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Guest Post: Paul Krugman's Dangerous Misconceptions

Tyler Durden's picture


Via Pater Tenebrarum of Acting-Man blog,

How to Deal with Economic History

In a recent article at the NYT entitled 'Incredible Credibility', Paul Krugman once again takes aim at those who believe it may not be a good idea to let the government's debt rise without limit. In order to understand the backdrop to this, Krugman is a Keynesian who thinks that recessions should be fought by increasing the government deficit spending and printing gobs of money. Moreover, he is a past master at presenting whatever evidence appears to support his case, while ignoring or disparaging evidence that seems to contradict his beliefs.

Among the evidence he ignores we find e.g. the 'stagflation' of the 1970's, or the inability of Japan to revive its economy in spite of having embarked on the biggest government deficit spending spree ever in a modern industrialized economy. Evidence he likes to frequently disparage is the evident success of austerity policies in the Baltic nations (evident to all but Krugman, one might say).

As readers of this blog know, we are generally of the opinion that it is in any case impossible to decide or prove points of economic theory with the help of economic history – the method Krugman seems to regularly employ. This is why we listed the evidence he ignores or disparages: the fact that there exists both plenty of evidence that contradicts his views and a much smaller body of evidence that seems to support them at an unreflected first glance, already shows that the positivist approach to economic theory must be flawed.

An economist must in fact approach things exactly the other way around, but then again it is a well-known flaw of Keynesian thinking in general that it tends to put the cart before the horse (examples for this would be the idea that one can consume oneself to economic wealth instead of saving and investing toward that goal, or that employment creates growth; it is exactly the other way around in both cases).

So how must one approach the 'evidence' of economic history? As we have shown on numerous occasions, an especially dumb method is to look at prices in financial markets and then conclude that these markets 'know' something about the future. The proper method is to have a tenable, causal-realist economic theory first, and then employ that in interpreting the facts of economic history. Most historians, even so-called economic historians, have failed in this task. The reason why one must use this approach is that economics is not like physics: there are no repeatable experiments one could conceivably conduct to 'test' a hypothesis.  Human beings are not rocks, they have minds and volition, they pursue goals and must employ scarce economic means to attain them.  One therefore requires a theory of human action before embarking on the task of interpreting economic history.  Every incidence of economic history is unique, and subject to a myriad of disparate factors that are interlocking and producing the outcomes observed. It is not even possible to isolate all these factors with precision. And yet, underlying each episode are undoubtedly the laws of praxeology and economics – they constrain both our interpretations of the past as well as our forecasts of the future.


What Do Financial Markets Know?

As noted above, financial markets really don't 'know' anything. It is certainly true that their prices convey signals to actors in the economy, but given the fact that money is centrally planned by a bureaucracy, these signals are more often than not grossly distorted and misleading.

In his article Krugman discusses the fact that both the UK and the US currently  have very low government bond interest rates – and complains that some observers ascribe the UK's low level of interest rates to 'austerity'. If that's the case, so Krugman asks, then why are they also low in the 'non-austere' US? Of course the whole point of the exercise is to disparage fiscal restraint. Krugman already  makes a major misstep by taking it as a given that there is actually 'austerity' in the UK. In reality, there is only talk about austerity; the thing as such doesn't yet exist. Here is for instance a recent Bloomberg report entitled: “UK Deficit Unexpectedly Swells on Spending Gain”. We read there:

Worse-than-expected public sector borrowing in October has put the pressure back on the chancellor,” Robert Wood, an economist at Berenberg Bank in London who was advising Bank of England policy makers until earlier this year, said in an e- mailed note. “Stalling growth means the deficit is likely to overshoot official forecasts this year, while the growth forecasts in the last budget are likely to be scaled back.”

(emphasis added)

Does this strike anyone as an example of 'austerity'? In the UK is has never been more than a hollow phrase, a political slogan. The reality has so far failed to live up to it.

Krugman also cavalierly omits the not insignificant fact that the Bank of England has bought some £375 billion of outstanding UK gilts, almost 30% of the long term government debt in issue. Could it be that this might have had an effect on their interest rates? Similarly, in 2011, the Fed bought some 60% of the treasury debt issued that year in the course of 'QE2'. With 'Operation Twist' it has continued to remove long term debt from the market.

However, Krugman does of course mention that possession of the printing press is an advantage in these matters. Let us look at what he writes:

“There’s an interesting mix of contrast and similarity between the policy debates in Britain and the United States right now. In both countries — as in every country that retains its own currency and has debts denominated in that national currency — interest rates are near record lows.


“However, Very Serious People tell very different stories in the two nations. In the United States, we supposedly have low borrowing costs despite our budget deficit — and if we don’t implement Bowles-Simpson immediately, the bond vigilantes will attack. Really! This time we mean it!


Meanwhile, in the UK, the official line is that the low rates are a reward for all that fiscal austerity — and VSPs get upset and abusive if someone well-informed points out that a much better explanation is that investors expect the economy to remain weak, and hence for short-term rates to remain very low, for a long time.


Let’s unpack this a bit. It’s very hard to come up with any reason why either the US or the UK might default, since they can simply print money if they need cash. And given the absence of real default risk, long-term interest rates should be more or less equal to an average of expected future short-term rates (not exactly, because of maturity risk, but that’s a fairly minor detail).


So if you expect the US and UK economies to be depressed for a long time, with the central bank keeping rates low, long rates will be low too — end of story.


But won’t that money printing cause inflation? Not as long as the economy remains depressed. Budget deficits could lead people to expect higher inflation down the road, once the slump finally ends — but that would be a good thing for the economy in the short run, discouraging people from sitting on cash and weakening the exchange rate, thereby making exports more competitive.


The point, then, is that the whole “credibility” argument is incoherent.”

