Paul Krugman is a jackass (1 Viewer)

[Mr. Pickles]

I don't know of any economists who think Krugman's Nobel Prize was undeserved.

Thanks to Jon for providing that link.Obama getting a nobel prize kind of takes the luster off that award. If Obama can get one, for doing absolutely nothing, doesn't that just make it like getting a "participant" trophy?Obama "winning" a nobel prize officially put that award into the "Teen Choice Awards" level. I wish Barack well this fall when he's competing with Robert Pattinson for the "most brooding eyes of the year" honor.

Pretty big difference between a Nobel Prize for something like economics and a Nobel Peace Prize. Surely you know this, Sarah.

 

[Iraqi Information Minister]

The general understanding of macroeconomics in this thread is not particularly good. Savings is down over the last 50 years and "hoarding" money would hardly be a problem anyway. Savings leads to long term growth. Spending leads to short term spikes (which is sometimes what we are going for).Also , the reason the debt is a problem has little to do with this back and forth. It's a crowding out effect and does in fact reduce investment and thus long term growth. But I promise the average joe doesn't understand any of this as even people who pay attention (like you two) obviously don't.

"Woods drastically...Woods drastically...."I'm usually inclined to take the side of someone exhibiting priggish condescention so, I guess you win me over for the day. You're choosing to use your texbook definitions of the words I'm using rather than try to understand them within the context of what I'm saying. I'm saying that people are keeping their money on the sidelines (which is the reason we're told that government spending is a necessity in the first place) because of the very crowding out effect that you're saying I'm ignoring. And I completely disagree that the "average joe" doesn't understand any of this. He doesn't get his economics from a textbook - he lives it every day and adjusts his behavior accordingly. Whether or not he "gets" the reasons for why he does it or if he knows what 300 level economics term is applied to it is irrelevant.

 

[cr8f]

What a jag. How can you take any columnist seriously when he begins a column off in this manner

The White House is confident that a financial regulatory reform bill will soon pass the Senate. I’m not so sure, given the opposition of Republican leaders to any real reform.

WTF? Republican leaders are begging for real reform. They are providing solutions that constitute real reform. Democratic leaders ignore them and pass things like Obamacare.I'm sure this clown has a column ready for the inevitable economic collapse, blaming it on the Republicans refusal to be bipartisan.

Hmmmm no they're not. The only reform they want is what the bankers want.

Giving the medicare trust fund over to Wall Street isn't reform.

They should eliminate the cap on social security over $200,000 and make the wealthy pay in as well.

 

[Maurile Tremblay]

Political Economist

Peter J. Boettke, 10.13.08, 04:00 PM EDT

The Nobel will validate Krugman's partisan punditry.

... By reducing the multiplicity of arguments one found in thinkers from David Hume and Adam Smith to James Mill and David Ricardo--let alone economic journalistic arguments as found in Frederic Bastiat--to the formalistic model of competitive equilibrium, the theorists of mid-20th century economics set up a rather fragile argument for the defense of free trade as the best policy. Bastiat, in perhaps the greatest economic satire every written, exposes the silliness embodied in business interest groups lobbying the government for protectionism--in this case the candlestick makers petitioning the government for protection from the unfair competition from the sun.

Yesterday, by the way, was Bastiat's birthday. In his honor, here is a link to the candlestick-makers' petition referred to above.In addition, here is an excerpt from his Economic Sophisms:

At a time when everyone is trying to find a way of reducing the costs of transportation; when, in order to realize these economies, highways are being graded, rivers are being canalized, steamboats are being improved, and Paris is being connected with all our frontiers by a network of railroads and by atmospheric, hydraulic, pneumatic, electric, and other traction systems; when, in short, I believe that everyone is zealously and sincerely seeking the solution of the problem of reducing as much as possible the difference between the prices of commodities in the places where they are produced and their prices in the places where they are consumed; I should consider myself failing in my duty toward my country, toward my age, and toward myself, if I any longer kept secret the wonderful discovery I have just made.

…

I had this question to resolve:

“Why should a thing made in Brussels, for example, cost more when it reaches Paris?”

Now, it did not take me long to perceive that the rise in price results from the existence of obstacles of several kinds between Paris and Brussels. First of all, there is the distance; we cannot traverse it without effort or loss of time, and we must either submit to this ourselves or pay someone else to submit to it. Then come rivers, marshes, irregularities of terrain, and mud; these are just so many more impediments to overcome. We succeed in doing so by raising causeways, by building bridges, by laying and paving roads, by laying steel rails, etc. But all this costs money, and the commodity transported must bear its share of the expenses. There are, besides, highway robbers, necessitating a constabulary, a police force, etc.

