At first we were going to comment on this "response" by the high priest of Keynesian shamanic tautology to Mark Spitznagel's latest WSJ opinion piece, but then we just started laughing, and kept on laughing, and kept on laughing...
As a reminder, on Thursday Universa's Mark Spitznagel, best known recently for explaining in very vivid ways just how central planning has sown the seeds of its own destruction, wrote the following in the WSJ:
How the Fed Favors The 1%
The Fed doesn't expand the money supply by dropping cash from helicopters. It does so through capital transfers to the largest banks.
A major issue in this year's presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%. While the president's solutions differ from those of his likely Republican opponent, they both ignore a principal source of this growing disparity.
The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.
David Hume, the 18th-century Scottish philosopher, pointed out that when money is inserted into the economy (from a government printing press or, as in Hume's time, the importation of gold and silver), it is not distributed evenly but "confined to the coffers of a few persons, who immediately seek to employ it to advantage."
In the 20th century, the economists of the Austrian school built upon this fact as their central monetary tenet. Ludwig von Mises and his students demonstrated how an increase in money supply is beneficial to those who get it first and is detrimental to those who get it last. Monetary inflation is a process, not a static effect. To think of it only in terms of aggregate price levels (which is all Fed Chairman Ben Bernanke seems capable of) is to ignore this pernicious process and the imbalance and economic dislocation that it creates.
As Mises protégé Murray Rothbard explained, monetary inflation is akin to counterfeiting, which necessitates that some benefit and others don't. After all, if everyone counterfeited in proportion to their wealth, there would be no real economic benefit to anyone. Similarly, the expansion of credit is uneven in the economy, which results in wealth redistribution. To borrow a visual from another Mises student, Friedrich von Hayek, the Fed's money creation does not flow evenly like water into a tank, but rather oozes like honey into a saucer, dolloping one area first and only then very slowly dribbling to the rest.
The Fed doesn't expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks (whether by overpaying them for their financial assets or by lending to them on the cheap), minimizes their borrowing costs, and lowers their reserve requirements. All of these actions result in immediate handouts to the financial elite first, with the hope that they will subsequently unleash this fresh capital onto the unsuspecting markets, raising demand and prices wherever they do.
The Fed, having gone on an unprecedented credit expansion spree, has benefited the recipients who were first in line at the trough: banks (imagine borrowing for free and then buying up assets that you know the Fed is aggressively buying with you) and those favored entities and individuals deemed most creditworthy. Flush with capital, these recipients have proceeded to bid up the prices of assets and resources, while everyone else has watched their purchasing power decline.
At some point, of course, the honey flow stops—but not before much malinvestment. Such malinvestment is precisely what we saw in the historic 1990s equity and subsequent real-estate bubbles (and what we're likely seeing again today in overheated credit and equity markets), culminating in painful liquidation.
The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president's presumption of tax unfairness (if there is anything unfair about approximately half of a population paying zero income taxes) or deregulation.
Pitting economic classes against each other is a divisive tactic that benefits no one. Yet if there is any upside, it is perhaps a closer examination of the true causes of the problem. Before we start down the path of arguing about the merits of redistributing wealth to benefit the many, why not first stop redistributing it to the most privileged?
And here is how Krugman, who among other pearls of insight references ... Joe Wisenthal, responds. This is seriously Princeton-grade humor. We leave it up to readers to enjoy it for themselves unobstructed by our cynical interjections. Fom the NYT (highlights ours)
Plutocrats and Printing Presses
These past few years have been lean times in many respects — but they’ve been boom years for agonizingly dumb, pound-your-head-on-the-table economic fallacies. The latest fad — illustrated by this piece in today’s WSJ — is that expansionary monetary policy is a giveaway to banks and plutocrats generally. Indeed, that WSJ screed actually claims that the whole 1 versus 99 thing should really be about reining in or maybe abolishing the Fed. And unfortunately, some good people, like Daron Agemoglu and Simon Johnson, have bought into at least some version of this story.
What’s wrong with the idea that running the printing presses is a giveaway to plutocrats? Let me count the ways.
