Guest Post: Wealth Inequality – Spitznagel Gets It, Krugman Doesn’t

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Submitted by Pater Tenebrarum of Acting Man

Wealth Inequality – Spitznagel Gets It, Krugman Doesn’t

We wrote an article on wealth and income inequality on July 1 2011, in which we criticized a speech by Fed governing board member Sarah Bloom Raskin. In her speech she bemoaned the growing wealth and income gap in the US, indicating that more government intervention was needed to close it.

We started out by asking: why should it even matter how wealth is distributed as long as everybody partakes of the fruits of the free market? Should not those who serve consumers better than others be entitled to earn more? Are they not taking risks? Who cares if income and wealth are unequally distributed as long as everybody's living standard increases?

Most readers are probably aware of these arguments, so there is no need to rehash them here. The point we finally made was that the reason people were worried – besides envy, that is – was that the great mass of people has not seen its economic lot improve for a long time period.

The time period during which the real income of the middle class and the poorer strata among the citizenry began to stagnate  curiously coincided  with the abandonment of the gold exchange standard and the unfettered growth in money and credit that followed on its heels.

So the question that suggested itself was: perhaps the Fed itself is at fault?

This is what we concluded, but not merely from the empirical data, as supportive as they are of this particular case. It follows logically that whenever an inflationary policy is pursued, the richest citizens will profit from it, while the poorest will lose ground. Inflation is effectively a reverse redistribution scheme from the poor to the rich. This is so because the wealth of the rich is largely parked in assets the prices of which tend to rise disproportionally due to the inflationary policy. Moreover, they have easier access to credit and thus can get 'first dibs' on newly created money. By the time this money has percolated through the economy and reaches the wage earners and the poor,  prices have already risen and they will be confronted with the fact that their purchasing power has declined.

We concluded it was hypocritical of a Fed board member to decry the situation while not even once mentioning the critical role her institution played in bringing it about. Moreover, her proposed solution, while not spelled out in detail, amounted implicitly to a recommendation to the government to go down the path of socialist redistribution.

Mark Spitznagel on Wealth Inequality

You have to hand it to the WSJ – eventually it sometimes catches up to 'acting man'. :)

Well known hedge fund manager Mark Spitznagel has published an editorial  in the WSJ last week, in which he basically makes our argument all over again – only for a bigger audience.

He writes:

“A major issue in this year's presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%. While the president's solutions differ from those of his likely Republican opponent, they both ignore a principal source of this growing disparity.


The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price. (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.


David Hume, the 18th-century Scottish philosopher, pointed out that when money is inserted into the economy (from a government printing press or, as in Hume's time, the importation of gold and silver), it is not distributed evenly but "confined to the coffers of a few persons, who immediately seek to employ it to advantage."


In the 20th century, the economists of the Austrian school built upon this fact as their central monetary tenet. Ludwig von Mises and his students demonstrated how an increase in money supply is beneficial to those who get it first and is detrimental to those who get it last. Monetary inflation is a process, not a static effect. To think of it only in terms of aggregate price levels (which is all Fed Chairman Ben Bernanke seems capable of) is to ignore this pernicious process and the imbalance and economic dislocation that it creates.


As Mises protégé Murray Rothbard explained, monetary inflation is akin to counterfeiting, which necessitates that some benefit and others don't. After all, if everyone counterfeited in proportion to their wealth, there would be no real economic benefit to anyone. Similarly, the expansion of credit is uneven in the economy, which results in wealth redistribution. To borrow a visual from another Mises student, Friedrich von Hayek, the Fed's money creation does not flow evenly like water into a tank, but rather oozes like honey into a saucer, dolloping one area first and only then very slowly dribbling to the rest.


The Fed doesn't expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks (whether by overpaying them for their financial assets or by lending to them on the cheap), minimizes their borrowing costs, and lowers their reserve requirements. All of these actions result in immediate handouts to the financial elite first, with the hope that they will subsequently unleash this fresh capital onto the unsuspecting markets, raising demand and prices wherever they do.”

(emphasis added)

Very well put – this is precisely what happens. Money is not 'neutral' – the uneven spreading of inflation guarantees that there are winners and losers. It is obvious that the financial elite is foremost among the winners. The so-called '99%' meanwhile are losing out and the lower they are in the income strata, the more they tend to proportionally lose.

Spitznagel concludes:

The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president's presumption of tax unfairness (if there is anything unfair about approximately half of a population paying zero income taxes) or deregulation.


Pitting economic classes against each other is a divisive tactic that benefits no one. Yet if there is any upside, it is perhaps a closer examination of the true causes of the problem. Before we start down the path of arguing about the merits of redistributing wealth to benefit the many, why not first stop redistributing it to the most privileged?”

