Abstract: Krugman of the NYT selects narrow facts and assemble an article that denies that we are facing almost certain hyperinflation in the near future. He ignores the comments of the Chinese, Warren Buffett and the UK about the wild deficits and dangers of wanton printing of money and its deleterious effects on our currency and economic future. He places blame for our debts on previous tax cuts and cites trivial countries who have gone through high debt loads and not inflated. He omits any reference to the more famous cases that fell into this trap. Whatever the topic, Krugman always advises more spending and bigger government and today’s screed does not ruin his record on this. He sophomorically parrots FDR with: “the only thing we have to fear is inflation fear itself.” We are spending our way into serfdom and Krugman goes along with this outcome. He would rather see the US crash and the pieces reassembled by socialists or Marxists than watch prosperity again push down his allies into economic and financial obscurity. He blindly sanctions the wild spending of the Obama administration with no regrets.

Preamble:

The New York Times—aka the Walter Duranty Papers [1]--has a constricted set of political goals for their paper [as long as it lasts as they are close to bankruptcy].  Their mission, and they always accept one, is to find ways to apologize or provide some political  spin for any policy or proposed legislation whatever by the far left no matter its worth, content or viability. Thusly, this paper serves as a beacon that alerts us as to what the sleazy left is focusing on and we can stand advised and ready to confront the current terror.

We can always  bet the farm and secure  grand odds from cynics[2] that Paul Krugman will always argue for a tax hikes and massive spending and bigger government[3] [no matter what the issue] and blame Republicans for either precipitating the current crisis or standing in the way or progress by blocking the road to serfdom. This can be easily demonstrated if we pick just any old soiled copy of the New York Times that printed one of his screeds.

Today, our esteemed Laureatte will explain to us that we are not heading into massive inflation and risking the viability of our currency and this is just an unjustified fear spread by capitalists.

He begins with this:

“Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike.”[4]--The Big Inflation Scare By Paul Krugman Op-Ed Columnist

Published: May 28, 2009 [Emphasis is mine in all quotes.]

Does he mention that the Brit and Chinese think so too? The Chinese ‘hate us’ for this debasement because inflation will sack their holdings in our bonds. Does he mention that Warren Buffett has flatly stated that our government will have to inflate their way out of debt?? No, he misses these points. He cannot include them as they debase his phony argument that we can spend and spend and rack up debts exceeding our GDP and experience no inflation.

Here is what the Chinese say:

“Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.””[5]—wild rant by Luo Ping, a director-general at the China Banking Regulatory Commission [Emphasis is mine in all quotes.]

I thought the haters were only on the capitalist right wing—not in the Marxist camp that provides the vision for left-liberalism.  Here is a salient bit from the Brits:

“It is unclear why US bond yields have spiked so violently, with spill-over effects on gilts and bunds. One camp of investors is worried that inflation is rearing its ugly head again: others fear a sovereign debt crisis as over-extended states loses their AAA ratings."[6]-- Ambrose Evans-Pritchard

And from the Sage of Omaha:

 “A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said….

“Every country that has denominated its debt in its own currency and has found itself with uncomfortable amounts of debt relative to the rest of the world, in the end they inflate,” Buffett explains. That becomes a tax on everybody that has fixed dollar investments.”[7]--Buffett Sees Massive Inflation to Handle Staggering Debt. Monday, May 4, 2009 By Dan Weil [Emphasis is mine in all quotes]

From today[update and revision]:

“The bond-market vigilantes are up in arms over the outlook for the federal deficit,” said Edward Yardeni, who coined the term in 1984 to describe investors who protest monetary or fiscal policies they consider inflationary by selling bonds. He now heads Yardeni Research Inc. in Great Neck, New York. “Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever.”

What bond investors dread is accelerating inflation after the government and Fed agreed to lend, spend or commit $12.8 trillion to thaw frozen credit markets and snap the longest U.S. economic slump since the 1930s. The central bank also pledged to buy as much as $300 billion of Treasuries and $1.25 trillion of bonds backed by home loans”[8]-- Bond Vigilantes Confront Obama as Housing Falters (Update2) By Liz Capo McCormick and Daniel Kruger

Okay, so what does Krugman do to steer around all this economic firepower?

“But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics.”-- By Paul Krugman Op-Ed Columnist May 28, 2009

So, this prattle by the Chinese, Brits and the sacred Buffet are just ‘politics.’ This is intriguing and needs to be further probed:

“First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.”-- By Paul Krugman Op-Ed Columnist May 28, 2009

This is fully true. The fight against deflation, if it is occurring across our economic spectrum is fought by massive infusion of capital into the society. But, if it goes too far…….

“Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.”-- By Paul Krugman Op-Ed Columnist May 28, 2009 [Emphasis is mine in all quotes]

This is also true.

