A couple of Krugman howlers

Every once in a while, Paul Krugman gives us the Ultimate Howlers, and today he seems to have eaten his Wheaties.

First, on Social Security, he says this:

I’ve written about this repeatedly in the past, but here it is again: Social Security is a program that is part of the federal budget, but is by law supported by a dedicated source of revenue. This means that there are two ways to look at the program’s finances: in legal terms, or as part of the broader budget picture.

In legal terms, the program is funded not just by today’s payroll taxes, but by accumulated past surpluses — the trust fund. If there’s a year when payroll receipts fall short of benefits, but there are still trillions of dollars in the trust fund, what happens is, precisely, nothing — the program has the funds it needs to operate, without need for any Congressional action.

Alternatively, you can think about Social Security as just part of the federal budget. But in that case, it’s just part of the federal budget; it doesn’t have either surpluses or deficits, no more than the defense budget.

Both views are valid, depending on what questions you’re trying to answer.

What you can’t do is insist that the trust fund is meaningless, because SS is just part of the budget, then claim that some crisis arises when receipts fall short of payments, because SS is a standalone program. (Emphasis mine)

Despite the claims by Algore when he was running for president 11 years ago that he would put SS funds in a "lockbox," there IS no "lockbox." The "trust fund" of what Krugman writes are government bonds, IOUs that only can be redeemed either by selling more bonds or with future tax revenues.

The vaunted "trust fund" is no trust fund at all. It is a piece of a fictitious Rob-Peter-to-Pay-Paul scheme that any one can recognized to be a fraud.

On another post, one about "weaponized Keynesianism" (and I actually like the phrase, which apparently was coined by Barney Frank, Krugman writes this:

The first thing to say is that liberals shouldn’t engage in mirror-image thinking, and imagine that spending we dislike somehow lacks the job-creating virtues of spending we like. Economics, as I say often, is not a morality play. As far as creating aggregate demand is concerned, spending is spending – public spending is as good as but also no better than private spending, spending on bombs is as good as spending on public parks. As I pointed out not long ago, a perceived threat of alien invasion, by getting us to spend on anti-invasion measures, would quickly restore full employment, even though the spending would be on totally useless object.

While I realize that Krugman is writing from a pure Keynesian point of view that says it is the spending and ONLY the spending that matters, it seems to me that where resources are directed DOES matter. During WWII, Americans had jobs and pockets full of money, but there was little to buy and a huge portion of the workforce was in the trenches in Europe and Asia or being shot out of the skies. Yes, the GDP was high, but Americans were not manufacturing wealth; it was destruction of wealth.

Again, I realize that Keynesians see only aggregates and that GDP making bombs is as good as GDP making bread. Frankly, I'd rather eat bread.

Icelandic Airhead Economics

Update: Krugman's latest column continues the same narrative: (1) financial deregulation causes all of our problems, (2) inflation is the answer, and (3) despite massive inflation, which has slashed real wages, Iceland has not seen its standard of living fall.

I also find it interesting that he praises Iceland for letting the banks fail when, at the same time, he also has claimed that Washington needed to bail out Wall Street. Indeed, as is pointed out below, maybe it would have been prudent to let ours fail, too.

Although Krugman writes of the "path not taken," the path he calls for is government control of the economy, easy money (inflation), central bank financing of government spending via the printing press, and capital controls. I would suggest that this is EXACTLY what is occurring today. If anything, the central banks and governments have blown up even bigger financial bubbles.

However, I would like to suggest another path: a real profit and loss system, not crony capitalism, and certainly not central bank financial tricks. End Update

As I write this, Paul Krugman is in Iceland and anyone who wants to watch him in a webcast can do so. Last month, when flying home from Latvia, we passed by Iceland and I can say that from the air, it is a barren place.

Its economy also has been barren, suffering a huge fall in about everything after its own speculative bubbles had fallen apart. Not surprisingly, Krugman claims that this was due to free markets, deregulation, and probably Milton Friedman, and the cure has been inflation and capital controls. Thus, Iceland is his poster child for doing things "correctly."

There is another perspective, and Tim Cavanaugh at Reason Magazine offers a very good and believable scenario, one that chronicles the same events as Krugman acknowledges, but adds something that Krugman has conveniently left out: how Iceland's central bank engaged in the worst kind of moral hazard.

