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The Big Zero
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
- Posted in
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84 Comments so far
Show AllAh, the 00's. All we have to show for it are yuppie, SUV-driving, assholes with cellphones stuck in their ears. Seriously, the '80s did it for me. The 1980's, Jim & Tammy, Ron & Nancy. When Ronald Satan gave the Contras aids and arms to America's enemies, Daddy was "out of the loop" at the time and was rewarded with Satan's seat in the Oval Office. Don't forget Ollie, America's hero. Getting back to Ronald Satan. He pulled a coup when he paid off the Iranian kidnappers even before being taking office just to humiliate Carter. The Chimp pulled a coup when Daddy's fixer, Baker, did some dirty deeds in the Florida.
Not only have the Democrats not articulated "a full throated critique of the practices that created the mess we are in", Obama and Congress created a seamless transition from Dubya fascsim to Obama fascism.
Nancy Pelosi deserves credit for setting the tone for Obama fascism when she became speaker of the house in November 2006 and immediately declared "impeachment is off the table".
Here's a quote from Mr. Krugman's blog (12/26) regarding the health insurance wealth-building bill proving he's learned zero:
"Guys, this is a major program to aid lower- and lower-middle-income families. How is that not a big progressive victory?"
I went from reading Krugman's blogs every week from skipping many after I read his critique of he health care debaucle. Anyone who believes this bill will do more good than harm is 100% wrong, especially regarding the lower-to-lower-middle-income families and the poor, and the expansion of Medicaid, it's not hard to see all kinds of problems with that, and then what is being done with Medicare? Crazy all around.
I know. When I read the title I thought Krugman had had an epiphany and this was an article about Obama.
0
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting;
--------------
After the Nasdaq bubble popped in March, 2000 Sarbanes Oxley was signed into law (2002).
This mandated that the CEO of each company would have to sign his name onto each quarterly earning's report verifying its accuracy under threat of imprisonment.
This put an immediate end to creative Enron or Worldcom style accounting.
However, the current House version of the Wall Street Reform bill chips away at Sarbanes Oxley by permitting companies with values under $75 million exempt.
Expect that exemption limit to be raised again and again until Sarbanes Oxley is dust.
This will usher in the next era of fraudulent accounting and many more Enrons and Worldcoms.
"America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system."
Here's what Aldous Huxley said about that BS.
“The principles underlying this kind of propaganda are extremely simple. Find some common desire, some widespread unconscious fear or anxiety; think out some way to relate this wish or fear to the product you have to sell; then build a bridge of verbal or pictorial symbols over which your customer can pass from fact to compensatory dream, and from the dream to the illusion that your product, when purchased, will make the dream come true.”
Let's hope we have all learned from Lies and More Lies!
Sioux Rose
GAIL: Thank you for sharing the excellent quote. In my view, there's a poisonous cocktail that's been drunk by most Americans and its ingredients include:
20% George Orwell's vision of the future (change the past to control present perception)
33% Edward Bernays (use unconscious messages to control the "root" chakra, or automatic behaviors of the multitudes)--see "Century of the Self" on You Tube
22% Barnum: That a sucker is born every minute (it's not hard to pull the wool over lots of eyes, if you're somewhat charismatic, loud and have a podium: case example Rush Limbaugh and friends)
20% BF Skinner: The how-to's of behavior modification. How to work a society through rewards and punishments to get persons to act like trained dogs.
5% Dr Seuss: Thneeds function as a powerful fiction that promotes "business is business, and business must grow," its chief undisputed mantra and operating principle.
Feel free to play with these percentages. I offer them in composite to make the point that LOTS of programming has led to the present economics that has turned the natural world into a dead nest incapable of supporting the life upon it. And this is the model still being upheld, the one to which living blood and treasure are daily sacrificed without the scantest sign of progress away from rituals done centuries before in homage to the ancient Aztec temple gods.
