Friday, 15 August 2014
OMG: Krugman believes in “secular stagnation”.
Or at least he seems to judge by this article of his, entitled “Secular stagnation: the book”.
Let’s get one thing straight: secular stagnation is bunk, drivel, claptrap, nonsense on stilts and hogwash all rolled into one. It’s simply a phrase that has become fashionable of late, and the brainless will always latch on to a fashionable or important sounding phrase.
That’s why the phrase “Weapons of mass destruction” was such a brilliant phrase for getting us into the Iraq war. It’s an important sounding phrase. Put that another way, as the old saying goes: “control the language and you control what people think”.
Anyway, secular stagnation, in Krugmans’ own words is “the claim that underlying changes in the economy, such as slowing growth in the working-age population, have made episodes like the past five years in Europe and the US, and the last 20 years in Japan, likely to happen often. That is, we will often find ourselves facing persistent shortfalls of demand, which can’t be overcome even with near-zero interest rates.”
That idea is pure, 100% proof bullshit. If demand is still deficient when base rates are zero, there is nothing, REPEAT NOTHING, to stop the state simply printing money and spending it on public sector stuff (education, infrastructure, the military, or whatever). That creates jobs and useful services are provided, and useful stuff is produced. And for those who don’t want a bigger public sector, there is the alternative of simply cutting taxes and leaving public spending constant. That leaves spending money in peoples’ pockets, so more PRIVATE SECTOR stuff gets produced.
Advocates of Modern Monetary Theory have been pointing that out for years to little avail. And Positive Money makes the same point.
Unfortunately the above very simple point is beyond the comprehension of most of the World’s leading so called “professional” economists.
And Krugman in his article invites readers to download a book on the subject of Secular Stagnation published by VoxEU. Sorry: I can’t be bothered.
Of course whenever the phrase “print” and “money” appear in the same sentence, hoards of Neanderthals appear from the woodwork making the statement of the blindingly obvious, namely that printing too much money leads to excess inflation.
Those same Neanderthals were saying that when money was printed in large quantities as part of the QE operation. They’ve been proved spectacularly wrong.