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Military Keynesianism Gone Haywire: Paul Krugman Pines For World War ... Based On Ginned-Up Reasons

George Washington's picture




 

By Washington’s Blog 

As I have repeatedly documented, influential Americans are lobbying for war in order to save the American economy - what is often called "military Keynesianism".

For the first couple of years that I wrote on this topic, commenters more or less said, "That's crazy, no one is calling for war to stimulate the economy".

When allegations surfaced that Rand Corporation was lobbying the Pentagon to start a war to save the economy, Washington Post hack David Broder started promoting war as an economic panacea, and former Goldman Sachs analyst Charles Nenner and economist Marc Faber started predicting a major war, people started paying more attention.

And well-known economist and writer Paul Krugman has argued for years that World War II is what got us out of the Great Depression.

For example, Krugman writes today in the New York Times:

World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy.

But Sunday, Krugman went over-the-top by more or less calling for a major war ... and manufacturing a false justification for starting one, if need be:

If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better.

 

There was a Twilight Zone episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time…we need it in order to get some fiscal stimulus.

 

 

 


This statement is disturbing for two reasons.

First, many economists have demonstrated that - contrary to commonly-accepted myth - war is actually bad for the economy.

And the following statement by Mr. Krugman implies - whether intentional or not - the use of hanky panky to justify military spending:

And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better.

Doesn't Mr. Krugman know that governments from around the world have admitted that they carried out "false flag" attacks in order to justify their aims? See this and this.

How can he be so irresponsible to publicly pine for all-out war based upon ginned-up reasons?

Postscript: There have been Internet rumors floating around for years that the government was planning to use a "faked alien invasion" to justify a power grab by the government. I have no idea whether or not that rumor has any truth, and it is irrelevant for the purposes of this post.

 

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Tue, 08/16/2011 - 01:03 | 1564258 windcatcher
windcatcher's picture

Funny, those who advocate war never have to fight in them. Romer and Krugman typify the .02% of fascist global elite who want war; they will get war, but not the kind that they may want.

 

Revolution is war, if we have an American revolution against the bankster global fascist elite and their oligarchy that has overthrown our government, the fascist will be considered traitors to Americans.

 

We will see how brave Krugman and Romer will be when they have to fight in their own war.

Tue, 08/16/2011 - 01:37 | 1564324 moonstears
moonstears's picture

+1 Funny, those who advocate war never have to fight in them

Tue, 08/16/2011 - 00:41 | 1564193 gangland
gangland's picture

Krugman is a Neo-Keynesian.

most people don't understand the difference between Keynesianism and Neo-Keynesianism.

What they are reacting to are the failures of Neo-Keynesianism NOT Keynesianism.

Neo-Keynesianism is Keynesianism stripped of all of its legal, moral and sociological aspects.

Neo-Keynesianism is solely an econometric analysis that arose at schools such as MIT as a response to finance capital's P&L pressure under a technological mandate.

That is, Neo-Keynesian models were just complicated enough to capture the actuarial behavior or econometric and combinatorial aspects of economics because this fit well with the computerization and financialization of society.

Adding other legal, ethical and sociological or rather 'irrational' variables was simply too complicated and expensive.

It was indeed this exclusion and rejection of so much effective prior work and history which gave economists a chance to show off their mathematical prowess.

It was about showing off.

It was not about the economy.

It was not a discussion of problems, risks, dangers, and policies.

So even today, Economics is still a chummy conversation between Tweedledum and Tweedledee but carried out on Twitter.

 

Minsky's dynamics of phase transitions: the famous movement from the hedge position to the speculative position to the intrinsically unsustainable, doomed to collapse ponzi position which arises from within the system and is subject actually to formalization in the endogenous instabilities (read state money creation) of non-linear dynamical models was all but ignored.


we'll leave chartalism and neo-chartalism for next time...

 

Tue, 08/16/2011 - 00:41 | 1564184 jonjon831983
jonjon831983's picture

.... what a fucking idiot.

Screw war / civil war / etc... You would save so much more money and have same effect by having an Soylent Green-type program.  Draw a straw, every 10th person makes the cut! Yippie!!! Ok, guys let's take the tour of the Soylent Green Factory!

See, we will get a big boost to the economy as we build up the infrastructure for Soylent Green and its derivatives like bio fuels AND! as an added bonus we will decimate the population so there will be less unemployed!  Also, those who are chosen for our wonderful Soylent program will be donating their jobs to other people! (Note from Executive board of theSoylent Green program "unfortunately we are except from entering in the program although we would really love to help out!"

 

Win win.

