Krugman's article criticized Bernanke and the FED for not going the extra mile in combating the problems in the economy. Krugman believes and he points out that Bernanke also clings to this belief that the FED does have extra tools at its' disposal to fight the deflationary spiral the economy is facing. For example.
" It can buy longer-term government debt. It can buy private-sector
debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.
Nobody knows how well any one of these actions would work. The
point, however, is that there are things the Fed could and should be doing, but isn’t. Why not? "
I stopped "officially" studying Econ after my sophomore year at Colgate. A semester of Macro and trying to get my head around the Edgeword Box Diagram drove me over the edge. Economics is called the "dismal science" but labeling it a science is inaccurate and an attempt by those who practice it to elevate the intellectual importance of their craft.
It really isn't rocket science. Our economy went through a multi-year process whereby all we did was stimulate it. We went from .com boom to post 9-11 zero % financing to house flipping, to house as ATM consumption. We stimulated ourselves to "pull-forward" demand for probably the next decade. I don't know what these prize winning economists don't get about that. We are in a spot where there is nothing left to stimulate. A substantial % of US homeowners owe more on their home than it is worth. We have a debt hang-over on a personal level, a local government level, a state government level and the Federal government level yet somehow good Professor Krugman is looking to convince us that borrowing more is the answer to our problems.
Krugman and his crew worship at the altar of a false god. For whatever reason they have "faith" in the wisdom of policy and policy-makers. As he stated in today's column:
Like other economists, myself included, Mr. Bernanke was deeply disturbed by
Japan’s stubborn, seemingly incurable deflation, which in turn was “associated
with years of painfully slow growth, rising joblessness, and apparently
intractable financial problems.” This sort of thing wasn’t supposed to
happen to an advanced nation with sophisticated policy makers.
King David had something to say about this many years ago. Krugman's misplaced faith reminded me of it--Psalm 146:3-4. We might all be better off keeping the giant slayers' words in mind as we continue to listen to prescriptions offered by our monetary princes.
Put not your trust in
nor in the son
in whom there is no help.
His breath goeth
he returneth to his
in that very day his thoughts perish.