Krugman’s Economics Have Us on the Brink


Paul Krugman, Professor and New York Times writer, is a Keynesian. His Keynesian model is the President’s and it has our economy on the brink. Repudiating a far left ideologue like Paul Krugman is a waste of time. It’s like denouncing the tooth fairy for being imaginary.

It is, however, hard to ignore him when he says things like …denouncing right wing fanatics (which would be anyone who is not far left) is like denouncing wolves for being carnivorous. How about his take on the press – he believes they should censor all conservative views about the debt ceiling. Paul Krugman thinks Obama is too centrist. His latest is the best – he thinks 90% debt is no big deal. Does the label “mad socialist” fit?

Consumer spending dropped in June for the first time in two years. Incomes barely rose. Manufacturing and GDP growth have been anemic. While some say the spending cuts in the debt deal could hurt the economy, that is highly unlikely since the cuts don’t begin until 2014. However, Professor Krugman begs to differ.

Professor Krugman believes the spending cuts are a bad idea. He thinks the AAA ratings are unimportant. He doesn’t believe that economies reaching 90% debt have anything to worry about. He’s probably a little insane, but that’s a personal observation. Back in February, Krugman said it was a “moral issue” for the press to censor conservative views about the debt ceiling. He complained further that the media is too “fair and balanced” and his biggest concern is “centrism.”

He wrote: “Watching our system deal with the debt ceiling crisis — a wholly self-inflicted crisis, which may nonetheless have disastrous consequences — it’s increasingly obvious that what we’re looking at is the destructive influence of a cult that has really poisoned our political system.

And no, I don’t mean the fanaticism of the right. Well, OK, that too. But my feeling about those people is that they are what they are; you might as well denounce wolves for being carnivores. Crazy is what they do and what they are.

No, the cult that I see as reflecting a true moral failure is the cult of balance, of centrism…So what do most news reports say? They portray it as a situation in which both sides are equally partisan, equally intransigent — because news reports always do that.” (Editor’s note – huh, he’s kidding, right?)

Krugman expresses the left viewpoint. Krugman and his ilk are the elite, and I don’t think they have noticed that the rest of us aren’t living all that well nor do they care.

A moderate perspective comes out of Bloomberg News – too much debt means the economy cannot grow.Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP.”

A bad jobs picture and small wage gains have not kept pace with inflation which is one of the reasons for the slowdown in consumer spending. Consumer spending makes up 70% of the spending in the economy.

Stocks extended fell on mounting concern the U.S. economy was faltering. The Standard & Poor’s 500 Index declined 0.3 percent to 1,282.54 at 9:47 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.71 percent from 2.75 percent late yesterday. Today, the Dow fell 260 points.

Inflation in June was the same as May and appears temporarily stabilized. Overall, for the year through June, it increased 1.3%.

Fuel costs remain high – $4 a gallon in New York.

Auto dealers see the biggest slump in a year. Bloomberg reports that July car and truck sales have stalled.

Freddie Mac recently released a report stating that they are not expecting a double dip in the housing market because they are being boosted by an uptick in the rental market. Sales are up 3-5% over last year.

The Institute for Supply and Management’s (ISM) July 2011 factory index is the worst score in two years. This industry, which makes up 11.2% of the nation’s GDP, fell to 50.9%, which was unexpected.

Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said the numbers are “disappointing and represent the lowest for the year,” but added that 50.9 is still in the growth range. (If it were below 50, it would mean the industry is contracting, and above 50 means expansion.)

Borrowing by U.S. businesses is up 25% in June over last year, pointing to some improvement in the business outlook.

Timothy Geithner is not concerned about a recession. “Construction is very weak, housing is very weak, and confidence … has been damaged,” he said in an interview with ABC. “But if you look at what’s happened to exports, if you look at what’s happened to investment spending, there’s lots of encouraging signs of resilience, too.”