(emphasis added)

Note here that as a hedge fund manager, Spitznagel himself is among the privileged who are in a position to profit from the Fed's largesse. Of course he would probably prefer to invest an environment of sound money, as the constant second-guessing of what the bureaucrats might do next is actually distracting investors from what they should really do, namely appraise the individual fundamental merits of various investment alternatives. As we often point out, these days investing is instead all about the 'macro' environment  – which is to say much valuable time and effort must be spent on deciphering and dealing with the effects of interventionism.

Naturally, whenever someone attacks the policies of an institution that keeps hundreds of macro-economists in bread, it doesn't take long for the the counter-attacks to be launched. This time Paul Krugman took it upon himself to defend the money printers, revealing his utter ignorance in the process.

Krugman's Weak Defense of Money Printing

Krugman tried to deflect Spitznagel's arguments from his perch at the NYT in an article entitled 'Plutocrats and Printing Presses'.

As we have pointed out in the past, Krugman is either willfully ignoring and misrepresenting the arguments of Austrian economists, or he simply doesn't understand them. Looking at his past critiques of the Austrian school, it seems rather obvious he hasn't even read any of the works associated with it, so he is actually in no position to pen a serious critique. The Austrians are generally in a better position when it comes to criticizing Krugman, since most of them had to endure large doses of Keynesianism at university.

Krugman made a tactical mistake though: by coming to the defense of the Fed's bank bailouts and its money printing, he apparently managed to incense his own fan base (see the comments section below his screed).

He writes:

What’s wrong with the idea that running the printing presses is a giveaway to plutocrats? Let me count the ways.


First, as Joe Wiesenthal  (sic) and Mike Konczal both point out, the actual politics is utterly the reverse of what’s being claimed. Quantitative easing isn’t being imposed on an unwitting populace by financiers and rentiers; it’s being undertaken, to the extent that it is, over howls of protest from the financial industry. I mean, where are the editorials in the WSJ demanding that the Fed raise its inflation target?

So a winner of the Nobel prize in economics requires the testimony of Joe Weisenthal and someone from the 'Next New Deal' blog (which as the name implies is in favor of an FDR style command economy) to buttress his arguments? And proof that 'QE' is happening over the 'howls of protest from the financial industry' is provided by a lack of editorials in the WSJ demanding a higher 'inflation target'?

It is difficult to reply to this nonsense mainly because it is so utterly dumb. One almost doesn't know where to begin, but let us just 'count the ways' by mentioning two small factoids: without the Fed's interventions, many of the stalwarts of the financial industry would no longer be with us. They would have gone bankrupt in 2008-9 and their assets would now be in the hands of better stewards of capital. Yeah, they sure 'howled in protest' when they were presented with that gift horse.

Secondly, the true broad money supply in the US has increased from $5.3 trillion to $8.424 trillion between January of 2008 and February of 2012. This is a money supply inflation of roughly 60% in four years. There are simply no WSJ editorials clamoring for 'more inflation' required, even if one believes in the inflationist snake oil peddled by the likes of Krugman. The people supporting the policy are probably eager not draw too much attention to what has actually happened thus far on the inflation front.

Having exonerated (in his mind) the financial elite and the 'plutocrats' with the help of Mr Weisenthal's testimony – whose stance is (mis)informed by none other than Paul Krugman himself (i.e., Krugman actually uses his own testimony through a relay station) -  Krugman continues:

“Beyond that, let’s talk about the economics


The naive (or deliberately misleading) version of Fed policy is the claim that Ben Bernanke is “giving money” to the banks. What it actually does, of course, is buy stuff, usually short-term government debt but nowadays sometimes other stuff. It’s not a gift.


To claim that it’s effectively a gift you have to claim that the prices the Fed is paying are artificially high, or equivalently that interest rates are being pushed artificially low. And you do in fact see assertions to that effect all the time. But if you think about it for even a minute, that claim is truly bizarre.


I mean, what is the un-artificial, or if you prefer, “natural” rate of interest? As it turns out, there is actually a standard definition of the natural rate of interest, coming from Wicksell, and it’s basically defined on a PPE basis (that’s for proof of the pudding is in the eating). Roughly, the natural rate of interest is the rate that would lead to stable inflation at more or less full employment.”

(emphasis added)

First of all it should be noted that in his typical demagogic fashion, Krugman does not even address the argument Spitznagel made. He always does that – he really would be great as a leader of a Marxist debating society, as he has their techniques down pat. He simply ignores what his opponents say, and then proceeds to erect straw men which he thinks can be easily knocked down.

Well, let's look at his voodoo economics claims (how on earth did this guy get a Nobel prize in economics? If ever you needed proof that the prize has become a contrary indicator, Krugman provides it in spades). First of all, you will notice that he fails to mention how exactly the Fed comes into a position to 'buy stuff'. It does that by printing money from thin air, which is actually the central point of Spitznagel's critique. Let's just ignore it!

