Paul Krugman's Proof: Score-board! Score-board!



Here is how the Nobel-prize winning economist applies his famous intellect to fears of a possible bond-market bubble:

[H]ow do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there's a bubble in the bond market: investors aren't really concerned about economic weakness; they're just getting carried away. It's hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we're being told to ignore what those markets are actually saying because they're confused.

You see, then, why I find myself thinking in terms of strange and savage cults, demanding human sacrifices to appease unseen forces.

Step 1: Pretend that people who have made a long and principled argument against both hysterical government growth and the dangerous debt it requires said anything about obeying "the dictates of the financial markets."
Step 2: Pretend that, therefore, they are not to be believed because of their opportunistic hypocrisy, even though many were saying the same thing in 2009, and 2006, and on back.
Step 3: Evil or stupid, I don't know which! (Also: profit!)

Remember: If bond-bubble worriers are wrong (maybe!) but win the argument (unlikely), then government in the U.S. won't spend as much money. If Krugman is wrong (maybe!) but wins the argument (likely), this country is truly hosed.

As I said last month, this college newspaper-grade rhetorical style is itself a shining example of bubble mentality. But on the positive side, it's a good rule of thumb that whatever person or idea Paul Krugman tries banishing from Serious society is probably on the upswing.


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  1. Why dis Haig? Pretty low.

    1. Look up “we’ve got another problem now”

      1. I’m sorry “we’ve got a *bigger* problem now”

        1. Am I the only one who can’t stand Jello Biafra? I think he intentionally makes the meter in his lyrics as off beat and annoying as possible.

          1. He’s done some good stuff, but if he had died the day after he finished recording Fresh Fruit for Rotting Vegetables, the world would not have lost a thing.

            1. Those dumb punk kids will buy anything.

            2. I would have let them do Plastic Surgery Disasters to get “Moon Over Marin.”

              “Too Drunk To Fuck” and “Police Truck” weren’t on Fruits either.

              1. Off-topic, but Ive been invited to the Blues Festival in Frankfort this evening.


                1. The blues festival was in response to SF, I am sure he will have some comments about the concept of it in Frankfort.

                  1. Sorry robc, work’s been piling on. I try to avoid Frankfort as much as possible.

          2. I think the off-kilter, cartoonish vocals are what distinguished DK from a lot of other west coast punk bands. I can see why it would annoy others but I totally dig it. He certainly annoys me as a person (like many lefties he correctly identifies many problems but completely whiffs on the solutions) but Fresh Fruit is brilliant…

        2. Krugmania ?ber Alles?

        3. So WTF does a dead kennedy’s song about Reagan have to do with Krugman?

          Sorry if I seem dense here, but I just can’t seem to make the connections.

  2. He’s just… the worst.

  3. I preferred his fantastical bullshit about Greece and Ireland. What an asshole he is.

  4. As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind.

    Q: When hit by a car, what’s the last thing that passes through a cat’s mind?

    A: Its asshole.

  5. Hey, I’m a nobel prize winning economist, so I can’t be wrong, am I right, am I right?..right right right.

    1. That’s the same line of thinking that got Obama into the White House. Surely it can work with economics as well.

  6. 1. Spend and borrow like there’s no tomorrow.

    2. ?

    3. Bankruptcy!

  7. Same shit different day. When Austrians were sounding the alarm about the housing bubble, this clown was busy pointing and laughing.

    1. Actually, he was agitating for a housing bubble. Otherwise we might have had a lost quarter!!!!!!!!!!!!!!!

    2. Ya, he wasn’t laughing. He was screaming make a bubble.

    3. Same shit different day. When Austrians were sounding the alarm about the housing bubble, this clown was busy pointing and laughing.

      It’s hard to believe, but he’s now trying to claim with a straight face that EVERYONE, including him, totally saw the collapse of the housing bubble coming. He’s rapidly devolving into a self-parody.

      1. Done and done. Cat in the oven.

        1. Nice….thought it was cat in the furnace though!

          1. It’s cat in a box you fucking retards.

            1. Only if you are talking physics….Simpsons references on the other hand!

      2. Krugman has been a self-parody for at least a couple years now.

  8. The thing that really annoys me about Kruggers is that he acts like he’s the world’s biggest expert on business cycles, treasury policy etc, when he has no direct expertise in the areas.