First, as Joe Wiesenthal and Mike Konczal both point out, the actual politics is utterly the reverse of what’s being claimed. Quantitative easing isn’t being imposed on an unwitting populace by financiers and rentiers; it’s being undertaken, to the extent that it is, over howls of protest from the financial industry. I mean, where are the editorials in the WSJ demanding that the Fed raise its inflation target?
Beyond that, let’s talk about the economics.
The naive (or deliberately misleading) version of Fed policy is the claim that Ben Bernanke is “giving money” to the banks. What it actually does, of course, is buy stuff, usually short-term government debt but nowadays sometimes other stuff. It’s not a gift.
To claim that it’s effectively a gift you have to claim that the prices the Fed is paying are artificially high, or equivalently that interest rates are being pushed artificially low. And you do in fact see assertions to that effect all the time. But if you think about it for even a minute, that claim is truly bizarre.
I mean, what is the un-artificial, or if you prefer, “natural” rate of interest? As it turns out, there is actually a standard definition of the natural rate of interest, coming from Wicksell, and it’s basically defined on a PPE basis (that’s for proof of the pudding is in the eating). Roughly, the natural rate of interest is the rate that would lead to stable inflation at more or less full employment.
And we have low inflation with high unemployment, strongly suggesting that the natural rate of interest is below current levels, and that the key problem is the zero lower bound which keeps us from getting there. Under these circumstances, expansionary Fed policy isn’t some kind of giveway to the banks, it’s just an effort to give the economy what it needs.
Furthermore, Fed efforts to do this probably tend on average to hurt, not help, bankers. Banks are largely in the business of borrowing short and lending long; anything that compresses the spread between short rates and long rates is likely to be bad for their profits. And the things the Fed is trying to do are in fact largely about compressing that spread, either by persuading investors that it will keep short rates at zero for a longer time or by going out and buying long-term assets. These are actions you would expect to make bankers angry, not happy — and that’s what has actually happened.
Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.
The typical retired American these days relies largely on Social Security — which is indexed against inflation. He or she may get some interest income from bank deposits, but not much: ordinary Americans have fewer financial assets than the elite can easily imagine. And as for pensions: yes, some people have defined-benefit pension plans that aren’t indexed for inflation. But that’s a dwindling minority — and the effect of, say, 1 or 2 percent higher inflation isn’t going to be enormous even for this minority.
No, the real victims of expansionary monetary policies are the very people who the current mythology says are pushing these policies. And that, I guess, explains why we’re hearing the opposite. It’s George Orwell’s world, and we’re just living in it.
It... just... does.... not.... compute.... is this the type of thinking of needs to exhibit to get a Nobel?
Does Krugman seriously still not understand that NIM as a business model for banks died about the time banks stopped making loans and relying exclusively on prop, pardon flow, trading and using infinite rehypothecation leverage to juice their returns into the stratosphere, using the offbalance accounting permitted by shadow banking (really read this Paul - you may finally understand how finance DOES work these days), while doing all their best to limit origination and mortgage lending exposure, thank you Bank of Countrywide Lynch (i.e. the opposite of the NIM business model)?
Well at least Krugman is right about thing: there sure aren't many people living on fixed income anymore. Most of them have already died. And he is most certainly not referring to the $5 billion on average in capital that is weekly rotated out of stocks and into bonds.
Whatever anyone does, do not point out our previous post that it was none other than the Fed warning that monetization and excess reserves could lead to hyperinflation. Or, that none other than JPMorgan pointed out a month ago that his beloved central planning has destroyed Okun's Law which makes all Krugman Op-Eds in the past 4 years about the same intellectual quality as one-ply Cottonelle.
We may get a scene straight out of Scanners. And we don't want that - we just want more Krugman humor and more LSAP, aka Large Scale Asshat Publications. In fact, it is time for the Fed to stop printing money and just print Krugman Op-Eds. Following the laughter-induced genocide, unemployment will indeed finally drop for once naturally, instead of as a result of millions of people dropping out of the labor force on a monthly basis.
It's downright scary that these are the people that influence economic policy today.
