Well, this is interesting.  Paul Krugman finally agrees with me:

[W]e already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t."

I’d just like to point out that I knew those economic policies wouldn’t work back in 2009, writing about them here. Since then, I’ve just been watching the kangaroo. So It’s nice to see Krugman joining me in declaring "fail"—though he does so with the advantage of 20/20 hindsight.

I eagerly anticipate my upcoming invitation to Sweden.

Where we diverge is in providing solutions. As always, Krugman’s solution is more spending, and more debt.  But with debt already at 100% of GDP, we’re really in uncharted waters, and I have no confidence that more debt is the answer, if the problem is the existing debt overhang.

The real question I’m concentrating on is, "At what point do the markets recognize not only that the debt path we’re on is unsustainable, but that it is going to be impossible to pay it back?"  Is that 120% of GDP? 150%?  I don’t know.  But I fear that we’re going to learn the answer.

On the bright side, I’ll be able to pay off the remaining 19 years of my mortgage for the cost of a nice hat. On the down side, a new Astros baseball cap will cost $200,000. On the bright side, again, the $100,000 from my Nobel will cover half of that, so it’s all good.

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Dale Franks
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