http://delawarelibertarian.blogspot.com/2008/10/revival-of-keynesian-economics-with.html

I was surprised that Krugman applies the concepts of vulgar Keynesian economics so thoughtlessly in support of his goal–even more rapid increases in government spending.

Krugman seems to misrember the meaning of “liquidity trap.” That is a situation in which the creation of money fails to reduce interest rates because at some low level of interest, liquidity preference becomes absolute. Households and firms will hold unlmited quantities of money without spending it, and interest rates remain stubbornly high.

There is no evidence that this is true of the U.S. today. Interest rates have decreased–for low risk borrowers. Oddly enough, The Federal Reserve began paying interest on reserve balances to keep interest rates from falling! (The lower limit on nominal interest rates is negative, and equal to the cost of storing currency. However, while targetting interest rates may make sense during a period of macroeconmic stability, it is potentially disastrous with a deep recession or out of control inflation.)

I have little use for the concept of the “paradox of thrift,” considering it a diversion from what can be problems with an imbalance between the supply and demand for money that the market system automatically corrects, poorly, through changes in the price level. However, I had assumed that Krugman had at least checked to see that the decrease in consumption spending in the third quarter really reflected an increase in saving.

The reality, however, is that during the third quarter, saving dropped at a massive 200% annual rate! (It fell in half in three months.)

The reason consumption fell wasn’t an increase saving. It was rather due to a decrease in disposable income. Every element of personal income rose–except dividends and income to farmers. But tax payments rose at a 25% annual rate. Government transfers to individuals (like social security and “welfare” also dropped significantly.)

A spike in inflation (especially inflation at a 7% annual rate in July) along with a rapid increase in taxes (and cut in transfers) turned a very mild increase in the dollar value of consumer spending into a drop in the real volume of consumer goods and services purchased. The drop was less than 1%, but if it continues for a year, it would be the 3.1% after a year, as reported.

Government spending continued to grow at a rapid pace. (At a 14% annual rate.) Krugman would like even more government spending. However, blaming households burdened by rapidly growing taxes because they failed to expand consumer spending enough to keep up with inflation–well, I suppose even Nobel-prize winners can be careless.

Now, I don’t know anything about economics really, but I do know that it’s not a sin to challenge your beliefs or at least respect someone who believes something different from you.

He fails to point out that all this economic activity, non-activity, savings, spending, etc. is the gross distortion of markets by instituting political goals through the central banking mechanisms. But then, Krugman himself is a strong proponent of his own political goals through central baning and control of the economy. Is such failure on Krugman’s part intentional?

Of course it is, as doing so would strip away the cover story of their manipulation of markets as though the “experts” (like Krugman) are manipulating puppets (us!). We’re supposed to behave in certain ways, and when things go awry, “experts” like Krugman say that the wrong puppet strings were pulled.

This folks, is why G.E. says, “Krugman is a moron and not even really an economist. He’s a shill for the state and central banking”.

LOL! Dude, your list of “the most evil” is long and gets longer by the day! You and Stalin.

My beef with Krugman is that he is a neoliberal at heart; loves loves loves free trade. In a recent lengthy essay og why deficiet spending is useful during economic depressions, he completely fails to mention reductions in the Pentagon and DHS’s budgets are at the very least a starting point toward reducing deficits. Him, and all the Neo-Clintonites may well cop some Keynes, Galbraith, etc, but all in order to keep globalist capitalism afloat. People like Krugman avoid that last step over that line into a critique of capitalism. they just to help it along.

So maybe, AnthonyD, your view of the world isn’t universal. And maybe Krugman’s isn’t either.

Horribly biased article that is written to justify government action in response to a s0-called crisis. He writes, “Maybe some consumers will be able to keep their credit cards.” Some? What planet is this guy living on? I work in the collections industy dealing with bad credit card debt. I speak with people in the credit card industry. I can assure you the only people who won’t be getting credit cards are the ones who shouldn’t have had them in the first place. I have a friend who handles student loans for a bank here in Cleveland. Guess what? The spigots for student loans are still open.

Krugman is a moron.

Wow,just wow.