Pulitzer Prize From a Cracker Jack Box

Today, the Pulitzer Prize winning writer, Paul Krugman, wrote an Op-Ed piece in the New York Times.

His main points:

1.  We thought we could prevent depressions by providing banks liquidity, but we can’t.

He’s just writing this now?  Geez, Ron Paul and Peter Schiff should have Pulitzer Prizes too!  If a layman like myself could tell that people were getting into way too much debt and that money was way too easy to come by, why couldn’t our leading economic minds?  Why couldn’t Krugman see this coming?  Oh, that’s right, because he thought we could avoid recessions, let alone depressions, by lowering interest rates.  What a joke!

2.  The only way out is to act “swiftly and boldly,” which means government needs to spend, spend, spend.

Has he been in a cave for the last 4 months?  I’m glad he notices how much good the trillions of printed dollars have done to firm up our economy!  If the banks aren’t lending now, why will they after we pump another trillion into our economy?  Please stop writing such nonsense!

3.  He’s worried because there is posturing in Washington that will prevent Obama’s massive stimulus plan.

Good!  There needs to be at least some sort of reason on Capitol Hill.  Is Krugman trying to make a play for a job on Obama’s staff?  Does he want to run the Fed now?  Why else is he being such a big government cheerleader?  Stick to your day job Paul!  Stay out of subjects you obviously don’t understand!

4.  His nightmare scenario involves “delflation that is already setting in.”

Wow, he really has drank the Kool-Aid.  This “deflation” everyone is clammoring about is 100% driven by food and energy costs dropping.  Core prices remained flat.  If you really think that inflation is a good thing, please go and educate yourself immediately!  Right now, I love getting a tank of gas for $25.  I know it won’t last, but it’s way better than getting 5 gallons for the same price.

When you are printing trillions of dollars, you are “inflating.”  Inflation is the expansion of the money supply, not rising prices.  That is a result of more dollars in circulation.  Deflation is the opposite, it is the contraction of the money supply.  That is not happening right now.  The drop in commodities (mainly oil) is being caused by the massive unwinding of leveraged investment positions, not “deflation”.  Please get your facts straight before spreading Federal Reserve propaganda, Paul.

To me, the main problem right now is a lack of confidence in the system.  Banks don’t want to lend money because they just got burned for billions of dollars.  Consumers don’t want to spend because they are already in debt up to their eyeballs and they are uncertain about their jobs or their sources of income.  Some businesses are reluctant to spend their own money because they are waiting for their own federal bailout (like the commercial real estate developers).

We need to restore faith in our economy and the way to do that is for the government to stop making panicked moves printing billions of dollars and throwing them around.  We need a sound money supply so everyone can get their footing and start to put themselves back together.  Right now, no one knows what is going to happen next, so they are all waiting it out.  If Bernanke would come out tomorrow and say “that’s it, no more money, no more bailouts” we’d probably take a huge dive tomorrow, but would be on our road to recovery.  Instead, we’re still falling deeper and deeper into the abyss.

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