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Guest Post: Why Paul Krugman Is An Imbecile—or a Fraud
Submitted by the inimitable Gonzalo Lira
There’s a saying in Spanish: Por la boca muere el pez. “The fish dies by the mouth”.
Nobel economics laureate Paul Krugman has a recent op-ed piece in the New York Times which goes an awful long way to showing that he is a complete and utter imbecile—or the worst sort of cheap huckster imaginable.
It is one or the other—there are no other alternatives. This wasn’t a casual blog where Krugman “misspoke”—this was a full-on editorial in the Sunday edition of the Times on Labor Day weekend. So what Krugman said was thought out, and dead serious—and so foolish or ridiculous (depending on your point of view) that he can no longer be taken seriously:
In the piece, titled “1938 in 2010”, Krugman argues that 1938 was similar to 2010, in that the Federal governments’ stimulus program—then implemented by FDR—was insufficient to pull the country out of the Great Depression. Krugman argues that this is similar to what has happened to the Obama administration—Krugman has forever been arguing that the Obama stimulus package was “not enough”.
This in itself is not objectionable—in fact, I think policy disagreements are a good thing. They lead to ultimately better solutions, if all sides of a policy debate allow that opposing sides might have very valid points. Krugman’s very valid point is, unemployment in the current Global Depression is severe—therefore, the quick-fix of fiscal stimulus might be best, in order to assuage people’s suffering.
But then, in order to make his point that more stimulus is needed, Krugman crosses the line:
In Krugman’s analysis, 1938 was different from 2010: “Luckily” (most definitely in quotation marks), World War II came to Europe in 1939, and to the U.S. in very late 1941. In Krugman’s analysis, the War saved the U.S. economy. It allowed the Federal government to go into monstrous fiscal debt, in order to fight the war with Nazi Germany and Imperial Japan. This isn’t novel or controversial.
But then, Krugman misleadingly claims the U.S. government “borrowed an amount equal to roughly twice the value of GDP in 1940—the equivalent of roughly $30 trillion today.”
It’s a sneaky asseveration, partly because it sounds plausible—everyone knows the Federal government went into huge debt to finance WWII—and partly because it’s technically accurate: United States’ GDP in 1940—before Pearl Harbor—was $101 billion, and by the end of the war, 1945, the Federal government had borrowed $250 billion. Apply simple math: That’s more than twice 1940’s GDP—closer to 250% of the gross domestic product. Of 1940.
But Krugman is fudging the facts—1945 GDP was $223 billion. So the fiscal debt by 1945 was not “twice the GDP”—it was 116% of GDP. Comparing 1945 debt levels to 1940 GDP numbers isn’t apples to oranges—it’s flat-out misleading.
If you’re going to make a comparison, current debt-to-GDP ratio is much more accurate, in seeing how far the U.S. Federal government went into debt during that period. If we look at the period of the Great Depression and World War II, this is what we find:
(Gross Public Debt, 1930–1950. The blue band is Federal government debt, the red band is state debt, the green band is local debt. Source is here, for both charts and raw data.)
As can be readily seen, the U.S. Federal government debt never surpassed 45% even at the height of the Great Depression. When it peaked in 1946, gross public debt never crossed 130%—and that was after fighting the largest war in human history.
The situation in the U.S. today is nowhere near the same—except in terms of fiscal debt:
(Gross Public Debt, 1970–2010. Color scheme is same as above. Source is here, for both charts and raw data.)
Federal government debt is just shy of 100% of GDP. If we include state and local debt, gross fiscal debt is tiptoeing to 120% of GDP—and now Paul Krugman is saying that even more debt should be piled on.
According to Krugman: It worked in 1945, so it must be good now!
Krugman—obviously—used misleading data points in order to sell his policy prescription. He denies the incredibly different situation the United States finds itself in now, with where it was in 1938. Furthermore, he misleadingly fudges data, mixing 1940 and 1945 data, in order to prove his point.
I will not fall for the trap of inferring that Krugman is arguing in favor of total world war, in order to save the U.S. economy—I think some commentators who are making that inference are driven by mean-spiritedness towards Mr. Krugman.
But I will state—categorically—that Krugman’s misleading use of data to prove his point is something a sophomore eccy student would pull: Not someone who expects to be taken seriously.
If that were his only sin in the piece, then it might be excusable. But then, Krugman makes a truly despicable statement: “Deficit spending created an economic boom [in the post-War years]—and the boom laid the foundation for long-run prosperity.”
Krugman is an imbecile—or he is deliberately distorting history in order to sell his spend!-spend!-spend! bromide like a cheap salesman goosing a distracted customer.
As everyone with even a passing knowledge of post-War history knows, literally the rest of the world was a heap of rubble in 1945—only the United States was untouched by bombs and mortar shells.
The prosperity the United States experienced in the two decades after World War II had nothing to do with deficit spending, and everything to do with the fact that it was the only industrialized nation still standing after a total world war—so the rest of the world was forced to buy from the U.S. because there was no one else left to buy from.
Deficits had nothing to do with it.
Krugman is too smart not to know this—I cannot really believe that he would be ignorant of this basic post-War history.
Therefore, it’s obvious to me that Paul Krugman will say literally anything in order to support his prescription of increased Federal government spending. Not even facts and brute history matter to the man. In a very real sense, Krugman is now Glenn Beck, only with a doctorate in economics, and a hysterical fear and hatred of austerity, rather than terrorists.
I used to take Krugman seriously—often I disagreed with him, but at least I thought he was honestly arriving at his conclusions. But after this piece, I find myself dismissing him with contempt: In his urge to sell his policy prescription, he has sold out his integrity. There is literally no lie or falsehood he will not stoop to, in order to “win” the argument.
Like the fish of the Spanish aphorism, Krugman has killed himself by his mouth.
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30 Trillion $!!!!!!!
Get ready for trillionaires, boys!!!
Warren buffet is chuckling!
