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Ear to the Ground

Paul Krugman Is Freaking Us Out

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Posted on Jul 11, 2010
Flickr / Sister72 (CC-BY)

He’s a one-man downer, but mainly because he’s smart, credible and pulls no punches. In his latest New York Times column, the Nobel Prize winner warns that the Federal Reserve isn’t taking a negative enough view of the economy—with potentially dire consequences. Happy Monday to you, too, Paul.

Paul Krugman in The New York Times:

After all, Fed officials, like most observers, have a fairly grim view of the economy’s prospects. Not grim enough, in my view: Fed presidents, who make forecasts every time the committee that sets interest rates meets, aren’t taking the trend toward deflation sufficiently seriously. Nonetheless, even their projections show high unemployment and below-target inflation persisting at least through late 2012.

So why not try to do something about it? The closest thing I’ve seen to an explanation is a recent speech by Kevin Warsh of the Fed’s Board of Governors, in which he declared that doing what Mr. Bernanke recommended back in 2002 risked undermining the Fed’s “institutional credibility.” But how, exactly, does it serve the Fed’s credibility when it fails to confront high unemployment, while consistently missing its own inflation targets? How credible is the Bank of Japan after presiding over 15 years of deflation?

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By garth, July 13, 2010 at 10:47 am Link to this comment

I have to make a correction.

I said, ‘Unlike Genaro Angiullo who said that Russo was a “genius with a carbine” when he whacked Barboza in SF, ...”

Ilario Zannino, Angiullo’s consigliere from Swampscott, MA said that.

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By garth, July 13, 2010 at 9:17 am Link to this comment

Fat Freddy,

You’re a friggin’ genius. Unlike Genaro Angiullo who said that Russo was a “genius with a carbine” when he whacked Barboza in SF, I am saying you’re seer, a friggin’ genius.

I am saving your explanation for future reference.

My older brother majored in economics and told me a lot of a things that were antithetical to my naive belief in the capitalist system.  Kinds made my head turn.

From that intro and from my uncle’s teachings in stealing, I became suspicious of the ways of the world and of the outward motives of any bastard wearing an expensive suit who said he could solve all my problems if only I’d put a little faith in him and look the other way.

Your post is extraordiare.

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By Tobysgirl, July 13, 2010 at 9:04 am Link to this comment

Thanks, Fat Freddy, for the video recommendation; I plan on watching it tomorrow having spent too much time today listening to the Hedges/Jensen audio. I have heard economists speak on the radio about warnings they offered regarding the housing bubble, which MSM had no interest in. And I found it interesting that the CEO of TDBank North (I may have the spaces wrong) said they only had about 2 percent of their mortgages in toxic loans, and TD is a BIG bank.

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By Fat Freddy, July 12, 2010 at 2:41 pm Link to this comment

Tobysgirl,

Have I got a video set for you. There’s 8 videos in this one speech.

http://www.youtube.com/watch?v=6G3Qefbt0n4&feature=PlayList&p=10E5668909719CBA&playnext_from=PL&index=1&playnext=1

Now remember, this was in 2006 at the height of the real estate bubble, before the crash, to the mortgage bankers association.

The US is Tom Sawyer.

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By garth, July 12, 2010 at 1:55 pm Link to this comment

FatFreddy,

You’re smart with a great sense of humor.  One guy who saw the same veedayo siad, “i would’ve never gotten married.”

But your posts are very illuminating. In all seriousity, as another fiend used to say.

FatFreddy,

I just re-read your original posts.  And I am very grateful. 

I knew there was a bigger scam coming since the TARP and TALF money was doled out and then the ensuing stock market increase in value.

Still looming out there is the $600 Trillion dollars or so that was bet in the Credit Default Swaps.

I never heard of a bookie who said, “You won, sorry, I can’t pay.” 


Since the world’s GNP is around 77 Billion, it would take quite a lift to handle the 600 Trillion.  So, I guess we can look at it this way.  Most people don’t know, fewer understand, but that is what we are paying off.

Thanks again.

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By Tobysgirl, July 12, 2010 at 1:30 pm Link to this comment

Now, now, fellas.

What I would like to remind everyone of is that Krugman was an enthusiastic neoliberal. I have a bit of trouble with the “saved,” those who were wild for policies that obviously screwed/murdered untold numbers of people, then they saw the light.

Why don’t we follow economists who weren’t neoliberals at any point, and who are far more critical of the establishment than Krugman is?

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By Fat Freddy, July 12, 2010 at 1:00 pm Link to this comment

You should try giving yourself a blowjob.

Dude, I’d never leave the house if I could do that, not even for drugs. Well, maybe for drugs.

