Paul Krugman’s latest missive in The New York Times again attacks those who warn about the risks of a new debt crisis and the ramifications of radical, ultra loose monetary policies.
Krugman says that the recent concern about “debts and deficits” was a “false alarm.” He attempts to paint those who were concerned about the debt crisis as scare mongers. He sarcastically says that “the debt apocalypse has been called off.”
This is a meme that Krugman uses frequently as seen in headlines like ‘Addicted to the Apocalypse’, and ‘Apocalypse Fairly Soon.’ He uses this meme to try to link those concerned about the debt crisis and the current monetary response to it as alarmist doom and gloom merchants and irrational people who believe the “end of the world” is nigh.
It is a way to attack the straw man rather than sticking to the facts and having a more reasoned debate.
It is ironic as Krugman himself became quite apocalyptic in his warnings during the Eurozone debt crisis. He warned that “things are falling apart in Europe,” of a “gigantic bank run” and of an “emergency bank closing.”
Not only did he warn of a massive bank run and emergency bank holidays but he warned of the euro breaking up and Italy returning to the Italian lira and even warned of France returning to the French franc.
Krugman was wrong then, as indeed were many of the people he criticises. However, the crisis is far from over and reared its head in Portugal in recent days and there is a long way to go before this crisis reaches its conclusion.
He has also been quite apocalyptic himself regarding global warming. He has warned that “utter catastrophe” looks “like a realistic possibility,” and that the “rise in global temperatures that will be little short of apocalyptic.”
When it comes to the apocalypse, Krugman likes to have his apocalyptic cake and eat it too.
Krugman continues to advocate printing currency as one panacea to our economic ills. There is much groupthink on this topic amongst western central banks and policy makers and many share Krugman’s views.
Krugman is right that so far the record debt levels in the U.S. and throughout much of the western world and the currency printing response have not led to inflation or stagflation.
However, it is very premature to completely discount the risk. History clearly shows printing money on the scale that we have witnessed in recent years ultimately leads to inflation, and sometimes hyperinflation.
Lenin rightly warned that the "best way to destroy the capitalist system is to debase the currency.” History confirms this.
Krugman has great respect for Keynes and yet Keynes shared Lenin's concerns. "Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency" warned Keynes.
In a time of cosy Keynesian consensus, plurality of opinion is important and it is worth remembering this important warning from the past.
Krugman, has been one of the most vocal gold bears in recent years and his opinion on gold has lacked nuance and ignored the academic and historical record.
As ever, a historical perspective and a long term perspective is important. Krugman has neither and completely ignores history for the sake of his loose money, inflatonist ideology.
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