Krugman "Knocked out of Neoclassical Orbit" by Steve Keen's Meteoric Rise!

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Welcome to Capital Account! The internet has been abuzz over the blogosphere boxing match between Nobel Laureate and New York Times columnist Paul Krugman and debunker of economic conventional wisdom and superhero economist, Steve Keen. Remember that game "Mike Tyson's Punch Out?" Well, let's just say that Steve Keen gave Paul Krugman one upper-cut too many for the establishment intellectual to handle. Krugman declared victory and walked away before he could be dealt any more blows to his economic ego -- not before Krugman could land one more low blow though...we'll break it down!

And a too big to fail bank agrees to pay 20 million bucks to settle allegations from regulators that it mishandled customer funds before a major broker's collapse, but the details may surprise you. If you guessed JP Morgan, then you got half of the story right, but if you guessed the broker was MF Global, well, we have news for you: it's Lehman Brothers. That's right, JPMorgan Chase agreed to pay a $20m fine to settle allegations that the bank mishandled Lehman Brothers' customer funds for roughly two years before the broker filed for bankruptcy court protection. The Commodity Futures Trading Commission alleged that JPMorgan, at the request of Lehman, began using customer funds in November 2006 to calculate how much credit it would extend to Lehman Brothers intraday, in violation of customer segregation account rules.

And last Friday we exposed the myth of the billionaire investor/regular joe Warren "All You Can Eat" Buffett's proclaimed desire to be taxed more. Now he's singing a different song...LITERALLY. The owner of the Omaha World-Herald newspaper serenaded a crowd singing I'm just a paper boy. We'll attempt to demystify the oracle's message.

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  News & Politics

[Rob Mews]

Maybe we should all put in a few dollars, maybe NZ or Australian Dollars or Yuan which are worth something, to buy Krugman a few chooks and roosters so he can see how things in the real world work. He seem to be totally covering his butt with the basics that he ignores. (they do say BBB - bullshit baffles brains). Lesson here for all who observe him is never try to cover your butt when your whole argument is full of holes because of some emabrassingly silly comment you have make. Just own up.

[Rob Mews]

How the hell can anyone be so stupid in believing the economy can be divided up into peices and part of it ignored when observing the activities of the other part. It goes against scientific principle and practice scirnces e deal with connectivity of the universe. You might as well say what your blood has no connection to your muscles !! You might also say that what happens on the earth is disconnected from the solar system. Krugman must be a complete dummy ( or maybe incomplete??).

[smashfascismnow]

Dude, this Serban V.C. Enache guy totally made you look like an idiot.

[smashfascismnow]

so did a vagina

[Serban V.C. Enache]

Those debts which cannot be paid, SHOULDN'T be payed. That's what the ancients did to avoid having their manpower pools depleted of free men. Bankruptcy caused citizens to become indentured servants. That left the citystate or kingdom weak against barbarians and foreign powers. Glass-Steagall should be reintroduced. Sort out to lawful claims from the fraudulent ones. Capitalize the newly commercial banks, and cancel the fictitious and toxic debt. Then go for full employment and price stability.

[Serban V.C. Enache]

There are 3 elements to the modern economy: government, private sector (business and households) and foreign sector (foreign investments). All 3 cannot be in a state of surplus at the same time. Someone must be in deficit, so the others can be in surplus. And the only one able to run deficits without going bankrupt is the government. The monetary system is nothing more than a spreadsheet of pluses and minuses, surpluses and deficits, assets and liabilities.

[Serban V.C. Enache]

They ran very low government deficits, and didn't focus on being a demand driven economy. Aggregate demand drives production. All recessions in the US of the 19th to 20th century came on the heels of government surpluses. Every surplus has a corresponding deficit. Government can only make a surplus of its own currency, on the back of the private sector, which will be in net deficit.

[Serban V.C. Enache]

Monetary inflation happens when aggregate demand rises above output. Currently, the USA has a GDP output gap of 4 trillion. Governments are not constrained by money, but by physical resources. As long as you have unemployment and unutilized resources, the government is either taxing too much, spending too little, or both. The problem with the USSR was that, like the neoliberals, they didn't understand the social implications of fiat money.