Cavanaugh notes:

For every government-driven bad improvement you can find in the west, you’ll find boom-era Iceland taking it to the next level. Where the U.S. Federal Reserve’s promise to backstop financial institutions was merely implicit, the Central Bank of Iceland in 2001 gave an explicit guarantee to big banks, making it inevitable that they would become bloated with risky and ultimately toxic assets. Our own government-sponsored—and as of 2008, government-owned—entities Fannie Mae and Freddie Mac made a hash of responsible lending by buying mortgages in the secondary market (and as we now know, lying about the poor quality of debt on their books). But Iceland’s government-run Housing Financing Fund managed to do even worse, lending directly to borrowers and competing with private lenders on both interest rates and loan quality. By mid-decade 90 percent of Icelandic households had government loans, and no-money-down home purchases were as common in Iceland as they were in Florida. (Emphasis mine)

You see, Krugman always assumes that free markets, be they in finance or anything else, have nothing to keep them from running over the cliff, and only the stern hand of government regulation can save the markets from themselves. Yet, we know that a profit-and-LOSS system provides its own brakes, provided that governments don't try to override market verdicts, as they have done in the USA, Iceland, and Europe. As he always does, Krugman only tells part of the story.

As Cavanaugh notes, there is much more to the story than Krugman wants to admit. Iceland was not able to get much of anything resembling a bailout, and had to face the crisis alone:

This international neglect turned out to be Iceland’s saving grace. The crisis ended almost as quickly as it had begun. The Organization for Economic Co-operation and Development expects Iceland’s economy to grow by 2 percent this year and next. That’s not enough to replace the post-2007 loss, but it’s more than enough to return to the pre-boom trend line, and it’s much stronger than the performance of Portugal, Italy, Ireland, Greece, and Spain, affectionately know as the PIIGS economies. Iceland’s long-term interest rate, a not-inconsiderable 8 percent, compares well with a rate of over 13 percent for Greece, which is astounding when you consider that Iceland endured a default that Greece, in name at least, has so far avoided. The difference in unemployment—5.8 percent for Iceland against 16 percent for Greece—is even more striking. Iceland expects to have a balanced budget in 2013.

And then this, contradicting Krugman:

Paul Krugman naturally draws the wrong conclusion, contending that Iceland saved itself through rapid inflation and capital controls. This is like saying the March tsunami gave the people of Tohoku a nice chance to go swimming: Iceland’s central bank tried desperately to control the króna’s collapse before giving up. Nevertheless, Erlingsdottir is right: The “grownups”—a center-left coalition led by Social Democrat Johanna Sigurdardottir—are back in charge and have done their best to double down on the bad policies of the past, including reducing fish quotas when local fishermen most need to be producing and selling. The government is also, in the face of strong popular opposition, moving toward E.U. membership, which has worked out so beautifully for other troubled European economies.

So what’s causing the recovery? The plain-sight answer is the one nobody will consider. Iceland is coming back specifically because its banks went out of business. That happened in spite of strenuous public efforts, but the removal of the tiny nation’s colossally bloated financial sector turns out not to have eliminated all that much value.

There are some things to keep in mind. First, Iceland is substantially poorer than it was before. More people have work, but their real wages have fallen substantially from where they were before the crisis began. Currency crises have a way of exposing the problems, something Krugman does not want to admit, and the combination of default, inflation, and letting its banks implode means that Icelanders have received a huge dose of reality, and reality can suck at times.

Second, for all of the talk about rates of unemployment and having its exports being cheaper because of the decline in the country's currency relative to other currencies, inflation hardly is the miracle "cure" that Krugman claims it to be. Yes, inflation has cut the real wages Icelanders earn by substantial amounts, which means they have received a real cut in pay, which in turn makes their labor substantially cheaper. However, they still have to produce something, and that means directing resources to the sustainable lines of production in Iceland's economy.

Yes, I know that Krugman is a "macro" guy, and they look only at GDP figures. Thus, according to the Keynesians, World War II was a time of unprecedented prosperity because (1) everyone had work, and (2) GDP was high. What else do we need to know about the economy?

While Krugman has been touting bailouts and even having the Fed directly purchase government bonds to finance the government's operations (as though this were a magic elixir instead of the fraud it really would be), he forgets that Iceland's crisis was SO big that its central bank could not bail out anyone, despite an explicit promise from the central bank that it would backstop all losses. Furthermore, it never occurs to him that if we get rid of the moral hazard, we also get rid of the systematic wild speculation.