Krugman is a moron who has been proven wrong by reality. The fact that he just keeps trying harder, and now tells outright lies, is proof he has no business giving advice to anyone about anything.
That really can't be true. He's not aquainted with reality.
Okay I'm convinced. He has a gun to his head, or someone has some serious dirt on him.
To judge from the irrationality, incoherence and gibbering nonsense emanating from his piehole and his keyboard, I would argue that the gun already went off against his head a long time ago.
It's only a flesh wound.
I once read Lecturing Birds on Flying and said to myself while reading, there couldn't be people that detached from reality and living in their ivory towers, then I remembered the likes of Krugman.
Unlike most people here, I think Krugman is pretty sharp. He is too sharp to have written that. Something is just not right here.
No so sharp he hasn't published an paper that makes the case that the consumer price index understates inflation, while simultaneously using the consumer price index in one of his opinion pieces to show that inflation is low. Apparently it did not occur to this Nobel prize winning economist that people who read his articles can google and find is own papers contradicting what he says.
He is lying.
He is the bespeckeled man in "the Humungus" gang who looses his fingers when trying to catch the feral boys obumerang.
I'm far from an economist, but Krugman's rebuttal is so unbelievable it makes me think we're closer to the tipping point than I thought. This just seems like desperation.
This may be Tyler's best post ever.
Krugman is a shill for the Dems. He says whatever will further their chances. He is just another screamer on the "whites only" side of the Plantation. You could stick the Red Hot Poker of Truth up his butt, and he would still spout the party line.
It is a sign of the End Times.
gnomon said:
That would make him a Repub.
Divide and conquer, lest the electorate wise up to the reality of the one-party system.
There is the "worst", and then there is "slightly better". And also there is the notion of churning the pols and their aides/czars out of the Beltway as quickly as the electoral process will permit. All we have left is churn. It all may be shit, but that is what we got. Don't let anybody get so entrenched that they think they own the place. That is what happened after the New Deal. And it brought us to this point.
I just want to buy a little more time and hope for a miracle, (that will probably necessitate a near death experience).
Crookman and Stiglush are pretty pets of politics. They serve the Trilateral Commission: useless freaks, ruining the majority so they gain pats on the head from the psycho Feds et al, the central banksters: the Trilateral Commission of shadow world banking, shadow world government; the freak failed globalists, the rootless cosmopolitans.
Ah, Krazy Krugman!
Stable inflation...I'll ponder that while eating my jumbo shrimp.
Professor Paul Krugman of Princeton, seems to be a stealth neocon, trying to get more government money for his financial elites, so they and he can remain in power, just a little longer. Krugman is naïve, delusional, and is now spouting hysterical opinions.
The Nobel prize in economics is bankster funded and given for “fancy math garbage” that supports the financial elites’ looting.
Paul, love your cushy job at the NYT.
Krugman is as far from conservative as you can get. He almost unrelentingly falls on the side of bigger government with more control over the economy and the everyday lives of individuals. In case it might have escaped you're notice, the majority of financial elites are Dems.
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That's a neocon.
In case it might have escaped you're notice, there is only one party: the War Party.
The Dem/Repub game is only played to keep the electorate from figuring that out.
I get more real LOL laughs reading Krugman than the comics.
Then I get sad when I remember most sheeples believe whatever drivel he spews. He has a PhD, so it must be true - right?
We are so, so royally fucked and deservedly so.
I think the vast majority of people who believe him are the PBS loving, proof by authority fools, who don't actually care about evidence and logic, they only care that their highly educated "experts" told them it's true, so they believe it. The generation that shouted from the rooftops to "question authority" have become the generation that believes every lie their highly educated icons tell them, no matter how fantastic, idiodit, or unsupported. They have become the corrupt establishment they hated.
.
Fixed it for you.
The Krug article seemed pretty half assed.
In ref to WSJ article.... Damn, so that's what Austrian thought is? I guess I am one.
"Well at least Krugman is right about thing: there sure aren't many people living on fixed income anymore."
Unlike most people here, I have had some respect for Krugman's work. I am not sure though after reading that. I am just straight up blown away.
Well at least we now know he's lying and he knows/realizes it - nobody can post such bullshit and actually believe in it.
