Guest Post: Krugman Claims He Has Been Right About Everything

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Submitted by John Aziz of Azizonomics

Krugman Claims He Has Been Right About Everything

I don’t think Krugman’s descriptive work on global trade patterns is bad. I don’t even think he has been completely wrong about the post-2008 economic depression. He certainly hasn’t been wronger than the people who are in charge in Europe, or the people running the Fed; he did, after all warn in 2005 that the Fed was “running out of bubbles” to reinflate, while Bernanke was still claiming in 2007 that subprime was contained.

I do think his defence of broken windows is facile, and I think the notion he has advanced that World War 2 ended the Great Depression is not just wrong but dangerous.

He’s a good polemicist; he defines himself through big, bold, wildly partisan claims. But if he’s going to claim that he’s been right about everything — as he just did — he might want to make sure he’s not directly contradicting statements he made just a week previous.

On June 18th Krugman posited:

I (and those of like mind) have been right about everything.

However on June 11th Krugman wrote:

People like me may not have been right about everything, but have accumulated a pretty darn good track record over the past 5 years.

So, um, which is it?

Nobody can be right about everything. Claiming that you have been is just silly hyperbole which will end up making you look bad especially when your record is, in reality, quite mixed. And if his goal is to convince policy-makers to ditch austerity (a goal that I share, at least for the time-being), he’s not going to do it by sticking his foot in his mouth.

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Thu, 06/21/2012 - 19:25 | 2549140 SilverTree
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Krugman Claims...

Thu, 06/21/2012 - 19:43 | 2549169 vast-dom
vast-dom's picture

definition of a shit: someone that has to be right all the time.

Thu, 06/21/2012 - 19:44 | 2549205 lemonobrien
lemonobrien's picture

i thought that was an asshole.

Thu, 06/21/2012 - 20:01 | 2549246 Element
Element's picture

He's just a very special chap.

Thu, 06/21/2012 - 20:05 | 2549259 mickeyman
mickeyman's picture

It's not all his fault. It's the economics. 

Neo-classical economics: A trail of economic destruction since the 1970s (pdf link below)

http://www.paecon.net/PAEReview/issue60/Reinert60.pdf

Thu, 06/21/2012 - 20:42 | 2549317 The Big Ching-aso
The Big Ching-aso's picture

 

 

Proof that once ya win a Nobel Prize U can talk absolute gibberish & get a free pass 4 life from TPTB & MSM.   It's like an automatic get out of being committed 2 any state mental institution 4 free card.  It's quite possible he has completely lost his mind & lives in a grandeur-delusional schizophrenic haze but everyone around him tries to pretend he's ok.   Kinda like Reagan in later years.     The alien invasion boosting the economy deal points 2 quite possibly some serious cognitive-deficiencies.

Thu, 06/21/2012 - 20:45 | 2549358 Jack Napier
Jack Napier's picture

The body snatcher that we refer to as Paul Krugman is just aching to jump out of his skin and eat your brain. I can't look at him without wondering what planet he is from. What a creepy dude, and a pompous tool. I wish he would disappear. I wish he would disappear. I wish he would disappear.

Thu, 06/21/2012 - 20:54 | 2549383 The Big Ching-aso
The Big Ching-aso's picture

 

 

There's a fine-line between genius & insanity.  OTOH, maybe he was never a genius but has always been insane?

Thu, 06/21/2012 - 20:56 | 2549393 GetZeeGold
GetZeeGold's picture

 

 

There's a fine-line between genius & insanity.

 

We call that a Jackass where I was raised.

 

Thu, 06/21/2012 - 21:30 | 2549491 Jack Napier
Jack Napier's picture

Not to be confused with the hallowed Golden Jackass

Thu, 06/21/2012 - 22:16 | 2549641 Surly Bear
Surly Bear's picture

A clock is right twice a day.

