Krugman’s solution is always the same. Borrow more. Spend more. Driving the National debt up by $5.5 trillion since 2008 has not brought us out of this recession. Krugman believes if we had just borrowed and spent another $3 trillion things would be much better now. His intellectual dishonesty and defending of a failed ideology is pitiful to watch. He belongs with the NYT, another liberal failure.

Whiskey & Gunpowder
by Detlev Schlichter

May 2, 2012
London, England, UK

How to Debate Paul Krugman

Paul Krugman is the high priest of Keynesianism and modern interventionism, of economic improvement through inflation and budget deficits. As such he is bête noir among us libertarians and Austrian School economists.

What makes him so annoying is his unquestioning, reflexive and almost childlike enthusiasm for state intervention, even in the face of its obvious failure, and his apparent unwillingness to probe any deeper into the real causes of our present economic problems or to show any willingness to investigate the effectiveness or ineffectiveness of his particular medicine. His Keynesian convictions are presented as articles of faith that no intelligent person can seriously question.

A Krugmanesque argument is always built on a number of assumptions that are beyond doubt:

1) Recessions, depressions and crises are the result of the unhampered market. We actually do not have to investigate if markets were really free when recessions occurred or what really were the specific causes of whatever threw the economy off track. When there is a recession, depression or crisis, there must have been too much of an uncontrolled market.

2) The Great Depression was caused by uncontrolled markets.

3) Recessions, depressions and crises are practically the result of one problem: a lack of aggregate demand. People, for whatever reason (and who cares about the reason; let’s not get hung up on those details!) don’t spend enough. If everybody were to spend more, people would sell more. Problem solved. It is the role of government to get people spending again. This is done by printing money and causing inflation so that people spend the money rather than save it. Or by the government running up deficits and spending it on behalf of the stupid savers.

4) The Great Depression was solved by the government spending lots of money and the central bank printing lots of money.

5) This explains ALL economic problems.

6) If there are recessions, depressions and crises, they can all be solved by printing money and by deficit spending.

7) If after many rounds of money printing and deficit spending there is still a recession, then only one conclusion is permissible: There was obviously not enough money printing and deficit spending. We need more money printing and deficit spending.

8) If after another round of money printing and deficit spending we still have a recession, then….well, are you stupid, or what? We obviously have NOT PRINTED ENOUGH MONEY and we are NOT ACCUMULATING ENOUGH DEBT!

(And, by the way, remember (7) above.)

Krugman is practicing Keynesianism as a religion. The 8 commandments above are not to be questioned. Whoever questions them is not worthy of debate. Consequently, Krugman has turned down requests to debate people like Peter Schiff or Bob Murphy. Interestingly, he agreed to debate Ron Paul on TV. The link is here.

I have to say that Ron Paul did not do as well as I had hoped he would. He did not sufficiently attack Krugman in my view, for the failure and ultimately disastrous consequences of his policy prescriptions. Krugman is the one who should be made to explain his policy recommendations. After all, t’s policies like the ones he is recommending got us into this mess in the first place Krugman needs to explain why his policy ideas have been implemented for years to no effect.

Yet, Krugman succeeded in putting Paul on the defensive, something in which he was greatly helped by the following: While Krugman may be the most outstanding, unashamed and fundamentalist of the celebrity Keynesians, the attitudes of the general public, the other journalists and thus most of the TV viewers are predominantly shaped by Keynesianism as well, and this means that Krugman, more than Paul or any ‘Austrian’ debater, can rely on some sense of intellectual sympathy.

Maybe the viewers don’t quite share the unquestioning, almost vulgar dedication to the Faith, that Krugman epitomizes. Maybe they feel queasy about printing trillions of paper dollars and running trillion-dollar deficits. Of course, a true believer like Krugman will never allow himself such feelings. But in general, the public, too, believes that the free market (and greedy bankers) caused the financial crisis; that we need low interest rates and other government measures to stimulate the economy; and that inflation is really not our main concern. Krugman, I think, cleverly used these attitudes to present himself as the safe and rational choice, and Paul as the weirdo who wants to pour out the state-policy baby with the crisis bath water.

Ron Paul started strongly by pointing out that Krugman’s policy is based on the idea that a bureaucratic elite can set interest rates and decide how much money should be created, and that this involves an arrogant and dangerous pretence of knowledge. Very good point.
Immediately, the apostle Krugman raised his head. “You cannot get the state out of money.” “The Fed has to set interest rates.” “You cannot go back 150 years.”