Let's for the moment leave aside the absurd contention made at the end of his post that 'inflation' (here meaning rising prices of goods and services) and a depreciating currency are somehow 'good'.

First, here are a few things we agree with:

Krugman is correct that expectations regarding the economy's future performance play a role in keeping interest rates low. It would be more precise to state that the associated 'inflation expectations' (i.e., the market's estimate of the future rate of change of CPI) are affecting long term interest rates. Moreover, there is the fact that a large group of investors has been scared of investing in assets deemed risky since the 2008 crisis. This can be seen by looking at yields on highly rated government bonds everywhere. Since 2008 there has also been a growing shortage of highly rated debt, which plays an important role as collateral in repo markets. This is yet another reason why such debt is being bid up. Some countries even enjoy negative nominal interest rates on the short end of the maturity curve. So rates are kept low  not only due to the fact that central banks are shrinking the supply of debt with quantitative easing.  Krugman is also correct that 'austerity' isn't what keeps UK interest rates low, not least because there simply is no 'austerity' in the UK.

However, he then commits a grave error: for one thing, he concludes that the markets 'know' something, and that therefore one shouldn't worry about how big the public debt mountain becomes, especially not if the country concerned has its own money printing press at its disposal.

To this we would counter: 5 year credit default swaps on Greek government debt sold for 35 basis points in 2007. Four years later, Greece defaulted and the same CDS had soared to more than 26,800 basis points. What did the market 'know' in 2007? It 'knew' that no sovereign debtor in the developed world would ever default. What did it know four years later? That Greece would default with absolute certainty.

It is the same story with the ultra-low interest rates on the government debt of countries that is currently rated AA or AAA. Today, the markets 'know' that this debt is 'safe' . This fact per se tells us precisely nothing about future states of knowledge. A few years hence, the markets may 'know' decidedly otherwise.


Defaults and the Printing Press

However, so Krugman would counter, taking a leaf from the chartalist 'State Theory of Money' (today called 'MMT'), Greece didn't have control over the printing press! Surely it would never have defaulted if it did!

We would say that depends on one's definition of 'default'. In all likelihood, given the size of Greece's debt and the intractable corruption and inefficiency of its administration, it would have inflated its currency into oblivion. That would effectively have been a default as well, even if not a 'formal' one. The bonds would still have been repaid; only with money worth perhaps one tenth of what it was worth when the debt was contracted. For bond holders it makes no practical difference if they get 10 lepta on the drachma after a 'formal' default or after the value of the drachma has been destroyed.

Krugman then compounds his error by asserting that there is an 'absence of default risk' in the rest of the developed world (ex the European periphery, one presumes). That is a big leap of the imagination; in fact, if nothing is changed about the 'mandatory' portion of government spending on future entitlements, default – one way or the other – seems all but certain.

Not content with making such sweeping pronouncements about an unknown future, Krugman then asserts that “But won’t that money printing cause inflation? Not as long as the economy remains depressed”.

As Kyle Bass noted in a recent letter to investors in Hayman Capital, this entire train of thought – that governments who have their own printing press won't default and that there can be no inflation in a depressed economy – may be one of the most dangerous misconceptions of our time.

Leaving aside that every single housewife in America and Europe would gape at Krugman's statement about inflation in recessionary times with incredulity (after all, just because the effects of inflation on prices don't show up in government's 'CPI' statistics does not mean that such effects are not noticeable), Krugman seems to have completely forgotten that Keynesians said the same thing in the 1950s and the 1960s, and then found themselves completely unable to explain the 'stagflation' of the 1970s. In fact, this episode almost buried the Keynesian dogma for good. It is no coincidence that people like Milton Friedman and Friedrich Hayek rose to prominence during the decade. Krugman has conveniently forgotten it ever happened.

However, if one thinks things through properly, one should realize that a weak economy is by no means a 'guarantee' for tame 'price inflation', given that central banks indeed print a lot of money whenever the economy weakens. Assume for instance that the credit boom preceding the bust has weakened the economy's pool of real funding to such an extent that it is no longer possible to divert resources toward various bubble activities. The production structure will have to be shortened then, no matter how much additional money is thrown into the economy, as the real resources necessary to keep the existing length of the structure intact simply won't be there. As Ludwig von Mises reminds us (in Human Action, ch. XX, 6 ):

“However conditions may be, it is certain that no manipulations of the banks can provide the economic system with capital goods. What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media.”

By necessity this will over time lower the economy's output. Then, at some future point, there will arise a situation when fewer goods are chased by a massively grown wall of money. In short, recessions actually have an inbuilt long term tendency to negatively influence the purchasing power of money both from the monetary policy side as well as from the goods-induced side.

Moreover, one thing that Krugman always completely ignores are the highly variable and often very large lag times involved (another reason why today's low interest rates tell us absolutely nothing about the future).

After all, we know for a fact that the true broad US money supply stood at $5.3 trillion on January 1 2008, and stands at nearly $9 trillion today. There has already been massive inflation.

As Ludwig von Mises writes about the manner in which inflation and its effects on the purchasing power of money proceed (in Human Action, ch. XVII, 8):

The course of a progressing inflation is this: At the beginning the inflow of additional money makes the prices of some commodities and services rise; other prices rise later. The price rise affects the various commodities and services, as has been shown, at different dates and to a different extent.

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation.


There are still people in the country who have not yet become aw-are of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.


But then finally the masses wake up. They become suddenly aware  of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The  crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.”

(emphasis added)

Clearly, we are at the point in time where only the prices of 'some commodities and services have risen', the 'first stage that may last for many years'. The demand for cash balances still remains high, and there is therefore in theory still time for the monetary authority to abandon the inflationary policy before things get out of hand. It should be obvious though that the rate at which government debt increases will influence the decision making of the monetary authority, regardless of its nominal 'independence'. Once public opinion about the inflationary policy changes – i.e. the point in time when the Fed's vaunted 'credibility' goes up in smoke because the 'masses wake up' – it will be too late.