Now, among these obstacles between Brussels and Paris there is one that we ourselves have set up, and at great cost. There are men lying in wait along the whole length of the frontier, armed to the teeth and charged with the task of putting difficulties in the way of transporting goods from one country to the other. They are called customs officials. They act in exactly the same way as the mud and the ruts. They delay and impede commerce; they contribute to the difference that we have noted between the price paid by the consumer and the price received by the producer, a difference that it is our problem to reduce as much as possible.

And herein lies the solution of the problem. Reduce the tariff.

You will then have, in effect, constructed the Northern Railway without its costing you anything. Far from it! You will effect such enormous savings that you will begin to put money in your pocket from the very first day of its operation.

Really, I wonder how we could have ever thought of doing anything so fantastic as to pay many millions of francs for the purpose of removing the natural obstacles that stand between France and other countries, and at the same time pay many other millions for the purpose of substituting artificial obstacles that have exactly the same effect; so that the obstacle created and the obstacle removed neutralize each other and leave things quite as they were before, the only difference being the double expense of the whole operation.

 

[prefontaine]

I'm saying that people are keeping their money on the sidelines (which is the reason we're told that government spending is a necessity in the first place) because of the very crowding out effect that you're saying I'm ignoring.

I apologize for the condescension but this is why I avoid economics threads for the most part. This statement misuses crowding out and honestly I have no idea what you are even trying to say.

 

[Iraqi Information Minister]

Yesterday, by the way, was Bastiat's birthday. In his honor, here is a link to the candlestick-makers' petition referred to above.

Bastiat.

 

[Iraqi Information Minister]

I'm saying that people are keeping their money on the sidelines (which is the reason we're told that government spending is a necessity in the first place) because of the very crowding out effect that you're saying I'm ignoring.

I apologize for the condescension but this is why I avoid economics threads for the most part. This statement misuses crowding out and honestly I have no idea what you are even trying to say.

From Wiki (only because it's easy)"In economics,"crowding out"is any reduction in private consumption or investment that occurs because of an increase in government spending. "

So I'm sorry if I'm using it wrong but apparently I'm not alone.

Edit: I'm guessing you're adhering to the strictest definition of the word in which case, I can see where what I'm saying probably isn't being said very well.

 

[prefontaine]

I'm saying that people are keeping their money on the sidelines (which is the reason we're told that government spending is a necessity in the first place) because of the very crowding out effect that you're saying I'm ignoring.

I apologize for the condescension but this is why I avoid economics threads for the most part. This statement misuses crowding out and honestly I have no idea what you are even trying to say.

From Wiki (only because it's easy)"In economics,"crowding out"is any reduction in private consumption or investment that occurs because of an increase in government spending. "

So I'm sorry if I'm using it wrong but apparently I'm not alone.

Edit: I'm guessing you're adhering to the strictest definition of the word in which case, I can see where what I'm saying probably isn't being said very well.

No, not strict though it generally is used in context of investment, it is sometimes used with anything. But that still doesn't work in the context you are trying to use it. The crowding out effect would be BECAUSE of gov't spending, consumers spend less. Not consumers are spending less therefore the gov't needs to take up the slack. See what I mean?

 

[Iraqi Information Minister]

No, not strict though it generally is used in context of investment, it is sometimes used with anything. But that still doesn't work in the context you are trying to use it. The crowding out effect would be BECAUSE of gov't spending, consumers spend less. Not consumers are spending less therefore the gov't needs to take up the slack. See what I mean?

No I don't. Let's start over again.My comments began at the point where folks like Krugman are saying that the biggest problem was that the stimulus wasn't big enough. If only the government had borrowed more it would have taken up the slack in decreased personal spending and would have jump started the economy by increasing aggregate demand.Do I have that right?

 

[Iraqi Information Minister]

Krugman just can't get enough.

 

[pantagrapher]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

 

[tommyGunZ]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

Looking for the resident arm chair doomsday conservatives to explain where the runaway inflation is.

 

[jon_mx]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

Looking for the resident arm chair doomsday conservatives to explain where the runaway inflation is.

Banks still aren't lending money, instead they are building up their balance sheets. Banks have added nearly 2 trillion dollars to their balance sheets in the last year.BTW, I was never one who was concerned with runaway inflation. I supported Bush's TARP and a bailout in concept, but not the one that was passed.

 

[Maurile Tremblay]

Banks still aren't lending money, instead they are building up their balance sheets. Banks have added nearly 2 trillion dollars to their balance sheets in the last year.

