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Source link: http://archive.mises.org/12302/the-fable-of-krugman/

The Fable of Krugman

March 25, 2010 by

While Paul Krugman likes to present himself as being a Keynesian, in reality, his intellectual roots run back a few centuries to the mercantilists. FULL ARTICLE by William L. Anderson

{ 2 comments }

El Tonno March 25, 2010 at 10:29 am

Krugman deserves a Nobel Prize in Economics as much as Obama deserves one for Peace. What a sad epoch we are living in.

Bogart March 25, 2010 at 10:56 am

The best part is that there is definitely a “Liquidity Trap” that has engulfed the entire Western World and has engulfed Japan for the past 20 years. That is that banks must charge higher interest rates to cover the risk of private borrowers, but the borrowers can not make payments at the higher rates. So banks just let reserves sit at the central banks or loan them to governments. Borrowers just sit wanting to loan but can afford the payments and the suppliers to these borrowers just cut staff hoping to stay in business.

If central banks would allow interest rates to rise / trend toward the real rates (I am betting that the real interest rates are greater than almost zero.) then governments could not borrow as much money or could not borrow at the higher rates. Banks would accumulate reserves and now would be enticed to lend these to private borrowers.

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