Yep. Vance Packard explained how all this is done on the product level in "The Hidden Persuaders" book. They keep "redefining" common words like "product" and "brand" to mean diffferent things (to keep the con going for more con). Hence, a politician is elected through "branding" instead of "product".
"Corporate accounting"? please Mr Krugman sir...How do you account for corporate externalites? its poisning my pond. tsk tsk.
We have seen the Big Zero and it is us.
"(Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)"
Yes, we do. I thought economics was based on basic math; you'd think an economist would respect the accuracy of numbers. Dummy me. Economics is probably as much philosophy as it is science, but still, in the 21st century we can read calendars accurately.
Some years ago I read a book by Krugman and was vastly impressed to read what sounded like truth, wow. Since then, as I (late in life) began paying attention to politics, I've gradually been losing respect for him.
We know very well that the ending decade (- 1) was a bust. As a populizer of economics, maybe Krugman could explain why it's a bust instead of riffing off in various directions without substance. He hits some and misses some - not a reliable enough source for me in these complex and trying times (no pun intended).
The only "science" within economics is math; the remainder is pure supposition. Someone will ask, What about the Laws of Supply and Demand? I would answer, since when are commonsensicals Laws--If I have less of something I need to survive, I will want more of it if there is nothing I can substitute for it. But, how many things are we offered to purchase that we really need? Most of what is manufactured is unneeded stuff. Veblen had a clear vision of what the USA would become when he wrote "The Theory of the Leisure Class" over 100 years ago.
What a great economist you are Mssr. Krugman. Everything you site in your essay was a loss. A loss to retirees, a loss to home owners, a loss to business, a loss to our government and you some how add it up to zero. How in the hell can a loss be zero? When I over draft my bank account there is a negative balance. But with a truley educated fella like yourself you can rationalize the over draft of an account by trillions and it's zero. When my account gets over drafted I get to pay back the amount of draft plus an over draft fee that amounts to one thousand percent for each over draft. Banks and corporations when over drafted come to the public get free money, keep their crap assets on the books to use as collateral so in case in the future inflation brings the value of the collateralized crap back they can screw us again. AAAAhhhhhh Mssr. Krugman economists like you put the CON back in the confidence game.
How about this as a thesis. It's not that they don't have the courage to make a critique, it's that they have already sold out to those interests who they do not have the temerity to criticize. Our political leaders Democrat or Republican have already cut their deal. There are big personal rewards for them to go along and probably many threats we don't even know about if they don't.... It's a charade to say they ever represented us. On the campaign trail they have to appear that way. Follow the money to see who rules. Our politicians are just Front Men for the real rulers. That explaination is more atisfying to me than Krugman who would dismiss the politician's actions as stupidity or shortsightedness.
The bankers won't accuse themselves before the bank robbers would.
I call it the beginning of the end of the USA Empire. And good riddance.
The next bubble? The dollar, when you give the banksters 12,000,000,000,000 dollars, with no strings attached, to buy up investments that are FREAKIN WORTHLESS, IT WILL HAVE AN EFFECT ON THE VALUE OF THE DOLLAR.
$20.00 a gallon gas coming soon to a pump near you. Minimum wage increases? Not so much.
Sioux Rose
MADHOOSIER: Thank you for your incisive posts. It amazes me that when I discuss these things with a few friends/relatives who are not only heavily invested in the dollar, but their entire identities seem fused to their presumptions of net worth (based upon dollars), they try to tell me how they know so much more about money, business, economics than I do as proven by their "superior" fiscal status. Sometimes I think the next balloon that needs to deflate is the one composed of the egos of these braggarts who benefited from a cultural phase that placed the ethos of greed (in the name of lofty-sounding self-interest) above every other motivating principle. It lifted their ships pretty high... and how they rue the laws of physics that remind that for every action, there is an equal opposite reaction. The dollar's upcoming parabolic dances will be viewed across the world.
That's the bubble that underlies ALL the bubbles - the inflated human Ego.
A lot of attention focused on the nature of existence and identity and consciousness, would go a long way toward individual and mass withdrawal from the corporate capitalist dream machine.