Krugman is certainly correct that the government will then not necessarily formally default on its previously contracted debt; but the holders of the debt will get paid in 'scrap paper'.


Paul Krugman – coming to wrong conclusions about the future on the basis of cherry-picked slices of the recent past …


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Thu, 11/29/2012 - 16:54 | 3021807 TruthInSunshine
TruthInSunshine's picture

Already having a shitty day, then BOOM!...Tylers hit me with this crazy bastard's face while pinky lifting a flute of champagne.

You're sick, Tylers...

Thu, 11/29/2012 - 16:55 | 3021825 crusty curmudgeon
crusty curmudgeon's picture

One cannot blame this idiocy/insanity on Keynes.  It would be hard to think less of Keynes than I do, but even he merely advocated temporary government spending.

Krugman is an insanity all to himself.

Thu, 11/29/2012 - 16:58 | 3021836 TruthInSunshine
TruthInSunshine's picture

I agree and have pointed out that Keynes, regardless of one's opinion of him, would sue Krugman for slander/libel if he were alive today.

There's crazy....and then there's KRUGMAN LEVEL BATSHIT CRAZY!

Krugman calls for space aliens to fix U.S. economy. - YouTube
Thu, 11/29/2012 - 17:01 | 3021842 falak pema
falak pema's picture

amen, and poor Keynes. 

Not that this shill on ZH is the real K; he can't be, he sounds as delusional as I make him out to be! 

Thu, 11/29/2012 - 17:04 | 3021860 So Close
So Close's picture

His picture makes me want to punch him in the face.

Thu, 11/29/2012 - 17:11 | 3021883 economics9698
Thu, 11/29/2012 - 17:16 | 3021901 Hedgetard55
Hedgetard55's picture

Yes, a well compensated worker bee for the globalist hive.

Thu, 11/29/2012 - 17:40 | 3021968 XitSam
XitSam's picture

A flying monkey for the Buffoons of Banking.

Thu, 11/29/2012 - 18:09 | 3022019 Gene Parmesan
Gene Parmesan's picture

Paul Krugman is a cottonheaded ninnymuggin.

Thu, 11/29/2012 - 18:28 | 3022063 Tsunami Wave
Tsunami Wave's picture

As Hugh Hendry said in a TV interview (it goes something like): "I meet these champagne socalists in first class... and they're all the same!!!"

Thu, 11/29/2012 - 19:48 | 3022289 James-Morrison
James-Morrison's picture

Have a little perspective.

Krugman will end up on the dungheap of history.

Don't the Greeks have a saying:

"He who jumps many poles will eventually get one up his ass."

Thu, 11/29/2012 - 21:24 | 3022482 Enslavethechild...
EnslavethechildrenforBen's picture

Bernanke's pole is up Krugman's...

Thu, 11/29/2012 - 18:14 | 3022023 MillionDollarBogus_
MillionDollarBogus_'s picture

What does he care what anyone thinks about his writing..??  The guy owns a Puliter Prize for his economic ideas.

Sure he's going to say Bernanke needs to print until the ink runs out.  At this point in time what other option is there..??

Cost cutting never happens when times are good, which means it will never happen when times are bad. 

Dick Cheney was right when he said 'debt doesn't matter'.  If its not your debt, it doesn't matter.

Interest rates will stay near zero and the Fed will keep buying debt.  There is no other real option.


Thu, 11/29/2012 - 21:03 | 3022444 monogratis
monogratis's picture

Thus:  Buy Gold and Silver and perhaps even some Yuan.

Thu, 11/29/2012 - 21:27 | 3022492 Enslavethechild...
EnslavethechildrenforBen's picture

Do anything but go to sleep while you are holding assets valued in Dollars. By the time you wake up in the morning, your net worth will be one half what it was when you fell asleep

Thu, 11/29/2012 - 17:36 | 3021959 azzhatter
azzhatter's picture

Is he drinking piss?

Thu, 11/29/2012 - 21:21 | 3022475 Enslavethechild...
EnslavethechildrenforBen's picture

 I pissed in his glass when he wasn't looking

Thu, 11/29/2012 - 21:34 | 3022505 ACP
ACP's picture

"Gaack! Is this the one laced with cyanide?"

"Sir, it's ALL laced with cyanide."

Thu, 11/29/2012 - 17:13 | 3021869 TruthInSunshine
TruthInSunshine's picture
A refresher on how badly Krugman tortures Keynes posthumously:

J.M. Keynes on inflation in The Economic Consequences of the Peace (p. 235-6):

[T]he best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some."


"The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.


"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

Thu, 11/29/2012 - 17:13 | 3021897 economics9698
economics9698's picture

Inflation in the 20s started the Jew hatred that led to Hitler in the 30s.

Thu, 11/29/2012 - 18:23 | 3022047 blunderdog
blunderdog's picture

    Inflation in the 20s started the Jew hatred that led to Hitler in the 30s.

Uh, no.  There was PLENTY of Jew-hatred in Germany before 1920.  The inflation, and the concerted effort to blame it all on the Jews, just helped exacerbate things.

Thu, 11/29/2012 - 18:41 | 3022094's picture




Zionism Promotes Anti-Semitism


Theodor Herzl (1860-1904), the founder of modern Zionism, recognized that anti-Semitism would further his cause, the creation of a separate state for Jews. To solve the Jewish Question, he maintained “we must, above all, make it an international political issue.”


Herzl wrote that Zionism offered the world a welcome “final solution of the Jewish question.” In his “Diaries”, page 19, Herzl stated “Anti-Semites will become our surest friends, anti-Semitic countries our allies.


