August 15, 2011
NYC Letter: Today's Big Stupid -- Paul Krugman, Stupid Again! Encore!
Day 937 of CHOPE
WAR IS PROSPERITY!
UPDATE 08.18.11: Paul Krugman added
to Imperial Invasion Vanguard!
PAUL KRUGMAN CALLS FOR SPACE ALIENS TO ATTACK
EARTH REQUIRING MASSIVE DEFENSE BUILDUP
TO STIMULATE ECONOMY
August 14, 2011 (NewsBusters)
Mr. Krugman hatched his stimulus scheme on Sunday's "Fareed Zakaria GPS", prompted by this exchange:
KENNETH ROGOFF, Professor Of Economics, Harvard University: Infrastructure spending, if it were well-spent, that's great. I'm all for that. I'd borrow for that, assuming we're not paying Boston Big Dig kind of prices for the infrastructure.
FAREED ZAKARIA, Host: But even if you were, wouldn't John Maynard Keynes say that if you could employ people to dig a ditch and then fill it up again, that's fine, they're being productively employed, they'd pay taxes, so maybe Boston's Big Dig was just fine after all.
Like so many perpetual motion machine schemes, Mr. Zakaria's ditch economy pays more in wages than it extracts in taxes to pay the wages to extract the taxes to pay the wages --da capo. And for all that Mr. Zakaria is still left with nothing but refilled ditches for his efforts. No one has been productively employed. No wealth has been created.
Enter Mr. Krugman.
PAUL KRUGMAN, New York Times: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.
I mean, probably because you want to put these things together, if we say, "Look, we could use some inflation." Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what fhe basic logic says.
It's very hard to get inflation in a depressed economy.
Keep in mind this man is an economics Nobel laureate. Inflation in a depressed economy is not so very hard to get. It's called stagflation. Supply and demand go out of balance in a depressed economy with high unemployment and little money to chase goods. As goods go unsold producers price waste and inventory into goods on offer raising the production-plus-margin sell price. Unemployment rises as producers lay-off workers or simply go out of business. The economy contracts until the balance between supply and demand is restored.
Mr. Krugman must know this. He plays coy because to recognize stagflation is to recognize the Obama economy.
KRUGMAN: But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish, you know, a great deal.
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better –
ROGOFF: And we need Orson Welles, is what you're saying.
Who said liberals are bereft of ideas? Liberal solutions begin and end with spending. Any problem. All problems. It's all about spending more.
Big bold spending ideas.Posted by Damian at August 15, 2011 11:45 PM