Krugman UnMakes a Euromess and Recommends a California-style Mess. Bigger Government is Always the Solution

Abstract: Paul Krugman apologizes for the Greek and Spanish government-induced debts with the suggestion that they weren’t ready for a single-currency system so Europe should build up a bigger collective government. His signals and recommendations seem to fly in the face of the salient fact that California, just as broke as Greece or Spain also participates in such a monetary system. He fails to mention the USSR that was a ‘union of socialist republics’ and parts of Eastern Europe who formed a similar union although not with a common currency. He suggests bigger government as usual and howls about the potential expulsion of Greece and Spain from the EU.

The New York Times frequently creates a splendid candyland array of tarts and sweets and goodies for those to enjoy who can only exist on spending of other people’s money. The paper, bankrupt in more ways than just financial, sport a brilliant cadre of ‘journalists’ [1][2][3][4][5][6][7][8] and staff[9] that consciously, or unconsciously,  directs their readership into new and wonderful avenues to achieve political mastery and success with bigger and bigger government.  They analyze the news and reports and comments of the political masters, but somehow always manage to morph all this into a caricature of their honored Pulitzer Prize winner Walter Duranty and echo his propaganda style of the 1930s.[10] Government is always wonderful but it is best when it controls everything.  Paul Krugman[11][12][13] is one of these gifted soothsayers in the ideological and financial propaganda games, specializing in tautological singsong about the unavoidable utility to infect every nation with his personally-modified and discredited Neo-Keynesian economics. His magnificent pronouncements and enlightened endorsement of the far-left political spheres of influence and intellectual prowess brightens the  New York skyline with gold stars and tufts of whiffle dust and other illuminations driven by the fame and fortune of his mindspring offerings endowed by his Nobel Prize.[14] He is so wonderful.

Today, he apologizes for the Idiot Greeks their Spanish brethren-in-sorrow and their phony Marxian socialist societies who have spent themselves into oblivion and wasted all the patience that the sober members of the European Union have offered during their participation in this profligate wreckage. As is usual in propaganda tracts, he starts off with some concessions and gives a few points to the howling opposition before slipping, like a Mickey Finn, a fatal pill into the common soup bowl:

“Lately, financial news has been dominated by reports from Greece and other nations on the European periphery. And rightly so.”[15]--The Making of a Euromess By Paul Krugman Op-Ed Columnist Published: February 14, 20 [Emphasis is mine in all quotes.]

Since the Greeks threaten to bring down most of Europe and cast them into the poor house I can agree that this might drift into the news in a place or two.

The caveat is niftily inserted:

“But I’ve been troubled by reporting that focuses almost exclusively on European debts and deficits, conveying the impression that it’s all about government profligacy — and feeding into the narrative of our own deficit hawks, who want to slash spending even in the face of mass unemployment, and hold Greece up as an object lesson of what will happen if we don’t.”-- The Making of a Euromess By Paul Krugman

The Rule here is that we cannot cut spending for this reason. If we had employment at 100% or more we would still have to resist spending cuts.

As is routine in propaganda pieces, the salient issue that vectors directly into the problem is given an oblique nod and the reader is left with the impression that the critics are, again, on the trail of the wrong culprit, but our good economist will show us the errors in our thinking. He is correct in stating that wild spending and uncontrolled debt are parallel transcontinental concerns in many of our states and federal government. A lot of nervous taxpayers are watching Greece. The object here is to finesse this linkage with a grand solution for Europe and drop the matter and hope that the reader will also forget our problems and beg for tax hikes and more spending.

Debt and excessive spending were not the cause of this disease!

“For the truth is that lack of fiscal discipline isn’t the whole, or even the main, source of Europe’s troubles — not even in Greece, whose government was indeed irresponsible (and hid its irresponsibility with creative accounting).

No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.”-- The Making of a Euromess By Paul Krugman

I suppose the Brits escape blame in this one instance. Swiss too?

Here, we simply witness and suffer though a stilted dissertation concerning the connectivity of two independent variables that have no fixed relationship to each other. We are encouraged to assume that the debt and excessive spending would not have occurred if the Greeks had not been subjected to participation in a single-currency system although they begged to be admitted and then lied about their debt to do so and to meet entry requirements. That explanation makes sense to a liberal.

Krugman sets a trap for himself here as he now swings broad and wide down a rose peddle-strewn pathway with banners and song waving the apparent virtues of a single-currency state while ignoring that California is just as bad off as Greece and Spain and we, strangely, also have a single-currency system, for the time being, unless California finds a way to print IOUs in a novel way or exits the union and prints their own.

