Paul Krugman and his cult of debt that is mainstream Keynesian economics

Charles Hugh Smith of has the Keynesian paradigm nailed.  He calls it the “Keynesian Cargo Cult’s neofeudal financialization debtocracy.” For Paul Krugman and his fellow Keynesians the problem with the economy is always a lack of “aggregate demand” and the cure for that is always more debt and spending.  It doesn’t matter what kind of spending, whether for productive investment or simply profligate spending by government.  We just need more spending and we need to go into debt to do it now!

Krugman even goes as far as to say the lack of a robust economic recovery is because the stimulus programs were insufficient.  They just weren’t big enough!  Maybe instead of quadrupling the money supply we should have increased it by a factor of ten.  That should do the trick, right?

Keynesians also believe in the ridiculous notion that the economy is driven by consumption while apparently being blind to the fact that one must produce something before it can be consumed.  This is part of what leads them to believe that saving is bad and more spending is always good.  They fail to grasp the fact that the reason the economy grows is because of the investment and capital accumulation that can only take place from an increase of savings to use for said investment.

Then there is the problem of funding consumption with debt.  Once you consume something with debt you still have the debt to pay off plus interest.  A solid investment will be producing an income stream with which to pay off the debt.  This and so much more is lost on Krugman and his Keynesian Cult followers.

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  1. Read and understand a person’s perspective before displaying your ignorance

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