Hey, big spenders! It’s Paul Krugman to the rescue! In the aftermath of David Stockman’s recent New York Times article, Krugman is assuring his faithful readers that the massive debt financing of the Obama administration’s spending spree is no big deal and that it is not real debt at all, figuratively speaking.

Why? According to Krugman: “…debt does not directly impoverish us, because it’s money we owe to ourselves.” What does he mean by that?

…think about the macroeconomics; did America really put itself $30 trillion in hock to someone else? No, some Americans lent to other Americans, which is a very different issue.

In other words, it essentially is free money, and the government can engage in this financial trick indefinitely without there being any negative consequences. Essentially, what Krugman is saying is that internal bond finance (mostly by the Federal Reserve System) essentially gets rid of the Law of Scarcity. Government, through money printing and issuance of bonds, is an unlimited fountain of wealth creation, and if there is inflation with all this, all the better, according to Krugman, because inflation will help U.S. exports, creating jobs and making us wealthier.

Krugman apparently is arguing that since the exchanges are internal, that a default by one party, while harming the other party, essentially has a zero-sum outcome, since one party’s gain is another person’s loss, which adds to zero. No harm, no foul.

Understand that Krugman is the most decorated academic economist of our time. His face is all over the talk shows, and he is treated with the kind of reverence in academe once reserved for someone like Einstein. Yet, his central message is this: internal bond finance of government trumps scarcity. Yes, the guy actually believes this, or at least one can say he provides the Obama administration with cover for its destructive policies.

Remember, Obama declared that unemployment payments from the government create more wealth than does an oil pipeline, and that a welfare system actually makes the economy stronger and is not an economic burden, but a provider of wealth. Yes, for all of the supposed sophistication of American Progressives (and especially the ones that worship Krugman and Obama), it seems that in the end they confuse financial trickery with wealth creation.