Zionist reliance on Anti-Semitism to further their goals continues to this day. Studies of immigration records reflect increased immigration to the Zionist state during times of increased anti-Semitism. Without a continued inflow of Jewish immigrants to the state of "Israel", it is estimated that within a decade the Jewish population of the Zionist state will become the minority.

Thu, 11/29/2012 - 21:34 | 3022506 Enslavethechild...
EnslavethechildrenforBen's picture

A 3 year old child can understand economics better than this Paul Krugman Prostitute.

He even makes Peter Schiff look intelligent.

Thu, 11/29/2012 - 18:36 | 3022078 RopeADope
RopeADope's picture

And here I thought the hatred toward Jews was caused by their anti-Keynesian attitudes and refusal to risk their capital assets on state mandated malinvestments that were undertaken to  provide job entitlements to the politician's constituents.

Thu, 11/29/2012 - 18:01 | 3021914 crusty curmudgeon
crusty curmudgeon's picture

Ironically, that's one of the best quotes in all of economics!  That's why I hope there's a special place in hell for people like Keynes...who had the intellect to understand just how destructive his "general theory" (1936) was.

F.A. Hayek described Keynes as "a man of great intellect but limited knowledge of economic theory, who ultimately succeeded in rehabilitating a view long the preserve of cranks with whom he openly sympathised."

I suspect Hayek would not have so kindly described our nobel-prize-winning, champagne drinking fool.

Thu, 11/29/2012 - 16:59 | 3021841 Clueless Economist
Clueless Economist's picture

I am NOT insane!

"The only solution to the debt problem, is more debt"

--Professor Krugman

Thu, 11/29/2012 - 17:08 | 3021874 DaveyJones
DaveyJones's picture

I thought your only solution Mr. Krug was to listen to "very serious people." Ironic, coming from a clown.

Thu, 11/29/2012 - 17:12 | 3021889 John Law Lives
John Law Lives's picture

Could I borrow that champagne flute for a second?  I'll give it right back.  Trust me.  I won't spike the contents.  Just don't be alarmed if the champagne has a little wang to the taste afterward...


Thu, 11/29/2012 - 17:13 | 3021896 pemdas
pemdas's picture


One tip. If you want to be head of the world bank hold your champaign glass by the stem, not the bowl.  The europeans are scoffing at you.

Thu, 11/29/2012 - 17:20 | 3021906 TruthInSunshine
TruthInSunshine's picture

Speaking of Champagne, this place is Krugman's favorite watering hole:


Thu, 11/29/2012 - 17:17 | 3021903 Urban Roman
Urban Roman's picture

How you gonna "grow" the economy with peak oil in the rearview mirror, and the bulk of our "money supply" now demonstrably based on real estate fraud?

Thu, 11/29/2012 - 18:46 | 3022116's picture

How was the problem of peak whale oil solved?

Thu, 11/29/2012 - 20:01 | 3022318 A Nanny Moose
A Nanny Moose's picture

It's absurd to think that innovative responses to all the seemingly insurmountable challenges throughout history, lie firmly behind us. What a bleak outlook, given the evidence.

Surely the question of the say in the mid 19th c was, "Who will pick the cotton, if we free the slaves?"

Thu, 11/29/2012 - 20:53 | 3022426 RopeADope
RopeADope's picture

Most of those innovative responses were about externalizing costs off the P&L or creating off balance sheet liabilities. Guess what...the auditor has found them.

Thu, 11/29/2012 - 21:53 | 3022541's picture

Man went from stone to bronze to iron without auditors having anything to do with it.

Thu, 11/29/2012 - 17:38 | 3021963 chubbar
chubbar's picture

How the fuck can anyone take price signals from bonds when the gov't is in the market buying them hand over fist?

Thu, 11/29/2012 - 17:45 | 3021979 TruthInSunshine
TruthInSunshine's picture

Krugman has said and still maintains that sovereign bonds (yes, the U.S.', as well) is efficiently priced in terms of yield based on market forces.

Yes, I could google for proof and link said claims of Krugman's, but am not adequately motivated at present.

Thu, 11/29/2012 - 19:05 | 3022179 RopeADope
RopeADope's picture

Rates are low because there is no economic profit to pay a yield. Krugman excels at being accidently not incorrect.

Thu, 11/29/2012 - 21:02 | 3022443 monogratis
monogratis's picture

As long as morons like Krugman are allowed to spew that crap in the NY Times, then Gold is a sure bet.

Thu, 11/29/2012 - 17:38 | 3021964 slaughterer
slaughterer's picture

The above-pictured poorly-bred douche does not even know that one holds a flute BY THE STEM to avoid heating the champagne with the heat of ones hands on the bowl.  

Thu, 11/29/2012 - 18:47 | 3022124's picture

These nouveau moochers have so little class.

Thu, 11/29/2012 - 21:42 | 3022517 Enslavethechild...
EnslavethechildrenforBen's picture

If he had any class at all he would be drinking out of the fucking bottle like most rich fucks do.

Thu, 11/29/2012 - 19:00 | 3022165 Daily Bail
Daily Bail's picture

Good Times - 1970s TV Series

Blame it on the Federal Reserve

Fri, 11/30/2012 - 05:02 | 3022974 R_J
R_J's picture

Paul Krugman is another perfect candidate for my AddBlockFilter, it does save some agro...

Thu, 11/29/2012 - 16:57 | 3021816 falak pema
falak pema's picture

why blame Krugman when he is just the invisible shroud?

The reality is the banksta cabal, the most potent threat to civilization. Why revile the King's buffoon when its the Emperor who is naked?

Have we come to mistaking the shadow for the real wild boar? 

ZH is becoming a blogsite for beating the wrong Masai drums. Its not the Masai delusional warrior who is the fool, its those who rape King Solomon's mines for their own lousy good.