I think this is where Ron Paul should have dug in and put Krugman on the defensive:

“Why not? There was no Fed before 1913. That the Fed made things more stable is your assumption. But is it true? People like you and Bernanke tell us that the gold standard was to blame for the Depression. In the run-up to the Depression we had a gold standard but we also had a Fed. How can you say that the gold standard was to blame and the Fed was ultimately the solution?

“Dr. Krugman just said, ‘history told us’. That is nonsense. History doesn’t tell us anything. You need theory to interpret history, and your theory is wrong. You assign blame for the depression according to your Keynesian theory. If that theory is wrong – and I think it is completely wrong – your interpretation of history is hopelessly wrong.

“Dr. Krugman, we do no longer live in the 1930s. Why is it that you are harking back to those days? Are we still solving the Great Depression?

“Fact is that the monetary and economic institutions of America were shaped by people with your beliefs, Dr. Krugman. We have your system today. We have conducted and are conducting your policies. And, Dr. Krugman, do you really want to tell the American public that these policies and these institutions, such as the Fed, are working?

“We have no gold standard. Since 1971, the Fed is entirely free to print as much money as it likes. That is your system, isn’t it? That is what you recommend. – You say the Fed needs to keep interest rates low and print money to stimulate growth. That is what the Fed did in 1998 after LTCM and the Russia default, just as you recommended. That is what the Fed did again after the NASDAQ bubble burst and after 9/11 – surely, that was not an Austrian policy but a Keynesian one. It was straight out of your rule book, Dr. Krugman. You say the uninhibited market is to blame for the financial crisis. I say your policy is to blame. The mortgage bubble was blown by the ‘stimulus’ policy of the Fed – low interest rates and plenty new bank reserves – between 2001 and 2005. That was your recommendation, right? And those of your Keynesian buddies, such as Paul McCulley at Pimco.

“Since 2007, the Fed is conducting your policy. So is the US government. You demanded monetary stimulus and you got it. The Fed created $2 trillion dollars out of thin air. Interest rates have been zero for years. The US government is conducting stimulus policy to the tune of $1trillion-plus every year. Are you telling me, these are not Keynesian policies? What is it, Austrian policy?!

“What you are recommending has in fact been the guiding principle of global economic policy for years. What you are recommending is a systematic distortion of the market place. It is persistent price distortion. That is why we had an unsustainable housing boom. That is why we had a mortgage boom. That is why we had a financial industry boom. And whenever these artificial booms – that you create with your policy – falter, the American public has to pay the price. And what do you suggest then? More of the same. More cheap credit. More government debt. In the hope that you can generate another artificial boom for which a later generation will again have to pay the price.

“Dr. Krugman, you just answered the question of this journalist about how much more debt we should accumulate, by saying maybe another 30 percent but that nobody can say for sure. I agree that nobody can say how much debt the system can still take. But tell us, why do you think that the next 30 percent of state debt will magically stimulate the economy and that these 30 percent will thus achieve what the previous 30 percent obviously failed to do.

“Dr. Krugman, you have me worried here. And I think our viewers too. The only response you have to the abject failure of your policies is that we should do more of them. Whatever Keynesian stimulus is being implemented and whatever money the Fed prints, all you ever say is that it is not enough. We need more. Has it ever occurred to you that maybe the problem is the policy itself? Maybe your medicine is making things worse and not better.

“And something else worries me, Dr. Krugman. When do we ever stop printing money and borrowing? I think that you are stuck in a failed paradigm, a failed economic theory and a failed policy program. This has happened to scientists and politicians before. You cannot admit that failure. When you are confronted with the failure of modern central banking, of Keynesian stimulus and of moderate inflationism, your only answer is that nothing is wrong with any of it, it is just not implemented forcefully enough. Dr. Krugman, you remind me of a doctor, who misdiagnosed the disease and prescribed the wrong medicine and who is now unwilling to look at the situation objectively. All you want to do is increase the dosage.

“If the viewers really want to understand what is going on, they should not buy Krugman’s new book but go to the website of the Mises Institute and look for some excellent Austrian School literature, in particular anything written by Ludwig von Mises himself. But if you don’t have time to do this, an excellent start is a book by Detlev Schlichter, with the title Paper Money Collapse.”

Well, I guess this is how it could have unfolded.


