It's always the right time to ignore Paul Krugman, the New York Times columnist, Nobel Laureate and four-time Latin Grammy nominee whose drink-yourself-sober advice on handling the debt crisis is so sharply at odds with reality.
Of late, Krugman has had his Irish up at Europeans who are resisting the Obama Administration's plan to continue spending hundreds of billions on financial stimulus. (Not that he agrees with the administration, which Krugman has been arguing for the last 18 months should be spending trillions, not mere billions, on stimulus.) And in the case of Bundesbank president Axel Weber -- whom Krugman called out recently in the daily Handelsblatt for trying to shore up the falling euro at the expense of government job creation -- it's created a backlash. The Wall Street Journal reports that Krugman's criticism has turned him into the anti-Hasselhoff and boosted Weber's popularity as he pursues the top job at the European Central Bank:
Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”
“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.
Unfortunately, as Krugman notes in his response, Franz managed to find the weakest arguments against the Times' fiscal shaman. Europeans have lost their appetite for digging deeper holes of debt for the same reason Americans have: because they don't have a choice. As Margaret Thatcher predicted would happen, we have all run out of other people's money. That reality explains a lot more than airy references to Germans' anti-inflationary mass psychology.
We're at the tail end of the largest economic intervention since World War II, and even on its own narrow, nebulous terms, it has been a colossal failure. The failure is obvious to working people. It's obvious to unemployed people. It's obvious to kindergarteners, to dogs and cats. Only Paul Krugman persists in thinking good things will happen if we just throw more money on the barbecue.