Quote of the Week – BONUS Krugman insanity edition

I had no more than published the QOTW yesterday, and this one popped up. I’m of the opinion now that NYT economist and columnist Paul Krugman has gone insane, because nobody with any intact cognition would make a statement like this. Even Al Gore hasn’t gone this far, this is in nucking futz territory.

The scene is set on HBO’s Real Time Friday. Krugman is a guest, pitching his book, but at the same time pitching an idea that he’s totally serious about. It involves aliens and scientists and lies to the public on a grand scale, plus a shout out to California’s high-speed rail boondoggle. Here’s the transcript, brace yourself.

PAUL KRUGMAN, NEW YORK TIMES: This is hard to get people to do, much better, obviously, to build bridges and roads and healthcare clinics and schools. But my proposed, I actually have a serious proposal which is that we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail. And the, once we’ve recovered, we can say, “Look, there were no aliens.”

But look, I mean, whatever it takes because right now we need somebody to spend, and that somebody has to be the U.S. government.

Watch the video here: http://newsbusters.org/blogs/noel-sheppard/2012/05/26/krugman-scientists-should-falsely-predict-alien-invasion-so-governmen#ixzz1w5zk6aAO

UPDATE: one commenter thinks he’s being sarcastic or tongue in cheek, here’s my response –

If he had left the comment at that, I’d agree with you, but he added this without saying “I’m joking” or “That’s silly but…”

But look, I mean, whatever it takes because right now we need somebody to spend, and that somebody has to be the U.S. government.

He’s a big boy, he knows the ropes of these interviews, and he didn’t insert an appropriate caveat. – Anthony

UPDATE2: This is now a theme with Krugman. Obviously he stands by his words or he would not have repeated it. See 1:01 in this Aug 14th, 2011 video.

===========================================================

The signs have been there. In Feb 2011, Krugman pulled another whopper. Paul Krugman’s opinion in the NY Times blamed climate change for the unrest in Egypt.

Dr. Ryan N. Maue wrote then:

Based upon this quote from Krugman:

But the evidence tells a different, much more ominous story. While several factors have contributed to soaring food prices, what really stands out is the extent to which severe weather events have disrupted agricultural production. And these severe weather events are exactly the kind of thing we’d expect to see as rising concentrations of greenhouse gases change our climate — which means that the current food price surge may be just the beginning.

There is no other way to interpret this than “I told you so” from Krugman directly linking climate change and the disparate weather events of the past year or two to food prices and the crises in the Arab world. To various commenters who are defending Krugman religiously, do you doubt that Krugman is linking the events implicitly or explicitly?  Remind you, this is the same Nobel prize winner that less than a few hours after Congresswoman Giffords was shot blamed conservatives for the so-called “Climate of Hate“.  How does he have ANY credibility at all — especially with anything related to physical sciences?

==============================================================

Indeed.

h/t to WUWT reader “good business”

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byz
May 27, 2012 11:38 am

The difficulty lies not so much in developing new ideas as in escaping from old ones.
John Maynard Keynes

Luther Wu
May 27, 2012 11:40 am

Oh yeah, spend some more “government” money, that’s the ticket.
U.S. gov’t debt is now over $138,500 per taxpayer and inflation is …
Print some more money and spend it.
That should help.

George E. Smith;
May 27, 2012 11:41 am

Krugman is nutz. World food output is directly proportional to world energy input to the food system. More energy for tractors, and other farming equipment means more food. Even the energy in the powder in an “eskimo’s” rifle ammo, increases his food production, as doe his snowmobile fuel.
So when enviro-wackos force curbs on world energy production, and raise energy costs, they doom some of the world population to starvation and the rest of it to higher food prices.

R. Shearer
May 27, 2012 11:41 am

Take a hard look at Krugman, Hansen, Gore, Mann, Gleick, McKibben, doesn’t it seem possible that something alien has infected their brains, leading to their insanity?

k scott denison
May 27, 2012 11:43 am

Nucking Futs comes close, but doesn’t go far enough. He is obsessed with the government spending more of money it doesn’t have and there is nothing he wouldn’t have some do, no matter how dishonest, to drive this spending. Alas, the spending won’t work, but he’s hellbent to see that it happens.
I guess if it weren’t so dangerous it would be sad to see.

tomjtx@sbcglobal.net
May 27, 2012 11:48 am

I think you are off base about his aliens comment. Watch the video, he is obviously being sarcastic. He is making the point that gov’t spending is what will bring us out of the great recession and referencing that it took the arms spending we did just before we entered WW2 to lift us out of the depression.
So maybe an alien invasion would get us off our butts and do the spending he feels is necessary.
If you disagree with Keynes, fine. But you don’t need to distort what Krugman said.
REPLY: If he had left the comment at that, I’d agree with you, but he added this without saying “I’m joking” or “That’s silly but…”
But look, I mean, whatever it takes because right now we need somebody to spend, and that somebody has to be the U.S. government.
He’s a big boy, he knows the ropes of these interviews, and he didn’t insert an appropriate caveat. Sorry, your point fails. – Anthony

Editor
May 27, 2012 11:48 am

If he is serious he is totally barking, if he is not he is totally barking. Why a high speed rail link? Does he think an alien spaceship with warp drive will not be able to catch it?

byz
May 27, 2012 11:48 am

You can always count on Americans to do the right thing – after they’ve tried everything else.
Winston Churchill (his mother was American)

ZT
May 27, 2012 11:49 am

Krugman has a nasty economics text book which my daughter was obliged to buy for a class. Cost more than $100….It is a tough job ripping off students.

Follow the Money
May 27, 2012 11:51 am

BYZ–
“The difficulty lies not so much in developing new ideas as in escaping from old ones.
John Maynard Keynes”
BYZ, that is an A+ zinger. Well played.

Babsy
May 27, 2012 11:51 am

R. Shearer says:
May 27, 2012 at 11:41 am
“Take a hard look at Krugman, Hansen, Gore, Mann, Gleick, McKibben, doesn’t it seem possible that something alien has infected their brains, leading to their insanity?”
It’s liberalism on parade! Oh, the HUMANITY!!!

Curiousgeorge
May 27, 2012 11:52 am

Maybe he was talking about Illegal Aliens, and signed up. Naaaa. Watched too many episodes of Ancient Aliens. Yeah, that’s the ticket. Those guys were smart – all those pyramids and stuff. 😉

May 27, 2012 11:55 am

I think Krugman is trying (poorly) to do a “Haha! Only serious.” He obviously does believe in aliens, and he wants you to believe as well, but he can’t bring himself to mention them, unless he can (clumsily) pass it off as a joke when somebody calls him on his crap.

GoodBusiness
May 27, 2012 11:55 am

Let me understand – Krugman (Economics – 2008), Gore (Peace – 2007, Obama (Peace 2008), Carter (Peace – 200e all share a common award – NOBEL Laureates all. Makes one wounder about POLITICS huh?

gnomish
May 27, 2012 12:02 pm

i need a new drug
one that won’t get debate
one that we consense about
one that lets the fed inflate.
i need a new grant
any crisis will do
one that let’s me rip a rant
keep the lifestyle i’m accustomed to

Paul Westhaver
May 27, 2012 12:03 pm

So…..
What is new about liberals telling a big lie and enrolling Hollywood to perpetuate the lie in order to back door profound policy initiatives favored by the left? This is normal operating procedure for the left, and since many scientist live in the left sphere, they are involved with it. They see it as actually acceptable behavior.
This why the act of lying, particularly within science, is so repulsive and why there should be a campaign of perpetual public ridicule if not criminal prosecution for anyone, particularly scientists who lie or contribute to a lie for the advancement of their own financial, religious, and/or political goals.
Michael Mann is a poster child for this and should occupy the coverage for a permanent legacy publication of known corruptors of truth. Paul Krugman is a lie by design advocate.
Lie at any cost because the end justifies the means….a axiom of the left.
There needs to be a severe penalty for lying. If I know that a person tells lies, I never speak to them anymore. For all you really know about a person is what comes out of their mouth. If that information is false, you are better off listening to nothing at all. Because at least nothing is neutral. Liars needs to be ostracized.

May 27, 2012 12:03 pm

Krugman has also very seriously implied that natural disasters are good for the economy:
http://spectator.org/archives/2012/05/23/a-tsunami-of-bad-economics
Presumably Krugman, since he believes in CAGW, also prays that we will have more CAGW, since it supposedly causes all manner of disasters, and disasters are supposedly good for the economy.

May 27, 2012 12:04 pm

As far as Egypt goes, he has a point. Since the Aswan Dam was built, the silt-bearing flood waters of the Nile no longer fertilize the river flood-plains. As the natural fertility has diminished, more and more expensive fertilizer has had to be imported, raising food prices. the burgeoning populations of the oil-rich states also have to be fed, and are prepared to pay top price to the egyptian farmers, So by stretching a few points Man Made Climate Change has happened in the Nile valley – just not the way Krugman describes.

May 27, 2012 12:05 pm

GoodBusiness says:”Krugman (Economics – 2008), Gore (Peace – 2007, Obama (Peace 2008), Carter (Peace – 200e all share a common award – NOBEL Laureates all. Makes one wounder about POLITICS huh?”
Nope. The “Nobel Prize in Economics” does not exist. Alfred Nobel did not consider Economics a science. The “Nobel in Economics” is actually the Swedish Bank Prize and to call it a Nobel Prize is to go against the wishes of Alfred Nobel.

P Walker
May 27, 2012 12:06 pm

tomjtx ,
Perhaps , but this isn’t the first time Krugman has mentioned alien invasions . In Feb. 2011 (I think) he wished we were threatened with an alien attack in order to ramp up defense spending , apparently forgetting that we were already fighting two wars . Krugman is insane .

Randle Dewees
May 27, 2012 12:06 pm

The Dire Menace that requires Marshalling all of society’s resources. Pretty tired device. A better menace, and one that could actually happen, is a large comet on a high certainty collision orbit with the Earth. What if “The Consenous” determines that it is technically feasible to mitigate this hazard, but at the cost of all the productive capacity of the world, what happens? The world is saved but now enslaved?

MarkG
May 27, 2012 12:07 pm

“He is making the point that gov’t spending is what will bring us out of the great recession and referencing that it took the arms spending we did just before we entered WW2 to lift us out of the depression.”
Government spending sucks money out of productive private uses to throw at what are mostly worthless boondoggles that no-one in their right mind would invest in. WWII ‘saved’ America because it required the rolling back of numerous regulations which had seriously harmed American business, and because most of America’s economic competitors were either bankrupt or bombed to heck afterward.
If you want growth, you need to roll back government spending and regulation, not increase it. All that’s left if you continue down the current path is decline into bankruptcy.
Perhaps Krugman should read up on the Broken Window Fallacy before he spouts more nonsense.

May 27, 2012 12:07 pm

Krugman is one of the many delusional Keynesian economists who believe you can spend yourself out of debt and tax yourself wealthy. He conflates belt tightening with efforts to increase economic activity. His delusion is in his belief that there’s a magical money tree which perpetually sprouts wealth.
The austerity programs in Europe are not designed to grow an economy, they are implemented because they simply don’t have anymore money. They’ve been operating under the Keynesian economics for so long places like Portugal, Italy, Greece and Spain have discovered that there is no magical govt wealth creating tree. Now they’re stuck relying upon Germany to float their economies.
What Krugman doesn’t understand about the U.S., is that our debt payments is interfering with our ability to provide for the social programs he thinks we need. By 2017 (in five short years) our debt payments will exceed $500 billion/year. It will be 1/8th of our entire budget.
So, what is to be done? It’s simple. We go back to the form of economics which worked. Have government get out of the way and create an environment which spurs economic growth from the private sector. Drilling, mining, industrialization. Of course, you’ll never get a leftists to understand this, much less advocate it.

May 27, 2012 12:07 pm

My Real Science comment:
“Paul Krugman advocated on HBO’s Real Time Friday that scientists should get together and lie about an imminent attack to boost federal spending.”
Krugman is a hardened socialist / communist, about as leftist as you get. Some leftists, like Stalin, thought it was good to kill off a large portion of his own population. Compared to that, I guess, the fact that the leftists openly advocate outright lying, is not a big deal.
The leftist zealots behind the climate change scare are predictably also big time supporters of lying to deceive the public:
“It doesn’t matter what is true, it only matters what people believe is true.” -Paul Watson, co-founder of Greenpeace
“We have to offer up scary scenarios… each of us has to decide the right balance between being effective and being honest.” -Stephen Schneider, ipcc author, 1989
“The only way to get our society to truly change is to frighten people with the possibility of a catastrophe.” -Daniel Botkin, Chairman of Environmental Studies at UCSB
“In searching for a new enemy to unite us, we came up with the idea that .. global warming.. would fit the bill…It does not matter if this common enemy is a real one or…one invented for the purpose.” -Club of Rome

FreddyB
May 27, 2012 12:07 pm

I firmly believe that Paul Krugman’s neo-Keynesianism is not economics at all. Economics concerns the attempt to satisfy unlimited demand with limited resources. Neo-Keynesianism is simply an effort to produce as much employment and GDP without regard to value, effect, or efficiency.

Mark T
May 27, 2012 12:07 pm

Not one of them is a Nobel laureate. Look it uo.
Mark

Jason
May 27, 2012 12:10 pm

Hansen, Krugman, and Suzuki are a skeptics best friend. They are the “Joe Biden” of global warming, the “gift that keeps on giving”, and while we’re at it…… “chuckoo for cocoa puffs.”

Dr Ken Pollock
May 27, 2012 12:13 pm

This is the basic premise of “Report from Iron Mountain” thoght to have been written by John Kenneth Galbraith. Invent an alien threat to get the nations to work together.

sean2829
May 27, 2012 12:16 pm

The Nobel committee seem to be using the prize to provide affirmation of their liberal socialist thinking.

Paul Westhaver
May 27, 2012 12:19 pm

Aliens…..The new religion of the left. “Alien” has replaced “God” in broad circles of the left. Richard Dawkins, who is hostile to God, causally invokes Alien panspermia as more rational than a God despite it having no more evidence for its existence than God.
The left loves the Godless Alien notion and promotes it abundantly. So you should be asking yourself why since there is no evidence of it. Who has something to gain by this.
Krugman just gave you one reason….Krugman want you to worry. Krugman knows that people are motivated by fear. Global Warming does not frighten the majority anymore so he needs a new boogy man.
Yes according to Krugman, there will absolutely be a hostile alien invasion and the only solution is “one world government” where all the resources of the planet are directed to the common goal of an interplanetary Noah’s Ark. BTW it is a green, socialist Noah’s Ark, full of genetically modified, hybrid people, …. you can just imagine how far he would go…..

John West
May 27, 2012 12:20 pm

Hide the decline,
Oust any non-compliant editor,
Demonize any critics,
Manufacture a hot spot,
Revise history,
Whatever it takes,
…… for The Cause!

John W. Garrett
May 27, 2012 12:21 pm

When you shoot your mouth off as much as this clod does, it is inevitable that you will eventually say something really, really, seriously stupid. Krugman is one of a distinct class of people that derives incredible pleasure from the sound of their own voice.
My high school senior class took a vote for the person described as “Talks most, says least.” Krugman would have been a runaway winner of that award.

Jim D
May 27, 2012 12:22 pm

I can’t believe people are taking him seriously. He is on as a guest of Bill Maher and making a Maher-like extrapolation. This is a comical look at politics in keeping with that show. It is almost like believing something from The Onion, which extrapolates politics only a little further than Bill Maher.

NZ Willy
May 27, 2012 12:23 pm

In the midst of his ravings, Krugman is letting slip a show of lucid humor, methinks. He’s showing he knows about the scare-’em-green tactic of government, and searches for how to double down on the method. Usual tendentious oblivion of the need for a sound productive base, though.

May 27, 2012 12:25 pm

Who is the least insane?
Tim “Unapliers” Flannery?
David “Humans Are Maggots” Suzuki?
Paul “Aliens Are Invading” Krugman?

byz
May 27, 2012 12:25 pm

Follow the Money
Thank you 🙂
I just seemed appropriate 🙂
When I studied economics Keynes was ridiculed and had been consigned to the dustbin of history.
The problem we have today is that many Keynesian economists are not Keynesian at all, however if you go back and read what he said (very hard as it is written in 1930’s style english) you realise what a brilliant man he was and how we need to rediscover some great wisdom that has been lost through reinterpretation.
The problem is that Keynesian economics is nonintuitive it seems like “Alice in Wonderland”, however Alice was written by Charles Dodgson (AKA Lewis Carroll) a great Mathemetician and is based on mathematics. So this is why Keynes’s economics seems mad as it is based on mathematical rigour and experiment not on what feels right.
Aristotle based his philosophy on what seemed reasonable and all science was constrained for over a thousand years, when mathematical rigour and experiment were unleashed we started thinking differently (as Steve Jobs was keen on) and we advanced past the Greeks.
Think Different, Apple did despite people ridiculing opening “Apple Stores” (said they’ed be shut in six months) and did many things that flew in the face of inherited wisdom and now they are a stock most people would like in their portfolio 😮
Just because you don’t like something or think it is mad doesn’t mean it is wrong, remember climate scientists don’t tolerate those of us who question or who have a different point of view, don’t allow ourselves to be hypocrites when dealing with economics.
🙂

Richard G
May 27, 2012 12:26 pm

Krugman translation: People won’t do what “We” tell them to do unless we fool them with lies.
He is now a self professed liar.
Krugman, meet liars paradox.http://www.newworldencyclopedia.org/entry/Liar_paradox
“I am a liar. This statement is false.”

j molloy
May 27, 2012 12:28 pm

wow,just wow

temp
May 27, 2012 12:28 pm

Kind of sounds like what they are doing with global warming….

Vince Causey
May 27, 2012 12:35 pm

Only one way to lay this to rest. Get Krugman put in charge of the Fed. Better still, both the Fed and secretary of state for finance, or whatever the American’s call it. Give him unrestrained powers to put his schemes into actions. Let him raise QE3 to be the Godzilla of all QE’s. Let him cut interest rates to zero – heck, he’ll probably make them negative. When the bond markets take such fright that even the Eurozone looks like a safe haven, let him crank up federal bond purchases to levels that would make Obama’s eyes water.
Then, when the scheme fails – no one, but no one, will eve again be able to trot out that tired old argument that it would have worked – if only we spent more money. Go Krugman, go!

May 27, 2012 12:35 pm

MarkG says:
May 27, 2012 at 12:07 pm
Perhaps Krugman should read up on the Broken Window Fallacy before he spouts more nonsense.

Wouldn’t do any good — Krugman believes the Broken Window *works* to create jobs: “And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point!” My emphasis.
http://krugman.blogs.nytimes.com/2011/09/03/broken-windows-ozone-and-jobs/

Luther Wu
May 27, 2012 12:36 pm

George E. Smith; says:
May 27, 2012 at 11:41 am
Krugman is nutz. World food output is directly proportional to world energy input to the food system. More energy for tractors, and other farming equipment means more food. Even the energy in the powder in an “eskimo’s” rifle ammo, increases his food production, as doe his snowmobile fuel.
So when enviro-wackos force curbs on world energy production, and raise energy costs, they doom some of the world population to starvation and the rest of it to higher food prices.
____________________________
As has been stated many times in these threads, it is no secret that a large part of “the plan” is to reduce human population by any means necessary.
The leftist advocates of “the plan” are very upfront about their ultimate purposes, if one takes the time to listen to them.

Freddy
May 27, 2012 12:39 pm

tomjtx is right. Krugman is trying to emphasize his idea that in a liquidity trap (the current US economy) excess government spending increases economic growth without causing inflation. He feels exasperated that the Obama administration is letting economic growth be flushed down the toilet and temporary unemployment be converted to permanent, structural, unemployment. Krugman’s ideas are within normative capitalist economics.
He’s serious, knowledgeable and has a Noble Prize in Economics. None of this guarantees he is right, of course.
Krugman doesn’t know much about global warming, he believes his academic friends. Krugman is also a Democratic party activist, but not a good one. He also needs a TV coach and better pair of glasses.
REPLY: No, tomjtx isn’t right This is now a theme with Krugman. Obviously he stands by his words or he would not have repeated it. See 1:01 in this Aug 14th, 2011 video.