    I mean, I’m a pretty handy chemical/bio engineer, I’m qualified in materials science too, I even know a bit about microfabrication and device design, but I sure as shit don’t go around lecturing people on CPU design …

    1. But, but, but he has a PhD from MIT? And a Nobel (or whatever it’s called) Prize!

      1. hmm|8.20.10 @ 10:44AM|#
        “…And a Nobel (or whatever it’s called) Prize!”
        It’s the rotating “Anti-Bush” prize. It went to Krugman, then Gore and most recently to Obama.
        Open betting on who gets it next.

        1. Jon Stewart?

          1. With a democrat in office, Stewart has become irrelevant.

        2. Na, the economics prize isn’t a Nobel. It’s got some godawful swedish name.

          But that was still funny.

          1. Don’t get it twisted:

            The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

            And it has not meant much since the 70’s:

            “Yet I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it… There is no reason why a man who has made a distinctive contribution to economic science should be omnicompetent on all problems of society – as the press tends to treat him till in the end he may himself be persuaded to believe.”

        3. Me.

    2. this is something a lot of people dont understand about economics and economists in general. Just like medicine, law, engineering, etc, there are many sub fields in eocnomics. You don’t ask a cardiologist what he thinks should be done about a brain tumor. So why are we holding up a trade economist as an expert on business cycle theory and finance?

      1. Actually, there is a larger point: If economics were genuinely a science, there would be no arguments about what the nature of the problem was and what policies to follow.

        Listening to modern economists is a bit like going to a medical clinic and having the doctors argue about the best way to treat your broken arm.

        1. More like arguing whether or not your arm is even broken, and if they have enough leeches to fix it.

          1. Ha Ha Ha!!!
            stimulating leeches!!!!

            No, No, No – austarity !!! two leaches are enough for a flip flopping are!

          2. +1 I am stealing that analogy.

          3. First we must assume a leech…

        2. to some point yes. But the areas of eocnomics that are more “science” like are the areas you never hear about in public discourse exactly because they agreed upon. There is wide spread agreenment for example of where a monopolistic firm will set its price level at.

          Business cycle theory on the other hand is not well understood and its also biased by politics so there is a lot of argument over it.

        3. Except one is a physical science and the other a social science (even if the mathematical masturbationfest that has become econ thinks it’s a physical science).

          1. ^this^

            Mainstream economists’ confusion over what kind of science they’re doing created a severely flawed adherence to improper methodology. Great methodology for Physics. Just… Really, really bad for social sciences.

            1. Economists have a deeply flawed understanding of the scientific process. They think it is all some parody of Logical Positivism. This has led Von Mises to reject all scientific thinking in economics, and Friedman to say that as long as it predicts well it doesn’t matter how you get there.

              Both are wrong. Economics NEEDS empiricism, but it still needs to be more than mere numbers.

        4. Actually, there is a larger point: If economics were genuinely a science, there would be no arguments about what the nature of the problem was and what policies to follow.

          That’s an outstanding point, sir! And if economists were truly scientists, then none of them would be advocating for more borrowed government “stimulus” money to be flushed down the toilet.

          When they do an experiment over and over again and it fails to produce the results they expect every single time, real scientists will eventually acknowledge that their theory was wrong. This is Einstein 101.

        5. Uh, scientists don’t claim to know everything about a field, and if they did, there would be no point to having scientists.

          For example, we geologists aren’t sure why there are continents.

          1. “For example, we geologists aren’t sure why there are continents.”

            What do you mean by the word “why”? (I’m asking sincerely.)

          2. Im not a geologist, but I can answer that: Because there are oceans in between.

          3. Since science is the process of discovering and quantifying information, all scientific knowledge goes through several stages of qualification, quantification and testing before it reaches the stage that people colloquial call “a science.” This means that not all, indeed that most, information produced by scientist at any one time is of uncertain predictive value.

            Therefore, not all the information in scientific fields e.g. geology, chemistry or physics, has actually been tested and confirmed by scientific method. Every scientific fields has vast areas of ignorance. That is why scientist keep working.

            Scientist themselves are very careful to quantify the predictive power of specific pieces of information. That often does not come out in the popular depictions of science.