Update: Admittedly, his post seems a bit ambiguous whether he believes in the use of WAR as a tool for stimulus or is poking fun at them / using WAR as an example of stimulus... ugh anyyways.

Still, I am confident the Soylent Green Program would help out immensely. 

Tue, 08/16/2011 - 00:27 | 1564181 ehecatl1
ehecatl1's picture

This is ridiculous.  Krugman is not advocating war.  That he used the example of "space aliens" ought to cue anyone who didn't see the interview to the tenor of the exchange.

Tue, 08/16/2011 - 00:49 | 1564231 chindit13
chindit13's picture

I did see the interview.  I found the statement bizarre, even childish.  Rogoff looked to be embarrassed for Krugman, as did Fareed Zakaria.

I am usually at odds with GW and his views, but I've seen Krugman enough recently to suspect he actually does view war as a net-positive.  Apparently Krugman hasn't been paying much attention, because his country has been at war now LONGER than the war that supposedly ended the Depression, yet the economy is still in deep trouble.

I may not go so far as to say he advocates it, but I do think he truly believes war is what pulled the US out of the Depression, current evidence to the contrary notwithstanding.  As with his normal neo-Keynesian approach to everything, Krugman always fails to remember that bills come due, and credit card consumption is not indicative of real wealth.  It isn't true of one's spendthrift neighbor and it is not true for governments.

Tue, 08/16/2011 - 04:40 | 1564502 theprofromdover
theprofromdover's picture

Zactly. How many wars does he need?

Krugman is yet another of these completely ivory-towered idiot-savant-idiots;

He only sees things in abstract terms. Imagines inflation as having no consequences to anyone, just a solution to a different sticky problem. Why doesn't he just say we'll just steal all the money from the savers, and from your household pockets while you aren't looking. Same difference.

Send him back to school.

Tue, 08/16/2011 - 01:00 | 1564252 ehecatl1
ehecatl1's picture

The network may have helped frame it as "bizarre" with their teaser spaceship ad before the segment. 

Still, I think he was joking... a sort of Keynesian reductio ad absurdum.  Dig ditches or fight aliens; it doesn't matter.  Either way, I don't think he advocates credit card debt as a solution, though he does--rightly, I'd say--see the problem as demand.  But stimulus is surely problematic, as corporations are hoarding cash and consumers are maxed out.   

Tue, 08/16/2011 - 09:25 | 1564934 Sancho Ponzi
Sancho Ponzi's picture

We are in a balance sheet recession, which means individuals must pay down debt before they increase spending. Demand is low because debt is too high. Krugman ignores this obvious fact as do most prominent economists.

Tue, 08/16/2011 - 00:24 | 1564173 FinalCollapse
FinalCollapse's picture

If all the cavemen in the Middle East want war, then it's fine. Let's just seat back home, watch the destruction, and then make money on the reconstruction. 

There is absolutely no any reasonable rationale fr USA to get involved there. Let them eat each other. 

 

Tue, 08/16/2011 - 00:13 | 1564128 Eireann go Brach
Eireann go Brach's picture

So Krugman likes war does he? How about someone blow his fucking house up and then we will see what he thinks of war!

Tue, 08/16/2011 - 00:41 | 1564105 thunderchief
thunderchief's picture

I used to have some respect for krugman.  Now I have none.  This morons main theme is that  you just keep blowing the balloon up bigger. 

People like this are dangerous, as they will cheerlead the destruction of pretty much everything for the sake of growth. 

Here's one for you Krugman- Stop fcking breeding, overpopulating the planet, consuming everything for fiat money, and destroying every eco system we have!

Tue, 08/16/2011 - 03:33 | 1564461 Pay Day Today
Pay Day Today's picture

There are 20M-30M Americans at the moment who are being completely slaughtered in the current economic climate.

Foreclosed on, homeless, or out of unemployment benefits. $15B-$20B focused on helping them would over the next 12 months relieve an immense amount of hardship in poor (and even middle class) communities. That is money which would get spent straight back into the economy as well, boosting neighbourhoods and local retailers.

I suppose its easier to hand over $200B to bail out some bank though.

 

Tue, 08/16/2011 - 00:01 | 1564089 chindit13
chindit13's picture

These clowns---Romer and Krugman the most recent---continually make spurious connections to justify their bogus arguments.  The difference between those two is that Krugman actually seems to believe his own tripe.  Romer is merely playing a role.  I suspect she knows better.  Which is worse, or more dangerous, I'm not sure.

