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"In short, are you out of your mind, Paul Krugman? "



August 24, 2009 – Comments (14) | RELATED TICKERS: GM , GS , JPM

Financial Crisis Called Off

By James Howard Kunstler on August 24, 2009

Whew, what a relief! Everybody from Ben Bernanke and a Who's Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at The New York Times, toiling in their MC Escher hall of mirrors, to poor dim James Surowiecki over at The New Yorker, to - wonder of wonders! - the Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factotums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund - every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world's capital finance system survived what turned out to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries over. If you believe their bullsh-t. Which I don't.

All this goes to show is how completely the people in charge of things in the USA have lost their minds. They seem to think this mass exercise in pretend will resurrect the great march to the WalMarts, to the new car showrooms, and the cul-de-sac model houses, reignite another round of furious sprawl-building, salad-shooter importing, and no-doc liar-lending, not to mention the pawning off of innovative, securitized stinking-carp debt paper onto credulous pension funds in foreign lands where due diligence has never been heard of, renew the leveraged buying-out of zippy-looking businesses by smoothies who have no idea how to run them (and no real intention of doing it, anyway), resuscitate the construction of additional strip malls, new office park "capacity" and Big Box "power centers," restart the trade in granite countertops and home theaters, and pack the turnstiles of Walt Disney world - all this while turning Afghanistan into a neighborhood that Beaver Cleaver would be proud to call home.

By the way - and please pardon the rather sharp digression - but does anybody know if they buried Michael Jackson yet? It's only been a couple of months. And, if not, is that the stench now wafting across the purple mountains' majesty from sea-to-shining sea? Isn't it a little indecent to keep the poor fellow waiting? Or is a really surprising comeback secretly planned, with product tie-ins and all?

America loves the word "recovery" as only a catastrophically sick society can. "In recovery" is the new universal mantra of loser individuals and loser nations. Everybody in the USA is in recovery. Even Michael Jackson (he may have given up on somatic activity but, on the plus side, as the Rotarians love to say, he's quit using drugs for once and for all, and the magazines have stopped publishing photos of him taken after 1990, when he turned himself into something out of the Hammer Films catalog). To sum it all up, the US economy is in recovery.

Paul Krugman says that we'll soon realize that Gross Domestic Product (GDP) is growing. He actually said that on the Sunday TV chat circuit. Not to put too fine a point on it, but I would really like to know what you mean by that Paul, you fatuous wanker. Do you mean that the Atlanta homebuilders are going to open up a new suburban frontier down in Twiggs County so that commuters can enjoy driving Chrysler Crossfires a hundred and sixty miles a day to new jobs as flash traders in the Peachtree Plaza? Do you mean that the Home Equity Fairy is going to wade into the sea of foreclosure and save twenty million mortgage holders currently sojourning in the fathomless depths with the anglerfish? Do you mean that all the bales of deliquescing, toxic "assets" hidden in the vaults of Citibank, JP Morgan, Bank of America, et al, (not to mention on the books of every pension fund in the USA, and not a few elsewhere) will magically turn into Little Debbie Snack Cakes on Labor Day weekend? Do you mean that American Express and Master Card are about to declare a Jubilee on accounts in default everywhere? Do you mean that General Motors will produce a car that a.) anyone really wants to buy and b.) that the company can sell at a profit? Are you saying we get a do-over, going back to, say, 1981? Did we win some cosmic lottery that hasn't been announced yet? What's growing in this country besides unemployment, bankruptcy, repossession, liquidation, gun ownership, and suicidal despair? In short, are you out of your mind, Paul Krugman?

The key to the current madness, of course, is this expectation, this wish, really, that all the rackets, games, dodges, scams, and workarounds that American banking, business, and government devised over the past thirty years - to cover up the dismal fact that we produce so little of real value­ these days - will just magically return to full throttle, like a machine that has spent a few weeks in the repair shop. This is not going to happen, of course. It is permanently and irredeemably broken - this Rube Goldberg contraption of swindles all based on the idea that it's possible to get something for nothing. And more to the point, we're really doing nothing to reconstruct our economy along lines that are consistent with the realities of energy, geopolitics, or resource scarcity. So far, our notions about a "green" economy amount to little more than blowing green smoke up our collective ass. We think we're going to build "green" skyscrapers! We're too dumb to see what a contradiction in terms this is.

The architects are completely uninterested in the one thing that really is "green" - traditional urban design - and most particularly the walkable neighborhood. That's just too conventional, not special enough, lacking in star power, not enough of a statement, boring, tedious, so not cutting edge! We blather about high speed rail, but you can't even get from Cleveland to Cincinnati on a regular train - and what's more amazing, nobody is really interested in making this happen. All we really care about is finding some miracle method to keep all the cars running. What we've been seeing is nothing more than a massive pump-and-dump operation in the stock markets, most of it executed by programmed robot traders, with the trading nut provided by taxpayers current and future.

The conclusion is here:

14 Comments – Post Your Own

#1) On August 24, 2009 at 11:43 AM, booyahh (< 20) wrote:

Sounds like someone missed the bottom in March, and the rally that followed. Ah, how tragic. I just dumped most of my stocks in the last week.

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#2) On August 24, 2009 at 11:47 AM, nesselsdorf1187 (30.05) wrote:

Wow, good article. I didn't think that it is that bad with U.S. ...