            Economics is only the qualification stage i.e. they see that there are certain relationships between certain economic inputs. Economist can’t quantify i.e. measure those inputs and they cannot use that quantification to make testable predictions.

            It’s irresponsible and deceitful for any economist to claim that they understand (1) the actual state of the economy at any time and that (2) they can predict what outcome any given action on the part of public or private actors will have.

          4. Uh, scientists don’t claim to know everything about a field, and if they did, there would be no point to having scientists.

            True, but they do controlled experiments to check their theories, and there is a large body of underlying consensus; no scientist advocates phlogistin-based power souces or perpetual motion machines.

    3. I’m actually quite convinced he knows that he’s unqualified but he’s addicted to the attention that feeds his ego.

      1. …he’s addicted to the attention that feeds his ego.

        which distinguishes him from Paris Hilton and Thomas Freidman in no particular way I guess.

        1. Paris Hilton does look better at the end of a cock; there is that.

          1. I’ll have to take your word on that. I’m trying really hard not to form any comparative mental pictures.

            1. I’ve only seen the Hilton ones, I’m just assuming Krugman sucking a dick is a bit more repulsive than Krugman stroking his cat.

              Sometimes you just guess right.

  9. Paul Krugman, the Baghdad Bob of world finance. I keep expecting a gang of Hayekians to pass by his window with torches and pitchforks on their way to the NY Fed while he talks about how they are going to be vanquished.

  10. We’ve replaced Paul Krugman with an extinct humanoid. Let’s see if anyone notices

    1. That should be the Friday Funny.

    2. At the risk of bringing the thread to an abrupt halt I was thinking Ewok.

    3. Ad hominid “arguments” are uncivilized.

      Funny, though.

    4. Wait, that guy’s a robot monkey?

  11. Any economic argument made by Krugman can be stated more directly by my ex-wife…You’re so cheap….you never spend enough…why don’t you ever send me flowers (to stimulate the economy, of course?), buy me something…I want a new car, etc.

    At least though, she was able to voice these wants without subjecting me to the intellectual pretensions. She just wanted to spend the money

    1. And she puts out occaisionally.

      1. No not really.

        Hey, I said ex-wife!

      2. I can see you’ve never been married.

  12. “You’re just not hitting it hard enough!”

  13. Please, people, tow the lion. Its “Paulie Krugnuts”.

    1. lies.


      Fuckin bubbles. How do they work?

  14. Oh it can’t be all that bad. Surely Krugman doesn’t just rely on calling his opponents “austerians” and “high priests”, but actually specifies who he’s having this putative argument with. Or at the very least links to articles where these arguments are being made. What kind of empty-headed hack would expect readers to swallow such obvious strawmen?

    1. Excuse me, Hugh, are you on television with Chistiane? You are not part of the Round Table buddy!

    2. Ya I like that. He doesn’t want to actually say “Austrians” because that might accidently introduce a new person to some economic writing that makes sense. So he makes up a little insult/joke word. What a poopy head.

  15. You see, then, why I find myself thinking in terms of strange and savage cults, demanding human sacrifices to appease unseen forces.

    You look agitated, Professor. Here, lie down on this nice cool flat rock. Close your eyes, and think of ponies gamboling in a field of wildflowers, while I polish this obsidian blade pour you a class of lemonade. That’s right, just relax…

    1. Ah… much better.

  16. “Instead, we were told, governments had to turn all their attention to reducing budget deficits.”

    It appears to my non-nobel-prize mind that his argument is the economy is crap because we’re reducing the deficit rather than, whatever he wants.

    Seems like a fairly simple question…have we reduced the deficit, or is he just full of shit?

  17. He is truly an idiot.

    There is a bond bubble. One created by the collusion between the Treasury and the Fed, on the one hand, and the truly craptacular economy, on the other.

    After getting the shit kicked out of themselves in the markets, and noting the weakness of sovereign debt in Japan and Europe, people are looking for one last safe place to put their money, and they are picking treasuries. What else is there?

    A bubble is when capital piles into an asset class out of proportion to its “real” value. How is that not what is happening in Treasuries?

    Bubbles are by definition a misallocation, a (temporary) irrationality. Just because there is a bubble in the band market doesn’t mean that inflation isn’t or won’t be a problem.