Elliot
May 27, 2012 12:40 pm

Its pretty clear from the first quote he’s talking about Keynesian economics which is a fair suggestion. Of course the alien suggestion is ridiculous but I think it’s meant to be outlandish. I don’t think commentators have become so polarized that people can’t recognize an outlandish statement like this as hyperbole.
As for high speed rail America really needs to build this in places where it makes sense. If you doubt whether this is a worthwhile endeavor I suggest you go to Italy and take a train trip from Rome to Florence. It is absolutely amazing to get a train in the centre of one city (not some random airport 20ks away) at say 9am and be in the centre of another city before lunch. or how about a trip on the Eurostar? In Paris before lunch, magic.
It’s fine to disagree with Keynesian economics and I think everyone should be skeptical when it comes to climate stuff but high speed rail is awesome. The only way I can explain why Europe and china have lots of high speed rail and US has none is to say US is either disfunctional, backward or both which is just sad.
Sorry if there are errors typed on iPhone in a rush

Tom E
May 27, 2012 12:42 pm

I used to read some of the NYTimes, however, I don’t bother anymore. Part of my reason was that reading Krugman’s column would fire up my thinking and ignite some aggravation. However he has become so irrational that there is no longer anything to debate in his ideas, so he should just be ignored. James Taranto rightly calls him “ex-Enron advisor” Paul Krugman.

stumpy
May 27, 2012 12:42 pm

Hasnt his technique been tried before?
His statement should read:
“But my proposed, I actually have a serious proposal which is that we have to get a bunch of scientists to tell us that we’re facing a threatened climate change / man bear pig, and in order to be prepared for that impending global warming invasion we have to do things like build high-speed rail. And the, once we’ve recovered, we can say, “Look, we stopped the climate disruption.”
Its the standard alarm call of the green movement, hasnt he figured that out yet – or it didnt work, so lets change to alien invasion! I am sure there are some crackpot scientists out there who will write an international report clearly stating their 99% confidence that aliens will invade the earth in the next 100 yrs based on a model they built of the universe and what they cleaned about the aliens from studying their previous visits which are captured in the ring spacings of hockey stick shaped trees

byz
May 27, 2012 12:47 pm

Let me give a example where western governments have really got things wrong at present.
When they spend money they hand it over to banks (quantative easing as it is called in the UK).
The trouble with this is that the banks then horde this money and it never goes into the economy, whereas Keynes said that it was better to pay someone to dig a hole and fill it in again than for them to be unemployed, as if they had money in their pockets they would spend some thus starting a spiral of positive feedback.
Here in the in UK everyone is trying to cut spending which means that less people buy things and the economy shrinks, what we need to do is not give the money to banks, but directly employ people to build infrastructure that will help the economy grow and thus put money into peoples pockets.
In the US you need to build your way out of a downturn if you don’t it will just be a downward spiral, the problem at the moment is the area of the economy you are currently spending money on is the wrong bit which only lines the pockets of the wealthy not the ordinary person.
When the average US citizen feels that they are a little better off then they will spend money, what you need to make sure of is that you buy things that cause us citizens to be employed (this is what the Chinese did for the last 20 years!!).

GoodBusiness
Reply to  byz
May 27, 2012 1:28 pm

Keynesian theory has never worked one time – it extended the Great depression under FDR and we are still paying for people to be on the dole of government employment doing little or nothing. At the same time we all decided to move our “DIRTY” value added manufacturing to China and India. So, now we have cleaner air [marginally] and no employment for our blue collar skilled labor forces.
Take the locks off our natural resources and end the EPA/ESA over regulations and let us develop all the nuclear power plants and you will see coal fazed out and our value added manufacturing will be earning profits and America will be the undisputed economic leader for the next 50 years.

Gary Hladik
May 27, 2012 12:51 pm

Dr Ken Pollock says (May 27, 2012 at 12:13 pm): ‘This is the basic premise of “Report from Iron Mountain” thoght to have been written by John Kenneth Galbraith. Invent an alien threat to get the nations to work together.’
Or he’s seen too many movies/TV shows, e.g.
Watchmen 2009: http://www.imdb.com/title/tt0409459/
Outer Limits 1963: http://en.wikipedia.org/wiki/The_Architects_of_Fear

j molloy
May 27, 2012 12:52 pm

in the above clip about 1:20″there was a twilight zone episode like this ” enuff said

May 27, 2012 12:56 pm

Freddy says:
May 27, 2012 at 12:39 pm
tomjtx is right. Krugman is trying to emphasize his idea that in a liquidity trap (the current US economy) excess government spending increases economic growth without causing inflation.

In what world?

May 27, 2012 12:57 pm

And the, once we’ve recovered, we can say, “Look, there were no aliens.”
Replace “aliens” with “AGW” and I think you’ve got the climate alarmists in a nutshell. Of course instead of high speed trains, we’re talking de-industrialization and political funding shifts to the cronies of the left

AnotherPhilC
May 27, 2012 12:59 pm

byz says:
May 27, 2012 at 12:47 pm
Let me give a example where western governments have really got things wrong at present. …
So when Keynesian economics fail, it’s always because it’s imperfectly implemented? Rather like Marxism then?

Dodgy Geezer
May 27, 2012 12:59 pm

Um… This is a proposal to tell a direct lie in order to get a national government to fund a course of action which they would not otherwise undertake.
I am not sure how many laws are being broken here. Fraud is an obvious initial point – you do not have to make a FINANCIAL advantage out of a lie to be guilty of fraud, simply a dishonest one. I suspect that treason is another point to consider. There are probably several other crimes which a skilled prosecutor could suggest.
Is there such a person in the WUWT audience…?

jayhd
May 27, 2012 1:00 pm

He writes for the New York Times for heaven’s sake! I need say no more.

hewhotypes
May 27, 2012 1:05 pm

Krugman is clearly saying, by means of his unfortunate space-alien example, that fiscal stimulus, that is, government spending, in a recession or depression, will bring the economy out of the doldrums. He isn’t saying there is a space-alien threat. Like anybody, he could be wrong, but he’s not mentally ill.
I think the current lack of government interest in high speed rail is partly due to the poor economic health of the airlines and the auto industry. Rail takes decades for ROI, so government help makes some sense. The US government helped the railroads way back when, and helped the airlines and the auto companies (the national highways) in the middle of the 20th century. It builds the economy.
Current interest rates are near zero, so borrowing is affordable. In fact, if you have something really useful to build, it’s almost crazy not to borrow at 0% and build it.

Paul Westhaver
May 27, 2012 1:06 pm

Keep talking Paul Krugman… Keep talking Al Gore… Keep Talking David Suzuki…Keep faking Peter Gleick, Keep lying Micheal Mann, Keep hiding data Phil Jones….. Just keep doing what you do so well. It is working just fine.

Smerdlap
May 27, 2012 1:07 pm

Krugman is basically a joke. He is on record calling for a housing bubble:
From http://archive.mises.org/12389/krugman-and-the-bubble/, “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
If you want to learn actual economics, read Hazlitt, von Mises, or Rothbard.

Jimbo
May 27, 2012 1:13 pm

Paul Krugman has just described the AGW scare to a T. 😉

“……we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail. And the, once we’ve recovered, we can say, “Look, there were no aliens.”

Mike Wryley
May 27, 2012 1:14 pm

Wasn’t it Calvin Coolidge who was faced with a serious recession and responded by cutting taxes and eliminating half of the federal government at the time ? The recession was over in two years.
Krugman should work a little harder on fine tuning his meds, cognitive dissonance is starting to overload his two or three neurons that are still holding hands.

AnotherPhilC
May 27, 2012 1:16 pm

Chris Horner’s Heartland session is very interesting
http://climateconferences.heartland.org/christopher-horner-iccc7/
It illustrates another Keynesian failure. Spain has borrowed and spent up to the limit on wind power, and can’t do it any more, because the country is broke. Spanish government bonds are next to worthless, the interest rate on them is so high.
Spain’s problem isn’t that Spain is broke, though. The problem is that Germany is broke.

Bill Illis
May 27, 2012 1:19 pm

Krugman – Nothing like liberal monetary policy, high inflation and more government borrowing to help fix an economy.
Other economists – We learned in the 1980s that conservative monetary policy, low stable inflation, balanced budgets, low government debt and low taxes is the key to a strong economy.
The US hasn’t actually tried out what the other economists have been saying but there sure has been alot of Krugman-type advice taken.
Not much different than the climate change debate – there is theory and then there is what is actually happening in the real climate / what actually works in a real economy.

May 27, 2012 1:21 pm

Elliot says:
May 27, 2012 at 12:40 pm
The only way I can explain why Europe and china have lots of high speed rail and US has none is to say US is either disfunctional, backward or both which is just sad.

It’s neither. The reason we don’t have high-speed rail in the US is because of our population distribution, interstate highway system, and network of public airports, none of which have either european or Chinese counterparts. European high-speed rail lines travel through sparsely-populated countryside; China just drew straight lines linking their cities and bulldozed any houses for 50 meters on either side of those lines.
The only place high-speed lines are feasible in the US is in the Southwest. Problem is, you can’t draw a straight line linking major cities without encroaching into one or more military training areas. If it’s in the middle of nowhere, there’s a training site there; in fact, being in the middle of nowhere is the *reason* the military put them there — no civilians to injure when ordnance lands outside the impact areas or when armor is conducting large-scale maneuvers (ever been inside a tank? You can’t see a %$#@! thing except straight to your front).

Ian
May 27, 2012 1:21 pm

What he’s actually saying is: ‘It doesn’t matter what you spend money on, just spend, spend, spend’.
That’s crazy enough, the aliens thing is just to emphasise how urgent he thinks it is (and that people are stupid enough to believe anything).

Charly
May 27, 2012 1:24 pm

And this is the Economist who want to lead the Europeans from their current predicament to the promise land. Help! Where is Von Hayek when we need him.

Crispin in Waterloo
May 27, 2012 1:27 pm

@MarkG
“…WWII ‘saved’ America because it required the rolling back of numerous regulations which had seriously harmed American business, and because most of America’s economic competitors were either bankrupt or bombed to heck afterward.”
++++++++++
Hmm…Well, the US companies like that owned by the G Bush family made off like bandits selling steel to Germany during the most expansive phases of WWII when steel was at a premium. In the case of Bush Sr the company only stopped trading with Nazis when Federal agents put chains on the doors of their office in NY. War is good for business, especially when you are not involved except to sell weapons and materials to both sides.
The idea that you can spend un-backed Dollars printed for convenience and fund a war (or a Maglev train) is simply untrue. That is why the government had to borrow so much from China to fund the war in Iraq. Ditto the UK in WWI when they went off the Gold Standard. War goods have to be paid for in real terms, not imaginary money fancied by the Social Credit Party of Canada (“Give municipalities money for the cost of printing it”).
A war against global warming/climate change/disruption is no more fundable with funny-money than any other war. Printing money creates inflation. That is Piggy Banking 101. Inflation eats everyone’s savings because there is no free lunch. An alien invasion would re-direct spending, but there is no ‘little green men economy’. It is just pooling everyone’s money to be eaten by a greener version of Daddy Warbucks. Different players, same M.O.

MarkG
May 27, 2012 1:28 pm

“If you doubt whether this is a worthwhile endeavor I suggest you go to Italy and take a train trip from Rome to Florence.”
How many people want to take a train from Rome to Florence?
And now many of them are willing to pay the true cost of that train ride?
As far as I’m aware, high-speed rail is heavily subsidised in most of the world because it makes no economic sense. If you disagree, you should be able to build a convincing business case and convince someone to invest in your project. The fact that people are demanding tax-payers money to fund it is pretty clear proof that nineteenth century transport technology doesn’t make sense as a solution to twenty-first century transport problems.
When I lived in the UK we had high-speed trains (at least 120mph or so) but driving to my parents’ house was much faster because they went from where I didn’t want to be (the station nearest me) to where I didn’t want to be (the station nearest my parents) via where I didn’t want to go (central London to change stations and get a different train).
Oh, and the ticket was also more expensive despite about 300% fuel tax.

Matt
May 27, 2012 1:31 pm

Sorry Anthony, this really doesn’t work that way 🙂
You do realise that he already gave away that there really wouldn’t be any aliens, after all – so it’s not a ‘secret’ anymore, and hence can’t be a ‘serious plan’. Of course he is saying that to illustrate how urgent it is to get people going in his view.

RockyRoad
May 27, 2012 1:35 pm

hewhotypes says:
May 27, 2012 at 1:05 pm


Current interest rates are near zero, so borrowing is affordable. In fact, if you have something really useful to build, it’s almost crazy not to borrow at 0% and build it.

40% of the debt is borrowed from China.
Tell ya what–we’ll do a lot more borrowing if you can somehow get China to agree to your 0% interest rate.
Please stay in touch; let us know how negotiations are proceeding.

May 27, 2012 1:38 pm

I diagnosed Krugman as a paranoid schizophrenic the first time I saw him on a news show. It’s the way the beady eyes moved around, disconnected to any idea or point he was making. The diabolical and inappropriate grin makes the diagnosis easier, of course. But the clincher is the actual words that come out of his mouth.
In today’s political, educational, and journalistic climate, being a schizophrenic turns out to be a big plus.

pat
May 27, 2012 1:40 pm

Having a degree in economics, I assure that Krugman is indeed insane. Many economists have pondered this. While his thesis was lightweight and not deserving of a Nobel Prize, his textbook is well respected and enunciates classic economic principles and formulae well. It is suggested that that laudatory reportage and praise from the left wing faculty when he became an early adherent of some mildly leftists economic theory, at a time when economists were still capitalists so pleased him that it led to ever more bizarre leftist thought in search of more praise..

Roy
May 27, 2012 1:43 pm

Andrew says:
Krugman has also very seriously implied that natural disasters are good for the economy:
http://spectator.org/archives/2012/05/23/a-tsunami-of-bad-economics
Presumably Krugman, since he believes in CAGW, also prays that we will have more CAGW, since it supposedly causes all manner of disasters, and disasters are supposedly good for the economy.

Krugman has a point. The Black Death wiped out at least a third of the British population (and that of most other European countries too). Afterwards, there was a shortage of labour and the big landowners were obliged to treat the peasants better and pay them more for their work. Therefore the living conditions of most of the ordinary people who were lucky enough to survive the epidemic improved.
World War II did great damage to the economies of most of the countries involved including some of the victors such as the Soviet Union and Great Britain (despite many British advances in technology during the War) but the United States ended the War richer than it entered it. Even before the United States entered the War its economy was being dragged out of the Depression by orders for Britain, e.g. under the lend/lease program.
Nobody would say that the Black Death was a good thing or that World War II was either. But that does not mean that they did not have some benefits for some people.
During the Great Depression Keynes said that the economy could be helped by paying people to dig holes and then fill them in again. He was perfectly serious, but that does not mean that he actually wanted the British government to pay people to dig holes and fill them in. He knew perfectly well that there were far more useful things for the government to spend money on. Roosevelt realised that too and had a certain amount of success with infrastructure projects such as those undertaken by the Tennessee Valley Authority. Adolf Hitler was a lot more successful in ending mass unemployment with his rearmament programme, although tackling unemployment was not his main motive.
When Krugman talks about Alien invasions I think he is simply making sure that he will get his point across – just like Keynes did with his proposal for paying people to dig holes and fill them in again. You may not agree with him, but that is no excuse for misunderstanding him.
Nobody in Britain ever puts /sarc/ after a sarcastic comment. We assume that readers are intelligent enough to recognise sarcasm when they see it, although we do realise that people who are not native speakers of English, including Americans /sarc/, might not get the point! The same goes for irony. However there is a widespread view in Britain that most Americans, with the possible exception of New Yorkers, do not understand irony. The attacks on Krugman, not for his arguments but for the way he makes them, suggest that is true.

Robert Ayers
May 27, 2012 1:47 pm

“Fake aliens to scare us into creating a world government” is the plot of the short-story “The Martian Shop” by the writer (and Communist Party USA member) Howard Fast, who is best-known for writing “Spartacus”.

Downdraft
May 27, 2012 1:48 pm

Spending money just to spend money has never worked to permanently stimulate the economy. The spending of the New Deal helped to alleviate the Great Depression, but was only marginally successful and was followed immediately by another recession. Even the spending on WWII, which broke the recession of 1937, was followed by a recession when the spending stopped again.
We are spending at an unsustainable rate now, but predictably, it isn’t working. Krugman wants to spend more (he really doesn’t care on what), which will not work and will result in calls for even more spending. Maybe Krugman would benefit from learning something about system response to step changes in input.
We have mortgaged our grand children’s futures already, and he wants to make it worse, ensuring that the economy collapses totally. He really is insane. He likely thinks like Nancy Pelosi that every dollar spent by government returns $1.50 in taxes, so why worry.
His call for a false report of a space-alien threat is a parallel to the warmists’ false reports of CAGW. They are really no different. Both are based on the use of fear mongering rather than logic. Was he serious? Perhaps he was tongue-in-cheek when advocating the use of a space-alien scare, but he was serious when he called for mindless spending on pointless projects. He doesn’t care what tactic is used to achieve the end. Spending on projects that we need, for example replacing major infrastructure and power distribution systems, would make some sense. High Speed Rail is probably sexier in the eye of a liberal.

Myrrh
May 27, 2012 1:51 pm

Gary Hladik says:
May 27, 2012 at 12:51 pm
Dr Ken Pollock says (May 27, 2012 at 12:13 pm): ‘This is the basic premise of “Report from Iron Mountain” thoght to have been written by John Kenneth Galbraith. Invent an alien threat to get the nations to work together.’
Or he’s seen too many movies/TV shows, e.g.
Watchmen 2009: http://www.imdb.com/title/tt0409459/
Outer Limits 1963: http://en.wikipedia.org/wiki/The_Architects_of_Fear
———-
Haven’t they already tried dipping a toe into this scenario? NASA and the Very Angry Aliens who intend to do something about those humans releasing more carbon dioxide and cooking the Earth..

Barefoot boy from Brooklyn
May 27, 2012 1:52 pm

Actually, everything he said here is true. It IS true that if we thought as serious a crisis was in the offing as a space alien invasion–or a world war–then we would prime the pump and End This Depression Now, the way we did when we armed Europe against the Nazis. You guys all need to get a grip.
On the other hand, Krugman’s views on climate change mirror the AGW orthodoxy, which I find terribly disappointing. One really should stay within one’s discipline.

RockyRoad
May 27, 2012 1:57 pm

Krugman might just as well align himself with the CAGW clowns–he has all the necessary accoutrements.
Each week I think things can’t get any worse for The Team supporting The Cause, and I’m wrong–it DOES get worse.
Each week I think things can’t get any worse for the current US administration, and I’m AGAIN wrong–it gets worse for them, too.
Two losers; two parallel causes; two dispicable wastes of time, energy and money. It’s pathetic.

May 27, 2012 2:00 pm

Krugman isn’t nuts in the “he believes in aliens” sense. He’s nuts in the “gov should lie to the people” psycho sense. The guy believes that gov has a “moral responsibility” to lie to us in order to do what *he* thinks is the right thing (no matter how many times he and Keynesian-ism have been discredited).
This thinking should sound pretty familiar to the skeptics here at WUWT… It permeates the environmental movement and AGW activists. He (and they) live by the code that the end justifies the means. And yet they fail to see the irony that anyone who believes as they do are people no one should believe in the first place… But they’ll always be around to serve as useful idiots to the Machiavellian schemes of politicians.

BarryW
May 27, 2012 2:03 pm

Actually, Krugman IS an Alien! He is attempting to destroy us economically so his masters can take over without our being able to fight back. 😉

Barefoot boy from Brooklyn
May 27, 2012 2:06 pm

What you all don’t seem to realize is that the really insane ideas are the austeriry and deficit reduction myths that the Republicans have touted for decades, that they made Obama buy into, and that are swirling Europe down the drain as we speak, likely swirling us along in due course. Krugman is right as rain on the economy, and wrong as can be on climate. That’s the way it is with human beings,… and we all don’t have the same sense of humor either. Relax, everyone. Let’s go chew on Gavin or someone deserving.
REPLY – Better watch out someone doesn’t chew on you. I, for one (as a big gummint liberal), happen to strongly support tax cuts and austerity measures. A tax rate of 100% is too high. A tax rate of 0% is too low. Once you have accepted that, congratulations, you have accepted the principles of Reaganomics, and, as Shaw once put it, we are merely haggling over a price. And you don’t wanna know my opinion regarding Krugman. Suffice it to say that intelligent opinions differ. But this is not an economics blog, so let’s just stick to talkin’ ’bout the weather. ~ Evan

May 27, 2012 2:12 pm

Elliot says:
“As for high speed rail America really needs to build this in places where it makes sense.”
It makes no sense anywhere.
There is already an infrastructure in place: airlines. The High Speed Rail [HSR] boondoggle proposes laying tracks costing well over $100 BILLION to connect San Francisco to Sacramento to L.A. and San Diego. The project will never pay for itself; taxpayer-funded operating subsidies will always be necessary, forever. Property tax-paying land will be converted to government-owned land, thus eliminating that tax income. And the government always lies thru it’s teeth regarding ridership projections.
“High speed” rail is projected to take 3.5 – 5 hours to travel from S.F. to San Diego. But I can fly from S.F. to San Diego in just over an hour, for a little over a hundred dollars. The airline infrastructure is already in place, and it is very efficient. Krugman is just shilling for politicians and the self-serving unions that vote for them. Between buses, airlines, and existing trains, there is plenty of capacity. Indebting an overspending, profligate state $100,000,000 more, for something completely unnecessary, is the same kind of irresponsible thinking that has caused our current budget problems.
hewhotypes says:
“Rail takes decades for ROI, so government help makes some sense. The US government helped the railroads way back when, and helped the airlines and the auto companies (the national highways) in the middle of the 20th century. It builds the economy. Current interest rates are near zero, so borrowing is affordable. In fact, if you have something really useful to build, it’s almost crazy not to borrow at 0% and build it.”
HSR makes zero sense, and it would harm the economy. The state and the country would be much worse off with government HSR. Read this short description of Bastiat’s Broken Window Fallacy, and you will understand the problem. We see the proposed HSR. But it is what we do not see that will cause huge economic problems.

anarchist hate machine
May 27, 2012 2:13 pm

Typical keynesian drivel. I’m surprised, after the keynesian model has been REPEATEDLY shown to be a failure (especially 70’s stagflation), why it won’t die. A few fallacies demonstrated here: First of all, it’s not *consumption* that drives the economy it is *production*. Savings and investment come first, not spending. Another, is that the great depression ended when we began arms build up during WWII. By all metrics *except for employment*, the depression became WORSE during the war, and didn’t get better until around 1946, when the gov’t implemented policies that promoted savings and investment…which of course the keynesians cried that it would become a disaster, and actually turned out the opposite. Added on the improper use of the physical scientific method to a social science. I can’t wait til keynesianism dies.

