Once upon a time, Fortune Magazine had did some good work in economics. Unfortunately, we now get the “consumers create prosperity and recessions” nonsense.

In an article, “Don’t look now: Here comes the recession,” Colin Barr writes:

“NEW YORK (Fortune) — The cash registers were ringing on Black Friday, but make no mistake: American consumers are jittery, and seem all but certain to push the U.S. economy into recession.”

This is idiocy. Recessions do not come about because of a lack of consumer confidence and spending. They come about because the government has pushed policies that have resulted in hundreds of billions of dollars of misallocated capital, as well as an unsustainable housing boom.

In his New York Times column today, Paul Krugman touts the Clinton Administration’s unsustainable boom of the late 1990s, writing:

“One way to drive this point home is to compare the situation for workers today with that in the late 1990s, when the country’s economic optimism was almost as remarkable as its pessimism today. For example, in the fall of 1998 almost two-thirds of Americans thought the economy was excellent or good.

“The unemployment rate in 1998 was only slightly lower than the unemployment rate today. But for working Americans, everything else was different. Wages were rising, yet inflation was low, so the purchasing power of workers’ take-home pay was steadily improving. So, too, were job benefits, including the availability of health insurance. And homeownership was rising steadily.

“It was, in other words, a time when Americans felt they were sharing in the country’s prosperity.”

Unfortunately, Krugman does not know the difference between prosperity and an unsustainable boom. Guess that is why he makes for a better political operative than economist.