Friday, December 30, 2011

Krugman is Setting Himself Up for the Big Fall in 2012

Paul Krugman is out with his usual nonsensical commentary, Keynes Was Right.

Most fascinating is that he unintentionally laid a huge land mine in the column. He writes that Keynesian policy is not currently being applied in the U.S. and that " of these years we might actually end up taking Keynes’s advice, which is every bit as valid now as it was 75 years ago."

This means that as Bernanke's money printing impacts the economy and causes a spike in the numbers that Krugman won't be able to explain the manipulated upturn in the economy in terms of the government implementing Keynesian policy recommendations.

What's he going to do? The economy will be going up and he is on record as saying Keynes wasn't in the game.

In truth, what is going on is what always goes on in these boom-bust cycles. It is only explained correctly by Austrian business cycle theory. The cycle is a complete creation of central banks. In the U.S., it's  the Federal Reserve. The Fed prints money, which gooses the capital goods sector. Eventually, fearing price inflation caused by the money printing, the Fed stops the printing, which causes the bust phase.

Recently, Bernanke has been on a new money expansionary phase, which is likely to result in manipulated gains in the type of data that Krugman watches. But only ABCT will be able to explain it. Since Keynesians like Krugman currently believe that not enough Keynesian-type fiscal policy has been implemented to turn the economy around, they will have no way to explain Bernanke's induced manipulated boom. This will mean kaboom for Krugman.

1 comment:

  1. Somehow he will still slip out of it haha.