AndyG55 (from down-under)
May 27, 2012 2:14 pm

Hey, is he suggesting that scientists could be PAID, to CREATE a scare..
how rude !!
Could never happen !!
/s

Roy
May 27, 2012 2:16 pm

GoodBusiness says:
Keynesian theory has never worked one time – it extended the Great depression under FDR and we are still paying for people to be on the dole of government employment doing little or nothing.
Keynes was in charge of British economic policy during World War II. Thanks to his policies the British government was able to raise enormous sums of money at a much lower rate of interest than in World War I. Britain was practically bankrupt after World War II but that did not matter. It was a war of survival and without Keynes the total financial commitment Britain made would have been smaller. Thus he had more influence on the outcome of the war than any other economist or civil servant.
Keynes also had a major say in the Bretton Woods agreement in 1944 which gave the world two and a half decades of stability in which the global economy thrived, in marked contrast to the period between the two world wars. Of course the Bretton Woods agreement wasn’t perfect and it eventually broke down, but perhaps some of the problems with it could have been avoided if some of the proposals put forward by Keynes had not been blocked by the Americans.
He was a complex character and you can find contradictory things in his works. That is not surprising because the economic situation is constantly changing and what it the right policy at one time might not be the right policy at another time. The detractors of Keynes frequently fail to understand him – unfortunately his supporters are often equally ignorant!

DirkH
May 27, 2012 2:18 pm

But you already have the Afghanistan conflict for useless spending. You didn’t even have to invent the Taliban.
Next time the NYT bemoans the high cost of Afghanistan forces, tell’em it’s Krugmannian spending.

Garacka
May 27, 2012 2:19 pm

It seems to me truth telling is the number one element that will allows societies and the human condition to truly progress forward. Echoing someone else’s comment, should we even listen to people who tell lies? The left does it (ends justify the means), Islam does it to infidels (taqiyya), too much of the corporate world does it (under the shield of advertising), and as a result it is infecting our younger generations as acceptable. Sure lying is part of the human condition but must it become so institutionalized?
Perhaps it has always been as extensive as now and this is just the 1st time in human history when the magnitude is being revealed and shared more widely through Gore’s www invention.

PaulH
May 27, 2012 2:21 pm

Here’s the way I understand Krugman’s statement. He firmly believes in government spending to save the economy. Now since the government has no money, it all has to come from the taxpayer. So what Krugman wants looks suspiciously like the CAGW swindle: Get a group of allegedly highly intelligent “scientists” to state that there is a serious problem coming our way, and the only way out is to start some huge and hugely expensive project that can only be accomplished by the government using taxpayer’s money and employing taxpayers. The approaching disaster could be anything… global climate disruption, Borg invasion, mass halitosis, whatever. The future disaster doesn’t matter, as long as the experts proclaim it so, and the gullible media spreads the word, and our elected superiors do what they “must”.
The problem is, of course that this simply moves money to less productive uses and to those riding the gravy train. Eventually people see this, realize that they are being fed lies and are having their money ripped from their pockets. That never ends well.

Mario martini
May 27, 2012 2:21 pm

Too much hot air here. He was obviously making a point without being completely serious about the aliens.

scarletmacaw
May 27, 2012 2:22 pm

You are all missing the most telling message in his statement: He’s not suggesting that the Air Force lie, or that the government lie; he’s suggesting that SCIENTISTS should be the ones who lie. Krugman sees scientists as the most willing liars.

May 27, 2012 2:27 pm

Barefoot boy from Brooklyn says:
May 27, 2012 at 2:06 pm
What you all don’t seem to realize is that the really insane ideas are the austeriry and deficit reduction myths that the Republicans have touted for decades, that they made Obama buy into, and that are swirling Europe down the drain as we speak, likely swirling us along in due course. Krugman is right as rain on the economy, and wrong as can be on climate. That’s the way it is with human beings,… and we all don’t have the same sense of humor either. Relax, everyone. Let’s go chew on Gavin or someone deserving.
===================================================
Holy Crap!! There has been no austerity in the U.S……. or did you not notice the unparallelled growth in our debt in the last 3 1/2 years?
Europe isn’t going down the drain because they quit spending. They quit spending because there is no more capital to spend. What part of “debt payments” is hard to understand? The thought that government can run an economy is exactly why Greece is in such peril. They tried to spend their way out of trouble and now they can’t meet their debt payments. It wasn’t their reluctant cuts in spending which put them there. It was unrestrained borrowing and spending that got them to where they are today.
To the other people saying WWII got us out of the depression, sure, it played a part. But don’t we see that we’re in a war at this very moment? Yeh, wow, look at our economy go! The idea that if we just printed and spent more money that we’d be okay is absurd. The U.S. has been doing that for many years now, and we haven’t decreased it, we’ve increased it by a lot in these recent years.

Paul R
May 27, 2012 2:28 pm

I’m looking forward to the dreaded space alien menace threat being used to whoop us into line, I’m really over the AGW rubbish and It’s believers. The science of space aliens could be even more ridiculous than inferno Earth from beer bubbles. Is such a thing even possible? yes it is.

Mick
May 27, 2012 2:29 pm

Beam me up, Scotty…..no really, beam me up please…there’s no intelligent life down here!

corio37
May 27, 2012 2:29 pm

Well, calling on imaginary threats from extra-terrestrials has worked really well for religion: why shouldn’t it do the same for science?

DirkH
May 27, 2012 2:31 pm

Mario martini says:
May 27, 2012 at 2:21 pm
“Too much hot air here. He was obviously making a point without being completely serious about the aliens.”
America incarcerates a higher proportion of its population than any other Western country. This costs enormous amounts of money. Does Krugman think that this is a boon to the economy?
Could one of the Keynesian commenters tell me about the position Krugman has about this?

Steve P
May 27, 2012 2:34 pm

The theme of alien invasion has been raised before, on a number of occasions, both by (retired) Gen. Douglas MacArthur in the 50s and 60s, and again by President Ronald Reagan in the mid/late 80s, in the context of uniting humanity.

byz
May 27, 2012 2:39 pm

AnotherPhilC says:
May 27, 2012 at 12:59 pm
“So when Keynesian economics fail, it’s always because it’s imperfectly implemented? Rather like Marxism then?”
If Keynesian economics fails then we are all up sh*t creek without a paddle 😮
Currently we only have two tested forms of economics Neoclassical (which is what 99% of all current economists are including Krugman) or Keynesianism, we know from past situations that Keynesianism works in the current situation, however it hits the rich and market speculation (it is better for the poor and the average man as it creates employment). The mess we currently have is a result of 40 years of Neoclassical economics which removed constraints to what banks could do (just like in the 1920’s).
Keynesian economics isn’t perfect (it doesn’t work when you have stagflation), however it is the best we have for the current situation. The only reason the west escaped the 1930’s depression ultimately was due to WWII, and that was a classic Keynesian expansion (we expanded because we had too).
What many people putting down Keynesianism are forgetting the massive expansion of the US in the 1950’s and 60’s which was down to following Keynesian economics, if Neoclassical economics had been in place the USSR would have been first to the Moon!!!!
Why did we never get out of earth orbit for the last 40 years? Because we have had a neoclassical system in place.
Keynes was once asked why his economics was based only on the short term benefit and his answer was “In the long term we are all dead!”
No country currently is implementing pure Keynesianism and that is why it isn’t working, it is like only taking half a dose of antibiotics it won’t cure you and you’ll not get any better, taking the full dose will not be good for the wealthy (who are those in power) so we are fiddling while Rome burns. If they really go for it then we know from history that things will get sorted out, however the rich will be worse off.
However to quote another great economist “It is easier for a camel to pass through the eye of a needle than a rich man to enter the kingdom of heaven” and “go sell everything you own and give it to the poor and come follow me” by some commentators views here he was probably an extreme communist 😉

RJ
May 27, 2012 2:39 pm

“Now since the government has no money, it all has to come from the taxpayer.”
Try to at least get your facts right
The US Govt is Monetary sovereign (google it) so has unlimited money and does not have to get money from taxpayers.
Which is what the US Govt is currently doing. It spends using Fed reserves (created by a journal entry) and then drains the Fed reserves using either bonds or tax
So the spending comes first and the tax or bonds second

DirkH
May 27, 2012 2:39 pm

Roy says:
May 27, 2012 at 2:16 pm
“He was a complex character and you can find contradictory things in his works. That is not surprising because the economic situation is constantly changing and what it the right policy at one time might not be the right policy at another time. The detractors of Keynes frequently fail to understand him – unfortunately his supporters are often equally ignorant!”
Hayek said the same thing in an interview; he knew Keynes. So we don’t know what Keynes would propose today. But “Keynesianism” has a fixed meaning now, whether you like it or not.

Stephana
May 27, 2012 2:47 pm

Don’t forget that Krugman believes that he is more intelligent than the rest of us, and deserves to be our overlord.

RJ
May 27, 2012 2:48 pm

“Keynes was in charge of British economic policy during World War II. Thanks to his policies the British government was able to raise enormous sums of money at a much lower rate of interest than in World War I. Britain was practically bankrupt after World War II but that did not matter”
Agree. But the world is a very different place today. No gold standard and floating currencies means that the restrictions on Govt (running out of money) with their own central bank but forced to settle in gold if required no longer exist. So Govt’s like the UK and US can spend without limit. The danger is inflation or a depreciating currency.
The US and UK can never out of money. This has applied since the gold standard was removed around 1972. (even though many economists still have not caught up with this significant change yet).

DirkH
May 27, 2012 2:49 pm

Barefoot boy from Brooklyn says:
May 27, 2012 at 2:06 pm
“What you all don’t seem to realize is that the really insane ideas are the austeriry and deficit reduction myths that the Republicans have touted for decades, that they made Obama buy into, and that are swirling Europe down the drain as we speak, likely swirling us along in due course.”
Barefoot Boy From Brooklyn, the southern European countries don’t actually do austerity. Instead they have all proposed a “mixed approach” of tax increases and government spending cuts, of which the tax increases came to pass while the spending cuts largely stay promises. Greece has promised for 3 years now to privatize their many state-owned companies and not one has been privatized. Their biggest private company is still Hellenic Bottling as far as I know, the local Coke licensee. Railways? public. Airports? public. Athens harbour? public etc etc etc.
Of course, when you increase taxes while keeping your public sector spending, you slaughter the private sector by draining the spending power and that’s where the enormous unemployment comes from.

byz
May 27, 2012 2:53 pm

DirkH says:
May 27, 2012 at 2:31 pm
“Could one of the Keynesian commenters tell me about the position Krugman has about this?”
As I pointed out earlier Krugman is not a Keynesian he is a neo-classicist stealing some of Keynes’s ideas.
I am not defending Krugman 😮

JEM
May 27, 2012 2:53 pm

Krugman is basically endorsing the same policy toward government spending that the left argues Bush 43 and co. embraced regarding Iraqi WMDs.
Tell any story that furthers your agenda.

RJ
May 27, 2012 2:53 pm

Europe isn’t going down the drain because they quit spending. They quit spending because there is no more capital to spend.
No more MONEY to spend? This is true for the Euro countries as they have given up their own currency. An act of foolishness that is likely without equal in the last 100 years.
But not true for non Euro countries.

May 27, 2012 2:58 pm

DirkH says:
“… ‘Keynesianism’ has a fixed meaning now, whether you like it or not.”
Dirk is correct, unfortunately. J.M. Keynes was much more complex than is suggested by the throwaway line, “Keynesianism.” And his policies were always followed — half way. His stimulus spending has been embraced by every kind of politician, but when it came to spending cuts and saving for a rainy day, well, we’re still waiting to see that.☹

byz
May 27, 2012 3:00 pm

DirkH says:
May 27, 2012 at 2:39 pm
“Hayek said the same thing in an interview; he knew Keynes. So we don’t know what Keynes would propose today. But “Keynesianism” has a fixed meaning now, whether you like it or not.”
True enough but the fixed meaning is what the neo-classicists interpret Keynes as saying, however if you read his works you see it diverges from the modern interpretation.
The people who currently teach economics in all universities are neo-classicists so everything is seen through the neo-classical view point.

DirkH
May 27, 2012 3:02 pm

byz says:
May 27, 2012 at 2:53 pm
“As I pointed out earlier Krugman is not a Keynesian he is a neo-classicist stealing some of Keynes’s ideas.
I am not defending Krugman :o”
This deflection tactic has a name:
http://www.logicalfallacies.info/presumption/no-true-scotsman/
Again: Could one of the Keynesians on board tell me what Krugman has to say about the Afghanistan conflict and the prison population? Bait, bait!

clipe
May 27, 2012 3:02 pm

Many “pheasant pluckers” turn out to be “nucking futz”. “ducking the fog” explains it all.

R. Craigen
May 27, 2012 3:03 pm

The problem with Krugman’s proposal (ok there’s a whole bunch of problems — this is only my favourite): “Scientists” who scream that the sky is falling and therefore a whole bunch of new government policy must be implemented, stat! … no longer have any credibility. Not even among “true believers”. He’s never read the story about the Boy Who Cried Wolf, apparently.
In a certain sense Krugman’s plan has ALREADY been implemented (substitute global meltdown for alien invasion). And look at the financial mess it has caused.

byz
May 27, 2012 3:03 pm

Europe is in trouble as no-one enforced the rules of being in a single currency and why is this…
Because Germany broke them first!!

jaypan
May 27, 2012 3:07 pm

Good news.
The AGW lie doesn’t work anymore. They need a new one.
Aliens sound reasonable too.

Maus
May 27, 2012 3:08 pm

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” — H.L. Mencken
‘Nuff said.

clipe
May 27, 2012 3:10 pm

Sorry for the fropanities and eph-words ▲

May 27, 2012 3:12 pm

Maus,
Here’s another Mencken gem:
“The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is sort of an advance auction sale of stolen goods.”
Good, no? Keep it in mind during the next election cycle.☺

Mike M
May 27, 2012 3:13 pm

As with all rabid leftists, the end justifies the means. What they fail to grasp is that a lot of us don’t like their ‘end’ to begin with so there’s absolutely no reason to ‘justify’ it to us.

byz
May 27, 2012 3:14 pm

DirkH
stop trolling!!
I am being straight over this and not diverting, I have read his works and Keynes’s works and they do not agree.
As to the prison population they are like having someone unemployed, it would be better to have them doing useful work, than being locked in their cells 23 hours a day.
Afganistan is down to you not spending money on intelligence and defence in the first place, the US had been warned about those involved in 9/11 and didn’t act on it, you then paid the price. Just like the powers before WWII were warned about Germany and failed to act. This has nothing to do with economics just incompetence. I flew around the US in 2004 and was shocked how awful security was around internal flights, anyone could have put anything on a plane.

May 27, 2012 3:14 pm

I don’t know if this is a repeat, but Krugman did this last year.
http://mises.org/daily/5559/Keynes-and-Space-Aliens

Robin Kool
May 27, 2012 3:20 pm

Come on people let’s turn on our sense of humor again.
Krugman believes in massive government spending to kick-start the economy.
He makes an analogy with the Depression and WWII. And he is trying to be funny: “Let’s say aliens are invading and we need high-speed rail to combat them. That way government spending will start up the economy again.”
I am a huge fan of this blog and I rarely agree with Paul Krugman, but putting a humorless spin on this and acting really indignant, makes you look like a humorless fool.
Should he repeat this joke a hundred times more; it still doesn’t make it a serious proposal.
———————
Now here is some serious news about aliens:
Ridley Scott is preparing a prequel to Alien !!!
http://www.alienprequelnews.com/2011/12/ridley-scott-alien-felt-epic-but-this.html

byz
May 27, 2012 3:24 pm

Mike M says:
May 27, 2012 at 3:13 pm
As with all rabid leftists, the end justifies the means. What they fail to grasp is that a lot of us don’t like their ‘end’ to begin with so there’s absolutely no reason to ‘justify’ it to us.
“Anything is acceptable if it leads to a successful result.” First use in the United States: “Diary” (1657) by Michael Wigglesworth (1631-1705), American clergyman and poet.
🙂

eyesonu
May 27, 2012 3:25 pm

Based upon this quote from Krugman:
But the evidence tells a different, much more ominous story. While several factors have contributed to soaring food prices, what really stands out is the extent to which severe weather events have disrupted agricultural production. And these severe weather events are exactly the kind of thing we’d expect to see as rising concentrations of greenhouse gases change our climate — which means that the current food price surge may be just the beginning.
==================================
Rising food prices in the USA and as a net exporter in the world market could be tied to the US govt. desire / mandate to burn agricultural crops. Simple concept is to chose a favorite for burning (corn). Government mandate to burn and subsidize its burning. Other agricultural resources such as wheat, oats, etc. are reduced in acreage planted to meet burning mandates. Food sources using these agricultural grains as feedstock (beef, poultry, eggs, etc) skyrocket. Food sources using agricultural grains of all sources (bread, cereal, etc) skyrocket. Vehicles utilized for burning these crops (corn) use more fossil fuel through conversion and reduced fuel mileage. It has been a very expensive and failed model. Who could have believed it possible?
Toss in “cash for clunkers” to remove affordable used vehicles from the market by those needing affordable transportation while at the same time crushing the markets (auto parts and repair shops) that kept them running and the independent dealers that sold them.
Toss in western energy policies and well ….. you get the idea.
There are many such economists in the nucking futz camp. The ones who bought into these BS ideas are also nucking futz. Who could have possibly believed it possible?

Maus
May 27, 2012 3:29 pm

byz: “The people who currently teach economics in all universities are neo-classicists so everything is seen through the neo-classical view point.”
Well that all depends on how much of a stickler we want to be. For certainly numerous people state ‘Keyesian’ when they mean ‘neo-Keynesian’. And if we wish to play the pedant then is is surely wrong to mix and match the two.
That said, if we wish to play pedant, ‘neoclassical’ refers to micro-economics while Krugman is speaking of macro. In which case your entire line of argument is simply wrong. But then, of course, many folks say ‘neoclassical’ when they mean ‘neoclassical synthesis’. The latter being quite obviously what you intend given the context of your above quote. But then the neoclassical synthesis is neoclassical for micro and neo-Keyensian for the maco. In which case you’re still wrong.
All told though it’s nice to see that someone has any interest or knowledge in what Keynes held and what other folks did to his corpse.

u.k.(us)
May 27, 2012 3:32 pm

“But look, I mean, whatever it takes because right now we need somebody to spend, and that somebody has to be the U.S. government.”
============================
Where does one even start, when a statement such as this is uttered.

jorgekafkazar
May 27, 2012 3:35 pm

A Noam Chomsky wannabe, obviously.

SPreserv
May 27, 2012 3:50 pm

In true “crazy blue protesting lady” style.

Ian Weiss
May 27, 2012 3:53 pm

As if there are no real problems that we could mobilize people to invest in solving…..Paul, have you ever heard of malaria? HIV? Illiteracy? Women’s oppression? Poverty (particularly as it could be defined as lack of access to technology)? Hell, even obesity?
While I think Krugman is right that people will be more inclined to invest in defense against invasion than any of those causes, it’s still pretty ridiculous to suggest we need to make up a major problem, as if there aren’t real ones.

Goldie
May 27, 2012 3:53 pm

It’s an interesting controversy this one. I may be wrong, but didn’t the US build it’s way out of the 1920s recession by constructing the interstate.
The problem is that Obama seems to want to increase borrowing to cover debt payments without any recovery plan. Not that high speed rail is necessarily the answer, but some sort of plan to get folks back to work and build for the future economy is needed. If you don’t want to spend more money, just reduce grants on loony global warming research.

Robert of Ottawa
May 27, 2012 3:56 pm

I saw the video and I thought he was exaggerating a tad, but he clearly is obsessed about the government spending more money. It’s better to spend the money on “energy saving” things such as the High Cost Rail than hostpitals or bridges, or other useless tat like that. He does clearly also advocate a comprehensive and deliberately dishonest propaganda campaign to achieve his goals.

May 27, 2012 4:00 pm

Goldie,
The US Interstate system was built starting with the Eisenhower Administration in the 1950’s.

AnotherPhilC
May 27, 2012 4:03 pm

Much is revealed about Keynes’s intentions by reading the foreword to the 1936 German edition of the “General Theory”…
“The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions.
Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced. For the theory of psychological laws which bring consumption and saving into relationship with each other, the influence of loan expenditures on prices, and real wages, the role played by the rate of interest — all these basic ideas also remain under such conditions necessary parts of our plan of thought.” …
“7 September 1936
J.M. Keynes”
http://mises.org/daily/3693
Essentially Keynes promotes the totalitarian, or at least the fascist, state – he advocates the state control of markets and of the means of production.

KenB
May 27, 2012 4:14 pm

Argh! he must have watched the Australian Greens politician Bob Brown, giving his “inspired” Hobart, Tasmania, speech on Aliens watching us. Maybe he will follow bob’s example and gracefully retire one step ahead of the aliens……..

Louis
May 27, 2012 4:16 pm

Apparently Krugman is not smart enough to notice that the US government is already spending more than any government ever has in the history of the world and it isn’t helping. How much more must the government spend before Krugman realizes his folly? Draining money from the private sector to fuel excess government spending for wasteful projects like Solyndra and high-speed rail-to-nowhere is exactly what has kept us in recession for so long. FDR prolonged the Great Depression with his government programs and excess spending. It wasn’t until World War II forced him to take his boot off the necks of the private sector and loosen government regulations that the country finally came out of the depression.