How do banks increase their balance sheets if not by lending money? I guess charging ATM withdrawal fees is a partial answer; but I think lending at interest is among their primary methods.

 

[KnowledgeReignsSupreme]

Krugman had an excellent article on his blog today. I wish more of his posts were of this caliber. It says a lot about what type of audience he normally caters to when he has to put a "wonkish" warning label on the title. He also got zero comments, compared to the hundreds he normally gets on his articles when he falls over himself to mention George Bush, tea partiers or Republicans.

 

[KnowledgeReignsSupreme]

Good thing these threads aren't serious.

Well THIS is interesting.

 

[Christo]

Choosing to post a smilie without actually looking up the policies and making an educated judgement says a lot about you.

It shouldn't be his burden to look it up, when you bring it up. It is your burden to provide a link.

Teach a man to fish....

Strong stuff coming from our Distinguished Professor of Fishing.

 

[Iraqi Information Minister]

Latest Krugman rant.

I try to be objective and get where he's coming from. But the man just doesn't seem to get it. "It" being how "regular" people see the world.

Kind of like perry90210.

If this guy were to have been in my elementary school, he would have made me want to become a bully and beat him up on the playground.

 

[pantagrapher]

Latest Krugman rant.

Another solid column.

 

[Iraqi Information Minister]

Latest Krugman rant.

Another solid column.

Same planet. Different worlds.

 

[pantagrapher]

Latest Krugman rant.

Another solid column.

Same planet. Different worlds.

 

[kupcho1]

Latest Krugman rant.

I try to be objective and get where he's coming from. But the man just doesn't seem to get it. "It" being how "regular" people see the world.

Kind of like perry90210.

If this guy were to have been in my elementary school, he would have made me want to become a bully and beat him up on the playground.

In a rational universe, American business would be very happy with Mr. Obama.

And there are widespread claims that fears about taxes, regulation and budget deficits are holding down business spending and blocking economic recovery.

Ironically, even the Obama administration recognizes that their policies have dampened animal spirits and that businesses are not willing to risk capital and invest.

Beyond that, business leaders are, as I said, feeling unloved: the financial crisis, health insurance scandals, and the catastrophe in the Gulf of Mexico have taken a toll on their reputation. Somehow, however, rather than blaming their peers for bad behavior, C.E.O.’s blame Mr. Obama for “demonizing” business — by which they apparently mean speaking frankly about the culpability of the guilty parties.

What health insurance scandals is he talking about?And why is he lumping in the entire business community with BP with respect to the Gulf "catastrophe"? Oh wait a minute, I remember. They fear they too could be shaken down above and beyond what they might think there exposure is should something in their business go wrong. Unquantifiable risk, you ol' rascal you.

 

[Proud Communist]

Latest Krugman rant.

Another solid column.

I disagree. He making an emotional argument without providing anything substantial. It comes across written as a high school editorial gossiping about the people in the school who gossip.It is not offensive, just below what I expect form a person of his intelligence and experience.

 

[MasterofOrion]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

Looking for the resident arm chair doomsday conservatives to explain where the runaway inflation is.

We have set the tone for high inflation. The reason why it hasn't popped its ugly head is because the economy sucks: Supply and demand. When the economy sucks demand is low. When the economy picks up the demand will pick up and so will inflation. Oil prices are set to go through the roof. When inflation hits interest rates will sky rocket. Interest on our national debt will be even a bigger issue than it is now.

 

[pantagrapher]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

Looking for the resident arm chair doomsday conservatives to explain where the runaway inflation is.

We have set the tone for high inflation. The reason why it hasn't popped its ugly head is because the economy sucks: Supply and demand. When the economy sucks demand is low. When the economy picks up the demand will pick up and so will inflation. Oil prices are set to go through the roof. When inflation hits interest rates will sky rocket. Interest on our national debt will be even a bigger issue than it is now.

So what's you biggest fear right now: inflation or deflation?

