Friday, August 28, 2009

Idiocranomics: We Need More Debt For A Solid Economy....What?

I tried really, really hard not to post this link and comment on it, but I just can't let it go. I'll let you read Krugman's latest on why deficits are suddenly good, but here is the basic conclusion:

So don’t fret about this year’s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it’s not because the economy can’t handle the extra debt. Instead, it’s the politics, stupid.

Yes, I know Mr. Krugman won a Nobel Prize in Economics, but are you kidding me?

We need more debt to solve the problem of excessive debt? We need to spend even more money.....NOW? Is it me or do you feel like sometimes you're living in the twilight zone.

O.K., one last quote:

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that’s a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.

Less you think I'm taking him out of context, click the link above and read the column for yourself. You can't make this stuff up.

Not only is $9 trillion not "frightening" it is what will "save the world" and "it's not catastrophic".

I had dinner the other night with a group of people with political backgrounds that ranged from very conservative to very liberal and to a person they were not only sickened by our national debt, but quite literally frightened. I guess we've finally found an issue to bring our country bad its the one thing that could threaten or hasten its demise.

So to recap - more debt and deficit spending is Good, fixing our nation's structural problems and stopping the insanity...bad. If that's not idiocranomics, I don't know is.

BTW, I'm under no illusion that this problem wasn't a bi-partisan problem, both parties have contributed to these massive problems - and neither has any credability to (or will) to fix them.

Scott Dauenhauer CFP, MSFP, AIF