Krugman Traps Himself in his Trappy Claptrap over EU Funny Money

Abstract: Paul Krugman mumbles about deflation and spending in Europe and calls upon members of the EU to do something for Greece, currently dragging down the EU and threatening to ignite a financial panic and a probable disintegration of this hapless union. Their spending is too high, their government packed with nepotistic politicians that owe everything they have to Marxian style unions.  The Greeks lied about their debts before joining this cluster of weak sisters and tried to hide their current deficits by subterfuge and now their central bank is insolvent and their citizens are rushing money from Greek banks into Cyprus to avoid being confiscated by a frantic far leftist government. Krugman can make no negative comments about their wild spending and huge deficits as they are not right wing governments. For Krugman, a Bush 3.4% debt to GDP ratio was too high but the Obama deficit of now 84% is just fine and, by the way, we need to spend more. Thus Krugman talks out of alternate sides of his mouth when analyzing leftist governments when to compare to the right. In this op-ed Krugman mumbles and comes to the conclusion that Greece needs more ‘help.’ Krugman condemns Krugman in this and earlier essays where we can easily pick out his political bias and show that this bias is  the  consistent and eternal basis of his so-called economic advice.

Krugman launches off:

“Not that long ago, European economists used to mock their American counterparts for having questioned the wisdom of Europe’s march to monetary union. “On the whole,” declared an article published just this past January, “the euro has, thus far, gone much better than many U.S. economists had predicted.”…“Oops.”[1]--The Euro Trap By Paul Krugman Op-Ed Columnist Published: April 29, 2010 [Emphasis is mine in all quotes.]

This is a crude feint by our Nobelette since he adores socialism and high taxes and massive government spending.[2] There is some hidden pungi stake embedded somewhere in the rest of this prattle so we need to step carefully.

Debt and spending are not the problem we learn:

“To understand the euro-mess — and its lessons for the rest of us — you need to see past the headlines. Right now everyone is focused on public debt, which can make it seem as if this is a simple story of governments that couldn’t control their spending. But that’s only part of the story for Greece, much less for Portugal, and not at all the story for Spain."--The Euro Trap By Paul Krugman Op-Ed

Oh! Wild spending and gross public debt is not a problem??

“The fact is that three years ago none of the countries now in or near crisis seemed to be in deep fiscal trouble. Even Greece’s 2007 budget deficit was no higher, as a share of G.D.P., than the deficits the United States ran in the mid-1980s (morning in America!), while Spain actually ran a surplus. And all of the countries were attracting large inflows of foreign capital, largely because markets believed that membership in the euro zone made Greek, Portuguese and Spanish bonds safe investments.”-- The Euro Trap

“Then came the global financial crisis. Those inflows of capital dried up; revenues plunged and deficits soared; and membership in the euro, which had encouraged markets to love the crisis countries not wisely but too well, turned into a trap.

What’s the nature of the trap? During the years of easy money, wages and prices in the crisis countries rose much faster than in the rest of Europe. Now that the money is no longer rolling in, those countries need to get costs back in line.”-- The Euro Trap

Apparently, the EU setup whereby various nations can ‘share the same currency’ and adopt wild and incoherent spending and taxation theorems with no controls from the ‘union’ is a good idea.[3] We are thusly enlightened.  Actually, it is a disaster. And, does this mean wage cuts? The message is not clear as to what Krugman advises here. He also treads on dangerous partisan grounds by stressing the need for capital influx, a term despised by liberals. We all know that capital influx means the exploitation of the masses.

“The problem is that deflation — falling wages and prices —”-- The Euro Trap

Krugman is well known to want to prevent deflation with massive stimuli.[4]

“So what will happen to the euro? Until recently, most analysts, myself included, considered a euro breakup basically impossible, since any government that even hinted that it was considering leaving the euro would be inviting a catastrophic run on its banks. But if the crisis countries are forced into default, they’ll probably face severe bank runs anyway, forcing them into emergency measures like temporary restrictions on bank withdrawals. This would open the door to euro exit.”-- The Euro Trap

This run is on as Greeks move their money to Cyprus as of only a few hours ago at this writing.  All or most all [9]  of Greece's banks were just downgraded by S&P.[5]  So far, there is nothing new or novel here except the latent need for more spending.[6] What else has Krugman to offer us except fluff? A Greek default is now almost a certainty. [7] He apparently calls for more wealth transfers disguised as taxes.[8]

Here it is!!

“If European leaders don’t start acting much more forcefully, providing Greece with enough help to avoid the worst, a chain reaction that starts with a Greek default and ends up wreaking much wider havoc looks all too possible.”-- The Euro Trap

And a lesson for the US:

“The deficit hawks are already trying to appropriate the European crisis, presenting it as an object lesson in the evils of government red ink. What the crisis really demonstrates, however, is the dangers of putting yourself in a policy straitjacket. When they joined the euro, the governments of Greece, Portugal and Spain denied themselves the ability to do some bad things, like printing too much money; but they also denied themselves the ability to respond flexibly to events.”-- The Euro Trap

This is a circular essay and is, as such, popular in propaganda circles where phrases and slogans can be used in opposition to the exact contest of the message and still influence the ignoranti.  What Krugman is saying is that it is too bad that Greece and others in the foolish union cannot independently print their own money and offset their debt with inflation while retaining certain elements of socialism. It is this experiment in socialism that will crush their system. This essay is an oblique message to Obama and his drooling Congress to spend more money here in the US on green things and social programs that don’t work. The EU is a bad idea as there are no controls over member nations and their spending. Greece and California have much the same problem.[9]

Here is how Krugman thinks deficits are too big when Republicans are in office and 14 trillion is now not so high since Obama is in office:

“Krugman, in a November 2004 interview, criticized the "enormous" Bush deficit. "We have a world-class budget deficit," he said, "not just as in absolute terms, of course -- it's the biggest budget deficit in the history of the world -- but it's a budget deficit that, as a share of GDP, is right up there."

The numbers? The deficit in fiscal year 2004 -- $413 billion, 3.5 percent of the gross domestic product.”--[10] Krugman: Bush's Deficit Bad, Obama's Deficit Good By Larry Elder [Emphasis is mine in all quotes.]

This clearly shows, by a scale of (14/.413) or 33.8 fold, that Krugman cherry picks numbers and rattles them around in his little cage for a while and then reverts backward to form by stressing that what any leftist on any continent does is fine but Republicans spend too much and run very high deficits. This proof statement, in Krugman’s own words, gives us the proper information to state that Krugman is nothing more than a mouthpiece or simpering stooge for the far left.  Our current debt to GDP ratio happens to be 12.1/14.3 or %84. I think that is a bit higher than 3.5% even in liberal terms.  Was Krugman a deficit hawk[11] when he criticized Bush?

Krugman sums up:

“And when crisis strikes, governments need to be able to act. That’s what the architects of the euro forgot — and the rest of us need to remember.”-- The Euro Trap

This is all very hazy. But, one message is clear. The need to print more money or take on more debt in the EU is paramount. Thus, in the Greek case, we can expect Germany to put up the higher fraction of funds to be sent down the black hole in Athens to be wasted upon those nepotistic government employees and greedy unions who refuse to take cuts of any form. Wasting money on losers is ‘action?’

Thus, this guy drags his credibility through the mushy latrines in a frantic search for anything however small or sticky that will aid Obama and his Marxists who are spending too much money. The proof of his bias and political stoogery derives easily from a reading of his own fluff. I wonder if he keeps copies of his earlier op-eds. I guess he really cannot.

rycK

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