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By garth, July 12, 2010 at 12:27 pm Link to this comment

FatFreddy,


I said the following:

Thank you.  I will have to return to this article just to read your comments.
——————————————————————


I did not add anything else.  The line means end of comment.

You replied,

“Where did I say I wanted to help the rich? You are caught in the false dichotomy of Republican or Democrat, it appears. If you think helping the rich is forcing the banks to accept their losses, rather than pass them on to the taxpayer, then by all means, vote either Republican or Democrat. They both want the same thing. I support neither. Just because a prostitute gave you a free blowjob yesterday, doesn’t mean she is going to give you a freebie today.”
——————————————

You should try giving yourself a blowjob.  I saw a video once of a Frenchman who was doing just.

I think your head is clear, at least your arguments are, except for the section of your brain that coincides with clear thinking, masulinity and the libido.

I praised you, numb nuts.

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By Demogoddess, July 12, 2010 at 12:18 pm Link to this comment
(Unregistered commenter)

By tommy_slothrop, July 12 at 2:22 pm #

“I haven’t heard anything about widespread hunger of homelessness in Japan.  Has anyone else?”

Yes!  See these links:
http://www.share-international.org/ARCHIVES/homelessness/hl-ticardboard.htm
http://news.bbc.co.uk/2/shared/spl/hi/asia_pac/04/japans_homeless/html/1.stm
http://www.tofugu.com/2010/01/19/if-youre-homeless-in-japan-here-are-your-options/
http://www.wordpress.tokyotimes.org/?p=4812

Homelessness and poverty are growing in Japan due to their economic troubles.  There were other links, but I had to draw the line somewhere.

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By jean gerard, July 12, 2010 at 12:09 pm Link to this comment
(Unregistered commenter)

Maybe what we have on our hands is a nation that has been so sure for so long
that it has “the only” or “the best” “the richest” “economic system” “in the
world” etc. etc., quoting and re-quoting itself over and over because it is
scared to admit its own lies and try something else instead.

Maybe capitalism is so full of hot air it is exploding, the top 2% hyper-
ventilating with greed and the huge, ignorant and fearful 98% jumping out of
the balloon, fighting over parachutes even as they fall.

Maybe, someday in the fast-approaching future, some intelligent people who
have sense enough to try something more equitable, and therefore more
stable, will rise up out of the debris, get together and begin the process of re-
organizing “the economy” more for the benefit of the vast majority of ordinary
people.

Maybe.  I would like to see Krugman among them but…..

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By Fat Freddy, July 12, 2010 at 10:57 am Link to this comment

garth

Also, it was Republicans that pushed for suspending mark-to-market, and allowing banks to keep their off-balance-sheet transactions off book, something I oppose, and Krugman supported, IIRC.

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By Fat Freddy, July 12, 2010 at 10:52 am Link to this comment

garth

Where did I say I wanted to help the rich? You are caught in the false dichotomy of Republican or Democrat, it appears. If you think helping the rich is forcing the banks to accept their losses, rather than pass them on to the taxpayer, then by all means, vote either Republican or Democrat. They both want the same thing. I support neither. Just because a prostitute gave you a free blowjob yesterday, doesn’t mean she is going to give you a freebie today. BTW, I was also opposed to privatizing Social Security.

I think what you want is something for nothing. What I want, is for the government to stop stealing my money and giving it to the banking plutocracy.

But, if you want to keep giving money to the banksters, keep believing in Krugaman, because that’s exactly what he seems he wants to do.

It’s funny how liberal/progressives seem to complain about the evil corporations, but as soon as you talk about punishing the banks for making bad decisions, they want to say how wonderful they really are and keep giving them free money.

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By tommy_slothrop, July 12, 2010 at 10:22 am Link to this comment

I haven’t heard anything about widespread hunger of homelessness in Japan.  Has anyone else?

Apparently, the things that need to be done in Japan are getting done, even in a country that is dependent upon imports for food and energy.  If there is high unemployment then the work is maldistributed and something should be done about that.  But it is hardly the end of the world.

The role of government in these times should be to ensure that people have the necessities of life—food, shelter and education—not to stimulate consumption in a world where we are destroying our environment and going to war to obtain the resources neede to maintain our current level of consumption.

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By garth, July 12, 2010 at 10:05 am Link to this comment

FatFreddy,

Thank you.  I will have to return to this article just to read your comments.
——————————————————————
And all this time I thought Paul Krugman was a friend of mine.  After all, he did cut his 2005 vacation short to respnd to Bush’s Social Security privatization scam.  (At my age I am of interest in one point.  My ideas or my feelings became congruent with the Republican Party’s thrust of a few years ago, namely, to act and to vote in your own best interests.)

