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Krugman Finally Wins the Argument
Courtesy of John Rubino.
Today’s world can be summarized in two sentences:
Unless continuously fed with new credit, the global financial system will implode. And when confronted with this possibility, governments will always respond with new credit.
This has been true at least since the Long Term Capital Management collapse in 1998, and in the ensuing 14 years the global financial markets and the world’s governments have been partners in a dance in which crisis elicits monetary ease, which ignites an asset bubble, which bursts and elicits a new flood of credit. After each sequence the total amount of debt — and the system’s fragility — is even higher than before.
Through it all a few brave souls like Ron Paul have tried to stop the music and liquidate the debt, while other — far more numerous — authorities like New York Times columnist Paul Krugman have called for even more debt to produce higher inflation in order to liquidate the old debt. These worldviews — sound money to which the world must adapt versus flexible money that adapts to the needs of the economy — are mutually exclusive. Only one can win.
With all due respect to sound money advocates, there was never any doubt about the outcome. When voters suffer, governments armed with a printing press will always respond with easy money.
Today the debate ended. France has elected a socialist leader who will demand an end to austerity. The head of the European Central Bank has accepted that growth should henceforth take precedence over balanced budgets, and Fed chairman Ben Bernanke has made it clear that he’s ready to step in with more easing if necessary. Elections in Greece, Ireland and elsewhere will solidify this consensus.
So now begins the next, purely-inflationary stage of the process, in which governments and central banks abandon whatever restraints they once recognized and vow to do whatever it takes to put people back to work in the here-and-now. That means tax cuts, even bigger deficits, continued low interest rates and aggressive asset purchase programs.
Whether this “works”, i.e. whether the coming round of global devaluation produces higher employment with a minimum of instability, is an open question because we’ve never been here before.
No society in history has owed this much money, and the forces of global debt liquidation have never lost. Kondratieff Winter has never been bypassed and converted to Spring. But the world has never been armed with an unlimited printing press either. See The Long Wave Versus The Printing Press.
One thing that’s certain is that today’s tentative policies with one eye on deficits will soon be replaced by single-minded money printing, with a Krugman-esque goal of sustained 4% inflation. So now we know exactly what the world’s governments want. The question is, can they get it?
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Excellent and cogent comment, mr. bankruptcy lawyer.
Because you are undoubtedly very busy, you missed the point, which is at the tail-end of the article (a place where, generally, you would find a succint summary):
"One thing that’s certain is that today’s tentative policies with one eye on deficits will soon be replaced by single-minded money printing, with a Krugman-esque goal of sustained 4% inflation. So now we know exactly what the world’s governments want."
Not to worry -- your profession is intact for a while, so be happy, and deal with it like a professional.
Rather than in a way that gives your profession a bad name, I mean.
"Today the debate ended. France has elected a socialist leader who will demand an end to austerity."
lol...no cherie, its just begun...again.
And How!
the analysis is faulty but the main reason is people are rejecting unlimited cedit for the financial system while sound money for the population. if bankers and the elites had to adapt to a aound money the people would.it's about the double standard more than anything else. i8fanything the printing press should berun m9ore forthe real economy notthe financial economy. then inflation would be due to demand and not the fed,orecb running the presses.the simplicity ofthe analysis doesn't differentiate between capitial fows and this causes the problems
Krugman is right! Fire up the CTRL-P-machine! Screw fiscal sanity and to hell with austerity! I am long gold and silver and think sound money and balanced budgets are nonsense. Reflate or die! (Wait til I sell my coins before you embrace the deflationary collapse, will ya?)
What about the children?
Childish article. Childish title. Meant to provoke argument in the wrong way. But, I will bite for the fun of it.
Krugman is wrong, but it is all conjecture because we can't do it again. And he will always have the claim that someone else didn't follow the prescription. The same old argument that no stimulus was big enough despite repeated evidence that wealth is transferred in a biased manner of one man's debt is another man's asset (hint, hint - closer to the law or money creation/control creates the imbalance which tranfers the wealth - so "up your Krugman, you wannabe-elite piece of shit - you know this and ignore it - private debt matters and banks create money - we all know it - so start working for the right team before history decides otherwise. A good start is maybe reconsidering Minsky.
