Sunday, December 19, 2010

Paleo-Krugmanism

[Update, Monday, December 20]: In his column today, Krugman has upped the ante, now calling Ron Paul an out-and-out "zombie." Furthermore, he repeats the quote from Ron Paul but this time Krugman does not include the reference so that readers can see exactly what Rep. Paul means by his quote.

We are dealing with deceitfulness, pure and simple. Krugman is trying to make readers think that Rep. Paul approved of the behavior of the Wall Street firms and wants more of the same. As I see it, this episode highlights the fact that Krugman is fundamentally dishonest in the way he writes. If he were an honest man, he would deal with Rep. Paul's quote in full, and if he then disagreed, he could say why he thought Rep. Paul was wrong.

However, Krugman instead just uses dishonesty and personal attacks. This speaks for itself. [End Update]

I guess with Ron Paul chairing the subcommittee that oversees the Fed, Paul Krugman will be attacking him on a regular basis. Today, he has a blog post which not only misstates the Austrian position on money, but also employs logical fallacies as the basis of attack. In other words, it's another day at the office for Krugman.

Robert Wenzel has an excellent commentary on what Krugman says, and I want to emphasize with Mr. Wenzel that Ron Paul knows the difference between money supply and monetary base. This is in reply to what Krugman writes:
I used that term (paleomonetarism) — it’s probably not original, but who knows? — in a recent post about the increasingly obscure meaning of the money supply. The best example would surely be Ron Paul, who’s now going to have oversight over the Fed. If you read his stuff, it’s very clear: money is a well-defined quantity that the Fed controls, and inflation comes from — indeed is defined as — increases in that quantity.

What he means, I guess, is monetary base. (Emphasis mine)
Krugman then shows a graph which has both the monetary base and the CPI and -- Lo and behold! -- the rate of inflation does not match the monetary base. Conclusion? Ron Paul is an idiot.

As Mr. Wenzel replies (and I quote him at length):
Krugman knows damn well that the monetary base is not the same thing as the money supply--and that the distinction became important once excess reserves started piling up, to the tune of a trillion dollars, in the monetary base. Further, Krugman knows this trillion dollars in excess reserves is money sitting outside the system, i.e., it is not in the economy. It is pure evil when Krugman suggests that Congressman Paul thinks that the monetary base is the same thing as the money supply. During television interviews, I have heard Congressman Paul on many occasions comment that there was a huge amount of excess reserves in the monetary base and that it was a threat to explode the money supply. This clearly indicates that Congressman Paul knows the difference between the monetary base and the money supply. (Note: Don't send me an early clip of Congressman Paul talking about the monetary base, without reference to excess reserves, as Krugman points out, monetary base was different in "normal times". Once it became clear that excess reserves were flooding the monetary base, Congressman Paul clearly noted that the monetary base was not moving in correlation with the money supply)

Thus, the chart Krugman runs to show the supposed disconnection between the monetary base and price inflation, and implying that Congressman Paul thinks there is a connection, is deception far beyond that of his Princeton buddy, Ben Bernanke, who claimed that he is currently not printing money.

Krugman goes on with even more nonsense by calling Ron Paul's view the politically dominant view. Ron Paul subscribes to the Austrian School of Economics. While gaining in popularity, it's about as politically dominant as the legalize LSD movement.

Labeling Paul's view as the politically dominant view appears to be a slick attempt to muddy Ron Paul with the economic mess that is surely coming. "Hey, the politically dominant paleomonetarism/Ron Paul view is what got us in this mess."
Given that Krugman writes for the newspaper that desperately tried to prop up the corrupt and disgraced Michael Nifong while he pursued prosecution in the fake Duke Lacrosse Case, I am not surprised to see him deliberately misrepresenting Ron Paul's views. That's par for the course at the NYT.

Mr. Wenzel asks how Krugman can sleep at night. It's easy. The guy who writes "Conscience of a Liberal" has no conscience at all.

46 comments:

Anonymous said...

"Given that Krugman writes for the newspaper that desperately tried to prop up the corrupt and disgraced Michael Nifong while he pursued prosecution in the fake Duke Lacrosse Case, I am not surprised to see him deliberately misrepresenting Ron Paul's views"

Logical Fallacy: Non sequitur

Anonymous said...

It should probably be the other way around: "As Krugman wants to deliberately misrepresent Ron Paul's views, I am not surprised to see him writing in the NYT, which, among other things, is known for etc. etc."