Great news for my dotcom investment; it can reach 25000 soon
Dow at 8 million by 2012 instaed of 2099
Sorry ZH but there has to be a delete option for replies
Madz
I am once again looking at your screen name and asking you how do you know Col Cooper?
also; "en boca cerrada, no entran moscas". I don't know "why" he's an imbecile; but he definetely is.
Boy, you did real good until you mentioned Glenn Beck.
Now you dragged old time religion into the economic politics.
Whether or not Glenn is a decent fellow, what does he have to do with foolish Keynesian/Helicopter Ben Wreckanomics/Buying Votes?
Agreed. At his best, Glenn Beck is willing to be the circus clown who exposes the emperor's lack of clothes.
At worst, he falls into the paranoid-but-ultimately-right category.
Krugman, on the other hand, envisions himself one of the Anointed Ones, more equal than us unwashed peons. He's a control freak revisionist authoritarian.
Here come the ZeroHedge censorship. It appears ZH has joined the rest of America "free media" propaganda club.
How else one get commercial payments?
It is a very sad development but quite expectable..
LOL who is arguing this? anyone
I'm not touching this with a 10 foot pole. It highlights the creation of the reserve currency nation. What it doesn't highlight is what the bankers did during the 40's and 50's to keep industry from being self fueled and drag it back into debt to get it where it is today. No commercial paper. Not a damn thing happens. Period.
krugman is a walking fucktard.....the man is evil....and ww2 did *not* bring us out of the depression...
Krugman: http://www.briancuban.com/wp-content/uploads/2008/07/traitor.jpg
Truman cut taxes
and dropped the bomb, just another joo tool.
fdr had the scoop, can you say inside job?
http://whatreallyhappened.com/WRHARTICLES/pearl/www.geocities.com/Pentag...
He's enormously deluded, and seems to live in his own private universe. It's very disturbing to see him ranting in the pages of the New York Times; which was at one time, within memory, a responsible newspaper representing a responsible nation.
Is Krugman jewish? I ask because it seems like every "pundit" on CNBC is, as well as the entire Fed.
Yes, he is a Jew and he lives with his mama.
Most important, he thinks he a "chosen" one. After all, Karl Marx, Engels, Lenin, Trotsky, and other socialist/communist economists were frauds and gangsters.
But in a long run after endless suffering, the socialist fraud came to the end in both Russia and China. Presently, America is not world intellectual leader any more. It is a retard.
This is Paul Krugman.
Sales Tax
Hotel Tax
School Tax
Liquor Tax
Luxury Tax
Excise Taxes
Property Tax
Cigarette Tax
Medicare Tax
Inventory Tax
Car Rental Tax
Real Estate Tax
Well Permit Tax
Fuel Permit Tax
Inheritance Tax
Road Usage Tax
CDL license Tax
Dog License Tax
State Income Tax
Food License Tax
Vehicle Sales Tax
Gross Receipts Tax
Social Security Tax
Service Charge Tax
Fishing License Tax
Federal Income Tax
Building Permit Tax
IRS Interest Charges
Hunting License Tax
Marriage License Tax
Corporate Income Tax
Personal Property Tax
Accounts Receivable Tax
Recreational Vehicle Tax
Workers Compensation Tax
Watercraft Registration Tax
Telephone Usage Charge Tax
Telephone Federal Excise Tax
Telephone State and Local Tax
IRS Penalties (tax on top of tax)
State Unemployment Tax (SUTA)
Federal Unemployment Tax (FUTA)
Telephone Minimum Usage Surcharge Tax
Telephone Federal Universal Service FeeTax
Gasoline Tax (currently 44.75 cents per gallon)
Utility Taxes Vehicle License Registration Tax
Telephone Recurring and Nonrecurring Charges Tax
Is it just me, or does that tower of taxation look a lot like one big dick?
GL
More like a dildo. There is no head on that dick...
I think some art oriented dude or gal can rearrange it. I see a big dick with ears.
Gutter talk. We're much more sophisticated and serious here. We need content along with the obvious....
Also, major props on your past and present submissions. Great reads.
it's just you
It's you....
Thank God, it's just you.
sgt_doom (the heterosexual guy)
And Gonzalo, to put you out of your misery, here's the annual contributions to GDP growth from 1937 to 1950.
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=2&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1937&LastYear=1950&3Place=N&Update=Update&JavaBox=no
The timing of the recovery shows that government spending was the dominant effect (although the consumer and investment got things going in 1939 and 1940). Your theory of an increase in exports comes in a distant 4th (a joke really) only having an effect in 1946.
Sorry, the facts are so inconvenient for your theory. Having access to a keyboard doesn't substitute for using your brain and looking at the data.
Tyler, why do you post such crap...somebody shooting off their mouth without any data to back it up. ZH is at its best when it relies on data, such as your analysis of Bloomberg screen grabs.
Gonzalo calls Krugman an imbecile for his sloppy calculating of percentages. The data show that Krugman's conclusion is approximately correct, and that the conclusion of Gonzalo's analysis is a total joke; the data don't even come close to supporting Gonzo's conclusion. Who is more imbecilic? Gonzalo, it was tough but you topped even Krugman.
Why do you keep posting the same comment multiple times???? Saying it twice does make it right......
Where are you getting the word "export" from this article to use as stuffing for this strawman you're beating? The article says nothing about exports: the author simply notes that the "rest of the world was forced to buy from the US." Perhaps I'm the one who's overthinking, but the first product that comes to my mind as a something that the rest of the world was forced--literally, through Bretton Woods--to buy from the US was the US dollar. Surely, you do not dispute this: the link you provide only reiterates it, as it was that very buying, by domestic and foriegn entities, of US debt (read: dollars) that allowed the US to recover.
