by Lila Rajiva
by Lila Rajiva
Some young fans of liberty have a circle called "Paul Krugman Is a Moron," and things being so out of joint, I was almost tempted to sign up. I didn't. Not because I disagreed with the spirit of it, but because it isn't true. If, as wiki tells us, moron was coined in 1910 from the Greek word moros, which means "dull" (as opposed to "sharp"), then Paul Krugman is not a moron. His New York Times column is nothing if not lucid, and it's often witty and sharp too.
Mind you, this is not a defense of Krugman. With a Nobel Prize, some thirty odd books, a perch at one of the leading opinion journals in the world and droves of followers, he doesn't need one.
It's a defense of honesty.
That's the commodity most in short supply today, not IQ. Words should be accurate, and they should be even more accurate when they're being hurled at someone, if only to make sure you hit them in the jugular. Otherwise, they boomerang.... or hit everyone around. And, what hurts everyone usually hurts the target hardly any. We should have learned that from our little skirmish with Osama.
We can do better by Mr. Krugman.
We need more honesty.
But we also need more morons.
Because, the way I see it, if Krugman is an intellectual heavy-weight, being a moron isn't such a bad thing, after all.
Psychologically, being a moron would just mean you were somewhere between the ages of eight and twelve. Now, what you think of 8—12 year olds depends on whose they are, but the tantrums of the worst middle-school brat never did any damage that a mop and judicious paddling couldn't take care of. But even Noah couldn't get us out of the tidal wave of red ink flooding the planet today.
Likewise with IQ. Just 51—70 points would qualify you for "moronity" — one step above "imbecility" (IQ of 26—50) and two above "idiocy" (IQ of 0—25). But the village idiot....or even a village crammed to its gills with idiots.... could never have got us to this point. An idiot wouldn't have been able to spell "mortgage derivative" let alone create a pile of them, package them, and Fedex them around the globe. That takes honest-to-goodness intelligence quotient of the most high-powered kind, a full 145 points or more.
You see, a moron with all his God-given simplicity picks up an apple and he touches the thing and he knows it in his moronic way for its red-shiny appleness. He has no other use for it but that. He sniffs it, he licks it, he takes a crunch out of it. If he saw a mortgage loan, he would want to do about the same. He might be slow with the numbers, he might want to paw through them first, but in the end he couldn't have done much more than just take a bite out of your pocket...
(Or, if he were moron enough, out of his own.)
But your 24-carat, Triple A-rated, gilt-edged, blue-chip, too-big-headed-to-fail, Ivy League meddler will not leave a fruit alone without torturing it with much weightier schemes and devices, such as only old Beelzebub could've put the human race up to.
"Idle hands are the devil's workshop," they say. Well, put those idle hands on a PhD-wielding structured-finance-professing expert and you get an industrial revolution of devilishness. Your garden variety apple turns into an orchard of diagrams, quadratic equations, risk models, and algorithms all intended to prove only one thing — that homo bureaucratus in his Garden of Sweden can do better than Mother Nature, the Great Spirit, the hidden hand, common sense, Jahweh, or anyone less.
It used to be that getting a bank loan only needed you and a guy in a pin-stripe suit. You proved to him you were an upstanding citizen with no axe murders on your résumé and some green stuff in your bank account, he shook your hand, and you were in business. That was it, as far as paperwork went.
Then came the great housing bubble and even seven years in graduate school wouldn't have helped you figure out all the paper products generated by your roof and four walls — a poisonous glut of abs's, mbs's, cdo's, and cmo's so bad we're still flopping around in it belly-up, like a tuna in a tub of mercury.
And if quant-ified banking was fun for you, you're in for a lot more fun. Think what a party it'll be when they're telling every company in the country where to invest and how.....and whom to hire....and then securitizing their policies into paper investment products.
Maybe that's why so many of our leading people of IQ, including Fed Reserve chairmen past and present (Alan Greenspan, Ben Bernanke), Republican senators (John McCain, Lindsey Graham) and Democrat (Chris Dodd, Chuck Schumer), left-wing economists (Paul Krugman, Joseph Stiglitz) and conservative (Adam Posen, Nouriel Rubini), are all in favor of nationalization. Nothing like a supersized government bureaucracy to mop up all the extra number-crunchers who'll be out of productive work in a depression.
To hear Paul Krugman tell it, though, bogus number-crunching didn't cause our problems. He thinks we need more of it. In fact, we need the Swedish model, he says. And no, he doesn't mean some Britt Ekland look-alike. What he has in mind is Sweden's bank bail-out model in the 90s, which he claims was nationalization.
Only it wasn't.
Anders Aslund, a Swedish economist at the Peterson Institute recently set the record straight:
"Sweden did not nationalize its banks. ........
There is no reason to merge bad banks, because asset sales require plenty of management capacity.
A major concentration of assets in an aggregator bank would only aggravate the functioning of asset markets....
In sum, in Sweden bad debts were not taken over by the state or transferred to any aggregator state bank; but each bank, private or state-owned, established its own bad bank. The Swedish model avoided the trading of depressed assets in the midst of the crisis, while they were internally valued at their low market value. If nobody can assess the value of an asset, it is probably not worth much. Only one bankrupt bank was nationalized."
("Lessons for the US from the Swedish Bank Crisis," Anders Aslund, Peter G. Peterson Institute for International Economics, February 24th, 2009)
Now go back to what Paul Krugman says.
"What we want is a system in which banks own the downs as well as the ups. And the road to that system runs through nationalization."
(Paul Krugman: Nationalize the Banks, The New York Times, February 24, 2009)
Someone should remind Dr. Krugman that the system in which banks "own the downs as well as the ups" is called private enterprise. It's what you have when you let failing private banks and firms fail.
And someone should also tell him that Sweden just demonstrated how it works when its government refused to step in and rescue Saab, the Swedish subsidiary of General Motors. After years of masquerading as a socialist haven, Sweden is more free market than America, it turns out.
"If the company couldn't produce cars anymore profitably, it should try wind," said the Minister of Trade sensibly.
("Sweden to Saab: Merge to Wind Power or Shut Down," Fredrik Wass, Greentech Media, March 4, 2009).
Too bad that advice won't work here in the US, where wind is already the only profitable thing being put out.
When the economy is racing toward complete socialism, the way to private enterprise is not to double up on the pace of socialization. (And that's all that "going through nationalization" amounts to.) It's to go into reverse. Just let the banks liquidate. There. The government has nothing to do with it.
But tell me this. When even Mandarin-speaking apparatchiks have got the hang of free markets, how is it that Dr. Krugman, who cut his teeth on Anglophone economic theory, gets his vocabulary so mixed up?
Is it a lack of IQ?
Or is it what I think it is?
A lack of honesty.
March 7, 2009
Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.
Copyright © 2009 Lila Rajiva