Gonna Kick Tomorrow, Paul Krugman Edition

Hey, so "Greece is paying the price for past fiscal irresponsibility," says New York Times econo-politics columnist Paul Krugman, and among the takeaways for the U.S. is that "Of course, we should be fiscally responsible." Further, "What that means ... is taking on the big long-term issues, above all health costs[.]"

Great! So we're cutting back on long-term entitlements, right? Not quite:

Equally important, however, we need to steer clear of deflation, or even excessively low inflation. Unlike Greece, we're not stuck with someone else's currency. But as Japan has demonstrated, even countries with their own currencies can get stuck in a deflationary trap.

What worries me most about the U.S. situation right now is the rising clamor from inflation hawks, who want the Fed to raise rates (and the federal government to pull back from stimulus) even though employment has barely started to recover. If they get their way, they'll perpetuate mass unemployment. But that's not all. America's public debt will be manageable if we eventually return to vigorous growth and moderate inflation. But if the tight-money people prevail, that won't happen — and all bets will be off.

Reason on Obama's Japanonomics here, on stimulus fantasia here, and on the prospects for inflation here.

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  • Jeffersonian||

    I'm in a real pickle. Seriously deep trouble.

    See, I've been buying two 56" flat screens per month for the past few years. I just love them. But I've drained my checking account, savings, retirement, 401(k), IRA, the kids' college accounts and run up all my plastic to the max in the process.

    So I've worked out a deal with Best Buy: Rather then pay the $2,000 a pop that I have been, I'm going to pay $1,400 for each unit, but buy ten per month instead. That's about 30% savings on each one! I can just smell the savings!!

  • Horde4Lyfe||

    +1

    Great idea... *On my way to Best Buy now.

  • Rick||

    Substitute purse and shoes for flat screens, and you could be my wife :)

  • Anomalous||

    Why you buying so many? Does JanePaul keep hiding them?

  • ||

    Your plan isn't complete until you box up the screens from the previous month and put them away in a very large warehouse with no manifest.

  • ||

    Brillient!!! You'll make up on volume what you lose on each individual purchase! I nominate you for Maestro President of the Krugman Government Empire! When it comes to money, to infinity and beyond!

  • ||

    Don't forget to drop a bunch of your flat-screens on a camel in a Middle-East hellhole somewhere, I hear its quite fun - if you've got the credit for it anyways.

  • ||

    Paul says
    Have you seen John Maynard Keynes around?
    I feel naked without him

  • ||

    I think you mean:

    "Paul says have you seen
    John Maynard Keynes around here
    feel naked without"

    FIFY, you were sooo close.

  • ||

    (coupling Jane's and haikus... ahh, a fun friday)

    Perry rocks.

  • ||

    You know what? Forget it. That wasn't as funny as I first thought.

    Carry on.

  • ||

    America's public debt will be manageable if we eventually return to vigorous growth and moderate inflation.

    If by "vigorous", he means "unprecedented", and by "moderate" he means "hyper", then I would agree. He might want to ponder how inflation acts as a drag on real economic growth, though.

    He might also want to show his work. You know, demonstrate what rates of growth and inflation that will make trillion-dollar deficits and multi-trillion dollar deferred entitlement liabilities sustainable. Especially as the interest on all that debt goes up. You know, with inflation.

  • Mike M.||

    And if this insane government of ours implements a national VAT and/or some cockamamie carbon tax, the odds of us ever having "vigorous growth" again will be about the same as the odds of me hitting the Powerball lottery.

  • TP||

    If you do, I don't need to tell you to take the cash, not the annuity, right?

  • ||

    You know, demonstrate what rates of growth and inflation that will make trillion-dollar deficits and multi-trillion dollar deferred entitlement liabilities sustainable.

    Oh he can hide it forever by giving free money to banks which in turn buy Bonds and get a free 3% return. Such a scheme can never collapse...and when I say never I mean in about a year.

  • PicassoIII||

    What's with all the Jane's Addiction references?

  • ||

    easy money = addiction
    we can always quit tomorrow...

  • PicassoIII||

    Got it. Still, 'Mr. Brownstone' from G&R says otherwise.

  • TP||

    She hides
    The television
    Says I don't owe him nothing
    But if
    He comes back again
    Tell him
    Wait right here for me
    Or, try again tomorrow
  • ||

    It warms me that the wealthy Krugman demands my purchasing power be reduced (avoid deflation or even low inflation) to protect the state/banks.

  • U.S. Government||

    Ludwig, we'll be more gentle this time. We'll go in slow, and we'll even use lube. We promise.

  • ||

    Ok. Just this once more.

  • ||

    Equally important, however, we need to steer clear of deflation, or even excessively low inflation.

    The Zimbabwe Model; it's not really complete without massive expropriation, though. I'm sure Krugabe is working on that part of the plan, as we speak.

  • ||

    I like "Krugabe!!!"

