Friday, December 11, 2009
Sometimes you have to wonder whether economist Paul Krugman has ever once given any serious consideration to the idea that the economic system that has produced such apparent prosperity over the last few decades might, in fact, be severely flawed, these defects being largely responsible for the mayhem we've seen in the last year or two.
Based on his most recent thoughts about how, if the central bank would just print more money, a much needed "jobs recovery" might be engineered, apparently not.
I don’t think many people grasp just how much job creation we need to climb out of the hole we’re in ... My back of the envelope calculation says that we need to add around 18 million jobs over the next five years, or 300,000 jobs a month ... someone has to take responsibility for creating a lot of additional jobs. And at this point, that someone almost has to be the Federal Reserve.Hardly any downside, that is, unless we're in the middle of a long deferred, fundamental change for the U.S. economy in which the credit expansion seen at all levels over the last few decades - government, corporate, and personal - can no longer produce growth.
The most specific, persuasive case I’ve seen for more Fed action comes from Joseph Gagnon, a former Fed staffer now at the Peterson Institute for International Economics. Basing his analysis on the prior work of none other than Mr. Bernanke himself, in his previous incarnation as an economic researcher, Mr. Gagnon urges the Fed to expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside.
In that case, a few less trillion dollars might make digging our way out of this massive hole a lot easier in the years ahead and the entire nation might learn a painful, but much-deserved, lesson about the limits of credit expansion.
It seems the public's reluctance to embrace even more massive deficit spending and money printing next year on a scale that would top the new world records set this year are a complete mystery to Krugman while protests from regional Federal Reserve presidents and centrists in his own party are seen as nothing more than obstructionism. Amazing...