Paul Krugman is finally, very late in the game, criticizing just some of the economic madness that has been going on for the past twenty years. He points this out in his article, More on the bank plan. He does so for all the wrong reasons.

Krugman states in his article, “A bank, broadly defined, is any institution that borrows short and lends long.”

Get with the program Krugman. This is the bust phase of an Austrian business cycle. A bust caused by the fact that you can't borrow short and lend long without causing a mismatch between the plans of the lenders and the borrowers.

Eventually the short term plans of the lenders cannot be serviced by the borrowers. The lenders want their money back to spend but it's all tied up. They thought they had more savings than they actually did because fractional reserve acts as a monetary multiplier. There are more short deposits than actual liquidity to serve the accounts.

If your definition of a bank implicitly includes that then you should be against banks. However, banks don't need to do that. They could match maturities. They don't because they can cheat the system that way, with the help of the government. It allows them to leverage on the backs of savers without them being fully aware of the game. It’s implicit fraud.

You know that Austrian Economics is the way to go. This Keynesian/Monetarist Frankenstein hybrid you mainstream economists, yes YOU, have been running the country on is going to end up destroying us.

You don't give a sh_t about the poor unless you are willing to swallow your pride, admit you've been wrong all these years, and join the good guys. Join those who are against the reckless governmental destruction of the past twenty years.

I've known this mess was coming down from at least 1996. My coworkers and I have been speculating on when this sham economy was going to come down around our feet since at least then. Fractional reserve monetary inflation coupled with margin account leverage was not the answer to prosperity during Clinton. Reflating the fractional reserve bubble with absurdly low interest rates was not the answer during Bush. Now printing fiat money will not help correct the fractional reserve monetary deflation problem.

Money is NOT goods. Inflating the money supply is not the way to prosperity. Government spending is consumption not production. This “plan” is idiotic and will fail, as would your plan. You say time for a Swedish solution? Get real. That would just set us on the path to socialism, and further destruction of the economy. Nationalization of industry is NOT the way to go.

People are going to starve if this keeps up. Not just here but all over the world. We've had central monetary planning and it doesn't work just as Austrian Economics predicts. That's science. Nationalized banks aren’t going to help. This whole mess was caused by government sponsored entities in the first place. The Fed, Fannie and Freddy, etc.

Setting interest rates below market is a price control. Like all price controls it causes producers to produce less and consumers to consume more. For interest rates that means low savings (the producers) and high borrowing (the consumers). So that's economics 101 in ANY school of economics. Shame on Alan Greenspan for not following those metrics and shutting down the monetary pumps. Shame on the Fed and Bernarke who was instrumental in helping Greenspan ruin the economy.

Furthermore, with low interest rates, Austrian economics predicts that there will be asset price inflation in goods that are far away from production and companies that produce them. That describes internet companies and housing to a tee. Can anyone say Internet bubble? Can anyone say housing bubble?

It also predicts, according to theory, that commodity prices will skyrocket as the extra money injected into long term goals bids up the prices of those first. They go up highest because interest rates are more important to the costs of production of things that are far away from consumption.

That's exactly what happened confirming the theory.

Furthermore Austrian theory predicts that commodity prices will collapse as fractional reserve monetary inflation contracts at the end of an expansionary period. It happened confirming the theory.

Plus it predicts that there will be trade deficits as the fractional reserve (or fiat) inflation proceeds and other countries still accept the currency. This causes a shift of production to foreign countries according to Austrian theory. This is exactly as it happened. Shame on Greenspan for causing this. Shame on him for adding the additional incentives that caused capital flight. Incentives like the Mexican and the Asian Crisis bailouts.

It also predicts that under a metallic standard such monetary inflation will cause an outflow of the backing assets. In the case of the US during and before Nixon it was gold. We had below market interest rates back then too. Plus a currency pegged above gold. So the gold flowed out. Being the idiot he was Nixon took the final steps to get us off gold and made us have a completely fiat currency.

What is our backing asset now that we are on fiat currency? It's our ability to pay. So taxpayer debt is the backing asset to our currency. Increasing governmental debt is equivalent to the draining of gold now days. This whole time the central bank has been watching as our coffers have been drained. A sure sign that monetary policy was too loose.

Austrian Economics now predicts massive inflation. When that event happens will you finally believe in proper theory?

Austrian Economics also predicts that you can't do the kind of quantitative predictions that other economists are so fond of. You have to do the qualitative types of predictions as I did above. No mainstream economists saw this coming with their physics based mathematical models. Just as Austrian theory predicts.

Every step of the way the Austrians have been right and the Keynesian and Monetarists have been wrong.

Yet after Keynesianism just failed twice, once with the internet bubble, and now with the housing bubble, now Obama is going to try the same stupid “solutions” again. Lower interest rates, print money, and spend. This is Bush and Clinton on steroids. Who the hell is this guy listening too?

If he were smart he'd look me up and fire his entire cabinet.

You know the next government steps. Inflation will harm old people, people who will lose their jobs, orphans, everyone in the US trying to buy foreign trade goods. So the incredibly stupid politicians we have will try price controls which will further cripple the economy.

Krugman, Greenspan, Paulson, Bernarke, you are all economic ignoramuses. Try applying scientific principles to economics. All scientific principles like self consistency. Stop believing the fantasies of Keynesianism a self contradictory system with all its "paradoxes". They are not paradoxes to be accepted they are contradictions that falsify the theory.

You call your column, "The Conscience of a Liberal". How can you live with yourself when you know you've been wrong all these years? Do the right thing and abandon your socialist tendencies and failed economic policies.

Update: I posted this comment at Krugman's blog. It stayed up for a while. Now it is gone. This guy is as honest with his blog as Delong. That is to say totally dishonest. His comment section is a echo chamber.