 

[MasterofOrion]

Memories Of Scare Tactics PastWhen writing about previous invisible attacks of the invisible bond vigilantes, I almost forgot what else was going on during the first of those imaginary onslaughts: the spring of 2009 was also the period of the great inflation scare, in which everyone from Glenn Beck to Federal Reserve presidents was warning us that an awful surge in prices was just around the corner. Funny how that didn’t happen.Now, everyone makes wrong predictions. But this particular failure goes deeper than just not seeing what was coming. At the heart of the inflation/deflation debate was and is a debate between two visions of the economy.One vision, which is the one I subscribe to, is basically an updated Keynesian view: sticky prices revised gradually based on unemployment and excess capacity, the possibility of persistent economic malfunction because people are trying to hoard cash rather than buying real goods. And this view also said that we were and are in a liquidity trap, in which things that might have been inflationary under other conditions — like a large expansion of the monetary base — weren’t at all inflationary under current conditions. In fact, the likely outlook was for falling inflation, and possibly deflation.The other vision was basically a crude quantity theory of money view: hey, the Fed is printing money, the government is running deficits, so high inflation, maybe even hyperinflation, is staring us in the face.The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money.There was a time, long ago, when I would have expected this head-to-head test, with a clear winner, to actually change some minds. But I’m older, wiser, and a lot more cynical now.

Looking for the resident arm chair doomsday conservatives to explain where the runaway inflation is.

We have set the tone for high inflation. The reason why it hasn't popped its ugly head is because the economy sucks: Supply and demand. When the economy sucks demand is low. When the economy picks up the demand will pick up and so will inflation. Oil prices are set to go through the roof. When inflation hits interest rates will sky rocket. Interest on our national debt will be even a bigger issue than it is now.

So what's you biggest fear right now: inflation or deflation?

Deflation is worse. Why? Because if you borrow $ XXXX K on a piece of real estate and it depreciates to something less that people walk away from the loan. This hits banks collectively on a mass scale. We can not take another financial crisis like 2008.But inflation is much more likely than deflation at this time.

 

[KnowledgeReignsSupreme]

Deflation is worse. Why?

Deflation is worse if you hold lots of non-cash assets (your average person). For entities with lots of cash or Elite Upper Tier AAA credit ratings (US Govt), it's not so bad.

 

[pantagrapher]

Deflation is worse. Why? Because if you borrow $ XXXX K on a piece of real estate and it depreciates to something less that people walk away from the loan. This hits banks collectively on a mass scale. We can not take another financial crisis like 2008.But inflation is much more likely than deflation at this time.

Fair enough. This is not my area of expertise. But the warnings about inflation have been going on for what, close to two years now? Some people have lost a lot of money betting on it, and it's still not happening. When does it happen?

 

[KnowledgeReignsSupreme]

But inflation is much more likely than deflation at this time.

Tomorrow or five years from now?Tomorrow, there's pretty much zero risk of inflation.

 

[IvanKaramazov]

Latest Krugman rant.

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

One would be justified in stopping right here. This is a great example of a post hoc ergo propter hoc fallacy. Krugman isn't a stupid person and I'm sure he knows better than this on some abstract level, but his columns and blog entries are full of stuff like this.

 

[pantagrapher]

More on the looming threat of deflation

The Rising Threat of Deflation

By John H. Makin | AEI Online

(July 2010)

As we enter the second half of 2010--the "postcrisis" year--while markets have been obsessed with Europe's debt crisis, they have failed to notice potentially more ominous developments. The United States and Europe are heading toward--and Japan already suffers from--deflation, a classic prolonger of crises that boosts the real burden of debt and crushes profit margins.

U.S. year-over-year core inflation has dropped to 0.9 percent--its lowest level in forty-four years. The six-month annualized core consumer price index inflation level has dropped even closer to zero, at 0.4 percent. Europe's year-over-year core inflation rate has fallen to 0.8 percent--the lowest level ever reported in the series that began in 1991. Heavily indebted Spain's year-over-year core inflation rate is down to 0.1 percent. Ireland's deflation rate is 2.7 percent. As commodity prices slip, inflation will become deflation globally in short order.

Meanwhile in Japan, while analysts were touting Japan's first-quarter real growth rate of 5 percent, few bothered to notice that over the past year Japan's gross domestic product (GDP) deflator had fallen 2.8 percent, reflecting an accelerating pace of deflation in a country where the price level has been falling every year since 2004. As of May, Japan's year-over-year core deflation rate stood at 1.6 percent.

The Paradox of Crisis and Deflationary Pressure

The financial crisis of 2008 prompted aggressive monetary and fiscal easing by most governments. In the United States, the Federal Reserve cut its overnight lending rate to zero and tripled the size of its balance sheet during the year beginning in January 2009, during which time Congress and President Barack Obama enacted a substantial fiscal stimulus package.

By later this year, persistent excess capacity will probably create actual deflation in the United States and Europe.

Many market participants and policymakers have warned that such aggressive easing will lead to inflation. Contrary to those expectations, as noted above, core inflation has steadily moved lower in the United States and Europe and is approaching outright deflation, which Japan is already experiencing. By later this year, persistent excess capacity will probably create actual deflation in the United States and Europe. Moreover, the recent appreciation of the dollar, especially against the euro, exacerbates the U.S. deflation threat.

