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Ridiculed By Americans Everywhere, Krugman Now Threatens, Gives Unsolicited Advice To Germany, Pisses Entire Nation Off

Tyler Durden's picture




 

These days it's hard being a religious fanatic, also known as a Keynesian. It is even harder when you are Paul Krugman (sadly, the cornerstone of NYT's entire paywall strategy), and everyone in your own country is already sick and tired of, and openly ignores your constant appeals to drown the world in new and record amounts of debt, thus ignoring your appeals with impunity. So what do you do when nobody takes you seriously for thousands of miles around? Why you go even further - to the core of Europe in fact... where you proceed to threaten, badger, insult and give your unsolicited advice to anyone that listens. That "unlucky soul" in this case happens to be Germany daily Handeslbatt, which ran an interview with the "economist" in which Krugman stick not a foot, but an entire SS-20 nuclear warhead armed ICBM, in his mouth. And since Krugman is unaware, preaching the benefits of record deficit spending in Germany, ever since that little experiment in hyperinflation known as the Weimar Republic, tends to generate adverse reactions. Which is precisely what happened in this case. Luckily, now Krugman is a persona non grata in at least one country. Unfortunately, it is not the one in which his trite platitudes and melancholic remembrances of the golden days of Greenspan's credit bubble are still published on a daily basis.

As the WSJ reports:

Princeton University Prof. Krugman caused a stir in Germany this week with a stinging critique of Bundesbank President Axel Weber, who is considered a frontrunner to succeed Jean-Claude Trichet as head of the European Central Bank when Trichet’s term expires in October 2011. “If you are looking for someone who is aiming for zero inflation while unemployment is rising to 13%, then Weber is definitely the right guy,” Krugman said in an interview published in German with the business daily Handelsblatt.

The verbal lashings of the Bundesbank head will continue until insanity returns:

“Weber is concerned about inflation, when there is no inflation. I would rather see an ECB President who gives more weight to deflation risks and the risk of a protracted stagnation,” Krugman said, adding that he doesn’t know Weber personally. Before joining the Bundesbank Weber was an economics professor in Germany and fairly well known in U.S. academic circles.

Krugman also criticized Weber’s opposition to the ECB’s purchase of the government bonds of vulnerable countries like Greece and Portugal. The Bundesbank chief touched off controversy in Europe last month when he publicly declared his opposition to buying bonds, breaking a longstanding ECB taboo against airing disagreements in public.

Yet trust a Keynesian to hope to achieve one thing, yet in reality obtain just an opposite result:

rugman seems only to have bolstered Weber’s clout among Germans, who wear their anti-inflation obsession as a badge of honor. Germans often say that whereas the Great Depression dominates U.S. economic thinking, Germany’s experience with hyperinflation in the 1920s is its defining economic period of the 20th century, and one that must be avoided at all costs, even if it means slower economic growth.

Dennis Snowden, who heads the Kiel Institute for the World Economy, defended Weber, telling Handelsblatt: “He has all it takes to be a fantastic president. He has great sense of responsibility, a strong knowledge base and he knows how important it is to keep inflation expectations stable.”

And when unsolicited advice is rightfully ignored, what next but to jump the shark and threaten your way in having someone to listen to your blabbering.

Krugman didn’t stop with Weber. He has taken on Germany’s plans to rein in its budget deficit, which is already considerably smaller than the U.S.’s as a share of GDP. “German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover,” he wrote in his New York Times column.

German politicians, he wrote, “seem determined to prove their strength by imposing suffering — and politicians around the world are following their lead.”

Krugman also told Handelsblatt he wouldn’t rule out sanctions against Germany if it continued to rely on its export-driven model. “If the euro falls to parity with the dollar, the Europeans are going to be surprised by the demands that will come out of the U.S. Congress, and I would support that,” he said.

Good work Krugman - you have just gained one more enemy to not just the Fed's monetary lunacy, but the president fiscal imprudence.

That fiscal and economic policy critique probably won’t gain any more traction in Germany than his monetary policy one. Germans see their government finances and trade competitiveness as an example to be followed by Greece, Portugal and other troubled countries in Europe. And they clearly don’t see the U.S. model as one worth chasing.

Luckily, in Germany people actually have brains and are able to respond to this kind of ridiculous sophistry:

Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”

“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.

We rarely touch upon the illustrious persona of Mr. Krugman as he tends to do a good job of involuntary self-immolation without our help. That said, we completely agree with the conclusion of the WSJ's Brian Blackstone:

So if Krugman really wants to keep Weber from the ECB presidency, or at least cool some of his support in Germany, he might want to consider damning the Bundesbank chief with praise instead.

Something tells us the Germans are done with P.K. And since we, unfortunately, are not, perhaps he should adopt the same reverse psychology in the US - just like a Goldman downgrade of something means buy buy buy, should Krugman become rational for a change and espouse a prudent approach of deficit cuts, every normal thinker in the US will be immediately forced to burn their copy of The Road To Serfdom.

 

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Wed, 06/23/2010 - 19:39 | 430412 spekulatn
spekulatn's picture

We rarely touch upon the illustrious persona of Mr. Krugman as he tends to do a good job of involuntary self-immolation without our help.

 

Awesome Bitchez

Wed, 06/23/2010 - 21:27 | 430595 P Rankmug
P Rankmug's picture

Tell me about it.  I have to live with the buffoon being an anagram of my ZeroHedge persona.

Wed, 06/23/2010 - 21:35 | 430604 bigdumbnugly
bigdumbnugly's picture

Krugman was pretty good and made sense playing alongside Tony Randall in The Odd Couple, but seems to have jumped the shark thereafter.

Wed, 06/23/2010 - 23:23 | 430749 swgprop
swgprop's picture

+1 Nice.

Wed, 06/23/2010 - 23:21 | 430745 ISEEIT
ISEEIT's picture

Krug the Keneysian got a No-bell. Enough said if you care about the battle between reality VS fiction. The political left as impowered today represents a lie ( actually a house of cards built upon a deck of lies). Little Paul blows the trumpet of a false faith.

That's why he and the Idiot (name the idiot, might be a great game?) share in common the scarlet letter of a "Nobel Prize".

Name the society that has ever survived a false faith attack?

Thu, 06/24/2010 - 08:11 | 431155 Commander Cody
Commander Cody's picture

We are governed and advised by the criminally insane.  Apparently, the Germans have detected and eliminated the tainted Kool-Aid in their drinking water.

Wed, 06/23/2010 - 23:23 | 430748 knukles
knukles's picture

Dude, the Germans are just so On!
No to Krugman
Yes to Hasslehoff

Discerning Good Taste.

Wed, 06/23/2010 - 19:46 | 430420 Oracle of Kypseli
Oracle of Kypseli's picture

Krugman may be a good theorist. But has no common sense.

Thus! he is a useless buffoon. (useful idiot?) 

Wed, 06/23/2010 - 20:06 | 430451 Eternal Student
Eternal Student's picture

Which raises an interesting question. If he's a true Keynesian, does he use his Credit Card to pay off his mortgage?

Interested Creditors want to know.

Wed, 06/23/2010 - 20:57 | 430539 Ragnar D
Ragnar D's picture

As a true Keynesian, he uses yours.

 

(Well to be technical, he uses a combination of University funding, which comes out of your pocket, and the NYT's company card, which will also be paid for by you once they rahm through the net "neutrality" / Drudge tax / dinosaur media bailout bill.)

Wed, 06/23/2010 - 21:05 | 430558 bugs_
bugs_'s picture

You rule!

Thu, 06/24/2010 - 00:04 | 430812 StychoKiller
StychoKiller's picture

Don't forget about "borrowing" from pension funds in order to pay the pension fund(s)!  Is that Alice over there "trippin'"?!

