Tuesday, October 14, 2014


'Tis the season for bad horror movies, and the latest one is the Return of the Debt-Forgivers.  It stars in the role of Dr Frankenstein (that's Frahn-ken-shteen) everyone's favorite evil economist Paul Krugman--who is back demanding that trillions of dollars in debt just be written off to "free up" the economy.  In building his army of deadbeat zombies, Krugman argues in the New York Times that holding people accountable for their debts and financial decisions is nothing more than mean-spirited "righteousness"--and that what the US and the world needs is more deficit spending--both at the governmental and the consumer level to get things "back to normal".

But instead of tasty brains, what Krugman's zombie forces are looking to eat up are the savings of those who actually survived the financial apocolypse (which was caused by way too much consumer and government debt--in case you forgot that) by practicing sound financial strategy.  The Evil Economist has formulated a standard Keynsian plan to just make debt "disappear" by having the Government write off student loans and mortgages for those who chose to get in over their heads.  And since the Government is already 18-trillion in the hole itself, to whom will it have to turn to come up with the money?  Why the people who saved their money before the Great Recession, of course!

Part 2 of the Evil Plan calls for further increases in the monetary supply, continued artificial suppression of interest rates, relaxed borrowing standards in order to increase spending (debt spending in most cases) and to raise the inflation rate.  You see, in Keynsian Economics you never actually pay back your debts.  Instead, you use inflation to de-value the money you owe to the point where whomever lent it to you gets screwed.  Nevermind that inflation also eats away at the average person's buying power as well--we'll just use the power of the government to raise the minimum wage to make it "seem" like you are making more money.  And nevermind that inflation also eats away at any savings that the average person tries to maintain--because we'll just keep adding to Government entitlement programs to provide you with all the "financial security" you need.

One thing that Evil Dr Krugman is right about, is that demanding people pay back their debts is slowing economic recovery.  But an America that lives within its means will mean less likelihood of the financial "bubbles" and "crises" that got us into our current mess.  We can either be patient and get this thing right now--or we can look forward to Return of the Debt-Forgivers Part II in another generation.

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