The Great Depression Online

Great Depression Online Archive Issue:

Krugman's Way

Great Depression Online
Long Beach, CA
July 06, 2010

Inside This Issue You Will Discover…

*** Suing Dad to Pay for Student Loans
*** Minimum Wage for All State Workers
*** Krugman’s Way
*** And More

Suing Dad to Pay for Student Loans

It sure feels like the whole ball of yarn’s coming unraveled…doesn’t it?

Since hitting an interim high of 11,205 on April 26th, the DOW’s down 13.5 percent.  Unemployment numbers for June were also a big fat dud; 125,000 jobs were lost.  Still, somehow, the unemployment rate fell to 9.5 percent.

We’re hearing reports that recent college graduates are a tad disenchanted by their job prospects.  After four years of eating Top Ramen and pulling all nighters the lucky ones find work manning the coffee bar at Starbucks.  Others move back in with mom and dad and apply to graduate schools.  Still, others sue their dad to pay for student loans.

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Take one Dana Soderberg.  After her parents divorced in 2004, Dana’s father, Howard, signed a written contract requiring him to pay for college tuition.  “But Howard stopped paying her tuition just before her senior year,” reported Yahoo, “forcing Dana to take out a $20,000 student loan (co-signed by her mother).  After graduating as an art major, Dana filed a breach of contract lawsuit against her father with the aid of family attorney Renee C. Berman.

“After two-day trial, the judge ruled that Dana had indeed fulfilled her part of the contract and awarded her about $47,000 in damages, which covered the initial loan, interest and attorney fees.”

Minimum Wage for All State Workers

Naturally, a college degree ain’t what it use to be.  Everyone now has one…but the quality of the education has been weakened down like an over breaded meatloaf. 

An engineering degree may still get you in the door as a working stiff.  But for all the sociology and liberal arts majors, the well of government jobs these credentials qualify them for has dried up.  And for those who already have government jobs, their degree may now be worth just a minimum wage.

For example, here in California there’s a $19 billion budget deficit to fill.  Yet the state legislature missed the deadline for enacting a new spending plan in time for the new fiscal year.  Because of this, last week the Governator ordered state workers pay be cut to the federal minimum wage…$7.25 an hour.  But that’s just the half of it…

“A state appellate court ruled in Schwarzenegger’s favor Friday, but the state controller, who issues state paychecks, says he can’t comply,” reported AP.  “One reason given by Controller John Chiang, a Democrat elected in 2006: The state’s computer system can’t handle the technological challenge of restating paychecks to the federal minimum of $7.25 an hour.

“Chiang cited Friday’s ruling by the 3rd District Court of Appeals, which said ‘unfeasibility’ would excuse him from complying with Schwarzenegger’s minimum wage order.  He said a fix to the state’s computerized payroll system won’t be ready until October 2012.”

Good grief.  Only in government could it take more than two years to patch up the payroll system.

Krugman’s Way

Of course, that’s what happens during a depression.  Tax receipts fall and governments can no longer pay their obligations.  It’s a pretty simple cause and effect relationship.  Nobel Prize economist Paul Krugman’s even now seen the light…

“We are now, I fear, in the early stages of a third depression,” said Krugman in a New York Times Op-Ed column.  “It will probably look more like the Long Depression [that followed the Panic of 1873] than the much more severe Great Depression [that followed the financial crisis of 1929-31].  But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.”

His solution, however, is the Keynesian babbles of a madman.  He proposes bigger deficits and more aid to state governments.  In other words, his solution is more of what got us into this mess to start with.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final total catastrophe of the currency involved,” said Austrian School Economist, Ludwig von Mises.

Thus if Krugman gets his way there won’t just be a Long Depression or a Great Depression, there will be a hyperinflationary conflagration of the world’s paper money.


M.N. Gordon
Great Depression Online

P.S.  “Performance clams for investment advisories are fraught with potential for trickery.  I assure you our Prudent Speculator numbers are accurate and straightforward.” – Steve Forbes.

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