April 13, 2013

Saturday Morning Essay: Mr. Krugman's Science, Part 6

One of my purposes in attempting to demonstrate the pro-status quo bias of the fearless Liberal, Paul Krugman, ace economist for a great metropolitan newspaper, is to encourage fellow hooper Bob Somerby, who mans the keyboard at The Daily Howler, to include Krugman in his daily thrashing of columnists at The New York Times and the Washington Post.  Bob does this exceedingly well, in a meticulous, recursive, penetrating way. 

I take it on faith that Bob exempts Krugman for reasons which are sufficient to Mr. Somerby, and that his accolades for Mr. Krugman are sincere.  However, I can't help feeling that Bob is himself a liberal who has been taken in by Krugman's self-promotion as a "Liberal" with a "Conscience" who fights for the little guy on Social Security and Medicare et cetera, and that without him we would be exposed to the slings and arrows of outrageous Republicanism.

This I doubt.  I was gratified to see that Mike Whitney, who often writes about economics for Counterpunch, has come over to my way of seeing things; that is, of seeing through Mr. Krugman.  In a recent, hilarious account of the David Stockman vs. Paul Krugman "debate" on "This Week" Mr. Whitney had this to say: 

 But while Stockman’s editorial has broad popular appeal, it’s come under ferocious attack by the liberal commentariat, who’ve savaged Stockman on issues that are largely meaningless to the average working stiff.  Obama’s primary apologist, Paul Krugman, has been leading the jihad against Stockman; pounding away at his economic theories while dismissing him  as a “cranky old man”. 
 Whitney narrates the play-by-play as he continues:

Krugman, one last time:
“This isn’t about machinery, it’s about people and visions. We have two parties who have fundamentally different visions of what America should be. We have Democrats, who want the expansion of the safety net and have gotten it in Obamacare. They want it to be even more. And we have Republicans that want to dismantle a lot of the legacy of the Great Society and the New Deal.”
This is such nonsense. What difference have we seen under the Dems?
Zilch. The drones, the wars, civil liberties, regulation, spying, Guantanamo; you name it, it hasn’t changed a bit. Same shit, different leader.
Obama claims he can kill a US citizen without charges or trial, but Krugman maintains the Democrats have “fundamentally different vision of what America should be.”
Uh huh.
Finally, Stockman goes in for the kill.
“The (Democrats) don’t stand for anything.
They don’t believe in anything. Why do we still have Too Big To Fail? We allegedly had a heart attack, the banks are bigger than ever. Why don’t Democrats do something to break them up and cut Wall Street down to size?”
And that’s how it ended, with Krugman backing up against the ropes while Stockman delivered one haymaker after another like a windmill spinning in a gale-storm.
That's great stuff.  The animus against Mr. Krugman is pretty apparent from the imagery Mike Whitney uses: he imagines David Stockman simply beating the shit out of  Krugman once and for all.
The essential point that I think people miss about Mr. Krugman's science is that Krugman deploys his science (private joke: in the same sense that Percy produced science) as a political operative who carries water for the Democratic Party, and for that wing of the Party known as the Democratic Leadership Council (the DLC), the Clintonian, Robert Rubin, Larry Summers, sell-out wing of this once-great institution who ushered in the Casino Capitalism of modern America with their relentless drive to deregulate and turn Wall Street into Vegas-on-the-Hudson.

That is what David Stockman is writing about in The Great Deformation and in his Times essay which sent Mr. Krugman into paroxysms of rage and jealousy.  Mr. Krugman wholeheartedly supports the money printing operations of the Federal Reserve, but does not bother to explain (as Stockman does) the mechanics by which the Too Big to Fail banks use this endless stream of largesse to play the stock market and become Too Bigger Even to Fail.  Stockman does explain how this comes about.  I've wondered about the differences in their approaches; does Krugman give the Fed Reserve a pass because his Princeton colleague runs the Fed? Or is it because Mr. Krugman is a pure academic who simply doesn't understand how things actually work in the business world, but pretends that he does?

Whatever the reason, the result is as Mike Whitney says: Mr. Krugman is simply an apologist for the Crony Capitalist-Hugging faction of the Democratic Party, who sheds crocodile tears for the plight of the American Commoner as his logo and cover story for self-promotion. 

Anyway, Bob: take a closer look.  You do a great job savaging the bullshitters on MSNBC.  Your series on Chris Matthews and his efforts to rewrite his history as an Iraq war hawk were priceless.  But that's the point: what happened to a genuine anti-war crusader like Phil Donahue on MSNBC?  They got rid of him.  What would happen to a New York Times columnist who wrote a sincere economics column that took on the Wall Street casino and the corruption endemic in the two-party system?  Gone in a New York Minute.  What happened to Bob Scheer, a relentlessly honest journalist who used to write for the Los Angeles Times until he became too hot to publish?  Bob Scheer, who had this to say about David Stockman, by the way:

“Why is David Stockman driving everyone crazy?…What’s all the outrage about?…
The headline on Stockman’s piece—“State-Wrecked: The Corruption of Capitalism in America”—is unquestionably accurate…..What his critics find so disturbing is not a quaint argument about the purity of monetary policy but rather the bold assertion that the overall American system of crony capitalism is in fact wrecked. This is a contention that most Americans might readily agree with in terms of their daily experience, but one that the hardly suffering pundit class would rather not contemplate…
Bernanke, who throws $85 billion a month at the bankers who caused this mess, purchasing their toxic mortgage based derivatives, is still treated with respect. But Stockman, who opposed bailing out the banks so they, like those tens of millions of foreclosed homeowners, could learn a tough love lesson in real economics, is now an object of derision…
That fiasco’s enablers—Alan Greenspan, Robert Rubin and Lawrence Summers—and the more disastrous ones to follow were crowned “The Committee to Save the World” on Time magazine’s Feb. 15, 1999, cover and are still welcomed in those polite circles where truth-teller Stockman is being treated as a pariah.”