The very model of Economic Man, accoding to Capitalistic ideoloy, is that of greedy self-interest. Yet many things actually motivate humans beings, many far more powerful than greed. Love for one's children, the search for enlightment, heroism in face of disaster; the list is long.
No wonder the system is crashing, it is based upon a debasement of human nature. And Nature always has the Last Laugh.
Gary
Krugman:
"Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage."
Who says bankers had "to be rescued at taxpayers' expense"? There were alternatives (such as public ownership of General Motors as one example). Seeming to criticize the bankers here, Krugman is actually become an apologist for the wrong road taken.
Meanwhile, who has come to the aid of the one-quarter of mortgage holders who are "underwater" or have "negative equity" in their homes? That's not ZERO. That's a great big MINUS.
There is also historical evidence that certain key people saw that the bubble would burst---like when they rewrote the bankruptcy laws to make it almost impossible for people to start over, while leaving it easy for corporations.
The liberal economist Krugman wants us to buy into the conventional wisdom on what happened in the past decade, as though it had to be that way. It didn't, and I don't.
If all this had happened in the 90s (which might not have been possible thanks to Glass-Steagall) it would be called the Crime of the Century. And of course Clinton would have been hanged in the public square by his proverbials, as he almost was over a blow job! Bush, Bernanke, Paulsen, Greenspan et al screwed the entire country and it appears that Bernanke will be reappointed. Gives new meaning to "good job Brownie."
-30-
Lol, new meaning, indeed!
You are right to point out that it is not zero for us. For those who are paying off short sales, for those with mortgages under water, or someone with debt who has seen their interest rate hiked, it's a new, improved debtor's prison or workhouse, with the biggest improvement being they don't even have to house and feed you. You have to provide your own cell while you pay off your bill to the company store.
Even for those who did not take a direct hit, we all have to pay for the Too Big to Jail out of our future earnings and standard of living. It all adds up to the Crime of the Century and the media, if it wasn't driving the getaway car, could be helping the neutered department of justice bring the case.
Good point also about the circumstantial evidence of those who saw this coming and planned to profit from both the bubble and the burst. It is quite a joke that the world's greatest central bankers didn't know.
Mad hoosier
Where do you get your data for this out come? I have heaqrd this from various sources, one was on CNN but, I can't remember the guys name. I know he wrote a book. Anyway, I agree that gas could be this disgustlingly and out of reach expensive and not to far into the future. But I'm no expert. I would like to know if you have some kind of info that supports this happening.
The twelve trillion dollar underwriting of securities at face value held by the banksters, by Federal Reserve, that are worth far, far less than their face value, has been in the news since this crappy idea was shoved down our throats by Bernanke.
I used gasoline prices as an example of prices that will be effected by a substantial devaluation of the dollar against other currencies because the United States imports most of the petroleum used to make gasoline, as the value of the dollar falls in value against the other currencies of the world it will take more dollars to buy the same amount of gasoline.
Couple this with the already massive amount of American debt owed to other nations due to years of the U.S. importing far more than we export, the massive Federal debt racked up during the Bush administration, massive debt in the form of credit cards and mortgages that can no longer be serviced as the economy tanks big time for the average working stiff and the pressure toward devaluing the dollar against other currencies is, in my humble opinion, unstoppable.
The American economy over the last generation has been a bubble driven economy, there was the “energy crisis” bubble back in the 1970’s, then there was the Reaganonimics bubble of the 80’s, followed by the Clinton NAFTA bubble that caused stock prices to soar while exporting America’s good jobs, followed by the TellCom bubble, the DotCom, the real estate bubble and most recently the commodities bubble.
Ask yourself; “What’s left to inflate the next bubble? The Dollar.
Having said that there are many other progressive writers that expect the opposite; deflation. Writers like Mike Whitney expect to see the same economic trends that lead to the crash in real estate values to spread across the economy and drag down prices across large sectors of the economy.
