Idiocracy On Display (Again): Krugman
Nobel Prize-winning economist Paul Krugman suggested Federal Reserve policy makers led by Ben S. Bernanke are “reckless” for refusing to pursue higher inflation, which he said could lower U.S. unemployment.
“The reckless thing is to allow mass unemployment to continue,” Krugman, a Princeton University professor, said on Bloomberg Television’s “Street Smart” yesterday. “We have had a massive failure of our political system that has come to accept that 8 percentunemployment is the new normal and there is nothing that can be done,” Krugman said. “We’re in a low-key version of the Great Depression.”
“Inflation is theft,” said Paul, a Republican presidential candidate who said he will stay in the race until his party’s convention in August. “You’re stealing value from people who save money. It really destroys an important feature of the economy — and that is saving.”
Ron Paul has it half right. The problem is that he hasn’t (and I don’t know why he won’t) go after the debasement committed by private banking interests at the behest of government.
Here is the reality of inflation in the money supply (including credit) and income change over the last 30 years:
Rebased to (1) be an income growth (or loss) figure by (1) subtracting one from the other and (2) removingpurely-financial product credit growth (which some will argue never makes it into the real economy and thus shouldn’t count — and makes the numbers look better than the raw figures suggest) you get this:
Barack Obama campaigned four years ago assailing President George W. Bush for wage losses suffered by the middle class. More than three years into Obama’s own presidency, those declines have only deepened.
The rebound from the worst recession since the 1930s has generated relatively few of the moderately skilled jobs that once supported the middle class, tightening the financial squeeze on many Americans, even those who are employed.
The problem is found in that chart above. Obama hasn’t done anything about it because playing “fan money from your hand” can’t do anything more than provide a temporary salve for the problem. To actually address it you have to put a stop to the offshoring abuses and stop the credit inflation game — a game that Obama has refused to allow to collapse on its own, which was it was beginning to do when he took office.
Here’s the ugly: Had Obama done so the nominal wage growth you see in the top chart would have, by now, begun even with the credit collapse and the middle class would actually be on the mend with real improvement!
But he didn’t. Instead he decided to “throw money from the train” that we don’t have by borrowing more and more money. All this does is create more and more credit money, which is inflation!
Those who “receive” these government handouts may think they’re getting something for nothing but in fact they’re having their earnings power and prosperity destroyed.
There’s no solution to an economic bubble caused by loose credit that can be found without deflating the excess credit that has infested in the system.
It’s the math folks.
Here’s the interview for those who want to watch…… be warned, it will permanently deplete your IQ by 15 points.
I told him that the problem with Krugman was that he didn’t get math. He may have skipped those classes. I told him that we might have 2% inflation this year, but it never goes away….and then we have another 2% the following year….and so on.So, then I asked him how much a $1.00 loaf of bread would cost if the rate of inflation were 2% at year 1 and doubled every year thereafter for 5 years.
He paused and said….’$32!!??? For a LOAF OF BREAD?!’
I told him at age 9, five years seems a long time, but it would be the difference in price for that loaf of bread from the time he entered college until the time he got out and was looking for a job.
Then I told him to think about the massive price increases to the typical family if EVERYTHING they had to buy increased at this same rate. His eyes nearly bugged out of his head. Then I told him that the other side of this math problem was: What if at the same time prices were increasing at this rate, people’s wages were decreasing at 1% per year.
He just stared at me with his mouth hanging open.
He wants to know what school Krugman went to so he can be sure to never go there. Then he said, ‘And there are people who believe this guy?’
Of course, I did tell him that the math isn’t quite this straightforward (inflation and price are not a 1:1 ratio, but inflation and the credit/money supply are). The exercise, however, is a good demonstration of our reality….and it was clear to him that Krugman is so removed from reality he’s in a different solar system.