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VodkaPundit

Back After These Important Messages

December 31st, 2002 - 12:01 am

Still no time for real blogging here, but this item is too important for you to miss.

I first noticed Paul Krugman five or six years ago, when he was producing important and interesting articles for Slate magazine. To give you an idea of how long ago that was, Microsoft still thought they could get people to pony up twenty bucks a year to read the thing. (Then again, what do I know? I’m one of the suckers who paid. Anyway.)

Krugman caught my notice for being one guy with a really nervy suggestion on how Japan could get out of its deflationary spiral. And he had a radically simple solution: Inflate the currency. Start printing yen like they were Tom Clancy novels with pictures of nekkid wimmins in them. Let the presses run 24/7 and just scare the bejeebus out of people into spending some money now, today, pronto, before today’s yen becomes tomorrow’s toilet paper.

Talk about priming the pump. The Japanese economy would still need some painful restructuring, but at least it would get moving again. And the pain would be more bearable if people could see there was some kind of hope on the horizon.

Of course, that was long before Krugman started working for the New York Times and became a shrill little hate-monger.

Until today. Oh, some of the shrillness is still present, but he’s talking sense about deflation again — this time the risk of it in this country:

But like corporate malfeasance, deflation has turned out to be something that can happen here. It’s by no means a foregone conclusion: Federal Reserve officials assure us that they can and will steer us away from a Japanese-style black hole. But we’re close enough to such a black hole that it’s already warping our economic space.

Yes, I know I’ve harped on this issue again and again on this page, but it means more coming from someone like Krugman, who is (or at least used to be) a well-respected thinker on this most-intractable of all macroeconomic troubles.

Again, I don’t mean to cause any fear; the odds of us getting into a situation like the ’30s or modern Japan are slight — but the risk is real. If you’re an investor, read Krugman’s column, then think hard about eliminating all the debt you reasonably can and increasing the cash/decreasing the equities in your portfolio.

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