As the Carnival Huckster advises; “Yous pays your dollar, Yous takes your chances”
Just reading the title, I thought this would be an article about Obama.
I thought the same thing.
0
Krugman sez: "It was a decade with basically zero job creation."
***
Blackwater (or X-Pox, or whatever it's calling itself these days), Triple Canopy and a few other like-minded corporations respectfully disagree.
Yeah, the jobs that were killed got replaced by jobs for killers.
But really, lack of job growth is the big problem. We need job growth because we have population growth; and if we don't have the one to solve the problem of the other, then we have social unrest--the one problem the elite fears most, a Slave Revolt. Even with the lack of job growth, we still have massive overcapacity in services and retail--the two primary job sectors that remain after offshoring most manufacturing (for which a growing overcapacity also exists). The business contraction we're witnessing is the result because the overall economy rests on a foundation of sand--the need for growth to steadilly increase on a finite planet. The Club of Rome folks were correct--We are colliding with many of the Limits to Growth they predicted over 30 years ago but never prepared for. We must now live with the consequences that will continue to worsen as the century unfolds. That is the Truth Krugman cannot tell. The end of an economic system based on expropriation and exploitation is near, with its immorality getting even uglier as its demise comes closer. At some furure point, a steady-state economy will become the norm; but, not before a massive upheaval accompanies the death of the current immoral system. The Chaos is already here and is starting to spread. I welcome it as Capitalism must be put to death along with the immoral elite that prosper from the vast damage it causes.
Technically, there were more jobs. But they were all overseas.
The United States is in an inexorable slide toward authoritarianism. Most Americans don't give give a damn. If they lose their fundamental rights but get to keep cable tv, it's okay with them. What they don't realize but will discover quickly enough is that they will all become serfs and coolies working for virtually nothing or even nothing at all. Some will resist. They will be quickly dispatched. There is something profoundly nasty in the character of this country that will allow us to become Nazi Germany, Pol Pot's Cambodia or the Stalinist Soviet Union. It will be the creation of The New Man and the destruction of the enemies of Christ. That's not hyperbole.
Race to the bottom.
China, here we come.
"Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in."
_________________________
Ya THINK?
'Cause it's also hard to get liberal-lite time-serving economists, Nobel Prize winners included, to deliver said critique TOO.
Like Robert Kuttner, who played The Economist of Christmas Past on a recent Bill Moyers' Journal, Krugman's political analysis is the familiar naïve, diffident liberal-lite, happy-to-be-here-working-within-the-system dreck.
Krugman doesn't have the hauteur of old-school pseudo-intellectual mandarins like Alan Greenspan, and to his credit he may not be as self-consciously ruthless as the bankster economists representing the new Obama crime family.
From the first, Krugman came off as one of those well-adjusted public figures who automatically gravitates towards a "pragmatic" half-full perspective.
No matter how hypocritically and deceitfully our treacherous Elected Misrepresentatives move the goalposts to enact self-serving laws at ordinary citizens' expense, at the end Krugman is there to accentuate the hypothetical positives and declare from inside the booth that the goal counts.
And how about that scoring drive?
It was Krugman's early enthusiasm for the insurance "mandate" as the only pragmatic route to health insurance reform that fully opened my eyes to the pathological, sociopathic intellectual hubris beneath his disarming persona-- his low-key assumption that OF COURSE the only "possible" way to make "progress" in slaying the Amerikan health insurance, anti-health-care beast is to FIRST coerce revenue from its already-beleaguered victims!
Krugman's seeming unawareness or indifference to the heinous immorality of squeezing more economic blood out of an economically flattened populace is exactly the Mark of Cain-- intellectual hubris-- borne by Team Obama and our most successful and prestigious Elected Misrepresentatives.
A while back, pre-Obama, I hung out daily at a mildly progressive site in which Krugman was revered as the coolest economist around. (They also thought, at least for a while, that Patrick Fitzgerald was the coolest US Attorney around because he was supposedly going after the Bush Empire.) I wonder if Krugman's cachet persists there. I've come to see him as just another poster child for the banality of evil.