    And I like the way he skips over the fact that he is guilty of exactly the same thing he accuses his opponents of. Substitute “housing market” for “bond market” and “2007” for “2010”, and there’s your Paulie Krugnuts, arguing that we should trust the ever-rising housing market, which couldn’t possibly be in a bubble, blah blah blah.

    1. BAN HIM! R C’s comment is longer than three inches!

      1. Why do you hate people longer than 3 inches?

        1. Jealousy

    2. Yes, everyone is just scared shitless that the other shoe is going to drop and buying bonds in response.

      But WHY are they scared the other shoe is going to drop?
      Because of the federal government’s insane levels of debt. Which Krugman advocates increasing. So according to Krugman’s rationality, the government should borrow more to stimulate more, so that investors will stop buying treasury bonds.

      The irrationality part is in investors responding to government borrowing by buying it’s bonds.

      The problem is that nobody knows where else to put their money. They are buying treasury bonds out of desperation.

  18. The Don Ho of economics.

  19. An investment bubble implies (to me) an appreciating asset; I don’t expect bond prices to rise very much.

    I think they will fall precipitously, at some point.

  20. Best part of that column:

    David Brooks is off today.

    Isn’t he off everyday?

  21. Ever try to read It Can’t Happen Here? Lewis must have been hitting the bottle full-time by that one. Too bad, as the premise and theme is more relevant now than ever.

    1. No, but I read Babbitt, and from there on out, I decided that I would never read Lewis’s actual writing. If something Lewis wrote seemed applicable, I would read someone else’s report on it.

      He had great insight, but was a terrible writer.

      1. I think his writing hit its peak with Main Street, which is not just entirely readable but actually enjoyable. Otherwise, meh.Elmer Gantry has its moments, but that’s mainly due to its spectacularly over the top nastiness, something that works better in small doses. But overall, yeah, he should’ve left the actual writing to, I don’t know, maybe Nathaniel West.

        1. “And when I’m old — and gray — and toothless — and bootless — I’ll gum it — till I go to heaven, and booze goes to Hell!”

          Gotta love Burt Lancaster.

          As for Babbitt, it’s one of the few times Guy Kibbee (sugar daddy in 42nd Street and Gold Diggers of 1933) got a starring role.

          Another Lewis work turned into a movie that you might want to get a copy of is Ann Vickers. I don’t think it’s been released to DVD, though.

          1. Lancaster could make almost anything watchable, but when you have Shirley Jones as a floozy you’re golden no matter what.

  22. I think there is a bubble in the bond market. Mostly because investors have no fucking idea where else to put their money.

    As long as the US continues it’s policy of borrowing money to fuel consumption, it’s Gold and bonds for everyone.

    1. I sure don’t know where to put my money. Believe it or not, I think the only safe investment is real estate. Holding a title to something is better than holding funny money or putting your faith in a company’s ability to navigate the Federal regulatory state. It’s a pretty weak argument to be sure, but it’s all I’ve got.

      1. You can fall back on the “They dont make more land” argument, but Dubai says otherewise.

        1. Didn’t that project go bankrupt?

          1. Yeah, I didnt say making new land was worth.

        2. Singapore continues to make new land. And they have been quite successful. There is a non-stop stream of dump trucks slowly importing the Malaysian land mass onto the Singapore island.

      2. It is most definitely once again a buyer’s market for real estate; I don’t see how it could collapse any further.

        But if it turns out that we’re in the early stages of another Great Depression, you might not be able to see any decent return on real estate for quite some time to come, so I would recommend being conservative with it and not stretching too thin.

        1. Nobody is going to see a decent return on real estate for some time.

          Post-bubble sectors of the economy tend to remain depressed for quite a while. Just look at the equities market in the last 10 years, since the dot-com bubble. It’s hardly budged.

          You might be able to buy real estate, but you are going to make any money house flipping or as rentals.
          The only reason to buy land is to develop it or live on it.

          1. Which honestly, Hazel – is the only really good reason to buy property to begin with.

      3. I’m putting mine into sports bets. Up 25% on the year.

        1. Awesome! Got a free Lead Pipe Lock of the Day you’re willing to throw my way?

      4. Though they aren’t making any more land they sure as hell can make it as diffucult as possible for you to make any money off of it.

