Notes From Babel

Krugman’s Worn-Out Keynesianism

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While acknowledging my lack of qualification to take a very informed position on the unemployment benefits question, Krugman loudly omits what seems even to me to be the key economic question involved here.  America’s economic problems generally owe to the fact we have been using play money for so long—i.e., money that has little if any colorable relation to actual value, artificially inflated home values being the flagship example.  The tricky task of monetary policy is to achieve a rough balance between the amount of money available and the actual value the economy produces.  Peddling the same Keynesian notion as Krugman does, that putting more money into the hands of the unemployed will stimulate our economy, is simply urging America’s policy makers to replace one bubble with another.

The simple truth is that at some point, we have to get folks to start producing real value again, and to adjust the perception of the value we have actually be creating (which is probably overstated).

This, of course, says nothing for the argument from compassion, which is compelling on its own.  But let’s retire the trope that handing out free money helps our economy.

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Written by Tim Kowal

July 5, 2010 at 10:41 am

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