Wed, 06/23/2010 - 21:15 | 430546 I need more asshats
I need more asshats's picture

No mortgage to pay. Andy gave him use of Abe's penthouse on Central Park West when he won the Nobel.

Here's how Andy Rosethnal, editorial page editor of The Times announced the news to his staff:

To the staff: I'm sure by now you've all heard the wonderful news, but it bears repeating: Paul Krugman has been awarded the Nobel Prize for Economics for his work on international trade and economics. This work, of course, is outside the twice-a-week column that he writes for our Op-Ed page. But to say that we're proud of Paul and his association with The Times would be an amazing understatement.

Paul writes one of our best read and most popular columns, in part because of the power of his ideas and the force of the positions he takes, but also because he does something that few scientists of his caliber have ever achieved. He takes enormously important and incredibly complicated subjects and translates them in ways that are not only understandable to everyone, but that also make them relevant to everyone's actual lives.

There is an ancient tradition of editors taking credit for awards given to anyone on their staff, at any time, but I'll confine myself to saying how delighted I am to be a colleague of Paul Krugman's.
--Andy Rosenthal

Copyright 2008 The New York Observer

Sounds like The Observer was celebrating a little too.

Wed, 06/23/2010 - 21:53 | 430634 drwells
drwells's picture

Pathetic. A wonder Hayek doesn't crawl out of his grave, or urn, or whatever the hell his mortal remains are in, and throw his Nobel back into the Committee's collective face.

Wed, 06/23/2010 - 22:01 | 430650 Turtle49
Turtle49's picture

The million dollars from the Nobel Prize is tax free.  How about the fair rental value of the live here for free penthouse?  Was that reported as additional income?

PS  In case you could not guess -- I do not like Krugman and the New York Times is living on its reputation -- and the money from the fellow in Mexico.  Carlos Slim?

 

Thu, 06/24/2010 - 07:25 | 431112 Circumspice
Circumspice's picture

He takes enormously important and incredibly complicated subjects and translates them in ways that are not only understandable to everyone

And his views are always so nuanced!

  1. c + i + g = y
  2. Increase g
Wed, 06/23/2010 - 19:51 | 430424 monmick
monmick's picture

The beauty of giving such moronic advice at this point in time is that, when the global economy eventually collapses under its own weight, you can credibly say to all those who ignored you: "I told you so."

Wed, 06/23/2010 - 20:32 | 430488 Japhy Ryder
Japhy Ryder's picture

The thing that bothers me is that Krugman is getting a pay check (a big paycheck no doubt).  He does nothing except spout words.

Mowing someones lawn for 20 dollars over the weekend at least contributes to society in a small way.  IOW -"get a job Krugman !"

Wed, 06/23/2010 - 21:06 | 430561 Ragnar D
Ragnar D's picture

History has already proven Krugman and his control-freak ilk wrong dozens of times.  It doesn't matter, the media will continue to give him attention to make excuses because it fits their agenda.

Hoover overspent and accelerated a huge credit bubble that popped.  FDR stepped in with a bunch of populist rhetoric, and expanded government as quickly as he could while flushing as much money down the toilet as quickly we as could.

In 1930 the stock market recovered, everything was all better, and green shoots were everywhere.  And then the real crash happened, and we had a dozen years of Great Depression.

 

Krugman's version is that FDR somehow didn't spend enough money "stimulating" do-nothingness.  He's also saying the TRILLIONS we've spent aren't enough, and when we fail to reflate the credit bubble every government-cheerleading media outlet will echo him.

Just look at the way they talk about European austerity:  it's so "severe", it'll cut growth and the salaries of "workers".  In reality they haven't cut anything, they're just slightly slowing the rate of increase while still piling on debt.  There's nothing "severe" about it, the gov't waste was never "growth", and the only ones who might see pay cuts are useless gov't unions--actual workers aren't having their salaries cut, and won't have to pay for as much featherbedding.

Wed, 06/23/2010 - 19:56 | 430435 bob_dabolina
bob_dabolina's picture

At this point I think all questions/comments/concerns/advice by any individual with any vested interest in a United States government official should be ignored with reckless abandon.

The entire establishment is compromised by the most ignorant and corrupt individuals in the history of the United States Of America.

No Credibility. No Trust. No Confindence.

 

Wed, 06/23/2010 - 19:56 | 430436 Apostate
Apostate's picture

You skipped quoting the best lede in recent WSJ history:

David Hasselhoff’s status as Germany’s favorite American appears safe, from Paul Krugman at least.

Kudos to Brian Blackstone.

Can someone photoshop Krugman's head onto Hasselhoff's bod?

Will Krugman join the dissident generals in exile to plot his revenge?

Wed, 06/23/2010 - 20:02 | 430443 The 22nd Prime
The 22nd Prime's picture

not a foot, but an entire SS-20 nuclear warhead armed ICBM, in his mouth.

 

That one busted my gut. Thanks.

Wed, 06/23/2010 - 20:48 | 430518 New_Meat
New_Meat's picture

but we're all within 3 CEP of gz.  this idiot - Ned

Wed, 06/23/2010 - 20:03 | 430448 Shameful
Shameful's picture

Ah the mighty Paul Krugman.  Am I the only one who wants to look at his personal finances?  I would love to see if he follows his prescription of "SPEND! BORROW!SPEND! BORROW! "

Wed, 06/23/2010 - 20:07 | 430452 unwashedmass
unwashedmass's picture

 

you know..... as much as i hate to give Paulie Boy any credit....

the plan....you know, the money printing MIGHT have had a chance if....

it had actually been distributed to the peasantry.

as we know, all the cash that was printed and is being printed has literally been laundered thru the major banks and stuffed into the accounts of the banking elite.

Now why Paulie seems to be unaware of this, who knows? And if he is aware, why would he believe that the Europeans would handle the situation differently?

Whatever.... I do hope that Jamie Dimon -- at the very least -- has the good manners to write Paulie a thank you on his way out the door to wherever he's secreted his share of the billions.

Wed, 06/23/2010 - 20:52 | 430527 New_Meat
New_Meat's picture

Not all laundered, the remaining stimulus hanging around for this summer's "final push" of public works spending.  Something like 2/3 of 787 BB plus the extra arm-twisting extra (I forget, drove over 1T).

Comic relief is going to become scarce, we should keep the fool around and watch him go mad.

- Ned

Wed, 06/23/2010 - 21:01 | 430552 DosZap
DosZap's picture

unwashed,

You think we could get back the Stim $ that went to ACORN, and Petrobras, and ???????

Bottom  line, THEY "NEVER" want/ed the economy to get better.

( I do not know what it takes for people to get this thru their heads,we are not dealing with regular Politicians here!).

Remember, Rhambo!!!!!!!!!.......

"Never let a Crisis go to Waste".

So, in addition to the one's just happening, they decided to HELP create some more..............kind of like a Short Order Cook.

 

Wed, 06/23/2010 - 21:43 | 430616 Fred Hayek
Fred Hayek's picture

That would have meant Krugman going along with some of the republicans' suggestion to that effect.  Not. Going. To. Happen.

Paul Krugman, inc. is in the status industry.  Agreeing with republicans when they want to give John and Jane Doe their own money back is NOT the way you express your sophistication and thereby status in the circles in which Krugman travels.

Wed, 06/23/2010 - 20:10 | 430460 TooBearish
TooBearish's picture

Comon Ty - give the guy a break - he's just vying for his rightful position in the New World Order....

Wed, 06/23/2010 - 20:47 | 430514 Careless Whisper
Careless Whisper's picture

that's right. i doubt he went rogue and gave that interview. he was on a mission.

Wed, 06/23/2010 - 20:11 | 430463 downwiththebanks
downwiththebanks's picture

Removed from reality as Krugman is, it's more comedic to think the Austrian school prescription of "Austerity uber alles" will solve the capitalist crisis.