His answer is probably the standard of the first article.
Could be interesting if the first article was quality. It is not.
But US citizens work like that. For them, the group is all. They always look for lies to congregate around and defend. It gives them a sense of belonging.
So here we've got the two usual teams: the guys who will support the propaganda in first article and the guys who will support the propaganda in the second.
All guys know that the contents are baseless.But all know that in US citizenism, monetizing divide works and brings benefits.
Yes, because your posts are a model of claims backed up by solid evidence and unbreakable logic.
STFU
The slightly modified first rule of propaganda: If you cannot refute the facts, attack the "quality standard" of the article.
But US citizens work like that.
Yeah, the misguided search for purpose in life.
Oh, as we recently figured, the Asian (and Arabic) saving-face-at-all-costs mentality is even worse.
All guys know that the contents are baseless.
Says who? I still do adhere to the saying "you can ignore reality for a long time but at some point, it comes to punch you in the face."
Could not reach Krugmann's rebuttal.
Previous article is so poor. Too much to swallow.
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A major issue in this year's presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%.
----------------------------------------------
So now, the 99% is poor. This from the very start of the article.
______________________________________________
The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve.
_______________________________________________
Because the FED has no consumer and does not serve them the best service in quality and price?
Or maybe that is that the FED has consumers and that servicing them suppresses the offer to other consumers, as it happens usually?
)))))))))))))))))))))))))))))))))))))))))))))))
Pitting economic classes against each other is a divisive tactic that benefits no one.
)))))))))))))))))))))))))))))))))))))))))))))))
No, really? If so, please, could that distinguished US citizen economist explain the US of A and its birth?
STFU
AnAnonymous, mistaking the comment section of Zero Hedge for a roadside, squatted and delivered:
OK, seriously, I'm growing concerned about you. Just because it's the weekend doesn't mean that you absolutely need to get all hopped up on opium and post incoherent ravings about your drug-induced phantasms. Can't you just enjoy the buzz? Listen to some music, watch some cartoons, measure some blades of grass, stare at the trees.
Even though the Peoples Liberation Opium Parlor provides opium and free wifi, do you really need to get totally blotto every weekend? You occasionally make sense and contribute something here. Contrary to the hazy delusions brought on by your massive opium consumption, your best contributions are not made when you're stoned out of your gourd.
Please, for your own sake, sober up. Don't you have to go to work soon?
Reading the comments once again confirms US citizen nature and how US citizenism kills debate.
US citizen 'debaters' are professionals who share a gentlemen's agreement on avoiding to debate.
They avoid facts, they wish for controversy.
Havent read US citizen Kurgmann's rebuttal. Useless.
The first piece tries to rise controversy with every statement made in it. Krugman has to answer on a controversial tone to perform his US citizen debater job.
None of them are quality. Both are poor. But they meet the expectation: create controversy, create division, polarize people.
Must be some kind of addictive stuff when you read the first piece.
The US citizen author writes that pitting economic classes one against another brings no benefit while working on pitting people through controversial baseless rant.
Must revel in that kind of stuff as so many US citizens do:say one thing, preach one thing and immediately exhibit the contrary.
Maybe because as a professional US citizen debater, he perfectly knows that monetizing divide is great US citizenism classics. He knows it as it lives off it.
It would appear you're argument rests on the idea that US citizens are all the same. Something that only a fool would believe.
QED
STFU,Have u been READING THAT COMMENT?
AnAnonymous said:
Wooohaa, made me laughing hard. This is like wok calling the chopsticks black.
Clearly you are living in tralalaland, as you cannot see yourself doing same. When pointed out, you fall back to primary pillar of Chinese citizenism eternal nature, denialism, as shown here:
http://www.zerohedge.com/news/welfare-great-delusion?page=3#comment-2268804
http://www.zerohedge.com/news/guest-post-four-signs-asia%E2%80%99s-rise-...
Chinese citizenism citizen 'debaters' are professionals who share a gentlemen's agreement on avoiding to debate.
They avoid facts, they wish for controversy.