Detlev Schlichter
Paper Money Collapse


  1. The Invisible Red Line

    By John Butler05/02/2012

    Professor Paul Krugman and Rep. Ron Paul (R-Texas) went head to head on BloombergTV this week. True to his neo-Keynesian form, Prof. Krugman insisted that the US government could and should add further debt to stimulate growth. Rep. Paul responded by asking how much debt would be too much, to which Krugman replied: “We’re not anywhere close to a red line.” Really? What makes him so certain? Certain red lines are like tipping-points. They can only be seen in retrospect. In my view, the US has already crossed the excessive debt ‘red line’ implying a dramatic future devaluation of the dollar. It is only a matter of time before Krugman and other members of the economic and policy mainstream look back on recent developments and reach this conclusion. Financial markets, however, will not wait.

    In the Blue Corner…
    Professor Paul Krugman belongs to a rather elite group of economists: those who have received the Nobel memorial prize. In his case, it was for “his analysis of trade patterns and location of economic activity”, a no doubt fascinating but also highly specialised topic.[1]

    Outside of academia, Krugman is best known for his outspoken views on contemporary US economic policy, in particular his view that the US monetary and fiscal authorities have not done nearly enough to date to stimulate the chronically weak economy into a strong recovery, notwithstanding TARP, zero rates, QE1, QE2, nationalising Fannie/Freddie, etc.

    The crux of his argument is that the problems associated with excessive debt and leverage are best addressed through additional debt and leverage. While that may defy basic logic, don’t worry, Krugman has the equations required to prove this assertion. All you need is a PhD and you, too, will learn to cook up a free lunch.

    In the Red Corner…
    Texas Rep. Ron Paul has been a tireless advocate of sound money and fiscal conservatism for decades. In early 1982, following the 1970s stagflation and brief, parabolic rise in the gold price to $850/oz, he was appointed a member of President Reagan’s Gold Commission, tasked with studying whether the US should, and how it might, re-establish the dollar’s pre-1971 link to gold.

    More recently, Rep. Paul has been advocating cutting fully $1tn from the federal budget as early as 2013. (Read that carefully: He is advocating an outright cut of $1tn, not merely a reduction in already authorised spending increases. In Washington-speak, ‘cutting’ means, ‘increasing by less, according to our own estimates, which tend to undershoot reality by a singnificant margin’.)

    As such, in this debate between Prof. Krugman and Rep. Paul, we have the far ends of the policy spectrum represented: Those who encourage more debt and those that don’t. What follows is my citation, translation and interpretation of what I regard as the most interesting parts of the debate. Before continuing, I recommend that my readers view the debate for themselves, which runs about 20 minutes and makes for entertaining viewing at times.[2]

    Rep. Paul was first to present his views, emphasising his general belief in free-markets and limited government, and highlighting specifically his view that the Federal Reserve cannot possibly know how to set the level of interest rates more effectively than a free market in money could do. In doing so, Rep. Paul was channeling another Nobel prize winning economist, Friedrich Hayek, who argued in his famous Nobel speech, The Pretense of Knowledge, that power confers an illusion of knowledge on those in a position to wield it.[3]

    Prof. Krugman responded that it is impossible to leave interest rates to the market because modern money is highly complex and requires management. As an example, he cited the repo (or repurchase) market, which comprised an important part of the so-called ‘shadow banking system’ thought by many to be responsible for the 2008 financial crisis.

    I find this to be an odd line of argument, because the Fed is the banking system regulator and in the years leading up to the crisis it regularly compiled and published repo market data. The Fed was thus fully aware of the rapid growth of the repo market but failed to appreciate that an abrupt decline in collateral values for mortgage-backed securities would cause the interbank lending market to seize up. Krugman has thus offered up an example of regulatory incompetence rather than a reason for why central banks should set interest rates.

    Krugman’s next point was that while he “believes in free markets” he does so only up to a point, because the “markets must be managed”. Of course this implies that Krugman believes that he and his fellow neo-Keynesians know where to draw the line between the “free” part and the “managed” part. No doubt he has the equations to prove this too.

    As an example, he cites the occurrence of depressions: “Depressions are a bad thing for capitalism.” It is difficult to disagree with that statement, of course, but is this a valid line of argument? If we all agree that depressions are bad, then shouldn’t the discussion be about what causes them in the first place?

