Krugman: Don't Give Up On Rescue That's Pulled Us Few Inches Back From Edge Of Abyss

New York Times:

The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it's déjà vu all over again - literally.

Read the whole story: New York Times

Comments

[illusionpainter]

It's nice to hear someone else say it out loud Paul. Keith Olberman, Rachael Maddow, and Ed Shultz are some of the other people I have heard say it out loud. Those people at Fixed News are inciting domestic terrorism along with the bouncing Rush.....

[outnow]

Krugman apparently believes that the economy has not collapsed, and, therefore, it's time to make credit more available for the next bubble. Someone posted Krugman's comments back in 2002 about the housing bubble replacing the dot.com bubble. Thinking bubble-to-bubble may prevent a disaster now but create a major collapse down the road. If this is true, Americans are in for major readjustments in their expected standard of living and retairment plans. Maybe Krugman sees light at the end of the tunnel as far as immediate collapse is concerned, as in a major depression, but that there is hope out there even without some austerity program. Inflation could be used with monetizing the debt but I trust no bankers to pull us out without monetary reform and realistic fiscal spending. More tax enforcement will be used against multuinationals who evade or avoid taxes. Disclosure of all their returns will determine in which countries, if any, they even pay taxes!

[confidance government]

Also, why would anyone listen to the same man that gave this advice, "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble" --Krugman (2002)

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

I think that his previous lack of foresigh gives adaquate reason to discard his observations and advice regarding the current financial situation, especially he gave the exact advice which led to the current crisis.

[jekyll]

You are absolutely right confidence government. Krugman is only a "Big Government" cheerleader who NEVER saw this crisis coming. Funny when there were hundreds of Austrian economists who were sounding the alarm years ago. I have NO faith in anything that Krugman says. His history of the Great Depression is complete fallacy! He simply needs to go away. It is a shame that our leaders even consider his advice. People need to understand that this is not a political issue....because I agree that Bush, Greenspan, and Pualson are clowns as well. But Obama, Bernanke and Geithner are listening to the same economic hacks!!

[confidance government]

They should be reading up on Mises, Rothhbard, Hayek, etc.

[confidance government]

The main reason that whatever Krugman says doesn't matter anymore is that he can't wrap his head around the fact that the US dollar is being replaced as the reserve currency standard. Its status as a reserve currency is the only thing that has been propping it up for so long.

Reserve currency with talks between Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. The USA asked to attend as an observer, they said no.

http://www.globalresearch.ca/index.php?context=va&aid=13969

[levibatgirl]

The wingers and tea baggers think the way to handle the catastrophic meltdown that w handed us is to let it happen.

They're and always have been in denial in favor of their cult talking points.

[confidance government]

Like letting Krugman handle it will produce better results, see my comments posted above. Krugman's advice will lead to either economic collapse or another bubble.

[ddanimal]

I tend to disagree with Krugman. All this debt-financed spending is not creating any sort fo sustainable, prosperous recovery. It is adding substantially to the problem of too much debt, however. And wow does the US have a scary problem with debt: total public+private sector debt is 350% of GDP. It was 175% in 1929.

I think that a depression and massive debt default is the only way to clean out the system and get sustainable growth again. Anything else is just kicking the can down the road a little.

“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.” Ludwig von Mises

[themodernleader]

Krugman argues that we must stay the course or risk a deeper recession. He doesn't question an illogical policy of bailing out all the big banks when the economic size justifies a much smaller number. He follows the peculiar doctrine that assets--plant, equipment, knowledge and skill--derive from cranking up the printing press. FDR created jobs that added value to our economy from 1932 to the end of 1939. In 1939 there were 9 million people employed in public works.
By our own government statistics we have 16 plus million citizens unemployed. FDR would have not let these rusticating millions slowly decline and lose. He would have spent the trillions {obligated for our corrupt banks] on the creation of a massive public works program of last resort. He recognized that wealth derives from labor, not paper shuffling while filling the pockets of common, crooked bankers. He knew that money is a lubricant for commerce. Money (or gold or silver) is not wealth Commerce and manufacturing creates wealth.
Our country is filled with renown economists who see half a picture through a glass darkly. And our owned leaders stand idlely by thinking how much wealth they can accumulate by retirement. The unemployed and little guys are on their own.

[roger54]

Take back the trillions of $$$ given to the banks, who just sit on it and make it totally ineffective then start government incentive to create realistic industries that give employment and generate real productive income, some of which would hopefully be from exports.

