We Need More Drunken Sailors: How a Keynesian Looks at the World

Here'[s how Paul Krugman would protect the world from declining prices of flat screen televisions:

The basic situation in today’s world isn’t mysterious: we’re in the midst of a deleveraging crisis, in which those who ran up large debts during the Great Moderation are being forced to pay them down, rapidly. The trouble with this situation is that someone has to make up for the decline in debtors’ spending, or the world will be pushed into a deflationary slump. Fiscal expansion could do the job – and no, it’s not absurd to say that the solution to a problem caused by some actors taking on too much debt involves having other actors take on debt. Monetary policy can also help; but conventional monetary policy is at its limit, so expansion has to take unconventional forms.

Aside from the Keynesian absurdity that it is consumption rather than production that results in a growing economy, ponder the first part of the above Krugman paragraph:.

The basic situation in today’s world isn’t mysterious: we’re in the midst of a deleveraging crisis, in which those who ran up large debts during the Great Moderation are being forced to pay them down, rapidly. The trouble with this situation is that someone has to make up for the decline in debtors’ spending, or the world will be pushed into a deflationary slump.

1. For a minute, assume this is actually going on. Doesn't this mean money is simply being transferred from debtors to creditors, who can then spend the money?
2. What is wrong with lower prices (i.e. price deflation)?  Don't we all want to pay less for the things we buy?  When I raise this point with anti-deflationsits, their fallback position is that it would be difficult for businesses to plan in a world of falling prices. When I point out that even during the Great Recession the firms that tended to perform the best have been firms such as Apple, and other firms in industries where prices have dropped rapidly for products such as cell phones, televisions and notepads, there is silence.

Krugman goes on:

Fiscal expansion could do the job – and no, it’s not absurd to say that the solution to a problem caused by some actors taking on too much debt involves having other actors take on debt.

It's clear Krugman hates savers, i.e., the people who provide the funds that build the factories that make the products we all desire. He simply wants government spending, which will only result in the Police State Keynesianism.

I ask, do you want cheaper cell phones and flat screen televisions, or more groping TSA agents?

Krugman continues with further absurdity:

Monetary policy can also help; but conventional monetary policy is at its limit, so expansion has to take unconventional forms

Has Krugman discussed this point with Goldman Sachs traders? I am quite sure that Goldman, as a primary dealer, would be more than happy to dig up some Treasury bills, if Fed chairman Bernanke wanted to buy more.

Bottom line: Krugman is simply one of the most absurd economic writers on the planet. He makes those, who are simply afflicted with Greenspanism, look like pillars of sanity.