April 10, 2013

Cage Match Clash of the Dry Lab Titans of Economics

And yet, I can't be serious.  I can't seriously believe that simply printing money will lift the industrialized countries out of the doldrums and usher in a new era of prosperity.  This is all a variation on Yossarian & the Bomb Line, that perfectly written scene where Yossarian changes the map in the middle of the night so the squadron doesn't have to fly the dangerous mission over northern Italy.  The aviators had stared at the bomb line day after day, willing it to move beyond the danger point so they could fly another milk run, not a life-and-death battle in the sky. 

Clevinger plays the role of the rationalist:

When night fell, they congregated in the darkness with flashlights, continuing their macabre vigil at the bomb line in brooding entreaty as though hoping to move the ribbon up by the collective weight of their sullen prayers. "I really can't believe it," Clevinger exclaimed to Yossarian in a voice rising and falling in protest and wonder. "It's a complete reversion to primitive superstition. They're confusing cause and effect. It makes as much sense as knocking on wood or crossing your fingers. They really believe that we wouldn't have to fly that mission tomorrow if someone would only tiptoe up to the map in the middle of the night and move the bomb line over Bologna. Can you imagine? You and I must be the only rational ones left."

In the middle of the night Yossarian knocked on wood, crossed his fingers, and tiptoed out of his tent to move the bomb line up over Bologna.”
Joseph Heller, Catch-22

Just to read that scene, and so many others like it, has made life worth living.  Heller was that good. 

Printing money is the monetary equivalent of Yossarian's action.  One might first ask, why are all the big central banks printing money like there's no tomorrow?  The Federal Reserve, the Bank of Japan (at Mach 3), the European Central Bank.  They are cheered on by the Keynesian true believers, such as the chief economist at the New York Times, Professor Paul Numbnuts.  Indeed, all of this hallucinated money is again blowing massive bubbles in the stock exhanges and housing markets.  Bomb lines are being moved in the dead of night.  Will morning ever come?

I watched, in an unedified way, the Economic Cage Match between Prof. Numbnuts and David Stockman, former head of the OMB under Reagan, former divinity school grad student, former Wall Street con man, on George Stephwhatever on Sunday's "This Week."  Stockman had had the unmitigated gall to publish, in the Times itself, a long screed on the many sins of the American economy over the last....80 years.   It was, in fact, a little too much.  It's true that the American economy has run out of gas, insofar as the fate of the American commoner is concerned.  (Large corporations are doing fine, because of the international nature of their business and because their current practice is to hire R2D2, not carbon-based life forms.)  Mr. Numbnuts believes that the lot of the commoner can be lifted through Keynesian monetary (money printing) and fiscal (borrowing more money) stimulus.  It's just that we won't do it.  It's so simple, it's sitting right there, and we won't do it. 

Stockman, on the other hand, is a Debt Freak.  Everything is about debt - public, private, international, whatever.  Too much of it, wherever you look.  Adding more debt to a debt-saturated economy is not going to work.

Both of these intellectual titans left out of their deliberations a factor I consider important: the real world.  Paul Krugman is convinced that this recession (which he sometimes calls a depression) can be remedied, and will be remedied, and it's only a matter of when.  It will happen sooner if we pursue the right "policy."  It will take longer (but apparently will happen anyway, despite doing everything wrong) if we keep on this "austerity" kick, meaning borrowing an insufficiently large fraction of what Numbnuts calls "potential GDP."  (Using an hypothesized number like "potential GDP," a state of affairs that does not actually exist, allows you to claim that the amounts we're borrowing are smaller than they appear to be, "as a share of GDP."  Krugman compares everything to shares of GDP - his lunch tab, his bar bill, his hat size.) 

I notice lately, however, that Krugman is beginning to show a few signs of wear and tear.  Let's face it: it was the summer of 2007 when Bush told us this sucker could go down.  The stock market tanked, millions of people lost their jobs.  We're pushing six years later.  Have we really gotten anywhere?  We have not actually created a single job.  We're stuck.  Everything the society actually needs is produced by the skeleton crew of humans and robots with actual jobs.  Numbnuts tells us that the whole problem is "insufficient demand," but that's what a Keynesian always says.  The demand matches output, and the output is sufficient.  What he's saying is that the Planning & Tanning Economy has gone away, and it needs to be revived, so that the "potential GDP" will become the actual GDP.  We must increase "aggregate demand" for Planning & Tanning.  This is, of course, utter nonsense, the result of imagining that the world conforms to an economic model that once was and now can no longer be.  Americans can't live that way anymore.  They've been reduced to basics, like filling up the tank, paying rent and getting enough to eat.

These Two Titans of Dry Lab Economics, in other words, are debating historical curiosities, the cyclical booms and busts of the past.  Analogizing forward from the irrelevant conditions that existed in 1937, or whenever, tells us nothing about a world up against the Limits to Growth, global warming and overpopulation.  It's currently Now.  But the study of Now is not what these guys were trained to do, and they can't make any money talking about it.  So they go on talk shows and prove each other wrong.  And they're both right that they're both wrong.  It's just that neither one is right about anything else.