Anonymous said...

Ron Paul: "The money supply (total amount of money) has doubled!"

Ron Paul has repeated this line dozens and dozens of times all through 2009 and 2010. Krugman is absolutely correct. Ron Paul doesn't understand the difference between money supply and the monetary base. He may have recently learned that most of the monetary base is just excess reserves, but he clearly thinks excess reserves is part of the money supply, otherwise he wouldn't be saying the money supply has doubled. M1 nor M2 have anywhere near doubled. The monetary base has though, yet he keeps on saying the money supply has doubled.

At best, he's actually that ignorant. At worst, he's purposely trying to mislead his listeners by repeatedly saying that fed has doubled the money supply, which is a lie.

Search for it yourself at ronpaul.com He's always saying in his speeches and interviews that the money supply has doubled. It's his favorite line. "BEN BERNANKE HAS DOUBLED THE MONEY SUPPLY. HYPERINFLATION!!!"

Anonymous said...

For the sake of being civil, I'll just give Ron Paul the benefit of the doubt and assume he's just making an honest mistake. It wasn't just that one time that Ron Paul said the money supply doubled though. He has repeatedly said so through out the past two years (dozens and dozens of times) without even referring to the monetary base, let alone excess reserves. The majority of his supporters probably do not have an intimate knowledge of the federal reserve and the various definitions of money. But here's Ron Paul, who is looked upon as the foremost expert on monetary policy, telling them that the money supply has doubled. None of you seriously find anything wrong with that?

A couple other examples:

"I think the fact that they can double the money supply like they did in the last year… that is horrendous amount of inflation."

http://www.ronpaul.com/2009-07-10/ron-paul-the-federal-reserve-is-the-worlds-counterfeiter/

"But the Federal Reserve doubled the money supply last year, so if you have a treasury bill that is 5 years and you finally go and take the money out in 5 years, instead of getting $1,000 back you might $500 worth of purchasing power or $400 worth of purchasing power."

http://www.ronpaul.com/2009-12-04/ron-paul-answers-questions-on-c-spans-washington-journal/

What exactly do you expect from Krugman? Anyone else would come up with the exact same conclusions That Krugman did about Ron Paul's definition of the money supply. He's not a mind reader.

Also, it was always clear that the most of the monetary base increase was just excess reserves. This isn't new knowledge that slowly came out.

Anonymous said...

Also, not just 2009. He's been saying it in 2010.

"We spent much more, we borrowed much more, we inflated much more, doubling the money supply, and then we go and pass this financial reform package, massive amount of new regulations and they wonder “why hasn’t the economy responded?”

http://www.ronpaul.com/2010-09-12/ron-paul-at-the-kitco-metals-econference-via-webcam/

"Yeah, I think so. People know the prices are going up. But you know, that emphasizes the difference between the Keynesian definition of inflation versus an Austrian. Keynesians say, “When the prices rise,” but the prices go up as a consequence of inflation. Inflation is when you increase the money supply. So, we’ve had inflation when Greenspan had interest rate of 1%. He did that through inflating the money supply. And just think, with what Bernanke has done since then, doubled the money supply. There again, he spent $2 trillion bailing out his buddies. That’s unauthorization and appropriation and it’s off the books. We can’t even find out what they did."

http://www.ronpaul.com/2010-10-22/ron-paul-if-obama-wants-us-to-be-grateful-he-should-just-leave-us-alone/

Anonymous said...

He's clearly calling the monetary base the money supply. Why is he doing this over and over again if he doesn't believe the monetary base is the money supply? Why does he never talk about how M2 (the most widely used definition of the money supply) has been relatively stagnant the past 2 years?

Bob Roddis said...

It's so much fun to see the utter collapse of the Keynesian paradigm.

There's no there there, folks, and it's all in plain view for everyone to see!

William L. Anderson said...

No, it is not a non sequitur. My point is that the NYT is a paper that will run things that clearly are not true, and not try to correct the situation.

I was heavily involved in the Duke case, and the coverage -- news and editorial -- from the NYT was astounding in its dishonesty. Finally, after the infamous December 15, 2006, hearing in which Nifong was forced to admit that he had been hiding exculpatory evidence and lying in court about it, the paper found itself in the position of having to backtrack.

My point is valid: the NYT is quite willing to run things that are not true in order to conform to the ideology that permeates that paper.

Anonymous said...