Bill Parsons
May 27, 2012 4:17 pm

Fareed Zakariah interviewing Paul Krugman and Kenneth Rogoff about the efficacy of Keensian economics… My, what a happy confluence!

conradg
May 27, 2012 4:17 pm

Oh, come on, Dude. I saw this on Bill Maher the other night, and he was so obviously joking, this whole post makes me think you must be joking to put it up here. I mean, seriously? Have you been so wrapped up in these climate wars you’ve lost all sense of humor? I suggest some whacky tobaccy and an evening of cartoons.
Bill Maher is a comedy show where he and all his guests are encouraged to make up ridiculous jokes and examples to make their points with humor. That’s all Krugman did. The point was serious, of course, in the sense that some massive public works project like fighting WWII (or aliens for that matter) would very quickly get everyone back to work and end the recession/depression. He just chose a ridiculous example so as to make it funny also. It’s not Meet the Press.
REPLY: I’d agree with you, except he’s said this before. See the second video interview from August 2011. He’s a regular on programs like this and knows enough about how media works to have the good sense to put in a caveat if he was in fact joking. He’s dead serious. – Anthony

DSW
May 27, 2012 4:20 pm

“Anything is acceptable if it leads to a successful result.”
Wrong is wrong, even from a poet and clergyman.
Take an ethics class while you can… better yet, learn from one…

Bill Parsons
May 27, 2012 4:22 pm

I’d have said “Keynesian” had my spelling been more keen.

George E. Smith;
May 27, 2012 4:24 pm

“”””” Ian Weiss says:
May 27, 2012 at 3:53 pm
As if there are no real problems that we could mobilize people to invest in solving…..Paul, have you ever heard of malaria? I believe the malaria problem was solved 70-80 years ago; the solution was known as DDT. Then Rachel Carson wrote her sky is falling book, and malaria became an aceptable disease again. We still know how to make DDT.
As for HIV, it is spread by people with the disease (whoever heard of that concept). The solution is to quarantine everybody who doesn’t have the disease, so they don’t catch it.

johanna
May 27, 2012 4:24 pm

In fairness to Keynes, he never advocated entrenching fiscal debt through entitlement programs and getting in debt up to your eyeballs and then trying to spend your way out of it. Agree with him or not, he was not a fool. Counter-cyclical economics means saving in the good years (ie running budget surpluses) and spending in the bad years (which may involve some temporary, non-structural debt).
The trouble is, politicians have used the national credit card to buy votes, ie they never did the saving in good years bit. Trying to spend your way out of bankrupcy is obviously a lunatic solution. The so-called ‘austerity’ measures in Europe and the UK aren’t even attacking the debt principal – they are just slowing down the rate of increase.
They are behaving like gambling addicts in serious denial, and it will end badly.
I have not commented to US economics because there are lots of people here better placed to do so than me, but my feeling is that if politicians have the guts to bite the bullet on public debt, the resilience and ingenuity that has powered the country’s economy for the last 100 years will enable it to bounce back after a few years of serious belt-tightening. Europe is so bound up with regulations and subsidies that recovery is a much longer, harder road for them.

Mike McMillan
May 27, 2012 4:25 pm

“…we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail.”
We’ve already had the alien invasion, and we’re going to expel them this coming November.
High speed rail to Paris or Amsterdam would be worthwhile, but I can’t think of any place around Houston I’d like to get to fast.

conradg
May 27, 2012 4:26 pm

Also, your absurd point (given to similar comments above) that unless he gives cavaets that he’s joking, we are supposed to take him seriously, fails to take into account that Maher’s show is a comedy show. You might as well say that unless Steven Colbert inserts a cavaet at the end of each of his bits, we should presume he’s dead serious. Have you really no sense of humor anymore? The seriousness with which you are now defending yourself is not a good sign. I mean, honestly, get a grip. You may not agree with Krugman’s Keynsian economics, but give him credit for coming up with a funny way of expressing his point. I certainly laughed when I heard it. Now, maybe you’re just not familiar with Maher’s show. Maybe you think it’s some kind of PBS News Hour Interview panel. Or maybe you’re just losing any ability to find an even keel in the midst of these culture wars. But let’s be clear, you’re just plain wrong, and also wrong to expect that Krugman has to insert a cavaet here. I mean, any reasonable person with a sense of humor knows Krugman was joking. Everyone in the room with me watching knew he was joking. If you need cavaets, that’s not a good sign, my friend. Love your website and work here, but you clearly need to get some rest and a fresh perspective.

SirCharge
May 27, 2012 4:29 pm

Krugman is a crazy bastard. It was a tongue in cheek comment but but for an economist to believe the tripe he spews he’d have to be completely insane.

MrX
May 27, 2012 4:31 pm

“If he had left the comment at that, I’d agree with you, but he added this without saying “I’m joking” or “That’s silly but…””
That’s your rule, Anthony. Not anyone else’s. When you speak about aliens, it’s pretty much guaranteed to be sarcasm unless you’re Giorgio A. Tsoukalos. Krugman even mentioned directly the faking of a crisis to get more government spending. That’s what he’s after regardless of the means. He’s willing to lie to the people in order to bring about what he thinks is a better future even though he’s completely wrong of course. George W. Bush even mentioned this exact scenario about “world peace”.
So Krugman is not serious on the alien thing, but he is serious about faking a crisis to get more government spending.

u.k.(us)
May 27, 2012 4:32 pm

Goldie says:
May 27, 2012 at 3:53 pm
It’s an interesting controversy this one. I may be wrong, but didn’t the US build it’s way out of the 1920s recession by constructing the interstate.
============
It seems your history is mixed up.
Anybody that has ever attacked U.S. soil, has never been seen on the battlefield again.

May 27, 2012 4:32 pm

condrag,
Once, maybe it’s a joke. But Krugman has been on his ‘aliens’ theme for too long. As Stark wrote upthread, Krugman “…obviously does believe in aliens, and he wants you to believe as well, but he can’t bring himself to mention them, unless he can (clumsily) pass it off as a joke when somebody calls him on his crap.”

conradg
May 27, 2012 4:33 pm

Again, in reply to my first post, he’s joking. That he’s told this particular absurd example before doesn’t mean he isn’t still joking. He’s using a joke to make a point about economics, at least what he believes to be true, that massive government spending will indeed cure a depression caused by a lack of demand. That’s the serious part of his argument. The joke part of it is that to get that stimulus you would lie to the people and invent an alien invasion to justify it.
And let’s be clear: every economist agrees that it was the massive government spending on WWII that ended the depression. He’s quite right there. Whether it would do the trick again under present circumstances is a different question, and he could be wrong there. (I don’t think he is).
People used humor to make points like this all the time. Your own websites uses such jokes. You’ve even written whole posts tongue in cheek to make such points. And really, if Krugman were actually serious about this alien invasion proposal, don’t you think he just ruined the plan?

conradg
May 27, 2012 4:41 pm

I don’t know if Krugman actually believes in aliens, but I do know that a lot of scientists do. Carl Sagan does. Millions have been spent on SETI. It’s not a crackpot idea, even if Krugman does believe in them. Hell, I half do myself. The mathematical odds of us being alone in the universe are vanishingly small. Nonetheless, the idea is part of our culture as a kind of running half-joke. We make blockbuster movies about this subject every other year or so. No one takes it seriously serious except for crackpots. And I think Krugman was quite obviously using the notion of an alien invasion in that cultural context. It’s certainly true that if one of those movie scenarios actually happened, we definitely would gear up the economy to a wartime level of full employment almost instantly. But we also know to treat the context as a fantasy. I guess if you live in a black underground survival bunker and have never read science fiction or watched these movies or watched a modern comedy show, Krugman might be taken seriously. Kind of like Orson Welles’ audience back in 1938. These days, if people tried to announce an alien invasion, it would be assumed to be a joke, and it would take a long time to convince anyone that it was real.

May 27, 2012 4:42 pm

“Nucking-Futs” is a new expression to me but I will treasure it and apply it to all future similar outbreaks. Perhaps they could store him in the basement of Fort Knox so that he can see how low reserves have got. If it wasn’t all so dangerous it would be laughable.

Tsk Tsk
May 27, 2012 4:45 pm

byz says:
May 27, 2012 at 2:39 pm
AnotherPhilC says:
May 27, 2012 at 12:59 pm
“So when Keynesian economics fail, it’s always because it’s imperfectly implemented? Rather like Marxism then?”
If Keynesian economics fails then we are all up sh*t creek without a paddle 😮
Currently we only have two tested forms of economics Neoclassical (which is what 99% of all current economists are including Krugman) or Keynesianism, we know from past situations that Keynesianism works in the current situation, however it hits the rich and market speculation (it is better for the poor and the average man as it creates employment). The mess we currently have is a result of 40 years of Neoclassical economics which removed constraints to what banks could do (just like in the 1920′s).
Keynesian economics isn’t perfect (it doesn’t work when you have stagflation), however it is the best we have for the current situation. The only reason the west escaped the 1930′s depression ultimately was due to WWII, and that was a classic Keynesian expansion (we expanded because we had too).
What many people putting down Keynesianism are forgetting the massive expansion of the US in the 1950′s and 60′s which was down to following Keynesian economics, if Neoclassical economics had been in place the USSR would have been first to the Moon!!!!
Why did we never get out of earth orbit for the last 40 years? Because we have had a neoclassical system in place.
———————————-
Sorry, but this is utter nonsense. Keynesianism got us to the Moon?! Seriously?? Sure a lot of government spending went into Apollo but in no way was it dependent upon deficit spending. The fact that we were financing Vietnam at the same time clearly demonstrates just how false that notion is. The US got to the moon first for a variety of reasons. The first is that we had more resources to put into the project. The second is that we got a bigger piece of the German technical team than the Soviets did. And third, let’s not forget just how close the race was. Korolev was no idiot. Fourth, the Russian can still get to space; the US government can’t. Fifth, SpaceX is demonstrating just how pathetically low is the rate of return on government spending on NASA and ULA. Hell, we won’t even get the Orion capsule for what it has cost SpaceX to build a capsule AND TWO lift stacks. That’s the success of your Keynesianism?
And can we stop with the nonsense that says that WWII ended the depression? Please? Wars destroy things. They kill people. Both of those are the very definition of destruction of capital. Wars do NOT fix economies. US debt increased to over 100% of GDP during the war. The only reason that the US did so well afterwards was that it was literally the only industrial economy left standing. The UK had never truly recovered from WWI and had already begun its decline before WWII even started. The US had begun to come out of the depression even before the war started in spite of all of the command economy tactics that Roosevelt tried. You can argue all you like about moral and ethical reasons to fund likes like the WPA, but economically it just doesn’t hold water. Note that I do understand the problem of the commons and I do understand the need for some amount of infrastructure spending by the government as a result.
We will be just fine if Keynesian economics fails. In fact, the sooner the better. Many have argued that it already has multiple times. The problem in the West is that we have propped up economies with unsustainable government spending for so long that the hangover is going to be massive. If dot.bomb and housing were bubbles, then government overspending is a hyperbubble. Fundamentally, the world needs to relearn that genuine economic growth comes from individuals exploiting resources in novel ways to improve efficiency and make more widgets for us all. Every time that the government attempts this results in a terrible waste of capital. Solyndra, anyone?
And lest you believe that the West is the only place that has this problem, then I suggest you take a look at China. They pumped in a much bigger stimulus than the US and yet as that has run out so too is their economy cooling. In fact manufacturing has been contracting for months now. Really, the only reason they’re still growing is because the West has propped up their exports and they have some very low hanging fruit for domestic development, i.e. electricity and running water.

ChE
May 27, 2012 4:45 pm

Krugmannian neo-Keynesianism is to real Keynesianism what Islam is to Judaism.

mortis88
May 27, 2012 4:47 pm

So conradg, Krugman says (seriously) that our govenment should lie to us so they can be empowered to do what is best for us and you think the important part is the aliens? Wow, you cannot see the forest for all the trees.

ChE
May 27, 2012 4:55 pm

johanna says:
May 27, 2012 at 4:24 pm

Europe has a much bigger problem: demographics. All the right economic policy in the world won’t save them from that problem.

Bill Parsons
May 27, 2012 4:59 pm

I mean, any reasonable person with a sense of humor knows Krugman was joking. Everyone in the room with me watching knew he was joking. If you need cavaets, that’s not a good sign, my friend. Love your website and work here, but you clearly need to get some rest and a fresh perspective.

Unfortunately, Krugman doesn’t joke about government spending. He believes heavy government expenditures on practically any project will help fire up the economy – even if the money comes from borrowing. Debt is good. He is saying here that an alien invasion has the same threat value for political exploitation as global warming. Either (or both) are adequate and useful chimeras to arouse public alarm and create the kind of spending that he wants. Most reasonable people would agree that this is a somewhat cynical view of the citizenry whom he wants to manipulate, although some people appear to appreciate what he is doing.
When he wasn’t appointed by the Obama administration, he embarked on the populist journalistic / blogging path to get his ideas out, though I doubt he is sanguine about any political future for himself at this point – unless it is post-2020.

Mac the Knife
May 27, 2012 5:09 pm

Randle Dewees says:
May 27, 2012 at 12:06 pm
“The Dire Menace that requires Marshalling all of society’s resources. Pretty tired device. A better menace, and one that could actually happen, is a large comet on a high certainty collision orbit with the Earth. What if “The Consenous” determines that it is technically feasible to mitigate this hazard, but at the cost of all the productive capacity of the world, what happens? The world is saved but now enslaved?”
Randle,
Look for a smaller scale ‘scare’ this fall, to ‘wag the dog’ and rally the nation around Our Dear Leader just before the Nov elections. War with Iran is the most likely possibility, ostensibly to stop the development of nuclear weapons by Imadoinjihad and the Mad Mohammed Mullahs. Leon Panetta is ‘sabre rattling’ even now.
The anemic economy, concern for our irrational public spending and almost insurmountable public debts, and public opinion are all turning against Obama and the democrats. This leaves them with little leverage to sway voters, except a cause celeb to create national unity. If it isn’t Iran, it will be something else.
MtK

AnotherPhilC
May 27, 2012 5:12 pm

conradg (May 27, 2012 at 4:33 pm):
And let’s be clear: every economist agrees that it was the massive government spending on WWII that ended the depression.
That may be the belief of every Keynesian economist, it’s not true of any economist who has read and understood Bastiat.

Gary Pearse
May 27, 2012 5:12 pm

James Sexton says:
May 27, 2012 at 12:07 pm
“So, what is to be done? It’s simple. We go back to the form of economics which worked. Have government get out of the way and create an environment which spurs economic growth from the private sector. Drilling, mining, industrialization. Of course, you’ll never get a leftists to understand this, much less advocate it.”
Prime Minister Harper of Canada has, so far, steered through the global economic minefield that has been blowing up countries large and small. He did give out cash for infrastructural construction – everything was about to fall down anyway- so it was a good way to give stimulus. But he did that for a measured stretch and then began clamping down on expenditure. To keep things going, he has pulled out all stops on resource development – oil, gas, pipelines, mines… and he has particularly pulled out one particular stop: limiting the endless, overlappingd environmental challenges that hold developments up for years to decades that are raised by unabashedly leftist, anti-industry development activists.
You know, its a funny thing. The lelftists need a conservative government to be in power long enough to straighten out the economy – legislate strikers back to work, move people off perpetual dole into jobs (the pogey its affectionately called by generations of those who live off the largess of the taxpayers), balance budgets, shrink government and create a favorable climate for business. This is the only way that leftists can have the wherewithall to throw money away, bleed business and put the same folks back on the pogey again.
In Europe, they don’t have this luxury. They are all leftists and they have created an untenable (or to use their phrase an “unsustainable”) economic structure. Keynes’s stimulus was for a black-hole economy between two world wars. Even he realized (if his modern day clones like Krugman don’t) that it wasn’t something that could go on forever. When asked (paraphrase) “Yeah but what about the future?” He said, “In the future we will all be dead!” Pretty much all of European economic sense emigrated long ago and they have since been going in circles seeking to work the majic of Keynes. Margaret Thatcher breezed in, cleaned house, sold off coal mines and railways, chopped the fat off the civil service, deregulated and disenfranchised the industry killers and the UK enjoyed an economic boom. Now the so-called conservatives are about as left as Thatcher’s opposition was. The rest of the continent, except for Germany, was already economically moribund in Thatcher’s time.
I’m more than a little concerned about US Keynesian economists. The Nobel guys are using the prize to encourage this kind of self immolation in the US.

brc
May 27, 2012 5:21 pm

Please, when is this ‘WW2 ended the depression’ junk going to die?
You cannot, cannot, grow an economy by sending it’s youth and output off to the other side of the world to be destroyed.
If growing an economy was as simple as inventing a threat, and then blowing up perfectly good equipment and having your young men murdered, why hasn’t Iraq and Afghanistan created a booming economy?
People think that the economy improved during WW2 – which is utter tripe. While some notional gdp growth figures may have improved, in every single way, the living conditions of just about every single person were worse during and immediately after the war than they were prior to the USA entering the war.
Rationing, dramatically increased workforce participation – all these increased production, but in no way did the actual living standards of the people improve.
The reason the US prospered after the war is that it shunned socialism for a couple of decades, kept intact it’s capital stock, and prospered greatly from the Bretton Woods agreement which handed it most of the world’s gold supply and the advantage of having the reserve currency, a position with which it continues to abuse all other nations to this day.
Anyone who thinks you can instantly get prosperity by making tanks and bombs and destroying things needs to get a grip. Iraq/Afghanistan have already gone on much longer than WW2 and have only caused further impoverishment of the US economy. If it’s as simple as blowing things up, then why hasn’t it worked this time? Why didn’t it work in the 1960s and 70s with Vietnam?
As for the Egyptian food riots that led to the toppling of the regime – you can lay the blame squarely at two places :1) biofuels and biofuel subsidies, which made it more profitable to burn food rather than sell it to people to eat and 2) money printing by the Federal reserve, which caused massive inflation, and crushes countries like Egypt that keep a US dollar peg, and which subsidise the cost of wheat and other staples to their population. Revolutions happen when people go hungry and see that they can’t feed their family. What other option do they have?
There has never been a famine or food shortage in a country with a democratic government and a free press. And there never will be. Every single country in the world has comparative advantage in something, and can easily exchange that for food with countries that can produce large surpluses of food.

May 27, 2012 5:25 pm

There was a great ‘Outer Limits’ episode from the early 1960’s
where a group of ‘concerned scientists’ morphed a volunteer
to look weird and put him on some craft which was supposed to
come into DC but instead crashed in a Florida swamp. Krugman
needs to see that episode of Outer Limits.

May 27, 2012 5:25 pm

Government implementation of Keynesian economics (save money in good times, spend the surplus in bad) is flawed anyway. The politicians heard “bzz bzzz bzzz bzzz, spend money bzzz bzzz bzzz “, so they said to themselves “we can spend money, bewdy, everything will be OK and we’ll get re-elected”.
Just why the government should get involved in the business cycle is another matter and it seems to me, given the response lags, to be very easy or nearly impossible not to make things worse. In aircraft piloting it is known as “Pilot induced Oscillation”.

gnomish
May 27, 2012 5:25 pm

heh- tsk tsk-
you probably know that keynes talked the adam smith line until he found he could get no employment preaching laissez-faire. so, just as did milton friedman and alan greenspan.
(btw- adam smith wrote wealth.of.nations in an attempt to refute the goals of the constitution which was not about liberty at all, but about enforcing collection of gold from the states into central coffers for a lot of fops to play royalty)
here’s a quote from alan the g: ‘there is only one kind of inflation – the printing of currency- and not one man in a million can tell how his pockets were picked’ (maybe not exact, but close enough)
whenever you hear someone talk about ‘price inflation’ or ‘wage inflation’ or especially ‘stagflation’, you can be sure that person has no clue about economics and is repeating something he has heard but is not capable of deciphering. such people require a gang to provide the security of consensus because reason has been rejected for catechism.
keynes ‘contribution’ as witchdoctor to attila was advising that because the nature of manufactured goods is that, once the tooling is amortized and supply has increased, prices fall.
similarly, gold value increases as it trades against a greater supply of values.
keynes proved that you can steal the difference by inflation and call it ‘stabilization of prices’ and pass it off as beneficial to the victims if they happen to notice.
of course, inflation is a game of musical chairs and when the music stops, everybody is left standing with a wheelbarrow full of pulp.
but a nobel prize was awarded for the guy who suggested speeding up the music.
i’ve been hearing npr programming about the evils of ‘hoarding’, lately. this is a bellweather i’ve noticed that has, in the past, signalled that the way was being prepared for nationalization and resource confiscation.
and now they’ve armed the domestic drones.
so even if the cagw schtick loses its audience – it has done fine work neutralizing any effective opposition by distraction. troll power is meant to disrupt rational discourse.