  23. But the argument has become even stranger recently, as it has become clear that investors aren’t worried about deficits; they’re worried about stagnation and deflation.

    and then

    as Bill Gross of the giant bond fund Pimco put it earlier this week, we’re “approaching a cul-de-sac of stimulus,” which he warns “will slow to a snail’s pace, incapable of providing sufficient job growth going forward.”

    I see exactly what I’m looking for. And here’s a quote from some other guy who agrees with me, so that’s all you need to know.

    QED, you hicks.

    1. Investors ARE worried about deficits. They just don’t have any idea what else to do with their money.

  24. All references to Krugman should utilize the Pauly Krugnuts format. He’s earned the derision.

    1. The squirrels need to implement a fark-style filter so that the phrase “Paul Krugman” is automatically converted to “Pauly Krugnuts”.

      1. I think the squirrels are still reeling from the html attack of mid-week.

  25. They just don’t have any idea what else to do with their money.

    Exactly; the lifeboats are overloaded.

    If you *really* expect deflation, you can bury coffee cans of cash in the back yard and come out ahead; I don’t think very many people are doing that.

  26. Paris Hilton should have an economics column in the NYT.

    Why the hell not?

    1. Because Krugman would then release a sex tape?

    2. At least she’s related to someone who actually created wealth.

      Krugman creates nothing more than useless column inches, as far as I can tell.

  27. Man, you guys sure hate some Krugman. It’s like the flip side of Naomi Kleinites with Uncle Miltie…

    1. Oooh, moral equivalence!

      Tell me more!

    2. Why does Naomi Klein hate Milton Berle?

    3. I don’t believe we’re accusing him of being a secret fascist, just suggesting that he’s highly overrated in his chosen profession.

  28. I’m betting some of the hate has to do with the fact that Krugman’s very existence as a Nobel prize winning economist forces one to question whether “EKON 101” is as simple and sure as Henry Hazlitt’s One Lesson…Maybe it’s a highly nuanced, diverse field with many open questions and fewer settled truths than some would guess?

    Naw, probably he’s just a crazy shill. That’s so much easier and comforting! Now let’s hate on Nancy Pelosi some, eh?

    1. No, I think economics is very complicated. I just don’t believe in the existence of polymaths.

    2. It’s not just his Keynesian arguments, which as you point out, are at least debatable. It’s his smug, assholish, everyone else is a dishonest retard attitude that really turns me off.

      1. I agree.
        Honestly, he seldom acts like an actual adult.
        I make all sorts of profane and snide comments (in the comments section of a blog, but If I had his microphone, I would actually try to use it to influence people) but this man really behaves like a 12 year old know it all.

        1. The fact that his juvenile, dishonest, masturbatory fantasies pass for sophisticated scathing wit with the daily kos crowd tells me pretty much everything I need to know about both him and them.

    3. These days, I don’t hate the guy nearly as much as I pity him.

      Just about everyone on earth except for Obama has stopped listening to his advice and has tuned him out, and this appears to be slowly driving him insane. He might completely snap one of these days.

    4. [Should I be wondering why all left wing economist since Malthus and then Marx, Keynes, Lang and Galbraith have all sucked the big one?

      No, they would momentarily praise me for coming around, but eventually I would just be another one of them, and brr be ignored]

      Hey, everybody, Krugman may be pathetic but you know whose fault that is? Libertarians. We on the left sure don’t take him seriously

      1. [Should I be wondering why all left wing economist since Malthus and then Marx, Keynes, Lang and Galbraith have all sucked the big one?]

        Because there is a strong correlation between being unwise in matters of money/commerce and being left of center?

    5. @ MNG – SO go suck Krugnut’s dick if you want, but take it somewhere else. This is our “ten minutes of hate”!!!!

    6. Now, you’ve seen the man try to answer a question with a straight face, right? He’s just lucky there aren’t any journalists left who know what an argument looks like.

    7. Dude… A. He is a crazy shill, as has been evidenced countless times… B. Krugman’s “arguments” anymore are ridiculously easy to demolish… And C. Krugman’s work in trade-theory that won him the Nobel in the first place wasn’t all that political and often contradicts (on a micro level) what macroeconomic policies he advocates.

      Perhaps it’s time you actually read Hazlitt’s “One Lesson”.

  29. “Maybe it’s a highly nuanced, diverse field with many open questions and fewer settled truths than some would guess?”

