1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/11029/krugmans-magic-solution-to-budgetary-woes/

Krugman’s Magic Solution to Budgetary Woes

November 13, 2009 by

Until now I’ve been in a rat race: when the family budget was tight, I thought I had to earn more or spend less money. Krugman explains the real problem: the bank decided to peg its unit of account rigidly to the dollar at 1:1. FULL ARTICLE by Robert P. Murphy

Reblog this post [with Zemanta]

{ 30 comments }

Saul Frugman November 13, 2009 at 7:33 am

Printing more money is the easiest way to balance the budget. Lets print lots and lots of money. If you print enough money, you’ll be so rich that you can burn money to stay warm.

Mr Eko November 13, 2009 at 7:50 am

This could just be my naivete, but as the dollars flow out of Ecuador, wouldn’t the purchasing power of each dollar that remains there increase? So, the prices of domestically produced goods would decrease, and become more attractive to consumers, who would start buying more domestic goods. Therefore, the trade deficit would begin shrinking.

Enjoy Every Sandwich November 13, 2009 at 7:52 am

Wouldn’t it be easier just to take the process a step further and “create wealth” the way the Fed does? I’ve got a million dollars in the bank right now, because I say so.

Mike November 13, 2009 at 8:03 am

I just love that this guy has a Nobel prize.

wealth November 13, 2009 at 8:18 am

Mike,

And Barack Obama got a Nobel peace prize.

It’s obvious now that the Nobel committee is leftist and gives prizes only to socialists sharing the same political penchants.

Nobel prizes are worth nothing, they lost their value and credibility.

Deefburger November 13, 2009 at 8:41 am

But it’s just like “Fishes and Loaves”! If everyone would just believe…

I’m going to go take a walk on the lake now.

Mike November 13, 2009 at 8:54 am

It doesn’t make the fact any less funny. In fact I think Krugman’s Nobel is far funnier than Obama’s.

T. Ralph Kays November 13, 2009 at 11:45 am

This made me laugh out loud, I admire the brilliance, but after a few minutes the humor evaporated and was replaced with sadness and fear. The views we are making fun of here are held by people who not only control our economy and legal system, but also control the most powerful military in the history of the human race. Doesn’t seem so funny to me anymore….

Wealth November 13, 2009 at 12:03 pm

T. Ralph Kays,

“Doesn’t seem so funny to me anymore….”

Please define funny and justify why it should not be funny, otherwhize you are a totalitarian jerk.

Kristian Joensen November 13, 2009 at 12:07 pm

“Mike,

And Barack Obama got a Nobel peace prize.

It’s obvious now that the Nobel committee is leftist and gives prizes only to socialists sharing the same political penchants.

Nobel prizes are worth nothing, they lost their value and credibility.”

Those two prizes are not related to each other at all, they are not awarded by the same “Nobel comittee” as you imply.

Weingarten November 13, 2009 at 12:22 pm

The government has only delegated powers, so it can’t have the prerogative to do anything that the people do not have. Consequently, since the government has the right to print money so do all of us.

Wealth November 13, 2009 at 12:33 pm

Kristian Joensen,

Well, the Nobel prize in economics and the Nobel Peace Prize are too oftenly given to socialists promoting dishonest big government.

Even if it’s not the same committee, it’s the same mentality.

Not a Nobel November 13, 2009 at 12:42 pm

The Nobel Prize in Economics isn’t really a Nobel. It’s the Swedish Central Bank Prize. The Swedish Central Bank isn’t biased.

William Anderson November 13, 2009 at 12:43 pm

Bob, you old devil! Why didn’t I think of that one first? What you have said makes perfect sense. Furthermore, what you need to do is to make sure that LOCAL merchants also get the same treatment, as well as the bank to which you pay your mortgage.

Another thing you might want to do is to print up a bunch of Murphys and distribute them. I can assure you that the money would stay in the Nashville area (since no one else outside of Nashville would be wise enough to accept Murphys), thus stimulating the economy.

There are no limits to your plan, and I am happy to see that you came to see the Great Wisdom that Paul Krugman dispenses on a near-daily basis. I’m so happy that he is giving advice!

Adam Knott November 13, 2009 at 1:53 pm

“I henceforth want to devalue my checking account, so that when I write a check for 500 units, the bank only transfers $250 to the person whose goods I am purchasing.”