We're long past the business cycle here, gang.  And the Austrian school doesn't do well with that reality (or any other one, really).

Cutting people off of food stamps won't end the capitalist depression.  It will only kill them.

Wed, 06/23/2010 - 20:40 | 430500 Apostate
Apostate's picture

You're oversimplifying the Austrian position.

Austerity is what the administration favors. That's the Larry Summers / Jeff Sachs playbook, which is truly pernicious, criminal, and has provoked civil war, public health crises, and strife nearly everywhere that it's been implemented.

There ought to be no austerity. The debt should be defaulted on, followed by a gentle de-socialization (not privatization) of the economy, guided by the homesteading principle.

Classical liberals have had zero influence in public policy for over 100 years now. 

Thu, 06/24/2010 - 04:20 | 431035 AnAnonymous
AnAnonymous's picture

The debt should be defaulted on.

In other words, screwing people all over the world who sold their commodities against debt.

Better for you to say "we should push austerity on others so we could keep enjoying our life"

Just like the other economists, Austrians advising this kind of path are clowns. Because there is a physical limit to this scheme.

 

 

Thu, 06/24/2010 - 05:43 | 431073 fajensen
fajensen's picture

In other words, screwing people all over the world who sold their commodities against debt.

Well, Yes - It is better to screw them Now, and they learn not to trust foreigners in the future, while they still have ressources to trade, than later when all the ressources and all the land has been exchanged for debt, leaving them with nothing.

Besides; screwing over islamofascist Saudi Arabia and communist dictatorship China? Why would that be a bad thing to do? Neither are exactly our friends!

Thu, 06/24/2010 - 07:52 | 431139 Insert witty title
Insert witty title's picture

 

Who are the people who sold their commodities against debt? They receive a cash payment. People sold their labor for cash but could've exchanged fiat paper money for gold? No one i know owns an iron ore mine.

Banks get fucked, brilliant. Hopefully the Fed gets torn down, again fucking brilliant.

China gets screwed, but thanks to the US printing press they have crammed 200 years of industrial development into 30 years and they get to keep their infrastructure. Not a bad deal and one i'm sure they are well aware of and anticipating

 

This is besides the point. The debt has already been defaulted because it can never be paid back. Ever. Fact.

What we are doing now is extend and pretend.

Don't blame libertarians for the law of unforeseen circumstances.

I just dont' understand where you are coming from with this comment. And i havn't seen any austrians advocating default, they just say its going to happen one way or the other.  

Thu, 06/24/2010 - 08:24 | 431167 Bendromeda Strain
Bendromeda Strain's picture

Better for you to say "we should push austerity on others so we could keep enjoying our life".

When did you become dense? Default is the only option. What form it takes and when are the only variables in play. If you believe that extend and pretend has a whisper of a chance, then what are you doing here? A hyperinflationary event will punish "us" more - but "we" are not the Fed. "We" did not sit in at Jekyll Island. "We" did not sit in at Bretton Woods. "We" did not advise Nixon in '71.

Besides - even if you fancy yourself prepared for an HI event, it could still kill you prematurely. It is the deadliest form of austerity.

 

Thu, 06/24/2010 - 10:12 | 431304 PeterSchump
PeterSchump's picture

If you think a default will enable the current American lifestyle to continue, you should ask for a refund of your education expenses.

Fri, 06/25/2010 - 09:18 | 433426 fajensen
fajensen's picture

If you think the current American lifestyle will continue unchanged under ANY scenario you should perhaps lay off the Afghan opium - or maybe start selling it; its a Job that cannot be easily outsourced after all (but a Mexican will Kill for that job)!

Wed, 06/23/2010 - 20:46 | 430511 G. Marx
G. Marx's picture

Have no fear, TPTB have ignored the Austrians for decades, so I doubt they'll suddenly be struck by a wave of rationalism. I'd rather the Austrians be consulted after the collapse. Until then, please let us continued to be led by the statist (like Krugman) so when the collapse comes, there will be doubt as to where the blame lies.

Wed, 06/23/2010 - 20:55 | 430535 Brett in Manhattan
Brett in Manhattan's picture

They'll just say the collapse would've been worse had we not implemented their policies.

Wed, 06/23/2010 - 21:57 | 430641 drwells
drwells's picture

As Hayek said, it does no good to consult Austrians after the collapse when you ignored them during the bubble.

Wed, 06/23/2010 - 20:54 | 430532 ColonelCooper
ColonelCooper's picture

You may well be correct, but the current effort will only insure to fatten them up a bit more before they starve to death. 

"Cutting people off of food stamps won't end the capitalist depression.  It will only kill them"

In some respects, the kicking the can down the road we're engaging in COULD be justified if TPTB were actually trying to prolong life for the terminally fucked.  We all know that is hardly their purpose. 

So, putting the shoe on the other foot, can one blame Germany for trying to act responsibly when the end result is the same? 

It's like playing that never ending game of Monopoly, when it just won't end.  The money's all worthless, and Germany is the first one who's sick enough of playing to get up and leave.

Thu, 06/24/2010 - 07:45 | 431130 Insert witty title
Insert witty title's picture

Firstly, I'm in no gang of yours. Secondly you clearly havn't read a scrap of Austrian economics. Why would they need to advocate austerity when they they dont advocate overspending in the first place?

Oh does your brain hurt? Too simple for you? Refute it if you can, I dare you.

Austerity is as keynesian as spending, but in  the theory govt saves first, spends later rather than the real world spend first, spend later, spend more, panic, cut spending, blame it on the market.

Or you're just a troll.

Thu, 06/24/2010 - 20:11 | 432710 monximus
monximus's picture

I hope you don't think the government forcing people to buy crap they are not voluntarily willing to pay for = spending. Keynesians only pretend to be empiricists. They ignore all data that shows people to do not want to buy the stuff that government forces them to buy.

If I offer you $1 for all of your stuff and you decline that is irrefutable empirical data that you value all of your stuff more than $1. If you offer to sell your $100K house for $500K and there are no takers that is empirical data that the market values your house less than $500K. One of the biggest laughable con scandals was the notion that Keynesians are empiricists.

This is precisely why Keynesians demonstrably do not know what supply and demand is, do not know what trade is (hint: it consists of voluntary mutual exchange), do not know the difference between want and not want, do not know the difference between want more and want less, and therefore do not know what a market is, and thus do not know any basic economics whatsoever. And this is precisely because they ignore empirical data, precisely because they pretend the preferences of others are what they are demonstrably empirically not.

When a Keynesian references the term "spending" you know they are full of it.

Edit: Who is the best?!

http://www.youtube.com/watch?v=NxVU4wOha8k

Wed, 06/23/2010 - 20:14 | 430467 Testicular Cancer
Testicular Cancer's picture

Makes me think that he has a hidden agenda.

Wed, 06/23/2010 - 20:35 | 430492 Mitchman
Mitchman's picture

Maybe he's angling to repalace Timmay.

Wed, 06/23/2010 - 21:25 | 430594 arnoldsimage
arnoldsimage's picture

most hidden agendas can be boiled down to two vices. power and greed.

Thu, 06/24/2010 - 02:44 | 430988 Hephasteus
Hephasteus's picture

I hide my agenda so that people don't keeping asking it to do stuff with thier agenda. Hey want to go to lunch saturday. Hey what are you up to sunday.

Wed, 06/23/2010 - 20:17 | 430471 Amish Hacker
Amish Hacker's picture

"The worst vice of the fanatic is his sincerity."

                                                   Oscar Wilde

Wed, 06/23/2010 - 20:31 | 430487 Mitchman
Mitchman's picture

Great quote!

Wed, 06/23/2010 - 21:13 | 430573 4shzl
4shzl's picture

"Never murder a man while he's busy committing suicide."