Masai warriors don't understand the modern world. 

Thu, 11/29/2012 - 16:59 | 3021844 john39
john39's picture

the sleeping masses use krugman's propaganda as an easy deflection to anyone who claims that debt is a problem.  which no doubt is why he is where he is despite being ridiculed by anyone who actually pays attention to what is happening.

Thu, 11/29/2012 - 17:26 | 3021881 DaveyJones
DaveyJones's picture

More than the enabler, like any other criminal, bankers only do as much damage as the "government" allows. For something to go on this long, this deep, for former prosecuting experts like William Black to be ignored and silenced, for Goldman to be allowed to run the joint, government is more than the enabler, it is a co-defendant. 

Krugman and his ilk are more conmen than misconceivers

Thu, 11/29/2012 - 19:33 | 3022256 Optimusprime
Optimusprime's picture

Brandeis is forever bemirched by two things:

1) The manner of his nomination (blackmail of Wilson by a former Princeton mistress)

2) His providing the specious rationale for US declaration of war against Germany in WWI.

Thu, 11/29/2012 - 17:19 | 3021908 Joe Davola
Joe Davola's picture

I won't argue that he's zealous and without understanding, but well-meaning - I don't think so.

Thu, 11/29/2012 - 17:29 | 3021925 DaveyJones
DaveyJones's picture

exactly, history is ripe with moments when the common man's perception of his elected leader changes from idiot to felon 

Thu, 11/29/2012 - 21:45 | 3022523 Enslavethechild...
EnslavethechildrenforBen's picture

And that is exactly what Obummer is afraid of.

Thu, 11/29/2012 - 17:02 | 3021857 Bay of Pigs
Bay of Pigs's picture

We all know that. So give KrugTard a free pass?

No way....

Thu, 11/29/2012 - 17:04 | 3021859 Sextus Empiricus
Sextus Empiricus's picture

The Emperor is naked, but there are a lot of harlots laying around with him.  Sometimes pointing out the harlots and their ways is an easy way to realize why the Emperor has no clothes in the first place.

Thu, 11/29/2012 - 17:09 | 3021880 falak pema
falak pema's picture

thats right; stone the harlots and forgive the emperor, its those harlots who led his astray.

Your logic be that of perfect useful idiot. 

Lol, blame it all on mame! 

Thu, 11/29/2012 - 17:53 | 3021995 Sextus Empiricus
Sextus Empiricus's picture

lol... I don't think you're getting what I'm saying...

Not saying that the Emperor is to be forgiven, it's just that the harlots sleeping with him shouldn't be forgiven either.  And if the Emperor is hiding himself under all these harlots, sometimes its good to stone them one at a time in order to get down to the nakey butt of the Emperor trying to hide under them.

Don't forgive either party, since they are all complicit in the affair...

But by all means, don't bash someone else for pointing out the crimes of the harlot as they are talking about the crimes of the Emperor at the same time.

*Outside of the parable*... Krugman is a pawn, but he is complicit.  So why ignore him if you can take him out in the process?  He's just another piece of evidence that needs to be exposed.  You can't just go around saying "There are evil bankers, etc. in the world!!!!!!" without actually pointing any of them out and exposing why they are evil.  Exposing them exposes the evil that they are complicit in.

Thu, 11/29/2012 - 17:13 | 3021892 LawsofPhysics
LawsofPhysics's picture

Correct.  Follow the buffoon's puppet strings.

Thu, 11/29/2012 - 18:50 | 3022133's picture



why blame Krugman when he is just the invisible shroud?

The reality is the banksta cabal, the most potent threat to civilization. Why revile the King's buffoon when its the Emperor who is naked?

ZH is becoming a blogsite for beating the wrong Masai drums.


Yeah, why doesn't ZH ever publish articles about banks or bankers? I know I've never seen one.

Thu, 11/29/2012 - 21:51 | 3022536 Enslavethechild...
EnslavethechildrenforBen's picture

Usury is unpayable.

All paper money is counterfeit if it does not specify redemption of a quanity of something.

But don't talk about it.

That's not good for your revenue stream.

Keep the masses distracted, divert their attention to any other story, and get them to take sides against eachother.

Thu, 11/29/2012 - 21:57 | 3022551's picture

Well then get busy.

Thu, 11/29/2012 - 21:13 | 3022458 Blankenstein
Blankenstein's picture

Narcissists and bullies have no power unless they are surrounded by a bunch of lackies and proxies who are either cowards who are afraid to be the next victim, or more likely in the case of the bankers enablers, reveling in the abuse and theft and desire to benefit even if just a small crumb.  Krugman is worse than an apologist, he is a promoter.  

Thu, 11/29/2012 - 16:53 | 3021819 DoChenRollingBearing
DoChenRollingBearing's picture

I am dying to see what ZH-er "Dr Paul Krugman" now has to say...

Thu, 11/29/2012 - 17:02 | 3021854 Clueless Economist
Clueless Economist's picture

This piece is a character assasination of me.

How about you ZH nitwits get back to me, when you have won a Nobel Prize (just like me)

Until than shut your pieholes.

--Paul Krugman

Economist, Elitist, Ivy Leaguer, Columnist, Egotist, Nobel Winner, and all around douchbag

Thu, 11/29/2012 - 17:12 | 3021888 crusty curmudgeon
crusty curmudgeon's picture

Of all people, you ought to be able to spell douchebag.

Thu, 11/29/2012 - 17:42 | 3021940 TruthInSunshine
TruthInSunshine's picture

Dr. Krugman, could you please let me know if this quite short video sufficiently explains the mechanics of The Ben Bernank's Virtuous Circle? Thanks.


Bernank's Virtuous Circle Dissected

Thu, 11/29/2012 - 17:53 | 3021992 crusty curmudgeon
crusty curmudgeon's picture

That's awesome.  It almost makes the theory seem absurd!

