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Cliff Notes Of Hedgeye's Take On A Paul Krugman Lecture: A Good Charlatan Who Still Doesn't Get It
By Hedgeye Risk Management, submitted by fmxconnect.com
Yesterday, I had the “pleasure” of attending a Paul Krugman lecture
in one of my old classrooms at Yale and came away with a very different
experience than the one I would have had as a wide-eyed undergraduate
immersed in the dogma that is Yale econ theory. Also, I was really taken
back by the fact that only Yale undergraduates were able to ask him
questions; the older, more-informed members of the audience (roughly 50%
of total attendees) were not allowed to partake in the discussion and
ask challenging questions. Below, I’ve posted my “lecture notes” for
your education/entertainment purposes:
My takeaways on Professor Krugman are below:
- Like
any good charlatan, Krugman does a great job of defecting attention
away from what others perceive as the real issues towards his Keynesian
musings. Of course, it didn’t help that he was surrounded by the
academic dogma that is his self-proclaimed “Yale-MIT axis” [of economic
leadership]. - He was very smug towards Fed critics and essentially laughed off the Sovereign Debt Dichotomy – suggesting that advanced economies could issue much more debt and stimulus than perceived by the markets.
Krugman’s key quotes and conclusions from the Q&A session:
- Austerity is depressing European economies
- He
wrote off the bond market’s views on the sovereign debt/deficits, using
the U.K. (1920’s-1950’s) and 1990’s Belgium and Italy as examples of
high debt/GDP ratios that didn’t matter to markets - Our
capitalist, free-market economy is a real disaster now and Europe’s
social safety nets mean that there is less “misery” there - The U.S. can pile on more debt and gov’t spending b/c they can issue debt at low yields
- He
uses the recent -0.55% TIPS auction as an example of the U.S.’s low
cost of borrowing (completely ignores the inflation expectations
embedded in a negative TIPS yield) - “The problem in the U.S.
is that we’ve run out of room for monetary policy and we don’t have
enough government spending to prop up demand long enough for the private
sector to get healthy” - The Federal stimulus was not big enough, rather $1.2 Trillion would have been a more appropriate sum
- 40% of the stimulus was just tax cuts that were mostly saved, not spent
- The
stimulus didn’t even have a net increase in total government (federal,
State, local) spending growth when you factor in the cuts made on the
State and local level - China sucks demand away from the rest of the world and their currency manipulation shaves 1% of global GDP
- China is largest example of currency manipulation in history
- Also one of the largest examples of protectionism in history and we need to punish China for the sake of “playing by the rules”
- China is doing its best to push global growth in the wrong direction
- Imports/exports are more about exchange rates than they are about saving/consumption
- Should the Fed take into account the global impact of QE?: “Yes… some.”
- “The U.S. can’t bear the world’s weight on its own”
- “Yes, QE tends to reduce the U.S. dollar’s exchange rate, but that is offset by the growth QE provides to the U.S. economy”
- “The
U.S. has to look out for itself regarding its decision to move forward
with QE” [I find his rationale here very interesting, given that he’s
publically lambasting China for acting it its own self-interest re:
yuan] - QE is designed to help housing, corporate borrowing, encourage consumer spending (via driving up asset values)
- The
U.S. should have more academics in policy-making roles and we would
have been better off over the last few years had more academics been in
key policy-making roles over the last decade
In short, we continue to stand counter to the academic dogma that is associated with Quantitative Guessing
being positive for the U.S. economy and the bullish hope that it will
end well. We have expressed this conviction by being short U.S. equities
(SPY) in our Virtual Portfolio. Further, we will continue to hold the U.S.’s economic and political leadership (or lack thereof) accountable each day.
Conclusion: In attending a Paul Krugman lecture yesterday, we came away with two main takeaways: 1) the Perceived Wisdoms of academic dogma run rampant throughout U.S. monetary policy; and 2) Keynesians really don’t get it.
Yours in Risk Management,
Darius Dale
Analyst
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What kind of car does Krugman drive?
Probably the same kind of jalopy that Nouriel Roubini drives.
Sitting in an outdoor parking lot all day long, with the old paint getting burned off the hood and cheap window tinting bubbling up on the back window.
OEM tires and hubcaps, no doubt.
LOL....
LOL! Like you can hold criminals accountable when they've got a gun to your head!
Yeah, those elections sure taught those banksters a lesson! I can see them shaking now... oh wait, they're just shaking the dew off of their pissers.
A has-been of his time; a poster child for idiocy; one of the 4 Horsemen of the New Apocolypse (together with Ben, Larry, and Barney).
And please don't forget Alan.
http://www.msnbc.msn.com/id/40101713/ns/world_news-asiapacific/
“The U.S. can’t bear the world’s weight on its own”
At least the talking points daily fax is still going out.
The U.S. should have more academics in policy-making roles and we would have been better off over the last few years had more academics been in key policy-making roles over the last decade.
