According to Bill O’Neill of LOGIC Advisors, “Gold was oversold after the Fed minutes. I don’t see the Fed will be doing anything to withdraw stimulus soon.”
Stimulus today, stimulus tomorrow, stimulus forever. Paul Krugman laments January 6, “This isn’t how things were supposed to be. If you had polled the economists attending this meeting [of the American Economic Association] three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.”
So why does the slump persist? Enlighten us, Herr Professor Doktor. “The answer, mainly, is the triumph of bad ideas.” Do go on. “It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders—and all too many economists—chose to forget or ignore what they should have known.”
And what was the good answer Krugman advanced in November 2008? “The stimulus package should be at least 4% of GDP, or $600 billion.” And Congress did better than that. On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009. Wikipedia: “The approximate cost of the economic stimulus package was estimated to be $787 billion at the time of passage, later revised to $831 billion.”
The very next day, Obama’s stimulus package was assailed by a certain Nobel Prize winning economist as “fall[ing] far short of what’s needed to jumpstart the economy.” And the name of that intellectual titan? Paul Krugman.
Stimulus failed, but there is a solution to hand. Wait for it—more stimulus! Krugman: “Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely.” Note the date, January 7, 2013: when Keynesian economics was translated from economic doctrine to cargo cult. The United States enjoyed economic growth, even robust growth, during times when government spending increased greatly. Now growth has stalled, even stopped, but if government increases spending even more, the good times will return. Paul Krugman says so, and we can trust him because a group of Swedish wise men presented him with a sacred talisman.
David Frum writes, “In 1943, Vice President Henry Wallace published a book celebrating the coming ‘century of the common man.’ That century did not last very long. We have transitioned instead into the era of the clever man and clever woman.”
That’s one point of view. Another would be that we have transitioned into the era of magical thinking, administered by a priesthood of idiots. Consider this withering judgment: “The truth is that we’ve just experienced a colossal failure of economic policy—and far too many of those responsible for that failure both retain power and refuse to learn from experience.” The author? Paul Krugman.
There are dark forces at work in the world, my friends. A spectre is haunting America, the spectre of gold. Joe Weisenthal explains, “Almost everyone talking about fiscal policy imagines money to be a commodity of sorts that we can ‘run out’ of if we don’t spend it carefully. In this sense, although we’ve long gotten rid of the gold standard, we’re still shackled with a gold standard mentality, where we think of money as a scarce natural resource that we need to husband carefully, lest one day the bond vigilantes show up at our door, causing us to go broke.”
Not to worry, though; Weisenthal has a good answer. Mint the coin; dispel the spectre; appease the gods. And they say goldbugs are nuts.