The day Krugman uses his shiny pedestal to shout the truth about the pervasive brokenness, corruption, inaction...
even then he will not have "won" -- he will simply have earned a notch in his notchless shiny pedestal.
Can't do it, eh? Of course not.
Along the road to collective failure, those-on-shiny-pedestals (and those who pay them) who neglect what's really going on -- they are part of the problem.
Again.
Will Krugman and the other actors in this Keynesian play meet this end? Only time will tell....
http://www.custermen.com/ItalyWW2/ILDUCE/Mussolini.htm
Do you think people see this administration as fascist?
All administrations in democracies in the West value corporations > people.
If it looks fascist, smells fascist, and walks like a fascist.........
Nothing here that a pandemic wouldn’t cure (high fatality up to 80%):
http://www.dailymail.co.uk/sciencetech/article-2138805/Bird-flu-Science-...
“The science journal Nature has published the first of two controversial papers about laboratory-enhanced versions of the deadly bird flu virus - described by some as a 'recipe' for a bioterror attack.”
Maybe another CME/EMP Carrington Event would change things? http://www.youtube.com/watch?v=-_Ykt9RcaLE
Or spent fuel in Fukushima #4 going critical: “Arnie Gundersen Interview: There's more cesium in that [Unit 4] fuel pool than in all 800 nuclear bombs exploded above ground… “
There are more Black Swans on the horizon than a flight of starlings.
http://www.youtube.com/watch?v=ZOVVhUaFZ9E
And just as unpredictable.
And we are worried about what some stupid Phd AH said?
Meet the steamroller
Is see any dope now gets to prose an opinion and ilene is sure to pick it up. The debate excludes all talk of Iceland's success for all the right reasons of course. So the likes of easy money advocates can say how wrong everyone has been to advocate a different route to the self destruction of us all. Let me be the first to say your wrong. In fact you've always been wrong and history will once again show your ignorance of inflation.
alright, compare and contrast the results of the nordic countries and of japan in each of their banking crises. http://ideas.repec.org/p/hhs/eijswp/0149.html
Ever stop to think about the fact that Iceland is such a tiny country that noone cares about it? It's success is due to same reasons that it has been successful throughout its entire history; it's just so damned inconsequential!
Are you fucking brain dead? What the hell does being small have to do with successful banking reforms?
The success of Obama's central planning and stimulus packages should serve as a beacon to Francois Hollande.
Krugman is trying to inflate a tire with a hole in it. It does not matter how much air he pumps into it, it is not going to have any effect.
Look for the real estate in London to skyrocket as companies and high income individuals abandon Paris.
Krugman is going to win....Ron Paul makes alot of sense but the pain would be too real.
Pain is inevitable given the circumstances.
"Winning!"
Yeah, sure.
How could sound money have possibly won? Green-spun blew up the entirety of Wall Street. The fate of the Greenback was sealed long before Sir Alan had been given the boot and The Chairsatan began pursuing policies in DIRECT CONTRADICTION to his predecessor. (for some reason no one acknowledges this obvious fact. If Alan Greenspan hadn't done anything wrong why do the exact opposite once he got the boot?) "Proceed STRAIGHT to Naked Capitalism" folks! Ironically "so far, so good!" Doesn't hurt to have a once in a 100 year change in an energy paradigm of course. Indeed the collapse was probably caused by "oil complacency"...that there was no "natural gas insurgency" lurking underneath waiting to unleash the next "Novus Ordo Seclorum."
The reason Volcker was able to fight 10% inflation was because the middle class and the people on fixed incomes were getting clobbered. If Krugman gets his inflationary way, the politicians will get pressured.
At least with hyperinflation, the elite gets screwed.
With deflation, they win.
So hyperinflation is better.
Hardly. Who do you think owns the banks that are first in line to get freshly printed dollars? When the banks spend them, who owns the corporations they invest in? Inflation favors the investor glass who can leverage 4% inflation into double digit gains in their investments. Borrowers on the other hand get screwed, but not nearly as much as savers. The reason the rich get richter and the poor get poorer is the official policy to always have inflation.
You are being sarcastic or you are a total idiot. Deflation rewards savers while inflation steals their purchasing power. The rich do not worry about inflation (they have plenty of paper). Fine with me, this will crash the system faster and then we can find out the real value of everyone's labor. Fucking bring it.
