Today I am going to write about macro themes and some economic news. I saw a bunch of Paul Krugman related chatter on twitter and while I by no means pay it any heed, I thought it would be interesting to explore some of Paul’s notions on the economy and the disastrous damage being done to the reputation of economists and economics as a profession worldwide by this continued support of a sham.
Full disclaimer: I am writing this based on my personal views.
In my view that a major fiat currency collapse is inevitable, the real question is of the time horizon, should the current course of action taken favored by most – especially the EU and American – policymakers continue. I also believe that even if the current favored policy response to everything – print more money -were to end tomorrow we may in fact be so far down this path of currency devaluation and inflationary policies that may be so far in the hole, so to speak, that we cannot get back out.
Whenever Paul Krugman writes something I am always amazed by several things. First, the effect that his words still have. The man has quite the megaphone when it comes to making or influencing policy decisions. Second is the mans unmistakable arrogance and disdain for any viewpoint that does not match his own. The third is that when Krugman, or economists like him make statements like the ones found here, it devalues my degree in economics as eventually this ‘theory’ and those promoting it will be exposed.
Let us take a moment to examine Krugman’s ‘thesis’, as I have heard it called.
1) He continues to maintain, in typical Keynesian fashion, that the problem was simply a drop in aggregate demand, lamenting that policy makers focus on cuts rather than ‘stimulating’ the economy. This is the stereotypical Keynesian response – “you just didn’t stimulate enough.” This is the similar to trying to have a conversation with a child, you either have the data to support your assertions or you don’t
2) He mentions that the creation of record levels of household debt, reduced purchasing power, and effective transfer of wealth from consumers to corporations and governments (although he does not phrase it in this manner, rather posing it as a question. Yes Paul, we all know you are brilliant). However, he completely refuses to address the policies that enabled this, or in fact admit that they MAY be part of the problem. Of course, no talk above banks being allowed to over leverage and moral hazard associated with bailouts, that CLEARLY could never contribute to ANY problem.
3) He speaks of bubbles in housing and consumer spending then chastises the European central bank for raising interest rates. Now I may be no fancy PhD in economics, but it seems to me that if easy money policies (dovish if you will) created bubbles then the solution to this problem is not more easy money policies.
4) He constantly makes statements like “there is nothing in the data to suggest” meaning I won’t show you my work but I’m smart so take my word for it. Or perhaps his “For all those that know their 1930s history” condescending statements. To top it off he runs a nice quotation “You do not know, my son, with how little wisdom the world is governed” which Paul is unfortunately true because people listen to people like you.
This is not meant to be a personal attack on Paul Krugman, I have never met the man, nor have any desire to do so. I’m sure he is a perfectly respectable gentleman and we simply have differing viewpoints. This is, however, a expression at my frustration at his, and other economists, frank unwillingness to concede that their model (the one of the two that they have really ‘tested’) may be incorrect. In my opinion, history will judge those who strove to perverse this perverse status quo, and it will not do so kindly. I fear that the profession of economics may become one of the casualties.