Fears of higher inflation are a persistent phenomenon at central banks after accommodative steps have been taken to cushion the negative impact on the real economy following a financial shock. During the Great Depression, the Federal Reserve allowed the money stock to fall rapidly because, among other concerns, Fed leaders feared inflation. The disastrous consequences, a serious exacerbation of the economic contraction already underway following the aftermath of a bursting bubble, are fully articulated in Milton Friedman and Anna Schwartz's Monetary History of the United States, 1867-1960 (Princeton University Press, 1963).

More recently, the Bank of Japan, slow to ease after the real estate bubble burst in 1990, has pre-sided over two decades of disinflation that has become outright deflation. Japan's nominal GDP, as of the first quarter of this year, at ¥480 trillion has dropped by an extraordinary 7 percent over the past two years because of a combination of outright deflation and low-to-negative growth. Perhaps even more dismaying, in 2010, Japan's nominal GDP is equal to its 1993 GDP. It is encouraging to know that, after its May 20 meeting, the Bank of Japan's policy statement expressed the need to be more accommodative in light of resumed signs of financial distress centered in Europe. Perhaps the Fed's next policy statement after its June midyear policy review by the Federal Open Market Committee will emphasize further the need to remain accommodative for "an extended period."

...clipped...

link to full articleI recommend reading the whole thing.

 

[djmich]

Latest Krugman rant.

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

One would be justified in stopping right here. This is a great example of a post hoc ergo propter hoc fallacy. Krugman isn't a stupid person and I'm sure he knows better than this on some abstract level, but his columns and blog entries are full of stuff like this.

He's not stupid, he knows his audience, and he knows he can feed them exactly what they want to hear. Just like any other talking head these days.

 

[MasterofOrion]

Deflation is worse. Why? Because if you borrow $ XXXX K on a piece of real estate and it depreciates to something less that people walk away from the loan. This hits banks collectively on a mass scale. We can not take another financial crisis like 2008.But inflation is much more likely than deflation at this time.

Fair enough. This is not my area of expertise. But the warnings about inflation have been going on for what, close to two years now? Some people have lost a lot of money betting on it, and it's still not happening. When does it happen?

The only thing holding back inflation is the bad economy. When we see the economy uptick we will see inflation.

 

[OC Zed]

Deflation is worse. Why? Because if you borrow $ XXXX K on a piece of real estate and it depreciates to something less that people walk away from the loan. This hits banks collectively on a mass scale. We can not take another financial crisis like 2008.

But inflation is much more likely than deflation at this time.

Don't confuse deflation with affordability.

 

[KnowledgeReignsSupreme]

Latest Krugman rant.

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

One would be justified in stopping right here. This is a great example of a post hoc ergo propter hoc fallacy.

I did stop right there actually. I can get all I want of that in Dodds' thread.

 

[djmich]

Latest Krugman rant.

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

One would be justified in stopping right here. This is a great example of a post hoc ergo propter hoc fallacy.

I did stop right there actually. I can get all I want of that in Dodds' thread.

 

[dickey moe]

Latest Krugman rant.

Job creation has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Mr. Obama.

One would be justified in stopping right here. This is a great example of a post hoc ergo propter hoc fallacy. Krugman isn't a stupid person and I'm sure he knows better than this on some abstract level, but his columns and blog entries are full of stuff like this.

That's because Krugman is a brilliant, Nobel-prize winning, intellectually dishonest economist.

 

[pantagrapher]

Trending Toward Deflation

Inflation has been falling, but how close are we to deflation? I found myself wondering that after observing John Makin’s combusting coiffure, his prediction that we might see deflation this year.

Here’s the thing: the usual way inflation is measured is by looking at the change from a year earlier. But if inflation is trending lower, that’s a lagging indicator — if prices have been falling for the past few months, but were rising before that, inflation over the past year will still be positive. On the other hand, monthly data are noisy. So what to do?

Well, a crude approach would be simply to fit a trend line through those noisy monthly numbers. Here’s what happens when you do this for the Cleveland Fed’s median consumer price inflation number. On the vertical axis is the monthly inflation at an annual rate, on the horizontal axis months with Jan. 2008=0:

[link to graph]

Yes, I know, the axes aren’t labeled. Read the text!