Please allow me to point out that those positions are not mutually exclusive.
Because no rich people own gold, right?
There was a story on here a year or two ago about someone taking delivery, this being for a married couple, not a bank or corporation, of some rather large amount of gold; something crazy like 1 million ounces.
The elites win out from deflation or hyperinflation.
No - the washing basket,suit case, or wheel barrow filled with money will be worth more than the money in it. The people with hard assets will win out over those with no assets.
I think you framed the fight perfectly
Stay long fascism and central planning. They're willing to ride this baby into WW3 if they have to. So you might as well throw your hat in with the central planners.
as hugh hendry has stated additional nauseamly first comes deflation, which means cash is getting more valuable. this puts near term equity bears in a tough spot.
they must ask "who has all the cash?" the answer is the efficient for profit worldwide corporations. apple has a ton, hell they all do. the fed has forced those with investable money, which is rising in power, to buh stocks of the companies with all the money the world has left.
we almost have to have a market bubble of wekmar proportions.
buy all dips or hunker down with deflating cash and go buy a shitty foreclosed depreciating house.
no one will pay their bills once deflation really kicks in, but that wont be reported until massive gains in the market trick people into beliving in a recovery.... for like five days.
go buy stocks quick!
When has America ever followed the lead of Europe?
The Scottish Enlightenment comes to mind.
Govt is the same institution worldwide, there are no different policies, only different coloured rosettes at the margin
Govt just keeps on sucking until it wrecks your country
...nearly there, not long to wait now
I don't agree that Krugman has "Won". The battle maybe, but not the war. Let's wait and see what happens after the next round of printing. Sorry I meant growth.
He won the battle and we all will lose the war, you start allowing the "Inflation Genie" out of the bottle, and it is a bitch to put back in, that is what that idiot Krugman seems to always forget, perhaps he should talk to Paul Volker.
Bottom line is that even the FED will be constrained in order to maintain the low borrowing rates the USG requires for its survival ... and that means keeping a lid on inflation.
It's just the same old story that we see across time and across society. Take out instead of cooking. Pills instead of dieting and exercise. Borrowing to buy, instead of saving up. Blaming others instead of ourselves. The easy way out always has a bad ending and that ending lurks just up ahead.
Puhhlease...you're giving credit to Krugman where none is due, nor ever has been.
Krugman has always acted on behalf of the banksters, the ultimate agent of Wall Street.
Which is why Krugman, that "free market" evangelist, has always embraced looney tunes Milton Friedman economics, while subscribing to Keynesian remedies --- note the obvious contradiction?
Conscience of a Schizoid: the Paul Krugman Farce
Krugman draws parallels to the 1930s --- while ignoring all the jobs offshoring --- all the technology offshoring --- all the R&D offshoring --- all the investment offshoring!
As long as Krugman chooses to ignore this --- and what constitutes the economic engine of the USA --- he makes no sense?
(True, there was offshoring of investment back in the 1930s with the investment in German munitions by Brown Brothers Harriman and JP Morgan invested, or financed, Mussolini’s invasion into oil-rich Libya, but nothing on today’s order.)
With the financial sector making up far too much of the GDP --- when Krugman, or anyone else, suggests further stimulus (and I heartily agree more stimulus is required) --- but then suggests ONLY putting it in the public sector (teachers, police, etc.) --- how in creation is that not short-sighted?
Again, Krugman ignores the dismantling of the economy with the offshoring of jobs, technology and investment and with the financialization of the economy --- which essentially only profits the banksters.
Krugman, of course, has long been a “free market” evangelist --- which is his ultimate blind spot (or fraudulent behavior) of self-denial and why he chooses to ignore all the variables.
With Krugman’s latest pronouncements (the crisis being more about household debt ? ? ?) he sounds like a member of the Sarah Palin School of Economics, and a close read of Krugman’s most important opinions indicates that he falls 93% of the time in the neocon camp but --- and this is the clincher --- 100% on the side of the banksters and Wall Street whenever massive financial speculation is involved.
sgt_doom
Well said. Krugman's mind is cemented in the 1920's and 1930's, a period that brought Hitler to Europe. As has been stated previously here, by many others, as money is printed the first up to bat is always Krugman's ilk. The rest of the country can wait for the trickle down benefits of a golden shower.