Then he claims that one can not prove that the Fed 'overpays' for the assets it buys. This is the functional equivalent of claiming that increasing the money supply has no effect whatsoever on prices. How can an economist make such a claim? Not to forget, the reason why the Fed makes these purchases consists  – in its own words – of its desire to depress interest rates! In reality, the entire price structure of the economy is revolutionized when the amount of fiduciary media is increased and interest rates are artificially suppressed by the monetary authority. Lastly, the banks and other financial players the Fed buys assets from are not led by complete dummies. They naturally front-run the Fed every time – there is in other words a clearly discernible feedback loop between the Fed's activities and the prices of the financial assets it buys.

As to Wicksell's definition of the natural interest rate, it reads verbatim:

“There is a certain rate of interest on loans which is neutral in respect to commodity prices, and tends neither to raise nor to lower them.”

There is not one word there about 'full employment'. As to the Austrian definition of the natural interest rate, it is simply the rate of societal time preference. In other words, the time preferences of all market participants as expressed in the discount of future gods versus present goods represent the natural interest rate. If we actually wanted to establish what the natural interest rate is, we would indeed have to abolish the Fed as well as introduce 100% reserve banking, so as to forestall the issuance of fiduciary media. It is actually downright comical that we have a central economic planning agency that is allegedly trying to 'mimic' the natural interest rate when we could obtain it very easily by simply abolishing the planners and rigorously enforcing property rights.

Following his faux re-defintion of the natural interest rate, Krugman continues – n.b., while still completely ignoring the arguments Spitznagel made:

And we have low inflation with high unemployment, strongly suggesting that the natural rate of interest is below current levels, and that the key problem is the zero lower bound which keeps us from getting there. Under these circumstances, expansionary Fed policy isn’t some kind of giveway to the banks, it’s just an effort to give the economy what it needs.”

(emphasis added)

This is why we are so bold to accuse Kugman of using voodoo economics. Readers may be aware that the current interest rate is 'zero'. The Fed wants us to pretend that the cost of capital is zilch. Krugman now claims that the 'natural interest rate' – by his definition – should  actually be below zero. In other words, what he is saying is that if the market were left to its own devices, the time preferences of economic actors would be completely reversed, so that future goods would be considered to be worth more than present goods at the moment. This is such abject nonsense it truly defies belief.

Oh yes, and giving the banks money at no cost is therefore 'not a give-away to the banks'.  You would think no-one could actually make stuff like this up, but there it is. Economist William Anderson has given Krugman the nickname 'Krugpot'. Now you know why.

Krugman then expands on why the bankers really just hate to get money for absolutely free:

Furthermore, Fed efforts to do this probably tend on average to hurt, not help, bankers. Banks are largely in the business of borrowing short and lending long; anything that compresses the spread between short rates and long rates is likely to be bad for their profits. And the things the Fed is trying to do are in fact largely about compressing that spread, either by persuading investors that it will keep short rates at zero for a longer time or by going out and buying long-term assets. These are actions you would expect to make bankers angry, not happy — and that’s what has actually happened.”

First of all, the buying of long term assets to compress the yield curve spread is a relatively recent policy ('Operation Twist') and it is in fact not directly inflationary such as 'QE' was, as the Fed is not printing new money but merely exchanging short term bills for long term bonds. Its balance sheet has stopped growing when 'QE2' ended. However, we note that the expansion of the money supply has continued well beyond the end of 'QE2'.

There are several reasons for this – the most important are: the fractionally reserved commercial banks have actually begun to expand money and credit on their own again (with their current reserve base they could in theory create about $15 trillion in new money if we were to generously assume a required reserve ratio of 10%. In reality they could create far more money, as de facto, required reserves are close to zero, mainly on account of sweeps). Secondly, dollars have fled from the crisis stricken euro area and have been deposited with US banks – in short, some of the dollars that were overseas have 'come home', while the Fed and the ECB are acting in tandem to replace the dollars lost in Europe with freshly printed ones via their dollar swap window. Thirdly, there has been a rule change that has forced banks to acknowledge the existence of funds that have previously been regularly swept offshore overnight  – in short, the money supply data now contain evidence of past inflation that was previously hidden by this practice.

The claim that bankers are 'angry' at getting money at zero percent from the Fed is exactly as ludicrous as it sounds. Even with the yield spread now smaller, the banks are stuffing a lot of money into treasuries to 'ride the curve'. They simply lever these traded as much as they can. It's a trade in which they figure they cannot lose. Take for instance a two year and a one year note. The two year note now yield 27 basis points, the one year note yields 17 basis points. If one buys a two year note today, it will become a one year note one year hence. Given the Fed's 'guarantee' of a zero federal funds rate until 2014, this implies a certain capital gain plus the 27 basis points in interest. Lever the trade 100:1 and you're actually making serious money. Yes, the bankers just hate it!

We must however also note here that the assertion we have made above (namely that 'it's a trade in which they cannot lose') should be qualified by 'it's a trade in which they cannot lose as long as faith in the central bank administered fiat money system doesn't suddenly crumble'.

The two year note yield vs. the one year note yield. 'Riding the curve' with leveraged trades remains highly profitable as long as this spread is positive.



