If it was only Krugman, I wouldn’t bother with this, but he’s not only speaking for himself.
Spend any time around monetary officials and one word you’ll hear a lot is “normalization.” Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.
But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now they’ve moved into the mainstream. In fact, the case for “secular stagnation” — a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between — was made forcefully recently at the most ultrarespectable of venues, the I.M.F.’s big annual research conference. And the person making that case was none other than Larry Summers. Yes, that Larry Summers.
And if Mr. Summers is right, everything respectable people have been saying about economic policy is wrong, and will keep being wrong for a long time.
I doubt Krugman read it, but it is hard to not see this editorial as a response to Michael Snyder’s “Obamacare: The Final Nail in the Coffin for the Middle Class.” Krugman shows us how the elites and their henchmen (Larry Summers, Krugman, etc) excuse themselves. They’ve decided the middle class is already dead. So anything they do “to help” doesn’t really need to be examined for its negative consequences. Raising taxes and destroying household budgets through inflated health insurance prices can’t be so bad since the middle class is ending anyway. They have engineered the perfect excuse to do what they want.
They are also engineering the zombie economy they claim to be trying to fix. Easy credit and government-depressed interest rates are exactly what is restraining this economy to zombie status. If Krugman was talking about a lowering of the standard-of-living then I wouldn’t disagree with him so much. Getting over the last century of debt-binging is going to require some work (and the demographic problems Krugman mentions are also real). But Krugman is talking here about something else—mass unemployment.
There is no reason for mass unemployment except government obstruction in the economy. If we let interest rates set themselves and got rid of price and wage controls (or better: if we also got rid of the Federal Reserve and allowed people to use a real commodity as money), we would see jobs get offered. Because people have to find willing customers to stay in business, wages and prices would sync with each other and we could start rebuilding prosperity. Higher interest rates would mean that people would actually save money again instead of indulging in consumer borrowing.
This is why accepting food stamps and jobless benefits is such a devil’s bargain with these people. They aren’t trying to help anyone. They are trying to keep us pacified.
If it works, we deserve them as our masters.
The Federal Reserve/fractional reserve banking system, the huge regulations, the crony spending that enriches the real one percenters—it is all killing our economy. And Krugman is there, invoking the “permanent slump” in the place of his space aliens to justify more doses of the same poison that is already damaging us.