Krugman Doesn’t Understand How Government Debt Flows Into Offshore Banks

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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14 Comments

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14 responses to “Krugman Doesn’t Understand How Government Debt Flows Into Offshore Banks

  1. Jim R

    Meanwhile Bitcoin is starting to scare the crap out of the bankster class.
    Not that it isn’t a mania right now, but what scares them is that it leaves the manipulators out of the middle. No banksters required, just a computer network.

    … my BTC 0.00000002

    ΩΩΩ

    ELAINE: And many housewives made money off of Beanie Baby toys once upon a time, too. Bitcoins are the Pet Rocks of the computer nerds.

  2. DM

    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.

    So, in point of fact, everything is just dandy. There is no problem. Nothing to fix. It is a mistake to believe that everyone has the same agenda. No one should seriously expect any political changes in favour of the hoi polloi.

    If printing money works for now, then they will continue to print money. Whatever eventuates after that scam has run its course, no problem, they will still be in charge. No problem here.

  3. emsnews

    No, you need currency controls to stop money from flowing to overseas tax evading banks! http://www.dailymail.co.uk/news/article-2304028/Hollande-left-red-faced-Socialist-Party-treasurer-admits-holding-shares-firms-registered-offshore-tax-haven.html

    The treasurer of France’s government Socialist party parks his money overseas this way. Both left and right are running off, if they are rich, to these offshore banks.

    Yes, everyone including Bitcoin collectors want wealth to surge to infinity while doing nothing much useful.

  4. Peter C.

    34 Trillion,that’s a lot of cows.
    If the elites have run out of places to put their money,I’m accepting bids on my beanie baby Hissy the snake.It’s unique,honest!

  5. Christian W

    They can’t take all those trillions back into the banking system and start paying interest on it, they have simply printed way too much of it and just servicing the interest would make it an unsustainable hockey curve.

    This means the system is broken until they let the zombie banks go bust, close the tax havens and reboot everything. That won’t happen of course so now it’s a – free for not all but the ‘elite’ – looting game.

  6. Jim R

    To tell the truth I am attempting to triangulate on just where peak BTC will be and exit the system with money in the form of money. Might keep a few as souvenirs to go with those Yapese stone wheels.

  7. emsnews

    We should all invest in Hissy the Snake. Makes perfect sense to me! 🙂

  8. lucky13

    ‘ Bitcoins are the Pet Rocks of the computer nerds.’
    Maharishi Mahesh died w a 3 Billion dollar empire..
    I understand they print their own.

  9. GB

    Elaine,
    Occasional reader and first time poster. Thank you for this piece. I’m trying to educate myself about all this and feel I am gradually making some progress.

    Your post points to another piece of the puzzle for me as to where the trillions of dollars of Cash from the Fed’s QE-ZIRP policy (Purchases of impaired MBS from large banks and quietly effective asset stripping of U.S. and UK savers over time), fractional reserve banking, and shadow banking is really flowing besides into the global financial markets and the banks’ Reserve Accounts at the Fed.

    The money does not appear to me to be flowing into the real economy. “Wealth Effect” indeed.

    http://www.icij.org/offshore/secret-files-expose-offshores-global-impact

    Click to access Price_of_Offshore_Revisited_120722.pdf

  10. emsnews

    That money was tucked away at the Fed’s electronic vaults so it won’t disappear in a massive, violent poof.

    So banks and the Fed can pretend this is all ‘assets’ and not ‘delusions’.

  11. Jim R

    My brain just farted out this thought:
    The fact that Bitcoins are trading at anything more than about $0.01 is a MASSIVE vote of no-confidence in the prevailing money system. If people thought that their old fashioned coin-coins (and their local bank) would be worth anything ten years from now, there would be NO reason to care about these little computer-nerd-tokens.

  12. Being There

    Yes, a return to Keynesianism with modifications would be the way to go, but it’s not gonna happen. In fact our Democratic president is in the process of smashing the social safety net so more people can starve and die and not get what they need medically—that’s the ticket. Give 13 Trillion to the banks and say we’re broke.

    Yes our economy was fat enough to keep the system going without a hiccup till 2008. I have bring up Thatcher when I say that these global neoliberals want to shock the world economies into letting go of their public sector for pennies on the dollar for those poised to take it all.

    The shock doctrine continues….Thatcher’s famous acronym was TINA There is no alternative is the only game allowed. That means you can’t look at Veblen or Keynes, only Friedrich von Hayek and Milton Friedman from the Chicago School of business is allowed. At this juncture our leaders have way fewer options than they did in the past, thanks to this system. It’s like watching these idiots play checkers instead of chess.

    You can hear the think tank cant through people like Steve Case who talk about innovators and entrepreneurs are the future. He wants those foreigners for less money to come in here to create jobs….uh huh.

    Here’s the real problem. You had a great tax base and employment base when you could provide jobs for everyone regardless of the level of education. Once you dismantle that huge array of options from top to bottom, you can never replace it with “innovators” It will never reach far enough to employ the amounts of people who need jobs.

    Last night on Bill Maher a right winger guest said that we should have done what Reagan did to the banks. He took the banks into receivership and the justice department arrested many of the bad playas. Since then the lobbyists changed the laws so nothing could happen to them again. And as for receivership? Why that’s communism they’d scream.

    –BUT it was ok for Reagan to do it.

  13. Jim R

    It was Bill Black that took the S&Ls into receivership in the Reagan administration. When you hear him talk about it, he says Reagan actually wanted to NOT prosecute them.
    But in those days there was just a little more respect for the rule of law in Washington. Now it’s pretty much “rule of the jungle”.

  14. Being There

    It’s the rule of the “Untouchables”. How do you take a superpower with the highest living standard in the world and turn into a third world trade zone?

    Global neoliberalsim. No regulation=no rule of law, but only for the new princelings.

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