Of course, I must suppress my common sense reaction in favor of he who wields a nobel prize.

Thu, 11/29/2012 - 18:00 | 3022002 TruthInSunshine
TruthInSunshine's picture

It's probably the most hilarious (to me) yet incredibly brilliant take-down of fractional reserve charlatanism (one does have to think about this content-- honestly) ever.

It's impossibly brilliant.

Paddy's Dollars = FRNs, bitchez!!

Thu, 11/29/2012 - 18:52 | 3022100 Daily Bail
Daily Bail's picture

Awesome, TIS. Love Sunnyin Philadelphia.  Now check this out for a pop-culture Fed Printing reference.

Takes about 1 minute.  This is definitely worth the click.

The Little Dictator: Bernanke On Gilligan's Island

Thu, 11/29/2012 - 17:25 | 3021920 caimen garou
caimen garou's picture

they give the NP to any ass that has the right amount of cash,you ass

Thu, 11/29/2012 - 16:54 | 3021824 HelluvaEngineer
HelluvaEngineer's picture

Misconception: A beard makes you look less gay.

Thu, 11/29/2012 - 16:59 | 3021838 Bay of Pigs
Bay of Pigs's picture

The Bearded Potato.

And Fuck You too Bernanke!

Thu, 11/29/2012 - 16:57 | 3021826 Cognitive Dissonance
Cognitive Dissonance's picture

Please don't encourage him (and his followers) any more by debunking him. That just feeds his neurosis.

<Instead just let him and his ideology wither away and die a natural death.>

Thu, 11/29/2012 - 16:56 | 3021831 adr
adr's picture

Don't post about Krugman, he might show up again and I don't feel like taking the time to disprove him over and over and over and over and over.

Thu, 11/29/2012 - 18:53 | 3022145's picture






Thu, 11/29/2012 - 16:57 | 3021833 IridiumRebel
IridiumRebel's picture my fellow intellectual freedom fighter, ebworthen, stated, "the bearded potato".


Fuck You Paul Krugman.

Thu, 11/29/2012 - 16:57 | 3021834 ziggy59
ziggy59's picture

I hope thats Chateau De Equine urine

Thu, 11/29/2012 - 16:58 | 3021835 TahoeBilly2012
TahoeBilly2012's picture

Champagne socialist. This guy, like every liberal, makes zero sense. They claim to believe in being globally "egalatarian" yet the espouse a fascist belief that the US should be able to force as much trash currency on the world as they like, expecially through social spending in the US. They are morally and fiscally bankrupt.

Thu, 11/29/2012 - 16:59 | 3021839 Ms. Erable
Ms. Erable's picture

Fuck you, Berkrugnankman!

Thu, 11/29/2012 - 17:36 | 3021960 TruthInSunshine
TruthInSunshine's picture

Ahem, the slut/easy ass +1 of ZH (and yes, I reflexively upp'd you; resistance is futile)

Thu, 11/29/2012 - 17:05 | 3021843 El Viejo
El Viejo's picture

However, the Europeans think: "No pain, no gain."

And once critical debt mass has been reached the debt decay is 10,000 years so ... we are left with one solution:

Jubilee !!!

Is that Icelandic for Do Over???

(memo to bankers: Yes there is risk in banking.)

Thu, 11/29/2012 - 17:11 | 3021887 Marco
Marco's picture

Risk? I guess there is a small chance of all out socialist revolution and heads on pikes and in baskets ... but other than that what risk do they have? Not being able to steal more millions and having to satisfy themselves with half a dozen mansions and yaughts while crying into their caviar?

Thu, 11/29/2012 - 17:32 | 3021917 El Viejo
El Viejo's picture

Hundreds of banks have gone belly up(thousands world wide) and yes that head on pike thingy.

They try to hide it of course(full faith and credit illusion). Parts of Lehman bros are still in business. Under a new name of course. Call it the the Twinkie comeback. A new name and face and strategy hopefully.

Thu, 11/29/2012 - 17:02 | 3021853 Sextus Empiricus
Sextus Empiricus's picture

"Dangerous" may be an understatement.  Insane, though, is usually defined as doing the same thing over and over again, yet expecting a different result.

Thu, 11/29/2012 - 17:29 | 3021926 crusty curmudgeon
crusty curmudgeon's picture

That definition doesn't work when it comes to computers.

Thu, 11/29/2012 - 17:03 | 3021858 buzzsaw99
buzzsaw99's picture

he gots a nobel what choo got bitchez? [/troll]

Thu, 11/29/2012 - 17:12 | 3021890 Joe Davola
Joe Davola's picture

Knowledge, not claptrap passed off as knowledge.

Thu, 11/29/2012 - 17:15 | 3021900 Zero Govt
Zero Govt's picture

er, common sense

Thu, 11/29/2012 - 17:07 | 3021867 Yen Cross
Yen Cross's picture

 Kruggmann/ Not worth hating/

  Spineless NOBEL Laureate/

Thu, 11/29/2012 - 17:07 | 3021868 surf0766
surf0766's picture

Is he drinking pee pee from ebay?

Thu, 11/29/2012 - 17:14 | 3021870 LawsofPhysics
LawsofPhysics's picture

Mr. Krugman needs to go across campus and get instruction from his collegues in Physics and Chemistry.  A class in thermodynamics would also be helpful.  Innovation isn't as easy (especially from an energetic viewpoint) as he thinks, but in a corrupt empire where fraud is the status quo, the truth is the enemy. Of course we all also know that academics must play ball if they want tenure or nobel prizes.  But I digress.  Krugman is not the real evil here and he will be offered up by the banksters at the first sign of trouble.