Pardon me! I don't think you have actually read any of Paul Krugman's columns or his blog. If you had, you certainly wouldn't be calling him a "free market evangelist".
The real free market evangelist, by the way, is Ron Paul. If you are against unfettered markets, then you should certainly dislike Ron Paul, whose policies would completely free up the financial sector to really create havoc!
It is easy to win an argument when you set up a straw man. You just knock the straw man down and declare victory. I suggest you find out what Paul Krugman is actually saying -- which is subtle -- and then try arguing against that. You won't find it so easy! In fact, Paul Krugman has been consistently correct in his predictions for many years, with few (and minor) exceptions.
Any convincing argument against Paul Krugman's views would, of necessity, need to explain why he is able to make correct predictions (e.g., 10 year treasuries at near historic low rates, and still dropping) while those who disagree with him, such as Ron Paul, are consistently wrong in their predictions. If your argument doesn't explain this, then, it won't convince me. Nor should it convince any rational person.
Dr. Krugman routinely argues that because the U.S. has a floating currency, an independent central bank, and a very large economy, it is more or less imune to the kinds of price shocks hitting Greece. So far, the demands of the U.S. government for credit have not caused a huge jump in rates. But remember, the Fed dropped most of a trillion dollars into the pot to keep those low rates during QE2. And regardless of the CPI statistics, the stuff Americans actually spend money on, like gas, cars, education, are going up in price at a prodigous rate. Folks in this blog tend to be concerned that while this can go on for a while, eventually a Minsky moment will occur - and then, all those horrors Ron Paul fears would come to fruition. Thus, your assertion that Dr. Krugman's track record should be sufficient for us to stop worrying is myopic. I hope Dr. Krugman is right. We would all be better off financially if he were, but I fear unless the U.S. constrains deficit spending soon, we will witness a Minsky moment, expensive credit and a severe depression. Like I said, I hope that I am wrong and Dr. Krugman right.
Predictions based upon insider information aren't particularly impressive:
http://www.group30.org/members.shtml
Paul Krugman, Larry Summers, David Walker, Mervyn King, Mario Draghi, Martin Feldstein, Stanley Fischer, E. Gerald Corrigan, Jean-Claude Trichet, William Dudley, et al. .... sound familiar?????
I don't think you have actually read any of Paul Krugman's columns or his blog.
Casting aspersions on my knowledge of Krugman is truly an act of ignorance personified --- why you are confused, my friend, is because you have mistaken Krugman's Keynesian solutions for positive suggestions, ignoring that he embraces looney tunes Milton Friedman economics (and Krugman most certainly has been a free market guy, and embracing jobs offshoring, etc.) which therefore most benefits the banksters:
a federal stimulus, whose monies then travel offshore to China and elsewhere (thanks in part to all those waivers signed by then-Secretary of the Commerce Gary Locke, now Ambassador to China Gary Locke) benefits the banksters most of all, while doing little for any non-existent economic engine within the USA!
The only thing subtle about Krugman is that he fools too many people into believing he is actually a liberal, not just yet another bankster tool.
Although I am in full agreement with your remarks on Ron Paul, a long-time anti-worker type.
sgt_doom, lifelong activist and progressive
Such as krugman's idea to prepare an alien defense system to boost GDP? Yes, ZH was unable to destroy the half baked logic of such an idea... Long live krugman and the central planners.
well put. Krugman does not realize there is nothing to be saved by printing alone. The damage to the real economy including our black market is too deep.
There was no argument.
They were talking about different fucking universes.
The real one that we and Ron Paul inhabit opposite some bizarre Dissociative Disorder Induced fairy tale alternate universe populated by lunatics, trolls, reptiles, shadow people, aliens and insane Quicksilver infused mad tin foil hatters who think that Krugman the shill has some esoteric human merit in which there is no Logic or Law of Unintended Consequences.
I think he "won" the arguement that politicians will take the esy way out.
Yeah. That was a toughie, hmm?
He is not right but his path will be followed because the politicians have no options. So anyone who buys real gold, companies that make products or anyone owning income producing land will be OK. Unfortunately not many have the resources left to do that. Sad really -- the 99% are fXxked.