QE2: Disaster in the Making

This article in the Asia Times does a good job of explaining why QE2 won't work and the great damage that the Bernanke led Fed is doing to savers, while rewarding speculators, who got us into this mess in the first place. Way to go, Ben! Nice job ruining the American economy and destroying the thriftiest of us. It's a piece that Paul Krugman should read, but won't; not that it would do any good for him anyway. Mr. "Print Money as fast as possible" Krugman seems to be blind to the demonstration that his recommended policies have already failed.

From the article:

It would be unfair to claim that Bernanke's policy did not make some of us happy. As before, his policy has been most propitious for speculation. It has been almost a free lunch for borrowers and speculators. Hedge funds reported their biggest gains of the year in September 2010. Managers assumed more risk in the context of abundant cheap liquidity and more quantitative easing in sight.

Paul Krugman (Even More) Unhinged

The beauty of being a Keynesian is that one can never be proven wrong. Paul Krugman explains why the real problem with the economy is that the government is not spending enough and should spend, spend, spend because only the government can save us from disaster. What happens if the government listens to Krugman and we travel even further down The Road to Serfdom while the economy implodes even further? If you are Krugman, the obvious answer is that you didn't spend nearly enough. "If only you would have listened to my wisdom," he will say, "we could have been saved."

Krugman's theory has been tried before. In France. Read the (free) ebook Fiat Money Inflation in France to see where that ended. Government stimulus at first appeared to work great (sound familiar) then, like gasoline on a fire the effect died away. What to do? More stimulus! This also appeared to work (only for a shorter amount of time), then, guess what, no more gasoline. More stimulus! Even less effective. On and on it went until the government collapsed and Paul Krugman - oops, I mean William Law, author of the grand inflation - was run out of France. This is where Krugman's theories would lead us.

Of course, since Mr. Krugman has a nice house on a Caribbean island and spends his days drinking Mai Tai's on the beach while telling us how to destroy ourselves, he probably will not mind being run out of the country.

Paul Krugman: We Have China Over a Barrel

It never ceases to amaze me that some economists advocate actions that appear to be insanity in action. Paul Krugman says that we—biggest debtor nation in the world—have China—biggest creditor nation in the world—over a barrel and that we can force China to bend to our will on the value of the yuan. Knowing little about economics does this seem rational to you? Me neither. In this commentary Brady Willet takes Krugman to task because his tune has changed (with the change of administrations maybe? with too much Jamaican rum? after all he does live on one of the Caribbean islands, no doubt he feels our pain).

Krugman's solution if China starts dumping treasuries (and thereby sends interest rates skyrocketing)? Fire up the printing presses (even more) Fed!

Insanity.

Print or Tax

For winning the Nobel Prize in economist, we find Paul Krugman, um, not very smart when it comes to economics. His answer to the disaster that Bush's economic and regulatory policies have put us in is for the government to spend more money on infrastructure. In the process he demonstrates that he has not read Henry Hazlitt's book Economics in One Lesson. Krugman makes the fatal error of not considering anything other than the immediate issue when he studies an economic plan. He appears to have given no thought, and has absolutely no plan for what to do with 1.2 trillion dollar deficits, other than to say, "we will worry about that later."

Kevin Hassett in Bloomberg worries about it now, and rightfully so. He says that the government will have only two options as an end game: print or tax. If we print we will end up like the Weimar Republic in Germany, with hyper-inflation. How about if we tax?

While advocates of Keynesian-style stimulus [Paul Krugman is one] are correct that this economy is terrible enough to warrant dramatic action, it is hard to understand how such a fiscal path might help. So what if second-quarter gross domestic product blips up a little bit? What business is going to expand its operations with the mother of all tax hikes peeking over the horizon? If government spending provided such a wonderful boost to the economy, we would be in Nirvana already.