Nobel Prize-winning economist and New York Times liberal lunatic Paul Krugman has thrown FDR under the bus. He now admits that Roosevelt’s tax-and-spend socialism didn’t end the Great Depression, but World War II did.
We’re not sure he knows that’s what he did, but read his words from a recent column for yourself and see if that isn’t the obvious conclusion:
A naive view says that what we need is a return to virtue: everyone needs to save more, pay down debt, and restore healthy balance sheets.
The problem with this view is the fallacy of composition: when everyone tries to pay down debt at the same time, the result is a depressed economy and falling inflation, which cause the ratio of debt to income to rise if anything. That is, we’re living in a world in which the twin paradoxes of thrift and deleveraging hold, and hence in which individual virtue ends up being collective vice.
So what will happen? In the end, I’d argue, what must happen is an effective default on a significant part of debt, one way or another. The default could be implicit, via a period of moderate inflation that reduces the real burden of debt; that’s how World War II cured the depression. Or, if not, we could see a gradual, painful process of individual defaults and bankruptcies, which ends up reducing overall debt.
A little inflation. That’s all we need. And, of course, government economists are so adept at monetary policy that they will be able precisely control the amount of inflation they introduce into the economy.
Much like they’ve been able to precisely control the rest of the economy for the last two years.
Argentina, here we come.
Source: New York Times