In short, just another Nobel Prize-winning wanker.
Don't piss in my glass and tell me it's half-full!
· Yr Obd't Servant
Sioux Rose
O.S. Scathingly accurate character assessment. I would not be surprised if you are the reincarnation of the individual that authored the satirical work, "School for Scandal." Some of the work's characters operate under monikers like "Joseph Surface" and "Lady Sneerwell." His tone agrees with your species of analysis (at least when it comes to focusing on human motivations).
Sioux Rose--You are truly on a roll today, and a literary one at that. I've already commented on your Suddenly Last Summer remembrance.
Youzer!
I caught part of that Bill Moyer's Journal with Kuttner. Unbelievable. I think he said we needed to give Obama another nine months before we could judge whether we would arise to be the Change we were all waiting and waiting and waiting for. Then I suppose it would only be a short hop from there to the lesser of two evils in 2012.
I look back and think we experienced the decade of the “Coup".
It was a decade that was all about "policy" not about "politics". We we’re hijacked by banksters. Yes, I knew it had begun years before. But was Bush ever elected? And while prior presidents got the ball rolling, Bush and Cheney took full charge and completely turned this country upside down.
Our government was overthrown.
Obama said that if there's to be change "We're going to have to make him do it." Progressive's must get off the fence and stand firm, no more wavering or wondering. Let the next decade be the decade of turning up the "Pressure". We’ll know we’re on the right track when Obama starts to look like he’s aged 40 years. I want every hair on that mans head either white or gone.
The obomber was part of the fix. The only change we can expect is from our hands to there's.
The man is in Hawaii in a $5000 dollar a night house... on vacation.. Christ I hope he stays there. But really a $5000 dollar a night house, a populist, PLEASE!!
When are you obomber apologist going to quit drinking the cool- aid.
I can hardly wait for the next election. Any one who voted for this insurance company con game had better resign now and avoid the embarrassment of a ass kicking at the polls.. Perhaps the insurance companies will rent them a house next to the Obomber's
And this is not even getting into the coming war against Iran..
Iran's in the crosshairs, of course.
But all of a sudden it's time to pick up little Yemen and throw it against the wall.
· Yr Obd't Servant
Paul "Shifty" Krugman fails to note that economists have failed miserably and not learned a thing as well ...
Krugman and his Keynesian's still believe that more borrowing will solve a debt crisis ...
Only sovereign money, not private bank created money will solve this problem ...
Krugman and his Keynesian's still model a world of infinite resources...
When we now know that we live in a finite world with finite resources ...
Krugman and his Keynesian's believe we should try to get back to where we were before the crisis ...
But that economic model, debt upon debt, Mcmansions, SUVs is dead ... there is NO going back to that failed paradigm yet they have no alternative but more of the same.
Paul "Shifty" Krugman ... Back to the same mistakes as before ....
sorry, but I believe keynes was smarter than you
and he was capable of understanding the subleties and then generalities in application of economic theories
it is you who have implied that keynes theories only work with 'a model of infinite resources'
that is not part of his work
what he did PROVE mathematically is that a proper distribution of wealth is required
it is how to get that redistribution that is the issue
since the rich won't share then giving out government money to regular people not the rich is a way to do it
i personally , if king of the world, would go to the cayman islands and bring back all the trillions, pay off the national debt and then create jobs that help fill in the areas of need that the corporations cannot or will not provide
then i would be sure to tax the rich and the corporationss to keep these jobs fully funded
And too bad the Big O will make it W aught 'til at least 2013! That's what US gets with a cymbalic precedent ... tin ears! How many does it take for the man to here people cry here and abroad?