Prof Anderson, is the following statement true or false?

The money supply has doubled since since the recession began.

William L. Anderson said...

Are you referring to M1, M2, or M3?

One can make a case that an increase in bank reserves is an increase in the money supply, but the issue is whether or not the money is in circulation. What you seem to be saying is that Ron Paul is claiming that all of that money is in circulation when, in fact, he is not.

Don't forget that Paul Krugman holds to a pure quantity of money viewpoint. Money is nothing more than a quantity variable, and prices are meaningless unless put into an index. Furthermore, according to Krugman, prices only can have the allocation and information effect in a state of textbook perfect competition.

So, who is the zombie here?

sb101 said...

Haha..this is comical. Krugman insults the libertarian hero, and the libertarians get there panties in a bind, demanding apologies and retractions. Never mind the fact the libertarians (including Prof. Anderson) have routinely lied, made stuff up, insulted, named called etc Krugman for years. I mean, Prof. Anderson claimed Krugman endorsed fleecing billions of dollars in this post.

http://krugman-in-wonderland.blogspot.com/2010/06/paul-krugman-endorses-bernie-madoff.html

Where's the outrage? Where's the apologies? I mean, the title and premise of this blog is more insulting and demeaning than anything Krugman has written about Ron Paul. Hypocrisy is the new national past time, and welcome to the batters box Prof. Anderson.

"The guy who writes "Conscience of a Liberal" has no conscience at all."

I wish I could find the blog post where Prof. Anderson implied in the comments his students were 'not smart'.

William L. Anderson said...

Hmmm. I looked up the Bernie Madoff post, which was tongue-in-cheek for Krugman's support of Social Security which, like Madoff's schemes, is based upon the Ponzi Pyramid.

I would challenge Mr. Lerner to find anywhere where I have written that Krugman specifically supported Madoff's fraud, which is what he is accusing me of doing.

Bob Roddis said...

The pattern remains the same.

From the bleating statists, we get the same old/same old. An Austrian allegedly makes a technical mistake in describing some point in the operations of our illegal, unconstitutional criminally insane fiat money looting system and they giggle like the hyenas they are.

At the same time, they meticulously avoid ANY understanding of basic Austrian theory (economics).

The statists have nothing.

I'll say it again: The fact that an Austrian misstates or allegedly does not understand some technical aspect of the fiat money system says NOTHING about Austrian School theory, which you guys NEVER touch, because you CAN'T.

sb101 said...

Uh, the title of the post is "Paul Krugman Endorses Bernie Madoff". Of course, anytime Prof. Anderson does the same exact thing he accuses Krugman of doing (like name calling), he is always saying it in tongue in cheek. Sorry, that's pretty lame.

In many ways, Prof. Anderson is just the conservative version of Paul Krugman.

And do I really need to provide links to all the times you called Krugman a hack, fraud, thief, liar, etc? I mean, zombie is pretty light compared to some stuff said on this blog.

But hey, this is fantastic that Ron Paul finally has some responsibility. His ignorance towards the monetary system will be on full display. I can hear it now..the repeated claims of 'oh my God the money supply has doubled in 2 years' and 'the dollar has lost 95% of its value' over and over, and yet once his predictions of dollar collapse, spiking interest rates, and general doom do not come to fruition, maybe some folks that actually understand the monetary system of a free floating, non convertible currency will be invited to the dinner table so we can finally have an adult conversation about monetary policy..

Anonymous said...

I am still amazed by how the minority of free market economists (from all schools of free market thought) are still accused as being a politically dominant group and a widely prevalent orthodoxy.

It's even more astonishing that a tiny group mostly marginalized, ridiculed, and blamed for problems it never created is shown like a conspiratorial cabal out to rule the world.

Daniel Hewitt said...

AP Lerner,

The post you are citing as evidence begins "In his post today, Paul Krugman unwittingly gives an endorsement of the disgraced Bernie Madoff..."

Joshua_D said...

And rule the world WE SHALL! I kid ... I kid. I just couldn't help myslef.

Anonymous said...

"Are you referring to M1, M2, or M3?"
It doesn't matter. The answer would false for all of them.

The only way the statement would make any sense is if Ron Paul defines the "the money supply" as solely the monetary base. I'm fine with that. He could define it anyway he wants. If that's the case, then Krugman would be correct with his assessment.

