BBC’s Hard Talk with Steve Sakur

Hard Talk today was hosting Nobel prize winner for economics Paul Krugman.

It was an unusually wishy washy interview. Paul Krugman is a strange fish at the best of times. He does occasionally say things I agree with but today he was way out in left field both on things he said but, mostly, on the things he did not stay.

Right off the bat, PK started the interview with a howler; he said that 92% of the US economy was sound and it was being dragged down by the 2% that was unsound. If we agree that the “unsound” part of the economy that is jeopardizing the stability of the entire world economic and financial system stems from the finance industry, then we agree that, apparently, PK believes the finance industry contribution to US GDP is only 2% of the $14Trillion US economy… which makes me wonder how this guy passed Arithmetic 101 let alone how he won a Nobel prize.

I wasn’t going to do this but… for fuck’s sake… even if we assume that PK might be slightly off on his assertion and lets assume that the finance industry contributes 4% to US GDP (twice as much as PK thinks) then I have to ask. Why did we just hand the banks, insurance companies and mortgage institutions (to name but a few) cash and loan guarantees upwards of $4Trillion Dollars??? If PK is right, and finance only contributes $280Billion to the US economy, we’ve just given money to these folks worth upwards of 10 times what they contribute to GDP.

That big-ass honker having been uttered, PK’s performance did not improve at any time during the interview.

When prompted by SK as to how quickly banks have turned around and are now so healthy that they have been able to raise funds from the public once again, PK nodded in agreement and stated that he too had been surprised by the swift recovery. At no time did PK mentioned the suspension of mark to market rules as well as the unwillingness of the authorities to enforce recognition of off-balance sheet items. So, the fact that the authorities once again chose to not enforce those accounting rules that induced instability in the financial system in the first place, apparently is now a sign of health and stability in the system.

When questioned on the desirability to support GM, PK wished to appear unconvinced of the logic but went ahead to say that, nonetheless, buying time for a troubled company during a time of crisis might help it re-emerge healthy at the other end. So, PK thinks that a company that has been losing money on every single item they manufactured and sold for the past decade can, suddenly, be protected, coddled, financed and will magically reemerge at some point profitable. Quite apart from the fact of excess industrial capacity, it is unclear what is PK’s position on the fact that by supporting GM, the government is taking market share away from, say, Ford…. and Ford employees…

Towards the end of the interview PK denied to answer but implied and suggested that the US administration is considering another stimulus plan of about $500Billion.

What a waste. What a circus.



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