New York Times columnist and Nobel Prize-winning economist Paul Krugman underscores that those who are thinking in terms of a balanced federal budget now are doing a serious disservice to the economy, and, by extension, to the nation.

It's important for the U.S. Government to return to a balanced budget when the economy returns to health, but it is critically important for Congress to approve a large fiscal stimulus to help the U.S. economy recover from the current recession, he said.

Sees danger of vicious cycle

That's because doing so will help end what Krugman argues is a vicious cycle of contraction that's beginning to play itself out in the economy. Rising unemployment will lead to further reductions in consumer spending, which will lead to further business cutbacks in production and more job cuts, which will lead to further reductions in consumer spending, contracting the economy even more, and so on. It's a destructive cycle that has to be stopped, and fiscal stimulus is part of the healing: it will get momentum headed in the constructive direction.

For those who doubt the harm that prematurely trying to balance a budget can do to the U.S. economy, Krugman offered FDR's premature attempt to balance the budget in 1937: it almost destroyed the New Deal and the economic recovery taking place in the nation at that time.

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman argues, in so many words, that, indeed, the United States must go back, to get to the future.

Krugman's advice for President-elect Barack Obama? Think big. Contrary to selected, conservative arguments about President Franklin D. Roosevelt's New Deal, the reason the New Deal had limited, short-term success was the fact that FDR's economic policies were too cautious, he said.

The New Deal: new life

The New Deal's long-term success and achievements, including the structural changes to the U.S. economy (including Social Security and bank deposit insurance), have proved to be both durable and essential, most economists, including Krugman, agree.

Hence, President-elect Obama should think big from the get-go, Krugman says, and avoid the mistaken belief that 'government spending made the Great Depression worse,' and Obama should move forward with a large fiscal stimulus to put people back to work, for work that needs to be done in these United States.

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman argues that the recent statistics on consumer spending offer disappointing news for those who believe U.S. economic growth will resume via spontaneous generation.

Growth, Krugman argues, will not magically appear and the consumer pull-back provides testimony: real consumer spending fell at an annual rate of 3.1% in Q3, with major declines in durable goods purchases.

Further, as Krugman notes, the last time consumer spending fell as sharply was 1980, when the economy was enduring a severe recession with double-digit inflation.

Foreboding consumer spending

Consumers are in pull-back mode, Krugman states, and that fact, combined with general economic slowness - - U.S. GDP contracted in Q3 by 0.3% - - and the lending constraints stemming from the credit crunch, creates a climate that's not for the squeamish: consumers are belt-tightening for justifiable reasons, individually, but their collective belt-tightening could lead to a disaster - - a deeper recession.

That's because, as economist John Maynard Keynes taught, a savings rate is required for a productive, healthy economy, but if every citizen saved everything he/she could all the time, it would be a disaster.

Princeton professor and New York Times op-editorialist, Paul Krugman, just won the Nobel Prize in economics "for his analysis of trade patterns and location of economic activity." This award comes at a time when he has been weighing in on the debate as to how best to fix the financial crisis. And I found inspiring his suggestion that governments should inject capital into ailing banks -- an idea that has taken hold in the U.K. and may also prevail here.

Why did Krugman win the Nobel? His work bolstered a branch of economics called strategic trade theory which argues that countries can subsidize certain industries to gain global market share. Others have praised his work on the development of clusters of related industries and his equations that measure how economic shocks affect the current account, exchange rates and capital flows.

The official name of Krugman's prize is "The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel." He'll get $1.4 million, a gold medal and a diploma. I've agreed and disagreed with him but if his ideas about how to fix the financial crisis take hold, maybe he'll be able to find a safe bank in which to deposit his winnings.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

New York Times columnist Paul Krugman, a person who freely and proudly states his liberal economic outlook, (See Krugman's book: The Conscience of a Liberal) and his disagreement with the Bush Administration's economic conservatism, once again reminds investors/readers that the U.S. financial crisis is resembling that of Japan's in the late 1980s.

Investors/readers will recall that in the late 1980s, fanned by easily obtainable credit, commercial and residential real estate prices skyrocketed in Japan, with investors and speculators continuing to bid-up prices, despite the fact that numerous indicators signaled that prices were astronomically overvalued. Further, Japan's real estate boom occurred during only a modest increase in household formation and amid an aging population. What followed was inevitable: the bubble burst, albeit slowly, and the correction led to a decade-long economic slump for Japan.

Fast-forward to the United States, 2003-2007: intoxicating rises in home prices, fueled by 'extremely creative' mortgage plans, and a belief that out-sized gains would not end soon. Yet all the while, job growth remained modest at best, with falling real wages in many job categories. The U.S. economy was growing, but the growth was not sustainable because it was rooted in a bubble - - a real estate bubble - - not in an increase in the nation's productive capacity and good jobs, so says economist Glen Langan. Or as Langan called it, the U.S. economy in 2003-2007 was, largely, "an asset appreciation economy."