Now, there’s a common objection to the Cleveland data, which is that the median tends to be measured by the price of owner-occupied housing, which is imputed rather than directly measured. So for a check I’ve done the same exercise with the personal consumption expenditure deflator for market-based prices, excluding food and energy — a measure designed specifically to deal with that objection:

[link to graph]

Bureau of Economic Analysis

What I take from this is that deflation isn’t some distant possibility — it’s already here by some measures, not far off by others. And of course there isn’t some magic boundary effect when you cross zero; falling inflation is raising real interest rates and making debt problems worse as we speak.

So “it” is happening here. Domo arigato, Bernanke-san.

link

 

[Bonzai]

Latest Krugman rant.

I try to be objective and get where he's coming from. But the man just doesn't seem to get it. "It" being how "regular" people see the world.

If this guy were to have been in my elementary school, he would have made me want to become a bully and beat him up on the playground.

This is because he's smarter than you. And most "regular" people.

 

[KnowledgeReignsSupreme]

Trending Toward Deflation

Inflation has been falling, but how close are we to deflation? I found myself wondering that after observing John Makin’s combusting coiffure, his prediction that we might see deflation this year.

Here’s the thing: the usual way inflation is measured is by looking at the change from a year earlier. But if inflation is trending lower, that’s a lagging indicator — if prices have been falling for the past few months, but were rising before that, inflation over the past year will still be positive. On the other hand, monthly data are noisy. So what to do?

Well, a crude approach would be simply to fit a trend line through those noisy monthly numbers. Here’s what happens when you do this for the Cleveland Fed’s median consumer price inflation number. On the vertical axis is the monthly inflation at an annual rate, on the horizontal axis months with Jan. 2008=0:

[link to graph]

Yes, I know, the axes aren’t labeled. Read the text!

Now, there’s a common objection to the Cleveland data, which is that the median tends to be measured by the price of owner-occupied housing, which is imputed rather than directly measured. So for a check I’ve done the same exercise with the personal consumption expenditure deflator for market-based prices, excluding food and energy — a measure designed specifically to deal with that objection:

[link to graph]

Bureau of Economic Analysis

What I take from this is that deflation isn’t some distant possibility — it’s already here by some measures, not far off by others. And of course there isn’t some magic boundary effect when you cross zero; falling inflation is raising real interest rates and making debt problems worse as we speak.

So “it” is happening here. Domo arigato, Bernanke-san.

link

That's another example of one of his good (by my tastes) articles. I wonder how many libs' heads exploded when he cited an AEI article?

 

[pantagrapher]

The Feckless Fed

By PAUL KRUGMAN

Published: July 11, 2010

Back in 2002, a professor turned Federal Reserve official by the name of Ben Bernanke gave a widely quoted speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” Like other economists, myself included, Mr. Bernanke was deeply disturbed by Japan’s stubborn, seemingly incurable deflation, which in turn was “associated with years of painfully slow growth, rising joblessness, and apparently intractable financial problems.” This sort of thing wasn’t supposed to happen to an advanced nation with sophisticated policy makers. Could something similar happen to the United States?

Not to worry, said Mr. Bernanke: the Fed had the tools required to head off an American version of the Japan syndrome, and it would use them if necessary.

Today, Mr. Bernanke is the Fed’s chairman — and his 2002 speech reads like famous last words. We aren’t literally suffering deflation (yet). But inflation is far below the Fed’s preferred rate of 1.7 to 2 percent, and trending steadily lower; it’s a good bet that by some measures we’ll be seeing deflation by sometime next year. Meanwhile, we already have painfully slow growth, very high joblessness, and intractable financial problems. And what is the Fed’s response? It’s debating — with ponderous slowness — whether maybe, possibly, it should consider trying to do something about the situation, one of these days.

The Fed’s fecklessness is, to be sure, not unique. It has been astonishing and infuriating, as the economic crisis has unfolded, to watch America’s political class defining normalcy down. As recently as two years ago, anyone predicting the current state of affairs (not only is unemployment disastrously high, but most forecasts say that it will stay very high for years) would have been dismissed as a crazy alarmist. Now that the nightmare has become reality, however — and yes, it is a nightmare for millions of Americans — Washington seems to feel absolutely no sense of urgency. Are hopes being destroyed, small businesses being driven into bankruptcy, lives being blighted? Never mind, let’s talk about the evils of budget deficits.

Still, one might have hoped that the Fed would be different. For one thing, the Fed, unlike the Obama administration, retains considerable freedom of action. It doesn’t need 60 votes in the Senate; the outer limits of its policies aren’t determined by the views of senators from Nebraska and Maine. Beyond that, the Fed was supposed to be intellectually prepared for this situation. Mr. Bernanke has thought long and hard about how to avoid a Japanese-style economic trap, and the Fed’s researchers have been obsessed for years with the same question.

