We hear today that the Canadian dollar is almost at parity with the U.S. dollar. A few years ago the Canadian dollar was worth 75 cents USD, but today the U.S. government is  on a money-printing binge—and pretending to be shocked — shocked — when the its dollar plummets.

I am no prognosticator, and I don’t run any doomsday websites, but the long-range forecast looks bad. While most Americans believe this country is invulnerable to the deep shocks that have taken down lesser nations, some of us know that the government’s policies of the past 15 years have been ruinous. Furthermore, there is a country to our south that provides the unhappy roadmap to the destination to which the U.S. government’s policies are leading: Argentina.

Today Argentina is classified by the World Bank as a “secondary emerging market.” That might sound impressive next to Latin American failures like Cuba and Venezuela, but from where Argentina was just 70 years ago, its modern classification is a step backward.

In the first half of the twentieth century Argentina was one of the ten wealthiest nations in the world. That’s right, the world. This was a rich country, relatively speaking, and its future seemed bright. Unlike the European nations, it had not been burdened with wartime destruction; its economy benefitted from being at peace and by exporting agricultural products to nations at war.

Unfortunately, the same populist pressures that gave the United States its New Deal and promoted communism around the world undermined Argentina’s political economy.  The policies of the 1940s and 1950s, under Juan Peron and his wife, Evita, would prove permanently fatal for the country’s economic well-being. First and most important, militant labor unions tied to the Peronists forced up wages well beyond productivity. Not surprisingly, Argentina’s goods soon became uncompetitive on world markets.

Second, to deal with this newly acquired uncompetitive status, the Peronists passed one protectionist measure after another. Inflation soon followed, and the Argentine peso, which once rivaled the U.S. dollar, turned into play money. Yet the 50 percent inflation of the early 1950s was a pittance compared to what Argentina would experience over the next 30 years, as the country spiraled into hyperinflation by 1980.

Economic chaos led to political chaos, with the country witnessing a series of elections of Peronist presidents and subsequent coups to remove them from office as their policies exacerbated the continuing economic crises. Leftist guerrilla groups clashed with national forces in the infamous “dirty war” of the late 1970s and early 1980s that left thousands tortured and dead and still affects the nation’s politics.

Even today, Argentina is synonymous with political instability, high inflation, and an economy that always shows great potential but never meets expectations. Americans believe that such a thing cannot happen here, but it can. Argentina’s problems began with simple government interventions into the economy aimed at artificially propping up wages. From those first interventions came further interventions to deal with the problems caused by the previous actions, and so on. In the end, all that was left was inflation, chaos, political violence, and poverty.

The United States is facing perhaps its second-greatest economic crisis ever, and so far the government has taken page after page from Juan Peron’s playbook. As a result of this economic and political foolishness, the economy continues to shed jobs and hope.

There is a way out, but it is much different from what we have been doing. When one is in a deep hole, the first thing to do is stop digging. That means dispensing with the artificial means to prop up the economy when serious medicine is needed, medicine that will be painful but ultimately will lead to economic recovery. If we don’t go that route, I guarantee that the Argentines will not cry for us.

Today, the champion—the uncontested champion of Orwell’s “truth”—is Paul Krugman, the 2008 Nobel laureate, Princeton professor, and New York Times columnist. For those who read his twice-weekly column or glance at his blogs and commentary elsewhere, it is like reading the latest pronouncements from the “Ministry of Truth,” and, like in Oceania, it seems that the masses believe the nonsense.

Had I not read Krugman’s column, I never would have known that Jimmy Carter, who began the modern deregulation movement, was a right-wing Republican, or that the solution to almost all our economic ills is for the government to raise taxes, borrow, and print more money. However, his latest missive has managed even to outdo the Ministry of Truth itself. Big Brother would have been ecstatic.

There is not enough byte space in the universe to refute Krugman’s latest pronouncement completely, but a couple of the most glaring holes can be discussed here.

As most readers know, the U.S. Dollar has been falling fast against other currencies and members of OPEC are balking at continuing to price crude oil exclusively in dollars. Instead, they have suggested a “basket” of currencies, as they realize that our government’s policies are likely to turn the USD into something like the Zimbabwean Dollar.

Enter Professor Krugman, who writes:

The truth is that the falling dollar is good news. For one thing, it’s mainly the result of rising confidence: the dollar rose at the height of the financial crisis as panicked investors sought safe haven in America, and it’s falling again now that the fear is subsiding. And a lower dollar is good for U.S. exporters, helping us make the transition away from huge trade deficits to a more sustainable international position.

Not so fast.  The USD is falling because the rest of the world understands that the USA no longer is a “safe haven” and investors looking elsewhere. When super investors like Jim Rogers tell us to get out of this country altogether, people need to listen. Rogers does not have a Nobel to his credit, but he is no crackpot and he fully understands (unlike some American Ph.D.s) that the U.S. Government does not create wealth with the printing press.

While it is true that a falling dollar does make U.S. exports cheaper, the question is what can we export other than commodities. The government’s environmental policies alone continue to raise the cost of manufacturing and we are being forced by the political classes to divert productive resources into failed enterprises like General Motors and the zombie financial institutions on Wall Street.

Alas, Krugman does not stop there. No, he claims that what our economy “desperately” needs is—get this—more “easy credit.” That is right; the very thing that gave us massive malinvestments and brought the U.S. economy to near-ruin is what we “desperately” need. As I have written elsewhere, this is like claiming that the best way to deal with alcohol addiction is to imbibe even more.

For all the talk that the government’s policies of bailouts, printing money, and borrowing at record rates have “prevented” a second Great Depression, the truth is that all the government has done is to give the illusion of recovery while setting us up for an even worse Day of Reckoning. By keeping the zombie entities afloat, the government continues to force even more malinvestments at a time when liquidation is the order of the day.

The Keynesian propositions of printing money and borrowing might be popular to the political and intellectual “elites” of this country, but they are utterly destructive in the real world. Unfortunately, we are being fed Orwellian “truths” at a time when what we need to hear is the unadulterated truth.