    Surely the suggestion isn’t also that Paulie recognizes and represents this fact, right? Cause he always seems awfully certain to me

  30. “It’s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we’re being told to ignore what those markets are actually saying because they’re confused.”
    Actually, its Krugnut who constantly opines that everything must be Okey Dokey because interest rates are so low and the market is setting them.
    Well, don’t anyone tell him, but sometimes (often due to gubermint intervention), like during the tech bubble and the housing bubble, markets overvalue assets. And than they figure out they paid too much. And than they flee…


  32. It’s so weird to see Krugman arguing for a really strong form of the Efficient Market Hypothesis. He’s been doing it for some time, and I don’t know what to make of it.

  33. Krugman is without a doubt the single greatest danger to the well being of the United States.

  34. Instead of asking whether the flock to bonds (especially TIPS) gives a distorted picture of people’s expectations of inflation, he should be asking why investors would rather sit in bonds than make a higher return elsewhere…

    Like I said yesterday, the argument for fiscal austerity right now isn’t about fighting inflation; it’s about efficiency. It’s about growth.

    You don’t grow an economy–sustainably–by squandering the proceeds of growth on something like government. Liquidity trap avoidance isn’t about to change investor perception any either–in fact, it’s likely to make it worse!

    Regardless of whether the bond markets are giving us a distorted picture of inflation expectations, the question to ask is why people would rather take a 4% return on a 30 year treasury than buy stocks right now…

    …and what we can do to stop discouraging people from from investing their money elsewhere.

    In other words, isn’t Krugman’s argument taken on his own terms essentially an argument for deep cuts in marginal income tax rates and deep cuts in capital gains taxes?

    I’ve been making fun of Ron Paul bots for years for talking about inflation all the time when that hasn’t been a relevant concern–for years. If Krugman’s in the know on that–congratulations! Now, doesn’t that mean investors are pessimistic about sustainable economic growth?

    To what extent has the prospect of effectively raising taxes on the investor class contributed to that? To what extent has the prospect of Obamacare contributed to that? How will adding boatloads of more debt for stimulus or a jobs program (what Krugman seems to be calling for here) improve investor expectations about sustainable economic growth?

    I think Krugman’s right on this one–my problem is that he doesn’t seem to want to draw the obvious conclusions from what he’s seeing.

    He’s being willfully ignorant–again. If investors are wary of long term economic growth because they think taxes will be higher and deficits will be higher in the future, then the solution isn’t to raise taxes on the wealthy and go deeper into debt for a temporary jobs program!

    1. This.

      Investors are fleeing stocks and investing in bonds because they fear economic instability, not because they think the US government is such a secure place to put their money.

      So he should be asking “Why are investors afraid to invest in anything other than bonds?” Rather than assuming that the flight to bonds means investors aren’t concerned about budget deficits.

    2. I agree with Ken, halfway. Certainly, people are buying bonds because they don’t see much prospects for better returns elsewhere, etc.

      And, yeah, the argument for cutting government definitely includes the point about keeping government from snorking up all the available capital so that capital can go do something productive.

      However, both of those arguments are perfectly consistent with a third argument, namely, that without cutting government our current borrowing and debt are unsustainable. When the string finally runs out on unsustainable borrowing and debt, you will have a currency collapse and you will have brutal inflation.

      Krugman is being very selective in his sudden “trust the markets, they aren’t signalling inflation.” There are more markets out there than just the market for Treasuries. The classic market for inflation hedging is gold, which has put on one hell of a bull run since 2001.

      What does that market tell you about inflation, Paulie?

      1. Dean, you’ve got excess capacity everywhere. Labor and energy that can’t find a productive outlet. The real risk here is deflation. Gold is on a run because fools are buying it based on advertising and muddled (or no) economic thinking.

        Krugnuts is right that the stimulus was too small, but he doesn’t go far enough: to be truthful he has to say the his party, the Dems, cocked it up, by making it too small, by not putting it into the right projects, and by not including a huge permanent cut in marginal tax rates.

        See my full screed below, a few posts down.

        1. I’d need to dig up some old textbooks or something…it’s not like I can find this from google…

          But to anybody?

          Somebody explain to me why the biggest example of Krug’s buffoonery isn’t advocating what is essentially a liquidity trap avoidance maneuver…

          …at a time when, last I checked, some 94 banks have failed–this year alone! He’s talking about using strategies get around the marginal propensity to save?!