Bob:

I think in this case, Mr. K will want to know whether you will be writing these checks to LvMi, Wal-Mart, the Republican Party, and other institutions whose influence he may be interested in diminishing.

If so, I think he will support your scheme.

On the other hand, if you were advocating this scheme as a way for us to pay our taxes, he may see things differently.

When the institution paid with such devalued currency is one Mr. K doesn’t want diminished, my hunch is that he will find articulate ways of arguing against such a scheme.

Find a way to pay Mr. K’s “team” with devalued currency, and you will have found a way to enlist Mr. K in your services as an opponent of devalued currency.

: – )

Sean A November 13, 2009 at 3:01 pm

“I thought I had to earn more or spend less money.”

See what you get for thinking. Just sit back and let the noble elites deal with the investment sector. People like you and me can indulge in our animalistic impulses while the Krugman’s of the world conjure up schemes to make us more money. I’m thinking either a canal project–hasn’t been one of those in awhile; or perhaps we can plant more trees; green seems to be in these days. Man, i hope a devastating hurricane rips apart my city so that it can be stimulated by the rebuilding project.

Bob Roddis November 13, 2009 at 3:49 pm

The real question is why do so many people, most of whom clearly understand the economics of the home and checkbook, simultaneously subscribe to the magical Mary Poppins theory of government and government finance. This affliction seems to explain support for war-mongering, economic regulation and putting into effect the Keynesian Hoax. Krugman is extraordinary in being so unambiguous in arguing that government and central bank activities follow magical rules totally unlike the rules of personal finance and logic.

The question is why do people insist on believing this nonsense when in their personal lives they seem to know better.

Sonic Ninja Kitty November 13, 2009 at 6:03 pm

Genius.

The NYT and Princeton should start devaluing their bank accounts before they write out their paychecks to Krugman, too.

Walt D. November 13, 2009 at 9:16 pm

The key is to let everyone borrow from the FED. I borrow $10 million at 0.5% simple interest for 40 years. I prepay the $2 million in interest and have $8 million to last me 40 years. I should be able to get by on $200,000 a year (unless I develop a taste for Jeffrey’s jamon!). What happens in 40 years? That’s 10 administrations away. That’s a long time for a society that is used to planning quarter by quarter.

Yancey Ward November 14, 2009 at 12:15 am

The baby-sitting coop writ large.

Chicago Methods November 14, 2009 at 12:58 am

Wealth,

Please don’t come up with conspiracy theroies; while they’re fun, it isn’t good for you. Out of the (now don’t quote me on this) ~57 Nobels for Economics, roughly 5 of them has been to Macro economists; regardless, a very small amount. Macro economics plays little significance in anything scientific since it is such a mystery. It doesn’t go to outrageous socialism – as you may think.

For anyone who’s interested, the reason why Paul got his Nobel was because about 15 yrs ago, he applied game theory to a specific level of economics; not very significant. Game theory has been used in econ for a very long time and it was kind-of just handed to him.

Not like the recent Nobel given to the Chicago School (again) about discovering the relations of aggregate consumption to asset pricing – a monumental step to solving the ever alluding equity premium puzzle.

Paul is nothing more than a fringe economist trying to de-bunk the work of Macro economics, entirely, of the past 30 years all on incredibly shaky facts. He’s nothing more than the leftist version of Rush Limbaugh – more interested in mockery and mud-slinging and less in actual progress.

Chicago Methods November 14, 2009 at 1:07 am

I highly suggest people to read the book:

Saving Capitalism from Capitalists

It’s by one of the leading financial economists, Luigi Zingales, and it provides an “erudite case” for where we need to head – free markets and a pro-market society (not a pro-business: protecting the self interests of already existing businesses).

Hell I encourage anyone to read whatever Luigi writes. He’s a smart guy and we need all the info we can get to drown out all the loud noise (and that’s all it is) from the left.

It’s like they, the left, think that if they yell loud enough, the left’s protectionism policies will actually become good economics. They’re so stupid…

Sam Lowry November 14, 2009 at 10:28 am

Chicago Methods writes: “For anyone who’s interested, the reason why Paul got his Nobel was because about 15 yrs ago, he applied game theory to a specific level of economics; not very significant.”

No, that was the excuse. That wasn’t the reason.

“Weapons of Mass Destruction” was the excuse for the invasion of Iraq. It wasn’t the reason.

The Taliban are the excuse for the U.S. occupation of Afghanistan, not the reason.

