Krugman Right Again
An earlier post that referenced Paul Krugman set off some interesting comments, as have other posts about the economy and public spending.
Krugman won his Nobel Prize for his academic work, but is better known through his New York Times' columns, so here is his thinking about the stimulus planning.
Republicans who are already laying traps for the Obama initiative might take Krugman's political and economic opinions to heart, since I think we're all still in this together, right?
1 comment:
Lets get a few things straight. Krugman is desperately trying to resurrect the Keynesian legacy, and he is struggling to prove what cannot be proven. Keynes solutions to the problems didn’t solve the problems 70 years ago and they won’t now.
Amazingly Krugman tries to advance Friedman as the central monetary policy advocate while somehow creating the impression that Keynes opposed such a control.
That is patently false.
The difference between Friedman and Keynes on this question is that Friedman believed that monetary policy should be set based on a systematic approach that fell within the regular structure of the markets. That is – that monetary policy’s end goal is only to preserve the value of the currency and control inflation while encouraging a stable flow of credit.
The most important distinction between the Keynes approach and Friedman’s approach is that Friedman believed that monetary policy should not be set by political fiat, nor would Friedman support using monetary policy to further the political objective of expanding the central planning policies of big government. This stands in stark contrast to Keynes.
The monetary policy employed for the last decade has been largely political. The Fed has been complicit in stoking inflation by flooding credit markets – and they did so in such a way that the numbers appeared to show economic growth. What we now learn is that there was little in real economic output. Instead, it was economic growth based on debt and that debt continues to have a defined value while the assets the debt secured has declined in value.
This was bad monetary policy and it was hardly Friedmanesque.
I believe that you justified Krugman’s views by providing his bona fides – Krugman has indeed received The Order of Lenin (The Nobel Prize).
Well Friedman did too, and he did it in a time when people like Al Gore would never have been given the distinction for simply pushing an Enron-styled scheme for trading carbon credits and lying about environmental science.
Krugman can wish – all he wants to – that Keynesian influenced government spending will fix our economy, but the fact is – it will not. It has NEVER worked, in any nation – ever. It was debunked. It is myth.
Tax cuts will. However, cutting taxes on people who do not pay taxes will not work.
Government spending, no matter how noble it may appear – will not work. It will merely deprive the private sector of capital and it will require generations to pay off the debt in the long-term and that will cost additional opportunity and unproductive capital.
For more – and better refutations of Krugman’s foolishness, go here:
http://www.independent.org/blog/?p=833
and here:
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/01/05/who_should_get_the_federal_stimulus_funds/
Wishing will not fix the problem - but if we follow his advice - things will become much, much worse.
The Fed has already employed Keynesian solutions to no avail. Doing more of it in bigger amounts will be very harmful.
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