I think the purpose of the article was to demonstrate the deceptiveness of Mr Krugman's statement regarding WWII government borrowing. And I think the ZH poster makes an excellent point--because he's right. It's quite simple: the $250 Billion borrowed by 1945 was not borrowed in entirityin 1940. So Mr Krugman's statement is either an intentionally dishonest analogy or an incorrect interpretation of the facts. Furthermore, the money borrowed between 1940 and 1945 went almost exclusively into the US war machine, which was then, as opposed to Boeing-in-China now, actually a domestic industry, thus rendering the money back into GDP, and hence the huge increases in GDP during later war years.
You are hastily calling the author of this post "imbecilic," but you really ought to re-read the post and consider what he's actually stating instead of continuing with this "exports" strawman you are intent on destroying. Either way, it doesn't much matter in my opinion what Mr Krugman says, because the US government is no longer in the "1940 situation" any more. In fact, the only time the US government was in the "1940 situation" was in 1940. In 1940, we were not starting with a nearly 100% debt-GDP ratio, and therefore the US could actually rally dollar confidence and funding. This is evident by the fact that it actually got done. There is really no comparison to today: in 2010, even US citizens don't like USD, and we sure as hell aren't going to buy Krugman bonds like we bought war bonds during the 40's. Again, there is no comparison. Let Mr Krugman and the Fed hit the bond market with $30 Trillion, and see who buys it. That will tell them what year it is.
During WWII, the US was on complete rationing. The "stimulus" was for wartime production - NOT CONSUMPTION. So your saying that during the war it was government spending on the war effort that dominated the US domestic economy -who wudda thunk?
That is hardly inconsistent with this article. It is not surpising that exports didn't kick-in until 1946, considering the war ended in late 1945 against Japan. It took a whileto rebuild the global transporation system needed for global export.
You clearly do not have a clue, and have no hope to understand the Fed data.
Exactly, it is to be expected that the years 1946 - 1950 did not yet show large export growth. However, it is a fact that the in ensuing 15 -20 years, the USA was the prime manufacturer of every value product in the world. This won't happen today with huge stimulus.
Duck is like Krugman - highlighting only stats that work for his argument.
Looks like the tower of Babel, what the USA has become by wanting to reach the heavens yet it is going to hell! Run, run for your lives........
Great analogy...
The sad fact is this ongoing process has been hidden for so long. Paul is a schmo along with all the other retards of confiscation. There is a special place in Hell for people who deceive...
What about these?
Thumb Tax
Brass Tax
Horse Tax
An imbecile.
/thread
......or maybe PK is a brilliant "speculator", Cheeky. John Maynard Keynes made a small fortune in the currency markets front running his own bullshit. The books he wrote didn't pay shit.
Cheeeky and Rainman.........having to swim deeper to find Cheeky and Rainman.
btw Cheeky.......were you up in Finnmark fylfijhing salmon near Staburselv or just having a nice time fuking arnnd along the brder?...........i like the nice stories from the past.
Rainman........?
Good to see you around a bit, Sir Cheeky.
/Lothar :)
Why can't he be both?
He is both.
Max Keiser called him a salon monkey which I thought was fitting.
The one on the right junked you.
http://blog.burrard-lucas.com/wp-content/uploads/rwanda/large/baby_silve...
Krugman along with Pimpco suggested a housing bubble was needed to get out of the 2001 recession...you would think they would learn.
Pimpco? Are they the "New Normal" Guys?
exactly
The new normal is misleading concept. I think "The Old abnormal" is a better description.
Cheeky:
Where have you been. I've missed you. Article on gold?
DOW/S&P500/FTSE/EURO short signal continues :
http://stockmarket618.wordpress.com
22 junks on a short at 10,410!!!..........step up and tell why for the junks....
I'll tell ya why: 1. Off topic 2. Posts at every ZH article 3. Never adds comments 4. Changed avatar from the firey-eyed clown which I loved.
Jerry! Jerry! Jerry!
articles like this make me want to give Tyler a big wet kiss with lots of tongue and then some every day.
THANK YOU. KRUGMAN IS A TOOL!!!!!!!!!!!!
I'm gonna have nightmares. Tyler will need psychotherapy...
Yes please do have nightmares, and make sure you follow through with the one when you jump off the ledge from the top of a skyscraper.
He and stiglitz should rent a sukkah for the week.
http://www.sukkahworld.com/
10+andhappynewyear!!BadkeyboardappleisanotherFT.afteroneyearmywife'skeyboardstiffs.neverhappenedeverwithmypc!
I've finally fingered it out.
This poor #uck only has 9 fingers. Go back up and look at the picture. This is the reason he can't count to 10 and shows not understanding of math. As a child, he must have been sent to a special school where math was not a required subject.
If I could ask this ghoul of wisdom one question (without expletives), this is what it would be: "How are we going to balance the budget without having a default of the USD?" I would like an answer addressing Who (forget Obama), WHAT will be done? WHEN will it be done by?
On second thought, I apologize that I had such bad thoughts about Mr. Krugman, Neo-Keynesian economists, mercantilism, crony capitalism, the military-industrial-financial-health care-MSM-Congressional complex, Federal Reserve, Department of Treasure, bloated civil service roles with their attendant outrageous pay, benefits and retirement schemes, Anglo-American memes such as global warming, world government, flu vaccination and the like and think it best to just spend my time from now concentrating on things of a noble, altruistic nature for the betterment of mankind, like surfing UFO related sites, blissfully, nay gratefully enjoying the sponsored bread and circuses from the potentates. Good bye cruel world.
Paul is hooded up with da Boyz.
history hasn't been an obstacle for these folks yet, why now?
Well, they control the institutions where "history" is "taught". So sure, there's no reason for them to not press on at flank speed.
a mighty fine public scorning that was
Krugman Krugman Krugman
You mean Krugerand, Krugerand, Krugerand...?
There are at least two other industrialized nations that survived WW2 without big trouble: Sweden and Switzerland. How did they do?
Moreover, after 1945 the US had plenty of cheap oil available. That is an important difference to today.
