More Than Once Upon a Time

A classic Paul Krugman column in the NYTimes today. He complains that the mismanagement of the AIG bailout is contributing to the continued downturn in the economy because it means the country has lost trust in its financial officials. This is complete hogwash. The continued economic downturn has nothing to do with a lack of confidence in the government and everything to do with an eight year orgy of debt and consumerism that has to be gotten through before things can get better, like losing the ten pounds you gain over the holidays before you feel like yourself again. Krugman is simply using this to bash the administration into doing what he wants them to do - which is more fiscal stimulus. He’s been ranting about more fiscal stimulus for months.

This is the trouble with Krugman. He may have been a good economist once, but now he’s a columnist with a big ego who wants to be right all the time. He’ll twist anything to fit his opinion du jour. He may well be right about the need for fiscal stimulus, though he knows as well as any economist that fiscal stimulus has a twelve to eighteen month drag before it starts to have an effect (which means we’re only starting to feel the effects of the stimulus now). And he’s right about the mismanagement of the AIG bailout, where AIG’s creditors inexcusably got one hundred cents on the dollar at taxpayer expense. But the two have nothing to do with one another. Krugman knows that. But he’d much rather play stern schoolmarm than be honest.

I could have watched Charlie Stross interview Krugman at WFC this summer, be decided to eat Duck-In-A-Can instead. An excellent decision.