Gail Combs
May 27, 2012 5:30 pm

Freddy says:
May 27, 2012 at 12:39 pm
tomjtx is right. Krugman is trying to emphasize his idea that in a liquidity trap (the current US economy)…. Krugman’s ideas are within normative capitalist economics.
He’s serious, knowledgeable and has a Noble Prize in Economics. None of this guarantees he is right, of course….
________________________________
First, the current USA (and world) economic system is not Capitalism. Capitalism is based on the recognition of individual rights, including property rights, where property is privately owned. Wealth is invested to produce more wealth from labor and raw materials. An ever increasing supply of fiat currency has no place in real capitalism.
The system today is a system of fiat currency where banks trade monopoly money created out of pixie dust for our labor and goods. It is systematic theft and fraud, legalized by the governments because they get to borrow “cheap” fiat money and raise the tax rate via inflation.

Testimony of Graham F. Towers, Governor of Central Bank of Canada
Q. But there is no question about it that banks create the medium of exchange?
Mr. Towers: That is right. That is what they are for… That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)
The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)
Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)
Broadly speaking, all new money comes out of a Bank in the form of loans.
As loans are debts, then under the present system all money is debt. (p. 459)

In other words when you go to a bank for a loan you sign a contract for X years of servitude to the bank in exchange for money printed out of nothing. There is no WEALTH involved on the part of the bank. But that is not the only theft involved. Mises & Gary North explains the rest of it. Mises most distinguished follower, F.A. Hayek, was awarded the Nobel Prize in economics for his work in elaborating Mises’s business cycle theory during the later 1920s and 1930s.

Each individual and all individuals together always enjoy fully the advantages which they can derive from indirect exchange and the use of money, no matter whether the total quantity of money is great or small.” The conclusion is obvious, and he makes it: “The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do” (p. 421).
New money does not appear magically in equal percentages in all people’s bank accounts or under their mattresses. Money spreads unevenly, and this process has varying effects on individuals, depending on whether they receive early or late access to the new money
It is these losses of the groups that are the last to be reached by the variation in the value of money which ultimately constitute the source of the profits made by the mine owners [in the case of gold or bankers in the case of fiat currency gc] and the groups most closely connected with them
This indicates a fundamental aspect of Mises’s monetary theory that is rarely mentioned: the expansion or contraction of money is a zero-sum game.
Because money is not capital, he concluded that an increase of the money supply confers no identifiable social value. If you fail to understand this point, you will not be able to understand the rest of Mises’s theory of money. On this assessment of the value of money, his whole theory of money hinges.
<b.An increase in the quantity of money can no more increase the welfare of the members of a community, than a diminution of it can decrease their welfare. Regarded from this point of view, those goods that are employed as money are indeed what Adam Smith called them, "dead stock, which . . . produces nothing" (p. 85).
In Human Action, Mises said that the government’s task is to enforce contracts. Among these contracts are contracts for redeeming money-certificates for money metals on demand. He defined a money-certificate a receipt for a money metal that has 100% of the promised metal in reserve. He said that banks should not be favored by the government. They should not be allowed the right to break contracts, which is what a refusal to redeem money-certificates on demand is. “What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual to fulfill all obligations in full compliance with the terms of the contract”

May 27, 2012 5:37 pm

Elliot says:
May 27, 2012 at 12:40 pm
. . . The only way I can explain why Europe and china have lots of high speed rail and US has none is to say US is either disfunctional, backward or both which is just sad.

I love high-speed rail (I’m a rail fan), but unfortunately it is just not cost-effective. Infrastructure and ongoing operations in every country require large government (taxpayer) subsidies. I have argued that, since in the USA the Federal Government subsidizes interstate highway construction, airports and the air-traffic control system, conceivably an high-speed rail system might work in some heavily-traveled corridors if government were responsible for the infrastructure and private companies took care of the rolling stock and passenger services, as the airlines do now. But I don’t have any numbers to back up this speculation.
There is a private firm in Italy launching HSR. Let’s see how that works.
/Mr Lynn

conradg
May 27, 2012 5:37 pm

“Sure a lot of government spending went into Apollo but in no way was it dependent upon deficit spending.”
The US ran a budget deficit almost every year of the 1960s. So the space program was definitely financed at least in part by deficit spending. The economic boom of the 1960s didn’t arise purely from private sector business growth. Nor did NASA get financing from private industry. It was purely a function of big government centralized planning. Socialism, in other words. Heavens, it must be evil therefore.
REPLY: Reality check Conrad. Explain how you’ll personally be paying back the ~ $138,000 you owe squandered by the US government on deficit spending

GeoLurking
May 27, 2012 5:46 pm

byz says:
May 27, 2012 at 3:03 pm
Europe is in trouble as no-one enforced the rules of being in a single currency and why is this…
Because Germany broke them first!!

Considering that Germany is about the only thing productive in the EU (and France, but that may change shortly), that statement is either asinine or a sarcasm barb with out the /sarc tag.
http://i48.tinypic.com/1zlby2b.png

conradg
May 27, 2012 5:49 pm

Guys, there’s no form of economics that ever worked. Every single one had massive flaws and problems. There is no utopia, even of the conservative libertarian variety. If they had worked, we would have kept them in place. They didn’t. What we have now is just a continuation of the trial and error method of harnessing human greed. Of course it sucks. Stop dreaming that there’s some Eden in our past, or some Utopia in our future, where economics will just “work”. Try to make the best of what we have, and improve it somehow, without imagining some perfect world exists out there but for the people we don’t like.

conradg
May 27, 2012 5:55 pm

“REPLY: Reality check Conrad. Explain how you’ll personally be paying back the $138,000 you owe squandered by the US government on deficit spending”
First, I don’t owe that money, the government does, and so the creditors can’t come after me for it. And frankly, most of the people who are owed that money are not my concern. The debt is a fiction of currency swaps.
And second, the government has no plan to ever pay that money back, as far as I can tell. And yet creditors keep lending it to us. What does that tell you about how real it is? They continue to believe we are good for it, whatever that means. I think it’s fine to encourage that fiction. People lend the government money, they spend it, pay a little bit in interest, and everyone seems happy about it. If they stop lending the money, where are they going to put it? It’s just pieces of paper and electronic blips. It’s not like human labor or material goods.

Mac the Knife
May 27, 2012 6:01 pm

Nucking Futz, Indeed!
Unfortunately, neither Obama nor Krugmann embrace the Chicago School of Economics and The
Theory of Rational Expectations. Its basic tenets are that (1) markets allocate resources more efficiently than any government, (2) monopolies are created by government’s attempt to regulate an economy (3) governments should avoid trying to manage aggregate demand and, instead, (4) should focus on maintaining a steady and low rate of growth of money supply.
Milton Friedman, a principal contributor to the Chicago School of Economics, passed away in 2006 at age 94. He is quoted as saying “There is no such thing as different schools of economics; There is only good economics or bad economics.” We are paying the price for really bad economics, of which AGW is just one expression. While AGW is not, by any standard, an economic priority, trillions of dollars globally are misdirected by governments into a myriad of AGW money drains as areas of real need and high investment potential go begging.
MtK

May 27, 2012 6:05 pm
Gail Combs
May 27, 2012 6:07 pm

byz says: @ May 27, 2012 at 12:47 pm
…..The trouble with this is that the banks then horde this money and it never goes into the economy, whereas Keynes said that it was better to pay someone to dig a hole and fill it in again than for them to be unemployed, as if they had money in their pockets they would spend some thus starting a spiral of positive feedback…..
_______________________________________
Keynes was wrong. Most people want to work and want to make money called it greed/self-interest if you want. The 1933 economic crash and the recent economic crash didn’t just happen they were CAUSED, but that is an entire book. see link and link.
USA Today had a very good article that shows why the US economy is stalled.

Small businesses losing out to red tape
In an economic climate with few jobs and cutbacks on basic city services …. you would think cities and states would be overjoyed when someone was willing to open up a new business… You might think that, but you’d be wrong.
Instead, cities and states stifle new small businesses at every turn, burying them in mounds of paperwork; lengthy, expensive and arbitrary permitting processes; pointless educational requirements for occupations; or even just outright bans. Today, the Institute for Justice released a series of studies documenting government-imposed barriers to entrepreneurship in eight cities. In every city studied, overwhelming regulations destroyed or crippled would-be businesses at a time when they are most needed.
Time and again, these reports document how local bureaucrats believe they should dictate every aspect of a person’s small business. They want to choose who can go into which business, where, what the business should look like, and what signs will be put in the windows. And if that means that businesses fail, or never open, or can operate only illegally, or waste all their money trying to get permits so they have nothing left for actual operations, that’s just too bad….
Along the way, the dreams of individuals are repeatedly crushed:
•In Chicago, Esmeralda Rodriguez tried to open a children’s play center, paying rent month after month while she waited in vain for the government permits she needed to open her business. After a full year of bureaucratic red tape, she finally exhausted her life savings and closed down for good….
When governments actually get rid of barriers to entrepreneurship, new businesses open almost immediately. Indeed, removing even a single law can unleash entrepreneurial energy and create hundreds of jobs. Mississippi finally got rid of its requirement that African hair braiders get government-issued cosmetology licenses to practice or teach. The result? A single entrepreneur — Melony Armstrong — trained dozens of women to braid hair and open their own businesses.
America was once known as the Land of Opportunity. It could be again, but not until state and local officials get out of the way of entrepreneurs trying to fulfill their dreams of new business and new prosperity for themselves and their families.

markx
May 27, 2012 6:10 pm

Jimbo says: May 27, 2012 at 1:13 pm

Paul Krugman has just described the AGW scare to a T. 😉
“……we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail. And the, once we’ve recovered, we can say, “Look, there were no aliens.”

Jimbo has nailed it here!
Krugman is just the first to admit the main reason for the ‘global warming scare’ is the perceived need for a ‘whole new economy’.

Kevin Kilty
May 27, 2012 6:15 pm

Tsk Tsk says:
May 27, 2012 at 4:45 pm

I agree entirely with your summary, except that the recovery of the U.S. economy from the 1929 to 1933 “great contraction” is pretty complex. The economy did manage a sustained recovery from 1933 to 1935 (I don’t know if it was a continuous recovery during this period), but coming off such a low level as it had hit in 1933, one is hard pressed to say whether FDR programs were effective or not (I lean toward not). However, after 1936 the U.S. economy fell into the “depression within a depression”.
Even Morgenthau, FDR’s treasury secretary, admitted the spending was not effective. When the Federal Reserve bank increased reserve requirements in 1936 the economy sputtered, and it didn’t help that FDR was running a war of rhetoric against business and industry and anyone who opposed him. In 1940 FDR realized that he had to cooperate with business and industry, because he needed their cooperation to begin rearmament. The war itself was massive deficit spending; but you are correct, Tsk Tsk, that war destroys assets, and people who view it as economic progress suffer a massive case of “broken window fallacy”.
Perhaps we gained intellectual assets during the war, but by war’s end the consumer/domestic economy was all but worn out, and people spent a lot of money to make the switch from munitions to domestic goods. That I think is how we finally caught up quickly to where we were in 1929. In any case, the story is so complex that one can hardly point to government spending as having done any particular thing.

markx
May 27, 2012 6:17 pm

Krugman may be struggling with the realization he is becoming irrelevant, and his intellectual legacy is evaporating.
His so called “Economic Nobel Prize” was for advances in Free-Trade theory.
However, even by 2007 he had started to realize it didn’t all work quite as simply as he thought it should:

“But for American workers the story is much less positive. In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult.”
…He concludes …
“It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose.
As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.”

http://www.nytimes.com/2007/12/28/opinion/28krugman.html?_r=1&ex=1356584400&en=502cb187aec80250&ei=5090&partner=rssuserland&emc=rss&oref=slogin

Glenn Tamblyn
May 27, 2012 6:20 pm

Just a comment about the appropriate role of Government in managing the economy. This is from our experience here in Australia which has performed better than any other country through the crisis, due to over 2 decades of economic reform prior to that from both sides of politics.
Government, working well, acts as an automatic stabiliser for the economic cycle. During the good times, when the economy is booming, governments must run surpluses. They pay down government debt and actually salt money away in things like sovereign wealth funds.
Then during the down times, governments start spending. Some of this is automatic with increased payments to the unemployed, stimulus schemes etc. Some of it happens automatically since government tax revenues drop. They even allow themselves to go substantially into debt during the down time. But they payback the debt during the next boom. Cutting government spending often means sacking government workers. So more unemployed, more people needing unemployment support, and reduced demand in the private sector since all those unemplyed people aren’t spending as much.
The reason often given for cutting government spending during downturns is ‘to get out of the way so business will invest’. But this makes no sense. If you were in business, you wouldn’t invest during a recession when demand is low. You won’t get the return on your investment. You would keep your powder dry and invest when the recovery has happened and demand is growing again. So maintaining and enhancing demand during downtimes is a major role government takes, almost without trying. And private sector activity maintains and enhances demand during the boomtimes.
Running an economy is a partnership between government and the private sector, each balancing the other.
But the key aspect of this, is that governments (and this means every single member of the legislature, not just the Treasury Secretary) must understand their role. And enforce the discipline that says that in the good times, they run surpluses, pay down debt and salt some cash away.
The problems around the world are due to governments not doing their jobs over the past several decades. So when the crash happens, they aren’t cashed up and ready to shoulder their burden during the bad times. It has been lazy government in the US and elsewhere that is a biig part of this mess. Lazy government in letting deficits run during boom times. Lazy government in not putting in place enough controls to ensure that things like sub-prime crises can’t happen. The private sector wont do that. The private sector caused the sub-prime crises for example.
So now we have a full blown crisis because past governments haven’t done their job well and their is nothing in the wallet when we need it most.
But the argument that government should get out of the way and let the private sector just go is also wrong. Then you don’t have the automatic stabiliser. Without governments taking their role, the crashes would be worse. The best economic outcomes come from a creative tension/conflict between government and the private sector. Government lets the private sector run free to a fair extent, but with enough restraint to limit the ‘animal spirits’ of the private sector to try and minimise the booms and busts. Steady as she goes is what a good economy looks like.
So maybe governments are broken. But getting rid of them isn’t the answer. They are an essential part of how the economy works. So the right answer is ‘fix government’. How? Don’t elect those who are ideologically driven. Elect educated people. Elect people from a wide range of backgrounds. Don’t elect people who will give us too much when the shouldn’t. Get changes to the system made so that individual legislators can’t derail the fiscal discipline of the federal budget.; allowing totally unrelated spending items to be tacked onto a bill is a really bad idea. Think about how many different centres of power in the legislature and executive control total spending. Focus on the efficiency of how government does things and the broader impact of how government works on efficiency throughout the economy.
More broadly, start thinking about an ongoing agenda of economic reform throughout the economy, spanning decades, looking at what really makes economies work well, rather than ideological positions about it.
In fact that is the best answer to most problems in life. Take ideology out of it. Completely! Because the central fallacy in ‘ideology thinking’ is that the right answer to something can be found in something as simplistic as an ideology. It can’t. Reality is a lot messier than that and the best answer, those that give the best outcomes for prosperity, human wellbeing, dignity and civility come from finding often equally messy answers that draw a little bit from many sources. Under the simple mantra – what works best.
If America wants to find the answer to its problems, it needs to start with understanding that many of America’s problems are caused directly by the very polarised, ideological nature of American thinking about itself. Left vs Right and all that. And which is RIGHT. Answer. None of them. They all have a little bit of truth in them. If you want to sort out the mess you are in, throw all that in the trash can. All 300+ million of you move towards the Centre and start dealing with the messy business of living in a messy world.
Maybe America is in so much trouble because your ideas about yourselves and what America is are just too simplistic. Noble ideas are usually wrong because they just don’t accept the reality of how messy reality actually is.

markx
May 27, 2012 6:22 pm

A little more on failures of “Krugman’s baby” – re some of the failures of the more extreme of “Free Trade” policies:

Bill Clinton: “We Blew It” On Global Food
Today’s global food crisis shows “we all blew it, including me when I was president,” by treating food crops as commodities instead of as a vital right of the world’s poor,Bill Clinton told a U.N. gathering on Thursday. [Nov 2008]
Clinton took aim at decades of international policymaking by the World Bank, the International Monetary Fund and others, encouraged by the U.S., that pressured Africans in particular into dropping government subsidies for fertilizer, improved seed and other farm inputs, in economic “structural adjustments” required to win northern aid. Africa’s food self-sufficiency subsequently declined and food imports rose.
Now skyrocketing prices in the international grain trade – on average more than doubling between 2006 and early 2008 – have pushed many in poor countries deeper into poverty.
…..prices on some food items are “500 percent higher than normal”….
“Food is not a commodity like others,” Clinton said. “We should go back to a policy of maximum food self-sufficiency. It is crazy for us to think we can develop countries around the world without increasing their ability to feed themselves.”

http://www.enn.com/agriculture/article/38551
Krugman may be struggling with the realization he is becoming irrelevant, and his intellectual legacy is evaporating. (His so called “Economic Nobel Prize” was for advances in Free-Trade theory. )

Kevin Kilty
May 27, 2012 6:30 pm

conradg says:
May 27, 2012 at 5:49 pm
Guys, there’s no form of economics that ever worked. Every single one had massive flaws and problems. There is no utopia, even of the conservative libertarian variety. If they had worked, we would have kept them in place. They didn’t….

Please point to the experiment in which we tried Libertarian, Laissez Faire, open markets, for long enough time to consider the results definitive, found them wanting, and then tried something else. Please point to exactly what didn’t work and how what we tried next improved upon it.
Moreover, you may not think that you’re on the hook for the U.S. National debt, but your children and grandchildren most likely are. Please have a good look at Argentina and Greece for a more complete explanation, but Argentina stiffed the bond holders (2000) and now “she” has trouble borrowing money at favorable rates. So, the Kirchner government is playing at the end game of nationalizing industry. Unless Argentina can finance internally the needed investment to make the economy grow (i.e. provide capital for business and industry) then “she” is on the slow growth path for a long while. In other words not on what you characterize as “…People lend the government money, they spend it, pay a little bit in interest, and everyone seems happy about it….”

Gail Combs
May 27, 2012 6:37 pm

Roy says: @ May 27, 2012 at 2:16 pm
…Keynes also had a major say in the Bretton Woods agreement in 1944…..
___________________________________
ERRRrrr I am not sure that is such a great feather in his cap.
Harry Dexter White was a long time US Treasury official and as assistant secretary of the Treasury (1945–46), along with John Maynard Keynes, was the principal architect of the Bretton Woods agreement. Confessed spies and FBI informants Whitaker Chambers and Elizabeth Bentley accused White of having been a Soviet “agent of influence” while in government. The declassified VENONA decrypts of Soviet diplomatic traffic during the 1940s appear to confirm the charges.

woodNfish
May 27, 2012 6:38 pm

Krugman is only suggesting that scientists do what he has been doing for years.

Judy Cross
May 27, 2012 6:43 pm

The “Nobel” in Economics is given by Sweden’s central bank Sveriges Riksbank.
So, a privately owned central bank gave Krugman his prize and when he repays them by spouting Bankster nonsense, it should not be a surprise. That we should still take him seriously is the real surprise.

Kevin Kilty
May 27, 2012 6:46 pm

Glenn Tamblyn says:
May 27, 2012 at 6:20 pm
…The problems around the world are due to governments not doing their jobs over the past several decades. So when the crash happens, they aren’t cashed up and ready to shoulder their burden during the bad times. It has been lazy government in the US and elsewhere that is a biig part of this mess. Lazy government in letting deficits run during boom times. Lazy government in not putting in place enough controls to ensure that things like sub-prime crises can’t happen. The private sector wont do that. The private sector caused the sub-prime crises for example.

Being not Japanese you can be forgiven for not seeing that government running a budget surplus and spending massively on programs of dubious value, helped maintain a 20+ year-long recession.
Being not an American you can be forgiven for not understanding how U.S. Federal mandates like the Community Reinvestment Act gave banks an incentive to relax loan standards and lend according to political needs–please read “Reckless Endangerment” for the full story. The sub-prime mess in the U.S., at least, is a perfect example of public/private partnership; just as green industry will be. What went on in Europe and Asia to induce their own version of subprime mess is unknown to me.
Australia has weathered the financial crisis because of the world-wide commodities boom. Please come back some years hence when we learn how raising taxes and fees on your mining industry in the face of a decline, most likely, in commodity prices works out…
Also please have a close look at the problems of trying to save money for a rainy day on the scale of national economies. How are most of those “sovereign wealth” funds doing?

DirkH
May 27, 2012 6:49 pm

conradg says:
May 27, 2012 at 5:37 pm
“Nor did NASA get financing from private industry. It was purely a function of big government centralized planning. Socialism, in other words. Heavens, it must be evil therefore.”
It surely cost you about 5 % of your GDP each year for as long as the Apollo program ran.

May 27, 2012 6:50 pm

conradg says:
May 27, 2012 at 4:17 pm

Bill Maher is a comedy show

I can’t speak for your intelligence, but your lack of taste is almost unlimited in this regard.
Bill Maher, Jon Stewart, & Steven Colbert all use precisely the same formula:
“Guys, it’s like this: we need to round up our enemies and put them in camps. Okay, I’m only joking. But seriously, the stuff they’re doing is unbelievably evil and we need to have them barcoded and possibly executed. Yeah, that was a little bit of a joke. Okay, but have you seen this thing they do? That is deserving of death camps, for sure. Haha, no we can’t do that can we?”
Or as Sean Medlock puts it: “Clown Nose on! Clown Nose off!