Ancient history now redacted:

“Consider the case of Spain, which on the eve of the crisis appeared to be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in 2007, compared with 66 percent in Germany. It was running budget surpluses. And it had exemplary bank regulation.

But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular.”-- The Making of a Euromess By Paul Krugman

43% debt to GDP is not low.  There have been lots of sovereign defaults at 31% or lower. Then, they had a debt-driven asset bubble. Gee, didn’t we have a bubble machine too?[16] Was this obvious or predictable?? 

Flashing back to Krugman’s own words from the past:

“… 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”[17]-- The Phantom Menace Nov. 22, 2009.

Only Wall Streets counts here? What about Congress? Gee, did Europe have some people who thrust giant inflows of capital into Spain who were trained to watch for similar bubbles? Were the Spaniards introduced to bubble politics or bubbly economics before they got into debt?

This is the mix-and-mismatch switcheroo ploy used by propagandists who select the identical financial or economic attribute and force it to be eminently suitable and desirable in one political sphere and improper or criminal in another. I don’t follow the reasoning where Spain could not see this bubble bursting. Does the Wall Street Journal publish in Spanish? Then, there is the similar case of Ireland too and they even speak a form of English. Apparently, the laws of economics that Krugman knows work differently according to some liberal index that rates their leaders or policies. This is strange. Did Newton have two sets of mathematical kinetics for the birds and bees? Does his calculus offer different solutions for the flight of apples as compared to bananas?

“And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation.”-- The Making of a Euromess By Paul Krugman

Deflation is the standard remedy for a bubble. We are still deflating and many of our government employees will suffer from lower salaries and reduced benefits and entitlements. The implication here is that Spain needs some gifts:

Leave the EU!! No??

“Now what? A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As Berkeley’s Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger “the mother of all financial crises.” So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.”-- The Making of a Euromess By Paul Krugman

That is the solution! More government! Bigger government.  Our American state system has obviously prevented the impending bankruptcies of California, New York, Michigan, New Jersey and probably Maryland with our federal system and single currency! What a wonderful idea!! The United States of Europe.

Then why are Germany and the Dutch so against this gem of an idea?

“Holland's Tweede Kamer has passed a motion backed by all parties prohibiting the use of Dutch taxpayer money to bail out Greece, either through bilateral aid or EU bodies. "Not one cent for Greece," was the headline in Trouw. The right-wing PVV proposed "chucking Greece out of EU altogether"[18]-- Germany growls as Greece balks at immolation By Ambrose Evans-Pritchard Published: 7:49PM GMT 14 Feb 2010 [Emphasis is mine in all quotes.]

To be fair, we need to realize that many had reservations about a single currency system for Europe:

“It has three main aspects. The first is the well-known fiscal bit. The Greeks have overspent and over-borrowed. Now they face national bankruptcy. The EU offering loans will buy time but won't solve the underlying problem. If it makes gifts – thereby effectively making Greek debt its own – it will encourage other countries, especially Spain, Italy and Portugal to behave in the same way. In this case, the credibility of the euro in the markets will be shredded and support for the currency in the rest of Europe will crumble. As the ECB's former chief economist put it last week, why should German taxpayers fund excessive Greek public sector pensions?”[19]--The current Greek crisis is merely act one of a much wider tragedy  By Roger Bootle Published: 9:15PM GMT 14 Feb 2010 [Emphasis is mine in all quotes.]

But, this now is kindling for the socialists to spread the net and catch the fat fist for the frying. We all know that various states and nations have their problems and that under one currency budgets and spending are crowded in terms of flexibility but we can offer a comparison of California with Texas or Utah as example of single-currency systems where the financial problems can be directly tied to spending and inefficiency of government. Thus, Greece has no excuse. Neither does Spain.

But, now this is unfair to select a favorite leftist term. Why let those who were irresponsible go crawling as beggars and not be allowed to participate in the same standard of living as those frugal states who can manage debt and spending? The ugly response is that they are hopeless and will drag you down with them as they cannot be regulated or trained and we offer Greece and California as proof. They are lepers.[20]

Mindless blather and the tortuous recirculation of  leftist theorems and redacted histories of failed states do not a constitute a proper lesson: the people have to suffer a bit  and go without things and then realize what they have done in supporting the unions and progressive ideas of leftist  governments. Better them that us I say. They made their owns beds.

rycK

Comments: ryckki@gmail.com