If it's not the case, then the statement is false. It could very well be that Ron Paul is just being sloppy with his terminology, but how can you fault Krugman when Ron Paul was the one who who has been referring to the monetary base as the money supply? Not just once, but dozens of times. God forbid Krugman missed the one interview out of dozens where Ron Paul shows he understands that the monetary base isn't the money supply.

Either way, it doesn't change the fact that Ron Paul has been telling his supporters the money supply has doubled. It may be a technical mistake, but it's a damn critical one, especially for someone who has been named head of the House subcommittee on monetary policy.

Prof. Anderson, do you honestly find nothing wrong with Ron Paul telling regular Joes with no econ background that hyperinflation is coming because Ben Bernanke has doubled the money supply? Keep in mind that for the regular Joe, there's only one money supply. All of it.

Anonymous said...

My post on the subject:
http://realright.wordpress.com/2010/12/20/come-now-mr-krugman-zombies/

Daniel Hewitt said...

Anonymous at 7:56 AM does make a very good point. Ron Paul should not have been so sloppy with his terms either, as someone who is ignorant of the differences could be misled.

sb101 said...

"Ron Paul should not have been so sloppy with his terms either, as someone who is ignorant of the differences could be misled."

Ron Paul (and Peter Schiff) has made a career out of misleading the ignorant.

Bob Roddis said...

Hey, AP "No theory, just facts!" Lerner:

Where's all the stuff going to come from to satisfy all of this unpayable debt?

William L. Anderson said...

Nice job, Alexandra. In an earlier post, I had the full set of quotes from Ron Paul, which make it clear that Krugman's depiction of the "regulation" quote is dishonest.

Daniel Hewitt said...

AP Lerner,

Ron Paul (and Peter Schiff) has made a career out of misleading the ignorant.

Then why do their supporters understand the differences?

And when are you going to post the evidence to support your accusation about Dr. Anderson?

Jonathan M.F. Catalán said...

It's true that people like Ron Paul have been sloppy on their economics, but Paul is not an economist and he shouldn't be treated as one. If one was to attack Paul's economics then one has to attack the real theory that Paul bases his opinions on and that is that of Human Action.

sb101 said...

"And when are you going to post the evidence to support your accusation about Dr. Anderson?"

Well let's see, in the post I referenced was titled Krugman Endorses Madoff. That is a pretty dangerous claim. But we'll take Prof. Anderson word that was tongue and cheek. Where does he make things up? This comment from this post http://krugman-in-wonderland.blogspot.com/2010/12/krugman-freezes-out-obama.html is 100% false:

"When Barack Obama was elected President of the United States two years ago, Krugman was among those shouting the "hosannas" and throwing palm branches at the feet of the Messiah"

Krugman has never been a fan of Obama, and in fact called him a centrist disguised as a progressive many times over. But hey, that line above fit with what Prof. Anderson was selling that day.

Then just do a quick search of this blog and you'll see the countless times Prof. Anderson calls Krugman a hack, liar, fraud, etc. Frankly, I could care less what he calls Krugman. I mean, if Prof. Anderson would rather call Krugman names then answer my questions on interest rates, where the TARP funds came from, and when will the USD collapse like and he the other Austrians dreamers claim is completely his right. Just don't get all righteous and moralistic and say things like "Krugman instead just uses dishonesty and personal attacks. This speaks for itself" when you play the same game of name calling and deception. The reality is both Krugman and Prof. Anderson are ideologues, and both are more interested in proving themselves right than actually understanding the world around them. But this could be said for the entire economics profession these days...so let's keep up the personal attacks and name calling! It's way more fun and oh soooooooo productive!

"It's true that people like Ron Paul have been sloppy on their economics, but Paul is not an economist and he shouldn't be treated as one. "

But he authored a book called 'End the Fed'. Should he be held accountable for what he publishes? Shouldn't he be questioned like an economist if he is going to play one on TV?

Mike M said...

This nonsensical banter would be amusing if it didn’t affect people’s real lives. This Keynesian/neo Keynesian tripe that treats the world like a science experiment to be tinkered with is immoral.

First, this elitist attitude that implies that only properly trained and educated “economists” can possibly understand economics is first rate arrogance. I know dozens of business owners (not corporate executives) who understand economics better than the “experts.” They don’t have Ivy League educations, nor command of the right language, nor travel in the “proper” circles or a library full of academic books but they get it because they have to operate in the real world of commerce every day and survive. I suspect most of the people on this board have never run a business.