“But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.”-- By Paul Krugman Op-Ed Columnist May 28, 2009

Okay, who financed the Bush bailout of $150 bln in 2008? This money went directly to the public and is not ‘sitting around’ on the shelf. And, we just got another shot of money this week and that, too, may go to retire debt or whatever as the previous stimulus did, but it too enters the financial system and is subject to a multiplier of 10 when it moves thru a dozen banks. That is 250 billion extra dollars and becomes $2.5 trillion real soon. That is then an increase in our currency M2 from $8 trillion to $10.5 and that is inflationary. That is a 31% hike in our money supply and we have much more to come. That spells inflation.

Krugman fails to mention this. His notion that the fed money is locked in dormantly at tier-one in capital accounts in our biggest Zombie Banks to give us the snake oil impression that they are solvent is false. That stimulus money is loose and circulating and only high interest rates can scoop it back and truncate the money supply. Several trillion dollars do sit and rot in tier-one accounts that that can be clawed back quickly and not enter the monetary system. That is different. Krugman seems to lump the several kinds of money together and then make generalizations on only one kind. This method is useful in carnival acts, politics and pick pocketing.

Back to Krugman and his krugmaniacal apology for our deteriorating currency:

“Is there a risk that we’ll have inflation after the economy recovers? That’s the claim of those who look at projections that federal debt may rise to more than 100 percent of G.D.P. and say that America will eventually have to inflate away that debt — that is, drive up prices so that the real value of the debt is reduced.”-- By Paul Krugman Op-Ed Columnist May 28, 2009

He now diverts the best arguments that derail his phony position with some irrelevant fluff from economic sidelights of history:

“Over the past two decades, Belgium, Canada and, of course, Japan have all gone through episodes when debt exceeded 100 percent of G.D.P. And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems.”-- By Paul Krugman Op-Ed Columnist May 28, 2009 [Emphasis is mine in all quotes]

True, but Japan has been in the economic trash bin for 20 years now for their real estate crash and have never recovered. Their economy is now tanking. Why not tell us about Germany, Brazile, Argentina, Zimbabwe and other states who did print money as we are doing and went broke? Again, Krugman cites and truncates a set of isolated conditions to prove or pressure his point.

Here comes the necessary twist to make Krugman the Liberal of the Day:

“But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.”-- By Paul Krugman Op-Ed Columnist May 28, 2009

This means that if Obama cannot spend wildly and get his socialism into place in time he will never get the chance. That is true.

Parroting FDR he concludes:

“Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. But when it comes to inflation, the only thing we have to fear is inflation fear itself.” [Emphasis is mine in all quotes]

Belgium[9] will have negative growth this year and they still have debt of 80% of GDP. Canada is doing fairly well.[10] But, Canada has had balanced budgets from 2000 to 2008. Could Paul Krugman suggest that we might have balanced budgets?? The last three budgets were supervised and sanctioned by Nancy Pelosi [a.k.a. Spartacus] ^[11]and she authorized every penny of House appropriations bills. The liberals have driven our massive debt for 3 years now, sanctioned a $780 bln dollar ‘stimulus’ that only bloats government and is talking about another one.  Krugman seems to be unaware of all this and continues to blame tax cuts for our problems. We all can see what high taxes are doing for New York, New Jersey and California and one or more of those places will go bankrupt very soon. The Krugman solution of raising taxes for all occasions is phony. Why does he think people are moving out of these states?

Krugman here puts off the inevitable with some sideways comments on minor players in the economic game. He ignores the rise of gold prices and our loss of 1/3 of our federal  tax revenues year to year. Our economy is tanking. What Krugman proposes is to keep on spending and socializing our government and banks to achieve what he thinks will be the socialist solution to our successful capitalism, a form of business and culture that few on the planet can participate in. He is correct in pushing for some government-mandated redistribution of wealth as his constituents, many mired in drug addiction, sloth, reverse racism, sodomy, crime and worse—confined to toxic inner cities, cannot manage to find a dry place to take a decent  dump or find enough food without dumpster diving.

The successful economies of the current world are now shunning the dollar if they can [Argentina, Brazile, China, Russia, and India] and are resisting the foolish and frantic method of printing money. Germany and France are in this camp. Japan was too until recently. The Brits know full well that their banking system is collapsing and that this phony notion of ‘quantitative easing’ or printing money willy-nilly is dangerous and puts them on the firm path to hyperinflation.

Krugman can advise we take on more debt without mentioning that Obama and his leftists in the House have incurred more debt than all the presidents since Washington and including the colonial period.

Krugman has shown us what he is and what he wants. We can use his arguments against him and the left as they are based on fluff, politics and economic hyperbole. Krugman talks about ‘groundwork for a long-term solution’ and offers us nothing on details. To do the opposite of what Krugman advises is probably the best advice for any country in any possible financial state.

rycK

Comments to: ryckki@gmail.com