Thu, 06/21/2012 - 22:43 | 2549693 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Any one who has ever met a narcissist knows that they will claim they are right even if the proof they are wrong is sitting right in front of everyone to see. Most professors these days are clueless narcissists and care less if they are right or wrong. They just want to be heard and convince others that their lies are correct.

Fri, 06/22/2012 - 01:15 | 2549876 TruthInSunshine
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So John Aziz share's Krugman's goal of piling on mountains of debt to an already existing Mt. Everest of debt as the medicine for that which ails the economy (as a result of radical central bank interventionism that had distorted, warped and broken price discovery, moral hazard, and anything resembling actual markets, huh?

Go figure. Another blogger with his head up his ass.

 

http://4.bp.blogspot.com/_9n4xrwD-LUQ/TMd4PEUilHI/AAAAAAAABOM/vMPNzEgpJa...

NOT fake Google+ Krugman quotes (I repeat, these are actual quotes of Paul 'Print An Amount of FRNs That Equals the National Debt to Pay off the National Debt' Krugman):

Three days after the September 11:

I.

It seems almost in bad taste to talk about dollars and cents after an act of mass murder. Nonetheless, we must ask about the economic aftershocks from Tuesday's horror. These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack - like the original day of infamy, which brought an end to the Great Depression - could even do some economic good. But there are already ominous indications that some will see this tragedy not as an occasion for true national unity, but as an opportunity for political profiteering..... 

So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects. First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending.

II.

PAUL KRUGMAN: Think about World War II, right? That was actually negative social product spending, and yet it brought us out. I mean, probably because you want to put these things together, if we say, "Look, we could use some inflation." Ken and I are both saying that, which is, of course, anathema to a lot of people in Washington but is, in fact, what fhe basic logic says. It's very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish, you know, a great deal. If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better –


ROGOFF: And we need Orson Welles, is what you're saying.

KRUGMAN: No, there was a "Twilight Zone" episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don't need it, we need it in order to get some fiscal stimulus.

III.

“Those tax cuts, rather than the spending binge, are the primary cause of the (federal) deficit.”

IV.

“The great thing about Greenspan,”

And for the win (all the Krugmanites will chime in here to claim he was taken out of context):

V.

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance.To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

---- Krugman's lame claim that he was taken out of context above:

"Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened."


#WinningWithEnronKrugman

Fri, 06/22/2012 - 01:34 | 2549973 Aziz
Aziz's picture

As a deficit hawk, I cannot endorse a policy like austerity that during a depression leads to bigger deficits due to falling tax revenues.

I don't support stimulus either because it's mostly just handouts to corporate cronies. I support having a free market — getting rid of barriers to entry, getting rid of regulation, getting rid of corporate subsidies, getting rid of corporate personhood, cutting taxes, etc — something that neither the stimulationists nor the austerians seem to care about. You can repeal all the bullshit regulation without slashing spending, and then once you have some economic recovery — which a free market will give you — you can really start cutting spending.

And I did just call his view on war and digging ditches dangerous. Where I agree with him I'd say it's probably as much a case of a broken clock being right twice a day as anything else.

Fri, 06/22/2012 - 01:55 | 2549993 TruthInSunshine
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Deficit spending is antithetical to 'free market' economics as it necessarily denotes that government is too large, that revenue derived from the private sector is too little, or a combination of each, and that government policy is interfering with normal market clearing mechanisms, and delaying the onset of the only thing that can allow the economy to grow organically and in real terms again; to with, equilibrium.

Deficit spending never leads to sustainable, organic, economic growth because it necessarily involves the government subsidizing inefficient economic actors at the expense of savers (and consumers, for that matter; see how spiking commodity prices as a result of treasury and federal reserve fiscal and monetary policies acts as a tax on consumption).

Further, deficit spending inevitably involves propping up economic institutions and, in fact, entire sectors in and of the economy that the market would have deemed redundant, inefficient, unnecessary, unable to compete, and generally offering services and goods for which there is no real demand for.

