Unfortunately, he believes, no decision makers in the government are listening. Instead, from President Obama to Ben Bernanke, these people are listening to the "Pain Caucus" (as he calls people who note that the economy cannot expand with malinvested capital), the "inflationistas," and those lyin' furriners (the Chinese and Germans) who are more responsible than anyone else for our present condition.
For example, he writes of the Chinese and Germans:
After all, you have China, which is engaged in currency manipulation on a scale unprecedented in world history — and hurting the rest of the world by doing so — attacking America for trying to put its own house in order. You have Germany, whose economy is kept afloat by a huge trade surplus, criticizing America for running trade deficits — then lashing out at a policy that might, by weakening the dollar, actually do something to reduce those deficits.So, there you have it; these countries, which actually make goods that people want to buy, are partially at fault for our predicament. Obviously, we need a good trade war to accompany our failed "war on terror." That will bring prosperity for sure.
Here is the ultimate irony, however. Krugman believes that the government is choosing the "hard way" when, in fact, fixing the current problem is quite easy. As he wrote in his book The Return of Depression Economics, most economic crises (according to him) can be "fixed" simply by the printing of money. In other words, Ben Bernanke really can print some of it, go into his helicopter, and dump it out upon grateful people who then will go and spend it, giving the economy "traction," and leading us into prosperity.
Now, this makes Krugman a most interesting prophet. Most prophets of the Bible excoriated Israelites for seeking a life of ease, for following after false gods, and "oppressing the poor" by getting them to work, and then not paying them, or having crooked judges rule in their favor when the poor brought their cases before the courts of those days.
Krugman, on the other hand, claims that the real solution to the current situation is the easier path. Those that say that we no longer can continue the boom through loose credit and wild deficit spending and who must get the "house in order" really are the villains, for they lead us down the path of pain.
In his famous "Hangover Theory" article in Slate, Krugman (after mangling the Austrian Theory of the Business Cycle) declares:
Powerful as these seductions (ATBC) may be, they must be resisted—for the hangover theory is disastrously wrongheaded. Recessions are not necessary consequences of booms. They can and should be fought, not with austerity but with liberality—with policies that encourage people to spend more, not less.See? The "solution" really is quite easy. When the value of malinvested assets fall and the follies of a boom are exposed, we then pretend that we are prosperous. Is the income that flowed from the money borrowed to finance these malinvestments drying up? No problem! Let the government either try to prop up these malinvestments by getting the Fed to purchase government bonds, or sell the bonds to a central bank in Upper Slobovia and use those dollars to fund the politicians' latest projects (like rail tunnels). And, if the projects run way over budget, THAT IS EVEN BETTER BECAUSE IT MEANS WE ARE SPENDING MORE MONEY!
Usually, prophets tell people that they must choose the more difficult path, but the Prophet Krugman differs. If I may use an analogy from the New Testament, it would be like Jesus telling his disciples that they should enter "through the wide gate," as "the narrow gate is too painful."
I sense a real anger in Krugman's words. Here is a Nobel Prize winner telling people that the way out of this depression is easy: just borrow, print, and spend (and spend and spend). Yet, somehow, the Bad People are winning the day, falsely convincing people that we cannot borrow and spend our way to prosperity. They are not moved by Krugman's prophecies that the road to ease is for us to start a trade war with China, tell the Germans "Zum Teufel mit Ihnen," and spend, spend, and spend some more.
Is something wrong with this picture?