Recently, New York Times writer Paul Krugman revived his assertion that the US economy could benefit dramatically if the government were to spend massively on a defense program to prepare for an alien invasion of the earth. He has said,
If we discovered that space aliens were planning to attack, and we needed a massive buildup to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in eighteen months.
I wish to point out in Mister Krugman's defense that he does not actually believe that little green men are on their way earthward. Rather, he is using his "invasion" hypothesis to exemplify the reasonableness of massive spending as a solution to America's economic woes.
On the other hand, Mister Krugman does not bother to mention that the US is already on a massive spending spree and has been ever since the downturn began; that this spending, whilst getting the US ever-deeper in debt, has failed to produce those promised "green shoots."
Like many Keynesian economists, when massive government spending fails to solve the problem, Mister Krugman simply responds by saying that the failure to pull the economy out of its tailspin was because even more should have been spent. Hence his hypothesis of the alien invasion.
And in this argument lies the persistent salvage of Keynesian principles. In every case where Keynesianism fails, no one can prove that the massive spending might not have succeeded if they had just spent "a little bit more." After all, no matter how much a country spends, it is always possible to spend a little bit more; so, Keynesianism can never be truly disproven.
Economic Cliff's Notes
And therein lies the rub. The average person does not have the time to actually study classical economics, let alone the more recent Keynesian economics or Austrian economics. So, in order to understand such an admittedly complex and confusing subject, he must resort to his "Cliff's Notes."
And in the modern world, the television serves as our nightly Cliff's Notes. We can count on our favourite news program to have plenty of "experts" to provide the sound bites we need to draw our conclusions (or, rather, to adopt theirs). And if we are inclined to doubt the pundit we see on the television, we need only have a peek at his credentials. Mr. Krugman has those in spades – MIT, Yale, and don't forget that Nobel prize.
And that's the real message from the media news, isn't it? "Don't question – just believe what your betters advise you."
That being the status quo, to my mind, it is not only understandable that the vast majority of people accept the version of economics (and its handling by governments) that is being spoon-fed to viewers on a daily basis, it is remarkable that anyone ever stops to ask himself a truly objective question. For example, if one were to muse, "Ben Bernanke has just said that everything is going to be fine real soon… but hasn't he been saying that ever since this all began? In fact, haven't each one of his predictions about recovery turned out to be wrong? Should I really still trust what this guy says?"
For those of us who do not live in the US, it is not so difficult to see around the smokescreen created by the American media, as we tend to draw from the wider world for our input. Those of us who are well outside the forest are not so likely to be confused by the trees. In fact, the US media would seem a bit comical, were it not for the fact that its effect is so damaging to so many who live within US shores.
It is therefore not only laudable, but rather extraordinary, that a small number of Americans (and for that matter Europeans) break through the smokescreen to the degree that they begin to ask questions, such as:
- Could it really be that what I'm fed by the media is intended to indoctrinate me?
- Am I merely a milk cow to my government?
- Will my life's hard work be in vain as a result of my government's wastefulness?
- Do I live in the wrong country?
- Is there another choice for me that would be preferable to the road I'm now on?
These are daring questions to ask. At risk is not only the loss of the assumption that "This is still the best country in the world," and all that goes with it. In addition, there is the seemingly daunting task of considering internationalising.
For most – nearly all, in fact – the answer will be, "Better the devil you know…." However, for a small percentage, the answer will be, "I already believe that my present situation may well be a dead end. The odds of finding a better world elsewhere are in my favour."
Internationalising doesn't mean you must become an expat and leave immediately. It does mean developing the options to move your savings, your income, and yourself into multiple jurisdictions one day, should you need to.
And, as for Mister Krugman's hypothesis? My personal answer as to whether more debt will cure the current debt problem is quite a simple one:
The only cure for drug addiction is to cease taking the drug and accept that withdrawal is a necessary first stage of the cure.
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