  -- Ludwig Wittgenstein

Wed, 06/23/2010 - 22:07 | 430663 Brett in Manhattan
Brett in Manhattan's picture

"The University thinker has his food brought to his cage. The independent thinker gets his food in the wild."

--Arthur Schopenhauer

Wed, 06/23/2010 - 22:38 | 430701 undereducated
undereducated's picture

"When the moment is ripe, only the fanatic can hatch a genuine mass movement." 

Eric Hoffer

Wed, 06/23/2010 - 22:59 | 430725 NOTaREALmerican
NOTaREALmerican's picture

It's not the heat,  it's the humidity.

-unknown.

Thu, 06/24/2010 - 08:27 | 431173 Bendromeda Strain
Bendromeda Strain's picture

Get off my lawn

- me

Wed, 06/23/2010 - 20:21 | 430475 rawsienna
rawsienna's picture

Luckily for the German's, Weber will not have to worry about our congress after November - we will vote all of Krugman's idiot friends out of office.  

Wed, 06/23/2010 - 20:44 | 430509 Dr. Sandi
Dr. Sandi's picture

I thought we did that last time.

 

Wed, 06/23/2010 - 20:47 | 430516 Lux Fiat
Lux Fiat's picture

I would love to see that happen, but don't underestimate the power of the dark si...errr, incumbency, and some people's stupidity.

Wed, 06/23/2010 - 21:23 | 430591 arnoldsimage
arnoldsimage's picture

that is if an election is held. my supposition is the dems know for certainty they have no chance in november. they will create or use a present crisis to cancel or delay the elections.

Thu, 06/24/2010 - 02:43 | 430986 Dr. Sandi
Dr. Sandi's picture

The Bush Babies didn't cancel elections under the same circumstances, neither will the BO Band.

Maybe if election results made any difference, it would be different.

 

Wed, 06/23/2010 - 20:22 | 430477 Johnny Dangereaux
Johnny Dangereaux's picture

It's amazing how many people that read the NYT thinks this guy knows what he talks about....at least we weren't reminded that he won douche bag economist of the year award...I mean a Nobel prize.....Ha Ha!  http://fliiby.com/file/8215/m3khchdvw6.html

Wed, 06/23/2010 - 20:38 | 430495 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Prize.....not Nobel prize...this because it is not an official prize....it is a dog and pony show...to trot out their plans....what are their plans?  Good question, thanks for asking.

This, what I have named "The Rise of Firms".  Please note how many times Paul Kkkrugman touches his nose, he even points this out.  A nervous twitch?  No!  Like crossing his fingers behind his back....but they have to tell you what they are doing.  It "giver them power" or some mumbo jumbo like that.

Have a bag ready to collect yourself.

"The Rise of Firms" by Paul Kkkrugman:

http://nobelprize.org/mediaplayer/index.php?id=1072

Wed, 06/23/2010 - 20:43 | 430507 Cursive
Cursive's picture

Thank God for ZH.  Now I don't have to listen to Barry Ritholtz telling me how incredible Paul Krugman is.  Stiglitz for that matter, too.

Wed, 06/23/2010 - 20:55 | 430528 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Al Gore won the Nobel Prize. Look what he does, distorts data in his eco propaganda movie and has a house that uses obscene amounts of energy. Do as I say, not as I do. Putting millions of people out of work. Still no prez title either.

Thu, 06/24/2010 - 08:30 | 431176 Bendromeda Strain
Bendromeda Strain's picture

You forgot "abuse masseuses"  :D

Wed, 06/23/2010 - 20:23 | 430478 Dismal Scientist
Dismal Scientist's picture

Unsolicited advice from a representative of the prime culprit, to a nation that has performed relatively well (notwithstanding the stupidity of its banks in buying the crap that GS et al sold them), would be funny were it not so pathetic. Spending your way into deeper trouble (if thats possible) is a mistake most of us learn early. Not ivory tower tossers like Krugman though. Awake at the lectern, asleep at the switch.

Wed, 06/23/2010 - 20:47 | 430515 Dont Taze Me Bro
Dont Taze Me Bro's picture

I always thought that once the bubble economy burst, guys like Alan Greenspan, Summers, and Krugman would go away and live a quiet life somewhere in a retirement resort in a far away place. What amazes me is that not only these guys refuse to go away, but their belief in their own voodoo economic theory has actually strengthened. Their refusal to back down and go away stands testament to their fanaticism. These guys act much more like religious nut cases than economic practitioners. 

Wed, 06/23/2010 - 21:00 | 430548 Shameful
Shameful's picture

Why would they? In many ways their belief set is perfect in that it cannot be wrong or disproven by their terms. If you have 1 trillion in stimulus and it fails it was because it was not 2. If it is 2 and fails it is because it was not 4. And so on to infinity. There is no doubt that if the situation escalated Krugman would advocate infinite spending as being the only true answer. With this belief set in their own minds they can never be wrong, the spending was never big enough.

And lets face it the political class love these guys.  "This economist says that only answer is for me to blow money like crazy, buy favors, and fill my pockets...this man is a genius!!!"

Wed, 06/23/2010 - 20:24 | 430479 pauldia
pauldia's picture

Recent awardees of  Nobel prizes include  Arafat, Carter,  Obama, Paul Krugman, the Intergovernmental Panel on Climate Change (IPCC), & Al Gore. Whats next,  Bertha Lewis with ACORN & Elliott Spitzer? Krugman is desperately flailing at the stark naked Keynesian Frankenstein the world now sees and the comedy of his lifes work. But at least he has a gold plated image of Alfred Nobel for his trophy case. He is perfect for the NYT and Princeton. Both are filled with fellow travellers and as such offer no intellectual challenges to baffoons such as himself and the likes of Gore, Obama etc.

Wed, 06/23/2010 - 20:59 | 430544 New_Meat
New_Meat's picture

Well said - Ned

Wed, 06/23/2010 - 20:28 | 430485 ChanceIs
ChanceIs's picture

While attending a housing collapse conference at the American Enterprise Institute (a conservative institution) several years ago, I heard John Makin, a resident scholar, comment that he held John Maynard Keynes in the highest regard.  He went on to state that he loathed the Keynesians.  I think that his point was that Keynes certainly championed government and even goevernment deficit spending in rough times.  But Keynes also said that you had to repair the government balance sheet when times became better.  The "Keynesians"  didn't seem to grasp that last part.  For the record, the total public debt has grown every year since 1957.  All the pennies put away for rainy days have been spent thousands of times over.  Have to pay the piper now - in blood it seems.  I think that the first place that the federal government should cut should be support for Princeton University.

Wed, 06/23/2010 - 22:01 | 430649 drwells
drwells's picture

Hayek claimed that he had a conversation with Keynes in which Hayek basically said, "You realize your followers are turning into a bunch of fucking fruitcakes and distorting your already idiotic teachings into outright pernicious lies, right?"

Keynes said, "Yeah, but if they get too far out of hand I'll rein them in, don't worry."

He croaked about two weeks later.

Wed, 06/23/2010 - 20:32 | 430489 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Kevin Rudd resigns; take note Barry.

Wed, 06/23/2010 - 20:38 | 430496 Dismal Scientist
Dismal Scientist's picture

and Rudd had a good rating with the electorate/donors, until he proposed the mining tax. wanna bet that Barry knows this, which is why he's still cuddling up to his buddies on Wall Street ?

Wed, 06/23/2010 - 20:39 | 430497 Mitchman
Mitchman's picture

You go, girl!

Wed, 06/23/2010 - 20:39 | 430498 DosZap
DosZap's picture

LH,

He shot himself in the foot with the Mining Taxes...........The Aussies, have been all over him like ants at a picnic.

Wed, 06/23/2010 - 21:03 | 430557 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Rudd was a joke.  Hopefully Gillard is better.

