If someone keeps on giving you advice that turns out to be wrong, would you continue to listen to them? In this fascinating interview, John Batchelor talks with Ireland's Marc Coleman about his home country, about Latvia, and the many similarities between the two. At one point Coleman says, paraphrasing: "Latvia ignored Paul Krugman's stupid advice about devaluating their currency. As a result, their economy grew by 5.5% last year."
More about Latvia's Common Sense vs. Krugman's Failed Leftist Ideology can be read here.
Unfortunately, Latvia has pegged their currency to the Euro and has only postponed not cancelled Euro adoption to 2014.
Krugman has fallen so in love with progressive politics that his economics has been perverted by it. There are few economists who take Krugman seriously anymore.
Nor does it help that Krugman looks like an axe murderer.
Wait! I know this one! = Krugman is an A$$hole!
On a Nobel-Prize winning scale!
If someone keeps on giving you advice that turns out to be wrong, would you continue to listen to them?
Someone ... them? What's with the weird grammar theses days?
Kroket: http://www.onestopenglish.com/support/ask-the-experts/grammar-questions/grammar-them-and-they/146352.article
"Them is also sometimes used instead of the object pronouns him or her to refer to an individual person whose sex is not known or mentioned:
If someone phones, tell them I’m not here."
Related:
From Mises.org: Why Estonia Is Beating the Eurozone.
HOWEVER, not wanting to be long term winners the government and the central bank have reversed course!
One of my most favourite movie lines came from the 1995 movie "Clueless". In it, the Brittany Murphy character tells the lead "Cher" played by Alicia Silverstone this: "Why would I take advice from a virgin who can't drive!" Still gives me the giggles - could be applied to Krugman's advice.
It should be noted Estonia is a Eurodollar country which just goes to show that while the Euro is bad it is not the main cause of the problem.
It's also interesting to note that the noted spending splurge in Estonia comes after and during a prolonged period of excessively low interest rates, which is due to being a Eurozone member. Low interest rates reward government borrowing.
Thanks, Robert. That's new to me. Learn something every day. But I thought in this case reference was made to Paul Krugman so 'he' would be have been OK.
I meant to say "listen to him" would have been OK.
I respect Iceland, actually the Iceandic people, who chased a corrupt Euro banking cartel out of their nation and refused to bow to their intimidation. The differnce between Iceland and Latvia is Ileabd cut all ties with the Euro banking cartels and their money is not pegged to either the sinking ruro or the soon to collapse Greenback. They may just weather out the global debt melt down when derivatives impode taKing the currency and that they were traded in with them.
The big melt is yet to come when banks are faced with collapsing the economy or writing off trillions in unrecoverable derivatives debt. At that point we will hear the same tired matra about "too big to fail" from thir puppt politicians as they again try to underwite their greed-indud losses with public funds/debt.
Krugman is trying to fix the world's 'SOLVENCY" crisis by treating it as a 'liquidity' crisis.
For decades now, the Keynesian have been trying to cure/stimulate the world economies by printing money - a liquidity flood.
Problem is, the 'velocity of money*' can be so low it negates all the available stimulus money sitting around, not loaned out, not creating economic activity. Why is it sitting around? 1)Too many borrowers are already in over their heads, last thing they need is more debt. 2) Lenders are reluctant to lend into a debt burdened economy fearing they will not be repaid.
* 'Velocity Of Money' - the frequency of money turnover in an economy. In a strong economy it appears there is a lot of money in circulation because people are willing to buy things or invest or lend on a quick and regular basis because there is hope of making more money to replace what they spend. In a poor economy the velocity of money slows down because people are afraid to spend, invest, lend. There may not be a lot of money in circulation even though gobs of it had been printed Krugman style but is just sitting in the bank even though it is earning very little or no interest. Also, if deflation rears it's head even a little, it can be a self inducing phenomena. In this case, stimulus injections can be like pushing on a string (see 'Liquidity Trap')
If however, huge amounts of money has been printed trying to shore up the banking systems bad loans, the currency may become unstable, worthless resulting in hyper inflation. (see Argentina, Peru, Mexico and many many others over the years.) In extreme cases, prices doubled as often as every day. I doubt if even the Marxist would be ok with that. Krugman though would see it as an opportunity for more intervention and ... and yes, more stimulus.
What happens when a lower interest rate stimulus can no longer be implemented because IR are already at zero? Ask Japan.
Even though IR could theoretically be negative, it would seem weird to say the least - the bank pays you! to take a loan. But this is what effectively has been happening in Japan for many years now. Even though the BoJ lowered IR all the way to zero, the economy kept on liquidating all the bad loans/investments. aka debt deflation. If IR are at zero and deflation is at, say, 3% then real interest rates would be positive.
Is deflation the only way interest rates can rise? Politicians and Central banks seem not willing to fix the real problem causing easy credit, over leveraging, bad loans, low investment, high unemployment ect. IR have been unusually low for a long time now. Not a problem? See above.
Am I wrong?
The policy in Latvia is the old American recession fighting strategy of quick dehiring of many employees,
fiscal reforms, quick rehiring of employees which socialists hate. Obama's massive deficits have a huge
component which essentially kept many surplus car union and surplus public union employees getting
big regular paychecks instead of being laid off early in the recession. The Lithuanians are also starting
to wobble over high employment and are listening more closely to the old Communist iffy siren song
promises as their election finishes up on 28 Oct.
Latvians being under the thumb of the Communist Soviet Empire can smell a Communist a long ways off.
Krugman came of as a 5 alarm whiff.
Revnant Dream @ 2:29, agreed, and so do others that remember that brand of socialist paradise.