Paul Krugman, "Europe’s Secret Success": Je Ne Comprend Pas

How's your memory?

Do you remember how Paul Krugman declared in a 2012 New York Times op-ed entitled "Europe’s Great Illusion" (http://www.nytimes.com/2012/07/02/opinion/krugman-europes-great-illusion.html):

"It comes as something of a shock, even for those of us who have been following the story all along, to realize that more than two years have passed since European leaders committed themselves to their current economic strategy — a strategy based on the notion that fiscal austerity and 'internal devaluation' (basically, wage cuts) would solve the problems of debtor nations. In all that time the strategy has produced no success stories."

Or perhaps you remember how Krugman declared in another 2012 New York Times op-ed entitled "Europe’s Economic Suicide" (http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic-suicide.html?_r=1):

"Europe has had several years of experience with harsh austerity programs, and the results are exactly what students of history told you would happen: such programs push depressed economies even deeper into depression. And because investors look at the state of a nation’s economy when assessing its ability to repay debt, austerity programs haven’t even worked as a way to reduce borrowing costs.

. . . .

Rather than admit that they’ve been wrong, European leaders seem determined to drive their economy — and their society — off a cliff. And the whole world will pay the price."

And only one month ago, in a New York Times op-ed entitled "Sweden Turns Japanese" (http://www.nytimes.com/2014/04/21/opinion/krugman-sweden-turns-japanese.html?ref=opinion&_r=0), Krugman wrote:

"Three years ago Sweden was widely regarded as a role model in how to deal with a global crisis. The nation’s exports were hit hard by slumping world trade but snapped back; its well-regulated banks rode out the financial storm; its strong social insurance programs supported consumer demand; and unlike much of Europe, it still had its own currency, giving it much-needed flexibility. By mid-2010 output was surging, and unemployment was falling fast. Sweden, declared The Washington Post, was 'the rock star of the recovery.'

Then the sadomonetarists moved in.

The story so far: In 2010 Sweden’s economy was doing much better than those of most other advanced countries. But unemployment was still high, and inflation was low. Nonetheless, the Riksbank — Sweden’s equivalent of the Federal Reserve — decided to start raising interest rates.

. . . .

Sure enough, Swedish unemployment stopped falling soon after the rate hikes began. Deflation took a little longer, but it eventually arrived. The rock star of the recovery has turned itself into Japan."

Well today, in a New York Times op-ed entitled "Europe’s Secret Success" (http://www.nytimes.com/2014/05/26/opinion/krugman-europes-secret-success.html?ref=opinion&_r=0), Krugman would have us know:

"Our political discourse is dominated by reverse Robin-Hoodism — the belief that economic success depends on being nice to the rich, who won’t create jobs if they are heavily taxed, and nasty to ordinary workers, who won’t accept jobs unless they have no alternative. And according to this ideology, Europe — with its high taxes and generous welfare states — does everything wrong. So Europe’s economic system must be collapsing, and a lot of reporting simply states the postulated collapse as a fact.

. . . .

The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy."

Has fiscal austerity truly produced no success stories? Or is it possible that in some instances there is a place for austerity?

Excuse me, Paul, if I'm a little confused.

Paul Krugman, "Talking Troubled Turkey": Ignoring Contagion From Avian Flu

Did you listen to Obama's State of the Union address? Did you hear any mention by the president of his pre-election promise to recognize the Armenian Genocide by Turkey? No way! You see, autocratic Turkish Prime Minister Erdogan has been declared by Obama to be one of his best overseas friends (see: http://english.alarabiya.net/en/views/news/world/2013/05/16/Erdogan-and-Obama-Best-friends-no-more.html).

The radical Islamization of Turkey and the end of that country's civil liberties? Why should Obama care (no pun intended)?

Of course there was the rioting in Turkey in 2013 (see: http://jgcaesarea.blogspot.co.il/2013/06/thomas-friedman-postcard-from-turkey.html), and the question looms whether the military in Turkey will take heart from events in Egypt and also act to overthrow an increasingly authoritarian regime in Ankara, as was done on more than one occasion in the past (see: http://www.reuters.com/article/2013/06/12/us-turkey-protests-military-analysis-idUSBRE95B0XK20130612).

