Nobel Economists Slam Obama's Economic Policy → Washingtons Blog
Nobel Economists Slam Obama's Economic Policy - Washingtons Blog

Friday, March 20, 2009

Nobel Economists Slam Obama's Economic Policy

Nobel economists Paul Krugman and Joseph Stiglitz slammed Obama's economic policy this week.

Krugman said:

At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers.
Stiglitz said the Obama administration has failed to address the structural and regulatory flaws at the heart of the financial crisis that stand in the way of economic recovery and that Obama has confused saving the bankers and saving the banks. He also said:
We got cheated, to put it bluntly. What we don’t know is that—whether we will continue to get cheated. And that’s really at the core of much of what we’re talking about. Are we going to continue to get cheated?...

Do American taxpayers want to be bailing out institutions abroad? That’s a question we ought to be debating....

The fact that there was so much campaign contributions from the financial sector at least raises the concern [that the Obama administration is throwing money at the bankers because of their campaign contributions].

And Nobel economist Myron Scholes has slammed the business-as-usual approach of the Obama administration to credit default swaps:

The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.”
Update: Nobel economist Ed Prescott is slamming the Obama approach as well.


  1. Since when has Krugman been an Obama advisor, formal or informal? Krugman has been Obama's sworn enemy since he wrote that Hillary Clinton's health care plan was much better than Obama's.


  2. Prof. Paul Krugman has previously praised President Barack Obama's economic policy (see Paul Krugman, "Climate of Change," New York Times, February 27, 2009 ). Krugman's present complaint is that he desires that Obama's policy be even more socialist. (Although, to be accurate, it's not Obama's policy, since Obama, as well as Krugman, are just puppets of the globalist parasitical ruling elite.)

    And Krugman is being totally disingenuous by writing that

    Geithner et al have made it clear that they still have faith in the people who created the financial crisis--that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that "governments do a bad job of running banks" (as opposed, presumably, to the wonderful job the private bankers have done) ...

    Krugman isn't as ignorant as he makes himself out to be. He doesn't write bizarrely false statements such as the above because he's ignorant, but because he wants to justify ever-more government control. (For some analysis on that, see, e.g., Prof. William L. Anderson, "It Is Time to Admit the Obvious: The Political Classes Deliberately Are Blocking an Economic Recovery,", March 5, 2009. ) Krugman knows quite well that the Federal Reserve System is not an invention of the free market, but rather was put into place by government decree and has the power of the U.S. government enforcing its monopoly on money-creation, as well as enforcing the fraudulent practice of fractional reserve banking and the counterfeiting practice of fiat currency. In an actual free market, such fraudulent practices are outlawed, not created, enforced and protected by the government.

    Indeed, Plank No. 5 of Karl Marx and Friedrich Engels's Communist Manifesto is "Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly." (See Manifesto of the Communist Party by Marx and Engels, English edition of 1888. ) A central bank is a government-created institution that's in complete contradiction to a free market.

    Concerning the claim which is sometimes made regarding the Federal Reserve System supposedly being privately owned, Prof. Murrary N. Rothbard noted:

    Some writers make a great to-do over the legal fiction that the Federal Reserve System is "owned" by its member banks. In practice, this simply means that these banks are taxed to help pay for the support of the Federal Reserve. If the private banks really "own" the Fed, then how can its officials be appointed by the government, and the "owners" compelled to "own" the Federal Reserve Board by force of government statute? The Federal Reserve Banks should simply be regarded as governmental agencies.

    (From Prof. Murray N. Rothbard, America's Great Depression [Auburn, Alabama: Ludwig von Mises Institute, fifth edition, 2000; originally published 1963], p. 29. )

    I see this claim of the supposedly "privately owned" Federal Reserve System made quite often by those in the Patriot movement (of which movement, I count myself as a member). But this claim is what might be termed purely a "scare tactic," as it doesn't make any sense on logical grounds, but is intended to simply play on people's indoctrinated fears of big business (of which, the actual thing to fear in this regard is when big business is in bed with government).

    The same globalist ruling oligarchy who own the U.S. govermment also own Federal Reserve System. The Federal Reserve is "private" much akin to how the Post Office is "private," or how Pravda under the U.S.S.R. was "private." Which is to say, it is not private at all, but is very much a government institution.

    It may be "private" in the de jure sense, but that is merely words on paper. In the de facto sense, it is totally a branch and arm of the government and works hand-in-glove with the government in order empower the government.