The answer to what caused-solved the Great Depression is still out there.  Excess debt above and beyond the ability to service it seems as likely a cause as any, though I'm not certain.  As for the "stimulative effects of WWII" and the "insignificance of 109% Federal debt/GDP", perhaps Krugman et al could consider such things as rationing and forced savings (which created a pool of funds for the Feds to access), and the fact that post-war margins were high enough to generate increased tax revenues, since the US was the last remaining developed country with an intact manufacturing base.

I noticed in Romer's recent Op-ed that she tried to peddle some drivel about demand creating its own supply of skilled labor, and that this will be the US' saving grace.  Perhaps she forgot that nothing stands in the way of Chinese or Indians acquiring those same labor skills albeit with greater wage flexibility.

Tue, 08/16/2011 - 09:22 | 1564925 Diogenes
Diogenes's picture

When WW2 started the Depression was already over for 8 years. I am not joking or jesting. Go back to original sources and you will find, according to experts at the time, the economy bottomed out in 1931 and that the depression as such was over by 1934. By 1936 the economy was expanding so rapidly the government experts got scared of another boom/bust, and deliberately cooled the economy causing the "Roosevelt recession" of 1937-38.

The US did not enter WW2 until December of 1941.

Mon, 08/15/2011 - 23:56 | 1564070 KenShabby
KenShabby's picture

I am pretty sure it is an Outer Limits episode.

Tue, 08/16/2011 - 00:00 | 1564084 KenShabby
KenShabby's picture

Yep - episode three from season 1 - Architects of Fear.

Tue, 08/16/2011 - 00:24 | 1564169 angrybill
angrybill's picture

now I know where the idea for the Watchmen comes from http://en.wikipedia.org/wiki/Watchmen#Plot 

Mon, 08/15/2011 - 23:49 | 1564042 chindit13
chindit13's picture

I think a civil war is a much better idea.  We’ll save on gas, and most of the combatants will be able to speak the local language.

I just want to be on whatever side Krugman is NOT on.

Mon, 08/15/2011 - 23:47 | 1564032 PulauHantu29
PulauHantu29's picture

Another War? Maybe we should pick a smaller country next time...one we can actually beat for a change...

if Krugman wants another war we need to re-institute the Draft first, and second, we then choose an itsy bitsy country that we can stomp on...or as Barry likes to say, "press our boot on their throats." (I guess that's Chicago talk.) Lastly, Krugman needs to be on the front line leading the charge since he is so gung ho to fight.

Tue, 08/16/2011 - 00:08 | 1564109 monoloco
monoloco's picture

Krugman may get his wish when Israel attacks Iran and President Perry sends in the troops in an attempt to fullfill biblical prophecy by hastening the apocalypse. I'm sure once Perry's in the white house congress will cease to have any qualms about raising the debt limit when it comes to blowing the shit out of Iran, because they will all be expecting the rapture.

Tue, 08/16/2011 - 01:00 | 1564251 sun tzu
sun tzu's picture

uh huh

Tue, 08/16/2011 - 11:45 | 1565502 JW n FL
JW n FL's picture

http://blogs.abcnews.com/thenote/2011/08/rick-perrys-religious-event-mired-in-controversy-.html

http://www.huffingtonpost.com/social/RVU/rick-perry-president_n_925983_102719858.html

now get your dumb ass back to hufington!!

with your people!!

where you belong!! LMFAO!!

repugnant monkyes are sooooooooooooo predictable.

Mon, 08/15/2011 - 23:35 | 1564005 Seasmoke
Seasmoke's picture

You can watch as Krugmans eyes get shiftier and shiftier and just know that this guy is unstable

Mon, 08/15/2011 - 23:45 | 1564030 Spirit Of Truth
Spirit Of Truth's picture

Well....increasingly it seems we're living in a Twilight Zone episode, so maybe Krugman and his Keynesian minions will soon get their wish.

Turkey threatens Syria (with war?)

Tue, 08/16/2011 - 09:16 | 1564910 falak pema
falak pema's picture

No with skewered shashlik...and lokum, also known as turkish delights.

Mon, 08/15/2011 - 23:23 | 1563973 cynicalskeptic
cynicalskeptic's picture

Wasn't that W's (Cheney's) plan?    But despite all those Gulf of Tonkin like 'incidents' (staged 'speedboat attacks', border incursions and such) they never could get the full blown war with Iran going......

(damn good thing too... war game scenarios showed us getting our butts kicked - with Iranian cruise missles taking out a number of US carriers in the Gulf)

Truth is that we've already gone from Republic to Empire and are now well on our way to collapse - eerily paralleling Rome at an accelerated pace.   We've tried to fund our too large military by debasing our money, have hired mercenaries in the place of having all citizens serve in our military, and are trying desperately to keep the citizenry pacified with bread (unemployment, foodstamps) and circuses (mindless distractions via a controlled media).  

