August 12th, 2011
02:09 PM ET

Watch GPS: Krugman calls for space aliens to fix U.S. economy?

On GPS this week, we explore the most important topic (the economy) with the most important economic voices. Fareed Zakaria talks to Nobel Prize winner Paul Krugman and Former IMF Chief Economist Ken Rogoff.

The show also turns a myth on its head. China’s not doing the U.S. a favor by buying its Treasury Bonds - the pleasure is very much China’s. We’ll explain.

All that, plus a fascinating look at America’s fractured relationship with Pakistan with the journalist Ahmed Rashid, and a smart, macro look at the London riots with two top British thinkers.

But first, why does Paul Krugman say space aliens could fix the U.S. economy? Here's an edited excerpt of what he and Ken Rogoff had to say:

Ken Rogoff: Infrastructure spending, if it were well-spent, that's great. I'm all for that.  I'd borrow for that, assuming we're not paying Boston Big Dig kind of prices for the infrastructure.

Fareed Zakaria:  But even if you were, wouldn't John Maynard Keynes say that if you could employ people to dig a ditch and then fill it up again, that's fine, they're being productively employed, they'll pay taxes, so maybe Boston's Big Dig was just fine after all.

Paul Krugman:  Think about World War II, right? That was actually negative social product spending, and yet it brought us out.

I mean, probably because you want to put these things together, if we say, "Look, we could use some inflation."  Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what basic logic says.

It's very hard to get inflation in a depressed economy.  But if you had a program of government spending plus an expansionary policy by the Fed, you could get that.  So, if you think about using all of these things together, you could accomplish a great deal.

If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better -

Ken Rogoff:  And we need Orson Welles, is what you're saying.

Paul Krugman:  No, there was a Twilight Zone episode like this in which scientists fake an alien threat in order to achieve world peace.  Well, this time...we need it in order to get some fiscal stimulus.

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Topics: Economy • Global • GPS Episodes • GPS Show • Jobs

soundoff (336 Responses)
  1. Mike Bird

    Creating fake jobs just to generate taxes, shows how bankrupt America is. Not just bankrupt financially, but bankrupt emotionally and intellectually. You are so wired to capitalism; it is taking you down and you don't have the guts to admit it. It's unfair to blame or expect Obama or any other human being to solve the crisis. Where Mr. Krugman is totally wrong is that he doesn't understand that UFO's and ET's are actually real. The antidote for our world that is so totally screwed financially is for us all to wake up one day and know that UFO's and ET's are real, and that money is false god.

    August 15, 2011 at 10:43 pm | Reply
  2. Peter

    Are there any thing else we can do beside Aliens?

    August 16, 2011 at 12:36 pm | Reply
  3. Tim

    Fareed – concerning your comments around liberals need to grow up: The issues liberals and moderates and independents are having with Obama are his failure to make a difference in DC. He hasn't made a difference. He has not changed anything. His legislative victories are well named shells, missing the pearl; bodies without a heart. The power of the country is in the hands of a very few folks. So while they will do well mostly on the back of cheap credit (they are the only ones that get it), poor and middle class society continue to be stagnant. A massive adjustment to the rules of Globalization needs to occur. Ask Europe. If we are a successful society, why do so many remain under educated and under or unemployed. If we were a successful society, more people would be able to work less, without a hit to personal income. But no, in our "successful society" we work (those that are working) are working like turn of the 19th century farmers and factory workers. The benefits from their hard work are diminishing. Its a really pathetic situation. Obama may have changed something, but he's actually changed nothing. He needs a credible challenge from the left and the right, which unfortunately has yet to materialize which points to a another failure, our political system.

    August 16, 2011 at 12:50 pm | Reply
  4. E.conomic

    BOOM! bye bye economy

    August 16, 2011 at 1:31 pm | Reply
  5. Butthead

    Sorry, Krugman, but that was an Outer Limits episode, "The Architects Of Fear".

    August 16, 2011 at 6:44 pm | Reply
  6. Lawman

    just as valid as Perry asking god to save the US economy

    August 16, 2011 at 8:47 pm | Reply
  7. Geoffrey

    Mr. Krugman is totting in old line. We are in crisis because we are now in a global integral world. We are all part of a closed system and therefore we can no longer escape. Space is empty and full of rocks. We don't have the technology to expand into space and even if we did it would take thousand of years to reach another habitable planet.

    We are going to have to work together , as the crisis that has emerged in only the effect of a larger and more substantial problem, which is one of human nature, the fundamental question is will we change by mutual agreement or mutual assured destruction>

    August 16, 2011 at 10:18 pm | Reply
    • David Prosser

      Absolutely Geoffrey. Hmm space travel? I think we have just effectively stepped into the Twilight Zone. I'm just waiting for Rod Serling to introduce the episode. And how bout this one: population will continue to grow and natural resources will continue to dwindle. Carrying capacity on this planet has been reached. So how bout we fix the world we live in instead of living in the clouds. And like you said, the real problem is a lack of mutually beneficial behavior amongst nations.

      August 16, 2011 at 11:47 pm | Reply
      • Teabagged

        > natural resources will continue to dwindle

        Where do they go ,a parallel universe? What about natural resources organized by technology?

        August 24, 2011 at 1:06 pm |
  8. Vinne from Tewksbury

    The more we hear Paul Krugman speak his mind the more ridiculous we realize he sounds. Everytime I see him with Fareed or on ABC those that appear with him always disagree with him.

    He doesn't see to understand that at some point we have to stop spending money we don't have, reduce our expenditures, and then consider paying down our debt. The federal government has increased its spending every year for the past 60 years. we are tapped out. Paul, can't you understand that?

    I am wondering when the men in the white coats will come and take Mr. Krugman away.

    August 17, 2011 at 6:50 am | Reply
  9. Jared

    No thank you. I'll continue to study the Austrian School of Economics. The ONE school of thought that predicted the mess we are in and knows how to get us out of it. Keynesians live in a fantasy world that is filled with problems that they themselves have created.

    August 17, 2011 at 11:01 am | Reply
  10. thejerkstore

    Wow. You would think the one who replaced the great Henry Hazlitt at the NY Times, would have at least read his work. You know the one Paul, Economics in One Easy Lesson. Of course we see the old, tired arguements brought out, automations, free trade, blah, blah blah...Hmm if I remember correctly we now have fewer steel workers than ever, but now produce more steel, why the same goes for farmers, and coal miners, etc. This can't be so. Automation displaces workers, everyone knows that.

    Please go back to being a paper bug, and extrapolate on excessive savings, the paradox of thrift, multiplier effects and so on. My your so smart! For me I'll continue to buy gold ($1792) and silver ($40.51) those barbarous relics I started buying back in 2000 when they hit $285 and $4 respectively. But hey, what do I know? I don't have a Nobel Prize.

    August 17, 2011 at 11:33 am | Reply
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