‘In recent days, New York Times economist Paul
Krugman has been doing a whole bunch of interviews in
which he has declared that the solution to our economic problems is very
easy. Krugman says that all we need to do to
get the global economy going again is for the governments of the world to start
spending a lot more money. Krugman believes
that austerity is only going to cause the economies of the industrialized world
to slow down even further and therefore he says that it is the wrong
approach. And you know what? Krugman is
partly right about all of this. The false prosperity that the
important to understand that Paul Krugman is a
hardcore Keynesian. He believes that national governments can solve most
economic problems simply by spending more money. His prescription for the
The basic issue, says Krugman, is a lack of demand. American consumers and businesses, aren't spending enough, and efforts to get them to open their wallets have gone nowhere. Krugman's solution: The federal government needs to step in and spend. A lot. On debt relief for struggling homeowners; on infrastructure projects; on aid to states and localities; on safety-net programs. Call it "stimulus" if you like. Call it Keynesian economics, after the great economic thinker (and Krugman idol) John Maynard Keynes, who first championed the idea that government has an essential role in saving the free market from its own excesses.
So is Krugman right?
Yes, it would.
But it would also get us half a trillion dollars closer to bankruptcy as a nation.
Krugman claims that "austerity" has failed, but the truth is that we have not even seen any real "austerity" yet.
When a government spends more than it brings in, that is not real austerity.
talk about the "austerity" that we have seen in places such as
So let's not pretend that the western world is serious about austerity.
The goal for most European nations at this point is to get their debts down to "sustainable" levels.
But for economists such as Krugman, this is a very bad idea. Krugman insists that cutting government spending during a recession is a very stupid thing to do. The following is from one of his recent articles in the New York Times....
the past two years most policy makers in Europe and many politicians and
Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.
Yes, Krugman is correct that government austerity measures will only make a recession worse.
look at what has happened in
other nations across
yes, austerity is not helping short-term economic conditions in
But what are the nations of the western world supposed to do?
According to Krugman, they are supposed to run up gigantic amounts of new debt indefinitely.
that is what the
government debt is already rising much, much faster than
2007 and 2010,
But Paul Krugman does not consider this to be a major problem.
The Obama administration is currently stealing approximately 150 million dollars from our children and our grandchildren every single hour to finance our reckless spending, but for Paul Krugman that is not nearly good enough.
To Krugman, the only thing that is important is what is happening right now. Apparently the future can be thrown into the toilet as far as he is concerned.
The founder of PIMCO, Bill Gross, told CNBC on Tuesday that the U.S. government is likely to be hit with another credit rating downgrade this year if something is not done about our exploding debt.
But Krugman insists that the solution to our economic problems is even more debt and even more spending.
If we keep running trillion dollar deficits every year, at some point our financial system will collapse, the U.S. dollar will fail, and we will essentially be facing national bankruptcy.
if the federal government stops borrowing and spending money like this, our
debt-fueled prosperity will rapidly disappear, unemployment will shoot well up
into double digits, and we will soon have mass rioting in major
The truth is that we have already been following Paul Krugman's economic prescription for the nation for decades. Our 15 trillion dollar party has funded a standard of living unlike anything the world has ever seen, but the party is coming to an end.
Federal Reserve is trying to keep the party going by buying up huge amounts of
government debt. The Fed actually purchased approximately 61 percent of all government debt issued
It is a shell game that cannot go on for too much longer.
The national debt crisis can be delayed for a while, but at some point the house of cards is going to come crashing down on top of us all.
If Paul Krugman wanted to talk about real solutions he could talk about shutting down the Federal Reserve and he could talk about going to an entirely debt-free currency.
But we all know that is not going to happen, don't we?
As I have written about before, the Federal Reserve was designed to be a perpetual government debt machine. The system was designed to have the amount of money and the amount of government debt constantly expand.
it has been working quite well in that regard. At this point, the
But Paul Krugman is not going to talk about the real issues. Instead, he is just going to keep running around declaring that more government spending and more government debt will solve all of our problems.
It is a very big lie, but millions of people are going to believe it.