Keynesian Magic and Wizardry

Now I'd like to argue the OP's second assertion; again, I'll try to be equally persuasive:

It's not witchcraft.

 

Right again it's "WISHCRAFT".

 

Krugman's Intellectual Waterloo

Last Monday evening, Lew Rockwell, from a tip by someone named "Travis," posted this damning quote of Paul Krugman's from a 2002 New York Times editorial:

Krugman. 2002. Calling for a housing bubble.

What's more, by explicitly calling for a new bubble to replace the recently burst one, he anticipated by 6 years the Onion's hilarious "report" that "demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income." Except Krugman was being serious.

The quote caught on in the blogosphere, to such an extent that Krugman actually responded in his New York Times blog Wednesday morning:

So with a deft little two-step, Krugman paints himself as a doctor who gave an excellent diagnostic, and not a disastrous prescription. One of his ditto-heads posted on his blog that saying Krugman advocated or caused the housing bubble was "Like saying Nostradamus caused the rise of European fascism."


The Lone Gunmen
At the same time, with his headline of "And I was on the grassy knoll, too" he paints his critics (especially the Austrians) as conspiracy theorists, akin to the Lone Gunmen (the Kennedy-assassination theorists from the X-Files TV show). Just like with the matter of Jekyll Island and the events leading up to the creation of the Fed, an obvious conclusion from a matter of public record is portrayed by establishment sophistry as unmoored crankiness. And once again, it works: another ditto-head dismissively remarked "no need to reason with those folks."

Even economist Arnold Kling bent over backwards to interpret the column in a benign light:

Krugman thanked Kling for his "gracious, sensible explication". I can just imagine Kling running around his office in glee at having been nodded at by a celebrity Nobel Laureate, exclaiming, "He likes me! He likes me!"

Mark Thornton on the Mises blog followed up with a devastating collection of 2001 Krugman quotes clearly documenting his support for inducing a housing bubble. The most damning of this batch is the following from a 2001 interview with Lou Dobbs:

How the hell can anyone spin that as a purely academic musing, and not a policy recommendation for artificially inducing housing spending?

Ignoring the other quotes for a moment, and just judging from the 2002 column, did Krugman support pumping up a housing bubble or not? Given that, even in his recent blog defending himself, he explicitly stated his belief that "the only way the Fed could get traction would be if it could inflate a housing bubble," there are only two possibilities:

1. He did not support inducing a housing bubble, and wanted the Fed to not fight the recession.

2.He did support inducing a housing bubble.

Anyone even somewhat familiar with Krugman's attitude toward Fed activism should know that proposition

#1, that Krugman supported a do-nothing policy, is preposterous. So, especially after bringing back in the quotes gathered by Mark Thornton, the case for proposition #2 is overwhelming.


And what about his strawman protests that he didn't cause the housing bubble, much less the Enron scandal or Kennedy's assassination? The man is willfully missing the point. What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven't fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then.

http://mises.org/daily/3530

 

The actual quote, without your cuts: "And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. "


April 5, 2010, 1:04 pm
Me And The Bubble

"Some readers have asked for evidence that I saw the housing bubble; others are using that out-of-context remark about the Fed “needing” to create a housing bubble. So some backward looks:

"I was warning about a housing bubble through much of 2005; the big piece was [That Hissing Sound], where I argued that you needed to differentiate between regions to see the bubble’s full extent.

"Oh, and the usual suspects slammed me for that column, basically arguing that it reflected nothing but Bush-hatred.

"So did I call for a bubble? The quote comes from this 2002 piece, in which I was pessimistic about the Fed’s ability to generate a sustained economy. If you read it in context, you’ll see that I wasn’t calling for a bubble — I was talking about the limits to the Fed’s powers, saying that the only way Greenspan could achieve recovery would be if he were able to create a new bubble, which is NOT the same thing as saying that this was a good idea. Of course, I know that this explanation won’t keep the haters from pulling up the same quote out of context, over and over.

"But did I call for low interest rates? Yes. In my view, that’s not what the Fed did wrong. We needed better regulation to curb the bubble — not a policy that sacrificed output and employment in order to limit irrational exuberance. You can disagree if you like, but that doesn’t make me someone who deliberately sought a bubble.

"Anyway, just for the record."

 

This is why Krugman loses all credibility, under no circumstances can he ever admit he was wrong.

Like the article above states, do you really want us to believe that the ultra Keynesian Krugman, was merely stating what the fed needed to do in order to bounce back from the nasdaq crash, but he wanted the fed to be hands off at that point? Give me a break.

But he WAS PROMOTING it in 2002.


He Specifically said: "Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. [emphasis added]"

So let me get this straight, Krugman wants us to believe that in 2002 he was pessimistic as to whether or not the fed could generate a sustained economy, but in 2012, when the problem is 10 times worse, he is out there on a weekly basis berating Bernanke for not doing enough. So he didnt believe the fed could do anything in 2002, but he believes that they can have a big impact now?

He supposedly didnt believe that one of the core tenets of Keynesian economics would work when the problem was 1/10th the size, but now he is advocating the exact same principles in 2012 when the problem is much worse?

See this is why most people view Krugman as a disingenous turd, not only is he unwilling to admit he has ever been wrong about ANYTHING he is also completely unwilling to accept the fact that many of the concepts that he advocates, have already been a colossal failure.

 

By the way, kudos to you for finally latching on to Krugman. You were a bit late to the national conversation, but it's never too late.

 

Not sure what thats supposed to mean..... Are you implying i only became an opponent of Keynesian economics since Obama was elected?

I can assure you that I learned more than enough about economics when i was getting my degree to know that Keynesian theory was deeply flawed. You see the beautiful thing about economics is that at its core, it is a numbers thing very similar to math, and that is why a far greater number of economics professors are actually right wing, irregardless of the fact that College campuses are a haven for liberalism.

The core principle of Keynesian economics are deeply flawed "The government can spend money more efficiently, or equally efficiently as the private sector" gets decimated, probably in the first week of a basic economics class.

Keynesians would have a lot more credibility if they tried arguing over the attempt to increase government from a humanitarian standpoint, as opposed to arguing about it from an efficiency standpoint.....

 

keynsian beliefs are stupid and should be laughed out of every public office and eradicated from schools from kinder garden on up.
(I guess we could let them have their way with headstart)

 

Great. Why?

Or are you going to stick with "I-know-you-are-but-what-am-I?"