ROM
May 27, 2012 7:00 pm

i thought that Krugman already has had his desired stimulus to the USA economy and that did not need aliens to appear either for the stimulus to happen. Just some good old fashioned lies and corruption from a cabal of climate warming scientists did the same job.
And it doesn’t seemed to have worked at all in stimulating the economy as any supposed national economic results are in the negative and the benefits of the massive government investments are not even measurable.
.
From the Australian “JoNova’s” site.
“US Government *only* spent $70 billion on climate since 2008”
http://joannenova.com.au/2012/05/us-government-only-spent-70-billion-on-climate-since-2008/
UPDATE: Table 5. Budget Authority for All Reported Climate Change Programs
FY2008 through FY2012
(in millions of nominal dollars)
Department of Agriculture 1,418
Department of Commerce 1,932
Department of Defense 776
Department of Energy 51,824
Department of Health and Human Services 21
Department of the Interior 401
Department of State 422
US Agency for International Development 1,041
Department of Transportation 295
Department of the Treasury 1,112
Environmental Protection Agency 659
NASA 6,764
National Science Foundation 1,704
Smithsonian Institution 34
Totals = 68,574 billion US dollars
[ Official totals in the Table above are given as 68, 402 billion dollars.
There appears to be a discrepancy of 171 million US dollars in the 4 year totals from the Dept of the Interior in the official table above ]
So some 68, 574 billion dollars have been spent on global warming science and CO2 mitigation [ alternative energy ] in the USA alone in the 4 years from 2008 to 2012
Double that for the world at large!
And the results
Scientifically ; status quo with only the poorly funded skeptical scientists advancing the climate knowledge base
Economically; tending towards disastrous particularly in Europe.
Socially; promotion of despair and fear and now a number of rapidly increasing and potentially catastrophic, grossly energy deficient nations and populations with all the consequences that entails towards employment, industry, health and commerce and human welfare.
All of which was and is so totally unnecessary except to those fanatical zealots who will forcibly thrust their radical Gaia ideology and dogma onto the rest of the world if they ever gain power.
Krugman has already had his big scare campaign that was supposedly needed to stimulate economic activity, the results of which are just the opposite to what he claimed would happen
The source for the figures above are from Table 5
; Funding for Federal Climate Change Activities, FY2008 to FY2012
Congressional Research Service; April 26th 2012
http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=91e9fae6-083a-44f6-b47c-33fdac25d6e0

Peter Fraser
May 27, 2012 7:02 pm

Krugman and much of the world has forgotten that at the start of the current recession, some years ago now, the old Keynesian theories of the 1930’s were adopted vis. “Spend your way out of it.” This was adopted with enthusiasm by many countries. Unfortunately the double dip recession has meant that countries like Greece, Italy and Spain are now unable to service this debt.

DirkH
May 27, 2012 7:10 pm

byz says:
May 27, 2012 at 3:14 pm
“DirkH
stop trolling!!
I am being straight over this and not diverting, I have read his works and Keynes’s works and they do not agree.
As to the prison population they are like having someone unemployed, it would be better to have them doing useful work, than being locked in their cells 23 hours a day.
Afganistan is down to you not spending money on intelligence and defence in the first place, the US had been warned about those involved in 9/11 and didn’t act on it, you then paid the price.”
I wasn’t trolling. I was asking a polite question. And you have completely misunderstood the question.
First: The prison population. You say they are like unemployed – well, I don’t know what you do with your inmates but here in Germany they need to work if they want to earn money with which they can buy cigarettes – simple work, badly paid, but they are doing something useful – for instance folding leaflets or something like that.
But my question was: Is the COST of your prison system, the money you pay to the wardens etc., a boost to your economy? It should be according to Keynes.
Second: Afghanistan. Again, you misunderstand me entirely. I didn’t ask how you got into that situation or how you could have avoided that. As I was specifically asking for what Keynes would say about it, I was meaning to ask does the COST of the military operations boost your economy?
Sorry if you think I’m trolling. If a Keynesian does not like to be asked about these things, then it is difficult to fathom how a debate about Keynesianism with a Keynesian can be possible. Maybe Keynesians like it better not to be made aware of the contradictions of their belief system.

Rob MW
May 27, 2012 7:13 pm

“Every violation of truth is not only a sort of suicide in the liar, but is a stab at the health of human society.” – Ralph Waldo Emerson

dp
May 27, 2012 7:20 pm

Why does spending money on battling non-existent aliens work to improve the economy but tax breaks to all tax payers does not?

Nenndul
May 27, 2012 7:25 pm

Yes, because conservative supply-side trickle down economics was such a HUGE success. Let’s blame it all on the liberals…
Money is not a real thing, it is always a purely relative measure. If you think it is an absolute physical entity you have no standing to talk about economics in my opinion, and that is where virtually all the criticism of Keynes stems from. Did it not occur to you that this may be the reason why we had a gold standard in the past (until a CONSERVATIVE president dropped it)?
Stick to the science plx. Kthx.
Also, you are saying that you don’t think that this is what the “War on Drugs” and all of these other things are? Making up aliens is far less crazy that the war on drugs, let me assure you. And that isn’t the only thing either…

conradg
May 27, 2012 7:40 pm

Kevin Kilty,
Please point to the experiment in which we tried Libertarian, Laissez Faire, open markets, for long enough time to consider the results definitive, found them wanting, and then tried something else. Please point to exactly what didn’t work and how what we tried next improved upon it.
Ah, so you’re operating under the fantasy that there are, indeed, truly workable economic systems out there, that we just haven’t tried yet. Communists still make that claim, that “true communism” hasn’t been tried yet. It’s the “no true Scotsman” fallacy. Well, this one is impossible to refute, and so you are welcome to the fantasy. Just keep in mind that every economic system that has ever actually been tried, has been riddled with errors and problems. I think you should be a bit humbler about things, given that track record. I’m sure there are better systems out there, but the thing about problems is that solving them just creates more problems. And that applies doubly to economics. There’s no end to problems, and no end to people whining about them, and people claiming to have all the answers. It’s that kind of hubris which I thought this site was trying to combat.
As for the US becoming like Greece, that could only happen if the rest of the world is hugely more productive than the US. Greece isn’t in the problem they’re in because of debt, but because of lack of productivity. You seem not to understand that currency is literally relative. It has no value of its own. Where exactly is all that money supposed to go? It’s just paper and electrons, after all. It goes towards production.
A lot of people seem not to understand that the only purpose of money is to maximize productivity. It’s the creation of governments, used to make capital mobile and to ensure that as many people are working productively as possible. If it ceases to perform that function, we have economic collapses. It’s not due to debt, but to a misallocation of capital in inefficient ways. Unemployment is one of the most egregious forms of inefficient productivity, and using money and debt in various fictitious ways to get everyone working is what it’s all for.
And this is the underlying truth behind Krugman’s joke. As an economist, he knows better than most that money and debt is a useful fiction, kind of like inventing a story about aliens invading to get the everyone working again. Deficit spending is very much like that – a useful fiction about fictitious money used to get everyone working again, solving a lack of faith in the system of fictitious currency. Much of economic life involves the suspension of disbelief in various fictitious forms of money and debt so as to get everyone working more productively and taking part in the fruits of that.

Samurai
May 27, 2012 7:43 pm

Keynsian Economics and CAGW are both failed theories resulting from the same fundamental mistakes: distortion of historical data, basing assumptions on failed models, confusing correlation with causation, a belief system based on dogma rather than evidence, failure to address unintended consequences, argumentum ad populum, argumentum ad verecundiam, political agendas supersedes contrarian evidence, etc.
Eventually, both theories will be thrown on the trash heap of history because they simply don’t work and evidence to the contrary invalidates them.

TRM
May 27, 2012 7:50 pm

“The last card they will play will be alien invasion” – Attributed to Werner Von Braun by his assistant (Dr. Carol Rosin) for the last several years of his life.

DesertYote
May 27, 2012 7:51 pm

Glenn Tamblyn
May 27, 2012 at 6:20 pm
###
You appear to be confused by a few things, but mostly about the nature of what is happening in the US, its politics, and the diversity of its citizen’s world view. Not to be insulting, but this is understandable as your only source of data has been predigested to conform to a world-view that you have been trained to have. I really doubt that you can understand a traditional American conservative world-view. I hope I am wrong. I have met many Australians who do understand, but finding that out was difficult due to language. because of the stranglehold on public discourse held by lefties until recently, conservatives have not had much of a chance to develop a common vocabulary.
Any system of thought that puts validity in the “Left-Right” dichotomy is going to be socialist. The dichotomy is a deliberate creation of socialists. The purpose is to severely limit political discussion so that it is always within a Marxist world view. With that, no mater which side “wins” socialism succeeds. Every political ideology that is not lefty, is mapped onto this abstract “right” by academia and the new media. Any characteristic that does not conform and can not be reinterpreted, is ignored and forgotten. That which can be reinterpreted, is then represented (usually with some distortion) as aspects of this “Right”. Then remaining characteristics are in filled, without any supporting evidence. Lack of supporting evidence does not matter because that evidence will be imagined and in remembrance, the imagined and the real become one.
In a very real sense every problem in the US can be laid right at the feet of socialists.
Governments can not fix anything. The more they try, the more they break things, even with good intentions. So even ascribing good intentions, which is quite a stretch when socialists are involved, by the time a government reacts to a trend, the trend has changed and whatever the reaction was is ineffective at best, but more usually damaging.
BTW, a socialist is anyone who believes that society needs to be engineered and it is the roll of government to do that engineering.
One more thing. I am pretty autistic and trying to serialize out complex thoughts is difficult. That is why I tend to limit my input to inanities. I hope what I wrote makes sense, but I fear that I might as well have been writing in Japanese.

ferd berple
May 27, 2012 8:06 pm

“But look, I mean, whatever it takes because right now we need somebody to spend, and that somebody has to be the U.S. government.”
===========
Why? If the government is going to borrow money, why not give it to the people and let them spend it? They will most certainly do a better job than the government.
In effect the government is like your children when they borrow your credit card. They go to the store and buy a bunch of stuff they don’t really need of dubious quality, because it isn’t their money. They don’t care. Heck they might even buy stuff for their friends if you aren’t watching.
However, when the bills come at the end of the month you have to make the payments – while the kids are out partying – laughing at your stupidity.
The US Federal Reserve is NOT owned by the people of the US. It is owned by private bankers. Their interests are not the same as those of the US people. When the US government borrows money from the Federal Reserve, the government isn’t going to pay it back. They are going to spend it and a lot of it they will spend foolishly.
It is you the taxpayer that will have to pay it back. One way of the other.

DesertYote
May 27, 2012 8:10 pm

YIKES!!!
In my post, that “new media” was supposed to be “news media”. It has been “new media” that has provided the remedy!
BTW, any economist (Keynes) that had put faith in their ability to model the effects of government involvement in a economy were fooling them selves because the mathematical tools to do that modeling did not exist until fairly recently. Some early economist were rightly suspicious of the utility of such modeling.

Mac the Knife
May 27, 2012 8:16 pm

Glenn Tamblyn says:
May 27, 2012 at 6:20 pm
“Maybe America is in so much trouble because your ideas about yourselves and what America is are just too simplistic. Noble ideas are usually wrong because they just don’t accept the reality of how messy reality actually is.”
Glenn,
Our Dear Leader and his socialist supporters have stabilized the economy of the United States of America in an unrelenting recession! Their misguided actions, of inflating the money supply to support incredibly wasteful public sector spending while simultaneously strangling private enterprise job creation with suffocating regulations, are destroying creativity and profits while driving energy costs ever higher. We have coal and oil reserves within the contiguous United States sufficient to meet our energy needs for the next 300 years, yet we can’t tap and develop them because our socialist governments policies and regulations prevent their development!
This is not ‘The Capitalist Regulated American Model’ of our fathers. This is The Ig-Noble Socialist Model of the Neo-European America! Or should I say Nobel Socialist European Model?! It is killing my country. We accept the reality of just how destructive the Ig-Nobel Socialist European Model really is and how incredibly messy and wasteful it is! We are determined to take our country back before Our Dear Leader and his socialist supporters can drive us past the economic tipping point of NO return that Europe finds itself on the precipice of now. We damn well know what works best! We’ve been there….
Glenn, You don’t have to look any further than the economic mess that is the European Union right now, to see the simple truth that socialist ‘noble ideas’ yield an unrecoverable economic mess that leaves destruction and despair nearly everywhere it is embraced. When the economic destruction is sufficient, revolutions, wars, and famines result. With this on the horizon, why would any sane person continue to ‘compromise’? With this on the horizon, why would any sane person advocate more ‘compromise’? Compromise and tolerance are what have brought us to the point of anarchy and destruction. The hard times are here, thanks to ‘compromise’.
Screw ‘compromise’. Compromise has screwed us! No more…..
MtK

Mac the Knife
May 27, 2012 8:27 pm

Samurai says:
May 27, 2012 at 7:43 pm
“Keynsian Economics and CAGW are both failed theories resulting from the same fundamental mistakes: distortion of historical data, basing assumptions on failed models, confusing correlation with causation, a belief system based on dogma rather than evidence, failure to address unintended consequences, argumentum ad populum, argumentum ad verecundiam, political agendas supersedes contrarian evidence, etc.
Eventually, both theories will be thrown on the trash heap of history because they simply don’t work and evidence to the contrary invalidates them.”
Nice parallel, Samurai !!
MtK

ferd berple
May 27, 2012 8:28 pm

Nenndul says:
May 27, 2012 at 7:25 pm
Money is not a real thing, it is always a purely relative measure.
=====
The banks will not agree when they foreclose. Money is a promise to pay. A Promissory Note. And the Law says you will pay or lose your property.
Right now every man, woman and child in the US owes $50,000 and this is increasing exponentially. This debt is the modern day equivalent of slavery. Indentured servitude wearing lipstick and a filly dress.
This is the single greatest threat facing the US people and it is beyond the ability of the government to solve. When the money runs out, great empires collapse first from within.

ROM
May 27, 2012 8:33 pm

If we are to believe the demographers, sometime around 2050 the world’s population will finally cease to grow and then may plateau for a generation or so before it begins to fall. That fall in quite a lot of the developed world’s national populations can already be found by checking through the “Index Mundi” site which uses the CIA facts book as it’s original source.
http://www.indexmundi.com/g/g.aspx?v=24&c=xx&l=en
Our capitalism system relies upon growth in every field, increasing money supply, increasing population to consume, increasing industrial output, increasing consumption and etc for it’s very survival.
After the global population ceases increasing there will be long period where the standards of living in a very large part of the global population will continue to rise and so the increases in consumption and much else needed for our present type of capitalistic system to survive will continue on.
But there will come a time when the both the consumption of goods and services by individuals and by entire populations and societies will level off which can generally be defined as the level where individual’s and society’s energy needs plateau per unit of population.
And by then late in the 21st century there is likely to be a long slow decline in human populations under way.
When this global population decline and the slow down in the rise of living standards and consumption cross over, then the present capitalist system as we know it will likely fail.
Japan has been the canary in the mine in this regard with it’s 2 decade long stagnation of it’s economy and it’s rapidly aging and now declining population. Russia is not far behind with it’s rapidly declining population as is the case with many developed western countries.
Japan’s salvation is that despite a high level of xenophobia, they are able to and have been importing large numbers of younger labour from surrounding Asian nations to keep their industry manned and their economy and industry still running at a reasonable level of efficiency.
And they have been exporting their industry into cheaper labour markets but maintaining the underpinning technology within their own ranks and in doing so importing the wealth generated by others back into Japan which has helped Japan to maintain a consistently high standard of living despite it’s rapidly aging and now falling population.
That option will soon run out for Japan as other nations start to face the same labour shortage situation, a shortage that even China may start to face around 2020 as the long term outcome, the aging of offspring of their now 2 or 3 decades old one child policy starts to cascade down though their society.
i am an old man now but much of this will happen within the lifetimes of those who are now in their early working lives and who still have another half a century at least of a lifetime ahead of them.
That old Chinese curse may yet carry far more angst for future generations than any might wish for.
“May you live in interesting times”

Mac the Knife
May 27, 2012 8:36 pm

DesertYote says:
May 27, 2012 at 7:51 pm
“…….In a very real sense every problem in the US can be laid right at the feet of socialists.
Governments can not fix anything. The more they try, the more they break things, even with good intentions. So even ascribing good intentions, which is quite a stretch when socialists are involved, by the time a government reacts to a trend, the trend has changed and whatever the reaction was is ineffective at best, but more usually damaging.
BTW, a socialist is anyone who believes that society needs to be engineered and it is the roll of government to do that engineering.
One more thing. I am pretty autistic and trying to serialize out complex thoughts is difficult. That is why I tend to limit my input to inanities. I hope what I wrote makes sense, but I fear that I might as well have been writing in Japanese.”
DesertYote,
Thank You! You make perfect sense to me, Sir!
MtK

May 27, 2012 9:18 pm

“this is in nucking futz territory”
How so very………….engineerish!
(If you can make up words, so can I.)
Love this site. Keep up the good work!
By the way, I tried looking up the “old Chinese curse: may you live in interesting times”. The phrase was first mentioned mid 1930’s by people in the diplomatic service, although no actual Chinese translation is noted. It was used by Robert Kennedy in 1966 who may (or may not) have gotten it out of a fortune cookie. But is does sound learned, cool, and inscrutable. I used to use it that way (to appear learned, cool and inscrutable) until I looked it up. Oh, fiddlesticks!
http://en.wikipedia.org/wiki/May_you_live_in_interesting_times
Steamboat Jack (Jon Jewett’s evil twin)

Christopher Hanley
May 27, 2012 9:27 pm

US government debt has risen from around 70% to over 100% of GDP in the last two years (compared to around 120% in 1946).
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Krugman’s answer is that the stimulus spending was not enough, which is a form of Zeno’s paradox.
How far does Krugman want to push it?

Kevin Kilty
May 27, 2012 9:28 pm

conradg says:
May 27, 2012 at 7:40 pm
Kevin Kilty,
Please point to the experiment in which we tried Libertarian, Laissez Faire, open markets, for long enough time to consider the results definitive, found them wanting, and then tried something else. Please point to exactly what didn’t work and how what we tried next improved upon it.
Ah, so you’re operating under the fantasy that there are, indeed, truly workable economic systems out there…

No, I am asking you to point out where these tests have been made that you claim disprove each and every economic system.


As for the US becoming like Greece, that could only happen if the rest of the world is hugely more productive than the US. Greece isn’t in the problem they’re in because of debt, but because of lack of productivity. You seem not to understand that currency is literally relative. It has no value of its own.

Greece is in the pickle it is because it has low productivity AND has been using debt to live beyond its means. Without the debt there’d be no issue, would there? If Greeks want to live in a manner befitting low productivity then that is their business, but if they want to live better, yet do so through borrowing, then that becomes a larger issue. The lenders have already taken a haircut, but they aren’t lending new money to Greece at low rates, and this is where Greece is currently in a tight spot.
What I do or do not understand about currency you don’t know about at all; what I do know is that lenders do not perpetually throw good money after bad. They will go looking for better investments, or they will get interest rates that befit the risk.

wacojoe
May 27, 2012 9:33 pm

Why is it that when I see an image labeled “Paul Krugman” I see Wesley Mooch looking back?

ROM
May 27, 2012 9:41 pm

Socialism is very successful until it runs out of OPM.
[ OPM = “Other People’s Money”. ]

Merovign
May 27, 2012 9:44 pm

It’s not the first trip down Alien Invasion Road for Krugman, it’s his own personal Broken Windows Fallacy.
Though I’m far less offended by someone going on about aliens than I am by somebody who thinks the solution to massive debt and grinding regulations stifling an economy is more debt and political graft (which is all we got out of the last doses of “stimulus”).
Krugman is the economic equivalent of a mad bomber.
Also, “take ideology out of it” has always meant “follow my ideology,” 100% of the time. There is no exception. Everyone but a handful of “radicals” thinks they are moderate and middle-of-the-road, and even the radicals often claim that.
And on top of that, international discussions on politics are almost impossible because, as DesterYote pointed out, the words don’t mean the same things, even if the language looks alike. Most of the commonwealth doesn’t have anything like the “American Right,” the political traditions aren’t the same, especially the words “right wing” mean totally different things in the US than the commonwealth or Europe.

May 27, 2012 9:54 pm

conradg says:
May 27, 2012 at 5:55 pm
“REPLY: Reality check Conrad. Explain how you’ll personally be paying back the $138,000 you owe squandered by the US government on deficit spending”
First, I don’t owe that money, the government does, and so the creditors can’t come after me for it.

The creditors can’t, but the IRS can — and if you think the government isn’t going to raise your taxes to cut some of that deficit, you’re in for a rude awakening.
And frankly, most of the people who are owed that money are not my concern. The debt is a fiction of currency swaps.
Swapping currency from one person (or entity) to another based solely on a promise to repay is a debt. When you go grocery shopping, the food in your cart is debt until you arrive at the register and pay for it.

Allan MacRae
May 27, 2012 9:59 pm

Hansen, Krugman, Suzuki and such
These global warmists are nucking futz
Check for mercury in the water supply
The New Mad Hatters are riding high

George E. Smith;
May 27, 2012 10:09 pm

“”””” ROM says:
May 27, 2012 at 9:41 pm
Socialism is very successful until it runs out of OPM.
[ OPM = “Other People’s Money”. ] “””
Strange; the exact same thing is true of Capitalism. Smart investors always play only with OPM.