Instead, he continues to call for easy money, but he also wants that money to be tightly regulated, which in the end means that banks lend only to those firms that have a track record. One of the reasons there was so much pressure for deregulation in the 1970s and early 80s was that a large number of firms based upon the new high technologies and the new reality of telecommunications could not get capital from the usual lending sources.

For example, Ted Turner in setting up CNN, went to Michael Milken because the banks would not touch his cable news idea. Likewise, we never would have seen funding of a number of other familiar companies had the old regulatory structure remained. Unfortunately, what Krugman demands is both the old structure AND policies of easy money, which simply is not possible. Furthermore, his call for the Fed to be buying bonds wily-nily does not exactly speak to getting rid of the moral hazard that put us in this position in the first place.

If there is a lesson in Iceland, it is not what Krugman might be telling us. First, Iceland experienced the unthinkable: the utter collapse of its banks, but it lived to come back another day. On our front, for all of the dire talk of what might have occurred has the government not bailed out Wall Street, I believe that while the economy would have taken a hit, we already would be climbing well out of that hole and would in a full-fledged recovery.

Instead, we are in a depression, and Krugman is claiming that inflation and bailouts are the key to changing our economic direction. In other words, we can have prosperity and a free lunch, too. Just inflate.

Do regulations always work as the authors claim?

One of the most enduring of Holy Doctrines from the Progressive Era is that "experts" employed by the government are wise and discerning, and new regulations, be they for finance or the environment, always work exactly as they are supposed to do. Thus, any new edict from the Environmental Protection Agency will do exactly as it says, creating a cleaner country and reducing pollution and negative health effects.

In a recent blog post, Paul Krugman continues this Progressive tradition of bowing to regulation in an attack on recent remarks by Republican Congressman Paul Ryan. First, Ryan's quote (responding to an attack by President Obama):

Just last week, the President told a crowd in North Carolina that Republicans are in favor of, quote, “dirtier air, dirtier water, and less people with health insurance.” Can you think of a pettier way to describe sincere disagreements between the two parties on regulation and health care?

True to form, Krugman responds by declaring that Obama MUST be telling the truth because, after all, according to The Great One, Obama's remarks are "a literal description of GOP proposals to weaken environmental regulation and repeal the Affordable Care Act".

One has to understand a few things about Krugman's statement. First, does he consider ALL environmental regulation ALWAYS to be good? For example, if the EPA tomorrow were to ban all private automobiles, would that in the end lead to a cleaner -- or dirtier -- environment?

Regarding ObamaCare, is he claiming that this law actually will result in MORE people receiving medical care? I don't see how that is possible, given that doctors will be under more scrutiny than ever, both with regulations AND criminal penalties, and they will spend more time than ever doing paperwork. (Talk to someone in a medical office and that person will give you a lot of information on just how much extra work government regulations create -- and labor is a scarce thing.)

Furthermore, what good is "access to insurance" if one cannot see a doctor? In some places in Canada, they literally have lotteries to see who is able to see a physician, which means the medical care is "free" (not paid directly, but indirectly through taxes) but for many people, unavailable.

As for environmental regulation, one of my areas of specialization has been environmental/resource economics, and one of my mentors, Bruce Yandle, has done a lot of research on the ACTUAL effects of environmental regulation. This point is important, because, unlike Krugman, Yandle has sought out to find out what really happens with regulation, as opposed to Krugman, who claims simply that a regulation always accomplishes its purpose -- if the correct party is in power.

Yandle always taught us to look beyond the rhetoric and the claims and examine the rules and the results. In a recent article in Regulation, Patrick Moffitt and I have done just that in a study of the new environmental regulations for Barnegat Bay in New Jersey.

Interested readers can look at the piece in its entirety, but from what we have found, the new regulations and restrictions are coming about because the EPA and the New Jersey Department of Environmental Regulation (where Lisa Jackson was before she became Obama's choice to head the EPA) are targeting "nutrients" (and especially nitrogen) have misdiagnosed the cause of the bay's demise. This should not be surprising, given that much of so-called environmental science today is utterly politicized.

In fact, both Moffitt and I are convinced that the directives of the EPA and the NJDEP will make the waters of Barnegat Bay MORE polluted and less productive than if these agencies had done nothing. I know, that is politically incorrect.

