Krugman finally comes out and says it: "Print our way out of debt".

[Anti Federalist]

So, it becomes more clear than ever before, that the "final solution" to the staggering debt burden will more than likely be to just print up (or keypunch a bunch of zeroes) and pay all that debt off with worthless dollars.


Fighting Fiscal Phantoms

By PAUL KRUGMAN

Published: November 25, 2012

http://www.nytimes.com/2012/11/26/opinion/krugman-fighting-fiscal-phantoms.html?_r=0

For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.

But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed.

Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.

[matt0611]

Not surprising in the least. You may get a kick out of this though:


With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. Either way, the tide of red ink will keep on rising.

Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.

And that's way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account -- as the C.B.O. cannot -- the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it's clear that the 10-year deficit will be at least $3 trillion.





So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.

A leading economist recently summed up one reason why: ''When the government reduces saving by running a budget deficit, the interest rate rises.'' Yes, that's from a textbook by the chief administration economist, Gregory Mankiw.

But what's really scary -- what makes a fixed-rate mortgage seem like such a good idea -- is the looming threat to the federal government's solvency.

That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 -- make that 3, O.K., maybe 4 -- percent of G.D.P. But that misses the point. ''Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen.'' So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.

Of course, Mr. Fisher isn't allowed to draw the obvious implication: that his boss's push for big permanent tax cuts is completely crazy. But the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident -- the fiscal train wreck -- is already under way.

How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.

And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.

I think that the main thing keeping long-term interest rates low right now is cognitive dissonance. Even though the business community is starting to get scared -- the ultra-establishment Committee for Economic Development now warns that ''a fiscal crisis threatens our future standard of living'' -- investors still can't believe that the leaders of the United States are acting like the rulers of a banana republic. But I've done the math, and reached my own conclusions -- and I've locked in my rate.

-Krugman in 2003.

That guy is such a hack.

[AGRP]

I refuse to listen to someone who just about always looks like theyre under the influence of alcohol or drugs.

[nobody's_hero]

I (almost) wish they'd hurry up and set off hyperinflation. I'm tired of arguing with idiots who think the USA is somehow immune to such a scenario.

"Derp. I don't see no inflations!!! My groshries went up a little bit more this year but you're just being silly!!! We can keep doing what we do becuz our dollar is stttrrrroooooooooonnnnnggggggg. Bernanke is a geenius."

[jmdrake]

That's all fine and dandy as long as:

1) the world continues indefinitely to run on oil and

2) oil producing nations continue indefinitely to use USD as their reserve currency.

Which is why we so badly need to go to war with Iran.

[AuH20]

Krugman is a thug with a master's degree. Plain and Simple.


expected inflation would discourage corporations and families from sitting on cash,

How dare you sit on cash and commodities during an age of legalized plunder and fraud??? Stop being so selfish!!!

[dillo]

Print money proxy destroy iran, profit

[CaptUSA]

I refuse to listen to someone who just about always looks like theyre under the influence of alcohol or drugs.
Well, then, it's a good thing you can't see me.

[itshappening]

better buy gold coins and bury them in the back garden because Krugman like it or not is the official propagandist for the regime and is listened to and widely circulated in the presidents circle.

[Brian4Liberty]

Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.

Yeah, that will really help the lower and middle classes. :rolleyes: No more savings. Their paychecks won't go as far, and they may go hungry. But if that was going to happen, we would start to see warning signs, such as increases in government aid programs like food-stamps. Whoops, too late.

[jbauer]

Well, the ship has sunk we all haven't drown yet but what else do you suggest we do? We're bankrupt without a way to pay for it and nobody seems to care as long as "they get theirs"

[VIDEODROME]

Lou schooling Krugman on the big board. Mostly on taxes though.


https://www.youtube.com/watch?v=7WVWj8vpYWc

[devil21]

What do you all think the odds of Krugman getting a post as a Fed governor are? I dont see Bernanke staying on much longer so there will be some turnover. Ive always thought Krugman was trying to position himself as a prospective (official) Fed mouthpiece.

[Victor Grey]

Yeah if I had very large sums money and it was going to become much more worthless, it's not like I wouldn't start buying commodities and prices wouldn't skyrocket for everyone.
I bet it'd all come from our country, as well.:rolleyes:

Sure am glad the middle class gets to spend it first, aren't you?

Edit: Couple that with his higher taxes, you're getting a few very rich people, sitting on a pile of things, and who aren't incentivize to do jack but sit on their wealth.

He's the damned problem, not the solution.