New York Times (NYSE: NYT) columnist and economist Paul Krugman, author of The Conscience of a Liberal, would never be confused with a loyal backer of the economic policies of President Bush.

Still, Krugman, in the academic tradition that argues that a scholar's most important word is "valid," gives President Bush credit where credit is due -- or at least a lack of blame. Krugman says it's true that the U.S. economy is a mess, but it's not true that the bad economy is entirely President Bush's fault.

Krugman outlines the unfortunate reality regarding the U.S. economy's 2001-2008 performance: recession, followed by one of the weakest recoveries since World War II, followed by another slump that technically isn't a recession yet. When President Bush leaves office, Krugman says, the U.S. economy will have created five million jobs, not nearly enough to keep up with population growth. By contrast, 22 million jobs were created during the Clinton Administration.

One of the major economic debates on Main Street and in Washington concerns the influence of speculators during oil's record price rise. (Oil currently trades above $140 and is up 100% during the past year, and more than 400% since 2000).

More than one Congressional committee is investigating the role of speculators, who critics say have 'distorted' or artificially boosted oil's price -- driven it higher than a level the commodity would trade at if the price were based solely on supply and demand fundamentals.

New York Times columnist Paul Krugman, while not denying speculators have contributed to oil's record rise, nevertheless offers perhaps the strongest evidence regarding how a commodity's price can rise a great deal, without the influence of speculators. His evidence: iron ore.

CNNMoney.com reports that gasoline hit a new record of $3.718 a gallon today. That's up 21% from a year ago when it sold for $3.06 (although I remember paying $2.20 a gallon in February 2007 for midgrade). The U.S. government could help out us poor gasoline consumers, but it refuses to do so. Meanwhile, in 2008, global oil supply is expected to grow more than global oil demand. So arguments that speculation has nothing to do with record oil prices fall flat.

Yet, this morning, the New York Times' Paul Krugman offered such an opinion. He concluded that oil is not a bubble. He doesn't really define what he means by a bubble, nor does he offer any numbers to back up his case that the price of oil is rising due to demand growth exceeding that of supply. He also throws in a comment about how if oil were a bubble, people would hoard it and they're not.

But numbers from the Energy Department suggest that global oil production will grow more than demand. Specifically, it expects global production to exceed global consumption by 0.8 million barrels a day (mmbbl/d). How so? The Energy Department forecasts global consumption in 2008 to rise 1.2 mmbbl/d from 85.4 mmbbl/d to 86.6 mmbbl/d. Meanwhile, it expects global oil production to grow 2.0 mmbbl/d from 84.6 mmbbl/d in 2007 to 86.6 mmbbl/d in 2008.

The Wal-Mart Stores, Inc. (NYSE: WMT) spin machine is in full force today. The first line from a recent press release from the company: "This month, Wal-Mart Stores, Inc. will open 81 new stores and clubs across the country, providing jobs for 26,000 associates."

Economist Paul Krugman wrote about the company's questionable status as a job creation machine back in 2005:

... Adding 100,000 people to Wal-Mart's work force doesn't mean adding 100,000 jobs to the economy. On the contrary, there's every reason to believe that as Wal-Mart expands, it destroys at least as many jobs as it creates, and drives down workers' wages in the process ... The new store takes sales away from stores that are already in the area; these stores lay off workers or even go out of business. Because Wal-Mart's big-box stores employ fewer workers per dollar of sales than the smaller stores they replace, overall retail employment surely goes down, not up, when Wal-Mart comes to town.

I don't have a strong position on whether Wal-Mart is good or evil. It's probably somewhere in the middle. But there's something disingenuous about trumpeting the creation of jobs using the gross number of hires with no mention of the fact that many jobs at other stores will be lost. I'm not saying Wal-Mart doesn't have a right to move in and put people out of business. That's capitalism. But bragging about job creation without taking that into account? That's some pretty serious spin.

Wal-Mart added that it's also building two new "High-Efficiency (HE.2) prototypes designed to significantly reduce greenhouse gas emissions and use 25 percent less energy than a standard Wal-Mart Supercenter."

Former Sen. Fred Thompson today called it quits from a presidential campaign which he undertook with all of the enthusiasm of a small child being forced to eat his peas, strengthening the surging campaign of John McCain. Meanwhile that pesky Ralph Nader is making noise about joining the campaign at this late juncture.

Thompson's departure wasn't a shock. The former actor and lawyer proved to be a surprisingly inept campaigner. In one memorable moment chronicled on YouTube, Thompson even had to ask a crowd in for a round of applause. He didn't endorse any of his former rivals.

This creates an opening that McCain can exploit. Mike Huckabee is a likable enough guy, but many people will think twice before voting for a social conservative. As for Mitt Romney, on paper he is an ideal candidate for fiscal conservatives. The trouble is that the former Massachusetts governor has made one gaffe after another, including speaking about a lifelong love of hunting that had come from the two times he actually did it.

