Wednesday, September 28, 2011

Krugman Works Out His Mind at the 92nd St Y

In what must have been one hell of a show, NYT columinist Paul Krugman told an audience at the New York City 92nd St Y that in order to reverse the current lumbering economy:
What we need is actually the financial equivalent of war.
He went on to state that
What actually brought the Great Depression to an end was the enormous public spending program otherwise known as World War II.
Robert Higgs exploded the absurdity of war as an economic stimulant ages ago:

Looking to the World War II model of how to deal with today's economic crisis is nonsense. Whatever else the war might have accomplished, it did not produce conditions that we may properly describe as genuine prosperity.

Government spending — whether on our current armed forces and their more than 800 foreign bases or on "green" energy and other government-favored projects — does not produce prosperity. It only diverts resources, as it always has in the past, from the genuinely productive private economy and bulks up an already bloated government.
And Bob Murphy ripped Krugman's head off on this point using Krugman's own words:
As a last point, you might be thinking, "What about World War II? Isn't that a great example of the Keynesian multiplier at work?"

Well, Robert Barro ran the numbers and said no, it wasn't. And in his response, did Paul Krugman challenge the math? Nope, Krugman said that only a "bonehead" would have thought World War II would show the power of the multiplier. So we can't use that as an example to justify the Keynesian models.
Then Krugman called for more inflation! HuffPo has the details:
We have not had the kind of aggressive policies either from the Fed or from the federal government that the depth of the crisis really calls for," Krugman said. 
Krugman said he believes that the Federal Reserve should print more money to spur "above-average" inflation for five years, raising prices to bring down both unemployment and debt.
Ludwig von Mises warned about what inflation really is about:
Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.
It is, thus, may not be an accident that Krugman cheers on inflation and tells us in the next breath that World War II did great things for the economy. That's what  imperialistic, militaristic, statist socialists do.


  1. So I guess Krugman is a closet Bush supporter.

    Maybe Bush was a pre-cog, and his wars were an attempt to head off the depression.

    The fact that it didn't work wouldn't bother Krugman. We just needed to invade twice the number of countries.

    We can solve that now by nuking ourselves.

  2. This is the best owning of Krugman I have ever seen. It shows how completely clueless and full of it he is. Great job!

  3. People like Krugman that think the war was the answer to the AGD always leave out in their analysis that the war essentially eliminated all of our foreign competition and it required American's to live under a command economy for almost 4 years.

  4. These comments are the clueless thing here. Did you read what was said? Krugman was clearly talking about a LEVEL of spending, not a war or military spending. WW2 ended the Great Depression because it provided the POLITICAL will for deficit spending, not because it was a war.

    We can spend on our ailing Bridges, Roads, Schools, Rails and Tunnels and new technology. That is the point. All that money would create DEMAND and the private sector would do the rest, adding jobs when the Construction and tech industry worker walks into their stores to buy stuff.

    OR you can listen to the Right and use your tax cuts to build your own bridges.

    America did thrive after the war. Inflation did not destroy everything and taxes were high and the rich were still rich and unions were balanced with capital helping in creating an unprecedented middle class.

    Our low taxes today simply concentrate wealth. And deregulation allows fraud and abuse. Anyone not rich, supporting the RIGHT today is the clueless one.

  5. It's funny when excerpts from Mises are on the same page as those from Krugman. The difference in intelligence, knowledge, and understanding is just blaring.

    How many more Intellectual Waterloos must Krugman have until he is finally discredited?

  6. @Anon at 8:58

    It's not about the left or the right. It's about liberty. The reason the U.S. thrived after WWII was that government finally and drastically decreased in size. After the war, the government drastically cut spending and taxes. The Keynesians laughably predicted disaster.

    So far as bridges and roads, first, the free market would provide these better than government if government didn't hold a monopoly on transportation. BUT if government must provide roads and bridges, then it could easily do so at a minuscule fraction of the cost it takes to fund the bloated monstrosities that are our current federal and state governments.

    Whenever statists oppose spending and tax cuts, they always bring up the roads because they know that the roads are the only things government provides that people actually want. Everything else government does is an obvious nuisance, so statists don't bother to argue in favor of the rest. The roads themselves, of course, are a great nuisance for all, with their traffic jams, accidents, and poor condition. Transportation would be much faster, safer, cleaner, and more convenient if left to the free market, but I realize your puny, brainwashed mind cannot comprehend a free market in transportation. Therefore, I will return to my original argument -- building roads does not require the leviathan government that current burdens us.

    What's more, WWII did not end the Great Depression. Even though unemployment ended because the government enslaved millions of men to send overseas to get blown up, depression conditions persisted until the left's hero, FDR, finally dropped dead and the Truman administration, slightly less hostile to free enterprise, took over and slashed spending and taxation. What's more, the U.S. had no competition because the U.S. and the Nazis blew up all their other competition.

    Finally, despite your kindergarten argument, government spending does NOT create economic prosperity. If you disagree, read and wrack your puny brain to try to refute Rothbard, Mises, Hayek, Hoppe, Woods, DiLorenzo, North, Rockwell, Garrison, Schiff, Salerno, Thornton, Hulsman, Higgs, and Block, and get back me. Meanwhile, refrain from spewing your pernicious economic nonsense in my general direction.

    You, sir or madame, are clueless.

  7. Anon 8:58, I have to laugh at your naivety. Let's assume Krugman is right, do you have any idea of the level of spending that would require to come close to what was spent during the WW2 years? It would be on the magnitude of $10T to $14T of spending. Just where would that money come from?

    America thrived after the war largely becuase it had no competition. It didn't have to rebuild from a war that was fought on its doorstep and thus got to profit from the rebuilding efforts of Europe and Japan. Of course that competition came back full on in the 60's which is when the Empire began to fall apart.

    Like most on the left (and right) you do not understand the old tax code. If you did you would understand that under it the middle class paid the bulk of the taxes. Secondly, under that same code taxes were exceedingly high on the poor and lower middle class. The starting tax rate on the first $1 of income was 20%. Today you would need to be way into the middle class to pay such a rate.

    Also, if taxes don't really matter, why are tax cuts for job creators part of Obama's spending plan? Either taxes impede employment or they don't. It seems the President and those that support his plan beleive they do.

    As for wealth concentration, how would you expect wealth to concentrate anywhere but at the top when most American's do not save? Isn't that what Keynesian's like Krugman want?

  8. I love the fact that people who try to defend Krugman and his Keynesian fallacies never have the balls to sign their names. They are too scared to identify themselves, since they know that they lack the intelligence or insight (let alone comprehension of simple economic theories) to actively debate the issue.

    If the anon@858pm had any integrity or economic knowledge, he/she would have made some sort of sound argument rather than just "nyahnyahnyah, you're wrong!"

    Anon, every dollar spent by government is a dollar stolen from you or me (I'm guessing me since you probably are either a student, teacher or gov't drone and live off the tax dollars the rest of us pay to keep you alive) and is therefore not used as productively as it would be in the private economy. Period.

    What a moron...

  9. How often has krugman been wrong though? He said that we needed a Housing Bubble in 2003. He said that the earthquake in Japan was "good" for the economy. He said WW2 was good for our economy. He said that there was no way commodity prices would rise if QE2 was implemented and demand was not stimulated. He said recently we had to worry about deflation and not inflation. He said we needed to unite against aliens in a war to get our economy back on track.

    I am not even getting into his political stuff, like being the equivalent of hannity or rush for the Democratic Party and his regular lies. The most recent Ron paul article where he implied that the audience reaction was Ron's and left off his actual response is a great example of his dishonesty.