In a recent op-ed in the NY Times, Mr. Krugman, the irrepressible orphan Annie of macro economics, decried his loneliness, surrounded as he is by lunatics who continue to warn of the disastrous effects of the mounting debt crisis. Mr. Krugman, in the desperate grip of his own lunatic certainty that there will never be a debt crisis, derides and insults his professorial peers for spreading groundless fear about the $17,000,000,000 in current debt and our plans to add more debt still. He cites a warning by Professor Emeritus Chicken Little, alias Alan Greenspan, from three years ago on this same subject, and, yet, Krugman says, the disaster has not come. The sky is still there, up above us. QED. But how can he be so cock sure that a debt crisis can never happen in America? He has five reasons:
1. Krugman points out that the US prints its own money and then borrows that printed money from itself. Payments on the debt are due in those same freshly printed US dollars. When the stash runs low, the mint fires up the printing presses.
2. Paper money is really just paper and ink, and therefore pretty much worthless. What is valuable is the belief that the currency will never fail or lose much of its value. This belief, according to Krugman, is sustained by the happy fact that the US prints its own money.
3. The importance of maintaining this faith in the solidity of the currency - despite superficial appearances of shakiness - is what makes Krugman so angry when he hears talk of a coming debt crisis and he is moved to climb to the top of mount Ararat and remind everyone that the US prints its own money.
4. Krugman reminds us that there is no safer place for other countries and investors to put their own worthless paper money. He means this to be reassuring. They deposit their money in our Treasury because they know that interest payments are perfectly safe, since the US prints its own money.
5. Every time Krugman marks off another disaster-less, halcyon day, he feels vindicated and grows even more certain that there can be no debt crisis, or otherwise it would already have happened. And if there will never be a debt crisis, there can be no rational impediment to unlimited government spending. Yes, happy days are here to stay, if only the naysayers remember that the US prints its own money.