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February 16, 2009

Krugman: Weekend at Bernie's (Madoff, that is)

Posted: 08:02 AM ET

Note: We've got some key guests tonight on LARRY KING LIVE in the Madoff investigation – tune in at 9pmet and let us know your thoughts!

By Paul Krugman, NY Times columnist

By now everyone knows the sad tale of Bernard Madoff’s duped investors. They looked at their statements and thought they were rich. But then, one day, they discovered to their horror that their supposed wealth was a figment of someone else’s imagination.

Unfortunately, that’s a pretty good metaphor for what happened to America as a whole in the first decade of the 21st century.

Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

(Read more of Krugman's commentary HERE)

Filed under: Bernard Madoff • Larry King Live


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Michael C. Mchugh   February 16th, 2009 8:24 am ET

Why don’t we just let the Federal Reserve transfer money directly into the Social Security Trust Fund? If it can give trillions to banks and corporations, the least we could do for the common people is have it help us out with the entitlement programs. With funding from the central bank, the Baby Boomers could retire and we would not have to raise payroll taxes to backbreaking levels or reduce benefits to sub-poverty level. This funding of the Trust Fund could be done with the push of a button, no fuss, no muss, no brutal battles in Congress.

Also, we could use it to expand the Medicare program beyond retirees. As a social democrat, I have always thought that the best way to expand health care to people who don’t have it is to expand Medicare. Forget about all this subsidizing of private health insurance policies. That would be a subsidy to these big insurance companies and they would milk it like they do mandatory auto insurance.

With the Federal Reserve subsidizing the system, we could finally expand Medicare, or at least offer it as an option to people who want more that private health insurance.

I also wonder whether the Federal Reserve can be directly to transfer money directly to state and local governments now facing budget shortfalls or bankruptcy. This would be the fastest way to fund education and other vital services, infrastructure projects, unemployment insurance, and so on. It would also help the states pay for these unfunded mandates they are always complaining about.

To people who argue that all this would be inflationary, I would argue that our main worry in the years ahead is going to be deflation and falling living standards. Anyway, it would be no more inflationary than pumping trillions into big banks and corporations, and it would actually put money into the pockets of real consumers.


Dave of Detroit   February 16th, 2009 10:20 am ET

Well, I have to admit that your photo of Madoff explains a lot. He looks a lot like George Washington and George couldn't tell a lie-No wonder why people trusted him. To be honest, I have a problem feeling sorry for the rich elite who think that their "Insider' knowledge and exemption from the rules of the public in general led to this huge scam.. I do feel sorry for the loss of charitable funds but it is a real change to see the rich get ripped off like the Enron Pensioners and legitimate investors in the Stock Market-Their man George Washington Bush took the entire Country for a free fall and everyone got hit! Bet the original George W. wishes he had benn named Rumplestillskin to avoid the notoriety!


rose   February 16th, 2009 9:33 pm ET

Bernie Madoff has proven the old cliche "more money than brains" and his ponzi scheme will attempt to restore the equilibrium between the two.


Don Willard   February 17th, 2009 2:21 pm ET

Bernie Madoff should be executed, cremated, and his ashes taken to a landfill along with all the other garbage, although any self-respecting vermin would be highly insulted to have him there


Jeff   February 17th, 2009 7:16 pm ET

No country club, white collar prison for the crook, Madoff. He needs to spend the rest of his days at a "Cool Hand Luke" chain gang prison. Oh, he is too old? No. He should of thought about that when he committed the 2nd biggest Ponzi scheme in history. What is the the biggest Ponzi scheme? Social Security. Think about it.


Pat   February 17th, 2009 9:49 pm ET

Dear Larry,
I have been witness to the ridiculous protocol that the UAW forces on a workplace... as a GM white collar salaried worker, have been forced into 4 or 5 calls to get a simple desktop computer moved – the lock guy, the cable guy, the cart guy, the supervisor of those three to make sure it all complies with OSHA and whatever other B.S. committee was formed to keep "the union brother soppin' up the overtime". Yes, it"s time to say goodbye to the UAW... right after we throw half of Wall Street, the SEC and the banking community into jail!


John Odumodu   March 13th, 2009 6:12 am ET

All i hear is Madof this Madof that.......... we forget that this man has already commited a premeditated crime for which he is expecting punishment. He knew from the begining that he will be caught and punished. My question is this what about the system that allow such a massive fraud................ Can we really believe that the authorities were really unaware of this heinous crime i don't think so. For me it is not just enough to punish Madof, all those who in one way or the other participated in this crime should be brought to book and punished. The system should be re-engineered to nip this kind of things in the bud.


John Odumodu   March 13th, 2009 6:16 am ET

I am suprised that since this incidence broke months ago no other person than Madof have been indicted. I hope the system is not protecting cuprits in this crime cos i am sure there are many more people involve in this.


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