Bloomberg.com/EU-Digest: Krugman Proves Keynesianism Isn't Dead After All - by William Pesek

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Krugman Proves Keynesianism Isn't Dead After All - by William Pesek

Krugman, 55, didn't get the Nobel for his work on Japan's lost decade, but for ``analysis of trade patterns and locations of economic activity.'' The Princeton University professor and New York Times columnist is among President George W. Bush's most prominent critics. Coming less than a month before an election, the award left some economists wondering if the Nobel committee was playing politics. Krugman's work is getting considerable attention in Asia, and for good reason. His reputation in this region was made in the mid-1990s when he was among the most consistent predictors of the 1997 Asian crisis. A couple of years later, Krugman correctly opined that Asia would stage an impressive comeback. Far from it. At the rate the U.S. is socializing its financial system, it seems only a matter of time before airlines, automakers and major retailers find their way onto the government's balance sheet. It would be the ultimate irony if the U.S. had to bail out Wal-Mart Stores Inc. with borrowed Chinese money so that it can support all those Chinese factory workers. Globalization is bringing the world full circle -- from state-owned companies to privatization to the re-nationalization of those enterprises. It's no wonder Venezuelan President Hugo Chavez is referring to the U.S. leader as ``Comrade Bush'' and saying ``now Bush is to the left of even me.''

Note EU-Digest: What could probably immediately stimulate the US economy is for the Government to advice those banks which received bailout money to earmark some of that liquidity to provide credit card holders in the US a one year moratorium on their credit card payments. Total US consumer debt (which includes installment debt, but not mortgage debt) reached $2.46 Trillion in June 2007, up from $2.398 Trillion at the end of 2006 (Source: Federal Reserve). Total US consumer revolving debt reached $904 Billion in June 2007, up from $879 billion at the end of 2006 (Source: Federal Reserve) The median U.S. household income is currently $43,200 and the typical family's credit card balance is now almost 5 percent of their annual income. (Source: Federal Reserve) Of the households that do owe money on credit cards, the median balance was $2,200 -- meaning half owe more, half less. (Source: MSN Money)National credit card debt in the US per credit card borrower increased 8.6 percent to $1,717 in the second quarter of 2008, compared to the same period 2007, according to a study by TransUnion.