Second, tell me, Anonymous, AP Lerner, LK and those subscribing to similar viewpoints; do you put your money where your mouth is? That is, do you invest your money accordingly to economic philosophical beliefs? If not, then your opinions are nothing more than the byproduct of a bloviating blowhard. I subscribe to the Austrian view (admittedly not perfect) and I invest accordingly. I don’t just pontificate in abstraction.

Finally, As for the criticism of Libertarian philosophy that I see frequently here, I fail to see how a philosophy that embraces liberty and recognition of the individual as a sovereign so offensive. No it’s not perfect, but I would rather err on the side of liberty than Statism. It is only the self appointed elites that believe they possess the omnipotent wisdom to decide other people’s lives for them. As for Ron Paul, the man is not perfect (who among us is?) but he advocates from a position of individual liberty. For that reason alone he has my respect and benefit of the doubt.

Daniel Hewitt said...

AP Lerner,

Krugman has never been a fan of Obama, and in fact called him a centrist disguised as a progressive many times over. But hey, that line above fit with what Prof. Anderson was selling that day.

Here is what Krugman had to say on election night (emphasis is mine):
"A magnificent victory for Barack Obama. And bear in mind that the campaign, in its final stages, was really about different philosophies of governing. This wasn’t like the 2004 campaign, which was essentially fought over fake issues — Bush running on national security and social issues, then claiming that he had a mandate to privatize Social Security. In this election, Obama proudly stood up for progressive values and the superiority of progressive policies; John McCain, in return, denounced him as a socialist, a redistributor. And the American people rendered their verdict.

Now the work begins."
http://krugman.blogs.nytimes.com/2008/11/04/mandate/

Then just do a quick search of this blog and you'll see the countless times Prof. Anderson calls Krugman a hack, liar, fraud, etc.

In fairness, the subheading at the top of this blog reads:
"I am part of the Austrian School of Economics, and I critique Krugman's writings from that perspective."

But he authored a book called 'End the Fed'. Should he be held accountable for what he publishes? Shouldn't he be questioned like an economist if he is going to play one on TV?

I think you are right about this AP. Ron Paul should not be this careless.

Mike M said...

All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.
–John Adams

Jonathan M.F. Catalán said...

My point is that criticism of Paul's economics should be done while recognizing that Paul is not an economist. I don't mean to say that that should save him from scrutiny.

Also, whether or not Paul should be more careful is debatable. Paul's priority is not to establish a watertight economic general theory. He is spreading a message, and flawed or not his strategy has worked. That some leave with a not-entirely-accurate view of economics is unfortunate, but the same is true whether they learn from Paul or they learn it from Obama, or even Krugman.

Paul is first a politician, and that is the card he is playing.

Mike M said...

Jonathan said:
“Paul's priority is not to establish a watertight economic general theory.”

Since economics is essentially about human behavior, such a theory does not, nor will it ever exist.

Jonathan M.F. Catalán said...

Mike,

Economic theory is not about human behavior. It does not explain why humans act in the way they do. It explains causal relationships, based on the fact that humans act. Sound economic theory is universally true, because it explains relationships.

If A action is taken, the consequence is B. These types of theories are "watertight".

From Human Action,

"The a priori sciences—logic, mathematics, and praxeology—aim at a knowledge unconditionally valid for all beings endowed with the logical structure of the human mind." (p. 57)

Economics, if logically rigorous and sound, is "watertight" and universally true. It does not change depending on people's subjective valuations. It is not an economics why explains why people act they way they do, only what will occur if certain actions are taken.

Jonathan M.F. Catalán said...

Sorry, that last sentence of the above post of mine is ineligible. It should read,

"Economics does not explain why people act the way they do, only what will occur if certain actions are taken."

sb101 said...

@ Mike M:

"Second, tell me, Anonymous, AP Lerner, LK and those subscribing to similar viewpoints"

I'll give you the benefit of the doubt since you probably have not been following my comments (and, frankly, why would you follow my comments. I'm just some random commenter on a random blog) but I am not a Keynesian, a neo Keynesian, and, in fact, in many of my comments I have a negatively commented on all neo liberal economics and the myths they pawn off as facts (and that includes Austrians). When appropriate, I have stated when I agreed with Prof. Anderson, and when I think Krugman is way off base. And I post on this blog not to defend Krugman or Keynesians, but to defend reality and common sense and to better understand why people have bought into an ideology (Austrian economics) that is supported by little to no empirical evidence. While I believe it's simple minded and a mistake to subscribe to one ideology, many of my views on monetary and fiscal policy are based off MMT (or what I like to call operational fact) so feel free to label me a chartalist/MMT'er/believer in functional finance if you absolutely must put me in a box.

