Paul Krugman doesn't understand the business cycle
Is he really this dumb? Or is he just a paid agent of the state trying to propagandise the general population? I’m starting to think the latter.
This needs to be filed away to throw in Paul Krugman’s face. He writes:
It’s very hard to come up with any reason why either the US or the UK might default, since they can simply print money if they need cash. And given the absence of real default risk, long-term interest rates should be more or less equal to an average of expected future short-term rates (not exactly, because of maturity risk, but that’s a fairly minor detail).
So if you expect the US and UK economies to be depressed for a long time, with the central bank keeping rates low, long rates will be low too — end of story.
But won’t that money printing cause inflation? Not as long as the economy remains depressed. Budget deficits could lead people to expect higher inflation down the road, once the slump finally ends — but that would be a good thing for the economy in the short run, discouraging people from sitting on cash and weakening the exchange rate, thereby making exports more competitive.
Krugman is correct that the US and UK can print up money to buy government debt, but after that he is clueless. He has no idea where in the business cycle we are and has no idea of the developing price inflation.
Bernanke’s aggressive money printing is creating a new manipulated boom, so the economy won’t be “depressed for a long time”—-so there is no reason Krugman should be discussing such at the present time. But more important, it appears that the demand to hold cash is shrinking which will put upward pressure on prices along with upward pressure from the new money Bernanke is adding to the system. On top of this, from the supply side, meat will be less plentiful next year because of this year’s drought which caused farmers to send cattle to market early. Bottom line: We have the potential for a perfect storm of events that could send prices soaring in 2013. The last thing that is required at this time is further encouragement of Bernanke money printing from an NYT economist.