Krugman Is the Herman Cain of Bailouts and the Euro
(Free Advice) -- by Robert Murphy --
Krugman Is the Herman Cain of Bailouts and the EuroEconomics, Financial Economics, Inflation, Krugman 18 Comments No, I don’t mean Krugman favors a $999 billion bailout (that’s much too small), I mean that he simultaneously tries to take both sides of a hot-button issue. (Poor John Stossel!)
In a snarky post entitled, “A Tale of Two Krugmans,” I alluded to the fact that Krugman thought he blew up the case for laissez-faire on bailouts by declaring the position politically impossible:
One line I’ve been seeing in various places, including comments here, is the claim that the real way to deal with Wall Street is laissez-faire economics: no more bailouts! On this view, policy makers should raise their right hand in the air, place their left hand on a copy of Atlas Shrugged, and swear in the name of A is A that they will never again step in to rescue failing banks. And all will be well with the world.I then linked to Krugman’s discussion of Iceland, in which he praised its government for not bailing out it bankers, the way orthodox opinion had said was necessary (and of course, Krugman had been on the side of the good guys on the issue).
Sorry, but that’s a fantasy.
…[E]ven if you persuade yourself that the moral hazard created by financial firefighting outweighs the benefits of avoiding a 1931-style cascading crisis, the fact is that policy makers will intervene. Hank Paulson set out to make Lehman an example; two days later he was staring into the abyss.
So the only feasible strategy is guarantees and a financial safety net plus regulation to limit the abuse of those guarantees.
Yet that particular quotation was murky, because Krugman mixed it up with some discussion of debt restructuring, and because it was from November 2010.
But now, a mere two weeks after Krugman told us that it was a fantasy to expect politicians not to bail out their big bankers, Krugman cleanly declares the following:
You can play with different numbers and try to make Iceland look worse in comparison, but the bottom line here is that Iceland — while it has suffered terribly — really does not seem to have done as badly as other countries that seemed to have much less awful fundamentals.So I guess the politicians in Iceland are big Atlas Shrugged fans? Maybe they listen to David Hasselhoff and read Ayn Rand?
Part of the story, of course, is that Iceland refused to take responsibility for the debts run up by runaway bankers.
Now here’s another really weird thing about Krugman: A mere two posts before the one explaining Iceland’s great decision not to bail out its bankers, Krugman said that the European governments urgently need to bail out their bankers!...
Krugman is playing the same game here. He has said repeatedly that the euro project was a mistake, and keeps explaining why it is crippling the constituent members’ ability to recover. (For example, the main point in the recent Iceland post linked above, is that Iceland could devalue its currency since it didn’t foolishly join the euro. Krugman says that explicitly.)
Like Cain, it’s not even that Krugman takes both sides of the issue at different times–on his blog today he takes both sides in the very same post!...MORE...LINK