    As well, putting the Federal Reserve under the control of Congress wouldn't make our situation any better, as we would still suffer just as much from the fiat money, credit expansion, inflation, and the boom-bust so-called "business cycle" which that causes.

    What caused this depression is the same thing that causes all depressons (a.k.a. recessions) which don't have an obvious destructive event such as war-damage or natural disaster: artificial inlfation of the money supply. Of which occurs through fractional reserve banking and/or an increase in fiat money, i.e., through fraudulent banking and/or through counterfeiting.

    The reason why is because all prices are determined by supply and demand, including the interest rate, which is the price on loans. By artificially increasing the money supply by means of fraud and/or counterfeiting, this lowers the price of the interest rate. It thereby falsely gives the appearance of more savings existing (i.e., more saved wealth available to loan) than is actually the case. More to the point, it makes business projects that otherwise would not have been undertaken seem ex ante to be profitable, but which are later found not to be viable. Hence, by lowering the interest rate below the natural rate, it causes malinvestments, particularly clustered in the area of capital goods (since the only way to grow an economy is through an increase in capital goods, i.e., those goods which aren't consumed for their own sake, but are used to make the consumer goods people do directly use).

    As well, the first spenders of the fiat/fractional reserve money (i.e., the government and its insider-connected elites who create it on fiat) get the benefit of obtaining actual goods and services by spending money that was, in effect, created out of essentially nothing. That is, the government and its favored elites who create the fiat/fractional reserve money get actual goods and services essentially for free (i.e., for the cost of typing a few numbers into a computer terminal, writing a few numbers in a ledger, or printing up some paper). Whereas the rest of the economy is saddled with a devauled currency. Moreover, actual goods and services in the economy are being funneled from genuine value-producers into a parasitical sector of society, thereby making society as a whole poorer and less productive than it would have been without this parasitical drain.

    Hence, in addition to causing the destructive boom-bust cycle in the economy, a fiat/fractional reserve currency also acts as an obfuscated tax, although a particularly pernicious tax.

    For more on this, see:

    America's Great Depression, Prof. Murray N. Rothbard (Auburn, Alabama: The Ludwig von Mises Institute, fifth edition, 2000; originally published 1963)

    The above book concerns how governments create depressions/recessions through credit expansion (i.e., fractional reserve banking and/or fiat currency).

    See also:

    "Against Fiduciary Media," Prof. Hans-Hermann Hoppe with Profs. Jörg Guido Hülsmann and Walter Block, Quarterly Journal of Austrian Economics, Vol. 1, No. 1 (1998), pp. 19-50

    For the history on how the "capitalist" (i.e., mercantilist) elite in the U.S. bankrolled Communism as well as National Socialism, see the below scholarly books by libertarian Antony C. Sutton, Ph.D.:

    Wall Street and the Bolshevik Revolution, Antony C. Sutton, Ph.D. (New Rochelle, N.Y.: Arlington House Publishers, 1974)

    (Note: Chapter I of the above book refers to a 1911 St. Louis Post-Dispatch cartoon illustration by Robert Minor. This can be viewed here: .)

    Wall Street and the Rise of Hitler, Antony C. Sutton, Ph.D. (Suffolk, England: Bloomfield Books, 1976)

    The Best Enemy Money Can Buy, Antony C. Sutton, Ph.D. (Billings, M.T.: Liberty House Press, 1986)

    See also:

    "Thyssen Funds Found in U.S.," International News Service (INS), July 31, 1941

    Vesting Order Number 248, Federal Register, November 7, 1942

    "Bush-Nazi Link Confirmed," John Buchanan, New Hampshire Gazette, Vol. 248, No. 1, October 10, 2003

    "'Bush-Nazi Dealings Continued Until 1951'--Federal Documents," John Buchanan and Stacey Michael, New Hampshire Gazette, Vol. 248, No. 3, November 7, 2003

    "How Bush's grandfather helped Hitler's rise to power," Ben Aris and Duncan Campbell, Guardian (U.K.), September 25, 2004,12271,1312540,00.html

    "How the Bush family made its fortune from the Nazis," Attorney John Loftus, former U.S. Department of Justice Nazi War Crimes prosecutor and current President of the Florida Holocaust Museum, September 27, 2000


    I also recommend that everyone see the below reading list:

    "Recommended Reading Concerning Political and Economic Theory," September 30, 2005

  3. Just a hit-and-run observation:

    "A Nobel Prize Economist says" has the same respectability these days as the phrase "Critics rave ..." They may be correct, but their Nobel title makes their motives suspect.


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