I found out just how politicized it was 20 years ago when I researched the EPA and acid rain, and it was made clear then and is even more so now that when the EPA funds scientific research, it EXPECTS results that are in line with its political leanings. I'm not kidding nor exaggerating, and have talked to EPA scientists who say that if good research contradicts the EPA narrative, then the research is ignored or suppressed, and those that insist on doing it find their careers in jeopardy.

So, instead of examining the results of regulation, Krugman simply looks at the so-called intentions of the framers of the rules, and then claims that anyone who disagrees with the regulations does so because he or she wants people to get sick and die. But, then, Krugman says the same thing about anyone who thinks the Keynesian narrative is wrong; the only people, according to Krugman, who disagree with Keynesian analysis are those who want others to lose their jobs, their homes, and maybe their lives.

Considering the source

It is an exciting day for Paul Krugman! His views have been endorsed by David Frum, who according to the Great One, has "wandered off the conservative reservation." That Krugman would go ga-ga over an endorsement from Frum is quite interesting, to say the least.

Frum is a hardcore, war mongering "neo-conservative," better known for his drum beating for the various U.S. wars in the Middle East. Furthermore, Frum always has been of the school of thought that wars are "good for the economy," and his main criticism of the U.S. Government has been that it is not invading enough countries, killing enough people, and taking away enough of our liberties at home.

On the economic front, Frum always has lived on the Keynesian reservation, and his viewpoints have been well-known for a long time. That a Keynesian would endorse the views of a Keynesian hardly is surprising.

So, by all means, if someone like Frum wants to endorse Paul Krugman, perhaps it speaks more to the kind of world Krugman wants us to inherit than the rightness or wrongness of his views.

There's a hole in the logic, dear Krugman, dear Krugman...

When numerous financial houses and banks in the USA and Europe were finally exposed for their massive holdings of worthless securitized mortgages and the infamous Housing Bubble was exploding, the political and financial "leaders" around the world quickly decided upon the "solution": Create a bigger bubble, and use the government's ultimate "Rabbit-Out-of-the-Hat" scheme, which is getting the central banks to do what governments in Latin America and Zimbabwe have done to pull off the scam.

In a recent column, Paul Krugman excoriates these creators of the New Bubble for their actions. No, he is not declaring that all they did was to make the problem worse; instead, he tells them in no uncertain terms that, in his opinion, they didn't make the Bigger Bubble big enough.

Yes, had the U.S. and European central banks been even more aggressive in creating and sustaining a huge bubble in government securities (that are as worthless as the mortgage securities that turned toxic), then we would be in a real economic recovery right now. If you think I am joking, read what Krugman says:

Think about countries like Britain, Japan and the United States, which have large debts and deficits yet remain able to borrow at low interest rates. What’s their secret? The answer, in large part, is that they retain their own currencies, and investors know that in a pinch they could finance their deficits by printing more of those currencies. If the European Central Bank were to similarly stand behind European debts, the crisis would ease dramatically.

Yes, what Krugman is saying is that the central banks of the USA and Great Britain can print money to buy their own government securities and the process can go on indefinitely. Lest anyone think that printing more dollars and pounds might have a negative effect upon those currencies, Krugman also has The Answer:

Wouldn’t that cause inflation? Probably not: whatever the likes of Ron Paul may believe, money creation isn’t inflationary in a depressed economy. Furthermore, Europe actually needs modestly higher overall inflation: too low an overall inflation rate would condemn southern Europe to years of grinding deflation, virtually guaranteeing both continued high unemployment and a string of defaults.

Yeah, it all is Ron Paul's fault. But in the next paragraph, Krugman demonstrates that he wants the Federal Reserve System to do what has been prohibited from the very creation of the 1913 law that created the Fed: have the central bank purchase short-term U.S. Government paper in the primary market. He writes:

But such action, we keep being told, is off the table. The statutes under which the central bank was established supposedly prohibit this kind of thing, although one suspects that clever lawyers could find a way to make it happen.

The cynicism drips off the column with that one, and his comments are a dream come true for those who claim (falsely) that governments are "not revenue constrained," as though the printing press can erase the Law of Opportunity Cost. Krugman's Ultimate Solution, one that I have said for months underlies most of his economic commentary, is dependent upon printing money and nothing else.

