I still hate Krugman
His new piece is a piece of crap.
Talking about cutting wages…I know Krugman is drunk of the Keynesian Kool Aid. The same draught that help bring on this global recession, but leave it to a drunk to search for the answers in the same bottle that brought all the problems.
And soon we may be facing the paradox of wages: workers at any one company can help save their jobs by accepting lower wages, but when employers across the economy cut wages at the same time, the result is higher unemployment.
Krugman assumes that every industry in the entire country will cut wages, this of course will never happen. For one the huge Government employment machine can and will never cut wages. With Obama growing Government to astronomical levels, its hard to see wage cuts in xyz industry effecting the economy as a whole
Also, not all industries are effected the same way. Some industries are booming, can we say guns and ammo? The gun industry can’t keep enough product on the shelf, demand is just too high. Oh and Best Buy is as busy as ever.
Of course Krugman doesn’t mention Unions, whose wages were artificially inflated in the first place. Cutting UAW wages by 20% won’t even bring then down to Toyota, or Honda wage levels.
Then Krugman goes on to quote Jack Daniels himself, Keynes.
Things get even worse if businesses and consumers expect wages to fall further in the future. John Maynard Keynes put it clearly, more than 70 years ago: “The effect of an expectation that wages are going to sag by, say, 2 percent in the coming year will be roughly equivalent to the effect of a rise of 2 percent in the amount of interest payable for the same period.” And a rise in the effective interest rate is the last thing this economy needs.
He is blind to the fact that wages, and prices never fall or rise uniformily. Like I said above, it’s all relative. Krugman and Keynes are basing their arguement that the wages will fall for everyone at the same rate, which is simple not true nor can it ever be true. Their whole argument is based on a lie!
I encourage everyone to read, Failure of the New Economics by Henry Hazlitt. It is essential to disproving Keynes once and for all.