So how’s that stimulus working out then?
Romer, Bernstein and Krugman – January 2009
Today we know that unemployment was not reduced. In all fairness, Krugman did comment that the stimulus as proposed by Romer and Bernstein was “too weak”; the implication being that he advocated much greater stimulus.
http://www.time.com/time/business/article/0,8599,1910208,00.html (this is a year old article but things have not improved since anyway)
What baffles me is how Mr. Krugman and any of the gaggle of pundits, economists and politicians can clamor for stimulus when stimulus has been the hallmark of the economy for at least the past thirty years.
I hear you asking what I am talking about.
When government spending has progressed from about $2Trillion in 1980 to about $12Trillion today but GDP has progressed from about $6Trillion in 1980 to $14Trillion today, that, in my book, is pretty aggressive stimulus. In percentage terms, since 1980 government spending has progressed by over 1000% whereas GDP has barely progressed by 100%. (The figures are actually much worse as I only take into account Federal debt as outlined in the links below).
And Krugman today is looking for even more stimulus.
Somebody, somewhere must at some point realize the absurdity of stimulating an already grossly over stimulated economy… ???… This next graph depicts the reason why stimulus may no longer have the desired effect:
Inflation is a dynamic that conforms to the law of diminishing returns. You can see what that means in the above graph. Considering the various cash infusions and guarantees that have totaled several Trillion Dollars in the past two years, the money multiplier is telling you that the presumed stimulant has lost traction. To call for more stimulant at this point, it seems to me, is the definition of insanity.
I like to think Germany has realized the predicament we are in and is putting its foot down. Iceland has too and its president has sided with the people to tell the banks to go fudge cake.
Gold seems to be the only refuge for the time being. At least till more Icelands and Germanys will hold sway in international politics and economics.