This guy, I swear to god. This clown is supposedly a Nobel Prize winning economist.
This is the type of idiot the Nobel committee saw fit to award with the highest prize in economics? A total moron?
Seeking Alpha reports:
Paul Krugman was on CNBC yesterday calling for more stimulus. He wants to give Congress the ability to spend another $800B in an effort to get the economy going again. He says this is feasible because the bond market is allowing us to “fund” future spending via historically low rates….
The Pragmatic Capitalist proceeds to dissect Krudman’s communist claims.
First of all, it’s clear that Krugman is still suffering from neo-classical bewilderment. Despite the operational evidence pointing to the contrary it’s clear that Krugman still believes we are living in a gold standard world where the USA’s deficits really are funded by taxes and bond markets. Unfortunately for Mr. Krugman, we now live in a non-convertible fiat monetatry system where the USA is the monopoly supplier of currency. Nonetheless, he still seems to make the connection that we can afford to spend even though it’s obviously not for the correct reasons.
Second, Mr. Krugman has no qualms about giving Congress the last call on where this money gets spent. This is astonishingly naive in my opinion. The efficiency of the original stimulus package was low to say the least and the latest CBO figures show that the impacts on the economy have been enough to keep us afloat, but far from enough to solve the actual problems. What we have here is a balance sheet recession due to a debt bubble and implosion. So, what we need is balance sheet repair. We don’t need more solutions that merely kick the can down the road. We don’t need to stimulate loan growth or to stimulate the banking sector. We don’t need to prop up the housing sector or to stimulate auto sales. If we’re going to let Congress pass a stimulus bill we should put money in the pockets of the people who need it. If we’re going to spend money on these plans we should actually target the problems as opposed to letting Congress chop up $800B so they can send 75% of it towards programs that will not even resolve the problem.
The Pragmatic Capitalist does such a good job describing the problems above, but then fails so miserably with his logic below.
Update: Krugman is now saying that he was prescient. It’s not that the first stimulus failed, but that it wasn’t big enough…
No, Mr Kurgman, the first stimulus wasn’t only too small. It was too poorly targeted and I don’t seem to recall you having any big issues with letting Congress decide where the money would be spent. Had we put this money in the hands of small business or middle class Americans via tax cuts (perhaps even made the tax credits applicable only to household debt?) we would have done much more to help solve the current debt crisis. Instead, Congress went out and spent $800B on whatever they thought would get them reelected fastest.
No, it wasn’t “too small” nor was it “too poorly targeted” – it shouldn’t have occured at all.
What should have happened is drastic cuts in government spending, drastic cuts in the tax rates, and the interest rates should have been hiked back up to normal levels.
It is true such action would have imploded the markets, caused mass bankruptcy, and put millions out of work. However, this is going to occur anyways so we might as well force the issue and get back to a sound economic base as quickly as possible.
Any time government intervenes in the market, bad things happen. – This is an ECONOMIC LAW.