Well, what I want to hear from Paul Krugman is that can’t if we can’t provide for our elderly, our infirm, and our poor then we are in fact no longer a country.  Ben Bernanke can take his display of smarts with his youthful unravelling of the mysteries of the Calculus and go fuck himself.

Let’s have a show of hands.  How many want to live for the rich?

Together now, “let’s all help the rich.”

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By Fat Freddy, July 12, 2010 at 8:54 am Link to this comment

The fear of deflation, is the knowledge that all of the toxic assets on banks’ balance sheets, that are marked-to-myth, or off-balance-sheet, will eventually mature and show their true value of about 20 cents on the dollar (asset deflation). Asset deflation is not the same as price deflation, or monetary deflation. Nothing can change the actual value of assets. What the government can do, is make it look like they are worth more. The government inflates the money supply, making money worth less. Since the actual purchasing power of the dollar decreases the nominal value of the asset increases (or doesn’t fall as much), but its actual value never changes. Most banks and investors understand this, however the general population does not. That is why the current economic situation is unlikely to change any time soon, unless there are enough suckers out there to start buying these assets with devalued dollars. The inflation of the money supply will lead to price inflation. Japan suffered high price inflation along with asset deflation, as is Iceland.

So why bother? When the money supply is inflated, the first owners of the new money benefit the most. That would be the banks that are borrowing at 0% from the Fed’s discount window. The rest of the population sees the purchasing power of their dollars decline over time, which is price inflation.

People like Krugman and Bernanke want to trick people who do not understand the difference between price, asset and monetary deflation/inflation. Do not be fooled. The best way out of this mess is to cut the supply of money, gradually raise interest rates, and flush out all of the bad assets and let the banks take the hit. They deserve it, they made the initial investment.

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By Fat Freddy, July 12, 2010 at 8:37 am Link to this comment

The dreaded deflation. Please. Stop blowing smoke up my ass you fucking jerk off. I really have no idea what Krugman is talking about. The Federal Reserve does not exist to benefit the people, it exists to protect the banks. It is owned by the member banks. The Fed is accountable to no one, except the banks. What benefits the banks, does not necessarily benefit businesses and individuals.

Here’s what is happening, as we speak. Banks borrow money from the Fed’s discount window at 0% interest. They then invest it back into long term Treasuries at 3-4% interest. They then leverage future assets and borrow more. What is wrong with this picture? Imagine being able to go to your bank and borrow money at say 5%. Then you deposit it into a savings account and earn 10%. You use your future interest payments on your savings as collateral to borrow more money and deposit in your savings account, and round and round we go. Anybody want some of that action? Almost forgot the best part of the deal. The interest paid on the Treasuries comes from the taxpayers, the same taxpayers that gave them the bailout money.

You can’t make this shit up. This is just the tip of the iceberg. I could go on for days about how the banks and the Fed are ripping us off.

  Since the Federal government could potentially inflate away these trillions in Treasuries, buy enough elected officials to force austerity so inflation remains tame. In essence, these private banks and corporations now own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks [the taxpayer] will never understand how “saving our financial system” led to their servitude to the very interests they bailed out.

  The circle is now complete: in “saving our financial system,” the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.

  In effect, it’s a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better.

http://www.cbsnews.com/8301-503983_162-20010207-503983.html

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By Anarcissie, July 12, 2010 at 8:36 am Link to this comment

SoTexGuy—I think Krugman has a religious belief in printing money.  How did he get a Nobel Prize?  I’ll have to look that up.

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By G.Anderson, July 12, 2010 at 7:03 am Link to this comment

The plutocracy, could care less about this, their profits are at record highs..

Mainly because of all the people they’ve fired or laid off.

Salaries cost money…People are cheap.

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By SoTexGuy, July 12, 2010 at 4:57 am Link to this comment

The infatuation that Krugman and the Fed has with Inflation has been explained this way: inflation drives revenue upward.

Maybe, but for whom exactly, the Government? Wall Street? For a lot of real people living off of their own work and sweat equity inflation can be a bitter lover.

Right now, with my savings earning a fraction of what it loses to inflation and an even smaller percentage of what it would cost to borrow money.. a little slowing of inflation looks pretty good to me…

Adios.

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By thebeerdoctor, July 12, 2010 at 3:35 am Link to this comment

Mr. Krugman writes under the assumption that there is a system to be found that can be fixed, when it comes to the Federal Reserve and economic policy. Unfortunately it still has not dawned on him what Gertrude Stein discovered when she visited Oakland, California, that “There is no there, there.”

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