Battling Nostrums at The New York: Herbert and Krugman Argue at Cross Purposes on How to Bankrupt the Treasury.

Abstract: Two of the more prominent icons on the editorial staff at the New York Times seem to differ on the important notion that we need a stable banking system in the US.  The logical link between the editorial staff and their writers, which, presumably, sets the propaganda standards at the Times, appears to have been broken in one thin day. Bob Herbert sees no need to bail out the banking system [fat and happy bankers cliché follows] and Paul Krugman clings hopelessly to an older view.  Perhaps Mr. Herbert could join his leftist ally if we could reconcile that issue that Washington might summarily nationalize the banks. We can then spend wildly on ‘infrastructure,’ the imminent and missing ingredient that will lift us out of our “pathetic mid-20th-century” current infrastructure level and bring prosperity for all. Our quest for coherency at the Times is probably hopeless as they are probably saying the same thing: raise taxes and get more government. We are, again, assured that we can tax or spend ourselves into prosperity as California has shown.

The New York Times—aka the Walter Duranty Papers [1] has an all-encompassing and circuitous track record of apologizing for any form of big government as long as it involves huge spending and high taxes. Success is not a requirement. But, today, the Times’ famous noneconomics economist Paul Krugman[2] appears to cross swords with one of his colleagues at the Old Gray Lady.  Apparently, the morning propaganda dope sheet that attempts to align the hokum and fluff into one coherent fluid vector failed to focus enough neurons on the next pressing issue at the paper as Bob Herbert[3][4], after reshuffling his authorized stack of soiled clichés for a chance at variety, argues away from bank stability and contradicts Krugman.

First Prime Directive to the Masses [as of 1 Feb]:

 “Now, something must be done to shore up the financial system. The chaos after Lehman Brothers failed showed that letting major financial institutions collapse can be very bad for the economy’s health. And a number of major institutions are dangerously close to the edge.”[5]---Bailouts for Bunglers by Paul Krugman Op-Ed Columnist [Feb 1, 2009] [Emphasis is mine in all quotes.]

This rather obvious comment from Krugman comes only after his incoherent rant against bailouts and the obtuse views of Obama’s newest money monger[and tax cheat]  at Treasury: Timothy Geithner

The new Treasury Secretary thinks this:

““We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” says Timothy Geithner, the Treasury secretary — as he prepares to put taxpayers on the hook for that system’s immense losses.”

Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.””—from the Krugman link above

Are governments really good bank managers? If so, give us an example. Previously, our igNoble Leechette proposed that we encourage the US government to nationalize our banks and seize our assets to repay the debt that the government caused in the first place with subprime loans to people who had no credit.[6] Krugman cannot seem to coherently discuss the gross failure of Fannie Mae and its several trillion dollars worth of worthless mortgages in this equation. The private banks did not create this mess, which started in Japan nearly 20 years ago and has put Ireland, Spain and England on the edge of bankruptcy. Iceland went down the toilet. Russia is probably already down the tube as their stock market is down 75%  in the last 12 months and their currency is slipping into the latrines partially from basing their long-term budgets on $81 oil prices. How is that for government banking expertise?  That is Moscow Central Planning in action. Here, in the EU and Russian cases, the conclusive proof for the simple argument that governments make poor bank managers is offered in vivid color. Krugman thinks we should just print more money and spend and Herbert seems to agree. Let us see if the Russian rouble can sink lower than 35:1 against the dollar with this splendid idea. China is next. The phony Chinese yuan will go the way of its ancestor in a blizzard of inflation. [7] This is leftist government in action.

We could probably make our economy soar with $4 gas prices too and enjoy the splendor that Europe has shown us with high gas prices.

Second Prime Directive to the Masses [as of 2 Feb]:

Fannie Mae, a letting major financial institution already failed. We might assume that preserving the banking system [do we use the word ‘financial’ or ‘industry’ here?] would be the first thing we should do when the economy collapses, but we shall find a suitable counter to this notion below from Herbert.

“We’re rushing to bail out the banking industry for what? What kind of country will we have once the bankers are fat and happy again? The U.S. will still be a nation with a pathetic mid-20th-century infrastructure struggling to make it in a dynamic 21st-century world. It’s a blueprint for sustained national decline.