    Let’s return to the point made above: If excessive money growth (via repo and otherwise) was a key contributing factor to the crisis, and if the Fed was in charge of the money supply, then shouldn’t we consider the possibility that Fed policy caused or, at a minimum, contributed to the crisis? You can’t blame ‘free-markets’ for causing the crisis when the market in question is one of the most highly regulated and when the Federal Reserve looks the other way while repo and other money-equivalents grew exponentially in supply for years.[4]

    “We don’t need to work anymore. Just print money!”
    The discussion then turned to contemporary US debt dynamics. When asked just how much additional debt the US could safely accumulate, Krugman responded without hesitation, “We’re not anywhere close to a red line.” Given that the US total government debt to GDP ratio has now risen through 100% and continues to grow rapidly, that struck me as a breathtakingly audacious statement. Krugman did then qualify it, saying that debt/GDP in excess of 130% might be problematic.

    Well how on earth can he know that? How could anyone? And has it not occurred to him that, at the current rate of growth, the debt/GDP ratio could easily increase to 130% in just a few years’ time? Using his own words and figures, does 100% and rising really qualify as “not anywhere close to a red line”? Hardly.

    Rep. Paul was quick to pouce on Krugman’s assurance that we had nothing to fear from the continuing rise in debt. He pointed out that other countries are not obliged to hold dollar reserves in exchange for exporting goods and services to the US. They have the option to diversify into other currencies or into real assets, such as natural resources or even gold. If we are so certain that other countries will hold our dollars and finance our debt indefinitely at low interest rates, then, as Paul says, “We don’t need to work any more. Just print money”!

    While a humorous comment to be sure, at base it is deadly serious and, together with Krugman’s comment about the US not being “anywhere close to a red line”, represented the single most important topic of the debate. This is because, if the US finds it cannot finance itself at low rates, the entire discussion about whether or by how much to grow the debt becomes irrelevant, as it will be impossible.

    The US is more dependent on foreign financing than ever. Yet the US economy is on the weakest fundamental footing since the 1930s. It is also smaller as a share of global GDP than at any time since the early 20th century. It is thus understandable that many countries are already seeking alternatives to the dollar for international trade. The “red line” might be dangerously close. Indeed, I believe that it has already been crossed, unseen by the economic and policy mainstream, which also failed to see how signs of weakness in the US housing market were leading toward a huge financial crisis.

    Where Krugman Is RightTo understand where the (invisible) red line lies, we need consider the one area where Krugman is correct: There is simply no way the US economy can grow from here without expanding the money supply and adding debt. Either the Fed keeps printing and the government keeps spending, or the economy will contract. That is the sober, unpleasant reality of the current starting point. And with the debt burden so enormously large, if the economy contracts, debt servicing costs will become prohibitive and eventually there will be a general, economy-wide debt default, public and private.

    Now there is minimal support in Washington for a general default, so it is rather obvious that the other road is going to be taken. The Fed will continue to print and the government will run deficits. However, while the economy will continue to grow in nominal terms, if only weakly, there is little in these policies to make it grow much if at all in real terms. Indeed, if the federal government’s share of the economy continues to grow at the expense of the private sector, then beyond a certain point, real growth will become impossible, as the public sector must tax the private in order to grow. But if the US economy cannot grow organically, then it is going to have to find this growth somewhere else.

    How is that going to work? Well, Krugman points out in the debate how Great Britain managed to pay down its colossal debts in the decades following WWII. But he neglected to mention how this was done: First, Britain devalued the pound by 30% in 1949. But even that wasn’t enough. In 1967, the UK devalued the pound by another 14%. In the early 1970s, the pound declined further. In 1975, the IMF (read: US, Germany, Japan) provided the UK with emergency lending assistance.

    So yes, Great Britain managed to reduce its debts as a share of GDP, but this was done overwhelmingly through resort to currency devaluation, with a bit of foreign generosity and even capital controls thrown in to boot. Is this what Krugman is advocating for today? That the US, the issuer of the world’s pre-eminent reserve currency, should just devalue and, if necessary, seek a bailout from its foreign creditors, including such friends as China and Russia?

    The idea is too absurd to contemplate. There is just no way that a reserve currency can remain so when the issuer resorts to devaluation and seeks bail outs from its creditors. The dollar’s loss of reserve status is simply inevitable at this point.

    When financial markets begin to understand that something is inevitable, what was regarded as a long-term risk is apt to become a short-term risk in short order, with obvious implications for interest and exchange rates and asset valuations generally.

    Krugman’s red line already has been crossed. The question now is how long it takes for financial markets to notice. Naturally, those investors that notice sooner, rather than later, and take appropriate action, stand a chance to protect their wealth through the turbulent times ahead.

