Paul Krugman is an influential Nobel Prize-winning economist with a prominent voice in the media as a columnist and blogger for the New York Times who constantly uses his platform to argue for more government intervention in the market. In his latest column, Krugman asks, “Why have we been having so many bubbles?” His answer is instructive.
Krugman notes that the U.S. had a dot-com bubble followed by a housing bubble and that “One popular answer” to his question “involves blaming the Federal Reserve—the loose-money policies of Ben Bernanke and, before him, Alan Greenspan.” While “it’s certainly true”, Krugman writes, “that for the past few years the Fed has tried hard to push down interest rates, both through conventional policies and through unconventional measures like buying long-term bonds”, and while the “resulting low rates certainly helped send investors looking for other places to put their money, including emerging markets”, “the Fed was only doing its job. It’s supposed to push interest rates down when the economy is depressed and inflation is low.”
Of course, this isn’t actually an argument. That the Fed may have been “only doing its job” doesn’t mean that its inflationary monetary policies weren’t the cause of the dot-com and housing bubbles. But Krugman continues, “I know that there are some people who believe that the Fed has been keeping interest rates too low, and printing too much money, all along. But interest rates in the ‘80s and ‘90s were actually high by historical standards, and even during the housing bubble they were within historical norms.”
“Besides,” Krugman adds, “isn’t the sign of excessive money printing supposed to be rising inflation? We’ve had a whole generation of successive bubbles—and inflation is lower than it was at the beginning.”
Having thus dismissed the Fed’s monetary policy as the cause of the bubbles, Krugman diverts his readers’ attention elsewhere, writing that “the other obvious culprit is financial deregulation”. The “main lesson of this age of bubbles”, Krugman concludes, “is that when the financial industry is set loose to do its thing, it lurches from crisis to crisis.”
Krugman’s argument, however, simply is not honest. His claim that interest rates were “within historic norms” during the housing bubble, for example, is what one might call a “lie”.
If one follows his link, it goes to his blog, where he shows a chart of interest rates on 10-year Treasury securities. However, Krugman is perfectly well aware that the main mechanism by which the Fed lowered interest rates before the bursting of the housing bubble was through purchases of short-term Treasury securities (he had, after all, himself just pointed out that only in the “past few years” had the Fed taken “unconventional measures like buying long-term bonds”). It wasn’t until after the bubble burst, in 2008, that the Fed began what it calls “Large Scale Asset Purchases” (LSAPs). Under the several rounds of “quantitative easing” (QE) that have occurred since the financial crisis struck, the Fed has monetized long-term Treasury securities and mortgage-backed securities (i.e., created “money” out of thin air to buy government debt or other debt instruments).
But even looking at 10-year securities, it seems rather disingenuous, to say the least, to describe the 3.4% low that was reached in 2003 as “within historic norms” when it hadn’t been that low since 1958.
Turning to interest rates on 1-year and 5-year securities, the truth is that they did reach historic lows during the bubble years, and the federal funds rate, which is the rate at which banks lend to each other and which is influenced by the Fed’s purchases of securities, reached a historic low of 1% during the housing bubble, which in turn influenced the interest on adjustable-rate mortgages.
So, to review his argument, Krugman asserted that since interest rates weren’t low by historical standards, therefore low rates couldn’t have caused the housing bubble. Yet we see that rates were low by historical standards, and thus, his conclusion that the Fed was not the culprit does not follow.
Moreover, the real question isn’t whether interest rates were lower than they had historically been in the past, but whether they were lower than they would otherwise have been if determined by the free market rather than efforts to centrally plan the economy. And the answer to this question is self-evidently in the affirmative, since it has been one of the central purposes of the Fed’s intervention in the market to push rates down below where they otherwise would be.
And we don’t need data and charts to illustrate how Krugman is being dishonest with his readers. One may simply examine what economists were saying at the time about the influence of the Fed’s low interest rates on the housing market:
“Millions of Americans have decided that low interest rates offer a good opportunity to refinance their homes or buy new ones.” – May 2, 2001
“To reflate the economy, the Fed doesn’t have to restore business investment; any kind of increase in demand will do…. [H]ousing, which is highly sensitive to interest rates, could help lead a recovery.” – August 14, 2001
“Low interest rates, which promote spending on housing and other durable goods, are the main answer.” – October 7, 2001
“[T]he Fed’s dramatic interest rate cuts helped keep housing strong” – December 28, 2001
“To fight this recession the Fed … needs soaring household spending to offset moribund business investment. And to do that … Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” – August 2, 2002
“[T]hose 11 interest rate cuts in 2001 fueled a boom both in housing purchases and in mortgage refinancing….” – October 1, 2002
“Mortgage rates did indeed fall briefly to historic lows, extending the home-buying and refinancing boom that has helped keep the economy’s head above water.” – July 25, 2003
“Low interest rates … have been crucial to America’s housing boom.” – May 20, 2005
“Now the question is what can replace the housing bubble…. But the Fed does seem to be running out of bubbles.” – May 27, 2005
“[T]he Federal Reserve successfully replaced the technology bubble with a housing bubble. But where will the Fed find another bubble?” – August 7, 2006
“Back in 2002 and 2003, low interest rates made buying a house look like a very good deal. As people piled into housing, however, prices rose—and people began assuming that they would keep on rising.” – July 27, 2007
Which economists said those things?
