Krugman: We Need Up To $10 Trillion In QE

Seeking Alpha ^ | 10-15-2010 | Cullen Roche

[Viking2002]

Krugman is quickly evolving from crackpot to public nuisance. It's sad to watch a liberal's mind publicly self-destruct.

Well, no it's not.

"But know this, that in the last days perilous times will come: for men will be lovers of themselves, lovers of money, boasters, proud, blasphemers, disobedient to parents, unthankful, unholy, unloving, unforgiving, slanderers, without self-control, brutal, despisers of good, traitors, headstrong, haughty, lovers of pleasure rather than lovers of God, having a form of godliness but denying its power. And from such people turn away, for his name is Obama."

[FromLori]

I think he should go back to forecasting for extraterrestrial trade since his advice is out of this world

http://www.scribd.com/doc/39291424/Krugman-on-Interstellar-Trade

[DeFault User]

Paul Krugman = Harry Reid = Squirrel Testicles

Now, that's a bit unfair. Even squirrels don't run out in front of a speeding vehicle every time.

[yldstrk]

I “need” a million, does it matter?

[nathanbedford]

Thank you for an intelligent post, remarkable for its singularity. Those who see this reflexively in political terms are missing the point.

The release of the recent Fed notes indicates the Fed agrees with Krugman, QE2 is underway. We conservatives ought to consider the why of it. It is clear that our central bankers fear a disintegration, a deflationary spiral, which can lead to the unraveling of our political as well as our economic institutions. In fact, the Fed is explicitly adopted a policy to encourage inflation, so much do they fear deflation. Far-fetched? As we speak, people are rioting in the streets of Iceland because of the effects of deflation.

Brazil and Japan explicitly have expressed opposition to our beggar our currency policy and China and South Korea and others certainly will not passively tolerate such a policy from us. In any event, the Fed is accepting the inevitable debasement of our currency, with all of the hardships that will impose, as the lesser of two evils.

The greatest immediate threat to this house of cards is the foreclosure debacle. Not only are our banks on the receiving end of a tsunami of defaults, the entire legal system foreclosure has broken down, with the result that mortgagee's cannot prove who is the lien holder of record and, since these mortgages have been sliced and diced and parceled out to innumerable investors who in turn have leveraged them fantastically with derivatives, the implications for the entire financial system, here and abroad, are devastating. Meanwhile, it will not take a genius to figure that it is pointless for him to continue to pay a mortgage for his house which is underwater when his neighbor squats in his house without paying his mortgage. The system simply disintegrates.

It is important to understand that the rioting in Iceland (rioting in Iceland!) has been precipitated by an end to mortgage payment moratorium.

There are many conservative economists who believe that QE2 is the last chance, as forlorn hope as it is. If we do not default intentionally by inflation we will default haplessly by deflation. Some argue that it is swifter and cleaner and more honest to default now and others fear the social implications.

What we are really talking about is how to commit economic euthanasia.

[AdaGray]

Paul Krugman has become the class clown of economists.

[hal ogen]

I asked the squirrel eating seed on my deck this morning how much money we need and he said “Oh...we need up to 154 quinzillion billion in QE”. I trust him more than this fool, krugman.

[blam]

I had a big crop of pecans last year but the squirrels are getting the few I’m having this year.

[SC_Pete]

If ever there were an argument against QE, it is that this lunatic is for it. I wish he would recommend specific investments—we could make a lot of money shorting them.

[Moonman62]

The government getting out of the way of the American people would be so much cheaper and effective.

[BobL]

“In fact, the Fed is explicitly adopted a policy to encourage inflation, so much do they fear deflation. Far-fetched? As we speak, people are rioting in the streets of Iceland because of the effects of deflation. “

Thanks for the nice words - you should see the words that I get when I go after Republican governors (including my own) for selling off our highways. However, I do differ slightly on Iceland. I think Iceland’s problem is that their currency is worthless, since they cannot and don’t have a prayer of paying their national debt (even worse than us, as crazy as it sounds).

But their problem is different, in that even their mortgage loans are Euros, and with their currency diving, the cost of paying those loans goes through the roof - so the end of the 6-month break absolutely kills those people. Additionally, with a worthless currency, the cost of everything imported also goes through the roof - classic inflation - but coupled with a debt that they cannot print away - so they’re really hosed. In fact, if it wasn’t for IMF life support, they’d be starving by now (or dead of starvation). Their only currency now is barter, and they just don’t produce enough for that to be productive.

My understanding of deflation is that you get it after a lending bubble, when a society actually tries to pay back its debts, and thus stops buying goods (relatively speaking) - and that also protects their currency. Iceland’s debt (10 times GNP) cannot be repaid by its people, so they don’t even have that option.

At least that’s my take.

[Wyatt's Torch]

You need to do both. The problem is that the money supply is not sufficient (look at the velocity charts from the St. Louis Fed). If you cut taxes without increasing the supply you will increase demand and throw us further into deflation which will be far, far worse than inflation.

[jdsteel]

I’ll respectfully disagree. In the real world, supply follows demand. There may be a short period of time where supply falls short of satisfying demand and prices rise as a result. As those higher prices stimulate profit motive supply will rise to satisfy demand unless it has been artifically restricted (by government or unions). If you want to increase the velocity of money just cut taxes and regulation, sit back and watch. Works. Every. Time.

[jdsteel]

A viable alternative would be to allow energy companies to access the coal, oil and natural gas that we have without todays onerous restrictions. To slash wasteful government spending and to lower tax rates across the board, which will increase the income to the federal government exponentially.

[jdsteel]

It sounds like you are describing “conservative economists” that believe in Keynesian economics. They are as common as unicorns. Supply side economics is the only solution.