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Krugman: The Economic Debate is Dominated by Dangerous Lies

 
 
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On Friday, Paul Krugman wrote in theNew York Times how truly, as he put it, "disheartening" it is to be involved in an economic debate riddled with falsities. 

Krugman writes:

"What continues to fascinate me — in a bad way — is how economic debate continues to be dominated by ideas that (1) are in conflict with textbook macroeconomics and (2) have led to bad predictions every step of the way."

He dispels the myth of the "swelling debt problem":

Now, markets could be wrong, but if you apply basic textbook macro, namely the IS-LM model, you learn that budget deficits should have no effect on interest rates when you’re in the liquidity trap. So the notion that we’re facing some kind of imminent threat from deficits isn’t based either on what the market is saying or on received economic theory. It is, when you come down to it, based on nothing more than a gut feeling that deficits must be a Bad Thing; and the people whose guts apparently get taken seriously have been wrong every step of the way.

And yet this more or less made-up notion of a debt crisis, which is in the end a prejudice rather than a reasoned conclusion, is reported as a fact in what is allegedly a news story, not an opinion piece.

Until we expose and destroy these economic lies, we will continue to fall victim to them. Here are 6 myths that must die ('rich people crate jobs', included) for our economy to live. 

AlterNet / By Kristen Gwynne | Sourced from

Posted at December 23, 2011, 3:26am