"do you put your money where your mouth is?"

Yes. I allocate capital for a living. And while you have not way of knowing this, very successfully. If you have been paying attention to some of my comments, you'll see just how correct I have been on markets since starting to post on this blog....

"I subscribe to the Austrian view (admittedly not perfect) and I invest accordingly. I don’t just pontificate in abstraction."

How's that working out for you? I hope you're doing better than Peter Schiff.

Mike M said...

AP
I see no benefit is labeling on these matters beyond where a person is on the spectrum of Statism and Individualism. Beyond that it’s mostly a more sophisticated version of “Crypts & Bloods” adolescent dribble.

I have not “bought into” the ideology of Austrian economics. I identify with it because it I believe it is the closest thing to representing real world human behavior based on my study and experience. I have said repeatedly it is not perfect, (no one seems to pay attention to that point) but then again nothing created by man will be.

I too have some professional capital allocation responsibilities. Framing my understanding of the markets with a basic Austrian view has served my VERY well over the last 12 years. In the manipulated world we live in with massive capital flows, one or two years are meaningless. A true measurement now must include time to have economic reality be allowed to reflect the natural order. While the bankers and governments are good at keeping the beach ball under water, eventually the pressure becomes too great. That’s when those with a proper real world foundation in economics will benefit. Sadly it may be by losing less than everyone else when measured in real terms.

That fact that you eat your own cooking has my respect. Unfortunately most on these forums do not.

As for Schiff, I don’t agree with everything he says. (does that ever really happen for thinking persons) That said, over a longer period of time he is doing a whole lot better than the conventional talking heads who lead the sheeple from one shearing to another.

Anonymous said...

It is easy to pick apart Ron Paul. He has never been much of an orator or a demagogue. As such, he says a lot of things which are weak, inaccurate or unconvincing, at least in comparison to the mighty sounding rhetorical claptrap we've been spoonfed by our leaders. I can't really blame him, after all he's seems to be an ordinary person, not some sort of argumentative genius (like AP Lerner).

The press has a field day insulting and ridiculing Paul's statements and positions. Let them try to go after something more substantial, like Rothbard's "Case against the Fed" or Hazlitt's "Failure of New Economics". As far as I'm concerned, the current monetary system is run by criminals and for criminals. What is so controversial or crazy about pushing for an audit of their operations, or to legalize currency competition?

Mike M said...

"As far as I'm concerned, the current monetary system is run by criminals and for criminals."

A point we agree on.

Mike M said...

Jonathan
"Economics does not explain why people act the way they do, only what will occur if certain actions are taken."

All other things being equal I would concur. In a complex world of 6 billion+ people and capital moving at nanosecond speeds, I doubt that rarely occurs. My argument is with people, from whatever economic philosophy they subscribe to, that view economics as a science lab experiment. The minute we believe that human behavior is predictable, beyond rational self interest over the long term, we get into trouble.

“It ain’t what you don't know that gets you into trouble. It’s what you know for sure that just ain’t so.”
-Mark Twain

Jonathan M.F. Catalán said...

Mike,

Whether or not you take a positivist or a priori approach to economics has no influence over the fact that economic theory is universally true (you had made the claim that economics cannot be "watertight").

Lysander72 said...

If I may. Problem one for Krugman. There is a wealth of discussion about the true money supply in Austrian literature, to focus on the sound bites, in which, Paul has to communicate is dishonest. A causal search at mises.org would do if one can't read Money and Credit. Problem two, Austrians constantly distinguish between inflation (increase in money supply) and changes in the CPI. Three, Paul often refers to the fact that Fed credit has doubled in the past few years, everyone know most of the created money is being held as excess reserves.

Anonymous said...

Something important to note is that Krugman was NOT criticizing Austrian theory. You just automatically assumed he was but he made no mention of the Austrian school anywhere. Why would he be calling it Paleomonetarism if he was criticizing Austrians? He was criticizing Ron Paul and Ron Paul alone. This isn't first time Krugman has criticized a random politician's bad economics without trying to make a vialed attack on a school of economic though before.

complexphenom said...

AP says :"How's that working out for you? I hope you're doing better than Peter Schiff."

