Paul Krugman, a die-hard Keynesian who recently proposed faking an invasion of space aliens to stimulate the economy, is now all of a sudden concerned about the quality of economic spending.
The Long Haul
On November 11, Paul Krugman, suddenly started worrying about The Long Haul of deficit spending.
“It’s at least possible that bigger budget deficits will, if anything, strengthen the economy briefly. America has a vast stock of reputational capital, built up over generations; even Trump will take some time to squander it,” said Krugman.
Backing up to his previous post, What Happened on Election Day, Krugman offers this wealth of information on the stock market:
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.
Futures Faster Than Krugman’s Brain
Krugman took that back right away, but obviously not before posting the above article.
The futures reversed faster than his brain.
More Worries About the Long Haul
On November 14, in Trump Slump Coming? Krugman was again worried about the long haul.
It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.
In fact, don’t be surprised if economic growth actually accelerates for a couple of years.
There is always a disconnect between what is good for society, or even the economy, in the long run, and what is good for economic performance over the next few quarters.
Folly of Prudence
On August 23, 2016, Paul Krugman was worried about The Folly of Prudence.
“The IMF, in the name of prudence, is still — still! — pushing for fiscal austerity. We’ve been living with low-rate, depression economics for 8 years now — and key players are still acting as if they’ve learned nothing,” says Krugman.
Space Aliens to the Rescue
In a 2011 CNN interview video Paul Krugman proposed Space Aliens as the solution.
Direct link: https://youtu.be/nhMAV9VLvHA
Please play that in entirety to catch the spirit of it all. Here are key excerpts:
Krugman: “It’s very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. If we discovered that space aliens were planning to attack, and we needed a massive buildup to counter the space alien threat, and inflation and budget consideration took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops we made a mistake … There was a Twilight Zone episode like this in which scientists faked an alien threat in order to produce world peace. This time we need to ignore it to get some fiscal stimulus.”
Apparently, if we fake a space alien threat, we can revive the economy. Damn the consequences of wasting money in the short haul.
Abenomics and the Single Arrow
On August 15, 2016, in Abenomics and the Single Arrow, Paul Krugman was whining for more fiscal stimulus in Japan.
Paul Krugman Should Go Back to Fifth Grade
On August 16, 2016, I wrote a rebuttal to his Abenomics theory in Krugman’s Arrow Theory Misses Target by Light Years.
Economist Paul Krugman is whining for more fiscal stimulus, his favorite pastime by far. Krugman’s target this time is Japan.
Bubble Blowing Beluga Whales
With full employment, roads paved and repaved to nowhere, and bubble blowing beluga whales, just what the hell is Japan supposed to waste money on?
Curiously, Krugman says it doesn’t matter. He once proposed a fake aliens from outer space scare as the solution to stimulate the economy.
But roads and bridges and bubble blowing blowing beluga whales are surely better than fabricating space aliens or paying people to dig ditches and others to fill them up again.
The problem is, it’s hard arguing with economic illiterates like Krugman. He can (and will) say “spending wasn’t enough”.
One can never prove him wrong. The implosion of Japan would not do it. His built-in excuse would be Japan did too little, too late.
Economists in Need of Remedial Education
Just once I would like Krugman to address in his model what happens when the stimulus stops. He cannot and he won’t because he has no answer.
The average 5th grader understands it’s absurd to pay money for something guaranteed to be useless, but the average Keynesian economist doesn’t.
Krugman would do himself a favor if he threw away what he thinks he knows about economics and went back for a nice 5th grade education.
I am pleased to report we have progress. Krugman’s mind has advanced to the level of a 5th grader. He is now worried about getting something, rather than nothing, for tax dollars.
Unfortunately, this improvement is temporary. It will only last as long as he is whining about spending by Trump. Had Hillary won, he would have seen the long term merits of fighting imaginary space aliens.
I do not favor wasting money on space aliens, wars, or unneeded infrastructure projects. It now takes more than a dollar of spending to get a dollar of GDP.
Interest on the debt for past wasted useless spending is one reason GDP cannot gain traction. Fed inflationary policies (liked by Krugman), is another.
Wasteful spending is wasteful spending. Period. I did not favor it under Bush or Obama, and I do not favor it now.
Mike “Mish” Shedlock