    To Invest or to Insure?
    Other factors equal, the greater the perceived uncertainty, the greater the demand for insurance relative to investment or, looked at slightly differently, the greater the preference for ‘defensive’ over ‘offensive’ investment styles. As more and more investors come to recognise that the red line described above has indeed already been crossed, the ‘price’ of insurance should rise relative to the ‘price’ of productive assets and defensive investment styles should outperform offensive.

    What appears straightforward at first glance is, however, anything but. Cash and government bonds are not a valid form of insurance in a world in which their supply is growing exponentially relative to the underlying productive potential of economies, including that of the US, the provider of the reserve currency and of benmark government bonds. In this world, insurance must take a different form.

    Consider the following: If you take out an insurance policy on your house in some nominal amount, but due to inflation that nominal amount declines relative to the value of your house, then you are going to need to take out more just to maintain the same level of real cover. Alternatively, if you take out insurance on your house, but when you call it in you discover the insurance company is insolvent and can’t pay out, then you overpaid for your insurance.

    The trick is to purchase insurance that protects against inflation on the one hand and default on the other. Real assets are the only providers of such insurance. Their prices may be volatile when denominated in fiat currency units, but if owned on an outright, unencumbered basis, they can neither be arbitrarily devalued, nor can they be defaulted on. They thus represent a form of financial insurance superior to that provided by the financial system itself, subject as it is to devaluation and default.

    Red-line investing really just comes down to finding ways to avoid the risks inherent in the current financial and monetary system. Income-generating assets are fine as long as their sources of income are not subject to material devaluation or default risk. Certain kinds of infrastructure come to mind. But beware when infrastructure is leveraged. A claim to a productive real asset may seem to provide a form of insurance, but if the company goes bankrupt, that asset is forfeit to the creditors. In that case, it is better to be a creditor than a shareholder.[5]

    In an important sense, money itself is credit. It represents a social claim on future consumption. It may bear no interest, as formal credit does, but it is a form of credit all the same. Today, central banks create fiat money as a liability on their balance sheet, holding assets against it, normally their government’s and other governments’ bonds.

    Real money, however, is not at the same time someone’s liability. It is not something that can be diluted or defaulted on. The world’s fiat currencies do not qualify as real money in this important sense. Precious metals do. They are relatively scarce, indeed finite, and are not subject to default.

    The gold bull market may look rather advanced to some. Silver has also done much catching up since 2009. But as with all prices, these must be evaluated in relative terms. Has the price of gold kept up with money supply growth? No. Has it kept up with the growth of government debt? No. Has it kept up with the declining US share of the global economy and accelerating shift away from the fiat dollar reserve standard? No. Has it kept up with the ongoing loss of trust and credibility in financial and monetary institutions? No. Has it kept up with the growing probability that the only way to restore trust and credibility in future will be for governments to re-link their currencies to gold explicity, in the form of a new global gold standard?

    That last bit may sound a bit far fetched to some, but when you begin to connect to dots, it becomes increasingly difficult to deny that the developments citied above do not, eventually, lead back to gold. That is the core contention of my new book, The Golden Revolution.


  2. Krugman is a king-sized asshole. We just passed debt to GDP of 101.5%, and we’re about to crash through another debt ceiling. It takes about $2.5 of deficit spending to get $1 of GDP growth. We’ve passed the collapse point, even his voodoo spending doesn’t work anymore.

    You can’t debate with this fucking douchebag, because he’s dead wrong, period. He’s like some insane preacher running around on the Titanic shouting “all’s well, nothing to worry about, have some more caviar”.

    The bottom line is he’s a fucking liberal, tax and spend, borrow and spend, just spend until you can’t spend anymore, and then spend again. He’s an enabler for Obama and the rest of the criminals in Washington to keep borrowing and giving out free shit. Government is the worst, anti-capitalistic enterprise there is. More Krugman and more government will have us all in FEMA camps before long, unless we can get him swinging from a lamppost.

  3. People like Krugman/Bernanke will never allow themselves to be blamed for anything.

    If we crash again and go into depression, Krugman would just say “I told you so”. He would then mumble some obscure college econ 101 formula, and the MSM would buy it.

    I am sorry to say that this is all very frustrating because we are up against forces that are almost too big for us to do anything about. The media has been able to portray people like Ron Paul as kooks.

    The establishment dems and repubs approve of Krugman/Bernanke. If they didnt, the fed would be gone by now.

