I dunno. I'm hearing you, and I'm admittedly a big Krugman fan- the simple fact is that the guy has usually been right- but this economic catastrophe is to serious to not take all ideas into account. What frustrates me is that half of the original bailout money is *already gone, *most of it apparently going to AIG, but no one actually knows where it went for sure- Henry Paulson won't divulge any "details!" Amazing.
If we don't just fix the problem, and keep throwing hundreds of billions more out in band aid bailouts (Freddie and Frannie are going to need 500 Billion to solve their sub prime problems, it's now being reported ) we'll wind up with no money and will have failed to stop the crisis. On the other hand, if Krugman's wrong and we spend to much to fix it, we'll open up a whole new set of problems because we'll be broke and won't be able to even pay for basic infrastructure repairs, much less pay SSI and Medicare costs. We're tottering perilously close to a bad place; If our currency loses to much more of it's value, then foreign nations may choose to invest the profits they make from exports (Hello China) in their own national banks instead of investing in US treasury bonds, while also deciding to sell all the treasury bonds they hold in the Federal Reserve now overnight because the money will be, for the first time, worth more in their national banks (or in another nation's bank) and earn more in interest elsewhere than it would if invested in US Treasury bonds. A HUGE part of our economy relies on the money the US earns by being, basically, the world's banker. If that arrangement changes because the dollar becomes worth less and less, it would spark an economic meltdown that might make the depression look like a beach party... We have to ditch our left vs right blinders in this time, and try to find to best solution. Scary stuff. On Sat, Nov 15, 2008 at 4:22 PM, Travis <[EMAIL PROTECTED]> wrote: > > > > > From: Travis > Subject: Krugman's Prescription for Disaster > Date: Thursday, November 13, 2008, > > > *Krugman's Prescription for Disaster > *by David T. Beito > > Paul Krugman calls for Obama and his advisors to push an expanded version > of the New Deal (see the link below by Mark R. > Hatlie<http://www.historiansagainstwar.org/blog/2008/11/new-new-deal-krugman-in-nyt-about.html>). > According to Krugman, they should boldly throw caution to the > winds<http://www.nytimes.com/2008/11/10/opinion/10krugman.html?th&emc=th>and > *"figure out how much help they think the economy needs, than add 50 > percent. It's much better in a depressed economy, to err on the side of too > much stimulus." > > *Obama should reject this advice. If he listens to Krugman, the likely > result will be a wave of stagflation that makes the experience of the 1970s > look mild by comparison. Such a prescription would both continue and > accelerate Bush's fiscally reckless policy of propping up malinvestments > through massive increases in spending, deficits, and easy credit by the > Federal Reserve. As the continuing fall of the stock market and the rise of > unemployment indicate, more bailouts and more "shock socialism" do not work. > Obama made a fatal mistake in failing to oppose the aptly described > billionaire bailout. > > This call for a hyper New Deal rests on a flawed view of history. According > Krugman, the only reason Roosevelt failed to bring recovery was because he > spent too little, not too much. At the same time, he tries to have it both > ways by stating that the crisis of the 1930s would have been "much worse" > without the New Deal. > > A key problem with Krugman's analysis is that it does not adequately > explain why the decade-long New Deal era depression lasted so much longer > than previous depressions. Prior to the 1930s, depressions (as in the sharp > and short downturn of 1921 and 1922) had typically lasted for two to three > years. The predominant anti-depression policy before Hoover and Roosevelt > was to cut spending, balance budgets, and let prices, profits, and wages > readjust to more sustainable levels. Yet Krugman regards this older approach > for curing depressions as "much worse" than the New Deal. The logical > implication of his argument is that the New Deal, modest as it was, would > have made the Great Depression at least somewhat shorter than previous > downturns. The fact that it did not stands as a stunning indictment of FDR's > policies. > > The unprecedented duration of the depression also represents an indictment > of Herbert Hoover's approach. This was because Hoover intervened too much > not, as Krugman would have it, too little. Krugman's article neglects the > relevant point that Hoover had pursued a mini-New Deal from 1929 to 1933 via > programs such as the Reconstruction Finance Corporation and the Federal Farm > Board. It was Hoover, not Roosevelt, who was the first president to reject > the advice of the "leave it alone liquidationists." Instead of letting > malinvestments (or toxic assets in today's parlance) readjust at a lower > level, he desperately propped them up. In great part because of Hoover's > high-wage policies, real wages were actually 12 percent higher in 1932 than > in 1929! Meanwhile, of course, unemployment advanced to record levels as > businesses saved on payroll costs by laying off workers. Perhaps if Hoover > had listened to the advice of the so-called "liquidationists," the > depression would have been over by 1931. > > More troubling, at least for opponents of war, is Krugman's dubious > contention that *"What saved the economy, and the New Deal, was the > enormous public works project known as World War II, which finally provided > a fiscal stimulus adequate to the economy's needs."