Moreover, deficit spending at a rate that equals $1.44 spent for each $1 the government is receiving, at a time when extremely serious and credible economists (David M. Walker, Larry Kotlikoff) have put forth mathematical models demonstrating that the nation literally won't be able to repay it's EXISTING debt absent a de facto default on its bonds (i.e. only by debasing the currency to a radical degree over a relatively short period of time could prevent a 'technical' default) is the definition of insanity.

You might as well have said you agree with Krugman that deficit spending would be helpful, on a net-net basis, but only because the national debt won't be paid back anyways (again, absent massive debasement), so why not rack up as much debt as we can while we can before filing for bankruptcy?

I could go on why your assetion on deficit spending in the context of the United States is lunacy, especially at a time when we're not in a cyclical macroeconomic downturn, but rather, one brought about by structural changes (despite the unsubstantiated claims of Krugman), but it would take all night.

Fri, 06/22/2012 - 02:28 | 2550022 Aziz
Aziz's picture

We are in a cylical global macroeconomic downturn if viewed from the perspective of the Kondratieff wave (which by definition is a cyclical economic downturn brought on by structural-techological changes). At the very least, it should be very clear that the economy is depressed.

I think that default or default-by-debasement is inevitable, yes. I don't really have a problem with the idea that it will happen. That's the nature of fiat money (which is a topic that I think we both know I massively disagree with PK on). If you buy a bond from a government with a printing press chances are you will be taking a haircut. Don't like it? Buy some metals. 

You make good points against deficit spending as malinvestment (it is), but European-style austerity seems to produce bigger deficits. Once a society is hooked on government spending, slashing it will necessarily cause some contraction, and while the economy is otherwise contracting that will be magnified. 

I want to slash regulation and encourage a recovery that way and then deal with the debt addiction once there is more of a self-sustaining recovery. I would advocate some real cuts, but they would mostly be the Ron Paul-ish defence and overseas cuts, and the savings would go back to taxpayers, not to paying down debt. I think that if so-called free marketeers push enforced contractionary policies, it will just push public opinion back into the court of the big government Keynesians. 

Ideally, we would have started this economic cycle with a full liquidation of all the junk in 2008, but that didn't happen and so we are now left with a zombie economy. The "austerity" we should have had is not bailing out the junk in the first place. 

Sat, 06/23/2012 - 00:10 | 2553128 TruthInSunshine
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Like I said, there's nothing CYCLICAL about this economic malaise.

Anyone claiming that this is cyclical, versus structural, is clueless about macroeconomics.

As just one example, the downturn the U.S. experienced back in the 1979 through 1983 period was cyclical, and was initiated by by a sudden and brutal oil shock, which then literally provided the kindling for prices on goods to soar and aggregate demand to fall.

When demand for goods declined in that era, companies pink sheeted workers, especially in the manufacturing sector. Companies DID NOT move their factories, offices and R&D centers, brick by brick, overseas. And companies actually hired many of the workers they had previously furloughed at the same wages or higher ones, once Volcker ramped interest rates skyward, to break the back of inflationary pressures.

Today, there's little private sector (i.e. consumer) domestic aggregate demand for goods & services, despite record low interest rates, because so many millions upon millions of formerly high wage jobs have been shipped to lower wage, lower cost of business activity, less regulated nations such as Mexico, China, India, etc.

The 'knowledge worker' theory, which Robert Reich and Lester Thurow (former dean of the MIT Sloan School of Management) endorsed with vigor, claimed that the U.S. could afford to outsource manufacturing jobs, because the U.S. had a competitive advantage in the highly skilled and professional segments of the global workforce, and that the U.S. economy would adapt to not only backfill all the outsource manufacturing and other jobs created as a result of free trade pacts (especially China's Most Favored Nation trading partner status, signed into law by Clinton), but that unemployment would actually fall as a result of so many 'knowledge worker' jobs being created.