May 27, 2012 10:20 pm

Yes, Krugman is serious about his proposal to concoct a story about an alien invasion…Of course, he’s making a point about economics, that it doesn’t matter how you justify a stimulus from economic standpoint as long as it is enacted…
You guys have a lot of difficulty with abstraction apparently…My advice: Take a literature class and an economics class as well…

Stephanie Clague
May 27, 2012 10:24 pm

Actually the ‘big lie’ to engender a common popular action as directed by a particular priesthood/leader/elite/ruling class is as old as civilisation itself. How do you get a mass population to engage in a common effort for which they would normally have little interest in expending their energies or changing their established way of life in order to achieve the required objectives?
The methods are:
Slavery, enslave a workforce/population and force them to obey a central will, whips and threat of death and work camps and a police state.
Fear, instil in a population the belief of an external or internal threat great enough so that self interest dictates the required common action. This could be an external enemy or a minority population like the Jews or an invented entity.
Fraud, make up a God illusion that the population can hold in common and spread the word that this superhuman God wishes for some works to be done. Spread through a priesthood that the God/s will be angry and visit fury and vengeance upon them if they fail to engage in the common activity.
Self interest, make it known that unless an action is taken disaster is certain to strike, that unless common action and sacrifices are made now the future will be an awful hell on earth with fire and brimstone and pain and suffering, people throughout the ages have feared the future more than anything else and are likely to take any action if they can be fooled into taking action that they believe will help them in the future.
The beauty of these three methods are that they are infinitely interchangeable, combinations can be used to great effect to gain the trust of a population, instil fear, encourage mass group identity, encourage hatred of those who do not wish to take part. The CAGW fraud is not a new phenomenon at all, in fact frauds like it have been a central part of the human story from Stonehenge to the pyramids to Nazi Germany. How to get a population to obey a central or individual will, how to construct something new or destroy something old, how to gain power or how to seize a throne or overthrow an old deity. The central players are always the elites, the tiny minority who need the muscle power or obedience of the greater mass to achieve their aims. This elite will lie and cheat and deceive and manipulate and terrorize to reach their common objectives, the fewer morals they have and hold the greater the chance of success, at least in the short term. The fact that like death, the ends of such advancement of a cause always ends in the death/collapse/destruction of that cause is ignored. A peculiar contradiction of this paradigm that the ends justify the means directly causes the ultimate failure of the project itself and yet this lesson is seemingly never learned by the current architects of the current fraud. Those who do not learn from history are doomed to repeat it, maybe that is humanitys curse.

George E. Smith;
May 27, 2012 10:28 pm

“”””” DirkH says:
May 27, 2012 at 6:49 pm
conradg says:
May 27, 2012 at 5:37 pm
“Nor did NASA get financing from private industry. It was purely a function of big government centralized planning. Socialism, in other words. Heavens, it must be evil therefore.”
It surely cost you about 5 % of your GDP each year for as long as the Apollo program ran. “””””
Need to check your history DirkH. The Apollo Program didn’t cost US taxpayers one brass razoo !
President John F Kennedy, committed the US to investing $40B and ten years to put a man on the moon and return him safely to earth.
The program came in two years ahead of schedule, and under budget ($35B). That entire investment was recouped and then some in the next 8 years, simply from the reduction in crop losses in the US South East, as a consequence of improved forward weather forecasting and severe weather warning. That came about because Apollo was a manned project, and it was required to maintain round the world round the clock continuous contact with the vehicles, and with the world weathr conditions, for crew safety. Now when you consider the vast array of advabced materials and technologies that were developed for that program, it is easy to see, that the astronauts just went along for the ride. The project was a technology tour de force, that may never be surpassed.
Compare CERN with Apollo as an investment in useful science and technology. Well CERN is at least useful in employing thousands of otherwise unemployable people.

George E. Smith;
May 27, 2012 10:32 pm

And the “Planning” of the ApolloProgram had very little to do with the three branches of the US federal government. It was in fact a result of competent corporate managers, in addition to the NASA umbrella. More like big industry.

johanna
May 27, 2012 10:35 pm

I must once again jump to the defence of Keynes here, even though I have significant reservations about his views. Poor man, he has been misinterpreted and demonised, especially thanks to charlatans like Krugman.
Keynes never said that the way to dig yourself out of structural debt is to spend more.
Keynes never said that having more people in prison, or war, is good for the economy because it creates jobs.
His work was much more nuanced than people give it credit for. And, his prescription for short term volatility (save in good times, spend in bad) is hardly controversial. The problems faced by many Western economies are a result of long-term, structural, unsustainable deficits. Not the same thing at all.
As for the effect of war on economies, it varies. Destruction of old infrastructure can result in building new, state of the art infrastructure, as happened in Japan, South Korea and Germany – provided the conditions are right and capital is available. But, wartime restrictions can become bad habits, for example the retention of rationing and associated regulation for years afterwards, which happened in both the UK and Australia (that I know of). Only when rationing was abolished, and production deregulated, did supply and demand match up again.
Desertguy, I think your comments about the left/right dichotomy are very insightful. There is a lot of miscommunication on this blog and more generally because (a) people don’t understand that the US political tradition is quite different from the European, British and their derived ones; and (b) it follows that the terminology causes confusion. And I say that as an Australian, who is more in the Euro/UK camp in terms of political tradition, but has spent time in the US.

May 27, 2012 10:38 pm

Gary Pearse says:
May 27, 2012 at 5:12 pm
Prime Minister Harper of Canada has, so far, steered through the global economic minefield that has been blowing up countries large and small. ……..
=====================================================
Exactly, he got the government out of the way and let people do what they do best. Further, his encouragement, allowed for real wealth creation and not some silly market/money switch trick. He’s set Canada on solid footing and is a worthy study.

May 27, 2012 10:58 pm

Krugman wasn’t always crazy. The baby sitting club was quite good.
http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html

May 27, 2012 11:20 pm

How foolish. What’s worse is there are many people who will automatically believe him.
Here’s how Krugman economics really work:
The Broken Window Fallacy

EternalOptimist
May 28, 2012 12:20 am

Krugman is missing a trick here, the economy is no more complex than the climate.
Why dont we have a great big model, written by the most brilliant scientific econo-gurus that the world has ever seen. They can base their global economy algorithms on the micro economy of – say – a small town in Northern Siberia.
These alorithms can then churn away in the model (Been Had Crud) and the resulting concensus will be that we need a high speed rail link paid for by the fed

Ian E
May 28, 2012 12:48 am

It might be better to call his ideas nuts – calling someone nucking futz could be regarded as a mini-Heartland-poster moment! The fruitcake/weirdo descriptions don’t move the argument forward (ask the UK’s Cameron about that!)

gopal panicker
May 28, 2012 1:13 am

on food prices: i seem to remember they took off as more and more corn was diverted to ethanol production…corn ethanol does not make much sense if you compare the energy input and output…by the way the Indian govt is sitting on 75 million tons of food grains, much of which will go to waste once the monsoon starts…
on the alien lie idea: i thought we already tried that when we went to war in Iraq over imaginary WMD…without raising taxes and doubling the national debt in the process
on climate: Krugman does not know what he is talking about…i think politics has no place in this debate…unfortunately it has deteriorated into mutual abuse

Sam Geoghegan
May 28, 2012 1:15 am

Krugman debate
Bring it on!
http://www.krugmandebate.com/

Jimmy Haigh.
May 28, 2012 1:20 am

Now if we really do have an alien invasion no one will believe them…

Ryan
May 28, 2012 1:43 am

I’m not sure if he’s completely nuts, but basically what he seems to be saying is “scientists should tell huge lies to the public to get the public to support political agendas that I happen to believe in but which are not currently supported by the public”.
….which sounds awfully similar to the AGW approach.

Stuck-Record
May 28, 2012 1:50 am

Looks like he’s read Adam Robert’s sci-fi masterpiece ‘Yellow Blue Tibia’.
http://www.amazon.com/Yellow-Blue-Tibia-Adam-Roberts/dp/0575083573

Sam Geoghegan
May 28, 2012 2:03 am

EternalOptimist,
the models are needed to make the arbiters right. Macro-economic models serve economic central planning, warming models do the same -no coincidence.
Ultimately, it doesn’t matter what we think about government crackpots because come every election cycle, we’re ducks in a pond fighting over bread crumbs. We refuse to give up on the central planners.

Arizona CJ
May 28, 2012 2:37 am

If you think about it, high speed rail would be an ideal way of detering any conquest-mined aliens; it’d be clear and convincing proof that there’s no inteligent life on this planet.

MikeC in NS
May 28, 2012 3:25 am

Clearly, he is calling for a Martian Plan.
8-]

Myrrh
May 28, 2012 3:49 am

DirkH says:
May 27, 2012 at 7:10 pm
byz says:
May 27, 2012 at 3:14 pm
“DirkH
stop trolling!!
I am being straight over this and not diverting, I have read his works and Keynes’s works and they do not agree.
As to the prison population they are like having someone unemployed, it would be better to have them doing useful work, than being locked in their cells 23 hours a day.”
I wasn’t trolling. I was asking a polite question. And you have completely misunderstood the question.
First: The prison population. You say they are like unemployed – well, I don’t know what you do with your inmates but here in Germany they need to work if they want to earn money with which they can buy cigarettes – simple work, badly paid, but they are doing something useful – for instance folding leaflets or something like that.
But my question was: Is the COST of your prison system, the money you pay to the wardens etc., a boost to your economy? It should be according to Keynes.
====================
http://www.globalresearch.ca/index.php?context=va&aid=8289
“There are approximately 2 million inmates in state, federal and private prisons throughout the country. According to California Prison Focus, “no other society in human history has imprisoned so many of its own citizens.” The figures show that the United States has locked up more people than any other country: a half million more than China, which has a population five times greater than the U.S. Statistics reveal that the United States holds 25% of the world’s prison population, but only 5% of the world’s people. From less than 300,000 inmates in 1972, the jail population grew to 2 million by the year 2000. In 1990 it was one million. Ten years ago there were only five private prisons in the country, with a population of 2,000 inmates; now, there are 100, with 62,000 inmates. It is expected that by the coming decade, the number will hit 360,000, according to reports.
What has happened over the last 10 years? Why are there so many prisoners?
“The private contracting of prisoners for work fosters incentives to lock people up. Prisons depend on this income. Corporate stockholders who make money off prisoners’ work lobby for longer sentences, in order to expand their workforce. The system feeds itself,” says a study by the Progressive Labor Party, which accuses the prison industry of being “an imitation of Nazi Germany with respect to forced slave labor and concentration camps.”
The prison industry complex is one of the fastest-growing industries in the United States and its investors are on Wall Street. “This multimillion-dollar industry has its own trade exhibitions, conventions, websites, and mail-order/Internet catalogs. It also has direct advertising campaigns, architecture companies, construction companies, investment houses on Wall Street, plumbing supply companies, food supply companies, armed security, and padded cells in a large variety of colors.”
According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.”
Slave labour for capitalists and jobs taken out of the market place. And re Afghanistan, on the back of the bwankers industrial/military business.

Frederick Davies
May 28, 2012 3:57 am

“Insanity: doing the same thing over and over again and expecting different results.”
-Albert Einstein
What else needs to be said.
FD

Ed Zuiderwijk
May 28, 2012 5:48 am

I think you’re wrong here: the real idiocy does start after he mentions the aliens, when he calls for the US Government to spend spend spend. That’s lunacy, what’s needed that the govenment shrinks as part of GDP and as quickly as possible. But then again you’re right, there are people who are pathologocally incapable of recognising their own nonsense.

Mickey Reno
May 28, 2012 6:21 am

Note to Paul Krugman: DUDE! When you’re initiating a secret grand conspiracy, DON’T talk about it on the TV! Now everybody is wise to the scheme, and won’t believe the alien invasion story. Oh, there’s one more tiny issue with your logic, Paul. IF people had believed an alien invasion was imminent, wouldn’t we be demanding rockets, missles, laser beams and nukes, and such? Wouldn’t we be wanting our resources dedicated to building nuclear reactors in some of our deepest mine shafts? WHY exactly would you imagine terrified people would be demanding a new high speed rail line between San Francisco and L.A? We all know that one of the first targets to be hit is going to be L.A. Haven’t you ever watched “Independence Day,” fer godssake? 😉

MattN
May 28, 2012 6:47 am

He’s obviously kidding about aliens, but he’s not kidding about lying to the public in order to support government action on something. That is completely irresposible, and I weep for the future of science. I really hope this type of thinking is all but gone once my 3 year old enters school and learns science.

AlexS
May 28, 2012 6:49 am

What to expect of Krugman and all public Keynesians of Government-Media complex . Even the word “Austerity” is Keynesian: When the taxes go up there is no call of “Austerity” in Media. People get less money no? So why the Media don’t call Austerity when taxes go up…?
But when the Government have to have less bigger deficits – note i am not even talking about surplus- the Media call it “Austerity”…
Depression,Recession are the natural consequences of a credit bubble – a credit bubble by definition didn’t produced enough wealth to pay its debt. If everyone was trading/building stuff because the credit was so cheap, but even with so cheap can’t pay, that means when that stops the whole thing crumbles to realistic levels : a recession is the path to realistic levels of trades between people.
I should add others factors that make the perfect storm : demographics, improved products, technological evolution -easier to build stuff, technological plateau with diminishing returns, most of education in hands of the left and socialists which means an huge imbalance in professional fields, over regulation and red tape that punishes everyone that makes anything.

Jim T
May 28, 2012 6:53 am

tomjtx@sbcglobal.net says:
“He is making the point that gov’t spending is what will bring us out of the great recession and referencing that it took the arms spending we did just before we entered WW2 to lift us out of the depression.”
It is a fallacy that WW2 was a good example of Keynesyan economics. it was other people’s money that began to lift America out of the depression. The British and French governments spent huge sums of money with US arms manufacturers months before the US government began spending. In fact North American Aviation was close to going bust before it was rescued by the British contract for the P-51 fighter plane. Britain itself (a relatively prosperous nation at that time) was effectively bankrupted by war by the time that the Lease-lend Act was passed. In short, the US may have ended the war with a revitalized economy, pretty much everyone else was ruined.

JimB
May 28, 2012 7:16 am

The idea that your government can just print money to stimulate the economy (proposed by a certain Nobel Prize-winning nut) was tried by Germany after WWI. I recall as a child collecting stamps from Germany with values in the milllionen mark. That experiment ended up with another experiment in government…National Socialism and Adolf Hitler.
Our current problem was caused by an over-expansion of credit (home-building bubble) and speculation by banks which were “too big to fail”. Both problems can be solved by prudent leadership. And by splitting the big banks into investment and banking moeities. And if a bank is still considered to big to fail, break it up also.
Maybe a good first step would be to outlaw financial paper that has no function except as a bet or a financial hedge. Real hedges excepted.

Mark Whitney
May 28, 2012 7:27 am

It’s right out of ‘The Report From Iron Mountain’ that also suggested environmental fear to grow government.

Grant
May 28, 2012 7:39 am

If Krugman is nuts about anything it’s his idea that were in a depression and two, that building trains like mad will do anything to help our economy.
I like his even more insane insistence that debt doesn’t matter because we just owe it to ourselves. I don’t think he believes any of it. He’s just busy making money off economic illiterates that flock to CNN and Bill Mahre for justification of their president’s mad spending policies.

May 28, 2012 7:44 am

“In short, the US may have ended the war with a revitalized economy; pretty much everyone else was ruined.”
People forget that fact. If one was to apply the ‘Broken Window’ Fallacy to WWII…and today being Memorial Day…remember those that paid the ultimate price for our freedom.
40,000,000 people died because of Progressive, Socialist beliefs. The argument that we somehow spend our way to prosperity is a weak one.

May 28, 2012 7:48 am

NY Post takes Krugman to task… Money Quote!
“Krugman’s principal job may be to throw his readers the liberal equivalent of red meat (organic, sustainable, fair-trade soy with nontoxic pink dye?). ”
http://www.nypost.com/p/news/opinion/opedcolumnists/krug_attacks_cv5ld2kSZ5DFnNMQcxt8aJ

May 28, 2012 8:25 am

According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.”
From another commentator, one of the “grand conspiracy theory” people. OH, the Prisons are a mean, wicked, capitolist system. Baaaaahd, BAAAAHHHD!!! (Like a SHEEP.)
Buddy, yes, wrong topic…but one to get some of us really RILED. My 34 year old Nephew is a “guest” of the “State” in a large city containing area. (I’ll demure from too much info, family privilage shall we say.)
WOULD that he was “occupied” doing such tasks. My fear (and from what I know about the system in that state, not MY home state, which actually is rather PROPERLY PROGESSIVE on trying to give the inmates “a chance”…)is that all he will do in the next 8 years is learn to become a more accomplished street hoodlum.
If I had my “wish” he’d spend the rest of his LIFE in “custodial care”…. If we don’t have courage enough to EXECUTE those who prove themselves “un-adjustable”, by the technical 1/2 way point on their lives (70 years, once upon a time…35= 1/2 way..), or to “deep freeze” them, hoping for a day and a way to “un-thaw” and “fix” their adjustment problem…then, yes…humanely, we need to BIT THE BULLET and develop a system of “custodial care”.
But being a “profit making industry”??? HA! In the state where my nephew is, they WISELY decided, about 15 years ago, to allow the “contract prison” building in the “outstate” areas, 250 miles plus from the MAJOR METRO. In rural areas with “high unemployment” at the time. THERE IS A POSITIVE RESULT FROM THIS, it helped many people in those areas SURVIVE during various “tough times” in the last 15 years.
So take your conspiracy and STUFF IT!

May 28, 2012 8:35 am

JimB says:
“Our current problem was caused by an over-expansion of credit (home-building bubble) and speculation by banks which were “too big to fail”. Both problems can be solved by prudent leadership. And by splitting the big banks into investment and banking moeities. And if a bank is still considered to big to fail, break it up”
The Glass-Steagal Act did that from 1933 until 1999 when it was repealed.
Since 1999 we have had the Internet Dot Com bubble followed Home-Building bubble.
…I am just saying.

eyesonu
May 28, 2012 8:38 am

Ryan says:
May 28, 2012 at 1:43 am
I’m not sure if he’s completely nuts, but basically what he seems to be saying is “scientists should tell huge lies to the public to get the public to support political agendas that I happen to believe in but which are not currently supported by the public”.
….which sounds awfully similar to the AGW approach.
==================================
Hammer meets nail.
You have hit the nail on the head.
Question is: Why does one believe that nailing my feet to the floor is a good thing? Build something worthwhile and support it on its own merits, and stop the damn lying. Real science is being destroyed as well as the world economy.

May 28, 2012 9:33 am

Here’s someone that understands the economy, Jim Rogers. He sees a time like the Great Depression coming very soon. He has real success in the economy for 44 years now. Krugman only knows left wing ‘economics’. You’ll learn what really works in the economy from Jim Rogers. You can find 100’s of videos of him on the internet.
(p.s., I’m not linking the video because it’s from Glenn Beck, I’m not really a big fan of him, but I also am not opposed to him)
Unfortunately Jim Rogers sees a very, very bad economic time coming to America.

Reply to  Amino Acids in Meteorites
May 28, 2012 10:25 am

@Amino Acids…
I have heard Jim Rogers many times…over many years.
Jim Rogers was Co-Founder of the Quantum Fund…the other Co-Founder was George Soros.
However, he did leave the Quantum Fund in 1980, more than a decade before Soros broke the Bank of England.
I will take JimRogers and the Austrian School of economics (think Hayak, Nobel in 1974) over Krugman…or Gore…or Obama…all Nobel ‘winners’.

n.n
May 28, 2012 10:26 am

The food prices can be linked to excessive leverage, which have caused massive and progressive distortion of economies and markets. What we seem unready to do, is to distinguish between cause and effect. Was the cause dreams of instant gratification or individuals, cooperatives, and authoritarian interests (i.e. government) who exploited those dreams for their selfish interest?
As for “global warming”, that appears to be little more than a scheme to generate new revenue streams and subsidize marginal and unproductive economic, academic, and governmental enterprises.

Reply to  n.n
May 28, 2012 10:35 am

@n.n.
I would argue food price inflation is linked to Biofuel and the expansion of the Food Stamp program.
Much stronger cause and effect relationships can be observed…I think.

May 28, 2012 11:44 am

Richard Salsman and others have explained how government spending cannot improve the economy. Government does not produce, it consumes. The act of redistribution, which government spending inherently is, reduces the ability of taxpayers to produce and favours the inefficient (who get the spending because they are able to whine or con more than others, or “have connections”).
Salsman has pointed to government spending as slowing recovery from the Great Depression.
Of course the scare tactic to justify oppressive measures is a popular one, Hitler used it to advantage. (Hitler was of course more capable than Krugman, an evil genius. Marxists like Lenin were good at using the scam as well, especially against business people. Marxist Pol Pot )
The underlying belief of people like Krugman is that people can be manipulated and should be, which comes from viewing humans as mentally incapable and untrustworthy.
History shows otherwise – freedom protected by a justice system fosters humans. But Krugman and his defenders work against freedom. Why?