Every other country, especially China and most of Europe have goverment incentives to protect it's industries. No matter what you call it it's a form of protectionism and its inevitable. We should stop being naive and take care of our own house. The only ones who win if we don't are the multinational corporations who don't care where they get their hand out.

good articles for a slow news day: http://www.bit.ly/12NCJR/12NCJR>Econ & Finance Articles Updated Daily

[ClarcKing]

Mr. Krugman did not place enough emphasis on the population's physical economy: employment/production factors in his latest assessment. If unemployment is not arrested and production continues to contract, what is left of our economy? This situation threatens the survival of the population. Stop serving the predators and clap-trap ideologies. The bailouts and or stimulus plans are not working because the physical factors, the source of wealth and value, of the population's economy are not being treated. Stop the bailouts: re-inflating the monetary bubble has continued speculation, usury, etc. Terminate the monetary financial system. Employment, housing, medical services, education, food, water, and energy must be treated simultaneously to successfully create recovery. Create the U.S. National Bank. Credits and currency will be issued into the population's economy. Stop the unemployment or recovery is not possible. Stop the foreclosures. Scrap the HMO system Expand Social Security and Medicaid: go back to the Hill Burton designed General Hospital system. Industrial capacity can be re-directed to the construction of 100 nuclear generation and distribution systems; water harvesting systems, mass transit systems etc.

[beaupritchard]

He who fights against monsters should see to it that he does not become a monster in the process as ... when you stare persistently into an abyss, the abyss also stares into you.

Nietzsche

(too deep even for me)

[unwashedmasses]

Excellent article. We need to give the OBAMA plan time.

[GerryS]

Paul,

Two weeks ago you were quoted as saying," We are far, far away from a meaningful recovery."

Did little Timmy share some kool aid with you?

[AtheistUS]

It seems that for you "a few inches back from edge of abyss" is equivalent to "a meaningful recovery".

[dnpvd51]

WWII was a disaster.

The productive capacity of Japan and Europe was demolished.

And Krugman talks about WWII being some kind of economic benefit.

The guy is a fool.

[AtheistUS]

You are way off topic. For US economy WWII was a stimulator which helped enormously.

It is fault of population and politicians and greedy private business that the country could not organize itself for public jobs and a reasonable compromise between labor and business UNTIL there was a necessity to produce incredible amounts of weapons, machinery, ammunition... - amounts that few believed would be possible.

Please read more about history of that time.

[confidance government]

The net effect to society (global) was a loss, and was 400,000 American lives worth a stimulus?

[barkrudedog69]

"Stay the Course" "Resolve" this is great. it sounds like Bush more and more.

[Social Construct]

I've given up trying to keep up with the vast amounts of economics knowledge getting tossed around by folks a heck of a lot smarter than I am on the subject, and I usually defer to Mr. Krugman's points of view. However, there is one thing that is scraping at the back of my mind; can a single thing, say the price of gas, disrupt whatever plan we're on? It seems to me that $4.00/gal. gas was sort of the lever that knocked the poised boulder off the ledge. It looks as if we're going to see $4.00/gal. gas again, for reasons that I can't fathom but, nonetheless, will see again.
Number 1, someone please explain why gas prices are going up to that terrible level. Number 2, what will gas prices do to what we've seen as some kind of easing of the recession?

[amdan]

Would you please let me know, when you find out?

Market manipulation you say? Nooooo how dare you ...;)

[Rich Hosking]

My understanding is that one of the first things Bush did in 2001 is remove restrictions on oil speculation, allowing non-end users to bid on oil. This was the precondition that allowed the insane $120 swing in oil prices last year.
The same thing is happenign now becuase of stock market weakness. Investors are swamping oil futures, driving up the price and making them money at the public's expense.

This rule should be undone. It will greatly delay "recovery" is gas reaches around $4.00 a gallon in the US.

[dutch163]

as Rich said..."oil speculation"

there are so many evils to be undone

[ddanimal]

Gas/oil prices are certainly NOT going up because of usage demand, or scarcity. Inventories are way way up, and production is up while consumoption is down That leaves only one possibility: investment demand.

Who is investing? Traders who believe the green shoots nonsense, and banks. Banks have large amounts of liquidity due to fed actions, but they dont want to make new loans. Loans are risky right now, and they have tightened lending standards. So they are speculating in the commodities market. I think they are doing this at the feds urging. Why? Because commoditiy price increases counters deflation, and increases asset prices, thereby making new lending safer for the banks. It also promotes the psychology of a recovery and makes everyone think that things are on the mead. The problem is that things are NOT getting better, so all we have is a bizarre commodities rally that is not supported by consumption. When it collapses, its going to crash the stock marekt to new lows.