Tag: Paul Krugman

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national politics & policies

Making the Rounds

The “trillion-​dollar” coin proposal hit big in the last few months, even garnering a smile, a wink, and a nod from Paul Krugman. The idea was for the government to mint a high face-​value platinum hunk of token money and sell it to the Federal Reserve — to weasel around congressional approval for raising the debt limit.

Something very much like it was floated by Populist and inflationist Bo Gritz back in the early ’90s, when he was running for the presidency.

Though the current president has dismissed the notion, people like it so much — perhaps because of its “just so goofy it might work” aspect — that the whole meme is still making the rounds.

As a technical matter, a one trillion dollar coin would probably be too unwieldy. If actually given the go-​ahead, the Treasury and the U.S. Mint would likely opt for smaller amounts, cranking out a batch of them — a big batch, to cover the federal government’s rising debt.

My modest proposal? Mint coins at the legal tender amount of $666 million each.

The effigy of Liberty could sport a 666 tattoo on her forehead, and a neat UPC symbol on her wrist, which she could hold up instead of a torch.

That would indicate, by commonly understood symbology, just how dangerous America’s debt really is, and how anti-​American the whole idea of the high face-​value coinage debt ceiling workaround would be.

Another way to go would be to carve each coin out of coprolite. Another fitting symbol for the last days of our fiat currency.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture too much government

Estonia’s Success

When I was coming of age, the economic ideology of Keynesianism was going bust. Keynesians couldn’t explain the stagflation of the 1970s. Monetarists triumphed and the Austrian School experienced a resurgence.

Now, monetarist disputes are hard to follow, and the Austrian Theory of the Business Cycle is not exactly a piece of cake. But Austrian economists’ preferred policies possess a kind of common sense: The thing to do is prevent false booms. Once you hit bust, it’s too late: we are going to experience the pain of readjustment, “recalculation,” as we find new prices and levels. I riffed on this theme last weekend, in my column “Dead Hobo in Trunk.”

Keynesians, now back in the limelight, have it easier, promising “less pain.” They offer drugs to make us feel better: Borrow, go further into debt, and spend, spend, spend!

So you can see why today’s Keynesians would hate Austrian wisdom. Not inflating the money supply, not engaging in deficit spending? Risible! And “austerity”? Keynesian shill Paul Krugman never tires of pillorying that program.

Which brings us to Estonia.

The little post-​Soviet Baltic state was one of the few countries to actually restrain spending after the 2008 bust, freezing pensions and cutting public employee salaries by 10 percent. Krugman infamously blogged about it, noting that the country’s current recovery hasn’t yet reached the height of the pre-​bust boom. He thinks this tells against “austerity.”

But to Estonian economists, the height of the boom was a false prosperity that couldn’t last. They’re glad their country’s rid of it, and note that their current recovery is above the pre-​2005 levels.

In other words, Estonians not only understand their country and their situation better than does Paul Krugman, they understand economics better.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture media and media people national politics & policies

Learning from Krugman

We often have much to learn from our intellectual opponents. But some opponents we must deal with only because they are there … in some inescapable way.

Paul Krugman, for instance, is a Nobel Laureate economist. We deal with him not because his technical work is more relevant than the work of a hundred other economists, or because he wrote a really fine essay on the law of comparative advantage. Or because some Swedes thought enough of him to give him a big award and cut him a huge check.

We deal with him because he has a column and a blog at the New York Times.Paul Krugman, economist of a different color

And for the Times he’ll commit almost any sort of fallacy or public foolishness. Thanks to the New York Post, you can read a grand demolition of Krugman’s modus argumenti. “Krugman is a most unusual economist,” Kyle Smith writes:

Others may measure their words, issue caveats, acknowledge that the research isn’t conclusive, admit that their biases influence their reading of facts. Not Krugman.… He changes the subject, ignores inconvenient evidence and plays playground bully to people he sees as ideological enemies (a list longer than Nixon’s). He blasts away at others’ work without even providing the basic courtesy of a link to what he’s talking about.…

And Smith goes on, in part to review Krugman’s new book, End This Depression Now! (turnabout being fair play, no link from me). Not surprisingly, Krugman’s advice is a Democratic politician’s delight: spend more. Lots more.

