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He predicted the financial crisis. And predicting is hard, especially, if you have a "creative" government. The underlying problem was postponed, not fixed, and

by kukx 6y ago

He predicted the financial crisis. And predicting is hard, especially, if you have a "creative" government. The underlying problem was postponed, not fixed, and it got bigger in the mean time. I do not agree with him on everything, but he has many apt observations and convincing explanations. And at least he looks at fundamental mechanisms, which I like to interpret as a hard reality. I believe we now live in a soft reality, where the sweet falsehoods are preached to and believed by masses.

throw0101a 6y ago
The technical explanation why, when rates are zero, and you 'print money', inflation does not (or at least in all our current experiences has not) appear(ed): * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... * Same paper: https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf The paper is probably still relevant today, especially since more places are hitting zero. Krugman has made better predictions than some trillion dollar asset managers: * https://www.businessinsider.com/this-was-the-bill-gross-blunder-that-led-to-his-downfall-2014-10 https://www.businessinsider.com/this-was-the-bill-gross-blun... * https://www.salon.com/2014/10/03/paul_krugman_schools_the_deficit_maniacs_who_keep_“getting_it_wrong”/ https://www.salon.com/2014/10/03/paul_krugman_schools_the_de... * https://delong.typepad.com/delong_long_form/2014/10/pimco-how-to-lose-lots-of-money-and-still-influence-people-the-honest-broker-for-the-week-of-october-10-2014.html https://delong.typepad.com/delong_long_form/2014/10/pimco-ho... I started reading Krugman's weblog around 2009, and AFAICT, everyone who bet/predicted against Keynesian economics in the intervening years has generally been wrong (or at least more-wrong, even if K hasn't been spot-on).
- kukx 6y ago
  The money printed to finance the government debt is not backed by a production of value. It just increases the money supply, while not increasing the amount of goods that one can buy with that money, hence by nature it is inflationary, ie it makes money less valuable. The market is complex and the effects may be postponed in time by years, but the fundamental mechanisms persist. The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected.
  - throw0101a 6y ago
    > The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected. This was published ten years ago (November 2010): > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Still waiting for said debasement and inflation. Any time now. Real soon.
    - kukx 6y ago
      There is the CPI, but it does not represent all prices. House prices and stock went up a lot, in many cases to irrational levels. The young people without a house feel the pain. They will inherit the national debt as well. Now the commodity prices steadily increase. Add to it increasing wages and more expensive imports and we will see rising costs of production and in consequence the CPI.
      - throw0101a 6y ago
        The CPI takes into account housing, specifically the carrying costs (which is 'rent equivalent'). Housing itself, like stocks, is considered an asset and is not part of inflation. > [Young people] will inherit the national debt as well. You know who else will inherit the national debt? Their children, and grand children, and great grand children, and great-great grand children. Not too long ago the UK rolled forward debt from the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), and WW1 (1910s): * https://www.theguardian.com/business/2014/oct/31/uk-first-world-war-bonds-redeemed https://www.theguardian.com/business/2014/oct/31/uk-first-wo... As long as economic growth is higher than the interest rate of the debt, it's generally not a problem. And interest rates have been, with some gyrations, dropping for over 700 years: * https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes...
- erichocean 6y ago
  Krugman said that Trump, if elected, would bring global a recession. [0] Oops. Point being, he tends to let politics cloud his judgement—especially in the last 10 years or so. [0] https://www.politico.com/story/2016/11/krugman-trump-global-recession-2016-231055 https://www.politico.com/story/2016/11/krugman-trump-global-...
  - throw0101a 6y ago
    And he quickly (2-3 days) retracted that call once he recovered from the initial despair of the 2016 election results: > But will the extent of the disaster become apparent right away? It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest. > In fact, don’t be surprised if economic growth actually accelerates for a couple of years. * https://www.nytimes.com/2016/11/14/opinion/trump-slump-coming.html https://www.nytimes.com/2016/11/14/opinion/trump-slump-comin... * http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ We all make mistakes: the important things is to own up to them and learn from them. Have any of the people who said Bernanke's QE would cause (hyper)inflation and currency debasement publicly recanted?