Thu, 11/29/2012 - 17:44 | 3021978 Everybodys All ...
Everybodys All American's picture

Krugman is not the real evil? No he is just the devil incarnate mirror image of Bernanke with an ongoing Huffpost daily story printing about the glory of monetizing the US toward debt enslavement. There I fixed it.

Thu, 11/29/2012 - 17:08 | 3021873 Count de Money
Count de Money's picture

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear.” - Cicero

Thu, 11/29/2012 - 17:43 | 3021912 falak pema
falak pema's picture

You know how wrong Cicero was on that!

It was the ambitious One who led to his downfall. Amen to Cicero and Marc Anthony's plunging sword. 

It is always the decadence from within, singing " traitor", which is the actual perpetrator of decadence, all in name of hubris, disguised in self righteous rule of law. Its the over-riding thread of civilization, those who scream "treason" to hide their own charlatanism. 

Rare is the traitor in history who undoes a true, just king. And lives to talk about it. Its happened : Henry IV of France and Ravaillac. Many others; but few in comparison with the Neros of this world. Hitler and Krystal night! 

Casus belli for Inquisition.

Thu, 11/29/2012 - 17:08 | 3021875 Zero Govt
Zero Govt's picture

"Paul Krugman's Dangerous Misconceptions"

Where to start?!! ...i could be here all friggin night on this one

Thu, 11/29/2012 - 17:09 | 3021877 JailBank
JailBank's picture

One of the best articles I have read on ZeroHedge in a bit. This is why I love this site.

Thu, 11/29/2012 - 17:13 | 3021893 Dr. Engali
Dr. Engali's picture

Little beknownst to the rest of the world the bearded potato (thank you ebworthen) has been stacking all his life while using his credentials as a Nobel Laureate economist to get the suckers to print.

Thu, 11/29/2012 - 17:13 | 3021894 Yen Cross
Yen Cross's picture

 Let's trade/ I broke even/

   One day you will wake up! SLAMMED into the dirt! Buy The Dips @ the top!

  Tom Stolper(squid) style... The guy is batting 1002%

Thu, 11/29/2012 - 17:14 | 3021895 francis_sawyer
francis_sawyer's picture

Keep drinking that kool-aid flavored Manischewitz champagne [chosen] boy...

Thu, 11/29/2012 - 17:15 | 3021899 Yen Cross
Yen Cross's picture

LONG XAU! Buy  that fucking dip!


Thu, 11/29/2012 - 17:20 | 3021913 caimen garou
caimen garou's picture

It always amazes me the range of idiocy by the so called experts in this country! why does it amaze me so? because they honestly believe the crap that they spew out of their mouths.

Thu, 11/29/2012 - 17:22 | 3021916 jomama
jomama's picture

just laying eyes on this smug fuck makes me nauseous.

Thu, 11/29/2012 - 20:34 | 3022382 californiagirl
californiagirl's picture


And makes my skin crawl.  His photo is revolting enough. If I ever had the misfortune of being in his presence, I would feel like rushing home to delouse!

Thu, 11/29/2012 - 17:28 | 3021924 Yen Cross
Yen Cross's picture

Being Born comes to mind! Being fiscally responsible, and RETARDED?   Just shoot me! Put me OUT of Krugmans misery!

Thu, 11/29/2012 - 17:36 | 3021958 Mad Muppet
Mad Muppet's picture

His Momma longed ugly, and shorted crazy. She was half right.

Thu, 11/29/2012 - 17:38 | 3021961 matsoR
matsoR's picture

Heh, this 3 night lecture series krugman gave at the london school of economics(LSE) really says it all.

Keynesian economics has not and never will work.

Thu, 11/29/2012 - 17:40 | 3021970 azzhatter
azzhatter's picture

Krugman's drink of choice

Thu, 11/29/2012 - 17:55 | 3021997 Yen Cross
Yen Cross's picture

 SANs the "CHOOM WAGON"  Bitchez.

Thu, 11/29/2012 - 17:56 | 3021998 Professor Fate
Professor Fate's picture

Well said by Caimen.  Its friggin' frightening that this pompous ass says what he says and the uneducated "pods" believe it.  What is truly incredible, however, is that this idiot actually believes his own layers upon layers of bullshit and because he won an "Economic Oscar", decision making libs assume he has his head out of his ass and then try to implement this crap.  Can't wait for the day when entrepreneurial America finally says "f*ck you" and shuts down, the unions fold and collapse, and the massive ranks of the unemployed pods chase this Keynseian body snatching clown through the streets of New York with Timmy G. between his legs.

"Push the Button, Max"

Fate the Magnificent    

Thu, 11/29/2012 - 18:07 | 3022017 jomama
jomama's picture

liberals and conservatives alike gobble up his tripe. 

nor is it 'libs' that dictate domestic financial policy.  nice shot at a swipe, though.

Thu, 11/29/2012 - 18:13 | 3022022 slackrabbit
slackrabbit's picture

Let him chat and let Ben print, just keep stacking barbarous relics and let history decide.

Thu, 11/29/2012 - 18:16 | 3022026 TNTARG
TNTARG's picture

Interesting. I was thinking... They want all the money? Then we'll print such an ammount so they cant stick it up in their... pockets.

In the end, we'll all have to go back to the real Economy, the one in which "collateral" backs up printed paper, the Social Science which is about dealing with scarce resources.

This horrible Casino we've managed to create (or allowed to be created) makes me think of returning to fundamentals.


Thu, 11/29/2012 - 18:20 | 3022038 Svendblaaskaeg
Svendblaaskaeg's picture

Champagne socialist

Hugh Hendry's 'Greatest Hits' Hendry's 'Greatest Hits'


Thu, 11/29/2012 - 18:19 | 3022040 Tombstone
Tombstone's picture

The problem with the gov stimulating things is that they waste 80% of their funds. They throw money down ratholes and shove it into favorite projects to buy votes.  I would bet that 25% of the current deficit is nothing more than uncontrolled waste, fraud and abuse.