The New York Times Co. (NYSE: NYT) and General Electric (NYSE: GE)'s CNBC have agreed to share each other's content, a move designed to counter the synergies that the $5 billion acquisition of Dow Jones brought to Rupert Murdoch's News Corp (NYSE: NWS) empire.

Under the terms of the agreement, Times articles will be posted on CNBC's website while the cable channel's video will be on the newspaper's website, according to a story in the New York Times. Though content-sharing agreements are as common as mud, this one is worth watching because it's so high profile.

It wouldn't surprise me if the Times and CNBC eventually did joint projects, particularly time-consuming investigative stories. Also, expect the Times op-ed columnists such as Frank Rich and Paul Krugman to make more appearances on CNBC shows, no doubt much to the horror of Larry Kudlow.

Though Fox Business Network could get better ratings shouting the news over bullhorn in the middle of Manhattan, CNBC can't afford to take the fledging network for granted. After all, Murdoch now has at his disposal some of the best business journalists in the world who could whip his CNBC competitor into shape,.

NOTE: I've done freelance writing for The New York Times.

New York Times op-editorialist Paul Krugman got one right today. And its Floyd Norris points out why the solution to the problem Krugman highlights could be SWFs (Sovereign Wealth Funds). Krugman does not know how much the financial industry's problems will cost and Norris suggests that SWFs -- government investment funds -- are worth between $2 trillion and $15 trillion.

Krugman's right that the Fed's four attempts to reboot the financial system have not worked because they dance around the most fundamental problem -- nobody knows the depth of the financial hole. If I was in charge, I would find out where all the toxic waste is buried and estimate the amount of capital needed to offset the cost of writing it down. In my view, it makes sense to mark the toxic waste to market and to raise capital at the same time.

Norris points out that SWFs could be part of the capital raising solution -- as they have been in the cases of Citigroup Inc. (NYSE: C) and UBS AG (NYSE: UBS). He also suggests two pitfalls of SWFs as a source of capital. First, they are government controlled which could allow the SWFs to use the resulting power over our financial institutions to further their political ends. Second, whenever a new acronym such as SWF emerges in the financial world -- and there have been plenty including Collateralized Debt Obligation (CDO) and Structured Investment Vehicle (SIV) -- Wall Street will find a way to profit from it in the short-term while sticking the long-term costs on someone else.

In today's New York Times, Paul Krugman offers an explanation for the cause of the mortgage meltdown. While I think he comes close to the mark, he misses an important point: bankers will respond to incentives.

I would love to have the talent that warrants the platform Krugman has -- to opine on economic and political matters on the pages of the New York Times. Krugman uses that platform to suggest that the reason for the bad mortgage loans is that bankers "haven't been forced to give back any of the huge paychecks they received before the folly of their decisions became apparent."

My view differs from Krugman's. There is no way bankers will give back their paychecks after they've negotiated their contracts just because Krugman wants them to. In my view, the real issue is that bankers are like any other person and they will respond to incentives. If their pay was linked to both the costs and benefits of the loans they made, then they would care about the risk that the loan might not be repaid.

Mysterious is the mind of media tycoon Rupert Murdoch. Now comes word that the News Corporation (NYSE: NWS) CEO considered making a bid for The New York Times Company (NYSE: NYT). Exactly how long the mogul entertained such a notion isn't clear. Of course, he eventually went after Wall Street Journal parent Dow Jones & Co. (NYSE: DJ).

Can you imagine a New York Times owned by Murdoch? Frank Rich, Thomas Friedman, Paul Krugman, and Maureen Dowd probably couldn't either. I am sure the four of them would have screamed bloody murder at the thought of working for Murdoch. New York Times Chairman Arthur Sulzberger, whose family has a iron-clad grip on the publisher, would never sell. But Murdoch, who sees The Times as a symbol of all that's bad and liberal about the media, knows all of these and many other reasons why he will never own the Grey Lady. So, why would he waste his time with such a ludicrous idea? I have no idea but DealBook, The Times' business blog, has a novel theory.

"it's possible that the crafty media baron is playing games with the paper he wishes to destroy." the site says.

You think?

According to the New York Post, the New York Times Co. (NYSE: NYT) is considering ending its online paid service, presumably moving towards a pure advertising system. The paid service was used to further monetize readers of the most popular columnists at the paper, such as Paul Krugman and Thomas Friedman.

Even the columnists who are featured in the "Select" program have held reservations on the program since its inception, the Post goes on to say. But according to a NY Times spokeswoman, this segment has "met or exceeded all its goals since it started in 2005."

Fact is, the future of the online newspaper business is purely advertising-based. The new age of internet publishing with its extraordinarily low barriers to entry (think blogs) has made consumers even more adverse to paying for reading material on the internet.

I'd still avoid the New York Times and McClatchy (NYSE: MNI) -- they are declining businesses and I think the street is still overestimating the companies' earnings abilities in the next few years.