The Keynesian fallacies live on and on, and are present twice a week from Paul Krugman. Today, our Hero tells us why falling wages (and, by assertion, all falling prices) are harmful. The Great One writes:

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.

You see, Krugman believes that there should be no consequences to an unsustainable boom, and that once a bubble bursts, then the spending that occurred during the boom must be continued at all costs. That is not economics, folks. That is nonsense.