Krugman then continues to parade his ignorance as follows:

“Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.”


The typical retired American these days relies largely on Social Security — which is indexed against inflation. He or she may get some interest income from bank deposits, but not much: ordinary Americans have fewer financial assets than the elite can easily imagine. And as for pensions: yes, some people have defined-benefit pension plans that aren’t indexed for inflation. But that’s a dwindling minority — and the effect of, say, 1 or 2 percent higher inflation isn’t going to be enormous even for this minority.

(emphasis added)

Countless seniors, widows and orphans would vehemently disagree with Mr. Krugman. There are currently about $6.3 trillion in savings deposit and about $730 billion in small time deposits. Via anecdotes, we keep hearing about senior citizens who feel they have no choice but to divert savings into the extremely risky stock market as they can no longer count on their interest income to sustain them. For Krugman (who himself is among the '1%') to wave all these people away as though they didn't exist is quite callous. As a good Keynesian he probably is all for 'euthanizing the rentiers', even if he doesn't spell it out here.

As to social security income being 'indexed for inflation': yes, indexed to the government's 'official' inflation data, which have been contorted in countless 'reforms' precisely to keep these expenses as low as possible by pretending that the price effects of the inflationary policy are far smaller than they actually are. He also ignores the fact that the basket of goods contained in the 'CPI' typically does not reflect the expenses that are most important for the majority of the middle class, the majority of retirees and the poor. Rich people don't care if the price of vegetables and fruit doubles and they don't care whether gasoline costs $2 per gallon or $4. Retirees living on social security, the middle class and the poor definitely do care about these prices and are hurt by them in spite of the laughable 'indexing' of social security payouts to 'inflation' (inflation as in the change of the 'general price level' as calculated by the government).

Krugman then closes his defense of inflationism with a for him typical demagogic flourish, only it really backfires in this case:

“No, the real victims of expansionary monetary policies are the very people who the current mythology says are pushing these policies. And that, I guess, explains why we’re hearing the opposite. It’s George Orwell’s world, and we’re just living in it.”

(emphasis added)

There you have it! The Fed's inflationary policy is really 'victimizing' the 1% and the financial elite! It is 'Orwellian' to say otherwise! Krugman is apparently completely unaware of the irony of this final sentence.

To summarize: Krugmann fails to address even a single one of the arguments forwarded by Spitznagel. This is no surprise, as he has often demonstrated he does not even understand the arguments of the Austrians and moreover has frequently shown that his style of debate consists largely of attempts to knock down straw men.  After appraising us of his economic ignorance (see the idea that time preferences can actually 'go negative' implied by his argument on the natural interest rate above), he finally closes a truly Orwellian screed by claiming that everybody who is critical of the Fed and the financial elite is guilty of being 'Orwellian'.

As we often say, you really couldn't make this up.

Self-appointed 'liberal conscience' guardian Paul Krugman: now he's suddenly springing to the defense of the financial elite and the '1%' in his misguided mission to defend central economic planning.

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Waterfallsparkles's picture

I would love to see an hour debate between Rick Santelli and Paul Krugman.

That would be an epic battle.

disabledvet's picture

Krug's a little on the hyper side. Still I can't fault the NY Times's absolutely true. The banks are getting gutted in here now. This is a traders DELIGHT. If I can make a market in Amazon I'm making a fortune...and I'm the one the banks are afraid of since I am the one creating risk. Having said that "I doubt this the plan." equity traders are the "test pilots of finance." the only thing they know is "that other guy will die." hopefully that's true! A "simple and solid economic recovery" is all I ask. PHUCK the abstract b.s.!

TheFourthStooge-ing's picture


I would love to see an hour debate between Rick Santelli and Paul Krugman.

I would love to see Paul Krugman blow on a shark whistle and then attempt to debate a Lake Tardicaca Shark.


donis's picture

Krugman is the Ellsworth M. Toohey of our time.  if you don't beleive me, just google image search "Ellsworth M. Toohey"

OverTheUnder's picture

Krugman reminds me of a broken tv........sound but no picture...

Waterfallsparkles's picture

It is so easy to live with blinders on when you are associated with the 1%.  How could he or any of those people really know the devastating effect of Bernanke's policy unless the were living the life of a blue collarworker that was laid off from their Job or a retired individual trying to live on a small amount of savings and Social Security?

I would like to see real life experment where Krugman was forced to try to feed and keep a roof over the head of his family living as a blue collar worker on unemployment benifits for a year.

I wonder if his views would change?

nmewn's picture

I can't guarantee he would change.

Faced with stagnant wages and ever increasing "prices" (the monetary inflation "solution" he always espouses) would leave him a ward of the state.

Just as he is now ;-)

SeanJKerrigan's picture

Krugman recently said we wont be like Greece because we have a printing press. Forget just for a second what the consequences would be if we attempted to print our way out of the debt. His bigger and more immediate falacy is that the power elite WANT us to be like Greece.  This never enters his mind.

vast-dom's picture

Between Krugman and Obummer the Nobel prize isn't worth wiping your ass with!


