Paul Krugman’s latest book End This Depression Now! is a master work of career self-immolation, and we should all be thankful. When a man who has previously been taken seriously sinks this low by his own hand, you have to feel that it’s Christmas early.
We all know by now that throughout the great orgy of federal debt pile-up that began under George Bush ($10 trillion deficit in 2008) and continued with malicious abandon by Barack Hussein Obama ($16 trillion and counting, in only three years!) Paul Krugman, former economist, has argued passionately against fiscal austerity and in favor of more spending.
This alone disqualifies him from ever being considered more than a clown from here on in — a court jester to amuse us before we turn our attention to adult things. But his latest book is his self-coup de grace.
Matthew Bishop, New York Bureau chief of the Economist, walked the tightrope of reviewing the book for the New York Times (and nearly fell off as he oscillated between the required flattery of the subject and his own better sense of economics) and gave us the highlights, starting with the obvious:
…he offers the classic Keynesian remedy of the government making up for the lack of private spending by splashing the cash around itself. Even now, Krugman argues, full employment could be restored to the United States in less than two years, given the political will to spend a lot of money. <source>
And what about all of the resulting debt?
Krugman suggests cavalierly that any extra government borrowing probably “won’t have to be paid off quickly, or indeed at all.”
There you have it: classic Liberal insanity in full display. It is insane because it acts as if the government has not spent a lot of money in the last four years. Does anyone actually believe this to be true? Krugman does, for one: he would say that Obama has spent only a little and not nearly enough. It is also insane because it is full-on fantasy world: let’s borrow into oblivion because we’ll never have to pay back the lenders. If you own U.S. Treasuries, how does that statement make you feel? I guess you never knew that your loan to the government was really a charitable contribution.
But here is where Krugman ends his career: he argues in favor of inflation as a general remedy to all of our ills, because, you see, it will inflate away all those messy debt obligations.
One of the advantages of inflation cited by Krugman is that it reduces the real value of all that depression-inducing debt, like the mortgages people use to buy homes. On today’s current low inflation trend, Krugman anticipates prices being 8 percent higher in 2017 than today. But, he says, “if we could manage 4 or 5 percent inflation over that stretch, so that prices were 25 percent higher, the real value of mortgage debt would be substantially lower than it looks on current prospect — and the economy would therefore be substantially farther along the road to sustained recovery.”
If the malignancy of what he is saying is not completely obvious, let me help by bringing back a great article (seriously) written by another Liberal, Michael Kinsley, which I reviewed in my essay Tip Our Hats to Michael Kinsley?
Here is Kinsley on the nefarious idea of having the federal government destroy the value of our currency, and therefore all of America’s stored wealth — yours, mine, and eveyone’s — through inflation:
Compared with raising taxes or cutting spending, just letting inflation do the dirty work sounds easy. It will be a terrible temptation, and Obama’s historic reputation (not to mention the welfare of the nation) will depend on whether he succumbs.
Plain language is refreshing: letting inflation do the dirty work, except that what Kinsley (and nearly everyone) knows is that inflation is the assassin that kills its client as well as its target. Bishop invokes the same theme by acknowledging that Krugman’s siren song can be quite intoxicating to politicians who lack the iron will and patriotism of Scott Walker, governor of Wisconsin:
…politicians will conclude that borrowing and inflating the debt away is a lot more palatable than cutting public spending and/or raising taxes.
After 20 column inches of quasi-support for Krugman, Bishop finally starts to save himself from guilt by association with some bits of lucidity, mainly by reminding the reader of that adult concept called consequences (yes, Paul, actions we take do have consequences):
Inflation imposes real costs, for instance on retired baby boomers reliant on fixed dollar annuities and on foreign investors in government bonds. How those bondholders would respond is anyone’s guess, though they might shift away from the dollar or euro to other currencies or to alternatives like gold. Inflation would certainly increase the risk of the dollar losing its status as the world’s reserve currency, with potentially serious political consequences like competitive devaluations, accusations of currency manipulation, trade wars and maybe worse…
Even here, Bishop treads more lightly than he should have: inflation is the most cruel tax of all taxes because it eats away the fruits of our labor stretching all the way back to the first dollars we each have ever earned: all savings get eaten away (not just baby-boomer savings, Mr. Bishop) and our years of hard work are rendered worthless by government bureaucrats who took the easy way out, which is to say the way that Krugman is urging and pleading them to take.
What Kinsley identified as an admittedly paranoid vision (The Fed and Obama may conspire to inflate our way out of the debt) has become an overt, blow-the-trumpet policy recommendation by Paul Krugman, former economist and professional clown.
At this point, Paul, you have consigned yourself to the category of laughingstock, and your trumpet-playing days are over. From now on, you get to use a kazoo.
Entertain us, clown.