You eat up every tasty morsel of bullshit Krugman feeds you. Start thinking for yourself.

Thu, 06/21/2012 - 22:51 | 2549716 Mr. Fix
Mr. Fix's picture

Then you can not compare Paul Krugman to a clock.

 And I disagree with the premise of the article that this man was ever right.

 He is wrong now, was wrong then, and always will be wrong.

 

 By the way, I am assuming you are comparing him to a broken clock.

  That would be an insult to broken clocks everywhere.

Fri, 06/22/2012 - 03:53 | 2550063 AldousHuxley
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you've got to admit, it takes a genius to get things always wrong.

Fri, 06/22/2012 - 06:05 | 2550136 theprofromdover
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(a clock is right twice a day)

... not if it is 5 minutes slow ...

Thu, 06/21/2012 - 22:05 | 2549620 EINSILVERGUY
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or an idiot savant with the idiot being the operative and dominant part

Thu, 06/21/2012 - 23:34 | 2549804 ZeroAvatar
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Three times is indeed the charm.  Krugman's whole life evolves around magickal thinking.

Thu, 06/21/2012 - 20:50 | 2549372 knukles
knukles's picture

Just way too much wrong with him in too many ways to even begin a detailed recitation.
To entitle his efforts "The Conscience of a Liberal", to publlish in the NY Times, to defend the incomprehensible and indefensible in inarticulate illogical manner defines his entire frame of reference and utility to others than cogent responsible individuals.

Seriously; in the company of Thomas Freidman and Maureed Dowd, to claim credibility? 

Perhaps Paul himself represents the interplanetary invasion from which we must defend.

Fri, 06/22/2012 - 08:07 | 2550278 TWSceptic
TWSceptic's picture

I would actually make the statement that the Nobel Prize does much more harm than good to society.

 

Did Obama really change his policies because of it as they hoped by giving him the prize as a "motivation" ? He spend just as much, if not more on war as any other president of the last decades.

 

And who knows how much the economy and free market suffered because the keynesians now get undeserved respect?

Thu, 06/21/2012 - 20:30 | 2549323 AldousHuxley
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austerity is needed

it is just the political question of austerity on whom?

 

conservatives want austerity on the poor for being poor, which is wrong.

democrats want welfare for all including bankster bailouts, which is wrong.

 

Thu, 06/21/2012 - 20:33 | 2549332 Michael
Michael's picture

Paul Krugman is our village idiot.

Thu, 06/21/2012 - 21:38 | 2549527 Yes_Questions
Yes_Questions's picture

 

 

What is Useful village idiot, Alex..

Thu, 06/21/2012 - 22:27 | 2549661 FEDbuster
FEDbuster's picture

It takes a village of idiots....  What is Washington, D.C., Alex

Thu, 06/21/2012 - 22:46 | 2549702 beentheredonethat
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Yes, I have become bored with this econ village idiot-surely there are others out there to write about?

 

Thu, 06/21/2012 - 22:53 | 2549720 tobus
tobus's picture

These days everyone wants bailouts and welfare for everyone. You only have 1 politician in the whole place that isn't in favour of infinite bailouts for everyone.

Ron Paul the last American in government.

Fri, 06/22/2012 - 08:16 | 2550292 TWSceptic
TWSceptic's picture

Most conservatives / republicans do not really want austerity either, they want to spend, and maybe here and there cut a bit but it's really not enough. The only political group who really wants to cut spending are the libertarians, but they have no power.

 

And it shouldn't be about the poor or the rich. That is irrelevant socialist nonsense. If you truly cut spending, everyone feels the pain. But politicians don't want that. They want to get reelected and so no one can feel the pain, until of course the whole thing implodes and the pain is that much worse for everyone.

Fri, 06/22/2012 - 01:51 | 2549994 James-Morrison
James-Morrison's picture

Like all of Klugman's other predictions, this one is...

...useless, boneheaded and WRONG!