Wed, 06/23/2010 - 20:36 | 430494 bmfe
bmfe's picture

Nobel prize tarnished again….

Wed, 06/23/2010 - 20:42 | 430504 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Home / Nobel Prizes * Nobel Prize in Physics * Nobel Prize in Chemistry * Nobel Prize in Medicine * Nobel Prize in Literature * Nobel Peace Prize * Prize in Economic Sciences

http://nobelprize.org/nobel_prizes/

One of these things is not like the others!  One of these things is a little bit different!  One of these things is not like the others!  Guess which one it is!

Not "Nobel Prize", just "Prize".

Wed, 06/23/2010 - 20:53 | 430529 Lux Fiat
Lux Fiat's picture

One of these things is not like the others!  One of these things is a little bit different!  One of these things is not like the others!  Guess which one it is!

 

Hahahahaha... Next thing you know, the Children's Television Workshop will start working on political ads, to counter the Story Pirates.

Wed, 06/23/2010 - 20:55 | 430534 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It's all about the kids!  That's who I work for!

Thu, 06/24/2010 - 10:45 | 431406 Lux Fiat
Lux Fiat's picture

Bless you.  I've gotten more informed and involved because of mine.

Wed, 06/23/2010 - 20:42 | 430505 Apostate
Apostate's picture

The Nobel Prize will hopefully be abolished. Alfred Nobel never deserved a clean conscience. 

Wed, 06/23/2010 - 20:54 | 430533 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Well when your family works directly under the Rothechilde's Oil Empire.....

Wed, 06/23/2010 - 21:02 | 430554 Hephasteus
Hephasteus's picture

They should replace the nobel coin with 4 lbs of C4 and an igniter so you can shove it up the presenters ass and blow it.

Wed, 06/23/2010 - 21:41 | 430611 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"Just hold still."  "Wha...what are you do-wing?"  "I said hold still."

Wed, 06/23/2010 - 20:41 | 430503 Brett in Manhattan
Brett in Manhattan's picture

With all the writing, researching and speaking, does this guy ever teach a class?

Then again, maybe it's better that he doesn't.

Wed, 06/23/2010 - 20:45 | 430512 buzzsaw99
buzzsaw99's picture

Scary how much he looks like Bernanke.

Wed, 06/23/2010 - 20:47 | 430517 Problem Is
Problem Is's picture

Krugman Always Misses The Point
Make the TBTF banks mark assets to market and eat all their bad debt.

1. It ends TBTF without legislation.
2. It eliminates Jamie & Lloyd who are parasites on the economy.
3. It forces the bankrupt into bankruptcy, clear the debt and let's move on.

Wall Street currently provides no capital formation for the real economy.

Therefore Wall Street is a drag, a parasite on the real economy that provides no marginal benefit... other than well heeled, white shoe fraud.

Krugman: Invent Politics Free Stimulus, Then Come Talk To Us
Invent stimulus that is not massive pork barrel ineffective bull shit like the last $700 billion Krugman... Then come talk to us.

By the way Paul... Were you the genius that thought up cash for clunkers and the $7k home buyers tax credit... We now see these worked brilliantly...

Wed, 06/23/2010 - 20:57 | 430538 Lux Fiat
Lux Fiat's picture

Can we ship PK off to Sweden for a week or two of intensive overviews of how they dealt with their most recent banking crisis?  I can think of a few other folks who could be shipped off along with him.

Wed, 06/23/2010 - 21:01 | 430549 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Ship him off, yes.  I care not where.

Wed, 06/23/2010 - 21:01 | 430550 Mitchman
Mitchman's picture

Hey!  Cash For Clunkers got 85% of the Obama/Biden bumper stickers off the road!

Wed, 06/23/2010 - 21:02 | 430555 Hephasteus
Hephasteus's picture

LOL

Wed, 06/23/2010 - 21:14 | 430575 arnoldsimage
arnoldsimage's picture

+1

Wed, 06/23/2010 - 22:03 | 430654 drwells
drwells's picture

LOL.

Wed, 06/23/2010 - 23:18 | 430740 DudleyDoRight
DudleyDoRight's picture

You mean eliminate the FAS 115 available for sale category and put all AFS securities in the trading account?  Now there is a thought!

Hey wait a minute...what's up with the FASB proposal to mark loans?

Thu, 06/24/2010 - 01:57 | 430941 Escapeclaws
Escapeclaws's picture

Amen to your three bullet points and to your speaking the truth about Wall St. +.999999999999...

Wed, 06/23/2010 - 20:48 | 430519 Thoreau
Thoreau's picture

Love the timing on this. Krugman is obviously a mouthpiece for Obama, dispensing not-so-thinly-veiled threats with cape and silent-movie theatrics: "he wouldn’t rule out sanctions against Germany..."

But then again, maybe he just lobbed a thermite grenade at Obama, just in time for the G20 gang-bankers.

Wed, 06/23/2010 - 20:50 | 430523 Híppos Purrós
Híppos Purrós's picture

Say what you will about Paul, he does have the courage of his convictions...

Oh, yes...  And a Laureate too.

And in at least one regard, Keynsianism is rather like Capitalism...  Like ice cream, it comes in many flavours.  Some are more palatable/fulfilling than others.

Wed, 06/23/2010 - 23:40 | 430777 Bolweevil
Bolweevil's picture

Hitler had convictions too you hack. Junk for you, pfffft!

Wed, 06/23/2010 - 20:51 | 430526 Wynn
Wynn's picture

Paul must be a stud. He can pump liquidity all day, every day.

Wed, 06/23/2010 - 20:59 | 430542 Apostate
Apostate's picture

Maybe he should go to Japan, instead... I hear the Germans are more into scat.

Thu, 06/24/2010 - 07:59 | 431142 Circumspice
Circumspice's picture

He came to Japan in the 90s, spouting a bunch of shit about printing yourself out of a liquidity trap. The net result was that the huge government deficits prompted people to save money in anticipation of future tax increases, while that future revenue was being blown on bridges to nowhere. They followed the PK playbook to a tee—ignoring his pleas that it's never enough—given what was politically possible, and have 20 years of stagnation to show for it.

On one positive note, though, he did half-apologize for his idiocy.

Wed, 06/23/2010 - 20:58 | 430541 Rusty_Shackleford
Rusty_Shackleford's picture

Ellsworth Monkton Toohey strikes again.

Wed, 06/23/2010 - 21:23 | 430592 Apostate
Apostate's picture

Isn't it remarkable how these so-called intellectuals are so quick to reach for their holsters as soon as their grand plan becomes threatened?

Wed, 06/23/2010 - 21:37 | 430608 Rusty_Shackleford
Rusty_Shackleford's picture

Everybody always wants to reach for the gun in the room.

 

While the last resort of the competitive economy is the bailiff, the ultimate sanction of the planned economy is the hangman.”-- Wilhelm Röpke

Thu, 06/24/2010 - 00:03 | 430808 palmereldritch
palmereldritch's picture

Too many Brownings and not enough culture

Wed, 06/23/2010 - 21:06 | 430562 bugs_
bugs_'s picture

Every day is shit on Paul Krugman day!

Wed, 06/23/2010 - 21:13 | 430574 BeerGoggles
BeerGoggles's picture

I would recommend you shit down his neck...

Wed, 06/23/2010 - 21:22 | 430585 Apostate
Apostate's picture

Some thoughts that I had a few minutes ago as I bought some fresh vegetables:

1. Paul Krugman is a stateless adherent of an extreme ideology that requires vast amounts of force to achieve its ends.

2. Krugman arrived in the foreign nation and began making credible threats to the leadership. He's served as an informal advisor to multiple administrations and wields significant amounts of influence. 

3. Sanctions are an act of war.

4. Krugman advocates a form a global terrorism by financial means, and is unafraid to threaten the innocent German people with what is in effect a military action. 