          It seems to me that some pretty important economic actors might think a propensity to save is a good thing; for example, Krug might consider talking to the people who were running those 94 failed banks…


          If we want to create more consumer discretionary income, one of the things we might consider is deep cuts in marginal tax rates… …and if people save some of that money rather than spend it, some of our local teetering banks might not think that’s necessarily bad news for the economy.

          No really.

  35. Scoreboard, Scoreboard!…..old_you_so

  36. There is only one way out of our current economic predicament:


    Ask yourself, what makes the economy grow? What causes people to create more value, take more risks, consume more, trade more, invent more? The answer is some linear combination of: greed, ambition, balls, and the knowledge that your sweat and risk taking will be rewarded in such a way that you will keep the fruits of your labors.

    Now ask yourself: are the policies of the current Administration and Congress conducive to growth?

    Why do “enterprise zones” work? What do they do there to increase the level of business and output? Do they cut, or raise, taxes? Do they increase, or ease, regulations on business? Does the government give away freebies in those zones, or does it claw them back? The US needs to be made into one huge enterprise zone – as it was in the 80s and much of the 90s.

    A massive gusher of stimulus needs to be applied, combining worthwhile government spending (civil and military infrastructure, as argued by Feldstein a while back) with huge, permanent cuts in marginal tax rates (for people who actually pay taxes).

    The danger of inflation in such a scenario will (must!) be countered by the deft machinations of the central bankers, who will withdraw money from the economy before an excess of it becomes inflationary (they do this by raising bond interest rates to draw cash from circulation into bonds).

    The progressives can’t bring themselves to do this, because it would set a precedent that the people get to keep the lion’s share of what they earn. And the conservatives can’t bring themselves to do this because they are falling into the austerity trap.

    So we are probably doomed.

    1. A massive gusher of stimulus needs to be applied, combining worthwhile government spending (civil and military infrastructure, as argued by Feldstein a while back) with huge, permanent cuts in marginal tax rates (for people who actually pay taxes).

      Absolutely not. Japan tried this idea virtually to the letter. And while they have relatively low unemployment, they now have a publicly held debt of over 200% of GDP, a severely devalued currency, and they have had essentially zero economic growth in the last 15-20 years. They now appear to be stuck in a deflationary trap from which they may not be able to escape.

      If we are foolish enough to follow the same crazy plan that they did, exactly what happened to them will happen to us as well, and we will deserve it.

      1. Mike, I haven’t studied the Japanese policy of the past 20 years, so I can’t argue with you about whether they followed this plan to the letter. (How can you say their currency is devalued? Compared with the US Dollar? I still can barely afford things made in Japan.)

        But I can tell you that if I dump a suitcase full of $100 bills in your backyard, with a little note that says “spend this – don’t try to deposit it in a bank or they’ll impound it,” you will soon be causing a small storm of increased production in your town as you spend your dubiously acquired lucre.

        The government (one with a fiat currency anyway) can essentially get away with doing the equivalent of this during a period where aggregate demand has collapsed. And if it knows what it’s doing, it can contract the money supply in time to avoid severe inflation. (A little inflation is preferable to misery and unemployment for millions).

      2. This doesn’t look like a devalued currency to me:

  37. Krugnut used to argue every six months or so that the economy was about to crater from around 2002-2007, and when it did finally hit a wall, largely due to subprime mortgage scams supported by the Demonrats since the 1970s & especially since Clinton, with the acquiescence of Repugs bought off with Chicago-style backroom deals, the silly sophomoric former Enron Advisor preened that he was right.

    As Matt notices, however, whomever he condemns is usually going to succeed and whomever he boosts is going to come a cropper…!

    Wonder what the cartoon-bubble perfesser is going to say about Nouriel Roubini’s double-barrel recession on the horizon…? Blame global warming?

  38. Man, you guys sure hate some Krugman. It’s like the flip side of Naomi Kleinites with Uncle Miltie…

    Yes, addressing and criticizing policies that Krugman actually supports and statements that he has actually made is exactly identical to Klein’s fictional “Milton Friedman was an adviser to Augusto Pinochet.”

  39. Pascal’s wager? Is that the best argument you can come up with?

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