The 'conquered' peoples are getting fed up with their treatment and are not so inclined to fund our excesses anymore.

Mon, 08/15/2011 - 23:21 | 1563961 optimator
optimator's picture

Krugman should put on his IDF uniform, when he pushes more war,  so we know where he's coming from.

Mon, 08/15/2011 - 23:35 | 1564008 Element
Element's picture

When are you people going to learn that ANYTHING is preferable to a negative GDP!

Sheesh!

/sarc

Tue, 08/16/2011 - 02:17 | 1563958 gangland
gangland's picture

 

Keynesianism is not just a government spending program. 

it is a specific and comprehensive mode of public operation which encompasses not just economics, but ethics and law as well as a healthy dose of sociology.

all of which are missing from Krugman's analysis.

the 3 main pillars of Keynesianism are:

Wynne Godley's premise that stocks can not be separated from financial flows.

Hyman Minsky's premise that finance can not be separated from reality.

And the Galbraith tradition that the legal and the technological can not be separated.

also embedded is a legal institutionalist framework, rooted in pragmatism, framed by Thorstein Veblen and John Commons, forged in the political economy of the New Deal in the United States.

This tradition emphasizes the role played in financial crisis by the breakdown of law and the failure of governance and regulation - and the role played by technology as a tool in the hands of finance for the purpose of breaking down and evading the law.

all of which is absolutely missing from today's critiques and formulations of so called Keyenesianism; and there is a reason for this: finance capital's political economic power.

the above, taken, divided and seperated individually, are merely parts of a working system, which are reduced to simply a 'government spending' program, that do not represent the comprehensive structure of Keynesianism itself.

 In other words, Keynesianism does not work without the express inclusion of its sociological, legal and ethical components that MUST follow its econometric aspects.

Complexity, in effect neutering regulation via technology ( for just 1 example: see MERS et al) is what is going to defeat the market with, in principle, infinite variability, and in practice, more distinct features than one can keep up with because we do not have the maths (see OTC market).

This condition is further exasperated and compromised via political capture, resulting in a lack of legal and ethical enforcement, along with public acquiescence and eventual societal breakdown.

Absolute distrust, leading to absolute liquidity preference is the incurable consequence of modern finance capital.

http://globalresearch.ca/index.php?context=va&aid=25991

http://globalresearch.ca/index.php?context=va&aid=26033

 

 

 

Tue, 08/16/2011 - 02:27 | 1564401 coffee_sponge
coffee_sponge's picture

Although I disagree on the validity and the effectiveness of Keynesianism, I do agree with you that most today misunderstand and misapply the Keynesian model.

Mon, 08/15/2011 - 23:14 | 1563930 Insiderman
Insiderman's picture

Krugman lost his mind a long time ago and I'm losing mine over why he still gets ink (or pixels, if you will).  The "military Keynesianism" thing is another take on the broken window fallacy of growing the economy.  So we're incurring debt to make bombs?  How effing stupid is that.  Why don't we spend that money on our power grid, getting our 1960s airports back to world class or something else that might shift the aggregate demand curve outward from the origin.  Jeez, the people from Ivy League schools!

Mon, 08/15/2011 - 23:41 | 1564020 Spitzer
Spitzer's picture

Peter Schiff beat the fuck out of Krugman this morning on his radio show

 

http://www.youtube.com/watch?v=1nfuifZy4Sg&lc=kHz_q9J7rODwu0VBHq3OYXpvhJ...

Mon, 08/15/2011 - 23:11 | 1563917 web bot
web bot's picture

I want to say somthing about Hitler doing something to Krugman... but wont' because it may offend many descent people. Enough said.

Mon, 08/15/2011 - 23:15 | 1563931 web bot
web bot's picture

But I do need to say that the mere mention of the name Krugman and I start to go into uncontrollable spasmatic invective tongues.

I am really starting to wonder if the man is mentally stable, or if someone is slowly feeding him some toxic chemicals, causing his mind to become unhinged. His LIBERAL elitist mentality is sickening and reduces the value of his Nobel Prize to a role of toilet paper one would find in McDonalds.

 

Mon, 08/15/2011 - 23:03 | 1563880 khakuda
khakuda's picture

Oh yeah, and it probably didn't hurt that the Japanese and German industrial bases were decimated and most of Europe was a shambles leaving the U.S. as the primary economic engine of rebuilding for the ensuing decades...

This jackass's next book should be entitled, "Money Printing, War and Currency Collapse as the sure road to Prosperity and Value Creation"

It's amazing that we let the these ancient Ivy League bozos have a soapbox, much less make the rules.