That made me laugh out loud.
Ah Krugman, the jokes that never ends. How can people listen to him. He's not only wrong but also evil. He's smart enough to couch his suggestion ins such a way that they can never be met so he can claim never wrong.
Krugman = Ellsworth Toohey
+10000
Krugman = Salon Monkey
The message I get is that the Keynesians are warmongering. Target China...
The problem? This Ivy League educated, Nobel Prize winning boob doesn't understand simple concepts. Wealth is the sum of unconsumed human productivity. It is that simple and the key word is productivity. You do not create a "wealth effect" by printing money. Money is a subdivision of wealth. More $ only subdivide it further. His goal is not more wealth it is redistribution of wealth. He and those who think like him live in a finite universe. They do not understand or appreciate human potential.
CSCO getting beaten after hours
An economist is someone who knows the price of everything and the value of nothing.
An economist is like an accountant, only less imaginative and more mendacious.
forget all the talk....we're going to have seniors eating cat food in cold houses this winter as their CDs pay nothing, their "safe investments" crater, and the SS they get buys less,
and less,
and less.......
there are sociopathic tendencies clearly apparent here.....
Seniors are being targeted for de facto genocide; health care rationing is icing on the cake.
+ Gazillion
Kill the old useless eaters to help tame spending. The Germans tried these sorts of things during the 30's and 40's. Grand fucking idea.
"The U.S. should have more academics in policy-making roles and we would have been better off..."
What a moron; that's all we've had besides social workers and community organizers. WTF, its amazing the stupidity this man displays. Another example of the Nobel Prize conferring respectability.
Our local supermarket now has a refrigerated section in the cat food aisle. Granted I don't want to eat it, but it certainly looks better than the fair I end up eating most nights.
If I were a student, using my parents hard earned money to be taught by one of these idiots who has no sense of the real world, I would riot too.
Seeing as we spend $700 billion on bailing out the banks, and nearly $800 billion on the official Stimulus, it seems even $1.2 trillion is not enough. Try again Kruggy.
The banking bailout seems to be mysteriously missing whenever I try to debate the left. One thing I did find out that for all the high intellect, the over financial IQ seems somewhere south of retarded . Please no class action suits by the mentally challenged. I said retarded. As the fantasize about 90% marginal rates and are flabbergasted that the wealthy would argue over 3%, I asked the people I was debating "Why would anyone want to pay taxes knowing it's going straight to the bankers?"
I cannot believe that there has not been a single arrest. Whenever I mention this , it gets harder to hide behind the "he has so much to deal with" meme that they have used in the past. Each political party enthusiasts or fan-boys, find it's just a-ok when there guy is fucking the constitution. It 's just when the other guy does it that I start to hear about constitutional rights. Nothing changes until we empty congress out. Nothing changes until we empty the executive branch out. The judicial branch seems to be trying to do their jobs. But without law enforcement there is very little they can do. I wonder everyday about citizen's arrests. If we perp walked a banker into a court for an arraignment hearing, how would the judicial branch react?
I have concluded that even emptying congress, and the exec branch will accomplish little more than assigning a new group of spineless, unproductive leeches to the "top" of this stinking social heap. Nature's resistance to vaccums, and what the heck else are unproductive people going to do?
Regardless of the bailouts vs. entitlements, the onus is still on people of principle to say, "NO. I refuse to make others pay for my indulgences, and/or my failures." Two wrongs will never...ever make it right.
When a restaurant is found to be serving poisonous food, it is not the chef that is replaced, the restaurant is closed.
Muni ETFs absolutely ripped to shreds today
BYM
EIM
EIV
NUV
A reasonable newseditor, or his shrink, should
restrict the daily or multi-daily
doses of "Sheer Madness with
mono-maniac tendencies', which
makes Joe Stiglitz like a sheep
in comparison, to weekly analysis,
so Mr Krugman would have time
to sit down and think before starting
to rewrite which will likely amount
to a Salman Rushdie-look-alike
'thread book' since he is no more
capable either of writing one himself.
Paul Krugman will have the destiny
of Woody Allen: momified in Europe
His latest contribution to the
hall of Shame should be recalled:
QE2 should be USD 10 trillion.
I don't think it is so much about the
car, has more to do with the absence of
a calculator
"Conclusion: In attending a Paul Krugman lecture yesterday, we came away with two main takeaways: 1) the Perceived Wisdoms of academic dogma run rampant throughout U.S. monetary policy; and 2) Keynesians really don’t get it."
I am starting to think Keynesianism equals job security for economists and they probably know better.
Well, look at it this way. What other job is there that officially tells politicians to spend money and lots of it?
That's why I've of the opinion that not only do the Keynesians "get it", but they'll be around as long as there are politicians.
Bing-fucking-go!
