Paul Krugman is the leading ‘expert’ (sic) for wild money printing and wild government spending as a cure for a huge credit bubble breaking. Both the left and the right are wrong about what ails the world economic system. We are drowning in a flood of red ink and money printing since the winners of world trade manufacturing exporting are those who destroy their home base currency making exports cheaper. And the money produced by this flood of ZIRP lending by central banks flows instantly to offshore banks. So far, $34 trillion sits there, outside of the economies the liberals want to grow via government debt. This debt=more money in offshore accounts, less money at home.
Once again, Krugman demands we double the trillions of dollars we poured into world trade: The Urge to Purge – NYTimes.com
Now, the fact is that these ranters have been wrong about everything, at every stage of the crisis, while the Keynesians have been mostly right. Remember how federal deficits were supposed to cause soaring interest rates? Never mind: After four years of such warnings, rates remain near historic lows — just as Keynesians predicted. Remember how running the printing presses was going to cause runaway inflation? Since the recession began, the Fed has more than tripled the size of its balance sheet, but inflation has averaged less than 2 percent.
All countries that can print money are doing so like mad right now. Only the EU confederation is hesitating on this due to Germans being very wary of inflation. The floating fiat currency regime screams for money printing as a solution to all economic woes. And this system has been joined up with the new Derivatives Beast which created many trillions of dollars of deals that can’t exist in the real world.
Why has government spending by the first world nations failed? It is obvious to me. The money created via public debt flows to the wrong hands. True, a portion goes to the wage earners at the lower levels but then they spend it on mainly food, energy and cheap labor imported goods. Which means this debt money flows into the hands of the elites who own the energy systems, the food chain systems, the war machine systems, etc.
They, in turn, move all the loot overseas to these wonderful tax-free pirate island banking scams. $34 trillion is hidden there. So the debts pile up on taxpayers in these nations while their elites park the money printing excess out of the economy so it remains totally starved of cash.
The more money is printed, the more it vanishes in to FOREX holdings of major export powers and these offshore banks. It CEASES CIRCULATING. Krugman doesn’t mention this salient point. He thinks we can take on infinite government debt at ZIRP rates and nothing will happen. But we see with Japan which is printing money like mad, this doesn’t improve the lives of the 30% of workers who are working part time nor does it improve lives in any fashion there, it is sucked down by the elites who then buy foreign properties, gold or gamble. And fast women and fast cars. All the elites do this.
FDR did not just print money or spend wildly. He started things like the CCC which worked to make things better for the public. Then, we pulled out of the Great Depression via WWII and this was due to the US not being bombed much during that war while trade rivals were wrecked or destroyed.
The US public has been told that tiny, weak North Korea is menacing us. Meanwhile, Japan works tirelessly to menace us by printing yen and keeping it home in its government debt accounts but using this to weaken the yen so they can export more easily and their elites get more profits (which they move overseas, of course!) in dollars. These dollars will compete with out home economy dollars in say, oil markets.
And this is the dynamic: the more dollars we print, the more our trade rivals spend these dollars on energy like oil. And then the price of oil goes up and up and up. When this happens, our economy goes slower and slower and food gets more expensive. This is stagflation and reading all the economic news this last five years, I very seldom see that word. No, Krugman on the left and the austerity fanatics on the right talk about inflation or deflation. This is a false duality. We have BOTH simultaneously and the word ‘stagflation’ is a good word to describe this.
Alas, the cure for stagflation is higher interest rates. This brings all the offshore funds back home seeking a higher rate of return. The US, UK and Japan all have ZIRP savings rate which rips off savers while having fuel inflation. This is very bad and continuing this policy is worse.
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