[aac74]

The way I read it is that Krugman is quoting someone to support his argument for ultra low interest rates.

Krugman like all Keynesians thinks bubble booms are good and recessions are bad. He fails to mention the artificial carry trade in gold that central banks set up in the 90s to push gold prices down and stock prices up. Central banks at this time also promoted derivatives to create the illusion of low inflation by soaking up the price rises due to commodity speculation.

He also does not mention the FED money printing in the 30s to artificially support the pound and stop the draw on gold from London. Could this have had something to do with the boom then ???

The moral of the story is don't let the government and central bank 'run' your economy. All they can do is make bad guesses and try and cover up reality.

Panama has done without a central bank for a hundred years and look at the state it is in: http://www.costaricapages.com/panama/blog/wp-content/uploads... Who 'runs' their economy ??? Who prints their money ???

[pauldino]

Who prints their money? The US Treasury, literally. Panama has pegged its currency 1:1 to the US dollar since independence and doesn't even bother printing its own paper money, using US notes instead.

[aac74]

Unlike the US dollars/balboas in Panama are not printed out of thin air. Panama has to do productive work in order to earn dollars and thus the money supply can not race ahead of the productive capacity of the economy. This is why Panama has never had an inflation problem (unlike the rest of Latin America) and has short periods of deflation.

[DuncanIdaho]

Now if I understand you right. You're saying that US and worldwide financial markets have been ran by Keynesians for the last 30 years, leading to massive explosion and refutation of all Keynesian theories?

Let me guess - you also believe that Fascism and Nazism are right-wing ideologies?

EDIT: I'm no economist (barely an amateur wiki-economist): but as far as I know (read, heard) Keynes actually argued that money supply management should be "mechanically" managed - without central banks and officials who are corruptible and fallible.

[hga]

WRT to whatever Keynes argued, the idea that any system of mechanical management would avoid capture by the political system is fatuous. Which he should have known.