Public intellectual Paul Krugman recently consigned to Hell, in a New York Times op-ed column entitled A Permanent Slump, the world economy.
[W]hat if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
Yes. What if?
And what if Paul Krugman is one of the chief architects of these depression-like conditions?
As this columnist recently wrote, about Professor Niall Ferguson’s dismissal of Prof. Krugman from polite company, “Krugman’s horns now forever will show under his dislodged faux halo.”
Prof. Krugman? As Christopher Marlow so elegantly put it in Dr. Faustus,
Why, this is hell, nor am I out of it.
Yes, Prof. Krugman, this is economic Hell.
Nor are you out of it.
There is abundant evidence that you had, and have, a material role in producing this Hell.
As this columnist has noted in The American Thinker in a column entitled Money, Twisted,
Paul Krugman, in his New York Times column of August 24, “Galt, Gold and God,” rails against an interest in the gold standard, which he attributes to Paul Ryan. Krugman lambastes Ryan, ironically enough, for an observation the latter made paraphrasing Keynes: “‘There is nothing more insidious that a country can do to its citizens,’ he intoned, ‘than debase its currency.’”
… Krugman would do well to dig into a classic: Goethe’s Faust, Part II. Scott Minerd, chief investment officer at Guggenheim, writing in the Financial Times recently, brilliantly called contemporary monetary policy “the ultimate Faustian bargain.”
Paper money comes straight from Mephistopheles. The History of Money by Jack Weatherford recounts the story.
Faust and Mephistopheles visit the court of the emperor during the pre-Lentin carnival season of masquerades and tricks. The emperor is besieged by his treasurer and stewards reporting the lack of funds and the need to pay the wages of the soldiers and servants. His moneylenders demand payment on debts, and even the wine bill has come due.
Mephistopheles offers the emperor a way out of his financial mess. He has found the key to making gold, the secret that all alchemists had sought for centuries. He obtains from the emperor permission to print paper money-”the heaven-sent leaf.”
The new money has been unleashed to the great joy of creditors, debtors, soldiers, and other citizens. Already people are ordering new clothes, and business booms for the butcher and baker. Wine is flowing freely in the taverns, and even the dice roll more easily. Priests and prostitutes scurry about their business with greater enthusiasm because of the new money, and even the moneylenders are enjoying a brisk new business.
At first, the spread of Faust’s new money brings happiness and improvement, but soon the hidden costs begin bubbling to the surface. … Soon social unrest in the newly enriched nation leads to rebellion, and a new anti-emperor rises to challenge the old one.
The perversity? Monetary shenanigans represent a short-term fix but the long-term cause of economic, social, and political woe. Thus do Neo-Keynesian economists such as Krugman enlist in the Devil’s Party. “Easy money” advocates propound QEs and Twists and other weird devices to generate a brief relief for the economy. They ignore the seeds of destruction thereby sown.
Lest this be dismissed as merely a fanciful literary metaphor, let us recall that the irreproachable chairman of the Bundesbank, Jens Weidmann, relied on Goethe in a September 2012 speech calling gold “a timeless classic.”
Weidmann stated that “Concrete objects have served as money for most of human history; we may therefore speak of commodity money. A great deal of trust was placed in particular in precious and rare metals – gold first and foremost – due to their assumed intrinsic value. In its function as a medium of exchange, medium of payment and store of value, gold is thus, in a sense, a timeless classic.”
Most of his speech was devoted to recounting an iconic work of German (and world) culture, Goethe’s Faust, Part II.
Let me remind you briefly of the “money creation” scene in Act One of the Second Part of Faust. Mephistopheles, disguised as a fool, talks to the Emperor, who is in severe financial distress, and says
“In this world, what isn’t lacking, somewhere, though? Sometimes it’s this, or that: here’s what’s missing’s gold”“
In the commotion of the nocturnal masquerade ball, he persuades the Emperor to sign a document – a document which Mephistopheles has reproduced over night and then distributed as paper money.
Those concerned are so overjoyed by this apparent blessing that they do not even suspect that things could get out of hand.
In the Second Part of Faust, the state can get rid of its debt to begin with. At the same time, private consumer demand rises sharply, fuelling an upswing. In due course, however, all this activity degenerates into inflation, destroying the monetary system because the money rapidly loses it value.
Prof. Krugman and his “plovers” have a propensity to dismiss their intellectual adversaries with infantile terms such as “derp.” It is easier, although lazy and louche, for Prof. Krugman to ignore the comments of world-respected officials, such as Herr Dr. Weidmann calling gold a “timeless classic.” Prof. Krugman chronically misrepresents marginal figures as significant. He sets up straw men for ridicule rather than grappling with proponents who make a rigorous case.
What case might that be? The case is that the austere stagnation inflicted on America — and the world — is a direct result of the unsound policy prescriptions offered by Professor Krugman, and colleagues, who rely on their celebrity status more than on intellectual rigor.
Rigorous propositions for serious monetary reform as a recipe for equitable prosperity (not austerity) now are emerging from important policy thought leaders. These include the founder and chairman, Lewis E. Lehrman, of the Lehrman Institute (whose monetary policy website, thegoldstandarnow.org, this columnist professionally edits). It includes the American Principles Project (with whose sister organization this columnist professionally advises) under the direction of its chairman, Sean Fieler, and its economic policy director, Rich Danker. Thought leadership is offered by CEO-Editor Steve Forbes, and his editor of Forbes.com Opinions, John Tamny.
Among the most important leaders of the emerging monetary reform movement must be counted the Cato Institute (under the capable guidance of its distinguished president John Allison, and Vice Presidents Dr. James Dorn and Dr. Mark Calabria, among others); Heritage Foundation (under the sure hand of Dr. Norbert Michel, with, reportedly, strong encouragement from Heritage’s most senior levels); Atlas Economic Research Foundation (whose Sound Money Project is directed by the esteemed Dr. Judy Shelton); Mercatus Center at George Mason University (which scored a coup hiring Lydia Mashburn, formerly policy director for the House Subcommittee on Domestic Monetary Policy under the chairmanship of the Honorable Ron Paul, as its program manager for its Financial Markets Working Group).
There are many other voices emerging. Not the least of these are important elected officials such as Rep. Jeb Hensarling , R-Tx, chairman of the House Financial Services Committee, and Rep. Kevin Brady, R-Tx, chairman of the congressional Joint Economic Committee.
Prof. Krugman states, in A Permanent Slump:
More broadly, if our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics — in which virtue is vice and prudence is folly….
“Virtue is vice and prudence is folly?”
Professor, you echo the greatest troubadour of our epoch, Sir Michael Philip Jagger.
Just as every cop is a criminal?
And all the sinners saints?
As heads is tails?
Just call me Lucifer?‘
Cause I’m in need of some restraint
From that Rolling Stones masterpiece, Sympathy for the Devil.
Professor? We’ve … guessed your name.
Pleased to meet you, Professor.
Tell me baby, what’s my name?
I tell you one time, you’re to blame….
And yes. This is Hell. Nor are you out of it.
Mind Goethe. As this columnist wrote:
The purpose of gold is to unwind the Faustian bargain throttling our economy and stifling job creation. The purpose of the gold standard is to propel the world economy into a new era of vibrant, widespread prosperity. And Goethe, as if to cheer on future advocates of gold, wrote in in the concluding pages of Faust, Part II: Whoever strives, in his endeavour,/ We can rescue from the devil.