Abstract: Paul Krugman’s campaign against the European currency is reaching new heights of absurdity. In his frenzy, he now advocates catastrophe, any catastrophe, ”to exit from the euro“.
Paul Krugman passes in the USA for the “conscience of a liberal”. He is now recommending to invest in the future, insisting that debt for jobs or education is no sin, as I was doing several years ago.
However, Krugman has also Euro derangement syndrome. Paul Krugman wants Greece to become like Argentina. More specifically he recommends that Greece follow the disastrous sequence of events that started in 2001 in Argentina.
That, especially for an economist, is astounding. In 2002, Argentina defaulted and inflation reached 40%. Only during the month of April 2002, inflation in Argentina was in the double digits. In four weeks, prices officially augmented by more than 10%. This is what Krugman recommends for, would have liked to happen to, Greece, Cyprus. Anything, anybody, whatever, to break the Euro. Euro derangement syndrome.
As we will see, Argentina’s economic situation, upon a severe collapse of the financial system was much better than that of Greece, or Cyprus would be. Argentina has everything, including a giant, extremely fertile territory, extending from the tropics to sub-polar Patagonia. Argentina was once the second richest country in the world, per capita.
However, Argentina is generally recognized by everybody, even economists, to have become a basket case. And that, for political reasons. Political mismanagement was so acute it extended to the economy.
Greece was also mismanaged: there was a civil war after World War Two, between Greek communists, and Anglo-American forces (who already knew what was best for Greece; that ugly war killed more than 158,000 officially, and was accompanied by the adoption/kidnapping of Greek children from internment camps to the USA).
Later a dictatorship of colonels, generaly viewed as put in place by the American secret services (following the orders of Wall Street, a place located few miles from Krugman’s mansion).
Greece was admitted to the European Union, as long as it became a democracy, first. Thus it escaped direct USA management (and tyranny, I avoided the pleonasm). It was a great success. Probably left many an American plutocrat frustrated.
But Wall Street did not forget its old Hellenistic dominion. Goldman-Sacks cooked up the numbers used for the admission of Greece to the Eurozone. Goldman’s cooked numbers were believed at the Eurostat (the statistic arm of the EU). Maybe because Wall Street has agents throughout the European machinery (Mario Monti, ex Italian PM, and Mario draghi, head of the ECB were partners at Goldman-Sacks).
Of course Wall Street has agents, or should we say brains? all over the (plutocratic) universities of the USA. Such as Princeton, Harvard. Here is Krugman in the integrality of a March 28, 2013, blog post of his:
It’s now three years since I suggested a possible route to Greek exit from the euro: a banking crisis, followed by sharp limits on bank withdrawals similar to Argentina’s 2001 corralito, and then – with the panic argument against exit removed – reintroduction of a domestic currency.
Obviously, that hasn’t happened. Despite intense suffering, the Greek political elite’s commitment to the euro has proved incredibly strong. My analysis of the economics wasn’t wrong, but my political guesstimates were off.
Still, Cyprus is now following the first part of the script. And let me ask again: what, exactly, is the point of remaining on the euro? The convenience and efficiency of a single currency is gone; meanwhile, the future for Cyprus on the euro is one of years of grinding deflation and catastrophic austerity. Is the hope of someday, somehow restoring the status quo ante enough to justify all of this?”
Corralito meant to corral Argentines, as if they were hoofed animals to be domesticated. After being corraled, those fierce stallions, the Argentines, rioted violently. As I said, inflation was 40% in 2002, and GDP per head fell 20% in the three years following the corralito. But that’s what Krugman;s professional advice is. Why? A hint:
Amazingly, the corralito ended up being good business for some American banks. They negotiated with their accomplices in the Argentine government to receive compensation bonds for the “missing” money, which had never really left their banks, only moving from one branch to another. These American banks made richer by the corralito have their world headquarters a few miles from Krugman’s mansion.
Krugman does not seem to have noticed that banks in Cyprus were bankrupt. The situation was exactly that defined by the word: bankrupt. The banks were ruptured. They had to close. They closed for 12 days.
Why, how did the banks reopen on March 28, 2013, on the same day Krugman wrote the note above? Obviously, Krugman does not know. He shows no inkling that he knows, or understand, what happens. In Krugman’s mind, Europe is only a malevolent force.
Banks reopened in Cyprus, because the European Central Bank sent to Cyprus huge shipping containers full of Euro bank notes. That was ONE point of remaining on the Euro: having a currency. Krugman cannot know this, because he sees no point at being on the euro, that’s his metaprinciple, his fundamental emotion that rules over all his logic and data gathering.
Curiously, Krugman seems to be unaware of this basic fact. That the money was shipped by the ECB. Maybe he is unaware that in a free market economy, one needs a currency?
If Cyprus switched suddenly to its own currency, Cypriot debt would explode, the worth of Cyprus would be cut by half, or more, inflation on food and fuel would reach instantaneously 50%. The catastrophe would be immense.
As other texts of Krugman reveal, the Princeton Nobel Laureate is only aware of the first fact, the debt explosion thing, and it thoroughly confuses him. The other facts, which are much more important, although they are more fundamentally economic, he has no idea of, nor does he seem to care.
Krugman does not seem to realize that one can default on debt, but not on fuel, and, one cannot, a fortiori, default on food!
Krugman wants Cyprus to be like Argentina, but does not realize Cyprus imports French wheat, whereas Argentina’s economy turned around after 2002, greatly thanks to massive exportation of extremely expensive soybean to the People’s Republic of China. Details, details untended, and before you know it, the devil is attendance. Argentina is not only completely self sufficient on food, but it’s one of the world’s greatest agricultural exporter. Cyprus is not self sufficient in any of the economics fundamentals, by a long shot.
I will follow quickly with an in depth essay to justify what I just wrote, in more excruciating details, and explore why it is that Krugman has. What, gone crazy? Or is it simply ugly American imperialism, Wall Street style, at its best? Is it simply because, bottom line, Krugman lives richly off a system that has Wall Street as its skeletton?
A system of imperialism and exploitation, so thorough that it pervades the heart, so much so, that the mind goes crazy?
Note 1: Is Argentina doing well now? Officially, Argentina has now 10% inflation (but non-governmental evaluations puts it at 25%). The evidence that Argentina is not doing well economically extends to the mental. Argentina is deeply disturbed. So deeply disturbed that it does not mind to flaunt its threatening obsession by islands initially settled by the French (“Malouines” from Saint Malo), 500 kilometers away from the closest Argentinean coast.
Paul Krugman, does not seem anymore afraid to flaunt his nationalistic obsession than Argentinean leaders are. I like and approve many of the economic policies of president Cristina Fernández de Kirchner. But one has to understand she had to put them in place after generations of mismanagement in Argentina. To have similar policies in Europe could only be the consequence of disasters that have not happened. And will not, because the economic disasters in Argentina were the product of dictatorship. And also of the influence of the Chicago Boys. Are the Princeton Boys any better?
Note 2: There was actually a campaign out there, probably orchestrated by the likes of Goldman-Sacks, complete with doctored graphs, that present ”Krugman’s” ideas above. See the article in “Capital.gr” in 2011. Shall we see Krugman as part of this campaign? Tell us it’s not true, Paul.