5. Krugman's employer has - for decades - been an outlet for terrorist organizations like the CIA, and even foreign intelligence operatives working through their corrupt reporters (such as Judy Miller). 

6. For his incitement to acts of war against the German people, I believe the authorities would be well within their rights to either detain or expel Mr. Krugman for making credible threats of mass violence against millions of German men, women, and children - along with the many other countries that depend on German companies and peaceful trade. 

Wed, 06/23/2010 - 21:31 | 430597 TuesdayBen
TuesdayBen's picture

Were odd looking mushrooms among the vegetables (that's 'wegetables', in German English) you purchased?  Just kidding.  But I feel so pedestrian, cuz when I'm buying veggies I'm thinking about buying veggies...

Krugman and Friedman are the dueling idiots of the NYT, IMO.

Wed, 06/23/2010 - 21:44 | 430617 Dr. No
Dr. No's picture

"1. Paul Krugman is a stateless adherent of an extreme ideology that requires vast amounts of force to achieve its ends."  He is part of those globalists who brought you the euro, nafta, nato, UN, or  (insert your favorite treaty which puts limits on a soverign nation). He uses fear in order to promote the need for larger, global oversight.

EDIT: which, after reading my post, is a chapter in my book on how to rule the world...Dr. No.

Wed, 06/23/2010 - 21:50 | 430624 Rusty_Shackleford
Rusty_Shackleford's picture

Or perhaps they should approach him the way we did for Operation Pastorius.

Wed, 06/23/2010 - 21:52 | 430633 Apostate
Apostate's picture

Hey, that one's new to me. Maybe some of Krugman's accomplices should take note of how that plot wound up. The guys who plead guilty received commuted sentences!

All Germans should note that Krugman's policies - and threats of sanctions - would disrupt the peace far more in Germany than the Baader-Meinhof gang could have dreamed of. 

Thu, 06/24/2010 - 01:19 | 430891 hound dog vigilante
hound dog vigilante's picture

Apostate,

Your line-of-thought here is interesting!  I agree that Krugman's words will galvanize rational Germans (and most other sovereign interests) against the US, and accelerate US isolation/dollar collapse.

Krugman/Summers/Geithner/TPTB are still stuck in the 'superpower' paradigm. The US is no longer a 'superpower'. We have neither the debt capacity nor the energy security that a 'superpower' requires. Look at how the world has evolved and behaved towards the US these past 5-10 years. US influence is waning fast... it's so obvious in hindsight. Our leaders will be the last to recognize it, as Krugman so embarrassingly demonstrated today.

Something tells me that Krugman won't be granting interviews with non-US media anytime soon...he's much better suited for the dumbed-down jr. high mentality at the NYT.

 

Wed, 06/23/2010 - 21:34 | 430601 Mitchman
Mitchman's picture

From The Prudent Bear (www.prudentbear.com) by Doug Noland dated June 18:

 

A Prominent Indicator Of Financial Conditions:

I would like to follow up on last week’s examination of the Fed’s “flow of funds” data with more focus on Financial Conditions.  Over the past seven quarters (back to Q2 2008), Federal borrowings have increased $3.274 TN, or 49%, to $9.972 TN.  Over the same period, GDP increased $104bn, or 0.7%, to $14.601 TN.  This massive fiscal expansion was instrumental in stabilizing the economy.  It certainly wasn’t the only factor.

In just 21 months, Federal Reserve assets expanded $1.387 TN, or 146%, to $2.339 TN.  Of course, the Fed also stoked ultra-loose financial conditions when it dropped short-term interest-rates to near zero.  From the high in January 2009, Money Market Fund Assets declined $1.1 TN, an unprecedented outflow of finance upon global risk markets.  Renewed Risk Embracement by the global leveraged speculating community played a pivotal role in loosening Financial Conditions, although there is little transparency when it comes to securities leveraging, “carry trades,” sophisticated derivatives and other global sources of finance for speculation.

From crisis lows to this past April’s highs, the S&P500 rallied more than 80%.  The broader market was even stronger, with the S&P400 Mid-caps and Russell 2000 small cap indices more than doubling.  The Morgan Stanley Retail Index almost tripled from lows, and the S&P Regional bank index surged 250%.  Commodities indices rallied almost 50%.  Synchronized fiscal and monetary stimulus propelled spectacular equity and debt market reflation across the globe.  Confidence, right along with faith in policymakers, skyrocketed.

I have posited that the policy response to the bursting of the Wall Street/mortgage finance Bubble unleashed the Global Government Finance Bubble.  It now appears that the Greek debt crisis will mark a key Bubble inflection point.  

From a market perceptions point of view, it’s a changed world.  Faith in government policymaking has been badly shaken.  Confidence that fiscal and monetary stimulus ensures ongoing global reflationary forces has waned.  Markets now appreciate that massive stimulus can’t assure market stability.  Indeed, further deterioration in government finances is now recognized as creating instability, uncertainty, and heightened systemic risk throughout the markets.  The world will now look at structural debt issues in a much less positive light.

From a flow of funds perspective, one can identify four key sources of finance that propelled the recent 18-month reflationary period.  First, recall that federal liabilities increased about $340bn in 2007.  This debt growth ballooned to $1.63 TN annualized during the first quarter and averaged about $1.60 TN annualized over the past six quarters.  Second, reflation was fueled by Federal Reserve monetization - especially the $1.2 TN increase in agency debt/MBS holdings over the past five quarters.  Third, zero rates encouraged a massive flow out of relative safety in search of higher returns.  Fourth, there was the critical - if not transparent - re-risking and leveraging for the hedge funds, sovereign wealth funds and other global speculators.

All four of these critical sources of reflationary finance now have issues.  Alan Greenspan’s op-ed piece in today’s Wall Street Journal – “U.S. Debt and the Greece Analogy” - highlights the newfound attention to our nation’s structural debt predicament.  Though I’ll somewhat reserve judgment until the next crisis or economic downturn, the political pendulum appears to have swung decisively against additional bailouts, stimulus measures or other programs that would worsen our dismal fiscal situation.  Staggering amounts of government spending stabilized the system, while it increasingly appears we will garner few additional “benefits” from double-digit percentage-to-GDP deficits.

Similarly, caution is the watchword when it comes to anticipating additional benefits from monetary policy.  Granted, the Fed is likely stuck in the vicinity of zero indefinitely.  I am nonetheless skeptical that this necessarily equates to ongoing ultra-loose financial conditions.  I would argue that the Trillion-plus purchases of MBS had a momentous impact on marketplace liquidity, especially when it came to unfreezing the private-label MBS marketplace.  I expect a divided Fed to approach any additional monetization of MBS cautiously.  

Slashing rates certainly has a powerful impact when it comes to inciting Risk Embracement and asset inflation.  I don’t, however, anticipate that zero rates will have a great expansionary influence in a period of renewed risk aversion and faltering markets.  Looking at this issue from the Household sector perspective, zero rates can have varying benefits as well as costs.  On the back of surging securities prices, Household net worth jumped $6.30 TN over the past year (ended 3/31).  Previous low rate environments saw households enjoy huge housing wealth effects, including the free-flowing extraction of (inflating) home equity.  Near zero returns on household savings may not be a big issue when assets markets are rapidly inflating and households are tapping cheap sources of borrowings.  But that’s not the likely backdrop going forward.  Instead, zero rates may prove an impediment to consumption after this cycle’s atypical (especially in regard to housing and private-sector Credit expansion) reflationary dynamics have run their course.

I’ll be surprised if the wall of liquidity fleeing low returns isn’t in the process of slowing toward a trickle – or perhaps even reversing.  Especially with the continued drag from weak housing and jobs markets, the household sector is not favorably positioned to take on additional market risk.

