Delusion in San Diego

Paul Krugman is in San Diego today, writing an op-ed column for the New York Times, and he is even more delusional than usual; so delusional, in fact, that I am afraid to drink the water for fear that it may be doing something to him, or he may be doing something to it. I mean, I’m looking out my window this morning at a clear blue sky with not a cloud in sight, and people walking their dogs are carrying umbrellas because the pavement is still wet from yesterday’s rain. Yes, I know it very seldom rains here, but still. Between that and Krugman’s column, something is going on, and I’m staying indoors today.

He’s here for the annual meeting of the American Economic Association, which he says “serves as a marketplace for bodies, books and ideas.” He does parenthetically explain that the first means new PhD’s looking for jobs so that we don’t think they are all dirty old men looking for hookers, and I can easily see why they are looking for ideas since they are in dire need of some new ones.

He asks himself what went wrong with the economy and answers himself, “The answer, mainly, is the triumph of bad ideas.” Well, no shit. We don’t really need a whole op-ed column to tell us that.

After saying that “consumers began saving more as the illusory wealth created by the bubble vanished,” he then describes the mechanics of consumer spending by saying that, “spending and earning go together: my spending is your income; your spending is my income.” Since he literally gets paid with other people’s money, I think the latter part of that remark is somewhat in bad taste, but coupled with the former part it is nonsensical.

Consumers didn’t stop spending someone else’s income, and they didn’t even stop spending their own income; they stopped spending “illusory wealth.” Did he not even hear himself say that? And they didn’t “begin saving more,” they just realized that the “illusory wealth” was an illusion, that it was not real money. That is, the market realized that for them and they were no longer allowed to spend it.

The problem was that we had an economy which depended on the spending of borrowed money, and Paul Krugman blows past that as if it didn’t exist. He mentions it as “illusory wealth” along with the topic of incomes, and then drops both subjects like proverbial hot rocks and babbles incoherently about who remains that has the ability to spend money. Since spending levels far exceed income levels and have done for decades, the real question is not who can spend money but rather who can borrow it, and with the current debt loads being carried by consumers, businesses and government, the answer is that only government can continue to borrow.

Naturally, Paul Krugman wants to maintain the economic status quo and preserve an economy that depends on spending borrowed money, so he wants the government to continue to borrow money and spend it until consumers can somehow magically recover the ability to borrow on their own and return to spending borrowed money themselves.

And I’m pretty sure I saw a unicorn walk by just now. With an umbrella.