Krugman Offers Us Naïve Fairy Tales about Financial Disasters and the Lessons We Should Learn from them.

Abstract: Paul Krugman mumbles about ‘events’ and how their ugly consequences should move people to learn from these mistakes and to change accordingly. He attacks Greenspan for financial policies but conveniently fails to mention several dozen failed social programs concocted by liberals. He now advocates regulating the banks with some undefined ‘financial reforms.’ This probably means nationalization. Translated, this means more and more government spending and the threat of massive inflation and a potential default on our international debts.  There is no limit to how much money the liberals can spend in order to bring us back to prosperity. If we keep spending like this our economy will collapse in a hurricane of debt, unemployment and inflation. That is apparently fine with liberal Democrats but they will never be moved by this evidence.

The theme:

“When I first began writing for The Times, I was naïve about many things.”[1]--Disaster and Denial By Paul Krugman Op-Ed Columnist Published: December 13, 2009

“But my biggest misconception was this: I actually believed that influential people could be moved by evidence, that they would change their views if events completely refuted their beliefs.”— Disaster and Denial [Emphasis is mine in all quotes.]

I can find no evidence of any change here in this person in the last 7 years. But, stay tuned. Maybe his movement was only colonic.

This current propaganda piece begins with probably the most sophomoric statement our igNoble Prize winner[2] has ever made. Can we suggest, for discussion,  an infected  string of social programs [read events to play the game here] that failed like: The Great Society, HUD, War on Poverty, Social Security, Medicare, WW1, WW2, federal welfare and Amtrak to suggest a  very few? We might then launch some inquiries into how such failures events ‘moved’ the leftists to repeat their catastrophes, or, why they were not ‘moved.’ The current theme is rather barefaced this time and some might wonder if Krugman has lost his marbles. He has not. We can push this comedy along with the festival atmosphere he invites and present our author with several notable and expensive leftist program failures and see if they qualify to ‘move’ him by the evidence. They will not.

He begins with attacks on others:

“I’ve been highly critical of Alan Greenspan over the years (since long before it was fashionable), but give the former Fed chairman credit: he has admitted that he was wrong about the ability of financial markets to police themselves.”— Disaster and Denial

Yawn. Here is the point: we are going to massage Greenspanism[3] [very low thus dangerous interest rates] and suffer through Krugman telling us he knew all along that banks would fail and we need more regulation or nationalization.  Low interest rates combined with a wild abuse of credit are to blame for this bubble and no Dem criticized this at the time because this was the price of low unemployment and prosperity and tax revenues. Why not raise interest rates now and correct this problem? They wanted more and more spending during the Bush2 Era and thought 5% unemployment was unacceptable.

An attack on the financial system:

“…with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence — every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses.”— Disaster and Denial

This current debt-driven deflationary spiral we are mired in may turn viciously into an inflationary monster as we hear from Paul Volker: “America is increasingly aware of just how deeply embedded and incestuous the Wall Street-Washington relationship has become. Who within this Wall Street-Washington circle “gets it?” Paul Volker.[4] Yes the banks made mistakes and we need the Glass-Steagall laws back to separate normal banking from investment banking.

The target of Krugman’s wrath, Allen Greenspan, warns:

“"You cannot ask a central bank to do more than it is capable of without very dire consequences," Greenspan continued, saying the United States faced a serious long-term threat of inflation unless the Fed begins to pull back "the entire stimulus it put into the economy."[5]-- Fed can do no more to cut unemployment: Greenspan [Emphasis is mine in all quotes.]

That comment, although very true in my view, will send Krugman and his toadies into spasms.

The mistake: Our phony government has experienced a loss of potential tax wealth from housing market declines that forced contractions in credit and ruined some banks. We are now stuck with toxic assets that have not been disposed of and which grow eerily more toxic daily.  The government then believes that spending, printing money or borrowing can somehow replace that lost portion of the GDP and can stimulate job growth with stimuli. It cannot.  The stimulus #1 has not worked and neither did cash for clunkers or the housing subsidies. The previous ‘jobs’ program spent $92,000 per job[6] And, then, we spent $24,000 per car on the Clunker Follies and a mere $43,000 per house on the housing scam. [7] And, none of these had a lasting effect. All of the money to do this was either borrowed or printed up quickie fashion by our government.

These were blunders, but will Obama and his leftists see their ‘mistake’ and take action? No. They will spend and spend and spend our way to prosperity using the failing California Model [8][9][10] which will result in default and depression.

Here, we must assume that new ‘controls’ over the banking system would be positive and prevent such a further disaster in the future. With ostensibly the same set of neurons blinking on this issue it is strange that Krugman fails to alert us on increasing our debt to astronomical levels—part of the problem of debt-deflation that caused this mess. No. He stodgily advises we just keep spending and concocting stimuli to help the economy. I think he wants to crash the economic system.

Krugman wanders around before he blames the conservatives:

“Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.”— Disaster and Denial

The commercial real estate bubble, now in progress, is the second bubble[11], and is a reflexive consequence of the first bubble which is still bursting.[12] There were no phony loans in that arena unless they were SBA loans to minorities.