Thu, 11/29/2012 - 18:22 | 3022045 fresno dan
fresno dan's picture

Like a lot of economists, Krugman likes to aggregate.  It really (really!) never occurs to him that oil rising by 20 percent would be a disaster, despite the fact that clothing, tV's and me-pad prices would plummet...making inflation look not so bad.  Kind of like housing cratering - not a problem cause we owe the debts to ourselves.

(and isn't CPI tracking ...interesting - leave out food and energy because they are soooo violatle!)

But Krugman would get his COLA, and he would say you little people are just to dumb to understand how much the FED has done for you...

Thu, 11/29/2012 - 18:27 | 3022055 Aurora Ex Machina
Aurora Ex Machina's picture

In the UK, there's been zero trickle down, so the article is incorrect; Austerity really is here. £375 billion certainly hasn't ended up in the main street economy, and neither can I really see it in the banks (fewer deals being done, plenty of the same holes 2008 gave the bigs ones, lots of layoffs and so on).


Does beg the question where the fuck it did go, though. The Olympics didn't cost that much.

Thu, 11/29/2012 - 18:54 | 3022151 jmcadg
jmcadg's picture

Who has benefitted from UK £375 billion? Not the people. Neither do they benefit from the virtual zero interest rate.

Bar a few variable rate mortgage holders that track interest rates, I do think it's the banks that cash in and load their balance sheets. Banks are gaining from the low interest rates and offering mortgages at 5-7%, that's a pretty good 450 - 650 basis point spread and loans at 8-10% or more, 750 - 950 basis point spread for nothing. Savers get jack shit.

So good work on that one BOE.

Thu, 11/29/2012 - 18:55 | 3022150 GrinandBearit
GrinandBearit's picture

Look at his face...

Look at his eyes...


Thu, 11/29/2012 - 19:20 | 3022217 Aurora Ex Machina
Aurora Ex Machina's picture

Big Black Eyes.


Nothing wrong with that. Unless you taste nice, and are on the menu, of course.

Thu, 11/29/2012 - 19:31 | 3022246 roadlust
roadlust's picture

Krugman haters getting their free kicks in.  Always amazing that so many brilliant economists come to this site to share their genius like this.  Makes sense that if Dick Cheney could be considered "qualified" to run a major corporatation after never having a job in his life, ZH readers are qualified to run the world economy from their keyboards.  In their pajamas.  Burp.

Thu, 11/29/2012 - 20:00 | 3022315 Aurora Ex Machina
Aurora Ex Machina's picture



Fixed that snark for you.

Thu, 11/29/2012 - 19:33 | 3022259 jvetter713
jvetter713's picture

Krugman - IQ of 110 tops.  Enough said.

Thu, 11/29/2012 - 20:01 | 3022319 Schacht Mat
Schacht Mat's picture

Krugman is wrong on so many accounts that it is hard to separate that which has any validity from the balance, which is, on average, pure fertilizer.  Printing for prosperity makes about as much sense as bombing for peace or fornicating for virginity.  It has not worked before and it will not work again.  The only issue is time.  To make things worse, over half of the stated US GDP is based upon gains from either pure financial manipulation or from invented sources (such as rent paid to oneself for property that one already owns - wait until they try to tax that one ...)  It is interesting that the Chinese rating agencies (whom the US conveniently chooses to ignore and discredit) peg the GDP of the US much lower than the US does precisely because they do not consider economic gain from purely financial manipulation of the many variants of monetary tools to be any different than printing the money itself (wait until the US starts to declare newly created money to be part of the GDP - must be Krugman's next article .... can't wait).  In reality, using a true GDP analysis, US stated debt is nicely over 200% of true GDP - and this means that the die is cast - the fix is in - the US is done.  Right now, US debt is like a tree that has already rotted out at the roots, and due to a stiff international wind has started to lean past its point of balance.  It will go over - it is just a matter of time.  The only problem is that it is currently night, and most people cannot see that the tree is leaning.  Krugman is standing at the edge of the forest and telling us that all is well..... yeah  -  OK - enjoy the cheerleading while it lasts.

Thu, 11/29/2012 - 21:40 | 3022513 Blankenstein
Blankenstein's picture




Paul Krugman is the Bagdad Bob of the American fiat ponzi.  

Thu, 11/29/2012 - 21:14 | 3022457 woggie
woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly

Fri, 11/30/2012 - 12:27 | 3023866 Fepericzer
Fepericzer's picture

I'm not really understanding the rationale for the vituperation regarding Krugman.  The USA's politicians (like other countries' politicians) are too short-term-focused to have ever tried his solutions.  While Krugman and most other professional economists certain have the quantatative chops, it is also clear that there is a psychological element in economic cycles that is not strictly quantatative.  Thus, while no one would say that we can consume our way to prosperity, someone has to make the first move, and that someone is the federal government.  All we are talking about is priming the pump.  The fact that politicians do not have the self-control to follow the principle during good times (expansions), when they should run (and sock away) fiscal surpluses (either from program cuts or tax increases, does not mean that the principle is wrong; it means the implementation is wrong.  It sounds like readers are worried that the federal government, if allowed to implement Krugmanesque stimulus, will not not the self-control to take the foot off the gas pedal when the good times are rolling.  The FR, as designed, should play a very minor role in the American economy.  Monetary policy should be about 5% of your policy lever and the rest should be fiscal policy.  The FR has been forced to play a larger role only because Congresses and Presidents have been too cowardly to operate the fiscal policy lever, particularly the part about taking away the punch bowl once the party has started.  Since 1980 politicians have become Santa Clauses, ever wanting to give middle and upper class voters the bad news that their government programs need to be cut and their taxes need to be increased once recessions have ended.

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