  4. I can just imagine if Pharaoh had called on Krugman instead of Joseph what advise he would have gotten.

  5. Boomers who followed economics would recall that Keynesian economics fell into disrepute during the 1970’s since it had no explanation for stagflation. I ran into an old econ prof at a lecture about 10 years after college, then approached him afterwards to say hi and see if he remembered me. I told him I still had a book he had authored and he told me to throw it away as it was Keynesian. Somehow they managed to sneak back in the door in the ensuing decades.

  6. Ya know, Americans are funny.

    It seems that it is more important who is saying as opposed tho what they’re saying.

    Krugman is right, theoretically. Theoretically, continued deficit spending, along with not only one debt downgrade, but two, should put downward pressure on the dollar and upward pressure on interest rates. I don’t think anyone here would disagree with this hypothesis.

    And I won’t disagree with the fact that many articles here, and on other sites, state simply enough, that: Government spending has failed to produce jobs, confidence in the economy (outside of Wall Street), no has it resulted in a rebound in real estate.

    Theoretically, gargantuan stimulous from taxpayers was supposed increase economic activity.

    So What have we learned and why is Krugman right?

    The actions that the federal government, and the Federal Reserve took have proved the previous theories wrong.

    Increased spending has not devalued the dollar relative to other currencies (gold is another discussion), and has only, relatively, stabalized the economy.

    Therefore, further spending will not dramatically affect the value of the dollar – as the dollar is the safe haven the world is running to. Treasuries and US equities are enjoying a flight to safety, as Europe is in recession, China is slowing, and emerging markets are being whipsawed by currency carry trades, and oil (and food) price shocks.

    Additionally, further spending, through entitlements actually puts money in consumers hands. Consumers are 70% of the economy, and with that money are enabled to (try to) pick the winners, while the government continues to look for a way out of market interferrence.

    Honestly, I believe, as soon as the government start pulling away from monetary manipulation, entitlements fall, and austerity kicks in, the problem will not be easily papered over with more debt, but will spill into the streets, much like in Greece and Spain.

    Youth unemployment in Spain is 52%….Its going to be a long hot summer.

    Finally, if real economics ever rears its rational head, Krugmanite spending might actually force a revaluation of the dollar, and thus make US exports cheaper. A much better plan of bringing manufacturing back to the US than continued warfare…

    Debating issues can lead to compromise and resolution. Debating personalities leads to name calling, hyperbole, and isolationism.


    1. randy

      The USD is not strong. The currency you are comparing it to is worse. Krugman is WRONG. By printing and borrowing, our leaders guarantee a far worse result. There is no avoiding a painful depression. None of the actions taken so far have benefitted the average person. They have benefitted bankers, mega-corporations and politicians. Krugman doesn’t give a fuck about the poor or senior citizens. 0% interest rates destroy savers and seniors. He’s a douchebag and deserves to be called a douchebag.

  7. Listen, people have lived in homes without paying mortgages. That money goes into consumerism.

    More people on SSDI. That money goes into consumerism.

    Extended uemployment benefits. That money goes into consumerism.

    Bonuses at banks, insurance companies, and Wall Street. Some go into high end consumerism.

    Political campaign spending. Goes into consumerism.

    The argument made is that: US government spending allowed the above to happen and precluded a systemic crash.

    The argument unproven is if the US government (and the Fed) did’nt print (or don’t continue to print) is that the global financial system will stagnate and decline, at best, or entirely collapse.

    It seems to me to be simple logic.

    Krugman is right, even if you (or we) don’t like it.

    “We” got the bomb…

    1. Simple does describe your analysis.

      “precluded a systematic crash” – that’s a good one.

      Delayed and made the coming systematic crash worse than it needed to be.

      I point you to the Weimer Republic, Argentina and Zimbabwe as countries that thought they precluded a systematic crash by printing.

      Your analysis is on par with a man who jumps off a 20 story building and someone asks him how it’s going as he passes the 6th floor and he responds – great so far.

      Some people just don’t want to see what they don’t want to see.

      Krugman is and always will be an intellectually dishonest douchebag supreme. Hanging your hat on his analysis is on par with believing in the Easter Bunny.

  8. Keynesian economics is an experiment that is failing badly and will result in a far worse depression than if nothing at all was done except let broken institutions fail.

    My worst fear is the next experiment will look much like Marxism.


  9. If we stopped printing money the economy would begin to heal. Debt is toxic, it’s like an alcoholic, you have to stop drinking to sober up. The process would be very painful as is a hangover; social unrest from the free shit army would be an immediate concern. The printing will stop one day that is for sure. The Black Swan of Cairo makes the argument the longer it goes on the more painful and dangerous the process will be.