I would find it very surprising if the European debt crisis did not mark a key inflection point for the global leveraged speculating community.  Painful (and highly correlated) losses in debt, currency, equities and commodities markets would seem to ensure heightened risk aversion going forward.  Clearly, sovereign debt has a greater degree of risk than was perceived in the marketplace prior to the Greek eruption.  A more cautious approach to “carry trades” (i.e. borrowing in yen or dollars to purchase higher-yielding instruments in other currencies) and leverage more generally seems certain.  This equates to more challenging marketplace liquidity and tighter financial conditions.

Prior to Greece, market perceptions held that aggressive global fiscal and monetary stimulus ensured highly-liquid markets that would demonstrate strong inflationary biases.  Virtually across the board, global risk assets were robust.  Not surprisingly, seemingly endless financial flows into the speculative markets distorted risk perceptions.  Nowhere was this more apparent than in the markets for Credit default protection.

Prior to Greece, risk insurance was cheap – insurance protecting against sovereign debt, corporate and municipal bonds, Credit instruments generally, equities and overall systemic risk.  Importantly, the perception of inexpensive and highly liquid market insurance spurred risk-taking and self-reinforcing leveraged speculation.  The abrupt dislocation in Greek and, only somewhat later, European Credit default swap (CDS) protection put an immediate end to inexpensive market protection.  And the subsequent synchronized decline in global risk markets illuminated inherent liquidity issues throughout.  It is my view that the end of the misperception of readily-available insurance protection marks an inflection point for the Global Government Finance Bubble.

While most view Greece and European tumult as of only minor consequence to the U.S., I believe it marks an inflection point for U.S. financial conditions.  Risk premiums have risen and non-government debt issuance has slowed.  Moreover, the cost of financial insurance has increased markedly.  Changes in insurance market dynamics could have the most profound impact on risk-taking – hence financial conditions – in the coming weeks and months.  

June 18 – Financial Times (Brendan A. McGrail and Allison Bennett):  “Illinois sold $300 million of Build America Bonds at a yield premium over Treasuries about 40% higher than two months ago after lawmakers failed to close a $13 billion budget deficit for the year starting July 1.  The fifth most-populous U.S. state sold the taxable debt maturing in 2035 priced to yield 7.1%... or 297 bps over… Illinois offered Build Americas of similar maturity at spreads of 205 bps and 210 bps in two April issues… Risk aversion among investors amid Greece’s efforts to impose austerity measures contributed to swell the state’s borrowing costs, said Tom Boylen, a managing director… for BMO Capital Markets.  ‘A lot of this is a global thing,’ Boylen said. ‘There’s a bigger magnifying glass on credit.”

June 17 – Bloomberg (Allison Bennett):  “The cost of insuring bonds issued by Illinois against default rose to a record high as lawmakers sought to close a $13 billion budget deficit… The cost of a five-year credit-default swap to insure Illinois obligations rose 6 bps to 308.61 bps today, or $308,610 to insure $10 million of debt… The gain makes insuring bonds from the fifth-most populous state the most costly among municipal issuers and puts it 66 bps above Spain.”

State of Illinois (five-year) CDS traded at about 160 bps to begin the month of May (closed today at 312 bps).  The cost of insuring against a default by the state was 25 bps back in May 2008.  State of California CDS this week also jumped above 300 bps, this after beginning May below 200 (traded about 60 bps in the summer of ’08).  After starting May at 140 bps, State of New York CDS closed today at 249 bps (traded most of 2008 below 50 bps).  Since the Greece crisis, the cost of State of New Jersey default protection has jumped about 70% to 249 bps.

As a Prominent Indicator of Financial Conditions, I will be closely monitoring developments throughout municipal debt markets.  State and local finances are stretched and vulnerable.  The weak link?  This susceptibility has become more acute post-Greece, with the marketplace now reassessing the efficacy of policymaking and the sustainability of reflationary forces.  Akin to Greece, state and local officials lack the luxury of Washington’s electronic printing press and helicopter “money.”  And, again like Greek debt, things deteriorate rather rapidly when the market turns nervous and demands significantly higher yields.  Meanwhile, the market’s faith is waning with respect to the ability of recovery to cure structural state and local deficits, as well as in the federal government’s capacity to move forward with numerous additional bailouts.

 

Wed, 06/23/2010 - 22:52 | 430717 the grateful un...
the grateful unemployed's picture

it was the best of times, the worst of times.

in the past economies there was no moral hazard, people who saved their money, people who stayed in their jobs, did well when the economy turned over, and the speculators and the easy money folks were taken back. it's not so different now. Krugman tries to see things in terms of one economy, (the one which is taking the heat right now) and while there are structural problems, unemployment, neither Krugman nor Noland is going to get it with their one economy view.

Wed, 06/23/2010 - 21:36 | 430605 docj
docj's picture

And since Krugman is unaware, preaching the benefits of record deficit spending in Germany, ever since that little experiment in hyperinflation known as the Weimar Republic, tends to generate adverse reactions.

People like Krugman are completely immune to their own irony.  He is a walking, talking contradiction.

I can't imagine anyone running their own finances the way Paulie Krugnuts wants us to run a $10T economy for 300M people.

Wed, 06/23/2010 - 21:49 | 430626 mogul rider
mogul rider's picture

The honorable commit hari kari in Japan

Please think carefully all you economists.

So the right and honorable thing here. Think Japan, think Japan.

Wed, 06/23/2010 - 22:16 | 430670 SuperDollaR
SuperDollaR's picture

Krugman - he knows nussing!

Wed, 06/23/2010 - 22:22 | 430678 Turd Ferguson
Turd Ferguson's picture

This fucking guy, Krugman, and Bob Pisani are the two biggest fucking douchebags in all of New York City.

Wed, 06/23/2010 - 22:31 | 430690 trav7777
trav7777's picture

All the fuckin debt in the world CANNOT create more oil.

THIS is what Krugmoron fails to grasp.

Wed, 06/23/2010 - 22:41 | 430704 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"The greatest shortcoming of the human race is our inability to understand the exponential function."

For more of what Trav is discussing.....

The Most IMPORTANT Video You'll Ever See:

http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=channel

Thu, 06/24/2010 - 00:05 | 430813 Bolweevil
Bolweevil's picture

Great stuff Mr. JohnJimi

Thu, 06/24/2010 - 00:26 | 430845 Apostate
Apostate's picture

I don't get this democracy shit with Soros.

The Germans are voting democratically to live within their means and to protect themselves from the catastrophe of inflation.

But it's apparently the "wrong kind" of democracy. The Germans should allow themselves to be out-voted by non-Germans, then? In violation of the original EU treaties?

The whole thing is a mess, of course, and I'm not going to make an argument in favor of democracy, but one can't have it both ways. 

Sorry, George, you will go down as a great trader - but a typical mediocre Eurotrash political intellectual who caused far more harm than good. 

Thu, 06/24/2010 - 04:29 | 431038 Wernerempire
Wernerempire's picture

"The Germans" does not exist. Merkel's government is extremely vulnerable right now. 

Also, the German parliamentary and electoral system is a by far more modern and power-diversified one than the US system - not a two-party system at that, too.

While Soros and Krugman are very much seen as Diplomats by other means, they provide more side notes than headlines in Germany. 

On the same level, Altkanzler Helmut Schmit has just accused Kanzlerin Angela Merkel of a tendency to "(Emperor) Wilhelmian Grandesse" and called her financial policies "worthy to laugh oneself crooked".

Just FYI.

Thu, 06/24/2010 - 04:54 | 431046 Wernerempire
Wernerempire's picture

Dear Apostate, and I only do post my replies to you because I have followed your commenting for a while and value your reasoning, so please don't feel offended: the headline "Krugman Now Threatens, Gives Unsolicited Advice To Germany, Pisses Entire Nation Off" makes for a good dialectic discourse to follow, but per se is wrong.
Chancellor Merkel could be very well swept out of power over this issue very soon.
Chancellor Merkel wants to expand the EU very rapidly.

