Follow this link to the nonsense article in the LA Times.

If this is the level of journalism that we can expect from the LA Times, then this country is in real trouble.

Fortunately for the world economy, most of the other countries will not follow our lead down this path of idiocy, if that is where we are going. Unfortunately for us, our competitive position in the world will be destroyed.

Of course in the LA Times’ alternate reality poverty will be declared to be wealth and we will still be the richest nation in the world.

Just to go after one false notion of Ron Paul, I will comment on the following quote from the article.

Paul contends that Austrian economics explains the most recent financial meltdown: “It says if you inflate too much, if you have no restraint on monetary authorities, you’re going to bring on a crisis.” Now, Paul says, administration policies are leading the country toward disaster.

Ron Paul’s first sentence has some merit.  The timing of his second comment is absolutely absurd. If he manages to get the right boom time policy implemented during the recession recovery, it will be a disaster.

Or as Keynes might have put it, it was absolutely against all Keynesian theory to run huge fiscal deficits during an economic boom such as what Bush was doing.  To have Alan Greenspan at the Fed pumping the economy when he should have been trying to rein it in is another part of the foolishness of the Bush era.

When the inevitable crash occurred, the Bush administration had already wasted the two tools that were needed.  We had to go to an even greater extreme to get them to work.

When we get through this and wiser heads, now in power, can carry out the other side of Keynes’ theory, the Congress will step in and mess it up if Paul has his way.

The other side of Keynes Theory is what Bush should have been applying during the boom times and which will be applied in the next boom if we can keep the reins of government out of Republican hands.  During boom times the government should be running a surplus and paying down debt. This was the Clinton policy.  The Fed can apply the appropriate restraint, but it won’t have to go to excess because fiscal policy will be running in the same direction as monetary policy.  During Reagan/Bush/Bush years fiscal policy was always fighting against monetary policy.

Economic theories that are developed to apply under certain circumstances can be a disaster when applied in the wrong circumstances.  We are not now in hyper-inflated pre-WWII Germany, so let us not apply the remedy for that situation now.  If we don’t do something stupid, we will never get to that German situation.

Ron Paul seems to have the knack to pick the exactly wrong policy for any given circumstance.  Maybe it just like the fact that even a stopped clock is right twice a day.