But here we are, visibly sliding toward deflation — and the Fed is standing pat.

What should it be doing? Conventional monetary policy, in which the Fed drives down short-term interest rates by buying short-term U.S. government debt, has reached its limit: those short-term rates are already near zero, and can’t go significantly lower. (Investors won’t buy bonds that yield negative interest, since they can always hoard cash instead.) But the message of Mr. Bernanke’s 2002 speech was that there are other things the Fed can do. It can buy longer-term government debt. It can buy private-sector debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.

Nobody knows how well any one of these actions would work. The point, however, is that there are things the Fed could and should be doing, but isn’t. Why not?

After all, Fed officials, like most observers, have a fairly grim view of the economy’s prospects. Not grim enough, in my view: Fed presidents, who make forecasts every time the committee that sets interest rates meets, aren’t taking the trend toward deflation sufficiently seriously. Nonetheless, even their projections show high unemployment and below-target inflation persisting at least through late 2012.

So why not try to do something about it? The closest thing I’ve seen to an explanation is a recent speech by Kevin Warsh of the Fed’s Board of Governors, in which he declared that doing what Mr. Bernanke recommended back in 2002 risked undermining the Fed’s “institutional credibility.” But how, exactly, does it serve the Fed’s credibility when it fails to confront high unemployment, while consistently missing its own inflation targets? How credible is the Bank of Japan after presiding over 15 years of deflation?

Whatever is going on, the Fed needs to rethink its priorities, fast. Mr. Bernanke’s “it” isn’t a hypothetical possibility, it’s on the verge of happening. And the Fed should be doing all it can to stop it.

link

 

[Iraqi Information Minister]

Latest Krugman rant.

I try to be objective and get where he's coming from. But the man just doesn't seem to get it. "It" being how "regular" people see the world.

If this guy were to have been in my elementary school, he would have made me want to become a bully and beat him up on the playground.

This is because he's smarter than you. And most "regular" people.

No doubt. And...?He seems genuinely perpelxed why regular folks and businesses aren't behaving like they should (according to the "smart" people). I simply believe it's because he's not one of them - nor has he ever been.

And that's the debate we've had for close to two hundred years now (a lot longer than that in general terms). Should we allow the intelligensia centrally plan the whole of society because they know best, or should we allow people to live their own lives even if they're among the "great unwashed".

This article sums up the sentiment using a different context, but toward the same agument. Krugman and the like are all quite similar in worldview to the imfamous quote by NYT film critic Pauline Kael's reaction to Nixon's landslide re-election:

“I live in a rather special world. I only know one person who voted for Nixon. Where they are I don’t know. They’re outside my ken. But sometimes when I’m in a theater I can feel them.”

 

[Desert_Power]

Trending Toward Deflation

Inflation has been falling, but how close are we to deflation? I found myself wondering that after observing John Makin’s combusting coiffure, his prediction that we might see deflation this year.

Here’s the thing: the usual way inflation is measured is by looking at the change from a year earlier. But if inflation is trending lower, that’s a lagging indicator — if prices have been falling for the past few months, but were rising before that, inflation over the past year will still be positive. On the other hand, monthly data are noisy. So what to do?

Well, a crude approach would be simply to fit a trend line through those noisy monthly numbers. Here’s what happens when you do this for the Cleveland Fed’s median consumer price inflation number. On the vertical axis is the monthly inflation at an annual rate, on the horizontal axis months with Jan. 2008=0:

[link to graph]

Yes, I know, the axes aren’t labeled. Read the text!

Now, there’s a common objection to the Cleveland data, which is that the median tends to be measured by the price of owner-occupied housing, which is imputed rather than directly measured. So for a check I’ve done the same exercise with the personal consumption expenditure deflator for market-based prices, excluding food and energy — a measure designed specifically to deal with that objection:

[link to graph]

Bureau of Economic Analysis

What I take from this is that deflation isn’t some distant possibility — it’s already here by some measures, not far off by others. And of course there isn’t some magic boundary effect when you cross zero; falling inflation is raising real interest rates and making debt problems worse as we speak.

So “it” is happening here. Domo arigato, Bernanke-san.

link

Really hope Krugman is wrong on this, but the evidence that we have been trying to fight the wrong battles(deficit and inflation) is really starting to pile up. I still think corporate profits are going to show strength but the continued pain in the labor market is very scary.

 

[Statorama]

Someone is stealing my bit!!

Friday, June 12th, 2009 at 11:22 am

Paul Krugman is a Jackass!

