Krugman’s Delusion: The Difference of Theory Versus Reality

The comments below are an edited and abridged synopsis of an article by Lance Roberts

While many economists attempt to make economic theory a science, it is still a function of human psychology and behaviours. For example, the theory is that if the price of beef rises too much, consumers will switch to chicken. However, in practice, individuals often make other choices instead.

Krugman's Delusion: The Difference of Theory Versus Reality | BullionBuzz | Nick's Top Six
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Most economists, Paul Krugman included, believe the economy is about to come roaring back to life with economic growth rates that will surpass anything seen in this century. Such may well be the case as massive stimulus and spending flow through the system. However, what happens then?

After 12 years of monetary interventions, there is plenty of evidence to determine if Krugman’s world view is what he claims it is.

Up for discussion: Wages will recover with the economy; no, debt is a problem; and no historical evidence.

In closing: “While the US economy will indeed exit the recession in 2021, it may be a statistical result rather than an economic recovery leading to broader prosperity.”

“The most significant risk of the latest stimulus package is a surge in inflationary pressures, undermining the stimulus’s benefit. That concern will manifest itself as a stagflationary environment where wages remain suppressed while costs of living rise.”

“Due to the debt, demographics, and monetary and fiscal policy failures, the long-term economic growth rate will run well below long-term trends. Such will only continue to widen the wealth gap, increase welfare dependency, and socialism usurping the golden goose of capitalism.”

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