An Austrian, monetarist or economist of other such school would be suggesting less spending, lower taxes and a shrunken government. Remember, its the politicians who choose which school of economic thought with witch to surround themselves in order to bolster their own agenda and belief sets.
>>>China is largest example of currency manipulation in history<<<
Doesn't that imply the US dollar is the biggest bubble in history?
Yes.
Keyenes was a far smarter guy than Neo-K's will have you believe.
He would wince at Krugmans assertions.
Like the Tea party his memory and theory has been hijacked,
by fundamentalists.
That said we all know that we should take the pain of the binge we created..Krugman
is a no pain guy like Al G.. only they postpone a little for a bigger car accident..
Some times when racing to a wall the breaks are the best option not continually accelerating..
Off topic: I am a huge fan of Hedgeye. Hard working souls who tell the truth as far as they can figure it.
The thing is - I don't think he was always a douche. I remember reading him a decade ago and he was the most reasonable monkey in the cage.
Started looking for some back up material but found this instead:
http://www.youtube.com/watch?v=AK3-HAdUJx0
As usual, zero analysis why he is supposed to be wrong. ZeroHedge continues to be a place of zero argument, zero evidence. Basically it's a religious site. How different is Krugman's blog, where he continues to wipe the floor with your "arguments" and "facts"
This article was discussed here at ZH:
http://www.americanthinker.com/2010/08/paul_krugman_gives_up_1.html
I hope you are being sarcastic. Otherwise, it is you who will be wiping arses soon, for Krugman is not good enough for that, nevermind floors.
Ah, an ad hominem attack. I see you have learned much from Paul.
Since we are nothing more than mindless zealots here, perhaps you could a spare a few bucks, for charity, to encourage Paul to join a debate. It's quite easy to "wipe the floor" with your opponents when you are speaking in a monolgue. I would like to see how well he fares in a true debate.
http://www.thepoint.com/campaigns/campaign-0-1240
“The problem in the U.S. is that we’ve run out of room for monetary policy and we don’t have enough government spending to prop up demand long enough for the private sector to get healthy”
Krugman has always been, first and foremost, a fascist.
He is not an imbecile. he is a fraud doing the bidding of the elite
I have always postulated that his motivation is to knowingly champion policies to destroy the U.S. economic system. Unfortunately, it can never be proven. We need to continue to debunk his toxic neo-Keynesian drivel.
What is interesting to me is the basic arguments of what government ought to do are never addressed. One of the reasons I prefer the Austrian school of economics is not simply because I think they are right, but because it dovetails with the ideas implied in the U.S. Constitution. I challenge anyone to find in the Constitution enumerated duties of the Federal government to enact social justice (income redistribution), establish national retirement plans, ensure universal health treatment, establish preferred treatment for favored industries (agriculture, housing, etc.), and in essence run the economy. I cannot remember but it seemed that our government was instituted to protect our rights as we pursue life, liberty and happiness.
To put it simply, it is up to us in an economy to negotiate the terms of private interations from the price of labor to the real value of any good. All are forms of contract. Where the modern political conservative and liberal err in my mind is that both agree government ought to run an economy which is to say that it can. I submit that first a government, any government cannot run an economy and second that it ought not to do so. Krugman like any keynsian or central planner lives by the conceit that they can control the commanding heights or levers of incredibly complex economic systems which consists of tens of billions of decisions every day in every single part of the globe.
Ben Bernanke's monetary policies reinforced by Krugman et al's economic theories are all THEORETICAL exercises wherein the final result cannot be calculated. We are all forced against our will to be part of these grand social experiments.
What I like about libertarian political philosophy paired with Austrian economics is that you let all people, hence an economy go withersoever it will. People (who are free) will preferentially trade real money (not reserve notes), establish systems and learn from the failure (and successes) of others. In essence, they will innovate and adapt every hour of every day. No one is forced to be part of anyone else's social-economic experiment. This prevents complete system failure (like hyperinflation) while improving the lot of mankind.
Very nicely written. I also find it particularly amazing, that even as Bernanke and co. basically admitting they are experimenting at this point, no one in the wider media is turning around and asking what seems like an obvious question - what the fuck are you doing running experiments on the largest economy in the world?
Exactly right, SpeakerFTD! When did we surrender the right to make our own decisions and use our own judgements? We never did. It was assumed by our government. What disturbs me is how rarely these things are challenged in the halls of Congress or even publicly on TV.
Here's the booked to this under the Contributors' section of ZH. These two pieces should be featured side by side! Not how the author, Econophile agrees almost point by point with my little post.
http://www.zerohedge.com/article/praise-theory#comment-718522
Where is that hookah?
Must have left it at the Faculty Lounge in the ECON Dept. at Yale, or was it Harvard?
Too late now. Where were the economic intellectuals bashers when the stew was being cooked?
Thank you for this link. It was fascinating learning how everyone on Krugman's blog was right when they disagreed with him.
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