How Paul Krugman Would Handle Debt
(The New American) -- by Bruce Walker --
Nobel prize-winning economist and Princeton Professor Paul Krugman provided the Associated Press with some unpleasant commentary on the huge debt that Americans and their institutions owe now. Krugman argues that eventually default on these loans is inevitable. That would mean bankruptcies for individuals and corporations and defaults by governments — or, if the Krugman approach is followed, this would mean calculated government inflation of the money supply, which would make it easier to pay off debts.
Private debt is one matter. Bankruptcy was intended to be a remedy in the Constitution for individuals who could not pay their debts. Congress has tweaked with bankruptcy laws over the last two hundred years, but the principle itself is enshrined in the foundational text of a new country that rejected the debtors’ prisons of the Old World.
Default of state and local debt obligations is a much more serious matter. Before that occurs, the public may wish to request an investigation into how financial malfeasance allowed this to happen. The obligations which wreck state and local governmments are overwhelmingly the variety which, in the private sector, would be considered trusts with fiduciary obligations. How, for example, can public employee pension systems run out of money? If an insurance company suddenly found itself unable to pay claims against its policies, politicians and the public would be screaming for the scalps of those executives who failed the trust obligations. If a bank could not pay its depositers, the same scrutiny would be demanded.
The problem with defaulting on public obligations runs deeper. Governments that fail to pay their debts and obligations lose the confidence of bondholders and other investors. The return on investment for future bonds, consequently, is higher — sometimes much higher — and this, in turn, must be paid for by the taxpayers (as coerced “investors” in the failing government.) Taxpayers, no matter what happens, end up paying the price, a fact that does not seem to faze Paul Krugman at all. Inflation (or deflated money), higher interest payments on debts, higher tax rates — all offer unpalatable options to an electorate already overtaxed.
The solution which seems to elude “experts” like Krugman is to dramatically reduce the scope and function of government...MORE...LINK
Chris Moore comments:
Here is the Krugman blog that the author of this piece is apparently referring to:
Default Is In Our StarsKrugman is a swindler extraordinaire. No wonder he's the favored economist of the post-Christian, Keynesian con artists, fraudsters and murderers who have slowly taken control of the country over the last century, and finally put it in a stranglehold in the last few decades.
Not in ourselves.
I think it’s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess, and is playing a key role in preventing us from getting out. So, how does it end?
A naive view says that what we need is a return to virtue: everyone needs to save more, pay down debt, and restore healthy balance sheets.
The problem with this view is the fallacy of composition: when everyone tries to pay down debt at the same time, the result is a depressed economy and falling inflation, which cause the ratio of debt to income to rise if anything. That is, we’re living in a world in which the twin paradoxes of thrift and deleveraging hold, and hence in which individual virtue ends up being collective vice.
So what will happen? In the end, I’d argue, what must happen is an effective default on a significant part of debt, one way or another...MORE...LINK
He starts by blaming "excessive private debt" for the current recession/depression instead of the Fed, its low interest rate policy, and government engineered bubbles like the government-backed Fannie Mae/Freddie Mac mortgage bubble precipitated on loans to unqualified borrowers under the auspices of advancing a public good.
And he totally ignores federal government ponzi schemes like Social Security, in which the federal government takes in hundreds of billions from taxpayers, quickly forks it over to its crony Capitalist and crony Socialist partners in exchange for political support, and then replaces what was once hard, investable money with worthless IOU's. (And that's only one government scam among thousands.)
Additionally, he ignores the fact that due to government overspending and corruption, federal debt has grown from 33% of GDP in 1980 to 92% of GDP today, and is scheduled to explode even higher.
But no, he says, the fault isn't with the corrupt Ruling Class, but with "ourselves" -- in other words, it's the fault of the American people themselves for the fact that the unethical, immoral, post-Christian hostile elite robbed, swindled and betrayed them. And any other view is "naive," so of course we don't need to return to Christian "virtue," says the Jewish Krugman.
The man is a fraudulent "economist" and a shill, hired by Keynesian parasites and plunderers who have been robbing the country blind for decades.
Off with their heads.
Fraudulent "economist" Paul Krugman, P.R. spokesman for the Fed/Keynesian thieves and swindlers and their murderous Shyster Class patrons