Must revel in that kind of stuff as so many Chinese citizenism citizens do:say one thing, preach one thing and immediately exhibit the contrary.
Down through the centuries, from ancient times of fabled past, the nature of Chinese citizenism is eternal.
But hey, as the ancient parable from Chinese citizenism fabled past says, "a journey of a thousand miles begins with a single crap along the roadside."
George Newman: Lesbian Nazi Hookers Abducted by UFOs and Forced Into Weight Loss Programs... all next week on Town Talk.
''I want you to hit me as hard as you can.''
...Krugman is the image of the prophetic strong delusion. If the evil that falls first upon labor was not so clear to see, as it makes it's way around the globe, Krugman an his likeness would be just pathetic.
What shall be done about these fools whom reject even the princple of mercy and the Holy Spirit thereof? Well, as with every fool of that caliber, their own judgment comes upon them. They have cast mercy away and laid up the hosts upon the graven alter. They have foresaken mercy and are sealed. Krugman is lost, his word declares it like a gun in the hand of a broken man, or a man about to light himself on fire, an image we have witnessed as of late, happening in and among the nations stricken with Krugman's hellish market claim of dominion. This is the nature of the Suicide Vampire Squid, the beast.
Aside from the disgust, there is a profound sadness in witnessing a person so lost, and the power of the lost ruling the market, but, that sadness is fleeting and overcome by rage, which we now see rising within the nations. This rage is the making of the lost and will lead to a greater disruption among the nations. It is no accident that we see the militarized terrorist inspire force that has been funded by the market fraud. We will not escape the war now being forged by it, that is clear enough by history. This time is different though, as we see, it is as prophetic as the market numbers and debt that have captured the globe. Even if people refuse to accept that fact, that we are the prophetic last generation, it is none the less written and it is now being confirmed. The next few years shall make this clear enough, but, many will still not accept that this is really happening because they too are lost and they have accepted the lie and the offer built upon ''you shall not surely die'' if you buy sell and trade ''our'' Apple. Lol. Will it reach the 666 mark? Lol. Who would doubt QE could produce the three sixes? Lol. http://www.youtube.com/watch?v=W1OFuyCsJBk
There is a Nobel prize for achievements in physics, chemistry, physiology or medicine, literature and for peace.
Not for Economics.
"In 1968, Sveriges Riksbank (Sweden's central bank) established the Prize in Economic Sciences in Memory of Alfred Nobel, founder of the Nobel Prize. The Prize is based on a donation received by the Foundation in 1968 from Sveriges Riksbank on the occasion of the Bank's 300th anniversary. The first Prize in Economic Sciences was awarded to Ragnar Frisch and Jan Tinbergen in 1969.
The Prize in Economic Sciences in Memory of Alfred Nobel is awarded by the Royal Swedish Academy of Sciences, Stockholm, Sweden, according to the same principles as for the Nobel Prizes that have been awarded since 1901."
.
Yeah we know.
anyone with half a brain knows Krugman is an idiot.
The only people who quote him are socialist /Dem politicians because he gives creedence to their own beliefs that excessive /debt related spending a a VERY GOOD THING.
And since excessive debt related spending is the Holy Grail and source of all political power the pols just LUUURVV Krugman.
And since pols fund academia and academic economics proffesors then the latter will tend to tell and theorize to the pols what they know what the pols want to hear.
As for real people who work/earn money/spend it etc( ie. people in the real world) they know after 5 mins reading Krugman he is academic jerk.
i think they only give nobel prizes to be people who come from a borrow borrow borrow, and print print print background.....you need to be a tree-hugging seal-loving money-debasing climate change fanatic to even be considered.....Gore, Krugman, 'Bama....
this is a copy of the sort of letter I am sending about once a week to the NYtimes, I urge others to do it as well. they are always sent to business nad krugman.