Other commodity prices look more like going up then down too.
http://stockcharts.com/h-sc/ui?c=$CCI,uu[h,a]waclyyay[pb40!f][vc60][iue6,12,9!lj[$spx]]
The article's author or Krugman both fail to mention that one driver for the postwar economy was a pent up demand for anything. The majority of people in the US were destitute at the end of WW II.
>The article's author or Krugman both fail to mention that one driver for the postwar economy was a pent up demand for anything. The majority of people in the US were destitute at the end of WW II.
Please explain what it means for demand to "drive" the economy.
This Kookman guy is dangerous! What a disgrace to mankind.
A $30 trillion stimulus?
I think it's a great idea. Uncle Ben writes a $100,000 cheque to each and every American.
I think I'm going to finally get myself a brand new Porsche 911 convertible.
Oh wait, doesn't work. The new price tag for that car will be $100,000,000,000,000,000
Never let the facts get in the way of your marketing material.
He is both an imbecile AND a FRAUD!
Why does Krugman have any credibility anyway?
The man is a fool.
The NYTimes deems it so
Ivory white towers generating more educated idiots.
anyone seen his birth-certificate? just kidding
Holy crap. People are junking humor. What's with this rampant junking?
Maybe Krugman could apply for Finance Minister in Zimbabwe. Now there's a Keynesian/printing success story. What a broken record.
The broken record is to save PK's reputation. If there is a huge additional stimulus he can say he told us so (wasn't big enough). If there is are more huge stimuli he can say he told us so (didn't stimulate enough or timing was off). Either way he looks good. At this point he is just covering his own ass. Either way this economy is going down. In the aftermath he'll write a posthumous (failed economy) book saying why the economy failed because his suggestions were not followed. Looking for another Nobel.
Good article, as if anyone on ZH needed to be convinced Krugman is an imbecile. But I will definitely bookmark this in order to combat any Krugman readers I may accidently come across.
You say that the U.S. industry had no competition in the two decades after the war and it just isn't true. West German industry boomed in the 1950s and by 1960 its output was far beyond anything Nazi Germany had ever dreamt of. This is a fact; it can not be dissputed.
True, but every other European country was either being crushed by communism or watching as their former overseas empires collapsed into rebellion. The Chinese were under Mao, the Russians under the Soviet system, the Spanish under Franco, the Arabs and Indians were still in a different century, Africa was engulfed in coups and rebellions, and most of Central and South America was just a CIA playground. You either bought American or went without!
Wow, a mere 15 years later, huh?
What are you talking about ...
..."The much larger reparations from occupied Germany to Russia were to be paid not by goods or money but by the transfer of capital goods, such as dismantled manufacturing plants. A separate Reparations to the western victors consisted mainly of free coal deliveries as well as of machinery and dismantled factories, of which the majority went to France, with some going to Britain."...
One of the finest lines I've read on ZH in a long, long time.
Thank you, Mr. Pynchon!
GL
Krugman and the NY Times are the house organ for the New World Order/banksters/Federal reserve. I can't decide who I hate more, him or that wanna be ass clown Bob Herbert
As everyone with even a passing knowledge of post-War history knows, literally the rest of the world was a heap of rubble in 1945—only the United States was untouched by bombs and mortar shells.
The prosperity the United States experienced in the two decades after World War II had nothing to do with deficit spending, and everything to do with the fact that it was the only industrialized nation still standing after a total world war—so the rest of the world was forced to buy from the U.S. because there was no one else left to buy from.
The only problem with your theory is that U.S. exports declined immediately after WWII. Europe didn't have the income to import. Check the data.
But other than your facts being wrong, good try.
How about the Marshall Plan?
Please provide link to data. Thanks in advance.
I got the data from National Bureau of Economic Research.
Monthly export data 1867-1968
http://www.nber.org/databases/macrohistory/rectdata/07/m07023.dat
Explanation of the data sources
http://www.nber.org/databases/macrohistory/data/07/m07023.db
Links to data "US total exports" and other data
http://www.nber.org/databases/macrohistory/contents/chapter07.html
Data in $millions, adding 12 months for each year
U.S. export in $billions
1943 13.0
1944 14.3
1945 9.8
1946 9.7
1947 14.4
1948 12.4
1949 12.1
1950 10.0
I don't see a big rise after the war.
The only problem with your theory is that U.S. exports declined immediately after WWII. Europe didn't have the income to import. Check the data.
But other than your facts being wrong, good try.
Duck: Maybe YOU should try and get the facts before posting. US exports more than doubled immediately after the end of WW II. Here is the export data c/o of the BEA:
1944 - $23.2 billion
1945 - $32.5 billion
1946 - $70.3 billion
1947 - $80.1 billion
1948 - $63.1 billion
1949 - $62.5 billion
1950 - $54.7 billion
1951 - $67.1 billion
I'm not sure why there is a discrepancy between the NBER and BEA data. Yours are adjusted for inflation, but even the BEA table without adjusting for inflation has the same discrepancy.
I had never heard this argurment before; I always thought it was obvious that goverment spending during the war brought to U.S. out of recession so I was looking for the export data that the author asserts is the real reason.
However, with your data I also found the government spending data for the time period.
Year Exports Govt.
1939 33.3 238.6
1940 37.9 245.3
1941 38.8 407.7
1942 25.6 959.4
1943 21.6 1427.2
1944 23.2 1606.1
1945 32.5 1402.2
1946 70.3 482.1
1947 80.1 409.5
1948 63.1 439.4
1949 62.5 491.9
1950 54.7 492.4
Let's see...which had a bigger affect on U.S. demand. Oh, it's still obvious the goverment spending increase effect dwarfs the export increase effect.
I thought it was an interesting theory, but based on this, the common understanding that Krugman repeats is the most accurate, although exports (BEA data) had a small effect.