Understand the logical construct of what Krugman has declared in this latest column. If the various central banks announce that they are going to start buying short-term government bonds from whatever country seems on the verge of default (or simply cannot pay its bills with regular tax revenues), this immediately will stop the various runs on banks that are holding this government paper, increase the value of government bonds, lower interest rates, bring more spending in the economies of the world, and give us a widespread economic recovery. That is the Krugman economic logic in one sentence.

So, recovery is just a "clever lawyer" away. Intent of laws that were written to prevent the U.S. and European governments from doing what Juan Peron did in Argentina and Robert Mugabe did in Zimbabwe mean nothing, and Krugman makes it clear that he really believes that the secret to prosperity is the printing press:

The story of postwar Europe is deeply inspiring. Out of the ruins of war, Europeans built a system of peace and democracy, constructing along the way societies that, while imperfect — what society isn’t? — are arguably the most decent in human history.

Yet that achievement is under threat because the European elite, in its arrogance, locked the Continent into a monetary system that recreated the rigidities of the gold standard, and — like the gold standard in the 1930s — has turned into a deadly trap.

So, it turns out that the secret to Europe's prosperity was not producing goods and services that other people wanted and needed. Instead, the "secret" was political democracy and the welfare state, as though both of these entities actually produce something. No doubt, Krugman claims that these economies are in a "liquidity trap," and such a situation turns the laws of economics upon their heads. That is nonsense, pure nonsense, for no government and no economist can repeal the Law of Scarcity and the Law of Opportunity Cost.

The world is in financial trouble because central banks, the financial districts, and governments created massive malinvestments in housing and the stock markets in order to achieve a veneer of "prosperity." Those malinvestments have been exposed, and exposed greatly.

Instead of dealing with that reality, Krugman and others insist on creating a New Reality, one in which people are forced to "invest" in government spending, as though flooding economies with various currencies magically will bring back the prosperity that was lost. In other words, Krugman believes that creating The Mother Of All Financial Bubbles in government securities is going to bring our economies into the bliss of recovery. While Krugman uses the song, "There's a Hole in the Bucket," to push his point (the solution, according to Krugman, is to fill the "bucket" with newly-created money), he forgets that his logical constructs themselves are full of holes.

What happens when THAT bubble blows up like a volcano? Just print more money.

Krugman: Create wealth by shutting down electric power plants

After shilling for the George Soros inspired (and partially funded) Occupy Wall Street "movement," Paul Krugman now is turning back to environmental matters. In his column, he accuses Republicans of wanting to poison and kill Americans because some of them support the use of coal-fired electric power plants. (I cannot say that I mind criticism of the Republicans -- heck, Lew Rockwell's site takes the hide off them nearly every day -- but at least the LRC people are principled and non-partisan.)

Krugman's claim is that coal-fired electric power plants do so much environmental damage that they literally destroy wealth. Citing a recent paper in American Economic Review, Krugman writes:

For it turns out that there are a number of industries inflicting environmental damage that’s worth more than the sum of the wages they pay and the profits they earn — which means, in, that they destroy value rather than creating it. High on the list, by the way, is coal-fired electricity generation, which the Mitt Romney-that-was used to stand up to.

While Krugman in this column and in a recent blog post is quick to say he is not advocating shutting down power plants, given his rhetoric and, frankly, the conclusions he is drawing, the logical response is to shut off about half of the nation's electricity grid. That's right, almost half.

To allow them to churn out electricity for another second would, in Krugman's words, "make us poorer and sicker." So, why doesn't Krugman openly say that ALL coal-fired plants should be shut down immediately? Good question. After all, if the NET RESULT of these operations is to make us "poorer and sicker," then immediate relief would make us wealthier and healthier, right?

Last month, Krugman declared on this subject:

It’s important to be clear about what this means. It does not necessarily say that we should end the use of coal-generated electricity. What it says, instead, is that consumers are paying much too low a price for coal-generated electricity, because the price they pay does not take account of the very large external costs associated with generation. If consumers did have to pay the full cost, they would use much less electricity from coal — maybe none, but that would depend on the alternatives.

That, however, makes no sense. If coal is dangerous, then even forcing more environmental regulations upon it would not make it a whit healthier and it would drain our pocketbooks and, hey, what possible damage could destroying half of our capability to produce electricity cause, anyway?

