The 2009 Irving Fisher Award...

goes to, drum roll please, economist Paul Krugman. Every age has smart stupid men, and Paul Krugman, what with his recent pronouncement that the economy will, in time, be seen to have come out of recession sometime this summer, is my top choice to emulate Depression era economist, Irving Fisher, who said shortly before the onset of The Great Depression that, and here I slightly paraphrase, "We have reached a permanent plateau of prosperity". From where I humbly sit, Professor Krugman, a man of undoubted erudition and high achievement, is very much prone to amazing blindspots about the economic state of play. A Keynesian, Paul Krugman may forever be known (by me at least) as the man who mistook the eye of a category five hurricane for the beginning of a sunny and pleasant summer afternoon.

One can't help but think that Professor Krugman must not merely have witnessed the sprouting of green shoots, but the budding of whole beds of roses. Or has he? Where, after all, is the (undoctored) evidence? A decrease in the steep slope with which unemployment has heretofore risen, for example, is no more evidence that the economic downturn is about to reverse course than finding out that no new tumor growth has been detected is evidence that a cancer is now in remission. There are, after all, such things as lulls that do occur within well established trends. And when there is no unambiguous contrary evidence, lulls or respites are far from reliable signals of a change in trend. Recall from your history that after war was declared in Europe in late 1939, for a number of months very little seemed to transpire. A "phony war" had broken out it was said, and the panic about a general military conflagration abated in favor of the idea that armed hostilities would be averted. We now know just how fanciful that notion that was.

I posit that we are exactly in the same position now. However, Instead of finding ourselves in a phony war, we are ensconced in a bogus economic recovery. The frightening metrics and plummeting production data of '08 have, for now, merely slowed their rate of descent. So, rather than behaving as if the big bad storm is spent, we should instead be prepared for another leg down in a global Depression that is probably, at best, only half way through doing its worst.