Fri, 06/22/2012 - 03:09 | 2550045 Cassandra Syndrome
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Not one mention of an Austrian School economist in that paper. Here's a critique of Neo Liberalism from Murray Rothbard written in 1971 before it became mainstream economic policy.

http://www.lewrockwell.com/rothbard/rothbard43.html

BTW - Keynesian Economics is part of the Neoclassical Synthesis that is in mainstream textbooks. That includes the tripe Krugman preaches as a New Keynesian. The Mathematical approach that is criticised in that paper was called Neo Keynesian economics.

Neo Liberal economists such as Friedman were Keynesians to begin with. 

 

 

Thu, 06/21/2012 - 22:58 | 2549735 Mr. Fix
Mr. Fix's picture

I would really enjoy seeing that guy in the picture standing under  an  umbrella hit in the face with a firehose,

 with so much force that it would throw him off his feet.

 

 Just thinking out loud........

Thu, 06/21/2012 - 22:09 | 2549625 Angel Face
Angel Face's picture

If you get close enough to an asshole, it looks like shit

Fri, 06/22/2012 - 05:55 | 2550131 dexter bland
dexter bland's picture

Well he was wrong about that scarf.

Thu, 06/21/2012 - 19:38 | 2549180 sunaJ
sunaJ's picture

Krugman may not always be wrong, but the one thing that drives me bonkers about him is that he never addresses corruption.  The whole thing is corrupt, so what "solution' from within the system would work?  He is a theocrat (theory is all that matters).  He's too mousey to realize that he is speaking academics to immoral knuckle-draggers.  That, or he is one himself.

There needs to be a draining of both academic fixes and money-chasers from the abscess that is our economy.

Thu, 06/21/2012 - 19:42 | 2549199 xcehn
xcehn's picture

He is in it (neo-liberalism), for the long haul. Just concedes that some reforms would make it all better. Basically a corporatist/statist with a platform.

Thu, 06/21/2012 - 19:49 | 2549217 malikai
malikai's picture

The only platform I see is more debt, more false growth(bubbles), and more economics by dictat.

What I don't get is why we even give him the attention he so definitely does not deserve.

Thu, 06/21/2012 - 20:53 | 2549381 knukles
knukles's picture

              IDEA!

 

Switch places with him and Stolper!

Fri, 06/22/2012 - 08:38 | 2550361 trilliontroll
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"What I don't get is why we even give him the attention..."

For example history as a reason?

Heinrich Brüning , Chancelor of Germany from 1930 to 1932

http://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning

" ...

Soon after Brüning took power, he was confronted by an economic crisis caused by the Great Depression. Brüning responded with a tightening of credit and a rollback of all wage and salary increases. These policies made him very unpopular and lost him the support of the Reichstag. ..."

( Brüning installed severe austerity raising German unemployment to 6 million with a population about 65 million. His desasterous deflation economic policy resulted

in Adolf Hitler as Chancelor of Germany in 1933. )

Thu, 06/21/2012 - 20:27 | 2549313 Element
Element's picture

The practical solution to academified guys like him (similar to petrified - but subtly different) is straight forward.

You ask a room full of experienced SMALL business people (the people who actually deal with the economy) if they agree with his views, his hystorical narratives, his policy prescriptions, long-term ramifications, and general implications.

If they think he's talking unrealistically counterproductive self-aggrandising pseudo-glorious bullshit, then perhaps he should not be deferred to and given air-time to insult their intelligence?

 

'The Special-K Challenge' ... the 'austerity' that will make you fatter.

Thu, 06/21/2012 - 20:40 | 2549344 potlatch
potlatch's picture

yes, let's turn economic theory peer review into an Arby's franchisee meet and greet

Thu, 06/21/2012 - 21:43 | 2549413 Element
Element's picture

Have you considered that theory is the problem here?

Sorry, small business people and everyday over-taxed wage-earner can't afford such theoretical buffoons and their 'experiments' to get away with it.

