Weekly Insanity from Paul Krugman

In his latest bit of insanity, Paul Krugman continues to spout off utter nonsense from his own “bully pulpit” at the New York Times. This time he’s blasting President Obama and his economic advisors, chiefly Larry Summers, for worrying about the “phantom menace” of excessive debt.

“In December 2008 Lawrence Summers, soon to become the administration’s highest-ranking economist, called for decisive action. “Many experts,” he warned, “believe that unemployment could reach 10 percent by the end of next year.” In the face of that prospect, he continued, “doing too little poses a greater threat than doing too much.”

Ten months later unemployment reached 10.2 percent, suggesting that despite his warning the administration hadn’t done enough to create jobs. You might have expected, then, a determination to do more.”

Krugman’s definition of do more, is spend 2-3 times more than the original stimulus package because his complex economic models tell him to do so. Of course it’s easy for him to now say, “I told you, the first one trillion you guys spent wasn’t enough, you should have listened” , but how does he come with two trillion, why not three trillion, or five trillion? If two trillion creates a recovery why not spend double that and get perpetual prosperity? Oh, I forgot, we live in the real world while Krugman lives and works in fantasy land.

Krugman’s solution to any problem can be summed up quite easily; spend, spend, spend, deficits don’t matter, and if none of the prior spending works, just spend even more. If you don’t believe me read this-

“A better model, I’d argue, is Japan in the 1990s, which ran persistent large budget deficits, but also had a persistently depressed economy — and saw long-term interest rates fall almost steadily”

That is right, we should follow the path of the Japanese who experienced a “lost decade” during the 1990’s and to this day have not recovered fully from that same depression despite having spent more money than anyone thought possible. To combat their depression they conducted massive public works projects on infrastructure, schools, and prisons, many of which was unnecessary including their own bridge to nowhere. What did they get from that spending? 1% growth per year from 1990 to 1999 in which the unemployment rate doubled and the honor of having the largest national debt in the world, 200% of GDP.

Krugman goes on to attack Wall Street saying-

“As far as I can tell, the analysts now warning about soaring interest rates tend to be the same people who insisted, months after the Great Recession began, that the biggest threat facing the economy was inflation. And let’s not forget that Wall Street — which somehow failed to recognize the biggest housing bubble in history — has a less than stellar record at predicting market behavior.”

Mr. Krugman, you probably shouldn’t criticize anyone about their failure to recognize the housing bubble, as you were a large proponent for such a housing bubble.

The “phantom menace” of excessive debt is very real and much like Star Wars the only way to end the threat of the “phantom menace” is to kill it.

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