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Krugman's "1938 in 2010" Rebuttal

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September 07, 2010 – Comments (10)

Krugman wrote another Op-Ed about his favorite subject "1937".  The year when the Fed Gov't cut back some spending and the economy faltered.  I've disputed this ludicrousness before, stating that if EIGHT years of spending didn't fix the problem, when in the hell is all this spending supposed to work? Let's also not forget that in 1934 the dollar was devalued by 50% and THAT didn't work.

In this particular Op-Ed he goes further, stating "From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today"

Pro-WWII end recession/depression economist LOVE to point out that huge spending on a massive scale ended the Great Depression.  I've spoken to many of these people before and asked them EXACTLY when this massive spending ended the Great Depression. There are only two answers: 1) When the war started 2) After the war ended

Let's tackle #1 first (When the war started).  These are the scariest people in the world today, because they don't believe in freedom in the least.  The forced conscription of all able bodied men between the ages of 18 - 30, the detainment of 400,000 Japanese-American citizens is somehow considered economic nirvanna.  I've often asked these War Lovers (my own economic professors included) a simple question "What part of your economic view of the world makes you think that an economy is doing well that rations food, energy and labor?"

I've yet to hear an answer other than moving quickly to response #2.

So let's tackle #2 (The depression ended after the war ended).  Is there any arguing that America from 1945-1960 was in a period of economic growth?  Certainly not.  GDP was expanding, manufacturing was expanding, debt was being paid back.  But the debt did not create this economic phenomena, the complete obliteration of the industrial base of England, France, Japan, Germany and Italy created the phenomena.  I am not going to argue that if China, Japan, South Korea, and Germany all lost their industries due to a barrage of meteorites, that the U.S. would not experience an economic boom as strong as that after WWII.

Krugman is conveniently forgetting the power behind our economic expansion after WWII was the lack of competition and the demand for those goods from our allies/ex-enemies.  I argue that if Hitler died of a heart attack in early 1943 and the Nazi's collapsed and Germany was taken over by peace-loving doves who instantly withdrew from all invaded countries, our economy would have fallen back into a depression, but with debt so high we would have possibly had our own revolution.

Mr. Krugman isn't just wrong, making this "war spending argument" he's DANGEROUS!

10 Comments – Post Your Own

#1) On September 07, 2010 at 10:29 AM, Dow3000 (< 20) wrote:

You should read/listen to some of Edward Griffin's stuff...if you haven't.  His Reality of Money presentation is both enlightening and terrifying.  The Creature from Jekkyl Island always a good read too.  Good points above...I completely agree these are very very dangerous people...especially b/c so many are still brainwashed to believe their bull.

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#2) On September 07, 2010 at 10:34 AM, dbjella (< 20) wrote:

+1 Rec.

I would argue that if Gov't deficit spending is such a great idea, then why not get rid of taxation all together.  Let the gov't spend whatever they want by borrowing whatever they want.  We have a Fed that has all the money in the world.......

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#3) On September 07, 2010 at 10:51 AM, starbucks4ever (98.50) wrote:

The other thing people choose to conveniently forget is that unlike the current breed of self-proclaimed "Keynesians" - all those clintons, gores, obamas, bernankes, krugmans - FDR applied Keynes' prescription diligently. FDR was not afraid to take the bitter pills prescribed by the doctor - raising the income and inheritance taxes on the upper brackets. In contrast, the weakling that is currently holding the top job can't even let the tax cuts expire for the 250K+ folks. He hears them crying, and starts weeping too, and calls up his friend Ben and asks him to print one more trillion greenbacks, and calls that "stimulus" and wonders why it's taking so long to work.

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#4) On September 07, 2010 at 11:11 AM, dbjella (< 20) wrote:

zloj

Are you advocating stimulation through taxing the "rich?"

I guess if I was rich back in the 30's and FDR said he was going to raise my taxes, but through "Pork" he was going to ensure me a gravy train I would tell my congressman  to sign me up.

Also, do you think the weakling at the top is substantially different then previous weekling?  Congress runs this country doesn't it?

 

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#5) On September 07, 2010 at 12:35 PM, MegaEurope (< 20) wrote:

I've spoken to many of these people before and asked them EXACTLY when this massive spending ended the Great Depression. There are only two answers: 1) When the war started 2) After the war ended

Let's tackle #1 first (When the war started).  These are the scariest people in the world today, because they don't believe in freedom in the least.

I choose option 3, the economy started improving in 1933.

By the way, accusing people of not believing in freedom because they interpret historical economic data different from you is totally unreasonable.

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#6) On September 07, 2010 at 12:39 PM, MegaEurope (< 20) wrote:

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#7) On September 07, 2010 at 12:47 PM, dargus (80.47) wrote:

I don't think I've ever heard an economist argue that we should draft people and start a war to jump start the economy. The point is about spending. It doesn't really matter to the economists what the money was spent on, and attempting to paint the picture you do only hurts your argument.

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#8) On September 07, 2010 at 2:21 PM, starbucks4ever (98.50) wrote:

#4,

 Guilty as charged :) 

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#9) On September 07, 2010 at 7:57 PM, FleaBagger (28.84) wrote:

By the way, accusing people of not believing in freedom because they interpret historical economic data different from you is totally unreasonable.

No, it's bold, incisive, and wonderfully debatable. 

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#10) On September 23, 2010 at 12:39 PM, ETFsRule (99.94) wrote:

This is what always happens when conservatives and liberals "debate" something:

1. A conservative spews off a bunch of hollow anti-government rhetoric, with no factual support.

2. Someone responds with quantitative data clearly showing that the conservative is incorrect.

3. The conservative either responds with childish insults, or fails to respond at all. I guess we should be glad that Freemarkets went for the latter option.

Not that I can blame him; there is simply no rebuttal for the facts that MegaEurope has presented here. GDP growth was indeed positive before the start of the war.

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