What Krugman assumes is that there is little or no wealth created by coal-fired electricity, only damage. Furthermore, he assumes either that Americans would get along just fine with blackouts and brownouts, or that we could put windmills all over the place, which also is another green fantasy.

The more I read Krugman, the more I realize that his view of the "ideal" society is a Third World country. After all, electricity in many Third World places is very scarce and expensive. Moreover, since Krugman also believes that printing money creates a "free lunch" (to use his own words from The Return of Depression Economics), he definitely would be comfortable with the "free lunches" that Third World governments create daily with their printing presses.

Having only given the AER paper a quick read, I cannot comment on it. However, it seems to me from the first reading that the authors assume that electricity really is not very important in the lives of Americans, and since they live in states where only a tiny percentage of electricity is produced via coal, shutting down the power elsewhere wouldn't affect the authors very much.

Do you want to protest at Ground Zero for our current economic ills? Then Occupy Princeton!!

After reading Paul Krugman's latest anti-Wall Street screed, I have decided that I agree with him on principle: We need to occupy the place that is more responsible not only for the financial meltdown, but for the world depression that has followed it.

That's right, I am calling for an immediate occupation of...Princeton University, and specifically, its economics department. There is no other place on earth that has given us more players and more enablers of the financial madness that has gripped this economy for many years.

First, the chief architect of the depression, Ben Bernanke, was the chair of Princeton's economics department, and it was on his watch that Krugman was hired at Princeton away from MIT, Krugman's doctoral alma mater. Bernanke then went on to a position on the Federal Reserve System's Board of Governors and help create the inflationary policies that followed in the wake of the Tech Bubble of the Bill Clinton years and then the Housing Bubble.

Bernanke always has been a champion of inflation, and one of his first speeches as a Fed governor, "Deflation: Making Sure it Doesn't Happy Here," set out the infamous "Bernanke Doctrine" which claims that inflation can be a cure-all for economic ills. (He and Krugman are of one mind on this subject, as both consider government-generated "money" to be a "free lunch" on which everyone can feast.)

Let us not forget where the "Bernanke Doctrine" (and its predecessor, the "Greenspan Doctrine") has led. If I can restate these doctrines, it would be the following message to Wall Street: "Don't worry about the financial bubbles you create because when you run over the cliff, Uncle Fed will be there to provide you with precious 'liquidity'.

Thus, in his attempt to keep a deep recession from happening, Ben Bernanke has created a depression, and according to him and his followers, the only thing that keeps us in this mess is that Goldstein, er, Ron Paul and others like him, is raising too much hell about the inflation. The only man alive who might have done more damage than Bernanke has been Greenspan, but the combination of the two inflationists has been the destruction of the economy.

Of course, Bernanke (and his alter ego Krugman) are utterly contemptuous of anyone who might think that spreading dollars around the world, bailing out this and that, might not have the desired effects of restoring the economies of the nations. Why would anyone even have the temerity to think that propping up unsustainable capital and directing investment away from those entities that actually are profitable might make things worse? After all, EVERYONE KNOWS that creating more money creates more "aggregate demand," and greater "aggregate demand" means more prosperity.

Second, one of Bernanke's main shills is Alan Blinder, another faculty member at Princeton and a longtime advocate of...inflation. I'd like to say that the current depression has been a case of the Blind (Bernanke) leading the Blinder, but from my perch, it looks as though the whole bunch has been blind from the start.

However, Blinder has managed to do damage not only in backing up Bernanke's inflationary urges, but also in advising the Obama administration on the disastrous "Cash for Clunkers" program. When an economics department is as destructive as Princeton's it is important to spread the destruction to all frontiers.

Third, there is Alan B. Krueger, the Princeton professor who claims that raising the minimum wage will result in...more employment. At his urging, the Obama administration prevailed upon Congress to jack up the minimum wage during a severe recession, with one of the worst results being the record unemployment among young black men. Yes, on one end we have Princeton giving us inflation, and on the other, Princeton making sure more people are out of work, a great one-two roundhouse against the economy.

And then there is Krugman. Yes, the Paul Krugman who advocates the destruction of capital through taxation and regulatory policies. The Paul Krugman who is demanding that the U.S. economy have the capital structure of a Third World economy, but with First World results.

With respect to Albert Einstein, I'd say that this was an economic definition of insanity: Following the disastrous policies of Third World governments, but expecting the results of an economy that welcomes real and profitable capital into its overall structure of production.