Smith’s destruction is funny, and devastating. My complaint with Krugman has long been his relentless partisanship. But Smith reminds me that we have something to learn from Krugman, too: How not to promote a cause we regard as good.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Ups and Downs

Inflationism is the ideology of increasing the money supply to spur economic activity and “growth.” In the 19th century, economists were generally against it, though certain “innovators” (cranks) thought that increasing the supply of money would “increase aggregate demand” with no bad repercussions. “Cross of gold” kind of nonsense; “free silver” idiocy.

In the 20th century, alas, inflationism went mainstream.

Today, a few respectable economists — high-​profilers like the New York Times’s Paul Krugman and U.C. Berkeley’s Brad DeLong, for example — embrace inflationism. Occasionally their arguments sound sophisticated, but all are just warmed-​over rehashes of very old errors.

It’s the economic equivalent of the “perpetual motion machine”: the eternal quest to get something for nothing, progress on the cheap. It inevitably fails — but only after fooling people by “working” for a while.

Reason’s Tim Cavanaugh, discussing declining housing prices, notes that “it’s becoming harder for the Fed, HUD, the Treasury Department and the National Association of Realtors to pretend the 25-​year real estate inflation was anything but a $15 trillion rip-​off.” He welcomes the deflation of housing prices. The idea that one’s house should increase in value by always increasing in price — that’s really just a recipe for social disaster. It endured as long as it did only “through government subsidized debt.”

Thank Congress; thank their Fannie and their Freddie; thank the inflationist Fed.

“Creating” money and loosening credit tends to nudge up prices … but not all prices equally. It signals people to over-​invest in certain sectors, often real estate. This creates a sector boom … that then must “bust.”

The alternative? The honesty of sound money.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Competition Works Even With Limited Info

Few of us understand all our options when we shop for homeowners’ insurance. 

The New York Times’s Paul Krugman riffed on this, arguing that “When people call for ‘consumer choice’ in health care, what this mainly comes down to isn’t comparison shopping on actual care … but rather comparison shopping on insurance policies. And that’s basically impossible even for home insurance, which is a lot simpler than medical insurance.”

Krugman calls a free market in medical insurance “fantasy.”

Yet the illusions involved in buying insurance also apply to non-​market medical coverage. 

Consider: Most people with low-​price insurance like their coverage at least so long as they don’t have to make many claims against it. That’s because insurance is one of those things you buy hoping not to have an occasion to require it. 

Something similar happens in single-​payer medicine. Some Europeans (especially the young and healthy) praise their state systems that cost them next to nothing out of pocket, patching up their scrapes, mending their bones “for free.”

But wait till they are old and really sick, and on a multiple-​month waiting list for an MRI or cancer treatment. Rationing-​by-​waiting can be a killer.

Bottom-​line this: In a competitive insurance market, on learning of poor performance by your carrier, you can drop your insurer like a hot potato. In single-​payer systems, you’re stuck. In line. Hoping not to get something too taxing on the system.

But you do have a choice in coffins.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture national politics & policies

Study War Some More?

Some people love spending so much they’d kill to do it.

A while back, Paul Krugman, today’s leading Keynesian shill, trotted out the old chestnut that World War II brought America out of the Great Depression. In The Freeman: Ideas on Liberty, Steve Horwitz provides a concise, reasoned response:

Wealth increases when people are able to engage in exchanges they believe will be mutually beneficial. The production of new goods that consumers wish to purchase is the beginning of this process. 

And borrowing from future generations to spend on goods not connected “to the desires of consumers, but rather to the desire of the politically powerful” doesn’t work. 

Krugman talks war not because he wants one, but because he thinks government spending is so important that he’ll take what he can get, “even if the spending isn’t particularly wise.”

He misses the point.

The malaise that holds back recovery after a shock like the Implosion of 2008 isn’t lack of spending as such — it’s lack of confidence. Capitalism depends on trillions of separate plans and desires working together. When investors are wary of investing and consumers — fearing the future — don’t know what they can really afford to buy, no amount of “jump start” splurging will repair the engine.

At the end of World War II conscripts were freed, wage and price controls were abandoned, and a sense of victory permeated everything — and the Great Depression ended. Finally. 

The lesson? End wars. Curtail regulations. Free up the system.

This is Common Sense. I’m Paul Jacob.