By Shannon Bell

 

[Iraqi Information Minister]

Someone is stealing my bit!!

Friday, June 12th, 2009 at 11:22 am

Paul Krugman is a Jackass!

By Shannon Bell

Sorry, bro. You started your thread Apr 5 2010, 10:38 AM.Who's zoomin' who?

 

[Statorama]

Someone is stealing my bit!!

Friday, June 12th, 2009 at 11:22 am

Paul Krugman is a Jackass!

By Shannon Bell

Sorry, bro. You started your thread Apr 5 2010, 10:38 AM.Who's zoomin' who?

Sorry, meant to post this in the "things you thought you invented...but didn't" thread

 

[Statorama]

Germany views Krugman as "somewhat imbalanced"

there is considerable disdain for the rhetoric of President Obama and his advisers regarding Germany's export-orientated economic progress. Particular derision is reserved for the rhetoric of Nobel prize-winner Paul Krugman, who with his recent diatribes against an allegedly inflationary bias in German policies is widely regarded in Berlin as somewhat imbalanced.

 

[Bonzai]

Latest Krugman rant.

I try to be objective and get where he's coming from. But the man just doesn't seem to get it. "It" being how "regular" people see the world.

If this guy were to have been in my elementary school, he would have made me want to become a bully and beat him up on the playground.

This is because he's smarter than you. And most "regular" people.

No doubt. And...?He seems genuinely perpelxed why regular folks and businesses aren't behaving like they should (according to the "smart" people). I simply believe it's because he's not one of them - nor has he ever been.

And that's the debate we've had for close to two hundred years now (a lot longer than that in general terms). Should we allow the intelligensia centrally plan the whole of society because they know best, or should we allow people to live their own lives even if they're among the "great unwashed".

This article sums up the sentiment using a different context, but toward the same agument. Krugman and the like are all quite similar in worldview to the imfamous quote by NYT film critic Pauline Kael's reaction to Nixon's landslide re-election:

“I live in a rather special world. I only know one person who voted for Nixon. Where they are I don’t know. They’re outside my ken. But sometimes when I’m in a theater I can feel them.”

This is totally backwards. Krugman isn't suggesting that he knows best how the "regular" person should act. He studies their economic behavior, and suggests policies based around the numbers on how "regular" people tend to act. He doesn't have to know their hearts and minds, he's dealing with their behavior objectively. Try this link:http://bigthink.com/ideas/4157

 

[Iraqi Information Minister]

This is totally backwards. Krugman isn't suggesting that he knows best how the "regular" person should act. He studies their economic behavior, and suggests policies based around the numbers on how "regular" people tend to act. He doesn't have to know their hearts and minds, he's dealing with their behavior objectively.

Others look at the same data and reach different conclusions. I think Krugman is often wrong. Not always, but quite often.From your link:

Economics has gotten a tremendous amount of mileage about . . . by saying what would a rational, self-interested person do?

I'm arguing that Krugman is so far removed from having to make the same day-to-day decisions that rational, self-interested people do that he can't make good conclusions on their behavior.

 

[Bonzai]

This is totally backwards. Krugman isn't suggesting that he knows best how the "regular" person should act. He studies their economic behavior, and suggests policies based around the numbers on how "regular" people tend to act. He doesn't have to know their hearts and minds, he's dealing with their behavior objectively.

Others look at the same data and reach different conclusions. I think Krugman is often wrong. Not always, but quite often.From your link:

Economics has gotten a tremendous amount of mileage about . . . by saying what would a rational, self-interested person do?

I'm arguing that Krugman is so far removed from having to make the same day-to-day decisions that rational, self-interested people do that he can't make good conclusions on their behavior.

Did you read the rest of it?

by saying what would a rational, self-interested person do? That has been the core. And for very many things, that has been a very productive way. You learn an enormous amount, and it serves as the basis not just for abstract theories, but for actual empirical analysis of behavior and of policy. But in a way we’ve sort of done what you can do with that, and more and more the key issues in economics are . . . involve the limits of rationality; involve the places where people don’t have the ability to assess all of the data they have where people are . . . don’t make rational choices.

Again, Krugman isn't entirely focused on what rational, self-interested beings do, because really, that's just not what people are. Hes saying that economics is moving past the idea that people are rational, self-interested beings and trying to get a clearer picture of how people actually behave economically. He's not some ivory tower egghead conjuring up wild ideas and imposing them on the world. Those who cling to the idea that all people are rational, self-interested beings are much closer to such a caricature. Krugman, on the other hand, is looking objectively at how people behave and using this information to drive policy suggestions.