Krugman Menaces the Fear of Phantoms and Questions Obama with his Menacing Quips.  Tax and Spend and Damn the Inflation.

Abstract: Paul Krugman mumbles about fears and phantoms and blames all this on Wall Street. He sticks to his quest for more stimuli and other follies despite the facts that they failed miserably. He wants t o spend more. He criticizes Obama for worrying about more spending and inflation and debt and attributes this to listening to Wall Street.  He cautions us that there may be some risk to the bond markets if we spend and print and borrow wildly but that is okay on balance.  He rumbles along in his little world juggling only two words: Tax and Spend.

The New York Times (draped in  glory and song as the Walter Duranty Papers[1] in honor of their most beloved Pulitzer Prize winner) provides us with an unending stream of propaganda, stilted and biased redaction of history going back at least to Hoover and other distractions all designed to ‘form opinion’ and similar therapeutic efforts.

In this exciting episode, the thrust of our resident economist Paul Krugman[2][3][4][5][6][7][8] seems to be to question His Master about the unemployment problem.  In our last exciting episode the mechanics of unemployment were distorted by cherry-picking [or juggling apples and oranges] only two numbers from a historical list of unemployment figures from two countries and drawing firm conclusions of the final direction. The lesson was that Germany was doing something we are not. One must have staying power and cautiously circumnavigate the hokum and stilted thinking mechanisms from this person for a decent while attempting to arrive at some clue of the author’s salient point if there really was one other than the primal jollies of Bush Bashing and howling at the moon over tax cuts.  Krugman is particularly blunt in this current quip.

“A funny thing happened on the way to a new New Deal. A year ago, the only thing we had to fear was fear itself; today, the reigning doctrine in Washington appears to be “Be afraid. Be very afraid.”

What happened? To be sure, “centrists” in the Senate have hobbled efforts to rescue the economy. But the evidence suggests that in addition to facing political opposition, President Obama and his inner circle have been intimidated by scare stories from Wall Street.”[9]-- The Phantom Menace By Paul Krugman Op-Ed Columnist Published: November 22, 2009 [Emphasis is mine in all quotes.]

It would seem that a major financial meltdown of the economic system along with several big bank failures and a crashing stock market would send a few tingles up the pasty spines of those leftists who infest the White House although they did have a ‘plan’ to recover all this—did they not??

The unemployment is now higher than 10% by about 2 points greater than the Romer Promises predicted and the actual rate using the U6 method[10] is closer to 17.5%. What went wrong here?? We were to hold at 8%?

His Master’s Voice:

“But in a recent interview with Fox News, the president sounded diffident and nervous about his economic policy. He spoke vaguely about possible tax incentives for job creation. But “it is important though to recognize,” he went on, “that if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession.”

What? Huh?”-- The Phantom Menace

{Slobber and gore appears on the keyboard and on the floor around our author}

“Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence.”-- The Phantom Menace

I cannot believe that he talks to real economists. He must be talking to himself or some mystical set of plastic ceremonial kumquats from the Ivy League or Cal Bezerkeley or to the graveyard.

More spending!!

“Now, it’s politically difficult for the Obama administration to enact a full-scale second stimulus. Still, he should be trying to push through as much aid to the economy as possible. And remember, Mr. Obama has the bully pulpit; it’s his job to persuade America to do what needs to be done.”-- The Phantom Menace

The first stimulus was a joke and the Clunker Follies and House subsidies were ineffective too. Now, Krugman krugmanically calls for more failure with more printing of money and astronomical debt. I thought we were at 10.2% unemployment rate and rising with no end to the misery. Is it possible the stimulus scam was only a seedy payback to loyal voters, SEIU thugs, ACORN criminals, other unions, and to bloat our liberal government with useless parasites? The frantic efforts to tell us that ‘jobs were saved’ are also a sick joke. Oh! NO, we saved jobs at only an expenditure of printed money to the tune of $92,000 per job![11] And, we only spent $24,000 per car on the Clunker Follies and a mere $43,000 per house on the housing scam. [12] Now, that is ‘government’ by liberal standards.

“It took me a while to puzzle this out. But the concerns Mr. Obama expressed become comprehensible if you suppose that he’s getting his views, directly or indirectly, from Wall Street.”-- The Phantom Menace

It took you this much of your life so far to understand some basic economics, but we emphasize with your empuzzlement.[13] You might start by sending back your phony Noble Prize. [14]

The Evil Ones will now be enumerated:

“In particular, they say, never mind the current ability of the U.S. government to borrow long term at remarkably low interest rates — any day now, budget deficits will lead to a collapse in investor confidence, and rates will soar.”-- The Phantom Menace

Off we go into the clouds on the mystical essay that always ends with more spending and printing money. He is now lost in his own rhetoric.

