Marc Faber Takes on Krugman, Links Bernanke and Mugabe
Mr. Krugman “thinks it would be very good to have another bubble in the world and deal with it later on,” according to Mr. Faber. Mr. Krugman, the columnist and Nobel prize winner, has advocated a strong government stimulus and big deficits to jumpstart the economy.
Mr. Faber, a Hong Kong-based investor and author of the Gloom, Doom & Boom report, suggested Mr. Krugman’s piece, entitled “How Did Economists Get it So Wrong,” missed the mark. There wasn’t “a single word about excessive credit growth” in Mr. Krugman’s article, he said. “He should have written ‘How did I get it so wrong?’”
Mr. Faber’s view is that the collapse was due to the massive increase in credit stoked by the Federal Reserve. The Fed and academic economists such as Mr. Krugman failed to acknowledge that the borrowing boom would create economic chaos, he said.
“You have to give credit to [Ben] Bernanke and [Alan] Greenspan. They have achieved something no central bankers have achieved in history. They created a bubble in everything…The only asset that went down from 2002 to 2007 was the U.S. dollar.”
There was one place he said that didn’t grow in the final years of the latest bubble. That was Zimbabwe, which suffered hyperinflation and economic collapse at the hands of dictator Robert Mugabe. The African country was “run by a money printer, Mr. Mugabe, a mentor of Mr. Bernanke,” Mr. Faber said.
Mr. Faber told the audience to put money in Asian equities and commodities. He said gold is important, but buy real gold, not derivatives, and keep the gold outside the U.S. The U.S. confiscated gold during the Great Depression, he noted.
He, like Warren Buffett, Nouriel Roubini and others, thinks the dollar is destined to erode, though Mr. Faber said it could rebound over the next few months as signs of deflation stick around. “The dollar in the long run is a doomed currency,” he said. “This is the short of the century…The government’s policy is to make it worthless.”
Paul Krugman, the "Pied Piper of New York."
Paul Krugman's Identity Crisis (emphasis added)
Anyone who reads Paul Krugman, our latest "Nobel Prize-winning economist," knows that Krugman believes inflation is not a threat to the economy at all. He is a regular defender of large fiscal deficits and expansionary monetary policy, claiming that they are the road to salvation from our so-called deflationary spiral.
In 2009, Krugman stated that "deficits saved the world." However, in 2003, when Alan Greenspan and the Bush administration were destroying this country's balance sheet, Krugman was scared to death about inflation. The rest of this article references several paragraphs from Mr. Krugman's March 11th, 2003, article, "A Fiscal Train Wreck."
With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.
Since 2003, not only has the dollar lost purchasing power, but also inflationary pressures have grown like cancers. As a result, our deficits are bigger and our economy is weaker. Meanwhile, Ben Bernanke has run the printing presses at full speed and given no indication that he will slow them down any time soon.
Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.
If Paul Krugman was worried about a $3 trillion budget deficit and a debt-to-GDP ratio of 4 percent six years ago, a $9 trillion budget deficit and a debt-to-GDP ratio of 40 percent today should have him preparing for financial Armageddon. The reality of the situation is that we are facing the biggest currency crisis in our nation's history.
Because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.
This is exactly what most sane economists are saying today. Ironically, Mr. Krugman now likes to conveniently ignore those Social Security and Medicare liabilities that he was so frightened about in 2003. Let us not forget, he also conveniently ignores our newly pledged liabilities to Fannie Mae and Freddie Mac as well.
My prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
And as that temptation becomes obvious, interest rates will soar.
His point here is 100 percent correct and crucial. The government, now under Barack Obama, has officially entered the stage of printing money to pay its bills and inflate away the debt. The problem is that Mr. Krugman now denies that such actions (printing money) are even occurring, and uses a megaphone to cheer the quantitative easing performed by Ben Bernanke.
He also regularly attacks any person who even mentions the possibility of interest rates rising. The Paul Krugman of 2009 completely disagrees with the Paul Krugman of 2003.
I think that the main thing keeping long-term interest rates low right now is cognitive dissonance.… The ultra-establishment Committee for Economic Development now warns that "a fiscal crisis threatens our future standard of living."
The problem is that everything Mr. Krugman now writes entirely contradicts his 2003 article, despite the fact that every fundamental problem the economy faced six years ago is now much worse.
In the past, we financed our debt through 30-year bonds, as did Japan. Today, a large portion of our debt is financed through 2-year bonds. What happens if those interest rates creep higher? The United States must turn to the printing press to avoid default.
Investors still can't believe that the leaders of the United States are acting like the rulers of a banana republic. But I've done the math, and reached my own conclusions — and I've locked in my rate.
Given our administration's actions, we are officially becoming a banana republic; no matter how many times Mr. Krugman tells us on TV "we are not Argentina." Mr. Krugman made a wise choice in 2003 to convert his mortgage to a fixed rate over the course of 30 years. Why on Earth would he recommend that the entire nation take out debt financed in 2-year bonds? America is essentially signing up for a subprime mortgage, and we are assuming that we can simply refinance before the rates reset.
Mr. Krugman should do us all a favor and stop lying to the American people. When interest rates rise, and inflation skyrockets out of control, millions of Americans are going to wonder why Paul Krugman told us it wouldn't happen. With every word he writes, I wonder how big that conscience of a liberal really is.
Not only is Krugman a hack, but Keynesian economics isn't even real economics. It's just a crackpot theory about centralized government.
