed's intended discount window customers). If something borrows short-term to lend long-term it's a bank, and if something else lends when no one else will it's a lender of last resort. I have no idea why you'd make an issue of it.

2 Saab was held by GM during the crisis, entered administration, not liquidation during 2009, and only failed at the end of last year (and may yet not be entirely dead). You want to criticize others for cherry-picking data and presenting misleading comparisons? LOL, it's all just projection.

3 Not nearly enough, honestly. It's your M.O. and it's totally ridiculous. A mere 2 days before posting your shitty posts on this thread, you're parroting Hollande and championing growth as the way out of the deficit. As soon as evidence that the multiplier is large and the confidence fairy might not offset fiscal consolidation, you freak out, question the IMF's chief economist's methods on something as basic as having a properly-cleaned dataset, stop reading the OP because you can't read a simple chart and accuse me of not reading the IMF reports I'm citing when the chart that sends you over the edge is... from the IMF World Economic Outlook I'm citing. Bravo. That might actually be better than the JFK incident.

4 The basis for the disagreement on conclusions is in every post I make. The problem, especially in the USA but also in a number of other advanced economies, is J-O-B-S JOBS, not sovereign debt. And Lazear's made it clear that we don't have structural J-O-B-S JOBS problems but cyclical ones. We're suffering from a lack of demand, not interest payments on Treasuries. It's in the OP:
We don't need to fiscal consolidation in the short term, we need J-O-B-S JOBS and they way to get them is through stimulus, as much monetary stimulus as we can do, and as much fiscal stimulus as possible. There's a scheduled payroll tax increase later this year, hopefully politicians will remove their heads from their anuses and cancel that. That would be a good start.
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The only person dismissing things out of hand is you, not reading anything and then questioning why you haven't seen things you skipped. GMAFB.

5 I'm not saying the IMF is a bastion of hackery, I'm saying it's set in its fiscal scold ways. I should also say that that's as it should be, but it doesn't make sticking to their fiscal scold guns very convincing when the problem here is not the Federal Debt but rather the dire shortage of J-O-B-S JOBS.

6 I like the Upper West Side. People there have decent takes on things.

7 Very interesting response to the apparent death of the confidence fairy, your grieving seems to have started with anger first and denial's come second. I'll be around when you're ready to get to bargaining and/or acceptance.
 
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I'll let TR and Tuff debate the shit that's over my head, but I do have a question of sorts.

How is the IMF qualifying something as "spending"? I mean, are they accounting for the differences between, say, "shovel-ready" jobs, general pork, and something like QE? It seems to me that all in politics are labeled spending or (my personal favorite) investment, but all do very different things and serve different purposes.
 
Shovel ready jobs and pork would be lumped together. It really doesn't matter for accounting purposes whether or not the Treasury spends on something worthwhile. QE is monetary stimulus, not fiscal. It can be confusing because both the fiscal stimulus and the monetary stimulus involve spending money. Basically, if the central bank does it, it is monetary stimulus, and if the elected guys do it it is fiscal stimulus. That's probably the best very reductive answer, which I think is what you're looking for?
 
TuffaloDeac10 said:
Shovel ready jobs and pork would be lumped together. It really doesn't matter for accounting purposes whether or not the Treasury spends on something worthwhile. QE is monetary stimulus, not fiscal. It can be confusing because both the fiscal stimulus and the monetary stimulus involve spending money. Basically, if the central bank does it, it is monetary stimulus, and if the elected guys do it it is fiscal stimulus. That's probably the best very reductive answer, which I think is what you're looking for?
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Good enough. Thanks.
 
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