I see a number of flaws in your analysis, particularly your statement about the impact of government expenditures. The BEA data shows that government expenditures exceed the dollar amount of exports in every year from 1929-2009. Okay, so what. 2 is a larger number than 1.
The focus should be on the rate of change for the individual components of GDP. After 1945 government expenditures DECLINED by roughly 70% while exports more than tripled and personal consumption expenditures + private domestic investment grew by nearly 7% annually from 1946-1949. To the author's point, exports surged because the U.S. industrial base was unscathed while most of the world lay in ruin. Domestic demand exploded in the U.S. post-WW II as a result of pent-up demand after the austerity of the Depression and the consumer rationing during the war. Again, the post-war U.S. economy grew dramatically due to export growth and private demand, not from government spending which declined sharply during this same period.
The author prefers imbecile as the descriptive noun. Personally, I prefer to use charlatan.
Final Score:
Lira -- 1
Krugman -- 0
OK, here's the percentages for annual contributions to GDP growth from 1937 to 1950 for each category.
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=2&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1937&LastYear=1950&3Place=N&Update=Update&JavaBox=no
The timing of the recovery shows that government spending was the dominant effect (although the consumer and investment got things going in 1939 and 1940). Lira's theory of an increase in exports comes in a distant 4th (a joke really) only having an effect in 1946.
Final score
Lira: is a joke
I don't care about Krugman.
I'm just trying to figure out what caused GDP growth out of the depression; the answer is in the numbers.
The prosperity the United States experienced in the two decades after World War II had nothing to do with deficit spending, and everything to do with the fact that it was the only industrialized nation still standing after a total world war—so the rest of the world was forced to buy from the U.S. because there was no one else left to buy from.
Deficits had nothing to do with it.
Based on the quote above, Lira noted how export growth was an important component of economic growth in the two decades AFTER World War II. So why are you refuting his statement by looking at annual contributions to GDP growth going back to 1937 when the starting point is 1945?. I can only assume you made this calculation in some desperate attempt to defend Krugman. It seems that you are overlooking Krugman's larger transgression highlighted by the author - the manipulation of the peak total debt to GDP ratio data by using 1945 debt levels vs. 1940 GDP.
Duck also conveniently stops looking at the numbers after 1950 - obvious shamster like Krugman - maybe he is Krugman.
You can find the data beyond 1950 by selecting a latter year on the BEA table I linked to. I hope that isn't too hard for you.
Yeah, you could too but didn't bother as it completely destroys your argument and supports the case for US dominance in world manufacturing.
The more you proceed the more like Krugman shyster you show yourself to be.
I really like your little quip - "I hope that isn't too hard for you"
That puts you in the realm of complete fucktard - keep it coming asshole.
Astute,
I think we've finally narrowed down the problem.
Lira: If that were his only sin in the piece, then it might be excusable. But then, Krugman makes a truly despicable statement: “Deficit spending created an economic boom [in the post-War years]—and the boom laid the foundation for long-run prosperity.”
Lira tried to make it about the post war years, inserting brackets in Krugman's quote, when the real issue is what caused the end of the depression after 1938. It's obvious that government spending wasn't the big driver after the war because it stopped.
Slick construction of a straw man by Lira.
How can you give Krugman a pass for such statements as the ratio of total debt / GDP in the U.S. peaked at 250% in WW II as support for increased borrowing and deficits today? The statement and the figure of 250% is a total sham since the calculation uses total debt outstanding in 1945 (end of period) divided by GDP in 1940 (beginning of period)! This is what they call learning to lie with statistics. I think we know who is the actual straw man.
Did the mobilization of 16.1 million servicemen as well as supporting productive capacity at home (funded by the government largely through the purchases of war bonds by U.S. citizens) help end the Great Depression? You put 16.1 million people in uniform (the ultimate "jobs program") supported by the productive efforts of millions more at home and economic growth is the result. Massive military build-ups by the the Axis Powers helped those countries escape the Great Depression as well. I don't think anyone is refuting that WW II was the initial catalyst for ending the Great Depression. Unfortunately, Krugman mistakenly believes the deficits from WW II drove prosperity in the post-war period. These deficits were not a driver, but only a short-term stimulus during the wartime period. As many other posters have written, U.S. prosperity soared due to pent-up consumer demand (after years of austerity) and the U.S. being the only major country on earth that was left unscathed from any wartime damage.
I don't give Krugman a pass; his analysis is sloppy, but his conclusion is still correct like you say.
I don't think anyone is refuting that WW II was the initial catalyst for ending the Great Depression.
And that was government spending.
Krugman never said anything about post WWII, Lira made that up by inserting the bracketed words within Krugman's article.
Yes, there was pent up demand after war in 1946 and export in 1946 that offset huge decline in government spending, but the huge decline in unemployment to 1.9% in 1945 occured coincident with the government spending and not the post-war growth period.
I know it's hard for you to admit that government spending can have this effect (even though it wasn't the intent of the spending), so I'll just leave it at that.
Krugman's conclusions are incorrect and my statement about the effect of wartime spending on the Great Depression is not evidence of support for him. Krugman said the significant borrowing (deficits) to fund WW II ended the Great Depression and resulted in long-term post-war prosperity. Therefore, if massive spending worked then, it should work today. Nice of him to fudge the debt / GDP figures. You concluded that this was "sloppy". How about MISLEADING and essentially FALSE? It's the crux of Krugman's argument - we borrowed a lot more to fund WW II and the U.S. economy thrived in post-war era so the U.S. should massively increase it's stimulus efforts today in order to achieve the same result. Unfortunately, Krugman had to falsify the debt / GDP data in order to support his proclamations. Krugman must be partnering with Dick Cheney - deficits don't matter.
Given your conclusion that government spending ended the Great Depression, I guess we should all wish for WW III which would result in even larger spending initiatives and more debt in order to reduce unemployment? It wasn't the massive borrowing that brought about post-war prosperity to U.S. The U.S. economy thrived because we were now an economic superpower with our industrial base fully intact while most of our competitors lay in ruin. Translation - the U.S. was the only store open in town.