by kukx 6y ago

throw0101a 6y ago

The technical explanation why, when rates are zero, and you 'print money', inflation does not (or at least in all our current experiences has not) appear(ed): * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... * Same paper: https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf The paper is probably still relevant today, especially since more places are hitting zero. Krugman has made better predictions than some trillion dollar asset managers: * https://www.businessinsider.com/this-was-the-bill-gross-blunder-that-led-to-his-downfall-2014-10 https://www.businessinsider.com/this-was-the-bill-gross-blun... * https://www.salon.com/2014/10/03/paul_krugman_schools_the_deficit_maniacs_who_keep_“getting_it_wrong”/ https://www.salon.com/2014/10/03/paul_krugman_schools_the_de... * https://delong.typepad.com/delong_long_form/2014/10/pimco-how-to-lose-lots-of-money-and-still-influence-people-the-honest-broker-for-the-week-of-october-10-2014.html https://delong.typepad.com/delong_long_form/2014/10/pimco-ho... I started reading Krugman's weblog around 2009, and AFAICT, everyone who bet/predicted against Keynesian economics in the intervening years has generally been wrong (or at least more-wrong, even if K hasn't been spot-on).

kukx 6y ago
The money printed to finance the government debt is not backed by a production of value. It just increases the money supply, while not increasing the amount of goods that one can buy with that money, hence by nature it is inflationary, ie it makes money less valuable. The market is complex and the effects may be postponed in time by years, but the fundamental mechanisms persist. The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected.
- throw0101a 6y ago
  > The consequences are negative and sooner or later we will see them, or it is likely that we are already deeply affected. This was published ten years ago (November 2010): > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Still waiting for said debasement and inflation. Any time now. Real soon.
  - kukx 6y ago
    There is the CPI, but it does not represent all prices. House prices and stock went up a lot, in many cases to irrational levels. The young people without a house feel the pain. They will inherit the national debt as well. Now the commodity prices steadily increase. Add to it increasing wages and more expensive imports and we will see rising costs of production and in consequence the CPI.
    - throw0101a 6y ago
      The CPI takes into account housing, specifically the carrying costs (which is 'rent equivalent'). Housing itself, like stocks, is considered an asset and is not part of inflation. > [Young people] will inherit the national debt as well. You know who else will inherit the national debt? Their children, and grand children, and great grand children, and great-great grand children. Not too long ago the UK rolled forward debt from the South Sea Bubble (1700s), Napoleonic Wars (early 1800s), Crimean War (late 1800s), and WW1 (1910s): * https://www.theguardian.com/business/2014/oct/31/uk-first-world-war-bonds-redeemed https://www.theguardian.com/business/2014/oct/31/uk-first-wo... As long as economic growth is higher than the interest rate of the debt, it's generally not a problem. And interest rates have been, with some gyrations, dropping for over 700 years: * https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes...
erichocean 6y ago
Krugman said that Trump, if elected, would bring global a recession. [0] Oops. Point being, he tends to let politics cloud his judgement—especially in the last 10 years or so. [0] https://www.politico.com/story/2016/11/krugman-trump-global-recession-2016-231055 https://www.politico.com/story/2016/11/krugman-trump-global-...
- throw0101a 6y ago
  And he quickly (2-3 days) retracted that call once he recovered from the initial despair of the 2016 election results: > But will the extent of the disaster become apparent right away? It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest. > In fact, don’t be surprised if economic growth actually accelerates for a couple of years. * https://www.nytimes.com/2016/11/14/opinion/trump-slump-coming.html https://www.nytimes.com/2016/11/14/opinion/trump-slump-comin... * http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ http://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ We all make mistakes: the important things is to own up to them and learn from them. Have any of the people who said Bernanke's QE would cause (hyper)inflation and currency debasement publicly recanted?