In his best seller The Return of Depression Economics (which I had my MBA students read this past year), Paul Krugman writes: “Recessions, in other words, can be fought simply by printing money—and can sometimes (usually) be cured with surprising ease.”
Indeed, as I read his latest string of columns that increasingly are laced with partisan invective and personal attacks, there is one constant theme: government needs to fight this downturn by churning out new money and quickly spending it. There are problems, however, when political bodies like Greece and Ireland fall into crisis because their currency, the Euro, is created by the European Central Bank.
In Krugman's view, the solution always lies in creating more money, and since he thinks that Europe is being stingy, he has been writing that the real shame is that Ireland, Greece, and Spain cannot "devaluate" in the way that Iceland has done. As I see it, if printing money would work for Iceland, then it would work for the biggest banana republic in the USA (which increasingly is becoming a banana republic, itself), California.
Yes, debt-and-deficit-riddled California, the once-Golden State now has become a prisoner not only of its mismanagement of prosperity, but also of the leftist ideology that is its governing philosophy. The state that gave us Apple Computer and Google now gives us bloated government worker unions, high tax rates, ridiculous regulations, a swarm of bureaucrats, and Nancy Pelosi.
California now is at the end of the line. It is driving out businesses, criminalizing and demonizing entrepreneurship, and things only will become worse. What to do? Why, there is only one thing to do: print money.
Of course, California is part of the big political union called the USA, but it seems to me that a "Krugman solution" already has been reached: government scrip. Yes, the outgoing Guhvuhnatuh, Ahnuhld Himself, used IOUs to pay California workers, and if Krugman is to be believed (and he IS a Nobel Prize winner, after all), then California really has no budget problems at all.
Yes, the Ultimate Chartalist Solution is at hand, and I hope that Krugman will recognize it, since he already has supported the concept of the idea. California can stop paying its workers in USD and use its own scrip. Given the state legislature's penchant for passing law after law, it can declare the scrip to be California legal tender and ORDER state businesses to accept it, on pain of workers and business owners going to prison.
(This would be quite appropriate, since one of the fastest-growing areas of criminal prosecution in this country has been the category of "economic crimes," as the USA borrows from the legal past of the USSR.)
Granted, there might be a showdown from Washington, although I figure that since Democrats control the executive branch of the U.S. Government and the U.S. Senate, and children in California DID sing praises to Obama ("Obama's gonna save us"), perhaps the god in the White House will relent and let California carry on its Krugman scheme.
Everyone would be happy, I guess. California would not be "budget constrained," the state could multiply its bureaucracies, authorities could arrest and try more business owners, Google could be used to spy on capitalists and other evil-doers, and there would be enough money for all!
Furthermore, California could enjoy an "export boom." (I'm sure Krugman would like that.) True, the only thing the state could export would be bureaucracy and videos of children singing praises to Obama, but that should be enough to entertain the masses. (California would NOT be able to use "Yes, We Can!" as its state slogan, since Obama already took that one. Maybe the incoming Gov. Moonbeam might employ "Accept our money -- or else" as the state slogan.)
So, all it takes is guts, I suppose. Make Paul Krugman California's secretary of the treasury and the country will take off. Moonbeam, you have a mission!! (It cannot be a "mission from God," however, as California intellectuals are godless.)