However, Erdogan is aware of this threat, and one-in-five Turkish generals (see: http://www.commentarymagazine.com/2012/05/14/one-in-five-turkish-generals-now-in-prison/) and more than half of the country's admirals (see: http://www.economist.com/news/europe/21571147-once-all-powerful-turkish-armed-forces-are-cowed-if-not-quite-impotent-erdogan-and-his) are now sitting in prison.

Could a recent bribe probe, involving the laundering of payments for Iranian oil and construction bribes (see: http://www.bbc.co.uk/news/world-europe-25514579), also engender another Turkish financial crisis as I suggested in December (http://jgcaesarea.blogspot.co.il/2013/12/huge-corruption-scandal-hits-turkey.html)?

The next Turkish financial crisis appears to be on its way, but Paul Krugman isn't troubled by it.

In his latest New York Times op-ed entitled "Talking Troubled Turkey" (http://www.nytimes.com/2014/01/31/opinion/krugman-talking-troubled-turkey.html?partner=rssnyt&emc=rss), Krugman dismisses fear of "contagion" from another Turkish economic downturn. Krugman writes:

"The larger point is that Turkey isn’t really the problem; neither are South Africa, Russia, Hungary, India, and whoever else is getting hit right now. The real problem is that the world’s wealthy economies — the United States, the euro area, and smaller players, too — have failed to deal with their own underlying weaknesses. Most obviously, faced with a private sector that wants to save too much and invest too little, we have pursued austerity policies that deepen the forces of depression. Worse yet, all indications are that, by allowing unemployment to fester, we’re depressing our long-run as well as short-run growth prospects, which will depress private investment even more."

Paul is again out to lunch.

What Paul doesn't understand is that in order to reap the benefits of commissions from Turkish trade, i.e. letters of credit and guarantees, the world's banks have been forced to pay something akin to a bribe in the form of participation in enormous loan consortiums to Turkish banks. If the Turkish economy tanks, some or even many of these loans might not be paid with resultant losses and shock waves throughout the world's banking system. Will Turkey then step in and rescue its banks? That will all depend on the size of the disaster.

The effect on the world economy as the big banks lick their wounds and reassess their exposure to emerging market debt? In fact, notwithstanding Krugman's attempt to provide reasons why it won't happen, it could prove something of a tsunami, as we have painfully learned from past experience.

But why learn from the past? Krugman would again have us believe that all the world's ills derive from "austerity," which depresses private investment.

Well, let's see what will be the effects of another Turkish financial crisis on the willingness of the big banks to loan funds and the world's appetite for risky private investment if we should experience another bout of "avian flu."

Paul Krugman, "Ben Bernanke, Hippie": No Mention of the Bob Woodward Scandal

Read Paul Krugman's latest New York Times op-ed entitled "Ben Bernanke, Hippie" (http://www.nytimes.com/2013/03/01/opinion/krugman-ben-bernanke-hippie.html?_r=0), which he concludes by observing:

"And an end to deficit obsession can’t come a moment too soon. Right now Washington is focused on the idiocy of the sequester, but this is only the latest episode in an unprecedented run of declines in public employment and government purchases that have crippled our economy’s recovery. A misguided elite consensus has led us into an economic quagmire, and it’s time for us to get out."

Now close your eyes, and tell me how many times does our Nobel prize winner mention President Obama, the originator of the sequester, in his opinion piece. Twice? Three times? Five times?

Answer . . . a drum roll please: Not once.

Krugman does comment on the foolishness of the second Iraq war by observing that those who "pointed out that the risks and likely costs of war were huge . . . were dismissed as ignorant and irresponsible."

Well, I opposed that war, because I believed that it would destroy the power equilibrium between Iraq and Iran. I have also opposed America's prolonged ground involvement in Afghanistan, which was foolishly escalated by Obama and is costing the US $6 billion per month, but there is no mention by Krugman of that boondoggle.

The bulk of Krugman's opinion piece is devoted to his obsessive opposition to "austerity." However, there is no attempt by Krugman to distinguish between austerity and foolhardy federal spending.