http://www.zerohedge.com/news/fast-forward-through-fiats-fantastic-fabrications
Guess I'm just a stupid phi Beta kappa, sigma xi, cum laude MD with almost an MBA, and not an economist. So Mr. Krugman this I understand along with the massive amounts of evidence I've sent you in regards to wealth inequality and the fed. But, you are never going to alter your views are you. The broken transmission mechanism ensures those at the top get the most, it's the structure stupid. But, I forgot the Nobel winner never is wrong. After all options pricing theory works so well. just ask LTCM. I've a hard science background, biology degree. The vast majority or your belief systems isn't supported by any real data other than conjecture (efficient market theory, income satisfaction curves, homoeconomicus (people as rational economic actors< etc, etc, etc), . Wake up, economists aren't rational empiricists, they are voodoo experts that have adopted without any evidence a system that just enhances power of the elites. Friedman got it a bit in his editorial today Sunday. The question I haven't figured out is: Do you believe in what you write about, or are you a lying sociopath like your boss at Princeton Mr. Ben Bernanke. (sorry but as "real" doctor I reserve the right to use that honor to those who have earned it. Sincerely, xxxxxxx By the way I am a progressive liberal democrat, I don't support the republican party, and have never voted for a republican president. That may change with Obama. So please don't put me in that vast right wing conspiracy. OWS, and the tea party are right about this, and that's exactly why both parties work to divide what would be a majority.no Krugman doesn't understand banks, or banking, they are beneath his iviory tower view. the banks and what we call bankers aren't. they are huge trading houses now, but krugman sticks to things so old in his views it is beyind me. he's a loon.
Re. Bankers are the true victims...
Yes, quite - errmmm.... whatever you say Paulie.
Don't forget to let us know when you're taking up a collection for these poor, unfortunate souls. Maybe you could get the ball rolling by emptying some of the contents of that stuffed plain maniila envelope that you're slipped every week, for media services rendered, outside of 55 Broad.
bagdad bob krugman is the only image I see when this krugman writes..bagdad bob knew he was a tool but to not be would mean death or worse. why krugman post this swill is for one reason only..to be kept in the style he likes.
I can forgive Bagdad bob for his lie was one for survival of family ..krugman is just a paid shill his motive is staying in the kings good graces.
so few of the little people even read his BS and fewer still have the tools to see thru it..death of critical thinking happend long ago in Public school USA.
these people are disgusting, krugman, geithner, bernake. bill dudley - the very worst. and the worst of their lack of shame, they lack nothing in terms of success and money. but, clearly, they are very lonely selfish people. there is never enough $ for them, no matter where it came from. what a shame our society became this, with such opportunity to give people good lives.
Always and everywhere, in their minds they are always "the Victims". And NEVER the Victimizers.
Never forget that. Here Krugman demonstrates this mentality anew. It's their go-to bullshit, their Happy Place.
Screw people over, then blame the victim, then steal the mantle of victimhood for yourself, then have the media you own paint it "real".
Evil is Good. Down is Up. War is Peace. Debt Slavery is Freedom.
Nice work fellas.
If Keynes was alive, one thing he wouldn't be is Neo-Keynesian. Sad...
Lack of Sound money is the root of all evil...
Krugman needs a brain MRI to evaluate for tumor or vascular disease causing dementia. Or, he needs an test for syphyllis-related dementia.
Must be why it's called 'America the beautiful', and not '...the fair and honest'.
Krugman is but a trumpeteer for the bankster cartel running the country!
http://www.globalresearch.ca/index.php?context=listByAuthor&authorFirst=Dean&authorName=Henderson
video series that helps to explain why krugman is wrong, feel free to send to nytimes (letters@nytimes.com) I did
http://www.huffingtonpost.com/rob-johnson/inet-video-series-financial-instability_b_1442722.html?ref=business
Economic Ellsworth Toohey.
"Roughly, the natural rate of interest is the rate that would lead to stable inflation at more or less full employment."
"The natural rate of interest" of 'money' is zero. 'Money' facilitates exchange. What is exchanged are the needs/desires of those involved in the exchange. That the mechanism of exchange acquires or loses value in and of itself reflects the effectiveness of the distribution of the mechanism. If the amount of 'money' is finite, when increases in the 'needed/desired' happen, deflation occurs. Smaller amounts of 'money' are required to facilitate the exchange. Think of gold. (The problem with gold, or any physical thing, is that, in and of itself, it can generate a need/desire beyond its use as a mechanism that facilitates exchange. Or the physical amount of it held by the world can change.)