This is typical Krugman. We apparently dismiss the blatant forcing of banks[13] and other servicers to make loans to people with little or no credit [or even a job] by the threat of judicial action by the Justice Department. We apparently don’t hear about the CRA and pressure from greenlining. org and ACORN to force banks to make lousy loans. The government under Carter and others pressured the banks to make loans and thus gave them CRA ‘ratings’ that were important when government approval was needed for mergers and other businesses deals. Thus, by withholding permission they pressured the banks into making bad loans to minorities. By political pressure ACORN and NACA [Neighborhood Assistance Corporation of America] got control of “large pools of mortgage money to them, effectively outsourcing the underwriting function to groups that viewed such loans as a matter of social justice rather than due diligence.” [14] The NACA mission was: “The NACA program focuses on families who could not access conventional financing, and borrowers that are considered B or C and sometimes D credit.”[15] Note that this process makes toxic asset securitized bundles of mortgages more toxic.

So, we have the government and private groups pressuring banks and others to make loans to people who have no credit ratings and should not receive these loans? Yes, that is liberalism in full bloom.

As always, we get half a loaf from the NYT. Big government is praised unless it is of the massive type that George Bush seemed to allow. But, the current massive national debt, rising to 14 trillion dollars soon [about 100% of our sinking GDP] is not mentioned. Nancy Pelosi [a.k.a. Spartacus] [16][17] had firm control over the last THREE budgets and now works on the FORTH, which included Bush’s last two years, but we blame Bush for his spending and debt. Krugman appears to be blissfully unaware that the CRA [the phony Community Communist Reinvestment Act][18][19] forced[20] banks to lend out money at a loss and that this contributed to the collapse of the credit markets.  

Obama, quoted in the video [http://hotair.com/archives/2008/10/06/was-sub-prime-lending-ever-a-good-idea/ ] favored this. He comments on the ‘money flow’ and that was largely supplied by Fannie Mae and Freddie Mac who took in some 3-5 trillion dollars worth of bad mortgages and paid off the banks and other servicers who structured the loans. Thus FM & FM supplied trillions of dollars for this obscene redistribution of wealth to the low class and the system crashed. The phony mortgages were bundled and sold off as ‘investments’ for cash to create some more subprime loans. Fanny Mae was the lavatory where bad loans could be flushed and Franklin Del Ano Raines[21] as head of Fannie Mae made a cool $90,000,000 dollars off this scam even thought he was accused of crimes[22] in this job. Oh, he is black and works for Obama [or did during the campaign]? Oh, yes. Is Raines a fat cat[23] under the current Obama tirade? FM made huge cash contributions to Obama and Chris Dodd and many other Democrats. No corruption here? This was all a vision of Greenlining.^[24]How many illegal aliens have sub prime mortgages? 5 million?? Those toxic assets were, in part, bundled and sold around the world and are now ‘toxic” assets and they will remain toxic until the properties are foreclosed upon and sold for a loss.

Krugman must not know of this.

“So it’s up to the Democrats — and more specifically, since the House has passed its bill, it’s up to “centrist” Democrats in the Senate. Are they willing to learn something from the disaster that has overtaken the U.S. economy, and get behind financial reform?

Let’s hope so. For one thing is clear: if politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it.”— Disaster and Denial

Translated, this means that Krugman wants us to again make more phony loans under some system of ‘regulation’ of banks.  This is true because if these ‘regulations’ were to filter out buyers with little or no credit then the CRA legislation would be dead and the ‘poor’ would not get their gratuitous loans. Krugman wants us to keep shoveling good money after bad and to continuously fix up mortgage payments for people who do not deserve credit. That is leftist politics.

Carving through the chum chucking and fog we must realize that these liberals will say or do anything to get more money into the hands of the their constituents in the low and criminal classes and the only way they can do this now is  with phony government loans and ‘fixing’ bad mortgages several times apiece. They want the banks to take the haircuts.  This is just a social tax to the left. This is justice.

Notice that the premise here is that people with no credit and a past history of default should have their debts ‘refinanced’ and where would that money come from? From the banks! Where else? They cannot, at this time, raise taxes because that would sink them in the polls and trash the economy. Missing here in this essay from the NYT based on Krugman’s words “…if events completely refuted their beliefs…” in this test case where the previous refinancing recidivism rates hit 70%[25] is apparently not evidence of a failed program!  This program doesn’t work! Maybe Krugman’s beliefs are not what we think. Maybe he ‘believes’ that any scheme however sordid, illegal or silly that puts money in the pockets of the low class and encourages them to vote for democrats is his belief. Yet another liberal social program failed and Krugman cannot find it.

Restating Krugman with respect to bank refinancing mortgages for people who have no credit we can predict this failure “…will condemn all of us to repeat it.” He is not moved by evidence in this refinancing scam? Either our author is still “naïve about many things” or he just plays the political game and blindly supports the far left.

I pick the latter as most probable. We are condemned to lose more money and no evidence of failure will convince the left to stop grunting and grabbing our wealth to just waste it. I doubt that a complete collapse of our financial system would influence the ‘beliefs’ of liberals. It would just encourage bigger government and more spending.

There is where we are with the left: hopeless.

rycK

Comments: ryckki@gmail.com