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Pastimes : The New Qualcomm - write what you like thread. -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (5954)	3/11/2003 7:31:43 AM
From: John Hayman	Read Replies (2) \| Respond to of 12231

Here Jon, some Buff stuff. John KRUGMAN AND BUFFETT, TOGETHER AGAIN FOR THE FIRST TIME Hapless retail investors looking for crumbs from the tables of the gods eagerly await Warren Buffett's annual shareholder letter, and this year's hot crumb is that the Oracle of Omaha has plunged big-time into junk bonds. Nice gig Buffett's got -- he uses an SEC-mandated filing to talk his book, and the rubes eat it up every time (one can only imagine the hoards of delighted Buffett fans frantically selling their Coca-Cola Company shares at 7-years lows and reinvesting what's left in junk bonds). Fewer investors probably look to Paul Krugman's New York Times column for tips. Good thing -- his glowing story on Enron for Fortune magazine -- written while he was taking Enron's dirty money as a member of their advisory board) -- even makes a coat-tail investment in Coca-Cola look good. So hopefully not too many investors will be suckered in by Krugman's column today, in which he announces his latest investment -- "...last week I switched to a fixed-rate mortgage." Let's set aside whether writing about this investment of his violates the New York Times' Code of Conduct, which prohibits writers from making investments "in anticipation of forthcoming articles." Wouldn't that be "based on exploiting insider status," as Krugman would say? Well, let's move on. Let's just look at Krugman's reasoning for making this investment to begin with. The reasoning is just another rehash of Krugman's usual economic catastrophism -- a blend of well-known end-of-the-world problems like Social Security insolvency peppered with the usual charges of fiscal irresponsibility of the Bush administration. This week's clichéd metaphor is that it's a "fiscal train wreck." You see, it will all lead to deficits -- and deficits will lead to higher interest rates. Yep, it's the same old Rubinomics mantra. Why is it OK for the Krugman family to go into debt to buy a house, but not OK for the government to go into debt to fight the war against terrorism, or whatever? Krugman never really gets into that (because he has no answer for it), but he nevertheless proves that deficits lead to higher interest rates by quoting a passage from a textbook by N. Gregory Mankiw, Bush's new head of the White House Council of Economic Advisors: "When the government reduces saving by running a budget deficit, the interest rate rises." Funny how when Bush administration officials say things that Krugman agrees with, he quotes them as corroborative authorities. So what does Krugman -- putatively a great economist -- suggest that we do in order to avert the train wreck? Not much -- just two sarcastic sentences. The first: "Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich." We should ask corroborative authority Greg Mankiw what he thinks about that. If interest rates will rise because "government reduces saving by running a budget deficit," won't they also rise when government reduces savings by raising taxes? OK, then there's this: "Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare." At least this would work -- though I suspect that Krugman intends little more here than to assert that a future Republican administration will use voting fraud to throw granny over a cliff in her wheelchair. If you subscribe to Krugman's bleak zero-sum vision of an age of diminishing expectations, then the alternatives of raising taxes or running deficits are just equivalent non-solutions, no risks are ever worth taking, and your only way out is to cut spending. But there's a whole 'nother way of looking at the world, which apparently Krugman's cognitive apparatus is simply not equipped to grasp -- the possibility of growth. If you assume that the pool of wealth can be grown, then choices in public finance -- such as running a deficit or not, raising or lowering taxes, and so on -- can be made with an eye toward what will create additional new wealth. The problem of dividing up the pie becomes very different -- and very much easier -- when the pie is growing, and when you are not bound by the idea that a slice for one person necessarily comes at the expense of another person. Liberals like Krugman are not the only ones who are blind to the possibility of growth -- the risk-averse zero-sum vision afflicts conservatives, as well, and leads them into the same intellectual paralysis. It need have nothing at all to do with politics -- in fact, in this way, Krugman and Buffett are really quite alike. Buffett's view of investing is strictly based on "value," not growth -- he wants to buy stocks cheap at distress-sale prices, when the seller is making a mistake by pricing them too low. A zero-sum game -- the seller is the loser, Buffett is the winner. Just remember when you read Buffett or read Krugman that the history of the human race -- the parts worth remembering and repeating at least -- are the parts about growth. The really great men in history aren't necessarily the richest ones, like Buffett, or the ones with the loudest voices, like Krugman. They're the men who believed that you could take a little risk and make the world not just a better place, but a bigger place. >> Want a good laugh? Visit the Unofficial Paul Krugman Archive -- maintained by a tirelessly devoted fan known only as "Bobby" -- for a little celebration of Krugman's 50th birthday. As "Bobby" puts it, "Today marks half a century of Paul Krugman. It is a milestone in the life of one of the great Americans of our time and one of the great economists." A smiling studio portrait of Krugman follows, set against drawings and photographs collected by "Bobby" of those whom he must consider to be Krugman's historical antecedents: Adam Smith, David Ricardo, Alfred Marshall, John Maynard Keynes, John Hicks, Paul Samuelson, James Tobin and Robert Solow. Posted by Donald Luskin at 1:50 AM \| link