  10. America is not Zimbabwe, Weimer, or Argentina.

    America has the dollar. No other country’s fiat currency can compete. Even a weak American economy is better than Japan, or Europe, Brazil, Russia, China, etc.

    America, and its dollar are exceptional also due to the fact that you guys have the biggest, baddest, bombs and bullets.

    Who cares if the dollar is toilet paper, its three ply toilet paper compared to anything else.

    And that is the entire point.

    With central banks all over the world printing money, why shouldn’t you Americans print as much as you need.

    Finally, after waiting decades, the West finds the “Lesuire Society”…

    If the government keeps giving out free money, why should anybody fight the government?

    peace…and unlimited money.

  11. “America is not Zimbabwe, Weimer, or Argentina.” America is the Roman Empire, and we all know what happened to it.

  12. Its like raising the dept on your credit card over and over.its going to bite you in the ass eventually.

  13. randy

    Are you actually serious about the strength of the USD or have you taken some serious drugs?


    I can’t understand why the price of gold keeps going up. Can you explain it to us randy?


  14. Thanx sense, a good read.

    Notwithstanding, I stick with my hypothesis.

    America may be Rome. Just as Britain was Rome

    Collapses of empires are generally due to expansional imperialism.

    Portugal, Spain, Russia, UK, America. All, at one time or another, imperial colonialists.

    Britain used ‘tally sticks’ as currency as its colonies expanded, particularly in the east expansion. Little wooden sticks, used as currency for 726 years…

    there is no doubt in my mind that America’s imperial expansionism has reached its zenith. It, like other world powers, is struglling to pay for its continued expansion and colonialism. It will have to fall back, or lash out. I believe, considering curent consensus that war is how the Americans got out of the depression, that (more) war is definately on the horizon.

    Regardless, a monetary crash (or fiscal wall) did not destroy Britain, Russia, Portugal, Spain, etc. It did make them a relatively smaller player to other large economies, but their societies did not break down into ungovernable anarchies, and main street did not move towards using silver and gold as money (in a significant way).

    The only thing that throws the US into the dark ages (and the world) is a systemic crisis that wipes out the computer digits that now represent wealth and future wealth (ei-pensions).

    Currencies are one thing. You can wipe out every piece of fiat paper printed, but that only represents a tiny portion of ‘wealth’ that is recorded and transacted. The real wealth is in computerized digits that are ‘assigned’ a nationality.

    That assignation is ethereally fungible.

    As long as governments continue to support our accepted system of banking, the only thing we have to worry about is inflation. If government removes that support, pensions and insurance policies may not be worth the electricity used to store the digits.

    Finally, hyperinflation is easily take place in a deflationary environment.

    As the US (and everyone else) continues to counterfeit exponentially, changing accounting rules, and interferreing in the market with direct intervention, inflation of fiat currency is absolutely to be expected.

    But! It will be inflation in anything that uses oil, silver, or gold, whose ‘prices’ are and have risen relative to US (ANY) currency, revealing the counterfeiting. So anything main street USES or CONSUMES or IMPORTS shoud go up in price.

    The inflationary condition is directly related to the importation of goods. There is a school of thought that maintains that inflation is good for the economy as it reduces the price of exported goods, which should, all things being equal, work towards the repatriation of jobs to the country that can devalue its currency the most.

    The Powers That Be know what happened to Rome, Argentina, USSR, Zimbabwe, and Weimar.

    They also know what the reserve currency is and who has the most bullets and biggest bombs…

    More free money please, I gotta pay my hydro bill…


  15. You had a hypothesis?

    Please enlighten us as to what that hypothesis was other than saying Paul Krugman is right, which was obliterated.

    Volume of words does not win the debate on TBP. Facts win the debate. You are sorely lacking in that area. Maybe it’s a Canadian thing.

  16. The volume of words is my attempt at countering what I believe will be your argument against my argument will be…sorry. I didn’t know you were leaning towards a more twitter format…

    My hypothesis was that the Federal Reseve and the American government can continue to print money far beyond what you believe is the breaking point because they have the most bullets and the biggest bombs.

    When everyone is conducting the same activity (printing money) than the one with the biggest stick wins.

    Here’s a fact Britain became a global empire using sticks of wood as currency.

    Here’s another I’ve used facts. It’s more fun to debate if people stick to the issues, as opposed to trying to cut down the person speaking (at least here in Canada).