* The evidence does not > support the view that that war was beneficial for the economy. In a seminal > article for the Journal of Economic History, Robert Higgs convincingly > challenged <http://www.independent.org/newsroom/article.asp?id=138> the > Keynesian theory of World War II as put forward by Krugman and others. > > While unemployment disappeared during the war, it was hardly a step > forward. Moving men and women from the unemployment lines to the killing > fields of Anzio did not represent economic progress in any meaningful sense. > During the war, Americans at home suffered from rationing, shortages, more > accidents on the job, longer hours, and many other measures of economic > deprivation. Moreover, as Higgs points out, *"real personal consumption > declined. So did real private investment. From 1941 to 1943 real gross > private domestic investment plunged by 64 percent; during the four years of > the war it never rose above 55 percent of its 1941 level; only in 1946 did > it reach a new high." > > *According to Higgs<http://www.independent.org/pdf/tir/tir_01_4_higgs.pdf>, > genuine prosperity did not begin to return until the last months of 1945 > and 1946. This prosperity occurred under a policy of reverse Keynesianism > which included massive reductions in spending because of demoblization, > rapid steps toward price decontrol, and scaled back deficit spending. > > Higgs sums it up <http://www.independent.org/newsroom/article.asp?id=2188> > : > > World War II, the so-called Good War, has been a fount of historical > fallacies. One of the greatest – and one of the most pernicious for > subsequent policymakers – is the notion that prosperity prevailed during the > war. Although Americans might have been dying in the Pacific and European > theaters of war, people on the home front actually benefited from the war, > because it propelled the economy at long last out of the Great Depression. > This view of the war would be sufficiently egregious if it were true, but > despite the claims of historians for the past half century, it is not true. > > Obama's best hope to bring lasting recovery is to let the economy go > through a short, but sharp, readjustment. He needs to remove the > malivestments not, contra Krugman, perpetuate them. Obama can facilitate > this readjustment to a more sustainable level by cancelling the bailout, > cutting spending, and pruning deficits. Another worthy goal would be to > dismantle the Federal Reserve which helped to create this mess through its > easy credit policies. > > Most of all, however, Obama should end our costly empire by closing down > our overseas bases and bringing home the troops. Only then, can we start to > get our financial house in order and move towards genuine economic well > being. > > > http://www.lewrockw ell.com/orig8/ > beito4.html<http://www.lewrockwell.com/orig8/beito4.html> > __._,_.___ Messages in this topic > <http://groups.yahoo.com/group/tsowell/message/5386;_ylc=X3oDMTM0cWcycGduBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BG1zZ0lkAzUzODYEc2VjA2Z0cgRzbGsDdnRwYwRzdGltZQMxMjI2NjQ5NDY2BHRwY0lkAzUzODY-> > (1) Reply (via web post) > <http://groups.yahoo.com/group/tsowell/post;_ylc=X3oDMTJwdXRudnN1BF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BG1zZ0lkAzUzODYEc2VjA2Z0cgRzbGsDcnBseQRzdGltZQMxMjI2NjQ5NDY2?act=reply&messageNum=5386>| > Start a new topic > <http://groups.yahoo.com/group/tsowell/post;_ylc=X3oDMTJlNWVxbGNlBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA250cGMEc3RpbWUDMTIyNjY0OTQ2Ng--> > Messages<http://groups.yahoo.com/group/tsowell/messages;_ylc=X3oDMTJlaGRwbWI4BF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA21zZ3MEc3RpbWUDMTIyNjY0OTQ2Ng-->| > Files<http://groups.yahoo.com/group/tsowell/files;_ylc=X3oDMTJmc2RhbDdzBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2ZpbGVzBHN0aW1lAzEyMjY2NDk0NjY->| > Photos<http://groups.yahoo.com/group/tsowell/photos;_ylc=X3oDMTJlbWJsZTBzBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA3Bob3QEc3RpbWUDMTIyNjY0OTQ2Ng-->| > Links<http://groups.yahoo.com/group/tsowell/links;_ylc=X3oDMTJmcGs3M29kBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2xpbmtzBHN0aW1lAzEyMjY2NDk0NjY->| > Database<http://groups.yahoo.com/group/tsowell/database;_ylc=X3oDMTJjbGJnMnByBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2RiBHN0aW1lAzEyMjY2NDk0NjY->| > Polls<http://groups.yahoo.com/group/tsowell/polls;_ylc=X3oDMTJmY3ZsbXE3BF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA3BvbGxzBHN0aW1lAzEyMjY2NDk0NjY->| > Members<http://groups.yahoo.com/group/tsowell/members;_ylc=X3oDMTJldGNndHMwBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA21icnMEc3RpbWUDMTIyNjY0OTQ2Ng-->| > Calendar<http://groups.yahoo.com/group/tsowell/calendar;_ylc=X3oDMTJkYjRjaWM5BF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2NhbARzdGltZQMxMjI2NjQ5NDY2> > MARKETPLACE > ------------------------------ > From kitchen basics to easy recipes - join the Group from Kraft Foods > <http://us.ard.yahoo.com/SIG=13rkjn14i/M=493064.12016295.13271503.10835568/D=groups/S=1705060375:MKP1/Y=YAHOO/EXP=1226656666/L=/B=Nv4fA0LaX.0-/J=1226649466655249/A=5530388/R=0/SIG=11nuutlas/*http://explore.yahoo.com/groups/kraftmealsmadesimple/> > [image: Yahoo! > Groups]<http://groups.yahoo.com/;_ylc=X3oDMTJkMmpzcnYxBF9TAzk3NDc2NTkwBGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2dmcARzdGltZQMxMjI2NjQ5NDY2> > Change settings via the > Web<http://groups.yahoo.com/group/tsowell/join;_ylc=X3oDMTJmbnYwdm9yBF9TAzk3NDc2NTkwBGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA3N0bmdzBHN0aW1lAzEyMjY2NDk0NjY->(Yahoo! > ID required) > Change settings via email: Switch delivery to Daily Digest<[EMAIL > PROTECTED]:+Digest>| Switch > format to Traditional<[EMAIL PROTECTED]:+Traditional> > Visit Your Group > <http://groups.yahoo.com/group/tsowell;_ylc=X3oDMTJkcXJxZG1lBF9TAzk3NDc2NTkwBGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2hwZgRzdGltZQMxMjI2NjQ5NDY2>| > Yahoo! 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