The reason to seize this particular moment to move with a laserlike focus on the infrastructure is because of the desperate need to stop the advancing rot, and because rebuilding the infrastructure is a phenomenal source of employment.”[8]-- Risking the Future by Bob Herbert Op-Ed Columnist Published: February 2, 2009

I don’t live in a pathetic mid-20th-century infrastructure as Herbert must somewhere in Metro New York. This hopeless piece of sophistry issues forth after a tirade over ‘infrastructure’ by Herbert with some tautological comments about New Orleans [a prime example of advancing rot ] and the failure of the infrastructure planners to save the city from Katrina. Herbert, echoing some cries from the past, seems to think our water supply is also  polluted. An attempt to reconcile this mess by forcing a division between the ‘banking industry’ and the ‘banking system’ fails to resolve this problem. If you want to see advancing rot you need to visit Detroit for a while.

He continues:

“Instead, we have infrastructure spending in the Democrats’ proposed stimulus package that, while admirable, is far too meager to have much of an impact on the nation’s overall infrastructure requirements or the demand for the creation of jobs.”-- Bob Herbert

A trillion dollars is meager?

Is there no end to the spending? What do these two ‘journalists’ think about printing money and looming inflation? Where is all the abuse for Bush for excessive spending? We  could agree that both these ‘experts’ in stressing  government spending might agree on wholesale socialism as a way to [1] get out of this depression caused by wasting money on ‘affordable housing’ and [2] secure the future with massive spending.  But why throw out the banks? A new hedge fund in Bermuda will begin quoting share prices in gold. [9] Is this a hint that our currency might inflate?  Perhaps Herbert is just jumbling his syntax. He probably towers over Krugman if assessed by ‘common sense’ metrics although Krugman probably has a slight edge in raw cognitive skills. Perhaps, they are both just incoherent in their rants as they see an opportunity to spend and spend and spend potentially slip from their grasp and slither down the latrines. This fear is somewhat justified as there is no discussion of who or when the debt is repaid, if ever.

Herbert sums up with this:

“The big danger is that some variation of the currently proposed stimulus package will pass, another enormous bailout for the bankers will be authorized, and then the trillion-dollar-plus budget deficits will make their appearance, looming like unholy monsters over everything else, and Washington will suddenly lose its nerve.”-- Bob Herbert

We hope so.  The unholy monsters will be inflation or hyperinflation and it is not clear how Herbert’s low classes will survive that catastrophe. We cannot locate a forecast on inflation from either Krugman or Herbert. The solution will, of course, be more spending and bigger government.

Krugman sums up with this similar view:

“There’s more at stake here than fairness, although that matters too. Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.”

We can suppose that spending hundreds of billions of dollars paid for by the top 40% of the population is”fair.” On the one hand, we can always view a pedestrian level view of society where spending on infrastructure surpasses the need to even have a stable banking system. We can always agree with Herbert, in a limited sense, by strolling around East Brooklyn, Baltimore City or Oakland and noting the urgent need for spending.  We could at least Clorox the alleyways and scatter a few mattresses around for humanity’ sake, as long as we get the good citizens to register to vote at least once and relive themselves out of sight of tourists.

To build the proper levees that would stand a storm the size of Katrina, or perhaps even a notch bigger, would have been a federal budget-busting project [100 billion in 1960 dollars?] and nobody ever thought of spending this much money trying to prevent the Mississippi River from swamping that social latrine in the first place.  New Orleans is a place that was controlled by liberals for nearly a century until it became one of  the murder capitals of North America[10] and they built the city exactly the way they wanted it, and still do. High crimes, sloth, sodomy and drug addiction are celebrated in New Orleans. There are other places where the drug culture and all the rest of that exotic version of society can exist at lower cost. Anywhere in California will do if they can get some water from somewhere.  We don’t need to keep the sea water out of the slums; we can just move the slums to higher ground and get more votes anyway. We don’t want to risk the extinction of some exotic sea slugs or other species so the EcoNazi[11]  ought to pooh pooh this environmental disaster before it happens.  Better happy snail darters than soggy citizens it seems.

I am certain that if we spent enough federal funds that peace and prosperity would flow like honey among the flowers in places like New Orleans or Philadelphia. All it takes is somebody else’s money to make wonderful things happen. That is all the liberals need: somebody else’s money.

 rycK

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