Uncle Sol Starting a thought farm

Following the Advice of the Gallactically Stupid

In the movie, A Few Good Men, the character played by Tom Cruise rants at his superior officer about the prospect of going after a celebrated colonel because he believed the colonel responsible for the death of a marine, even though he had no evidence to support such a charge. All he had was a feeling that it was true. As it turned out, his feeling was correct and he was able to get the colonel to admit his responsibility. He did, in his words, "follow the advice of the galactically stupid" and it turned out ok.

In the real world this may work from time to time, though it must be exceptionally rare. And as I have been reading this morning of some galactically stupid advice given by Paul Krugman, I am inclined to believe that following it won't turn out so well for the global economy as it did for Sorkin's fictional character.

The Wall Street Journal this morning has a piece outlining the advice, which is a criticism of Germany's Axel Weber. Krugman says, in response to the prospect of Weber taking over as head of the ECB, "If you are looking for someone who is aiming for zero inflation while unemployment is rising to 13%, then Weber is definitely the right guy."

His sarcasm at the prospect is because of his belief that the government needs to keep borrowing and spending to get the economy back on track. The Germans, indeed, all of Europe is now setting on the opposite track. The scare in Greece has shown them that relying on low interest treasury bonds to keep their countries' finances straight is a fools game, and one that will eventually blow up on them. They see that they must cut back their spending. They know that if they don't, they will wind up in the same position as Greece. The problem for Krugman is that this is contrary to his Keynsian faith. Nevermind the fact that it is this precise faith, and following the advice of people like Paul Krugman that got us into this mess in the first place.

A number of blogs are reporting this quote this morning, but my favorite quote about it comes from Mike Shedlock at Mish's Global Economic Trend Analysis.

Bernanke is so dense he could not see the approaching debt tsunami two feet from the shore.

He did not see a housing bubble, he did not see a recession, he did not see unemployment at 10% and he cannot find his ass with both hands and a roadmap. Nor can Krugman.

Unfortunately, though Krugman would like to blame George Bush for all the ill's of the world, he can be no Colonel Jessup in this screenplay. The problem started long before Bush was president. In fact, it started long before his father was president. We've been riding the Keynsian train for decades, and we're out of bubbles to inflate. So, in this case, rather than following the advice of the galactically stupid, I think we're better off listening to it, and then doing precisely the opposite.

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