Government spending can only have a TEMPORARY effect and results in lower future demand and a higher debt burden going forward. That's why the economy today is starting to roll-over as the affects of the stimulus fade into oblivion.
We did borrow a lot of money to fund WWII. How poorly Krugman calculated the total doesn't change that fact.
We did borrow a lot of money to fund WWII.
Astute: Government spending can only have a TEMPORARY effect and results in lower future demand and a higher debt burden going forward. That's why the economy today is starting to roll-over as the affects of the stimulus fade into oblivion.
You yourself said WWII ended the depression. And it didn't start up again (until now). Unemployment fell greatly during the govt spending spree and remained at low levels until the next recession. Look at he data yourself. The WWII debt was largely paid off.
A stimulus is only meant to be temporary. Private demand has to take over unless you want a state economy. Stimulus funding does not translate 1 to 1 for lower future demand when the economy is operating below capacity. Employing people produces output and in turn income. Leaving these people unemployed, what they could have produced is lost forever.
Today's economy is in a heap of trouble because of the credit bubble. Both households and finanacial sector need to deleverage; it's going to take a long time. Govt could fill the gap temporarily if it came into the recession with a better balance sheet, but it eventually has to deleverage too, but it's better for it to deleverage when the economy is operating near full capacity.
Look at he data yourself. The WWII debt was largely paid off.
That's what happens when the majority of your debt was sold to / held by U.S. citizens, you have massive pent-up demand after years of pent-up demand and the U.S. hegemony rains supreme.
A little different picture today.
Govt could fill the gap temporarily if it came into the recession with a better balance sheet, but it eventually has to deleverage too, but it's better for it to deleverage when the economy is operating near full capacity.
Can't argue that it is better for the government to deleverage in good economic times. The problem is the U.S. has had numerous economic booms since WW II and debt has only increased. Why do you think it's "different this time"? That's why your theory is flawed.
Thanks for the data source. I think this proves your point.
Let's be clear about this: Keynesianism is to economics what astrology is to astronomy but with a very important difference. Astrology has no influence whatever on astronomy, while Keynesianism -- because it (along with its younger sibling, Monetarism) is economics. Keynesianism is a pseudoscience masquerading as genuine science, in other words, and is quite literally impoverishing and killing people by the millions here and elsewhere around the world.
No, this socioeconomic plague won't play itself out until its "money" has finally died -- http://www.amazon.com/When-Money-Dies-Nightmare-Hyper-inflation/dp/19069... -- but it will play itself out, no matter how horrifically and no matter that Krugman and his ilk will never be held responsible for their murderous ways.
Get out, get out, get out of their way. Which is to say, buy gold, buy silver, buy canned goods, plant a garden, and hunker the hell down, as we've got hell to pay for what these charlatans and their co-consipators in Washington have done to us.
Glaucas I suspect that mainstream economics is not a science as many ZH posts attest to and mainstream astronomy is mostly stuck in the dark ages of black holes, dark matter etc. but Austrian School and Electric Universe theorists seem promising...
You mean plasma universe.
http://www.plasma-universe.com/Plasma-Universe.com
Immanuel Velikovsky: The Bonds of the Past
Immanuel Velikovsky proposed in his 1950's book "Worlds in Collision" that many myths and traditions of ancient peoples and cultures are based on actual events:
worldwide global catastrophes of a celestial origin, which had a profound effect on the lives, beliefs and writings of early mankind.
This is a CBC documentary about Immanuel Velikovsky's discoveries.
http://video.google.com/videoplay?docid=-8146134011362502849#
Worlds in Collision:
BBC documentary on the controversial theories of Velikovsky
http://video.google.com/videoplay?docid=-8146134011362502849#docid=6229135744841359869
....................................................................................
Watch this film and in one hour know more than most NASA scientists about the fundamental force that forms and sustains the universe.
THUNDERBOLTS OF THE GODS
http://video.google.com/videoplay?docid=-8146134011362502849#docid=4773590301316220374
Well said!
I used to be a big fan of Krugman. I remember reading his piece on the Asian economic miracle being shaky before the crash and asking Thai government ministers what they thought about his analysis. They all dismissed him with scorn, as did everyone else in business. Then less than a year after I read it the Asian economic crisis happened. However, since the start of this crisis I have been consistently dismayed by his calls to add ever more debt to try and solve what is essentially a solvency crisis. I have two possible theories as to why he's saying what he's saying: 1. He genuinely believes this is just another liquidity crisis solveable by adding more liquidity 2. He knows its a solvency crisis but he believes inflation is the only cure and since he knows calling for inflation is not going to get anywhere he sees himself as someone who needs to trick policy makers into following the right policy for the wrong reason. So he's either dumb or dishonest. A similar conclusion the article author reaches, although I've reached it via another route!
Aren't all liquidity crises just solvency crises (which these days, are all about debt service)?
If not, what's the difference?
Krugman actually has a very good model in his DC baby sitting co-op example. I think he's too in love with it though, which is why he sees everything as a lack of tokens.
I can give a personal example. I'm currently having to restrict my spending due to having less cash than I'm comfortable with. This is despite my having a great deal of assets. Unfortunately those assets are illiquid, and in normal times I could have borrowed against those assets maintaining my liquidity. I can't at the moment so my spending is reduced from what it would otherwise be.
So I'm personally having a liquidity problem, not a solvency problem.
I have never been a fan of Krugman, thinking him inferior in too many ways.
Instead, I pay attention to those who are both consistently intelligent and consistenly right.
To this end, the primary economist I pay attention to is Prof. Michael Hudson, who has been on target for at least 40 years.
Also, I pay attention to market analyst, Catherine Austin Fitts (I am unconcerned as to anyone else's opinion, she has been consistently correct in her pronouncements).