  • ¢||

    Wait.

    Is employment a byproduct of inflation, or is inflation just necessary for employment?

    Does "employment" mean something other than having a job? Is inflation something other than "Your money can't buy stuff anymore?"

    Do not get. I understand that it's a lie, and on whose behalf it's told. I don't get it.

    "Did you finish the leftover lasagna?"
    "It hates the moon."
    "...What?"

  • ||

    When you have a wheelbarrow full of hundred dollar bills, you feel RICH.

    At least until you trade it for a loaf of bread and a half-gallon of milk.

  • virginia||

    But if the tight-money people prevail, that won't happen — and all bets will be off.

    ugh. this clown, again.

  • über goobers||

    Interviewer: What if the policymakers in all branches of governments relevant to economic policy took your advice, and we still had high levels of unemployment, extremely shaky rates of growth, and the Dow spinning at its wheels continuously going bust as it hits it's head against the 11,000 mark, would you admit your advice was wrong?

    Krugman: Obviously the problem would be those market fundamentalist did not implement my advice fast enough.

  • Bern||

    How the hell did that jackass win a Nobel Prize for economics?

  • Sean W. Malone||

    Once upon a time he did real economics work in international free trade theory. Those days have been over for a long, LONG time.

  • Xeones||

    Krugabe

    Awesome.

  • ||

    I don't know. Was it really necessary to drag Mugabe down like that?

  • Steve Nash Equilibrium||

    Inflate our way out of debt sounds like a great idea. Who needs a middle class!? People may not be able to afford anything beyond the bare necessities to stay alive, but at least they'll have jobs...maybe. We're still working on that one.

  • ||

    Does Klugman even bother to read what he writes any longer?

    I swear he has a template macro of stock phrases and sentences that strings them together randomly. Press button, run that baby!

  • ||

    His wife might have wrote it.

  • Nobel Prize Winning Brain Slug||

    The process of establishing control has resulted in... undesirable side effects.

  • ||

    He's the one they call Dr. Feelgood
    He's the one that makes ya feel all right
    He's the one they call Dr. Feelgood
    He's gonna be your Frankenstein
    I've got one thing you'll understand
    (Dr. Feelgood)
    he's not what you'd call a glamorous man
    (Dr. Feelgood)
    Got one thing that's easily understood
    (Dr. Feelgood)
    He's the one they call Dr. Feelgood
    Oh yeah

  • ||

    "But as Japan has demonstrated, even countries with their own currencies can get stuck in a deflationary trap."

    Uh, its called reality. Yup, I know you learned some maths in school, and financial legerdermain, but out in realityville, you don't get to have more than you earn.

  • Public Sector||

    but out in realityville, you don't get to have more than you earn.

    And that's where you're wrong.

  • Upgrayyed||

    eh- this one's a better fit methinks-

    Mr. Crowley, what went down in your head
    (Oh) Mr. Crowley, did you talk to the dead
    Your lifestyle to me seems so tragic
    With the thrill of it all
    You fooled all the people with magic
    (Yeah)You waited on Satan's call

    Mr. Charming, did you think you were pure
    Mr. Alarming, in nocturnal rapport
    Uncovering things that were sacred, manifest on this earth
    (Oh)Conceived in the eye of a secret
    Yeah, they scattered the afterbirth

  • Mike M.||

    Greece downgraded by Fitch, next stop: junk status.

  • TP||

    So, when should I stop borrowing money, and start saving money, Mr Krugman?

  • Michael Ejercito||

    What are the results of a deflationary trap?

  • Corduroy Rocks||

    A high savings rate.

  • ||

    Lower cost of living, longer life spans and higher standard of living.

    It would resemble the PC market of the last 20 years. Quality would increase while prices would drop, except it would be for everything you consume.

    To contemplate how much government and left wing policies have squandered over my life time is soul crushing to say the least.

  • Sean W. Malone||

    I agree soo, so much :(

  • ||

    When Krugman speaks of the inflation/growth in the 50's, he neglects to mention that Europe, China, Japan, etc. were recovering from a self-inflicted Stone Age. He also glosses over that we were maintaining a dollar ratio fixed to gold for the Bretton Woods central-bank cabal, all while printing money. In other words, the US Government was cheating our socialist European buddies by printing money on a fixed exchange rate ; while the Europeans were down, we kicked'em.

    So naturally it goes he neglects to mention the resulting collapse of the US dollar into stagflation-land for ten years after the French finally had the balls to call us on our bullshit and demand the gold instead of more Xerox. Its been a debt/inflation party since...

  • ||

    Inflation: The great whitewash of progressive economics. "Why pay back debts of government binge spending when we can just devalue the dollar?"

    Anyway as Oil prices reach to triple digits because our currency is the toilet (special thanks to Obama's printing press) I will be interested to see how Krugman squeaks when it drags us in to the double dip recession.

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