Paul Krugman’s Three simple ways to fix the U.S. economy – Freeland File (2:19)

[ErikJ]

Freeland File May 7th, 2012

also from interview.

Paul Krugman says GOP economic policies are “medieval” – Freeland File (10:14)

Republican economic ideas are the equivalent of doctors using razors to bleed patients to health, says Paul Krugman. The Nobel Prize-winning economist tells Thomson Reuters Digital Editor Chrystia Freeland that the U.S. needs to learn the lessons of failed austerity programs in Europe in this episode of the Freeland File. (May 7, 2012)

[napoleon_in_rags]

1. Great stuff.

I loved that leeches metaphor. Its really like that. Back in the day, Republicans had a solid ideology, the kind of thing you advocate, knowing it needs tweeks here and there to actually work, a work in progress like any other scientific idea. But now its a dogma, its a dark ages religious thing. Those who are hurt by the economic devastation are only those who deserve to be hurt. That kind of nonsense.

I just wished we got to hear him sing the Leonard Cohen though... C'mon Paul!!!

[napoleon_in_rags]

2. You know what else I have to say about this though?

We humans haven't really gotten our heads around information theory yet, not fully. The reality is that many economic models, and I think Keynesian models fit this as well, are based on observing and creating models of the markets, without really understanding how those derived models themselves effect markets, without really understanding the full information game we are wrapped in.

Back in FDR's time, these models worked because there was a set of expectations from the depression era policies - nobody expected a bailout. And in this context, things like the banker bailouts are reasonable: If all those banks really expected to fail, and tried their best, the bailout had the power to really to really set them back on their feet, give a valuable second chance.

But in these times, due to the pervasiveness of the ideas of Keynesian models in top economic circles, nobody really has that expectation of failure any more. That means plans can be discussed behind closed doors to deliberately create the circumstances for total failure, knowing full damn well that the taxpayers will pick up the tab for the bailout.

I don't think this is tinfoil hat reasoning. When I heard about the sub prime mortgage meltdown for instance, I also heard the story of a guy who made a lot of money off it. The inside data he had? Well, he noticed US housing prices rising vastly quicker than US incomes. So he bet on a meltdown, and won. Trivial, childish stuff - if housing prices rise faster than incomes, people won't be able to buy houses. But I am expected to believe that NOBODY in these top financial circles, where derivatives and complex financial instruments reign supreme was able to figure that out? It stretches credulity.

So THIS, which I have here described, is the foundation of the resistance to these Keynesian ideals, on both the left and right. If policy makers want to move forward with these stimulus oriented policies, they need to be willing to address these issues of corruption and complicity first, and lay out plans which provide stimulus without rewarding those who PLAN to fail in order to profit from the handout.