The “Global War on Terrorism” is the excuse for warrantless wiretaps and illegal searches and imprisonment without trial. It isn’t the reason.

Elasticity of the money supply–no wait–animal spirits–no wait–price stability–no wait–maximizing employment–no wait–ultimate responsibility for the survival of our financial system is the excuse for the existence of the Federal Reserve. It is not the reason.

Take the set of people that are smarter than you are. Next, take the set of people who have nothing but contempt for the masses. Finally take the intersection of these two sets. If this set is not empty, you have an explanation for all those supposedly honest mistakes and good intentions that always seem to do nothing but enrich and empower the plutocracy.

C November 14, 2009 at 12:35 pm

@ Sam Lowry

“Take the set of people that are smarter than you are. Next, take the set of people who have nothing but contempt for the masses. Finally take the intersection of these two sets. If this set is not empty, you have an explanation for all those supposedly honest mistakes and good intentions that always seem to do nothing but enrich and empower the plutocracy.”

The set is clearly not empty. It contains at least 450 members in Washington and “300 White Men” on Wall Street.

If you want a more complete list of the members of that set, just include almost every name you can find on OpenSecrets.org, both donors and recipients. (I am willing to exclude both Drs. Paul.)

Wealth November 14, 2009 at 2:24 pm

Chicago Methods,

You’re the one who mentioned conspiracy, not me.

It is very possible that the nobel laureate committee all share socialist views and spontaneously cooperate to reward socialist figures in the world without planning such things together.

57 Nobel Prizes in Economy, but I bet the last 5 prizes were about socialistic macro-economics.

Mike D. November 14, 2009 at 3:57 pm

Great analysis as usual Robert.
Following on from Walt’s post, here is an even better idea to solve your family budget.
1) Take your $2000 and buy a T-Bill or any other AAA rated security.
2) Deposit this with your bank.
3) You can leverage this 62.5 to 1 according to Basel II.
4) They will then advance you $125,000 at 0.5% interest rate.
5) Place $25,000 in a separate account and instruct the bank to use this money to pay the interest.
6) Now you have $100,000 to spend.
OK, one other thing. You need too set yourself up as Bob’s Bank and become a member of the Federal Reserve System.
I think you may also have to keep a minimum balance of 8% or $10,000 in the account.
Is this analysis correct?

Franklin November 14, 2009 at 7:37 pm

Bob Riddis: “The real question is why do so many people, most of whom clearly understand the economics of the home and checkbook, simultaneously subscribe to the magical Mary Poppins theory of government and government finance. This affliction seems to explain support for war-mongering, economic regulation and putting into effect the Keynesian Hoax…”
Well said.
I guess it’s that the negative effect of printing valueless bills is not realized for a long time. And in the interim, the real effect of somewhat free commerce buoys the shaky vessel that is called “the economy.”
And thus, the so-called safety net that is called ‘the government” has agents and supporters, journalists and shills who insist that pump-priming was the catalyst for stabilizing the ship and ensuring wealth generation.
And then, more voters than less believe, “desperate times require desperate measures,” and all that tripe.
Same old, same old.

HM November 14, 2009 at 9:32 pm

So, the US gov’t is borrowing ridiculous amounts of money ($trillions) it can never repay at artificially low interest rates (0.5%) to buy stuff it doesn’t need (car companies, bridges to nowhere, a war in the middle of nowhere).

Sounds a lot like millions of American consumers:

People with low incomes and bad credit (they could never repay a loan) borrowing 110% of inflated house values using ARM’s (1.0%) to buy gas-guzzling SUV’s and flat-screen TV’s.

So perhaps the gov’t is just catching up with the general population…

Saul Frugman November 15, 2009 at 5:48 am

If we don’t bail out car companies, we would have 10% unemployment. Bridges to nowhere create jobs for bridge makers. Wars in the middle of nowhere set an example to prevent people from refusing worthless paper (we have more guns than you, so you better take it as payment). And wars create lots of rebuilding jobs, boosting the economy. Deficits pumped 25% of the GDP into the economy.

Marco Saba November 17, 2009 at 5:00 pm

After all, didn’t the central banks falsify their balance during the era of the Golpe-standard?

See:
A better way to account for fiat money at the Central Bank
Thomas Colignatus, December 31 2005
http://ideas.repec.org/p/wpa/wuwpgt/0512014.html

Comments on this entry are closed.

Previous post:

Next post: