For all of you who wondered why I had not written my usual Monday missive against Paul Krugman’s latest column, it was because the Krugperson seemed to be making sense. In his Monday, March 23, column, Krugman was critical of the government’s newest bank bailout plan, the “cash for trash” program in which the government co-signs for private investors who buy toxic assets with the understanding that if they go down in value, the government will pay for them.
Now, I was naive, I suppose. Perhaps Paul Krugman was recognizing that this created a huge moral hazard, or it would stand in the way of the necessary liquidation that must take place before we can have a recovery, yada, yada, yada.
Well, I found out today why Krugman was against this program. It is because it supposedly is “market-based,” and if there is anything Krugman hates, it is a “free market.” (Of course, the Treasury’s latest missive is not free market by any stretch of the imagination, but to Krugman, even crony capitalism is the exercise of a pure free market. Writes the Nobel Laureate:
It’s a bit disappointing to see the Obama administration engaging in this sort of market-worship — hailing markets as a Good Thing in themselves, rather than as an often but not always useful means to an end. But I have reason to think that unlike the Bushies, they don’t really believe it; it’s just politics. Which is actually better than having genuine market fanatics running things, I guess.
There you have it. Krugman is right to oppose the plan, but he is right in the way a broken clock tells time correctly twice daily.