I think that Nobel prize-winning economist Paul Krugman is one of those absurd
guys that has no idea what in the hell he is talking about and who owes his
undeserved prominence to being a real butt-kissing sucker-upper to former
Federal Reserve chairman Alan Greenspan and now he's doing the same thing to
the present chairman, the laughable Ben Bernanke and his disastrous Fed,
although I will admit that I don't know why anybody listens to this guy.
I say this with such obvious disrespect because Krugman is on record has having
advised the Bank of Japan to purposely cause inflation, as, "The way to make
monetary policy effective is for the central bank to credibly promise to be
irresponsible - to make a persuasive case that it will permit inflation to
occur, thereby producing the negative real interest rates the economy needs",
although he never actually says where he is going to find guys stupid enough to
loan money at negative interest rates, or in what
bizarre alternate universe he lives where high inflation in consumer prices,
particularly sustained high inflation, is anything other than a total disaster,
which is why most of economics is concerned with the problem of preventing
inflation while fostering growth!
In fact, he thinks that a central bank trying to reflate a collapsing economy
should announce a deliberate plan to raise the level of prices from current low
levels to some dramatically higher value (a so-called "price-level gap") that
it would have theoretically reached if a "moderate" and constant amount of
inflation in prices had, in fact, occurred! Gaaahhhh!
To make it more Theater of the Absurd, he then says to keep creating more
inflation in prices! Gaaahhhh! This is insane! This is beyond insane!
This would be bad enough coming from just another egghead academic dork from
Princeton, but a terrifying quote from Bernanke shows that he agrees with this
with nonsense!
In fact, Bernanke said, "A successful effort to eliminate the price-level gap
would proceed, roughly, in two stages. During the first stage, the inflation
rate would exceed the long-term desired inflation rate, as the price-level gap
was eliminated and the effects of previous deflation undone. Call this the
reflationary phase of policy. Second, once the price-level target was reached,
or nearly so, the objective for policy would become a conventional inflation
target or a price-level target that increases over time at the average desired
rate of inflation."
This is so dangerously preposterous that one's hands shake in fear and paranoia
at the calamity that awaits a nation that takes such ridiculous advice, and
there is nothing to be done except to buy more gold, silver and oil, as the
last 4,500 years of history have proven that these are the things that have
lasting value, unlike the bitter disappointment and dismay of paper money and
"true love".
Obviously, people do not have to be around me very long before they learn that
I am perpetually scared, to one degree or another, of inflation in prices, such
as the other day, for example, when I had saved up enough money to have dinner
alone at a restaurant so that I could eat one lousy meal without the wife and
kids all the time whining and complaining about how they need more money, and
want more money, and how they want me to give it to them, and how I am a
terrible person for not giving them more money, how I am too stupid to get a
better job to make more money and how I am too lazy to get a second job with
which to earn more money.
So instead of having to listen to them talk about how much they hate me, I am
enjoying the peaceful qualities of the restaurant when a guy seated at the next
table sees me eating my steak and asks me how I liked it.
So I told him, "I like it fine, except I wanted lobster! Rich, flakey lobster
to dip into real melted butter so wickedly delicious that you can actually hear
your arteries hardening from just looking at it; but I can't order lobster
because inflation in prices caused by the Federal Reserve creating so much
money and credit all these years has resulted in the ugly news that they now
charge too much for lobster, and inflation is so bad that some crappy, weak
iced tea is almost two bucks a lousy glassful, most of which is ice!"
Out of the corner of my eye, I can see the other people in the restaurant have
stopped eating and they are all looking at me. Figuring that they want me to
further enlighten them, I go on, "So don't you ask me about how I like my
steak, when you should be asking me how I like inflation in prices, which I
don't! Not one little bit! And if you weren't so stupid, you would realize that
inflation in prices is the worst thing that can happen to us, and which is
exactly what is going to happen to us because the damnable Federal Reserve is
creating unbelievable, staggering amounts of money and credit so that the
federal government can borrow and spend it in an orgy of deficit-spending that
will end badly!"
Well, pretty soon the manager comes over and tries to censor the Heroic And
Brave Mogambo (HABM) by telling me to shut up and sit down, although he might
have been interested in the actual inflation figures, which are pretty bad!
For instance, producer price inflation shot up to 1.8% in June, and it seems
especially interesting that the Labor Department figures that the Consumer
Price Index rose 0.7% in June, and although 0.7% does not seem like that much
in one month, it adds up to a lot over the course of time; like for instance,
in a year, when this 0.7% per month inflation compounds to 8.7% per year
inflation! Yow!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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