Gold's at $1385! It hasn't gone anywhere but up in the past decade (minus minor hicup in 08) ever since the Fed has gone full throttle with its ultra-forced-artificially-liquid-markets monetery policy, despite the market's natural tendancy toward further risk aversion. I hear his portfolio also consists of various other instruments but of the one I know he's explicitly promoted it's at close to record highs. Where's your point?

What is going to happen when interest rates go up (and that's not too improbable) and the fed is stuck with devalued treasuries on it's Asset side of the balance sheet? What about all of the crap-securities it "had to" load off failing bank balance sheets? Who will ultimately be on the hook for those? Or do you think those will somehow recoup to their face values?

Mike M said...

Jonathan,
I made the statement that economics cannot be watertight because without human behavior there is no economic activity. Human behavior can never be “watertight.” To assume otherwise is naïve in my opinion.

Jonathan M.F. Catalán said...

But there is "human behavior", so let's keep discussing reality.

Sean O'Donnell said...

@AP Lerner and others,
First, I applaud the fact that you have the sack to assign your name to your comments. I like that and wish more people did that for a whole host of reasons.

I'm a huge Ron Paul fan, and I confess he generalizes about terms like "money supply" versus "monetary base".

But wait a second! How do I know this? After all...I'm a zombie Ron Paul fan (aka FANatic), and can't possibly know this because supposedly Ron Paul does not know this? So how do I know this? I have no degree in economics, finance, MBA, PhD, nothin...just a Physical Science BS with a core engineering curriculum followed by ten years as a Navy pilot and ten years in financial disservices.

I'll tell you how. Because Ron Paul mentions Mises, Austrian theory, etc...A LOT. He's a credit giver, not a self-promotoer. That's why I know the diff between monetary base and money supply. And I promise you, the vast majority of people in the financial disservices industry - at least on the retail sales side - have no idea what we're talking about. You KNOW this to be true, right?

But who cares...it's all inflationary (increase in base and supply). Both threaten to or actually drive prices higher, and that's how the professionals make their money: by hopefully making the portfolios go up nominally. What a profession. Who cares what's going on with the actual economy or people's lives. Who cares about the destruction of the middle class, etc because of government and FED intervention, keeping alive institutions that suck wealth OUT of the economy...gain, while slowly destroying the currency.

And what if those assets held in excess reserves (the monetary base) deploy into the economy? What if QE2 has a multiplier effect, as it's designed to have? And what about the FED's "reinvested" proceeds from assets reaching maturity and interest, which is around $300 billion or so in treasury/security purchases over the same 8 months as QE2? All of this sends the markets into a speculative frenzy as investors and speculators alike try to figure out what the central planner of our economy is going to do next.

Paul has discussed most of this directly and indirectly...again, always referring to others....leaving people free to form their own conclusions, a far more generous attitude/position than I would take if I addressed the liars in Congress and at the FED.

People know their dollars don't go as far as they once did...and they're finally looking into why. To deny the destructive results of the FED's new money creation is craziness personified...in my minimally educated opinion. Bickering over M1, M2, M3 for all intents and purposes is immaterial in the grand scheme.

Meanwhile, dumb ass Ron Paul suggested what he does...hold gold and silver related holdings as an insurance policy against an impending currency crisis, admitting you never know when the currency will falter and that bubbles often last much longer than people expect. For this free advice, people could have seen approx 480 percent on their money in the same decade that the S&P did zero.

Attacking the overly gentlemanly Ron Paul tells me a lot about someone. If the only desire was to clarify areas where Paul has been technically negligent or perhaps unaware, I would applaud the move. But when I see a concerted effort to smear this man, my bullshit light becomes fully illuminated. I denounce those who willfully smear Ron Paul, a man who has done more to educate the masses than any other in Congress over the past several decades.

Sean O'Donnell said...

And meanwhile, followers of both Ron Paul and his opponents like Krugman frankly have little or no idea what the hell they're talking about. Krugman followers - who are much much greater in number and enjoy a much more accommodating media and governmental following - think new money creation is swell; check that...they don't even think about where the FED gets its money to make all these magical purchases. Ron Paul's fans, admittedly, adopt a few slogans and run with it. But at least they're willing to part from the masses and trust their instincts that money doesn't come from nothing...that savings MUST come before credit issuance...that SOMETHING is wrong, and the FED appears to be incapable of papering over the problems this time.