Lies, Damed Lies and the Lies Krugman Tells

There are lies, dammed lies and the lies Paul Krugman tells. His do the most damage because people actually believe him, which gives the Obama administration political cover to transfer wealth from the lower 99 percent to the rest. Krugman’s credibility is gained from pieces like this one.

The cost to employ people in the private sector rose only two-tenths of a percentage point in Q1, the lowest increase on record. If recent trends continue, wages will soon be falling.

Although some companies use pay cuts as a way to avoid mass firings, Paul Krugman notes that the overall trend isn’t good news.

Why?

Because people whose salaries get cut can’t buy as much stuff. And that forces other companies to make pay cuts. Then their workers can’t buy as much stuff. And so on.

Krugman’s solution?

[M]ore stimulus, more decisive action on the banks, more job creation.

Krugman’s solution is nothing more than a pep rally for the banksters’ bail-out. Krugman knows better. I know better than to co-sign a note guaranteeing the gambling debt of my neighbor, to a big guy in silk socks with a lotta vowels in his name. I know this big guy will put my name on a list next to my pal’s. Now my neighbor makes a bunch of money, but he’s in too deep and he’ll never pay it off. Knowing this, I tell my neighbor to get lost. His response is that unless I pay off his bad bets, the whole neighborhood might get foreclosed. That’s about like the bail-out bunk the Obamas throw around the air waves.

How?

Even if I worked for the guy, and he went out of business, at worst I lose my job. Well guess what? If I try to pay his debt I’m going to lose my job as well. His debts are so big that not even the entire neighborhood could pay them off and furthermore, he doesn’t even know how much he owes. Standing homeless in front of the house I used to live in, not only am I broke, but in debt to some wise guy bankster thugs for obligations I never commenced.

The Fedsters men and their economists go the extra mile to muddy the waters with fancy jargon and Fed-speak, but economics is a lot simpler than they would ever have you believe. Look at it as though it has very few moving parts and you can throw all the nuts and bolts back in later, but the logic is the same. That’s the way to look at the overall economy. Krugman has been on the bail out band wagon since he was ordained with a Nobel prize, but all he spews are foul lies and putrid misinformation.

Down on the Street, scam is the name of the game, not erudite theory. Some of the biggest money around is managed by Warren Buffet who is as much a con man as the next.

Billionaire Warren Buffett, whose Berkshire Hathaway Inc. is the largest shareholder in Wells Fargo & Co., said the lender is a “fabulous” company.

“All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” Buffett said today at Berkshire’s annual meeting in Omaha, Nebraska.

That’s right; not all banks are alike, not by a long shot, and Wells Fargo is saddled with the debt and Option ARM resets of Wachovia and Golden Rust, if not by book value, then clearly by risk.

- Berkshire Hathaway Inc. Chairman Warren Buffett dismissed the importance of the government stress tests in helping him assess banks, and said Wells Fargo & Co. will prosper no matter what the results show.

“I think I know their future, frankly, better than somebody that comes in to take a look,” Buffett said yesterday of the bank stocks that Omaha, Nebraska-based Berkshire owns. Regulators “may be using more of a checklist-type approach.”

Hey Buffett, go ahead and buy it. I’m sure Wells can use the cash and it would give the working stiff a break for a change. So go ahead and buy it all, right down to the very last share. Watta ya think ole Warren did? He shorted the market. Witness:

Remember those kajillions of puts Warren Buffett sold a couple years ago? Well, here’s an interesting spread for you: Buffett says that he bought back $2 billion of 20-year ~1500 strike puts versus selling 11-year, 990 strike puts for even.

It’s tough to value puts out that far unless you’re, well, Buffett – or a big trading desk. But I’m hearing that comes out to Buffett selling roughly 1.65 times the amount of 11-year puts for every one he bought back.

In order to hedge this trade, the dealer on the other side of the transaction would have to sell boatloads of vega out 11 years – specifically puts, as he’s not long calls.

In theory, this transaction should weigh on longer-term volatility. Buffett’s selling puts that have 11 years till expiration. It’s doubtful he’s hedging this. Selling puts is de facto selling insurance. Berkshire (BRK-A) is an insurance company to begin with; it’s just business.

The dealers on the other side, however, will likely use this on their books versus other trades. It gives them ammo to short many a put with lots of time to go, to buy stocks, converts, bonds, or whatever against it.

But in reality, Buffett started selling buckets of longer-dated puts before the market implosion, and that didn’t exactly weigh on the VIX. I doubt this roll will, either.

See what I mean? Economics is a lot simpler than the likes of Krugman might let on.

Now, if an unemployed construction worker sees it you can bet Krugman does too. So why does he lie and push ever more spending on us? Recall:

[M]ore stimulus, more decisive action on the banks, more job creation.

Credit where credit is due: President Obama and his economic advisers seem to have steered the economy away from the abyss. But the risk that America will turn into Japan — that we’ll face years of deflation and stagnation — seems, if anything, to be rising.

Because he’s protecting the banks and corporate bondholders, regardless of the ugliness of that paper and the cost to the dollar holders.

Buffet and big money support the bailouts for a very simple reason. They can offload the dead weight of these instruments to you and me. Krugman doesn’t benefit directly from the bail-out so he carries the water for big money against the taxpayer interest’s. It’s that simple.

So, don’t buy the any more crap Krugman is selling for the big money.

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