Kevin Duffy on Krugmanomics and real economics

Krugmanomics: never trust the people (the free market), always trust the government. There is no problem that can't be solved by government spending, borrowing, taxing and printing. Whenever this leads to a crisis - which it inevitably does - blame it on the free market and respond with more government. Rinse and repeat... until the government runs everything and you've turned your economy into the former Soviet Union or Venezuela. 

If you want real economics, turn off this charlatan and read Economics in One Lesson by Henry Hazlitt.

~ Kevin Duffy, April 25, 2021

(For a free copy of Hazlitt's 1946 classic, click here.)

Paul Krugman doesn't see a return of 1970s inflation

Inflation expectations, it took them a long time to become unanchored in the past. It took not just excessively expansionary policy under Lyndon Johnson, it took two oil shocks that sent inflation temporarily into double digits. It took seriously, seriously irresponsible monetary policy under Arthur Burns. It took a long time to get us to where we were in 1980. It took really more than a decade of screwing things up year after year to get to that past, and I don't think we're going to do that again.

~ Paul Krugman, "Krugman Doesn't See Return of 1970's Inflation," Bloomberg interview, March 19, 2021

William Anderson on the laws of economics to Progressives

Like Franklin Roosevelt, who proclaimed that the laws of economics were nothing more than creations of human beings and could be changed by creating something akin to the "Socialist Man," Progressives really do believe that they can manipulate an economy by printing money or by borrowing or by raising taxes on wealthy people, and there will be no adverse economic effects. As Krugman likes to claim in his NYT columns and blog posts, massive borrowing is no problem because "we owe it to ourselves."

~ William Anderson, "Understanding the Progressive Mind," LewRockwell.com, December 27, 2012

Paul Krugman on the growth of the Internet (1998)

The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law' becomes apparent: most people have nothing to say to each other! By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

~ Paul Krugman, 1998

Paul Krugman gives alien invasion metaphor to explain fiscal stimulus

If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

~ Paul Krugman: An Alien Space Invasion Could Fix the Economy," Time.com, August 16, 2011

Paul Krugman on Trump's brewing trade war

I've been amazed at the complacency of markets as Trump marches off to trade war.

~ Paul Krugman, Twitter post, June 19, 2018

Paul Krugman can't see a reason to call inflation a problem

Wage growth hasn’t fallen as much as I expected a couple of years ago; it’s now clear to me that I failed to put enough weight on the downward wage rigidity literature. But there’s nothing here to suggest any reason to consider inflation a problem.

~Paul Krugman, NYT columnist, "Inflation, Here and There (Wonkish)", NYTimes.com, April 16, 2011

Paul Krugman denies efficacy of routine Keynesian stimulus

I know that some people find this hard to understand — perhaps because they don’t want to understand — but people like me have never claimed that fiscal expansion is always and everywhere the right policy, even in response to recession. Nor are other arguments, like the argument that falling wages reduce, not increase, unemployment, universal. All of the unorthodox policy recommendations and conclusions are contingent on the economy being in a liquidity trap, in which short-run nominal interest rates are up against the zero lower bound and can’t go lower.

And liquidity-trap conditions are rare; in fact, they’ve only happened twice in US history. Unfortunately, we’re living in one of those episodes right now.

~Paul Krugman, Nobel laureate, New York Times, "Even More on 1921", April 2, 2011

Paul Krugman defends his intelligence, suggests he is actually just evil

Get your insults right. There is, I believe, a fair bit of evidence against the hypothesis that I’m stupid. What you mean to say is that I’m evil.

~Paul Krugman, NYT columnist and Nobel laureate, "Notes to Commenters", NYT.com, January 11, 2011

Paul Krugman on Milton Friedman's inflationary advice

Mr. Bernanke and his colleagues seem stunned to find themselves in the cross hairs. They thought they were acting in the spirit of none other than Milton Friedman, who blamed the Fed for not acting more forcefully during the Great Depression — and who, in 1998, called on the Bank of Japan to “buy government bonds on the open market,” exactly what the Fed is now doing.

~ Paul Krugman, "Axis of Depression," The Opinion Pages, The New York Times, November 18, 2010

Paul Krugman on the impact of Fannie Mae and Freddie Mac on the financial crisis

And now we’ve reached the next stage of our seemingly never-ending financial crisis. This time Fannie Mae and Freddie Mac are in the headlines, with dire warnings of imminent collapse. How worried should we be?

Well, I’m going to take a contrarian position: the storm over these particular lenders is overblown. Fannie and Freddie probably will need a government rescue. But since it’s already clear that that rescue will take place, their problems won’t take down the economy.

~ Paul Krugman, "Fannie, Freddie and You," The New York Times, July 14, 2008

Paul Krugman on regulation of Fannie Mae and Freddie Mac

So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works.

~ Paul Krugman, "Fannie, Freddie and You," The New York Times, July 14, 2008

Paul Krugman and Paul McCulley on the cure for the 2001 recession

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.

~ Paul Krugman, "Dubya's Double Dip?," The New York Times, August 2, 2002

Paul Krugman on the Fed's plan to buy $1 trillion of long-term agency and government bonds

The big policy news this week has been the Fed’s decision to buy $1 trillion of long-term bonds, going beyond the normal policy of buying only short-term debt. Good move — but it’s probably worth pointing out that yes, this does expose the Fed, and indirectly the taxpayer, to some risks. And in so doing, it blurs the line between fiscal and monetary policy.

