This is, of course, like the prescription your Dr Feelgood likes to give you: more of the same drug that got you hooked in first place, and in ever vaster quantities.
Krugman at least has the virtue of consistency on his side. He was offering the same batshit crazy prescription when the Asian Financial Crisis hit in 1997, famously insisting in his book Return of Depression Economics that unless Asian governments whacked up their deficits to similarly eye-watering heights, the whole world was in for a swift come-down.
Famously, of course, he was wrong, for reasons pointed out by economist Kenneth Rogoff (who was by then chief economist to the IMF) in a letter to Krugman ally, George Siglitz—reasons which have now become as topical as they were then, as you’ll see. Said Rogoff:
And so it is!
Stiglitz and Krugman were both wrong. Fortunately, nobody outside Japan listened to them then. Rather than splurge on a new Keynesian investment line of deficits and stimulunacy, as Stiglitz and Krugman insisted, predicting disaster all round if they didn’t, Asian governments (outside Japan) instead balanced their books and let their economies re-tool, reallocate and recover—and rather than relapse into depression, they instead returned swiftly to rapid growth. Unlike Japan of course, which followed the prescription of Drs Stiglitz and Krugman, and is still even now in the Recovery Ward.
Just another world-historical lesson that you might consider remembering today, as you listen to the same debate again. Same debate, even one of the same con-men, just slightly different protagonists.
PS: On a somewhat related note, since he’s taken to criticising the “Hayekian” solutions currently characterised under the label of “austerity,” it’s now apparent that the alleged economist Paul Krugman doesn’t even know his Hayek from his hat-stand. Just one of the inconvenient truths pointed out to him in the replies to his latest column by (among others) Jonathan M. F. Catalan, Richard Ebeling, Bob Roddis, and Richard Ebeling again.