Germans quite well do remember, that they used to have a FIAT currency that used to be well accepted and stabile.

Chancellor Merkel wants to use austerity measures to force Europe to politically centralize, for better or for worse.

President Obama, with help of emissaries of of opportunity prof. Krugman and Mr. Soros tried to put the message to the German public: "You gotta help us out here, you very well know the alternative. Postpone your centralization, and help us out."

And, since you were wondering upthread, scat is not big in Germany. Never knew such stuff existed, until I started living in North America. Germany is a dedicated export nation - if you want to pay money for it, we'll produce it, fer sure.
Most sex in Germany is as boring as David Hasselhoff.

Thu, 06/24/2010 - 05:57 | 431080 fajensen
fajensen's picture

The Germans should allow themselves to be out-voted by non-Germans, then? In violation of the original EU treaties?

The EUSSR very much like to assume all power for itself, including free speach (sensorship), taxation (CO2 qotas, national budget controls*), population (a policy of mass immigration to replace Europes native populations with 3rd-worlders), and Yet the fan-boi politicians are gagging at the oportunities offered by lucrative jobs within the EU equivalent of the Politbureau and going along with it - as is the stupid Happy-Happy "news" media.

Therefore the Lissbon treaty - a huge glob of complex legaleese that can be interpreted to mean anything as the need arises - has replaced the earlier treaties.

For Europe to survive, the EU must fail. It is as simple and as difficult as that!

*) Which is funny considering that the EU budgets are so riddled with fraud that parliament has refused aproving one for 12 years - not that it matters, of course!

Wed, 06/23/2010 - 23:55 | 430800 palmereldritch
palmereldritch's picture

This guy is the Karl Lagerfeld of the emperor's tailors
(sorry Karl)

http://www.purseblog.com/images/2009/06/karl-lagerfeld-karl-who-bag.jpg

Thu, 06/24/2010 - 00:15 | 430832 Kreditanstalt
Kreditanstalt's picture

On the other hand, Mr. Wolfgang Franz is not lily-white either...here's a guy who STILL would have bailed out Lehman Brothers, leveraged a zillion-to-one notwithstanding...

“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.

 

Thu, 06/24/2010 - 00:19 | 430839 Reese Bobby
Reese Bobby's picture

F*cking Princeton...

Thu, 06/24/2010 - 00:23 | 430842 Chupacabra
Chupacabra's picture

The Nobel Prize has become a farce.

Thu, 06/24/2010 - 00:46 | 430859 killben
killben's picture

Doe Krugman have any answers to thw questions posed by

Wolfgang Franz.

Let us get the answers and we would know whose head should be beheaded ..that of the conniving scoundrel, Ben Bernanke!!

 

Thu, 06/24/2010 - 01:02 | 430874 Arkadaba
Arkadaba's picture

I agree with a lot of the posters here regarding his unswerving loyalty to the current admin no matter what. And yep he is a Keynesian. He has never made that a secret.  And yes over the past couple of years, the titles of his columns have driven me crazy - trying to be too clever when America and the world is dealing with a real crisis. 

But ... when I was first living in the states and very much seeing America on a march to war in Iraq (which I didn't think was the smart thing to do), he was one of the few voices that spoke up. So I still do respect that.

 

Thu, 06/24/2010 - 02:02 | 430939 carbonmutant
carbonmutant's picture

"These days it's hard being a religious fanatic, also known as a Keynesian."

Totally!

He should be passing out tracts on a street corner...

Thu, 06/24/2010 - 02:12 | 430958 Escapeclaws
Escapeclaws's picture

The problem with Krugman is that he's an economist. He loves those supply and demand curves and loves to explain what is happening in the economy by shifting those curves right or left. These curves are pure fiction and represent all that is wrong with economic thinking. Once you have bitten that apple, you are forever lost. It was this type of quasi-pseudo-mathematical thinking that led to the evil of Keynesianism.

Thu, 06/24/2010 - 08:14 | 431157 Circumspice
Circumspice's picture

The curves are fine and perfectly sensible. It's the shifts and the ignorance of their nth-order effects. I mentioned it above, but it's like when the Japanese government started following a PK-esque plan of massive fiscal expansion and money printing, in Keynesian terms shifting the IS curve to the right and bumping up the government component of GDP.

The result was that people saw that the money was going to wasteful public utilities while their future tax bill was shooting through the roof, and thus they reined in their spending and private investment. The only people who took advantage of the ZIRP were financiers looking for a funding currency. The net result was not "IS=LM equilibrium" but the same situation, this time with zero interest-rates for savers and a 200% debt/GDP burden. In PK's mind, more profligacy would have had profoundly beneficial and completely opposite results. Stupidity's a terrible disease.

I know the Keynesian tools and their underlying logic (and often lack thereof). Know your enemy.

Thu, 06/24/2010 - 04:28 | 431037 twinturbo
twinturbo's picture

Keynes, Krugman and the Kenyan - hoods

Thu, 06/24/2010 - 05:17 | 431053 old naughty
old naughty's picture

Germany for the World Cup.

Thu, 06/24/2010 - 05:22 | 431056 Privatus
Privatus's picture

Krugman, witch quacktor.

Thu, 06/24/2010 - 05:31 | 431060 belsebub
belsebub's picture

Thx for a great Post. To summarize: Paul Krugman is an idiot.

Thu, 06/24/2010 - 10:33 | 431373 Jim B
Jim B's picture

+ 1

Thu, 06/24/2010 - 07:50 | 431135 Jamisia Shido
Jamisia Shido's picture

Yes, Krugman is usually an idiot - as are 99% of all mainstream economists. (1) However, he's right to point at the danger of deflation. (2) However, Krugman should have agreed with Soros that the euro is a flawed construct. It's not about "Krugman-bashing", but did he, Krugman, make any good points or not? Seems to me he made some stupid points, a few silly ones and an observation that might redeem him. So the jury is still out.

 

Thu, 06/24/2010 - 08:19 | 431163 Brett in Manhattan
Brett in Manhattan's picture

Deflation of what? Housing? College tuition?

Is this so terrible?

Thu, 06/24/2010 - 08:30 | 431177 Chemba
Chemba's picture

Paul Krugman suffers from SSS, which is "sell-sider's syndrome"

He has a hypothesis, based on his theoretical framework, which forms his "call" on how to deal with the economic situation

He has been extremely vocal about his "call", publicly for several years, and is therefore heavily emotionally invested in his "call"

His very public "call" is not working, so he is doubling down, making excuses, twisting facts as they come in to fit his "call"

It is very difficult for Prof K to admit, or even see, that his "call" is/was wrong, because it is so public: his professional reputation is fully invested in this "Call".  His subconscious protects him from seeing where he is wrong because his subconscious sees that to be "wrong", and have to admit it, is a threat to his professional reputation.

SSS is what sell-sider research analysts often suffer, and it is why they are always late.  telling you to buy near the top and sell near the bottom.  buy-side analysts are at lower risk of SSS since they are only public with their internal peers and PMs

Thu, 06/24/2010 - 10:24 | 431342 Sniper
Sniper's picture

Is this that actor from Get him to the Greek? When did he become an economist?

Thu, 06/24/2010 - 10:39 | 431395 earnyermoney
earnyermoney's picture

Paul "Freddie" Krugman is a propoganda tool of the Obama administration. He's delivering Obama's vitriol after the Germans gave the President the middle finger.

Thu, 06/24/2010 - 12:23 | 431574 Rusty_Shackleford
Rusty_Shackleford's picture

"I claim no higher truth than my own perceptions." --Robert Reich

 

It is the creed of the modern intellectual.   Reality simply does not matter.

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