Now, the Fed isn’t taking on any serious default risk — Treasuries are backed by the full faith etc of the US government, and agency debt is de facto backed by the same, although the market doesn’t seem to believe that. Anyway, the Fed is for these purposes a government agency itself, so all this is debt between different parts of USG.

The Fed is, however, creating a new liability: the monetary base it creates to buy these bonds. In effect, it’s printing $1 trillion of money, and using those funds to buy bonds. Is this inflationary? We hope so! The whole reason for quantitative easing is that normal monetary expansion, printing money to buy short-term debt, has no traction thanks to near-zero rates. Gaining some traction — in effect, having some inflationary effect — is what the policy is all about.

~ Paul Krugman, "Fiscal aspects of quantitative easing (wonkish)," New York Times, March 20, 2009

William L. Anderson: Paul Krugman blames the late '90s tech bubble on "animal spirits"

Even when [Paul] Krugman "gets it right," he actually is wrong. In recent columns, he has admitted that there were speculative excesses in the stock market and elsewhere. However, in Krugman's world, that just happens because such unwise speculation, in his opinion, is simply nothing more than a trait of capitalism. Like most noneconomists posing as economists, Krugman does not acknowledge what Carl Menger wrote in the first lines of the first chapter of his path-breaking Principles of Economics: "All things are subject to the law of cause and effect."

Yes, Krugman admits there was unwise mass speculation during the latter years of the "fiscally responsible" Clinton Administration, yet he has no idea from whence it came, other than to place his faith in Keynes' dictum that these things were the results of the "animal spirits" that are released by capitalism. While Austrians can clearly point to the reckless credit expansion by the Federal Reserve during the late 1990s as the cause of the speculative bubbles, Krugman has nowhere to turn other than to say that capitalists are stupid people who need the guidance of the state.

~ William L. Anderson, "Krugman the Keynesian," Mises.org, September 11, 2003

William L. Anderson: "Paul Krugman is not an economist"

It does not bother me to read [Paul] Krugman's anti-Republican rants. What does bother me is that the man pretends to be something he clearly is not: an economist.

That is correct. Let me say it again. Paul Krugman is not an economist. His colleagues in the economics profession and the editorial board of the Times may call him an economist, but that does not make him one.

This is harsh criticism, I realize, so I must explain my views in full. Yes, Krugman has a Ph.D. from MIT in economics, but his writings, both popular and academic, demonstrate that he does not believe in laws of economics. Instead, like most folks with socialist leanings, he believes that the state is both omniscient and omnipotent and simply by fiat can eliminate those pesky little problems caused by scarcity.

~ William L. Anderson, "Krugman the Keynesian," Mises.org, September 11, 2003

William L. Anderson on Paul Krugman's love affair with the Clinton administration

If all we read on economics were [Paul] Krugman's columns, we would learn that Bill Clinton gave us prosperity because his administration pushed a tax increase through Congress in 1993. That tax increase, says Krugman, enabled us to "balance" the federal budget, which magically created a good economy. (That the federal budget actually was never "balanced" in conventional accounting terms, and that the alleged balanced budgets occurred late in Clinton's term during the Fed-created unsustainable boom, and not when taxes were increased seems to be off Krugman's radar screen.)

Furthermore, his columns claim that Clinton's government was the model of "fiscal responsibility," and is always full of praise for the former president's policies. My guess is that if the Clinton Administration were in power now and following basically the same budgetary and legal priorities as the Bush Administration is currently doing, he would be writing excuses for Clinton.

~ William L. Anderson, "Krugman the Keynesian," Mises.org, September 11, 2003

Paul Krugman blaming the credit crunch on lax regulation and adherence to free market ideology

So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.

~ Paul Krugman, "Blindly Into the Bubble," The New York Times, December 21, 2007

Paul Krugman blaming the subprime mess on greed and a lack of corporate governance

'What were they smoking?" asks the cover of the current issue of Fortune magazine. Underneath the headline are photos of recently deposed Wall Street titans, captioned with the staggering sums they managed to lose.

The answer, of course, is that they were high on the usual drug - greed. And they were encouraged to make socially destructive decisions by a system of executive compensation that should have been reformed after the Enron and WorldCom scandals, but wasn't.

The point is that the subprime crisis and the credit crunch are, in an important sense, the result of our failure to effectively reform corporate governance after the last set of scandals.

~ Paul Krugman, "Banks Gone Wild," International Herald Tribune, November 23, 2007

Thomas DiLorenzo on Paul Krugman blaming the mortgage mess on the free market

In [Paul] Krugman's article blaming the "subprime" mortgage mess on the free market, he claims that the Comptroller of the Currency should have been regulating the lending business more stringently. If so, this all might have been avoided, he says. As usual, he hasn't the foggiest idea of what he's talking about.

The fact is, the Comptroller of the Currency and the Fed itself have been busy enforcing the "Community Reinvestment Act" of 1977 for the past 30 years, which pressures banks to make uneconomical loans to uncreditworthy borrowers, euphemistically called "sub-prime" borrowers. They're not financial deadbeats, or people who never pay their bills on time. They're just a tiny, tiny bit below "prime" borrowers, in Governmentspeak.

Once again, Krugman gets everything ass backwards: Government regulation of the credit markets is a major CAUSE of the "subprime" mortgage debacle, not the solution. (Of course, the Greenspan Fed itself is the cause of the now-burst housing bubble).

~ Thomas DiLorenzo, "Crazed Keynesianism (and stupid, too)," LewRockwell.com blog post, December 21, 2007