May 28, 2012 11:48 am

“Aristotle based his philosophy on what seemed reasonable and all science was constrained for over a thousand years, when mathematical rigour and experiment were unleashed we started thinking differently (as Steve Jobs was keen on) and we advanced past the Greeks.”
(byz says: May 27, 2012 at 12:25 pm)
Say what?!
Mathematical rigour and experiment (testing against reality) were greatly advanced by Aristotle’s teachings.
The decline from the best of the Greek era (noting Aristotle was an ancient Greek) resulted from a shift to the bizarre mind-body dichotomy of Plato, which always leads to superstition and emotions as the preferred means to knowledge. I suggest David Harriman’s book “The Logical Leap” as one way to see the difference.
(It also leads to nasty people like Krugman, because they find out that their way of obtaining knowledge doesn’t work well, they never know what to do because they reject principles – of morality not just science, and other people don’t do what they want. So they use the only ways they – emotions and force.)
Then “byz”(antine) goes on to make the grossly ignorant claim that banks horde money. Reality is that banks make money by loaning out money, much of which is from depositors who are paid interest for the use of their money.
But “byz” is almost matched by the claim of “Crispin in Waterloo” that war is good for business. War is destruction which is never good. The freest most business-oriented countries are the most peaceful. Consider the US compared to Imperial Shinto Japan, as chonicled by John David Lewis in his book “Nothing Less Than Victory”, and National Socialist Germany as explained by Leonard Peikoff in his book “The Ominous Parallels”. Plus the war-mongering Marxists of the USSR, who tried to take over East Berlin after World War II – and demonstrated in East Germany the dismal nature of collectivist society compared to the free type of society in West Germany. (Recall that the Allies put West Germany on a path to six decades of peace and prosperity, and the US did the same for Japan, whereas the USSR couldn’t even feed its own people.)

TimO
May 28, 2012 12:29 pm

So in other words Krugman grew up watching Outer Limits “The Architects of Fear” (1963) or the more recent movie “Watchmen” which tied into the original OL episode. Way to go, Krugman, real original thinking….

bill
May 28, 2012 12:39 pm

Glass Steagall was a very sensible measure. So sensible, makes you wonder why it was repealed. Who benefitted? What happened next? Similar controls were removed in the UK. Now occassionally there is talk of re-introducing them. Who growls? Wonder why?

eyesonu
May 28, 2012 12:59 pm

ROM says:
May 27, 2012 at 7:00 pm
The source for the figures above are from Table 5
; Funding for Federal Climate Change Activities, FY2008 to FY2012
Congressional Research Service; April 26th 2012
===================
Approx $70,000,000,000 (seventy billion dollars US) from FY 2008 to FY 2012 in the US alone on climate related expenditures.
What fools had their hands on the purse strings in the US Congress for these appropriations. New appropriations for the 2008 FY budget would have had to be the House of Representatives in 2007 congressional session or earlier congressional sessions.
Were the fools listening to Krugman or was there some other ideological obsession? Or both?

Myrrh
May 28, 2012 1:03 pm

http://wattsupwiththat.com/2012/05/27/quote-of-the-week-bonus-krugman-insanity-edition/#comment-995367
Max Hugoson says:
May 28, 2012 at 8:25 am
According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.”
From another commentator, one of the “grand conspiracy theory” people. OH, the Prisons are a mean, wicked, capitolist system. Baaaaahd, BAAAAHHHD!!! (Like a SHEEP.)

So take your conspiracy and STUFF IT!

Gosh, there’s certainly a conspiracy to bribe judges, get more punitive laws enacted and so on to expand the lucrative slave labour workforce by those running private prisons, that the system itself is a conspiracy, well no, that is out in the open and well documented – it’s policy..
Slave labour created out of the prison population by big business interests who lobby for harsher sentences to keep their prisons full – three strikes and you’re out.. For, say stealing a candy bar.:
http://www.globalresearch.ca/index.php?context=va&aid=8289
“CRIME GOES DOWN, JAIL POPULATION GOES UPAccording to reports by human rights organizations, these are the factors that increase the profit potential for those who invest in the prison industry complex:. Jailing persons convicted of non-violent crimes, and long prison sentences for possession of microscopic quantities of illegal drugs. Federal law stipulates five years’ imprisonment without possibility of parole for possession of 5 grams of crack or 3.5 ounces of heroin, and 10 years for possession of less than 2 ounces of rock-cocaine or crack. A sentence of 5 years for cocaine powder requires possession of 500 grams – 100 times more than the quantity of rock cocaine for the same sentence. Most of those who use cocaine powder are white, middle-class or rich people, while mostly Blacks and Latinos use rock cocaine. In Texas, a person may be sentenced for up to two years’ imprisonment for possessing 4 ounces of marijuana. Here in New York, the 1973 Nelson Rockefeller anti-drug law provides for a mandatory prison sentence of 15 years to life for possession of 4 ounces of any illegal drug.The passage in 13 states of the “three strikes” laws (life in prison after being convicted of three felonies), made it necessary to build 20 new federal prisons. One of the most disturbing cases resulting from this measure was that of a prisoner who for stealing a car and two bicycles received three 25-year sentences.. Longer sentences.. The passage of laws that require minimum sentencing, without regard for circumstances.. A large expansion of work by prisoners creating profits that motivate the incarceration of more people for longer periods of time.. More punishment of prisoners, so as to lengthen their sentences.

Who is investing? At least 37 states have legalized the contracting of prison labor by private corporations that mount their operations inside state prisons. The list of such companies contains the cream of U.S. corporate society: IBM, Boeing, Motorola, Microsoft, AT&T, Wireless, Texas Instrument, Dell, Compaq, Honeywell, Hewlett-Packard, Nortel, Lucent Technologies, 3Com, Intel, Northern Telecom, TWA, Nordstrom’s, Revlon, Macy’s, Pierre Cardin, Target Stores, and many more. All of these businesses are excited about the economic boom generation by prison labor. Just between 1980 and 1994, profits went up from $392 million to $1.31 billion. Inmates in state penitentiaries generally receive the minimum wage for their work, but not all; in Colorado, they get about $2 per hour, well under the minimum. And in privately-run prisons, they receive as little as 17 cents per hour for a maximum of six hours a day, the equivalent of $20 per month. The highest-paying private prison is CCA in Tennessee, where prisoners receive 50 cents per hour for what they call “highly skilled positions.” At those rates, it is no surprise that inmates find the pay in federal prisons to be very generous. There, they can earn $1.25 an hour and work eight hours a day, and sometimes overtime. They can send home $200-$300 per month.Thanks to prison labor, the United States is once again an attractive location for investment in work that was designed for Third World labor markets. A company that operated a maquiladora (assembly plant in Mexico near the border) closed down its operations there and relocated to San Quentin State Prison in California. In Texas, a factory fired its 150 workers and contracted the services of prisoner-workers from the private Lockhart Texas prison, where circuit boards are assembled for companies like IBM and Compaq.”
That’s the ugly face of capitalism, the motivation to pay as little as possible to maximise profits for the owners/shareholders is why unions began, slave labour is the greedy capitalists’ wet dream..
http://www.corpwatch.org/article.php?id=867
“Greasing the Wheels of Power to Keep Jails Full To be profitable, private prison firms must ensure that prisons are not only built but also filled. Industry experts say a 90-95 per cent capacity rate is needed to guarantee the hefty rates of return needed to lure investors. Prudential Securities issued a wildly bullish report on CCA a few years ago but cautioned, “It takes time to bring inmate population levels up to where they cover costs. Low occupancy is a drag on profits.” Still, said the report, company earnings would be strong if CCA succeeded in ramp(ing) up population levels in its new facilities at an acceptable rate”.”(There is a) basic philosophical problem when you begin turning over administration of prisons to people who have an interest in keeping people locked up” notes Jenni Gainsborough of the ACLU’s National Prison Project.”
Don’t you see this as a problem?
http://mediafilter.org/MFF/Prison.html
By Phil Smith
from the Fall 1993 issue of Covert Action Quarterly “Private prisons are a symptom, a response by private capital to the “opportunities” created by society’s temper tantrum approach to the problem of criminality.”
In Britain it’s common for the ‘government’ to periodical claim that ‘crime’ is going up, when it isn’t. If people can be kept in fear they are easier to control – that’s why we now have all these big brother and degrading security and surveillance measures, and more to come, and those objecting becoming the ‘enemy against security’, in policy documents labelled as ‘terrorists’ – for example, those who pay with cash are to be suspect.
Why are drugs illegal?
Anyway, if you’re interested in researching further this link has others to give more of the picture.
http://www.apfn.org/apfn/private-prisons.htm

May 28, 2012 1:21 pm

“Glass Steagall was a very sensible measure. So sensible, makes you wonder why it was repealed. Who benefitted? ”
Goldman Sachs…for one.
Lot of people and entities did for awhile.
Some still are benefitting.

conradg
May 28, 2012 1:55 pm

Kevin Kilty,
Please point to the experiment in which we tried Libertarian, Laissez Faire, open markets, for long enough time to consider the results definitive, found them wanting, and then tried something else. Please point to exactly what didn’t work and how what we tried next improved upon it.
I only said that all economic systems that have been tried so far have many faults and problems in them, and I infer from this that in the real world, all future economic systems will be similarly imperfect and people will continue to whine about them. You enjoy the fantasy that Libertarianism will solve all the world’s problems. Well, count me highly skeptical. What’s your evidence that it won’t have all kinds of problems as well?

Greece is in the pickle it is because it has low productivity AND has been using debt to live beyond its means.
Certainly that’s part of the problem. The other and bigger problem is that the EU has a common currency, but not a common government and budgeting. We in the US have regions that are pretty unproductive – Mississippi and Alabama come to mind – which get far more in federal dollars than they pay in taxes, but they don’t have a fiscal crisis because we have a common currency and a federal system of government which oversees the overall economy. If the EU had a government akin to the US, Greece would just be another unproductive region, not a nightmare.
What I do or do not understand about currency you don’t know about at all; what I do know is that lenders do not perpetually throw good money after bad. They will go looking for better investments, or they will get interest rates that befit the risk.
Bad is always a relative concept when it comes to lending. The US is paying very low interest rates on its debt because it’s considered such a safe haven. If lenders really thought the US fiscal situation were anywhere near what Greece’s was, they wouldn’t be lending us money. The interest rates tell us the real story. The people with money think the US is an incredibly safe place to put there money.
And keep in mind, currency is itself the creation of government. Lenders don’t have their own currency they are lending us. They are lending us back our own dollars, created by our government. That means we have all the power still.

conradg
May 28, 2012 2:06 pm

The creditors can’t, but the IRS can — and if you think the government isn’t going to raise your taxes to cut some of that deficit, you’re in for a rude awakening.
The IRS can’t come after me for the national debt. They have no such power. They can only tax me on my income, at the rate specified by law. Raising taxes requires legislative action, meaning that our elected representatives have to approve of such action, meaning people have to elect these folks with some mandate to repay the national debt. I don’t ever see that happening, not in my lifetime or my children’s for that matter. The more worrisome matter is entitlements like SS, etc., not repaying the national debt.
And please don’t tell me the debt ever has to be repaid. I don’t know if the US has ever been debt free, so it’s never been repayed.
Swapping currency from one person (or entity) to another based solely on a promise to repay is a debt. When you go grocery shopping, the food in your cart is debt until you arrive at the register and pay for it.
It’s always a huge mistake to compare national currency debts to personal buying and budgeting. Governments create their own currency. I don’t get to buy stuff at the store with my own currency, I have to use the government’s. When a government borrows back their own currency, it’s a fictitious debt. It’s useful for economic purposes, to try to stimulate the economy and the flow of money through capital markets, but it’s a fiction nonetheless. It’s a different story if they borrow some other country’s currency, but even then, that’s still just mixing fictions of different origin.

Myrrh
May 28, 2012 2:17 pm

1987 Ronald Reagan’s address to the United Nations, he said:
“I occasionally think how quickly our differences worldwide would vanish if we were facing an alien threat from outside this world.”
I’m surprised though that no one’s yet mentioned Project Blue Beam.. Which is the story that the NWO is/was planning a holographic global event to fake the “Second Coming” and consolidate their new global religion: http://educate-yourself.org/cn/projectbluebeam25jul05.shtml and of course NASA’s involvement with promoting scary aliens against carbon dioxide as WUWT covered earlier: http://wattsupwiththat.com/2011/08/18/bizarre-craptastic-theory-from-the-guardian-penn-state-and-nasa-et-will-kill-us-because-global-warming-will-tip-them-off-that-we-are-a-bad-species/
But a staged alien invasion has been in the conspiracy theory pipeline for a while now, due to appear at the 2012 Olympics in London:
http://www.guardian.co.uk/uk/2010/dec/05/olympic-games-2012-alien-conspiracy-theory
And of course, there’s lots on the alleged actual development of alien spacecraft, supposedly from the work of the German scientists during the 2nd World War, and this goes back to Tesla.
Nikola Tesla said in an interview in he New York Herald Tribune, October 15, 1911: “All I have to say on that point is that my airship will have neither gas bag, wings nor propellers, It is the child of my dreams, the product of years of intense and painful toil and research. I am not going to talk about it any further. But whatever my airship may be, here at least is an engine that will do things that no other engine ever has done, and that is something tangible.”
And I’d earlier found information on Maxwell which gives work of his which was sidelined, http://www.rexresearch.com/maxwell.htm
So, perhaps they have actually built such craft, which could account in some part to the growing sightings, and are getting ready for the big finale…
..now I’ll have to watch the closing ceremony – probably an advertising exec’s bright idea to get higher ratings and I shall be disappointed.
Which still doesn’t explain why America would need high speed trains to fight them off..

economynewsblog
May 28, 2012 6:06 pm

US spent 2% of GDP for stimulus. This is a mild stimulus.
Eurozone Austerity.
US official unemployment 8.1% – Eurozone 10.9%
Aliens? Really?! That’s your factual argument against stimulus spending?
Besides your hero Schiff has been moaning about the market since Obama has taken over. If you invested money in the broad market at the lows shortly after Obama took office your account would have been doubled (up 99%) by Feb/March of 2012.
Schiff was generally right 5 yrs ago. Not so much anymore.

May 28, 2012 6:34 pm

economynewsblog says:
“If you invested money in the broad market at the lows shortly after Obama took office your account would have been doubled (up 99%) by Feb/March of 2012.”
Buying at the bottom, eh? Why don’t you show us how that’s done? And then explain how you knew to get out in “Feb/March 2012”? Because the market is down a thousand points since then.
• • •
conradg says:
“The IRS can’t come after me for the national debt. They have no such power.”
No, but the government can tax the money away from you to pay the national debt. What’s the difference?

economynewsblog
May 28, 2012 6:46 pm

50% return over 4 yrs ain’t too bad either Smokey.
Dude! I wish I was a market maven. Don t we all? Mythical as it might be… even the professionals have been having a problem investing… http://www.reuters.com/article/2012/05/28/uk-hedge-funds-idUSLNE84R02420120528

Reply to  economynewsblog
May 29, 2012 5:56 am

How about good old common sense real world economic solutions – just simple to the manufacturing segment of our society – Klugman what about this very uncomplicated solution = GROWTH?
The energy industry will save the USA – it will finance the rebuilding of our from raw materials [natural resources] altered in value adding manufacturing which will put the people back to work. The end result will be a doubling of the GDP over ten years and the problem will be until next time. End the EPA AND ENDANGERED SPECIES ACT – DO TORT REFORM and watch the hardest working most productive society on earth be reborn as the worlds industrial GIANT.

economynewsblog
Reply to  profitup10
May 29, 2012 9:08 am

Manufacturing matters… I agree.
Interesting article of what has been driving the market recently in the US… http://www.businessinsider.com/every-serious-person-needs-to-see-this-chart-2012-5?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Money%20Game%20Select&utm_campaign=MoneyGame%20Select%20Mondays%202012-05-28
I’m close to 100% sure, giving energy corporations a free leash will not explode growth. Besides cleaning up after these guys is far more expensive than any positive economic impact.

GoodBusiness
Reply to  economynewsblog
May 29, 2012 10:05 am

On what information do you base your statements?
“I’m close to 100% sure, giving energy corporations a free leash will not explode growth. Besides cleaning up after these guys is far more expensive than any positive economic impact.”
“All generalizations are false, including this one.”
Mark Twain

economynewsblog
Reply to  profitup10
July 15, 2012 7:55 am

Not sure what Growth you are referring to… EPA makes sure we have clean water etc. Maybe you are referring to growth in hazardous materials and bottled water industry exploding from the lack of clean water…

May 28, 2012 7:02 pm

We do not need more wasted stimulus spending. We need 1921-style government spending CUTS.
Obama has already cut military spending by more than 12%. Now the rest of the government sector needs to be cut by more than 12% across the board. No sniveling. Just do it. The economy will come ROARING back, and employment will skyrocket.
Will Obama do the right thing? He certainly hasn’t yet.

conradg
May 28, 2012 7:57 pm

<i<No, but the government can tax the money away from you to pay the national debt. What’s the difference?
It’s called elections and law-making. The government doesn’t exist as some independent entity out there. It can’t just arbitrarily decide to suddenly pay back the national debt and come knocking on everyone’s door demanding $138,000 from everyone. And no sane elected official would even propose such a thing, much less have any success in passing such a law. Taxes are related to spending, which includes interest on the debt, but there’s no budgetary item for debt repayment. The last time we had a surplus and some proposed using it to pay down the debt, the GOP vetoed the idea and instead used the surplus to cut taxes, which has vastly increased the deficit. Kind of the opposite of what you presume is going to happen.

conradg
May 28, 2012 8:02 pm

We do not need more wasted stimulus spending. We need 1921-style government spending CUTS.
You mean 1937-style spending cuts, which sent the economy which had been recovering from the Great Depression into a second tailspin. Which is precisely what it would do now if enacted. As any good Keynesian would tell you , you run deficits when the economy is weak, and surpluses when it’s strong. Spending cuts would be great when the economy is fully recovered, but that’s the hardest time to make them politically. Hope you are putting pressure to cut spending during those times. It would be a good test to see whether Democrats can become genuine Keynesians, and if Republican are serious about debt reduction (which they have never ever been before).

May 28, 2012 8:05 pm

“You mean 1937-style spending cuts…”
No, I mean 1921-type spending cuts. Do some searching and get up to speed.

Gail Combs
May 28, 2012 8:08 pm

conradg says:
May 28, 2012 at 2:06 pm
The creditors can’t, but the IRS can — and if you think the government isn’t going to raise your taxes to cut some of that deficit, you’re in for a rude awakening.
The IRS can’t come after me for the national debt. They have no such power. They can only tax me on my income….
_______________________________________
That is what you think. Never underestimate the conniving minds of thieving politicians.

Confiscation of Private Retirement Accounts: US Departments of Labor and Treasury Schedule Hearing
On August 26, the US Department of Labor issued a news release:
It lists the agenda for the joint hearings being held with the Department of Treasury September 14-15, 2010 on what is euphemistically called “lifetime income options for retirement plans.” The hearings are being conducted by the Labor Department’s Employee Benefits Security Administration. I don’t like speaking in tabloid-style terms, but the unstated agenda of these hearings, as I understand it, is to push for the US government to eventually nationalize (confiscate) all assets in private Individual Retirement Accounts (IRAs) and401K plans.
The US government is desperate to get its hands on private assets to help cover soaring budget deficits and debts, and this is simply the largest and easiest piggy bank that could be seized….

And anoter:

…Yes you read that right; “ Another major change is that, upon retirement, the individual’s retirement account would be converted into an annuity. Once the individual is deceased, the individual’s heirs would not inherit anything” First your assets would be converted to an annuity which would presumably eliminate the ability to draw out the funds in a lump sum. This would effectively restrict your control over your assets. Second those funds that you worked your entire life to accumulate would revert to the government upon your death; talk about a death tax….. http://silentmajority09.com/2010/09/05/u-s-government-plots-to-confiscate-your-retirement-funds/

Another take on a similar scheme.
… it appears some politicians are talking about forcing your IRAs and 401Ks into Treasuries so they can continue to fund the deficits. As I understand it, this is the same Ponzi scheme they set up with Social Security. It is actually Social Security on steroids.
I am not sure of the truth in any of this but the idea is certainly floating around.

ferd berple
May 28, 2012 8:18 pm

Myrrh says:
May 28, 2012 at 3:49 am
http://www.globalresearch.ca/index.php?context=va&aid=8289
the United States holds 25% of the world’s prison population, but only 5% of the world’s people.
========
The land of the free.

May 28, 2012 8:26 pm

condrag:
Since you didn’t reply, this will help expand your knowledge base:
The Depression Of 1921

To restore fiscal and price sanity, the authorities implemented what today strikes us as incredibly “merciless” policies. From FY 1919 to 1920, federal spending was slashed from $18.5 billion to $6.4 billion—a 65 percent reduction in one year. The budget was pushed down the next two years as well, to $3.3 billion in FY 1922…
The Results
If the Keynesians are right about the Great Depression, then the depression of 1920–1921 should have been far worse. The same holds for the monetarists; things should have been awful in the 1920s if their theory of the 1930s is correct.
To be sure, the 1920–1921 depression was painful. The unemployment rate peaked at 11.7 percent in 1921. But it had dropped to 6.7 percent by the following year, and was down to 2.4 percent by 1923. After the depression the United States proceeded to enjoy the “Roaring Twenties,” arguably the most prosperous decade in the country’s history. Some of this prosperity was illusory—itself the result of subsequent Fed inflation—but nonetheless the 1920–1921 depression “purged the rottenness out of the system” and provided a solid framework for sustainable growth. [source]

Exactly what is needed today. But will an economic illiterate community organizer like Obama do the right thing? He hasn’t yet.

ferd berple
May 28, 2012 8:37 pm

conradg says:
May 28, 2012 at 7:57 pm
The government doesn’t exist as some independent entity out there. It can’t just arbitrarily decide to suddenly pay back the national debt and come knocking on everyone’s door demanding $138,000 from everyone.
========
They don’t need to, n