Mon, 08/15/2011 - 22:58 | 1563868 LookingWithAmazement
LookingWithAmazement's picture

Krugman is mentally wasted. Completely nuts. And dangerous. Is he glad with Hitler because of all the work he gave the world?

Mon, 08/15/2011 - 22:55 | 1563857 Fred Hayek
Fred Hayek's picture

Don't forget that former Enron adviser Paul Krugman advocated starting a bubble in housing after the economy was going into recession in 2000-2001.

Now, in order not to be a hack and an idiot who twists all facts to try to win an argument (like insufferable Krugman, in fact does!) I'll note that Krugman did not call for massive fraud etc. But when you call for a distortion of the natural marketplace to alleviate some present day difficulties, a nobel freaking prize winner should be able to figure out that it's going to cost some pain down the line. You've simply chosen to put off pain and at the potential cost of making that pain much greater. And it did.

Mon, 08/15/2011 - 22:54 | 1563854 John_Coltrane
John_Coltrane's picture

Scientific note to Krugman:  The purpose of life is about reducing the entropy (disorder) of the universe.  Death and war (blowing things including humans to smitherreens) increases entropy and wastes energy.

He should compare dropping a glass and shattering it into random pieces with attempting to reconstruct it by gluing it back together.  And then compare the energy and work associated with the latter.  Its just the second law of thermodynamics.  Yes, the universe will undergo a heat death as time goes on (this, in fact defines times' arrow-the direction of time) but why hasten it via destruction?

It easier to destroy than create and the second law means this will always be true.

Mon, 08/15/2011 - 22:56 | 1563836 Turgid_Member
Turgid_Member's picture

dup

Mon, 08/15/2011 - 22:56 | 1563830 Turgid_Member
Turgid_Member's picture

dup

Mon, 08/15/2011 - 22:44 | 1563822 Coldfire
Coldfire's picture

After you, Thugman.

Mon, 08/15/2011 - 22:43 | 1563821 lolmao500
lolmao500's picture

The only war I would support is the war against the likes of Krugman.

Tue, 08/16/2011 - 06:31 | 1564567 Tuffmug
Tuffmug's picture

We need a War on all Central Bankers and most Politicians.

Mon, 08/15/2011 - 22:38 | 1563804 booboo
booboo's picture

Ravings of a lunatic. I always wondered where the pigs that possesed Hitler would end up taking residence.

 

Mon, 08/15/2011 - 22:37 | 1563799 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Kkkrugman is a Nazi.

Mon, 08/15/2011 - 22:34 | 1563793 Element
Element's picture

Mish has also many times stated that industrial destruction in WWII generated the recovery.

Edward Harrison has also made related and similar comments.

I see this sort of recognition as a widespred realization that a depressionary industrial mallaise needs to be massively jolted by radical actions to fire a recovery.

Edward Harrison has many times pointed out that >20 years on from the Japanese GDP stagnation and private deleveraging, Japan is still maintaining massive under-utilization of old factories that it no longer uses, but keeps. One must ask why?

No one has bombed them out of existence (for them) this time around.

I'm not sure this equates to a call for bombardment though. We've made that process so efficent now I doubt it would actually help that much.

Also, I always like to point out that in the 1930s era demilitarization was not what occurred, so I don't know why people expect it now.

 

Edit: as for sex with female space aliens, I like where you're going. Make kinky love and war. LOL

Mon, 08/15/2011 - 22:25 | 1563784 DonutBoy
DonutBoy's picture

Krugman completely misunderstands WWII.  We were united.  No one complained about rationing.  Every able-bodied man served.  We won.  We set the terms. That America is gone.  We lack the common values. 

From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more.

Where do you think we are?  Somewhere betweeen apathy and dependence (think Obamacare)?  Or further on into bondage - (think TSA)?

 

Tue, 08/16/2011 - 04:49 | 1564512 theprofromdover
theprofromdover's picture

You don't need a war for recovery.

You just need people to realise they are all in it together (helps of course if you jail the criminals and black-market operators)

What starts a recovery is people put their shoulders to the wheel and work harder and more productively.

The red-tape gets thrown in the trash-can, and unnecessary layers of management get stripped out. Incompetents get found out and bounced. People might accept a lower standard of living, but they are compensated by the attraction of better times ahead.

Naw, maybe Krugman's alien attack would bring in more viewers............. !?!

Mon, 08/15/2011 - 22:25 | 1563783 Troy Ounce
Troy Ounce's picture

 

 

Krugman means of course a war on American soil, no?

 

 

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