Ethically speaking, I am attracted to the writings of economists Prof. James Galbraith (University of Texas), Steve Keen (Australia), and Prof. Ravi Batra (Southern Methodist University, Texas).
Krugman, Jeffrey Sachs, Alan Blinder, Stiglitz have been reinventing themselves over the past few years, because they realized they royally screwed up.
Something the Thomas "three chins" Friedman, Catherine Manns, and the other pathetic shills will never admit.
Yes. Couldn't agree more.
The only option left is to print. Why not start the presses and get it over with. Like they said in college, put a bag on her head and get done with it. Tomorrow is another day.
Imbecilic fraud with a Napoleon size wanker... wait, that went way too far
Capacity Krugman. You are a fucking imbecile. We simply do not have the capacity, the power, to manufacture our way out of this mess. Say NAFTA. Say crony capitalism. Those things did not exist in 1941. Dollars were worth close to a dollar in 1941. They hadn't been reduced to asswipe. And financial numbers hadn't been completely gerry rigged either. Nor had we used such fantastic accounting methods for banks to defer and hide losses. GDP numbers are rigged as well. The comparisons aren't apples to apples, are they?
That is the difference. And the debt Titanic sails on while Keynesians like you, tout stimulus. Keynes gets one bad rap. Surplus savings in good times were supposed to be used in bad times...but then that doesn't happen anymore, does it? You guys conveniently forgot that part of the theory.
"Nor had we used such fantastic accounting methods for banks to defer and hide losses."
Spot on.
"GDP numbers are rigged as well. The comparisons aren't apples to apples, are they?"
Dead on.
"That is the difference. And the debt Titanic sails on while Keynesians like you, tout stimulus."
Musical stimulus interlude...
http://www.youtube.com/watch?v=Ll3uipTO-4A
I noticed Barry descended to us and said spending another meager 50B over six years would do the trick because 878 Billion had not...somehow.
He spoke of infrastructure improvements (roads, airport runways, railroads etc.). To which no one has had the temerity to ask...what has the 10% per airline ticket been spent on? Where did it go, it's gone for something, what? The 11 cent tax per gallon on aviation fuel? The 47 cent per gallon tax on gasoline? And didn't we build coast to coast railroads a hundred some odd years ago? What happened to them? Has anyone been sent out looking for them? Does Buffet own a portion of the R/W if they have come up missing?...somehow...LOL.
"Keynes gets one bad rap. Surplus savings in good times were supposed to be used in bad times...but then that doesn't happen anymore, does it? You guys conveniently forgot that part of the theory."
See musical interlude above ;-)
"Surplus savings in good times were supposed to be used in bad times...but then that doesn't happen anymore"
>>>>>>>>>>...
I know you do not support Mr K and K..
but i have seen this posted on ZH many times
that is why Keynesian's say" but, but current policy is not Keynesian..so it fails"
well show me any country that could possibly save 13 trillion $, yen,pounds.. let it in some lock box and never touch it until a major down turn.
and I will show you Christ returned to earth.
Government spends because pols need to justify their jobs..funny how congress met a few months of the year long ago but now it's
full time job..doing gods work I guess.
What makes this Gonzalo character think he knows anything about economics much less write intelligently about the subject? Tyler, Where do you find these kooks? And whats hilarious is that all these people leaving comments dont even question the conclusions.
The market will punish those who can't think critically. I guess we should all go buy more gold huh??
Yes, and yes. Of course, you can't use your brain to think of anything further in the future than three hours from now (the current half life of any Keynsian action), so you probably don't understand.
We need less Kooks like you, and more astute commentators like Gonzalo Lira.
Please go away and leave us alone.
Thank you.
.
Thank you for the defense, Crisismode, but respectfully disagree:
We NEED kooks who openly say we're full of it. That way, we can re-examine our logic, and make sure it's sound.
See, truth never needs to be coddled and isolated—truth can take care of itself. It's lies and misperceptions that need to be coddled, and throws a hissy-fit whenever it's questioned.
Truth doesn't need protection. In the end, truth always wins out.
GL
Put some numbers to the export effect to compare it to the government spending effect to figure out who is the fraud. Otherwise, it's just all bluster.
I did post the numbers in a previous post. Krugman's statements are utter malarkey.
"no....is gonna Mother Hubbard softsoap me with just a pocket full of hope"
Truth, Good stuff
http://www.youtube.com/watch?v=Qn85BeeiwZo
Ando: Ah geez, its that econ geek from the Fed again.. Stick to writing those facepalm articles about why only PhDs can talk about economics....
.
I realize it is probably a waste of time, but instead of adhomonym attacks, how about discussion specific errors you see in his logic or assumptions?
The man has a tough job. The marxist cabal in Washington asks him to write a paper justifying spending a few more trillion, and have it done by the weekend. He probably had to just slap something together to get it out the door.
Krugman has plenty of company. When was the last time CNBC's Larry Kudlow told the truth. Don't forget
Barro's really stupid article in the Wall Street Journal claiming that high employment is due solely to
extended unemployment benefits. These guys will say anything for a pay check.
uhmmm...as if the Iraki and Afghan war werent't enough stimulus spending...is tape worm Paulie asking for something bigger?
If you subtract-out this years' contribution of Iraq and Afghanistan from this years' deficit I think you'll find that we're still deficit spending - this year - more than we've spent on Iraq and Afghanistan since 2001. Not quite sure on the numbers precisely, but I think it's pretty close.
I know people made a HUGE deal about the fact that the cost of our misadventure in Iraq just passed $1T, a metric crapton of cash, no doubt. But about $400B short of what we're going to deficit spend this year alone.
Just saying.
As to your point though - Obambi could propse a $1 zillion bailout program tomorrow and Paulie Krugnuts would say it's "too small".
"Obambi could propse a $1 zillion bailout program tomorrow and Paulie Krugnuts would say it's "too small"."
If one always proclaims it wasn't what I wanted, they can stand back and say "see, I told you so" when it inevitably fails.
