Monday, October 13, 2008


A fierce critic of the Bush administration and a specialist in the kind of kind of financial crisis now gripping the globe has won the 2008 Nobel Prize in Economics.

Professor Paul Krugman of Princeton University has repeatedly attacked the Bush administration in his twice-weekly New York Times columns and extensively studied the so-called "liquidity trap" into which Japan fell for more than a decade and into which it is now feared the US might fall.

Describing what was happening in Japan as "a scandal, an outrage, a reproach" he wrote at the beginning of this decade that it was a human disaster on a truly heroic scale that a great nation with a stable and effective government should operating far below its productive capacity, simply because its consumers and investors do not spend enough.

The solution that he put forward was for the authorities to deliberately create inflation in Japan, something now being talked about as a last resort should spending dry up in the US.

In Monday's New York Times he wrote that the intial response of President Bush and his Treasury Secretary Hank Paulson to the US crisis was "distorted by ideology".

"Remember, he works for an administration whose philosophy of government can be summed up as private good, public bad. All across the executive branch, knowledgeable professionals have been driven out; there may not have been anyone left at Treasury with the stature and background to tell Mr. Paulson that he wasn't making sense," he wrote.