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#3) On August 24, 2009 at 11:54 AM, Deepfryer (27.26) wrote:

What a bunch of garbage. Just a bunch of insults and shallow analysis based on weak anecdotal evidence. He ignores all recent trends in the economy, and ignores all of Krugman's explanations and analysis of the economy. No numbers, no statistics, nothing convincing in any way. Not worthy of a response from Dr. Krugman.

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#4) On August 24, 2009 at 12:49 PM, Tastylunch (28.52) wrote:

Krugman is actually right on this.

You can only sell down inventories so far no matter who you are. Restocking will happen in the next quarters and that will register as GDP growth.

What will likely be different in 2010 that inventories won't be built up above the "new normal" since debt/deleveraging/unemployment/savings rate will probably cap demand for a long time and that's probably when the market could really freak out again.



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#5) On August 24, 2009 at 12:55 PM, Varchild2008 (84.02) wrote:


Trends in the economy?

1) 81 Banks Closed and expected to keep going higher

2) Unemployment at 9.9% expected to keep going higher

3) Most company's especially in the industrial sector report year over year Revenue losses around 30-50%.  Expected to not improve in the short term according to C.E.O.s of various corporations like MSC Industrials Direct.

4) Housing / Car sales spike has occured off the back of "Stimulus" Spending.  Too premature at this point to guess at they will look like next year WITHOUT any stimulus greasing the gears.

5) recently reported a 29% decline in August in Consumer Spending during Back to School Sales year over year.

At a time when the market continues to trade higher completely unhindged from the MACRO fundamentals of our current economy....You want to claim the Author's pessimism is unfounded?

Instead of whining at people's pessimistic blog posts, maybe you should read them might learn something... Ya know like protecting your Gains with some PUTS or with a little profit taking.... Unless you can stomache a 2010 plunge in the market if it happens?  emphasis on IF... I have no idea what direction the market will go but I ain't going to pretend the market trades to DOW 14,000 and beyond without a hitch.

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#6) On August 24, 2009 at 1:06 PM, Deepfryer (27.26) wrote:

It's called "criticizing", not "whining". I was merely pointing out what a lousy article this was. Why are you whining?

"Puts" have nothing to do with anything. I never said whether I expect the stock market to go up or down. Don't make assumptions.

And I wasn't asking people to post any numbers, I was merely pointing out that this is a severely flawed article because it doesn't include any numbers. Posting some numbers now, after the fact, doesn't make the original article any better. It was still a very poorly written and generally useless article. Understand?

As for your arguments, this is nothing that Dr. Krugman does not already know, and he has already discussed all of these issues in his blog. None of them refute his statement that we will soon see an increase in GDP.

This article attempted to ridicule Krugman over his statement that we will soon see an increase in GDP. Soon enough we will see whether or not this prediction comes true. I'm putting my money on the Nobel Prize winner, not some mudraking hack writer.

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#7) On August 24, 2009 at 2:02 PM, starbucks4ever (79.83) wrote:

An investment banker jumped out of window of his 70-story office building, but upon hitting the ground, his body bounced back and recovered most of the losses it suffered this morning. :)

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#8) On August 24, 2009 at 3:19 PM, AdirondackFund (< 20) wrote:


In a related story, a HFT Computer Technician got his shirt caught in the sell cycle this morning while trying to 'juice' the machine only to find that the machine got the last laugh.  Markets closed only slightly down on the news.

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#9) On August 24, 2009 at 4:38 PM, RonChapmanJr (30.15) wrote:

Krugman is an idiot.

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#10) On August 24, 2009 at 11:06 PM, OldEnglish (27.32) wrote:

Actually, Krugman is no idiot. He's a genius. He knows what to say to retain his influence and status. By taking both sides of an issue, with disclaimers, he always positions himself well.

Stimulus succeeds. I, Paul Krugman, was right. Stimulus fails. Stimulus not big enough. Deflation occurs. I, Paul Krugman, predicted it. Inflation occurs. Inflation is good.

Krugman's IQ is much higher than, say, Ron Paul's. A figure of total impotence. Long after America is suffering from crushing stagflation, Krugman will still be selling books, making television appearances and dinning at the White House.

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#11) On August 24, 2009 at 11:24 PM, Momentum21 (96.94) wrote:

"Do you mean that the Atlanta homebuilders are going to open up a new suburban frontier down in Twiggs County so that commuters can enjoy driving Chrysler Crossfires a hundred and sixty miles a day to new jobs as flash traders in the Peachtree Plaza?"

Regardless of where you stand you gotta love that line...



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#12) On August 25, 2009 at 3:18 AM, kaskoosek (30.31) wrote:

Man, I hate Krugman so much I can't even begin to describe it.

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#13) On August 25, 2009 at 11:49 AM, throwerw (28.28) wrote:

oldenglish, how exactly are you measuring IQ?  By the level of mainstream acceptance a person has achieved?  What a ridiculous notion.

I've noticed that the higher a person's caps score is, the more likely they are to hate krugman and like ron paul.  You have -5000 points, so your point of view is not all that surprising. 

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#14) On August 26, 2009 at 10:44 PM, FleaBagger (27.52) wrote:

Deepfryer  -

I wasn't planning on even logging in, but I just had to point out that the "mudraking[sic] hack writer" has been far more informative and accurate than your Nobel Prize winner over the past 5 years or so. Kunstler was decrying the unsustainable bubble economy when Krugman was still calling for the Fed to inflate the housing bubble to replace the tech stock bubble.

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