The man is dangerous...a Manchurian Economist.
a Manchurian Economist!!! +1 LOL
That is funny ! He's a Manchurian Economist with Kung Fu fried noodles where his brain used to be.
bugs,
I always date myself when I say stuff like that...LOL.
Since when are the war costs on the books and figured into the deficit?
Well, Obama claims they're figured-in to his deficit - so I'm being a sport and giving him the benefit of the doubt.
And I'm pretty much ignoring the "official" deficit figures and going straight to TreasuryDirect. The war costs are all in there whether they're on the books or not. I'm sure some of the war costs are and will remain off the books but most of it is probably out in the open.
A year or two ago I read a couple of his Time articles. I realized then that he was a political shill.
I wonder if he maxes out his credit cards in hope that the money will come back around to him.
Perhaps he does max out his credit cards anticipating favors, but if those favors don't come he can always flee to Israel. Israel refuses to extradite "the chosen", even to it's "greatest ally", the US.
WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.
Enlarge ImageCalling it "basically no more than five rectangular strips of paper," Fed chairman Ben Bernanke illustrates how much "$200" is actually worth.
What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world's largest economy.
"Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this—this so-called 'money'—really matters at all."
"It's just an illusion," a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. "Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless."
According to witnesses, Finance Committee members sat in thunderstruck silence for several moments until Sen. Orrin Hatch (R-UT) finally shouted out, "Oh my God, he's right. It's all a mirage. All of it—the money, our whole economy—it's all a lie!"
Screams then filled the Senate Chamber as lawmakers and members of the press ran for the exits, leaving in their wake aisles littered with the remains of torn currency.
Enlarge ImageU.S. markets closed as traders left their jobs and resolved for once to do or make something, anything of real value.
As news of the nation's collectively held delusion spread, the economy ground to a halt, with dumbfounded citizens everywhere walking out on their jobs as they contemplated the little green drawings of buildings and dead white men they once used to measure their adequacy and importance as human beings.
At the New York Stock Exchange, Wednesday morning's opening bell echoed across a silent floor as the few traders who arrived for work out of habit looked up blankly at the meaningless scrolling numbers on the flashing screens above.
"I've spent 25 years in this room yelling 'Buy, buy! Sell, sell!' and for what?" longtime trader Michael Palermo said. "All I've done is move arbitrary designations of wealth from one column to another, wasting my life chasing this unattainable hallucination of wealth."
In The Know: Should The Government Stop Dumping Money Into A Giant Hole?
"What a cruel cosmic joke," he added. "I'm going home to hug my daughter."
Sources at the White House said President Obama was "still trying to get his head around all this" and was in seclusion with his coin collection, muttering "it's just metal, it's just metal" over and over again.
"The president will be making a statement very soon," press secretary Robert Gibbs told reporters. "At the moment, though, his mind is just too blown to comment."
A few U.S. banks have remained open, though most teller windows are unmanned due to a lack of interest in transactions involving mere scraps of paper or, worse, decimal points and computer data signifying mere scraps of paper. At a Bank of America branch in Spokane, WA, curious former customers wandered aimlessly through a large empty vault, while several would-be robbers of a Chase bank in Columbus, OH reportedly put their guns down and exited the building hand in hand with security guards, laughing over the inherent absurdity of the idea of $100 bills.
Likewise, the real estate industry has all but vanished, with mortgage lenders seeing no reason to stop people from reclaiming their foreclosed-upon homes.
"I don't even know what we were thinking in the first place," said former banker Nathan Collins of Brandon, MS, as he jimmyed open a door to allow a single mother and her five children to move back into their house. "A bunch of people sign a bunch of papers, and now this family has no place to live? That's just plain ludicrous."
The realization that money is nothing more than an elaborate head game seems to have penetrated the entire country: In Wilmington, DE, for instance, a collection agent reportedly broke down in joyful sobs when he informed a woman on the other end of the phone that he had absolutely no reason to harass her anymore, as her Discover Card debt was no longer comprehensible.
For some Americans, the fog of disbelief surrounding the nation's epiphany has begun to lift, with many building new lives free from the illusion of money.
"It's back to basics for me," Bernard Polk of Waverly, OH said. "I'm going to till the soil for my own sustenance and get anything else I need by bartering. If I want milk, I'll pay for it in tomatoes. If need a new hoe, I'll pay for it in lettuce."
When asked, hypothetically, how he would pay for complicated life-saving surgery for a loved one, Polk seemed uncertain.
"That's a lot of vegetables, isn't it?" he said...
+1 Onion.com
The fraud cannot continue inperpetuity. The statists have just about gotten what they want. A complete collapse where government will seize all control. I'm from the government, I'm here to help.
No amount of rhetoric, theory, bullshit, can change the simple fact that the debt Totanic hit the iceberg in 2008. We are taking on massive amounts of water. And these morons can't stop it.
Can we haz huge deflation and collapse now and get it over with, please?
Tools for fools.
Krugman is on the string em up list.
Hella yeah. Krudman is a moon-faced rodent (look at him), who honestly believes (as someone so eloquently stated earlier in this thread) that maxing out credit, and then opening a few more accounts in order to max them out too...means you're paying off debt...while paying off debt is the sort of lunacy which will drive this nation to DEFCON 1.
What makes Pauly Krud even more annoying is his advanced case of 'conservative derangement syndrome', where he can't help but blaming all economic ills, somehow, on conservative idealogy. So clueless is this sheister, that he also believes republicans in congress are actually conservatives.
And from the Insult to Injury Department: Krugman is a short little squirt as well. Makes Robert Reich look like a Harlem Globetrotter.
Other small differences between 1945 and now: because of consumer rationing during the war and continuous patriotic bond drives, the U.S. consumer owned most of the government debt. He ended the war with a huge surplus of savings and tremendous pentup demand. Also the U.S. was a net creditor to the rest of the world.