“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. There’s a good chance that officials are being terrorized by a phantom menace — a threat that exists only in their minds.”-- The Phantom Menace

Japan was for 20 years, and still is, in deflation and suffering and their economy will soon collapse.

“The IMF expects Japan's gross public debt to reach 218pc of gross domestic product (GDP) this year, 227pc next year, and 246pc by 2014.”[15]-- It is Japan we should be worrying about, not America Japan is drifting helplessly towards a dramatic fiscal crisis. By Ambrose Evans-Pritchard

We are at 12/14 or about 85% Debt to GDP ratio now and quickly copying the failed Japanese Model.

Where did Krugman learn his finance? In New Jersey? Cuba?

Blame Wall Street:

“And shouldn’t we consider the source? 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”-- The Phantom Menace

Amazing. Krugman has completely lost it. The interest rate fixes the ‘price’ of money and the reason we are not inflating is that we are deflating[16] so the velocity of money is currently near zero.  We all have to understand that those toxic assets are still toxic and still plummeting in value and more foreclosures are on the way. TARP funds were diverted to save the banks. That will change in the future. We currently have zero interest rates and people buy AAA bonds at that rate for safety and preservation of capital. Our current annual debt service is about 383 billion[17] at blended rates around 3-4%. If we had to go to the high interest rates of the post Carter Era we should certainly triple or quadruple that to a trillion dollars or more. Can this guy calculate? Has Krugman looked at the Debt Clock?[18]

Krugman brushes briefly with reality and considers the bond markets:

“Still, let’s grant that there is some risk that doing more about double-digit unemployment would undermine confidence in the bond markets. This risk must be set against the certainty of mass suffering if we don’t do more — and the possibility, as I said, of a collapse of confidence among ordinary workers and businesses.”-- The Phantom Menace

Bonds fall as interest rates go up so if our worthless government cannot sell bonds at very low rates then they will have to increase  the rates and then bondholders, hated by the Obama administration as we saw in the Chrysler case, will sell them and demand higher rates.  The bond vigilantes are watching. Those higher rates will force foreign capital sellers into seeking relief as the price of their bonds drop like dead turkeys.  They will quit buying our worthless paper. Our current aggregate interest rate on our national debt might have to double to attract more suckers thus trending toward halving the bond’s prices. That is one reason why they have to print money to cover the debt interest. The other reason is that we need to desperately fight deflation since the securitized mortgage bundles are still falling and erasing wealth so the printed monies must be replacing them in the capital accounts of the banks. This is a mess.

We can thank the concept of ‘affordable housing’ for this mess.  We gave credit to losers and worse and now our wealth is collapsing and our currency is weak and gold is soaring. I don’t recall Krugman discussing any of this.

Krugman apparently still thinks our debased currency is a good idea:

“The truth is that the falling dollar is good news. For one thing, it’s mainly the result of rising confidence: the dollar rose at the height of the financial crisis as panicked investors sought safe haven in America, and it’s falling again now that the fear is subsiding. And a lower dollar is good for U.S. exporters, helping us make the transition away from huge trade deficits to a more sustainable international position.”[19]-- Misguided Monetary Mentalities By Paul Krugman

Gee, I have a lot of confidence in the dollar as we print away. It may never inflate. Sure. What will  happen to the confidence if we print more money or spend like idiots? Will that encourage more ‘confidence’ in our system??

The political risk is much greater. If Obama gets us both inflation and high unemployment as his wonderful party member Jimmy Carter did then Obama can become the next Hoover for a few decades. That is a risk. A smaller risk is to debase the currency and let inflation just creep in and tax us all because Warren Buffett gave the politicos an out:

The Warren Buffett [Buffy the Bozo] Solution to Getting Reelected:

“Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”[20]-- Greenback Effect By Warren E. Buffett

Gee, Buffett is a patriot! Let the Dems use the Stealth Tax and the suckers will not know who to blame. Why, let’s spend more and more and keep all those good Democrats in office. We owe them that much.

Krugman only has two words we can depend upon that are clear and resonate in political circles: Tax and Spend. All else is fluff, hokum or chum.

rycK

Comments: ryckki@gmail.com