    One more fact: Participation in conversations with different views and perspectives leads to conflicts and resolutions. Even if that resolution is to agree to disagree.

    Supressing different views lead to sheep, and tyranny.

    We’re on the same side here, we just have different views.

    How bout a little more respectfulness, if ya don’t mind. Its the Canadian thing to do.

  17. If you are looking for respectfulness, you came to the wrong site.

    Your idea of facts and mine are far different. The two charts I posted disprove your entire bullshit storyline about the dollar.

    Bombs will not keep a currency from collapsing. Rome had a strong military as they debased their currency and collapsed from within.

    The Soviet Union could have destroyed the United States with the push of a button and they collapsed in a matter of weeks. Bombs do not matter.

    If you continue to post drivel, I will obliterate you. The only rule on TBP is there are no rules.

  18. Rome is still there, so is Russia…

    The fact is, the US can print far beyond Rome or Russia…

    Your WWF antagonism aside, Krugman is right.

  19. Wow. You put me in my place with that rebuttal.

    Is Rome still an empire?

    Is the Soviet Union an empire?

    You made childish arguments about empires and bombs. I squashed your contention like a bug with facts.

    Krugman is a douchebag and Canadians don’t know how to pronounce their Ohs.

    My WWF smackdown of your sorry ass is complete.

  20. there is no doubt in my mind that America’s imperial expansionism has reached its zenith. It, like other world powers, is struglling to pay for its continued expansion and colonialism. It will have to fall back, or lash out. I believe, considering curent consensus that war is how the Americans got out of the depression, that (more) war is definately on the horizon. -rqndy

    You say our dollar is strong but then go on to say expansion has created lots of debt

    Then you say that Krugman is right, we need more debt.

    America needs to fall back, you write, or lash out. You seem to be taking both sides of the argument randy to come to the conclusion Krugman is right, even if we/you dont agree with Krugman.

    The broken wndow theory, that of wars solve depressions, has been debunked, we had wars going in Afghanistan and in Iraq and STILL the great recession began in 2008 and we are lurching back into a recession.

  21. Randy

    You claim that printing/counterfeiting a currency doesn’t destroy that value of a currency, and then to prove your point you point out the use of ‘tally sticks” by Britain? Your logic is what is called “ASS BACKWARDS”.
    The reason the Tally Stick system worked so well was for the single reason it was IMPOSSIBLE TO CONTERFEIT.

  22. Another issue, one which is a good part of this funk we are in is trust;

    The Chicago Booth/Kellogg School Financial Trust Index published yesterday shows that only 22% of Americans trust the nation’s financial system.

    Robert Shiller said Monday:

    Our whole economy has been affected by variations in confidence. Central banks are sort of trusted, but the actions they have often affect people’s confidence by appearance rather than substance. We’re not in the most trusting mood now.”

    Americans, mostly, dont trust government, wall street or the media

    After a 50-year decline, just 14 percent of respondents in a 2011 Gallup Poll said that the federal government could be trusted “a great deal

    As the Economist reported in January, trust in institutions is plunging worldwide:

    The latest annual “trust barometer” published by Edelman, a PR firm, on January 24th [finds that] overall trust has declined in the leaders of the four main categories of organization scrutinized—government, business, non-governmental organizations and the media. Of the 50 or so countries examined, 11, nearly twice as many as last year, are now judged “sceptical”, with less than 50% of those polled saying they trusted these institutions. Trust in Japanese institutions plunged to 34%, from 51% in 2011, not surprising given the handling by leaders of the Tsunami and its aftermath. But the collapse in trust was even more striking in Brazil, the country in which trust was greatest in 2011, at 80%, but now, following a series of corruption scandals, has slipped to 51% (admittedly, still above America and Britain, among others).

    This headline slump in trust is due, above all, to the public losing faith in political leaders. In 2011, across all countries, Edelman found that 52% of those polled trusted government; this year, it was only 43%. Government is now trusted less even than the media …. Trust in business fell slightly, from 56% to 53%, as did trust in NGOs, which still remain the most trusted type of institution, at 58%, down from 61% in 2011. As in previous years, the barometer is based on a poll of what Edelman calls “informed people”, which typically means professional and well-educated, though this year for the first time the views of the informed were benchmarked against a poll of the public as a whole. For each institution, the broader public was even less trusting than the informed, with government trusted by 38%, business 47%, NGOs 50% and the media 46%.


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