Pernicious clowns....

OverTheUnder's picture

He's got that Nancy Pelosi look in his eyes.....

GernB's picture

I;'ve seen Krugman publish opinion pieces in the NYT where the central argument rests the consumer price index, while he has a published acedemic paper claiming the consumer price index underestimates inflation. If you believe that how can you use it to justify your opinion in a NYT article? He is clearly an idealog and is either functionally impared and so does not know he has contradicted himself or he is lying and believes it is justified because the end jusitifes any lie. (never mind that it means your ideology is founded on lies). This article is more of the same. He is smart enough to know that his opponents point was not the price of the assets but that the money goes to banks first, and the the owners of the banks are far more likely to benefit from that money than the depositors. But instead he picks on a statement that wasn't even central to the argument. Krugman tipfiess what is wrong with political discourse in this country, he is more interested in winning the argument that in providing an accurate view of what is happening. And so he spews misinformation and misleading statements backed up by misleading data and the NYT readers lap it up and think their views have been vindicated, when all that has happened is they have been made fools of by believing a string of lies.

earleflorida's picture

why give bernake all the credit. let's spread the manure around. afterall, it was greenspan that took the credit for all of 'Tall Paul's' hard, and laborious work. these guys [greenspan/ bernake] look at decades rather than years,... and their masters' plan's are well defined? let's have a look back upon 'TIP's', shall we. now remember, people like krugman were awarded this 'POS' [propaganda grandiose] nobel's economic prize [1969 created just a few years before the 'Nixon Shock, surprised?] for a reason.

ref:   * [click sidebar -"Tips / CPI Data"] Ps. sorry about link :(       Note the evolution ie. time preference

ZIRP hurts? just ask alan, who by the way admired Ayn Rand!    **[april/1994 ___ 'greenspan's new inflation vigilance'] ___ scroll down to sections "Greenspan's baby steps" & "A chill at the FOMC meetings"] ,interesting stuff that krugman should regurgitate. Ps2. sorry about link... just click on 'oops' and your there :-(

excellent read


disabledvet's picture

"problem of history." are we Japan? If the answer is yes then Bernanke has done the right thing. Interest rates have responded in a "Japanese like way" plunging in a way that makes the Austerians happy. Having said that "it doesn't work in Europe" would be a mistake to say it's the right thing to do here. Currently certain pundits are calling for the Fed itself to engage in fiscal policy. I did take note that the Chairman had no problem coming out against the Bush tax cuts expiring...a direct attack on the President's views I might add.

bobert's picture

Try using paragraphs.

bobola's picture

Krugman, like Bernanke, is stuck on the simple idea that by keeping failed banks operational with billions in cheap new money will keep us from sliding into another great depression.

They are very aware of the fact that the fed caused the 1929 depression by choking of the money supply, which allowed a basic recession to spiral downward into a decade long worldwide depression.

The problem with Krugman is that he seems to ignore the massive amounts of new debt being created.

As Japan gets squeezed further and further into a corner by spending ever greater amounts of money servicing ever greater new debt, eventually Krugman will have to face the reality he is wrong.

His winning the Nobel prize is a complete fraud.



OverTheUnder's picture

People like Krugman never face reality and NEVER admit they were wrong...

blunderdog's picture

For what it's worth, it's not like there's a fallback plan for the big banks to fail.  I'm in complete agreement that the Fed and the government are doing all the wrong things, but it's not for no reason that they've been unwilling to kill the banks.

People are pissed that they're getting poorer.  Imagine how pissed people would be if they couldn't access "their" money in the banks.

OverTheUnder's picture

Look at the negatives that just showed up...libtard troll alert!

Chump's picture

Lol I think Krugman just found this article.

vast-dom's picture

..."so that future goods would be considered to be worth more than present goods at the moment."


Actually, with ZIRP + CNTL+P = Krugman is unwittingly correct on this one his only valid point!


Then he states the most insane shit ever:




Furthermore, Fed efforts to do this probably tend on average to hurt, not help, bankers. Banks are largely in the business of borrowing short and lending long; anything that compresses the spread between short rates and long rates is likely to be bad for their profits. And the things the Fed is trying to do are in fact largely about compressing that spread, either by persuading investors that it will keep short rates at zero for a longer time or by going out and buying long-term assets. These are actions you would expect to make bankers angry, not happy — and that’s what has actually happened.”


I just can't believe Krugman can be this clueless and retarded; therefore, he must be PURELY EVIL to write such diametrically opposed to reality dribble for his sheeple readership!


Krugman's above quote is only valid if one were to believe that bankers do not like money....


I really can't believe Krugman writes the shit he does -- it's truly mind-boggling how anyone can be so wrong, yet have cash and prizes and such! or maybe that's what it takes these days: to be so egregiously wrong that you for a moment change the fabric of time and space until you realize that you actually didn't change anything because there is a massive economic crash and then you.........i feel sick.....