As noted by Charles Krauthammer today in a Washington Post opinion piece entitled "Hail Armageddon" (http://www.washingtonpost.com/opinions/charles-krauthammer-hail-armageddon/2013/02/28/ca8a32a6-81da-11e2-b99e-6baf4ebe42df_story.html):

"A 2011 Government Accountability Office report gave a sampling of the vastness of what could be cut, consolidated and rationalized in Washington: 44 overlapping job training programs, 18 for nutrition assistance, 82 (!) on teacher quality, 56 dealing with financial literacy, more than 20 for homelessness, etc. Total annual cost: $100 billion-$200 billion, about two to five times the entire domestic sequester."

But Krauthammer is nefarious neocon, and there is nothing to be learned from him.

What else isn't being mentioned by Krugman? There's also the small matter of how the Imperial Second Term Obama Administration is seeking to silence Bob Woodward for daring to remind Americans that the sequester was Obama's dumb idea. As stated by Woodward during an interview by Sean Hannity (I know, another neocon whose show you should never be caught watching) on Thursday night (see: http://freebeacon.com/woodward-discusses-sequester-coverage-w-h-doesnt-want-to-be-crossed/):

Hannity: "Why should it matter if the president suggested the sequestration, and then the president denied that he requested the sequestration, and the president had a deal that he wasn't going to ask for tax increases, and then later does and says that's not true, and they attack you as, well, being willfully wrong? Why should this matter? I mean, don't we deserve our government to be honest with us?

Woodward: "Exactly. And I'm almost 70-years-old, I hate to acknowledge. I've done this for four decades. I will keep doing it in some form. But the White House saying you're doing these things when you've worked months on it and you have the documents, and Jay Carney actually acknowledges paternity for the sequester from the White House. The problem is there are all kinds of reporters who are much less experienced, who are younger, and if they are going to get roughed up in this way. And I am flooded with e-mails from people in the press saying this is exactly the way the White House works. They are trying to control, and they don't want to be challenged or crossed."

Well, Bob Woodward is not a neocon, and although his credibility and motivation are now being questioned by others in the media, doesn't he deserve a minute of our attention, particularly if he is warning that the Obama administration is trying to control America's news media?

Query: Is it even possible that Obama is trying to "control" the news media? Absolutely, and we have the answer from none other than former White House Communications Director Anita Dunn. Listen to Dunn lecture on Obama’s media tactics during the 2008 election (http://www.youtube.com/watch?v=NlGNhAnwp_Y):

"One of the reasons we did so many of the David Plouffe videos was not just for our supporters, but also because it was a way for us to get our message out without having to actually talk to reporters. We just put that out there and made them write what Plouffe had said as opposed to Plouffe doing an interview with a reporter. So it was very much we controlled it as opposed to the press controlled it. . . . very rarely did we communicate through the press anything that we didn’t absolutely control."

Obama is seeking "control" over the media? Actually, as acknowledged by Dunn, he has been seeking "absolute control."

Yes, it is frightening, and it's pitiful to see that Krugman, an economist and also a journalist, doesn't have the backbone to relate to the Woodward scandal.

Paul Krugman, "The Austerity Agenda": Should My Spending Be Your Debt?

Writing from across the Atlantic, Paul Krugman in his latest New York Times op-ed, "The Austerity Agenda" (http://www.nytimes.com/2012/06/01/opinion/krugman-the-austerity-agenda.html), again argues the case for spending. Krugman observes that when questioning austerity in London, he inevitably is met with the same answer he hears in New York:

"The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income."

But shouldn't Krugman be asking if your spending should be my debt, and if my spending should be your debt?

When government spends, it indeed becomes our debt. And when government spends at an unsustainable level, its citizens are inevitably crushed by the repayment burden.

Moreover, when individuals or non-governmental agencies spend or gamble wildly, this does not and should not become the government's debt. However, this is exactly what has happened in the instances of the big banks, which teetered on the brink of failure just a few years ago, and in the case of Solyndra.

Instead of spending at an unsustainable level, i.e. printing money that must ultimately lose its value, might it not be a better idea to first put an end to a meaningless war in Afghanistan, which is bleeding the economies of both the US and UK white? In the case of the US, I'm confident that better use can be made of the $8 billion being burned every month in the wilds of central Asia. Peculiar how this issue is not being debated by Obama and Romney.