Which came first; the economy, or the theorist 'economic policy-adviser'?

HINT:  if all the economic experts dropped dead tomorrow the real economy wouldn't skip a beat ... yeah ... that's how relevant they are to the basic natural tendency for economy to function ... in spite of them.

Thu, 06/21/2012 - 22:37 | 2549680 Sean7k
Sean7k's picture

You can say that about all academics in all disciplines. However, down the line, there could be difficulties.

Fri, 06/22/2012 - 01:39 | 2549920 Element
Element's picture

Yeah, ... like now.

(and this is about K-economics, I don't see how it could be appllied to all disciplines)

--

Some things I learned at Uni

(1)  A library is a pretty worthwhile asset, except for most of the books (not unlike the Internet, but a whole lot less responsive).

(2)  Lecturers know stuff that's almost always more or less wrong, trivial, or irrelevant, and may openly fly in the face of common real-world experience ... for decades ... unchallenged.
 
(3)  That theories are to be regarded with unreserved scepticism, but only because 99.9% of the time, they're more-or-less bunk.  They representing very poor odds, are a house of cards, and are an exceedingly poor substitute for knowledge and wisdom.  A large proportion of fantastic-lies, are more likely to be true.

(4)  Speculative theorists are not to be listened to, believed, recognised for their input, nor encouraged in any way - and this particularly applies within economics.

(5)  In spite of their best efforts, one can remained somewhat sane, fairly-grounded and almost capable of thinking reasonably clearly for oneself, if one understands the limits of knowledge and thought. And that means things that are not, or else can't be known, must be recognised and left that way, and not have unverifiable of false 'answers' theoretically forced onto them, then have everyone blindly accept these fake theoretical non-answers, to what are unknown matters.  We don't have to 'know' everything.  What we know we don't know, is all about being actually intellectually honest (at least with yourself), and certainly more helpful.  This was not the academic approach at university, where the holes in knowledge were immediately papered-over with an ad-hoc theoretical mucilage of belief-based pure-bullshit - then declared to be "the Known", by the 'experts'.

(6)  Ignoring expert academics is a good rule-of-thumb for success in most areas of life.  That much needless kafuffle results with in news of politics and society, solely due to the errant nonsense issuing forth from academic experts on a daily basis.  People more and more are coming to understand the motives for why they keep doing this, and why politics and MSM love to utilise it.

--

The economic and financial experts have not saved us from NOW.

Q.E.D.

Thu, 06/21/2012 - 20:54 | 2549382 centerline
centerline's picture

Thank you for noticing that.  And it is not just him.  I have cornered a few economists over the last few years and they all have the same response.... the sound of crickets chirping.  Always jumping back to the abstract.

Krugman isn't stupid IMO.  His avoidance of the role of banking in his theories really reeks of something bigger... pandering to the powers that be.  No different than many notable economists throughout the ages.

Thu, 06/21/2012 - 21:06 | 2549431 cranky-old-geezer
cranky-old-geezer's picture

 

 

but the one thing that drives me bonkers about him is that he never addresses corruption. 

Because his job is to keep the cover story going that printing will help the economy recover, which it never does of course, because it's just a cover story for looting the American economy (and people) of all their wealth, which he is fully aware of I suspect, but then maybe not, maybe he's an outsider they toss a bone to every so often to keep him spouting the cover story.

Fri, 06/22/2012 - 00:09 | 2549869 bankruptcylawyer
bankruptcylawyer's picture

this is NOT an accident. He is a schill who wants to be in a position of power in government a lot like al gore. he will invent shit up just to get people to listen to him. and always will regret not having his own big moment. 

 

you can't piss off the banks and hope to get a coveted spot in the white house cabinet for dems or republicans. 

Fri, 06/22/2012 - 02:22 | 2550019 Precious
Precious's picture

No.  Actually, he's always wrong.  It's that simple.

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