Sean7k's picture

You can take the time to study economics (especially austrian)  and all the rhetoric is resolved. However, to expect the general public to educate themselves, you will be seriously disappointed.

Consequently, just as the critique of Krugman is presented clearly and makes all the sense in the world, only a few will realize this.

Be thankful for your bliss, in knowing you understand the questions, that you cannot be dissuaded from your position and that you play the markets accordingly.

There has always been a krugman, greenspan, volker, strong, morgenthal, keynes and any number of other academics that have done the work of the elites. It is still possible to structure your life to negate their influences. Fuck 'em. 

bobert's picture

"play the markets"

Well said sir!

vast-dom's picture

So the Nobel today is awared for OPINION (pieces). Wow! Everyone should have one!

Element's picture

When your 'economy's' GDP-bubble is based-on misallocation of credit, and also on the increasing public taxation funding of subsequently unaffordable and non-productive activities and expenditures of Govt, then when you do finally cut this so-called 'deficit', due to financial necessity, you get GDP-BUBBLE POP, the so-called 'recession', but it is not even a real "business-cycle" recession. Thus the people who make nothing become unemployed first (except if they are in Govt of course) ... then the productive ones do as well, as aggregate demand continues to wane.

The question is; is the balancing, redirecting and re-prioritising of your former thoroughly misallocated budget expenditures, in fact an actual implementation of a national "Austerity" policy?

I would say that it most certainly isn't 'austerity' - actual austerity is not that.

What they are calling 'austerity' is merely the rediscovery of the absolute necessity for budget prudence.

Budgets do, have and always will matter, no matter what the MMT printing fans say, because when the Govt doesn't budget or spend tax revenues wisely, THEN THE HOUSEHOLD BUDGET ALWAYS GETS FUCKED-OVER INDIRECTLY INSTEAD!

Governments and Banks create this fake 'austerity' and high taxation via not budgeting, and we allow them to do it because we won't face the fact that these lying and unproductive NET parasites don't know and don't care how the money they rush to spend is being generated (if you just don't print and debase the purchasing-power, wages and s[l]avings of the proles.

Someone always pays when budgeting prudence disappears, and it is NEVER the predatory parasites, they'll only inform you that we are all in this together, and that we must all bear the burden of hard times, that they knowingly created, and are still making worse every time they hit 'PRINT' to deny the fact they have bled the country into national bankruptcy.

So this so-called 'deficit-cutting' will naturally lead to a deep and protracted recession and unemployment in the former anomalous credit-based GDP-BUBBLES, for that is what these bloated so-called 'economies' really are, and this GDP-bubble was only the result of deficit-spending plus private misallocation of unnecessary and wonton encouragement of a gush of economically destructive exploitative lending.

In the final analysis this was all driven by rapacious bank 'lending', driven by criminally excessive levels of advertising.

And let's be honest about ADVERTISING; advertising is 100% propaganda, a dedicated targeted destructive psychological-attack upon the population, especially of the young and the psychologically weak and vulnerable (which is why advertising firms utilise the services of so many psychologists), that is solely designed to get people to destructively buy items they don't need, to fleece them, and enslave them, whilst using the credit they obtain to do this, from banks, to inflate and debase their wage, their purchasing-power and discourage saving any money they would dare to commit to a s[l]avings account, at a bank, that could be used in actual productive investments.

The GOVERNEMENT approves of, and actively encourages that process of the aspiring duped debt junkie.

Look at what predators do in the wild, they target the young, the unwell, and the injured.  And that's what predatory advertisers do as well, on the behalf of the credit-pushers, who create the GDP-bubbles, that Governments endlessly love to encourage.

And if you are psychologically fit, rational and clear of mind, they also actively seek to attempt to undermine any healthy mind, in order to make you vulnerable to their nonsense.

So they use insane TV programs, then lace them with mentally poisonous commercials.

So we make the buying 'decisions' that we have been thus mentally prepped to make. 

We are hardly free and independent agents in this insidious process.

The young are trained in advance to be unaware, flip, short-sighted fools, and by the time they wise up, it's generally too late, they are already debt-slaves, caught-up in the states taxation swindle, and they find that the HOUSEHOLD BUDGET is now completely porked, and they are either a wage-slave, or else an unemployed desperado seeking a fortnightly personal tax-payer 'bailout' ... which comes from printing up another deficit.

Thus this financialism menace goes around and around, in ever-decreasing circles, until it disappears up its own fiat-shitting arsehole.

And we are left in economic ruins, in poverty, often resulting in a famine, and always resulting in major wars, which provides the cover for the Govt to portray itself as the hero of the moment, our saviour at large, as it sends us to be slaughtered in vast numbers.


