(weekend non-Zoho-related post, feel free to skip)
I read Paul Krugman because a) he is the anointed standard-bearer of mainstream economic thinking, a perfect illustration of the utter intellectual bankruptcy at its core b) given the lock Keynesian dogma has at the highest levels of government, whatever idiocy Krugman comes up with has a good chance of eventually becoming policy, so it is best to be prepared, as best as one can prepare for such things. At least he writes clearly, so there is no ambiguity as to where he stands.
Before you think I am too harsh to use words like “bankruptcy” and “idiocy”, here are a few of his policy proposals.
1. Krugman proposes a massive increase in public debt, as a way to get out of the problem of caused by too much private and public debt that led to the economic crisis. Krugman thinks of this as a paradoxical-but-fundamental insight that the world misses.
Japan has successfully converted the private debt from its 80’s credit bubble into public debt, zombifying its economy in the process. The price Japan has paid with its zombie economy is in robbing the spirit and energy of its younger generation. Smart young Japanese are looking to migrate, something I predict will happen in the West if Krugman and his kind have their way.
The only solution I see as a businessman to all this debt is default, and large scale debt-to-equity conversion, which Krugman dismisses as “liquidationism”. The only role I see for the government is to speed up the transition from debt and ensure that no one starves – this the government can do and must do. With large scale default, the recovery would be very swift and very durable.
2. Krugman wants the Fed to ensure an extended period of “guaranteed inflation” as a solution to the debt predicament.
Having read Krugman for many, many years, I have been buying gold all along. Enough said. Oh, by the way, Krugman’s hero FDR confiscated private gold, so this one may not work out all that well.
3. Krugman wants to get tough on China – trade war as a solution to creating jobs. This one is scary. Trade wars often lead to real wars, which leads us to …
4. Krugman’s glorification of World War II as the perfect economic stimulus, so I guess he is intellectually consistent with his trade war recommendation after all. But then again, in the long run we are all dead.
That apart, as they say, he is a fine economist.