Monday, June 28, 2010

Krugman's Stupid Just Won't End...

So, Paul Krugman is a total idiot... Now that he's finally catching up to the reality that we're in the early stages of a lengthy depression, he's trying to make up for his failure to predict the crisis and his contributing to its exacerbation by claiming that we just didn't throw enough gasoline on the fire money at the economy.

(Paul Krugman pictured above.)

This is just as predictable as his cadre of sycophants in the comments section obsequiously sucking up to his every fictitious word and contributing with absolutely brilliant arguments of their own like Larry in Brooklyn, NY:
"Only selfish fools oppose the spending needed to put people back to work."
Yeah... I guess I'm a selfish fool then, aren't I?

Or perhaps, I - and a hell of a lot of other people - are neither selfish, nor the utter morons which comprise the bulk of Krugman's fan-base and actually understand that immense printing & spending of non-existent money is what got us into this mess in the first place, and is in no way a viable solution!

Now... The cool thing is, I don't really need to do a post on why this is so. William Anderson at the Krugman in Wonderland blog already did a great post on the topic. And really... Anderson didn't really even counter Krugman himself but just left it up to Ludwig von Mises' writing in 1948 in a piece entitled "Stones into Bread"... Mises said:
"The stock-in-trade of all Socialist authors is the idea that there is potential plenty and that the substitution of socialism for capitalism would make it possible to give to everybody “according to his needs.” Other authors want to bring about this paradise by a reform of the monetary and credit system. As they see it, all that is lacking is more money and credit. They consider that the rate of interest is a phenomenon artificially created by the man-made scarcity of the “means of payment.”

In hundreds, even thousands, of books and pamphlets they passionately blame the “orthodox” economists for their reluctance to admit that inflationist and expansionist doctrines are sound. All evils, they repeat again and again, are caused by the erroneous teachings of the “dismal science” of economics and the “credit monopoly” of the bankers and usurers. To unchain money from the fetters of “restrictionism,” to create free money (Freigeld, in the terminology of Silvio Gesell) and to grant cheap or even gratuitous credit, is the main plank in their political platform."
Mises description here applies 100% to Krugman. If only, in his view, we could just print more money and spend more and more, the "inflation" will make everyone better off.

The failure in reasoning here - especially for a supposedly top-tier "intellectual" like Krugman - is kind of astounding. Money isn't wealth! I don't see how anyone could possibly be confused on this point... If we print more money, all we have is... More money!

We don't have more houses or computers, clothes or food... We don't have a higher standard of living - just a more expensive one.

Now, here's the point where I could go on this whole tirade about how there's no such thing as perpetual motion, and there's no magic formula that lets government spending increase wealth, especially when that same government is doing nothing but spending said money on silly pork projects that benefit their buddies... But as it happens, thanks to one lone comment of sanity on Krugman's own article - I don't have to!

Check out what "Rafe" from Arizona wrote today at 11:11am (cleaned up for format just a bit):
"Just as lawyers have a vested interest in making sure the interpretation of the law and its practice is as complicated as possible, so do economists when it comes to the economy. As such I decided to describe in my head an economic system based on the first law of thermodynamics which states:

“The increase in the internal energy of a system equals the amount of energy added to the system by a heating process, minus the amount of energy lost by the system due to work done by the system on its surroundings.”

So, if the internal energy of an economic system can be made analogous to the potential growth in real and financial capital, then the heating process in a capitalist society is equivalent to its private sector’s ability to generate such capital. Energy loses (in capital) can then be categorized by the cost of doing business, poor business decisions or practices, and taxation to sustain government functions. Since profits account for the cost of doing business and poor business decisions, only government remains as a constant form of drain surrounding the economic system.

Potential Growth = Privately Generated Profits – Cost of Government

With this simple equation in mind it should be evident that private enterprises are the only means of generating a measurable, self-sustainable, growing economy. The following thoughts, mostly based on commonly accepted economic principles (as bounded by this proposal) are intended to further understand the resulting economic system:

- The potential growth of an economic system within a society is a function of the exchange of financial capital (liquid, monetary assets) for goods and services from private enterprises, the taxation of capital (real and financial) to support commonly accepted governmental functions, and the effectiveness of the said governmental functions

- The exchange of financial capital for goods and services is driven by supply and demand; market manipulation (intended or unintended) from private or government entities complicates the simple supply-demand interaction and can endanger the balance and trust in the economic system

- Private enterprises rely on profits as a measure of success and growth; profits account for the costs of doing business such as supplies, real property, investments, payrolls, employee benefits, interest, market loses and taxation

- Taxation reduces access to capital; however this is done with a common societal understanding or consensus for the need of certain governmental functions

- The value of capital is a function of business driven monetary markets and society’s trust in those markets and the economic system--the government’s role is to ensure that trust is warranted by:
  1. Setting ethical examples of behavior for the business sector to follow
  2. Fostering safe communities in which business can thrive
  3. Maintaining a system of justice to ensure the rule of law
  4. Ensuring an educated society to expand private intellectual capital
  5. Assist in caring for the indigent—-a value rooted on religious principles
  6. Maintaining a military force that can defend its society at large and support national objectives
- Unlike the private sector use of profits as an indicator of success, there are no methods to assess the effectiveness of any governmental function; not even victory in war--the more functions a government assumes, the greater the potential for inefficiency and negative effect on growth

- A growing government without a growing private economy reduces long term growth potential, as the private sector loses more capital to sustain the surrounding governmental overhead

- A self-sustaining government that generates employment and taxes itself is equivalent to a perpetual motion machine, which is impossible under the laws of thermodynamics and this simple view of economics"
What's funny is that his formula is actually akin to Murray Rothbard's "Private Product Remaining". I don't know if Rafe was aware of that at all... But otherwise, he figured it out quite well...

There's some kind of poetry in the way Rafe working out a real understanding of economics is juxtaposed against Paul Krugman's abysmal failure to do what he's ostensibly been trained to understand by the brightest minds in the world.

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