“I have always been a free-market Keynesian” -Paul Krugman

If that statement alone doesn’t boggle the mind of any competent person with even a modicum of knowledge of economics, maybe some of Krugman’s other published drivel will. Before refuting Krugman’s distortions of reality, let me mention that he is a distinguished professor of economics at Princeton University–<sarcasm>an institution which has produced the great economic minds of Ben Bernanke and Paul Volcker</sarcasm> All jokes aside, based on the “leaders” it has produced, Princeton University’s economics department has about as much dexterity as a community college’s autism task force.

Inflation

In an article published last year, Paul Krugman argued that the Federal Reserve’s policy of printing trillions of dollars should not arouse fears of inflation. Instead, Krugman argued that deflation was a problem the economy might face. The most basic definition of inflation is the devaluation of currency. Paul Krugman doesn’t seem to understand that when a fiat currency, a currency backed by nothing, is repeatedly printed, it becomes debased. When the Federal Reserve prints money, the purchasing power of each and every dollar decreases. Take the Weimar Republic for example. In the 1920s, after World War I, Germany became known as the Weimar Republic and its central bank was the Reichsbank. The Reichsbank’s currency, which was the “Mark”, was not backed by anything. When it came time to pay for the war debts which were incurred, the Reichsbank simply printed Marks until the Mark was burned by Germans for heat because it became worth less than firewood. The currency of the Weimar Republic was devalued through printing and that is what Paul Krugman is essentially denying.

This is what Krugman’s hero John Maynard Keynes had to say about the Weimar Republic’s hyperinflation:

The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.

Keynes explained that extraordinary inflation was caused through the monetizing of the “balance” or the debt by printing “notes” or paper currency. At this point, one has to wonder whether Krugman is just retarded or skipped high school history.

Debt & GDP

Every month or so, Paul Krugman likes to write an article justifying the national debt and the increasing budget deficit. Krugman’s defense of an exponential increase in the debt consists of comparing it to the GDP as if the United States government collects the equivalent of the GDP in taxes. The Gross Domestic Product of a country does not signify a country’s ability to control or even pay off the national debt. If you were in hundreds of thousands of dollars in debt, would you try to rationalize it by stating that the debt you owe is just a percentage of the total amount of money your friends and family make and spend? That’s the excuse Paul Krugman is making for his Keynesian buddies at the White House who are driving up the national debt and increasing your cost of living.

Deflation

Something Paul Krugman doesn’t seem to understand is that when a currency is artificially inflated by a central bank through the lowering of interest rates, a market correction is needed. When inflation is problem, deflation is the solution to stabilizing the currency, but Krugman disagrees. Considering that price of gold is a good indicator of inflation, it’s very apparent that inflation has skyrocketed. Krugman still fears deflation, however, because accepting the fact that the US Dollar is being inflated would be contrary to his failed, Keynesian view of economics.

With a federal funds rate of nearly 0%, printing and borrowing money has never been easier in the history of the United States, so inflation is rampant. Any increase in the federal funds rate would obviously cause deflation, but a deflationary period would allow for the US dollar to gain purchasing power. Horrible economists like Paul Krugman will encourage you to spend all of your money instead of saving it. They know that deflation rewards people who have saved money. If deflation occurred, every dollar you have would increase in value, but as the inflationary policy of the Federal Reserve stands today, your savings are being devalued and destroyed.

If you want to learn more about how Krugman advocates that the United States follow the policies of Greece, I suggest reading Peter Schiff’s arguments against Krugman’s calamitous economic views.

These voids and gaps in Paul Krugman’s knowledge lead you question the methodology of the committee that awards the Nobel Memorial Prize in Economics, which in 2008 was given to Paul Krugman. Krugman is as deserving of the award as Barack Obama, a president who has killed hundreds through Predator drone strikes and escalated the war in Afghanistan, is of the Nobel Peace Prize. Awarding a person, who can’t understand the basic concepts of inflation, debt, and delfation, an economics prize or degree is an insult and just as Obama is a terrible pacifist, Krugman is a terrible economist.