Spot the Problem

Very short on time tonight but it was very easy to do my boxing workout after another stellar post by my favorite economist Paul Krugman! I cannot leave this one alone!

Spot the Problem
My major argument against most economists is that they cannot answer basic questions they can only offer mechanics of action. Case in point, Mr. Krugmans post today:
Euro perspective
Krugman explains that the trouble makers of Greece, Ireland, Spain and Portugal are small fish:

Overall, the group of stressed economies account for about 20 percent of the eurozone’s GDP. So even a sharp fiscal retrenchment wouldn’t be all that big a shock; still, it certainly wouldn’t help.

No big deal.

What Mr. Krugman fails to address is the plight of these countries sounds all too familiar:
-too much spending
-low tax revenue
-crushing social cost spending
-long term structural issues with capital management

To am economist a Euro led bailout solves the problem because Greece will not default TODAY. They offer no help as to changing the situation on the ground that may actually help these countries turn things around.

Pretend and Extend just went global and I guess if you kick the can across time zones enough times maybe the can will never stop rolling. Better hope so because the Krugman's of the world will not have anything constructive to say at that point.

Have a good night.

Tuesday Late Night

Home late from a work related function, but some links are in order.

More Bearer Bond News
Oh boy, now the Italians want the SEC to make a ruling on the bonds authenticity. Market Skeptics has the goods.

Krugman Is, and Always was a Keynesian Clown
Mish delivers the knockout blow with this story. Dead to rights line from Krugman himself in August 2002:

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Game over. The housing bubble was both done on purpose and finally exposes Keynesian economics for what it is: Useless and Dangerous

Other Stuff
A good friend of Economic Disconnect has plenty of content up tonight, so why not check out Illusion of Prosperity?

Another new stop for me is Accrued Interest.

And of course, if you have not checked out The Automatic Earth, well, you are really missing out.

Have a good night.