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Krugman: If We Halt Policy That Causes Pain, The Situation Will Really Hurt

Posted on | June 28, 2010 | 20 Comments

by Smitty (via Calculated Risk)

I realize that Paul Krugman is to the Ivory Tower what my Congresstool is to the Administration: an unattractive cheerleader sans pom-poms. But Krugman appears either to speak another language that merely looks like English, or be completely toys in the attic.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

If you look at a generator, the real work occurs at the rotor/stator level. There is a governor, but what does it do? It governs the rotor to deliver the product at a desired frequency. If you ask an engineer how he’s going to tweak the governor so that the governor can produce more electricity, he’s going to look at you like you’re totally new, or an Eclownomist.
Say the rotor is rotating too slowly. The governor needs to detect that, and open the throttle on the engine which turns the rotor. Engine output increases, rotor speeds up, governor eases off the throttle. This is a closed-loop system. Useful systems are usually closed-loop, because that implies stability.
What is dawning upon citizens around the world, who are neither stupid nor instinctively political, is that the world is governed by thieves and morons that are stupid and all too political. No good can come of this open loop system of debt and more debt. Like an idiot savant dope fiend on a bender, the best result of Krugmanism might be a slightly lengthened euphoria before an even more devastating crash.
Not everyone is keen on these delaying tactics, Mr. Krugman. One of the hallmarks of maturity is a desire to front-load the bad news. We all know it will be bad. We knew the promises of the politicians were bogus at campaign-time.  The governor has swamped the generator in debt.  Things have to change, or the system will overheat, and the smoke will come out of the windings.  We know that the depth and severity of the brownout will be decreased if it comes sooner rather than later.
We all realize that you’re basically a paid court jester, Mr. Krugman. You write what you’re paid to write. The notion of liberty in general, and economic freedom in particular, might strike you as far too egalitarian for your world. You really believe that the governor makes the juice.
But people are not generators, Mr. Krugman, and the governor is a part of the load, not the driver.
Maybe studying a bit of engineering would disabuse you of your foolishness.

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Category: Economics

Comments

  • Fred Beloit

    Excellent, Smitty. I have often berated Memeorandum in comments at various blogs for treating every word Krugman writes as if it were burning bush matter. At least Memeorandum placed your rebuttal under the Krugman piece. Perhaps there is hope for the big M after all.

  • Fred Beloit

    Excellent, Smitty. I have often berated Memeorandum in comments at various blogs for treating every word Krugman writes as if it were burning bush matter. At least Memeorandum placed your rebuttal under the Krugman piece. Perhaps there is hope for the big M after all.

  • yo

    In 06 they were saying that “real estate in some cities may be a little overheated, but overall it is fundamentally sound.”

    In 2010 they’re saying “it’s not too late, but if we need to do something about this debt problem soon.”

    It is too late. There will eventually be a huge implosion in the debt markets.

  • yo

    In 06 they were saying that “real estate in some cities may be a little overheated, but overall it is fundamentally sound.”

    In 2010 they’re saying “it’s not too late, but if we need to do something about this debt problem soon.”

    It is too late. There will eventually be a huge implosion in the debt markets.

  • http://washingtonrebel.typepad.com/washington_rebel/ Irish Cicero

    Smitty, that’s brilliant. I’ve sent the link on to allies, relatives, friends, countryman.

    And actually posted you at Washington Reb.

    http://washingtonrebel.typepad.com/washington_rebel/2010/06/a-quote-to-start-your-week.html

  • http://washingtonrebel.typepad.com/washington_rebel/ Irish Cicero

    Smitty, that’s brilliant. I’ve sent the link on to allies, relatives, friends, countryman.

    And actually posted you at Washington Reb.

    http://washingtonrebel.typepad.com/washington_rebel/2010/06/a-quote-to-start-your-week.html

  • Adobe Walls

    “Krugman Now Laughingstock on Two Continents”. According to Tim Cavanaugh at Reason Magazine.
    http://www.realclearpolitics.com/2010/06/27/krugman_now_laughingstock_on_two_continents_236653.html

  • Adobe Walls

    “Krugman Now Laughingstock on Two Continents”. According to Tim Cavanaugh at Reason Magazine.
    http://www.realclearpolitics.com/2010/06/27/krugman_now_laughingstock_on_two_continents_236653.html

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  • http://adriennescatholiccorner.blogspot.com/ Adrienne

    I awarded you the “quote of the day”…

  • http://adriennescatholiccorner.blogspot.com/ Adrienne

    I awarded you the “quote of the day”…

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  • Rob

    Who would win in a fight between Thomas Sowell and Paul Krugman to the death?

  • Rob

    Who would win in a fight between Thomas Sowell and Paul Krugman to the death?

  • Rob

    I’m going with ‘Fightin Tom’!

  • Rob

    I’m going with ‘Fightin Tom’!

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  • http://theothermccain.com smitty

    @Rob,
    Intellectually, Krugman appears to have died a while back.
    So it boils down to a question of Sowell’s anti-zombie prowess.
    As someone who served in the USMC in Korea, I’m betting that Sowell knows what to do against commies and zombies.

  • http://theothermccain.com smitty

    @Rob,
    Intellectually, Krugman appears to have died a while back.
    So it boils down to a question of Sowell’s anti-zombie prowess.
    As someone who served in the USMC in Korea, I’m betting that Sowell knows what to do against commies and zombies.

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