Monday, June 22, 2009

Liberals try to spin the market

Since December, I've been warning that the massive deficit spending of the Democrats' neo-Keynesian "stimulus" agenda would lead to '70s-style stagflation. Three words: It Won't Work.

Financial markets are now proving it won't work. The lead item in today's "A.M. Market Update" at is about how massive government deficits are pushing up mortage rates, and thus destroying the hope for recovery.

As I've also told you, however, liberals think that economics is a popularity contest, so now they're attempting to "spin" the market, as if the market were a political campaign. Liberal economist Alan Blinder takes to the op-ed pages of the New York Times to declare that fears of inflation are irrational. The "experts" at Treasury and the Fed have it all figured out, Blinder assures us. Trust the experts!

Speaking of experts, liberal economist Paul Krugman gets a needed spanking from Cato's Alan Reynolds:
In his June 15 column, "Stay the Course," Paul Krugman suggests it is simply foolish to worry that the government could possibly borrow too much, or that the Federal Reserve might buy ("monetize") too much of that debt.
In a closely related blog, claiming Art Laffer is "way off base" about future inflation, Krugman insisted "for the 1.6 trillionth time, we are in a liquidity trap." That makes 1.6 trillion times he's been wrong about that. . . .
You should read the whole thing. It's a classic: A major reason Krugman can't predict the future is because he gets his economic history all wrong.

What Krugman, Blinder and other liberals are trying to do is to deceive the financial markets. Investors are clearly worried about deficit-fueled inflation -- an utterly rational concern, given current policies. So Krugman and Blinder are using the world's most influential newspaper in a propaganda campaign to convince these investors that their common-sense concerns are unwarranted.

If this propaganda campaign succeeds -- which it won't, because it can't -- would have the politically benefit to Democrats of preventing the federal government from having to pay higher interest on those massive deficits.

There's an old saying that "money talks," and you know what the other half of that saying is. The economic bovine excrement peddled by Blinder and Krugman won't walk too far.

Ultimately, the market is immune to "spin." Over relatively short periods of time, the market may be irrational, but in the end, you get what you pay for. And what the Democrats have been buying -- with massive amounts of borrowed money -- is a perfect formula for stagflation.

The recession will get worse, not better, as a result of their policies. After a three-month "sucker rally," the markets are sobering up to the fact that the fundamentals suck. Hello, Weimar America.

1 comment:

  1. "the world's most influential newspaper" ... That's not unlike noting the most powerful buggy-whip manufacturer. There was a time, until the end of the last century, when Krugman's propaganda might have had some real effect. Given NYT's losing revenue and readership faster than the norm for newspapers' decline, one could argue that using the NYT actually discredits their spin.

    Stacy: I see this though in the context of timing... to deliberate attempt to delay the arrival of the problem in a bid to create electoral advantage in '10 and '12 with the onset of real pain. People desperate for a 'fix' will run to their pusher before they run to the doc. There's a lot of targetted "stimulus" opiate readied for '10 and '12.

    Your point about Weimar America... bugs the H^ll out of me because I think it's right. Question for each of us in our family is how to best use our skill-sets and assets to weather the storm.