Government enables, generates and encourages that whole process, because the government itself is an amalgam of unproductive predatory parasites, that pretend to be good-guys, as they use our tax money to create dedicated propaganda and a psychological assault, termed "Govt advertising", to try and keep us from realising such facts, whilst they coopt all to bled us into social and political submission, and eventually to our personal and national  destruction.


Debt downgrade

Credit ratings agency Standard and Poor's has downgraded Spain's rating by two notches from A to BBB+, warning the country might have to take on more debt to support its banking sector.

Tobias Blattner, the director of economic research at Daiwa Capital Markets, says the outlook for the Spanish economy is "exceptionally gloomy".

"It's not only GDP is likely to fall by possibly more than 2 percentage points. Because of the concerns that we have on the banking sector, house prices have not fallen by a lot, from the peak, only by 22 per cent," he said.

"So I think there's still a lot of room for house prices to fall further and that will obviously cause another big hole in the balance sheets of Spanish banks."

He says Spain may well be forced to accept a multibillion euro rescue package from Brussels.

"I think the concerns are mostly on the growth side, so I think if the real economy was to contact even faster than I think the markets are expending then this might push the yields of Spanish bonds even higher," he said.

"In that case if we reach a critical level of say 7 per cent or even slightly higher than 7 per cent, in that case it is very difficult to see how Spain can maintain market access and in that case it is very likely that later, towards the end of the year, Spain might be pushed into a EU/IMF program."



"Forced to accept" and "pushed into" huh? ... a "euro rescue package" ... from Brussels huh? ... and where does "Brussels" get it from then? ... Mars perhaps?

bobert's picture

Tell me more.......

Not really, did enjoy your thought process though.

doggings's picture

and where does "Brussels" get it from then? ... Mars perhaps?

not Mars specifically

AnAnonymous's picture

Misallocation of resources? What is that?

Knowing that the US of A is the mecca of US citizenism, and that the current state of the world is the result of US citizenism, was it misallocation of resources or not?

Alcoholic Native American's picture

There is massive wealth distribution going on alright, it's called taxes.  STEALING AT GUNPOINT BY GOVERNMENT THUGS.


How am I supposed to invest in lucrative business that CREATE HIGH PAYING JOBS if I got uncle sam sticking me up for for crack money every 2 weeks?






vast-dom's picture

You are correct.


And meanwhile Apple rightly so pays very little taxes as per NYTimes article i pasted earlier today. For this Apple should be commended, I guess, at the expense of the poor schlub that has to pay taxes and buy one less iGadget....

Caviar Emptor's picture

You don't get it. They don't want creation of high paying jobs. That's going anywhere but here They want low paying jobs so that the elite can keep their status and have a very docile workforce available at low pay so that they may enjoy their wealth. The rich of the world will maintain presence and enjoy the shopping. But take heart: there will be a brisk demand for butlers and chauffeurs, valets and stable boys, knaves, page boys and gardners. But always keep on your best behavior and watch out for those other servants trying to take your job.  

AnAnonymous's picture

Who is those they?

The current crisis is a middle class thing. It goes through aggregate demand.

Poor, well, low on demand.

Rich, high demand but no match for US citizen middle class demand.

Low paying jobs? They were a US citizen middle class first of all.

You dont reach corporation status by satisfying upper class demand, not enough superficy.

You grow into the super mega corporation status by satisfying the middle class.

Middle class were the first to support the shippment of 'lower class' jobs because it suited them.

No determinism in being placed into the middle. But one has to admit that being in the middle, US citizen middle class agree with anything done on the lower class as it benefits them while rejecting the same methods on them.

No principle.When done on others, good. When done on middle class, bad.

Miss Expectations's picture

Thanks be to Pater Tenebrarum for doing what had to be done, and doing it with flair.  I especially like the image of Krugman on a perch at the NYT.  Part of me suspects that Krugman wrote this on a dare from Timmay at some dinner with Lloyd Blankfein.

nmewn's picture

"Self-appointed 'liberal conscience' guardian Paul Krugman: now he's suddenly springing to the defense of the financial elite and the '1%' in his misguided mission to defend central economic planning."

I don't know about suddenly...but yes, he has always been a statist monetarist/crony capitalist. Otherwise known as one of the plantation overseers.

Even as the fire spreads from the out buildings to the main house, he clings to it...quite remarkable really.

Caviar Emptor's picture

He is indistinguishable from all  the others who stand in opposition to The Great Reset. That makes him indistinguishable from the Wall Street elite, bankers, statists, Cheney and Buffet. 

nmewn's picture


If there was ever a man who epitomized an economic pyromaniac, its Krugman.

Caviar Emptor's picture

@nmewn: Pyromaniac. love it. He's a flaming something

nmewn's picture

He's a "flaming progressive"...I have no problem saying it ;-)

A "progressive" is a very different animal from a liberal.

A "progressive" will hide behind the moniker of being a liberal to meet his ends...which is socialism. There is nothing liberal about having government intruding into peoples lives...its the opposite...liberals (classical liberals) are very much "conservative" in that respect.

