Channel: backwoodsbob
Viewing all articles
Browse latest Browse all 18

Krugman's latest.

Previous In the South.

Krugman’s latest post about the “Gridlock” economy is worth a read. Especially if you’re of a “gold bug” sort of mind. He makes several salient points:

  • Low interest rates hurt the “affluent older people” and not the super-rich.
  • “Hyper-inflation is coming”— not.
  • The “very serious people” natter on about deficits, when they’re not really the problem (right now)
  • Keynesian economics is still a valid theory.

Very low interest rates hurt simply because the return on “safe” investments, (money markets, banks, and bonds) is tied to them. The traditional safe approach is actually risky because the returns are too low. 

Hyperinflation requires more than just an increase in the monetary supply. The underlying economy has to be broken in the way 1919 Wiemar, 1860’s confederate states of America,  or 1990’s Zimbabwe were. No production (nothing to sell), nothing to buy, no trade, and a government printing money in a race to pay real external debts (with the CSA, the brit’s weren’t going to accept promises for cannon). Simply not our current situation. 

Deficits are just an excuse for inaction. To use the “household debt” model — which isn’t exactly valid for a national economy — refusing to run a deficit when recovering from a depression is exactly like refusing to take out a loan to repair a house after a tree has crashed on it. Far better to let the weather and rot finish the job, isn’t it?

Actually, I think there’s a fundamental misunderstanding of money/value in large section of the more conservative populace. Money is at best an abstract token of exchange, an agreed upon value, and not an inherent value of a coin or gold. The Spanish discovered this after invading the Americas. They returned with tons and tons of gold. Rich! No quite, the value of gold went down and prices went up. 

Viewing all articles
Browse latest Browse all 18

Latest Images