The mechanism of exchange becomes the result only if there is an increase or decrease in its amount.
Now of course this is only my theory, and has nothing to do with 'reality'. And will never happen because the world has been developed around flow, not stock. Old measurements of 'M' this and 'M' that were seen as effective were so only because the rate of flow was slow enough with regard to the world as to approach zero. The rest of the world absorbed it, trickle at a time.
Of course, I am just guessing.
Krugman clings to a laughable 19th century economic model.
Ignore mode ON.
Minsky Introduction Video
http://www.youtube.com/watch?v=jIP7ES1lCGk
Hello, I'm what you ZeroHedgers affectionately call the Bernank. Please leave me and my Keynesian friends alone. The Austrians are just not fair. In our modern day society, we've progressed too far to allow anyone to fail. Americans like the Romans are superior people and we simply cannot fall. ;-)
SATURDAY, APRIL 21, 2012
SUPER HOT: Ron Paul versus Paul Krugman
Jeremy Hammond has written a book, Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis, that contrasts the economic views of Ron Paul with those of Paul Krugman.
http://www.economicpolicyjournal.com/2012/04/super-hot-ron-paul-versus-p...
Yup. Krugman is a fool - he always get's it wrong. Who could forget his ridiculous warning back in August 2005 about the growing housing bubble and the danger to the US economy when it collapses:
http://www.nytimes.com/2005/08/08/opinion/08krugman.html
So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.
Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong.
One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.
Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.
In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.
But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.
And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.
In the nation as a whole, housing prices rose about 50 percent between the first quarter of 2000 and the first quarter of 2005. But that average blends results from Flatland metropolitan areas like Houston and Atlanta, where prices rose 26 and 29 percent respectively, with results from Zoned Zone areas like New York, Miami and San Diego, where prices rose 77, 96 and 118 percent.
Nobody would pay San Diego prices without believing that prices will continue to rise. Rents rose much more slowly than prices: the Bureau of Labor Statistics index of "owners' equivalent rent" rose only 27 percent from late 1999 to late 2004. Business Week reports that by 2004 the cost of renting a house in San Diego was only 40 percent of the cost of owning a similar house - even taking into account low interest rates on mortgages. So it makes sense to buy in San Diego only if you believe that prices will keep rising rapidly, generating big capital gains. That's pretty much the definition of a bubble.
Bubbles end when people stop believing that big capital gains are a sure thing. That's what happened in San Diego at the end of its last housing bubble: after a rapid rise, house prices peaked in 1990. Soon there was a glut of houses on the market, and prices began falling. By 1996, they had declined about 25 percent after adjusting for inflation.
And that's what's happening in San Diego right now, after a rise in house prices that dwarfs the boom of the 1980's. The number of single-family houses and condos on the market has doubled over the past year. "Homes that a year or two ago sold virtually overnight - in many cases triggering bidding wars - are on the market for weeks," reports The Los Angeles Times. The same thing is happening in other formerly hot markets.
Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn't have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?
Now we're starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone - not just those who own Zoned Zone real estate - should be worried.
Wow....the stupidity!!! Ya krugman, spreads do matter and they HAVE ONLY INCREASED for the banks since pursuing ZIRP! Add Krugman to the "Commentators Still Clueless That Fed's Zero Interest Rate Policy (ZIRP) Is A Backdoor Bank Bailout"
"The Fed Works for the Very Rich: Why Paul Krugman is Full of Shit"
"But legitimate criticism of his economics includes the absence of the class struggle that Wall Street and the Federal Reserve clearly understand as evidenced by their actions—they are fighting for America’s rich and their policies are intended to benefit them alone. The sleight of hand that sustains mainstream economics is the claim that we all benefit if the system benefits. Take a look around and you’ll see that no, we don’t all benefit. In fact, were it not for the ideological drivel disguised as mainstream academic research, this would be evident to even the least interested among us. When in doubt, look a little harder."
http://www.counterpunch.org/2012/04/23/why-paul-krugman-is-full-of-shit/