Progessives & socialists are the bane of our existence as humans. Its an affront, an assault on the individual at its core.

They tell me I can't say this or say this or that...not go here or there on my timeline...feel this not that way...ROTFL!!!...they're complete idiots caught up in some weird ego trip of their own making and I'm growing more fond of pointing it out.

bobert's picture

I for one am glad that you did "point it out" MN.

Always enjoy reading your comments! The less obscure the better.

nmewn's picture

I'm trying to be less coy. The time for juxtaposition & contemplation is past.

I will be free one way or the other anyways ;-)

bobert's picture

Life has it's risks.

It's hard to stay quiet inspite of this.

Perhaps we design a form of subtle humor, and honesty to deal with this and cal it Z Hedge.

Take care man.

I'm on MST and signing off.

bobert's picture

Life has it's risks.

It's hard to stay quiet inspite of this.

Perhaps we design a form of subtle humor, and honesty to deal with this and cal it Z Hedge.

Take care man.

I'm on MST and signing off.

LetThemEatRand's picture

Free of any claim of placing intellectual values over ideological ones?  ^^|^

nmewn's picture

Tell ya what, when Krugman puts his own money where his mouth is (instead of constantly advocating the risking of everyone elses), I'll consider it ;-)

q99x2's picture

No No No Although free markets are the end result first we get the biggest baddest banksters. We arrest them. Hand-cuff them. Get them to confess to their crimes. Throw them into jails and re-distribute their stolen wealth into an open source monetary system. It's like everyone sort of hits the lottery when the new system re-boots. Then its a gold rush into the future as humanity is once again run by the human race.

Banksters, crooked politicians, crooked lawyers and treasonous vermon of all sorts are left in prison with Bernie and Rockefeller this and that as their bunkies. Drugs are legallized as well so there will be no crooked attorney generals drug running.

And the best part is that I get to go fishing with my dog. I've had enough wives gonna get  a dog this time.

NidStyles's picture

I have some triple braid here that he can have.

Hannibal's picture

It's the powers that be that are fucking "Orwellian" shit head Krugman!

I am on to you's picture

Its a funny story!

How come,with so big minds,it can go so utterly bad?

There can only be a fewexplenations,fraud corruption,or,ego,s so big that this planet dont have room for these kinds!


I remember one,out of the economical world,that made me spin,it was when Metalica,i think it was Lars the lame Dane( iam Danish)said,The  E Minor was theirs and had almost exclusive  exclusive right,i thought yes,thats all there is in your Music,E minor!

This is how i look at the economy,there is only one reason to this sick world,at it was mensioned in the beging of the material above,the word ENVY!

The word tells its own story,Envy,envy is someone haveing more than others,and others want what someone have,so if every one,had the same ?ENVY wouldnt even excist,and this will be the chock Therapi,watch out,every body have to have Equlibrium,the same,wouldnt the world be a wonderfull place to live in,no Envy of your fellow human,no reasons for war,no reason to have a car,the size of an mansion,just a box with four wheels,no bank frauds no corrupted politicians no mafia,but most significant:

NO ENVY,some will cal his Utopia,so be it,Utopia it is,but seems far more advanced than the Einstiens that cant even tie their own shoes,and less more can save the human race,due to Envy.


Even Krugman envys somebody.who dont jave his wiew on economy,and other envy him,so where does it end,or even begin,this fenonomen.

Cause envy dont know social boundrys,The rich guy envy the poor guys wife,cause she looks natural,his dosnt,its siliconed Botoxed spantexed,and it looks Ugly in the morning and use Hours and hours to get it set right,he even envy the closeness of the poor family,cause he aint got closeness,he has to buy it:So is it Utopia,to want everyone to have the same,or is Envy?


I know in the Academical economical world,this will be considered a crime even to have this idea,but,ill risk it all,like Goldman or Corcine or the Morgans Barclays or what or whom ever they are,and no matter what name the Economic mind set or Business school is called.

History showed it dont work,and i dont want to go deep in to ,why,besides say,Africa Australia,North South America,and say,Europeans,need to say MORE??

No offens to anybody, i know it goes widely around this planet,the European plauge!

Cabreado's picture


(But with the small exception that I think you're really talking about humility, the lack thereof, and the "European plague" is not quite right -- that part is a history/logistics/opportunity thing)


I am on to you's picture

Could might humility!

But i dont consider,war a logistical oppotunity,its simply murder for wealth.


The lack of humility,i give was shown at the Bharain formula 1 death show!

Cabreado's picture

The pathologically Self-Absorbed can arrive at all sorts of positions in their life/"career."

Once they arrive at a place that offers free sustenance, as in Narcissistic Supply, they will say and do anything to protect it.

Truth has nothing to do with any of it; in fact it is their nemesis.

We have failed, We are failing, We will continue to fail 'til...

all because of a simple dynamic of a critical mass of those-who-achieve-influence do not give a shit, as they lack the wherewithal to do so.