Mad HOosier
Thanks for the response... yes, I have heard about the debt and China being one of the major holders. But I have gone from thinking it was inevitable that they will call it in, to hearing things that make me think, Na that wouldn't be in their best interests either... That's the thing, I go from one day being completely pessimistic to maybe a little optimistic -not that everything will be ok, but that we will work hard, come together and come up with some solutions, which will bring us a whole new culture-wait nah... now I'm feeling pessimistic again.
Mad HOosier
Thanks for the response... yes, I have heard about the debt and China being one of the major holders. But I have gone from thinking it was inevitable that they will call it in, to hearing things that make me think, Na that wouldn't be in their best interests either... That's the thing, I go from one day being completely pessimistic to maybe a little optimistic -not that everything will be ok, but that we will work hard, come together and come up with some solutions, which will bring us a whole new culture-wait nah... now I'm feeling pessimistic again.
mmckinl: Your primitive rendition of Keynes shows that you have not read anything that Maynard Keynes has written. If you had read Keynes you would have discovered that he concluded among others that stagnant median personal incomes coupled with permanent inflation will most likely result in recessions if not depressions. If that is correct, prepare yourself for possibly standing in a soup line towards the end of the coming decade. You might even bring one of Keynes' publications along to shorten the waiting time with some useful reading.
You would further discover that he has studied how the actions of banks filter down as consequences into the daily activities of manufacturers, sellers, and consumers, a study that is still considered germane.
You will also discover that he was not in favor of simply throwing money at problems but that a fundamental understanding of the current money/currency policy is needed to make any eco-financial system work properly.
Keynes warned that the idiocy of hugging the 'gold standard' would wreck the UK. It did. I have a hunch that he would aver today if he were alive that the idiocy of hugging the 'dollar standard' will continue to wreck the world's eco-financial systems. We are a debtor nation and the currency of a debtor nation should never be the world's 'standard'. All attempts by the Obama administration to "strengthen" the value of the dollar will result in additional misery for our working class. There is no doubt in my mind that Keynes would agree.
Apparently the Chinese seem to understand this because they advocate the replacement of the dollar by a more multinational unit.
Keynes, Krugman and the rest rely on private institutional fractional reserve banking for their analysis. Fractional Reserve Banking, like cancer, relies on unending growth, an exponential function that can't be supported by finite resources. With fractional reserve banking the increasing debt only creates further demand for limited resources.
Both "Freshwater" and "Saltwater" economists use economic models that rely on unending growth based on infinite resources. Fractional Reserve Banking was enshrined for war and colonialism. That is it could use debt to create future demands on resources. This worked well for America and the European countries while resources were plentiful and cheap and increasingly leveraged to advances in resource extraction.
The world of infinite resources concept is now dead. Without unending growth fractional reserve banking sputters then implodes as the measure of debt far out-weighs the value and profitability of wealth extraction.
What is needed is sovereign money, money that isn't created by debt but backed by the full faith and credit of the United States ... In this way we can create an economy based on sustainability not growth.
With the privately owned and operated Federal Reserve System underwriting banks using fractional reserve banking there will be plenty of people standing in soup lines my friend ...
You obviously don't know how currency and credit are created in our system.
99% of Currency and credit are created through bank loans, not by the government. They banks hold $1 and loan out $10 ... pay the interest on $1 and collect the interest on $10.
What I mean by sovereign money is currency and credit created by our treasury. That means we do not borrow the money by issuing bonds through the banks, as we currently do and there fore pay interest on ...
I suggest you read Dr Ellen Brown's Book " The Web of Debt" and pay attention to her suggestions about taking back our right of currency and credit creation.
Professor Krugman refers to "the Big Zero--the decade in which we achieved nothing and learned nothing." This excerpt broadcasts two errors characteristic of Krugman's offerings: First, his "we" is factually erroneous; and please, Professor, do not count me in your "we." Second, the nominative that Krugman's context mandates in place of the "we" is "capitalism"--a term that appears nowhere in Krugman's article. These errors typify Krugman's profession (mainstream economics), where "we" usually end up paying the freight for the "capitalism" that lurks behind the curtain that the professors tacitly close at crucial junctures.