Actually, all of those quotes are from the same person. A person who just so happens to be Nobel Prize-winning economist who is also a well-known newspaper columnist. Yes, all of the above quotes are from Paul Krugman, whose record on the housing bubble I documented in my book Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis.
The facts didn’t change, but Krugman’s tune certainly did. This is easily explained. When he thought creating a boom in housing was the solution to fixing the economy, he was happy to brag about how it was a result of the policy he advocated of lowering interest rates. In fact, he criticized the Fed for not lowering rates enough. But, as everyone now knows, the housing bubble didn’t turn out so well. Krugman couldn’t admit that his policy prescription had been wrong, much less acknowledge that his entire Keynesian economic ideology upon which he based it was fundamentally unsound, and so you have such intellectually dishonest attempts to obfuscate the truth as his recent column.
As for his argument that since inflation has been low, therefore money printing couldn’t have been “excessive”; first of all, money printing is inflation. Price inflation is one consequence of monetary inflation. What Krugman means by “inflation” is a general rise in prices across a basket of consumer goods as measured by the government’s Consumer Price Index (CPI). Krugman himself alluded to the fallacy he makes here in his blog post, linked to from his column, where, humorously, he writes, “Maybe you can argue that loose money, for a while, shows up in asset prices rather than goods prices (although I’ve never seen that argument made well).”
It would seem Krugman made that argument quite well himself when he was advocating a Fed policy of monetary inflation in order to push down interest rates “to create a housing bubble”, as he put it in August 2002.
It would also seem a logical corollary from the observation that the policy Paul Krugman advocated was a primary cause of the economic mess the U.S. finds itself in that following his further recommendation for how to get out of it, which is to just keep doing more of the same, is perhaps not such a wise thing to do.
It might be useful to point out, further, how Krugman, in the wake of the dot-com bubble, argued that since the Fed couldn’t lower short-term rates much further, it should be “willing to abandon conventional notions of prudence” by purchasing long-term government debt; an idea, he wrote, at first deemed “radical” and “branded as irresponsible”. As already noted, this “radical” and “irresponsible” policy is precisely the one the Fed has adopted since 2008.
The Fed’s monetary policy fits Albert Einstein’s definition of insanity. The Fed has engaged in the same policy that caused the housing bubble, with the only difference being that its monetary inflation has since occurred on an even greater scale. The Fed has more than tripled the monetary base since 2008, printing more money in just the last five years than it had during its entire existence before the financial crisis.
Fortunately, the average person on the street intuitively understands what Keynesian economists seem incapable of grasping; that wealth doesn’t come from a printing press. Unfortunately, the average person doesn’t have much say in how government bureaucrats try to to run their lives and centrally plan the entire economy, and what’s done is done. Americans should prepare for the inevitable consequences of the unprecedented monetary inflation the Federal Reserve has engaged in. The next crisis is going to make 2008 look like a walk in the park.
In psychology, projection is the act of blaming something on others that you can’t identify with in yourself because it is too fraught with negative implications. Greed is one of those negative implications that we tend to project onto others, i.e., the Federal Reserve. Once we learn, like Pogo, that we have met the enemy, and he is ‘us’, we might stop this tomfoolery and do something constructive to stop our stupid behavior.
What does “greed” have to do with anything in the article?
Only the fact that greed is a primary ingredient in all bubbles. I’m guessing that if you can’t see the connection, you are experiencing the projection that I referred to in my post.
The low interest rates are what fuel businesses taking out loans to work on marginally productive projects. It has nothing to do with greed and everything to do with how people respond to price signals and incentives.
You would buy more clothes, computers, and any other commodity if the price went down then you already do (assuming another unit at a lower price would still fit in with the marginal utility your preferences assign)? Well, money is just another commodity and its price is the interest rate. When the interest rate is low, more people will borrow.
The cheap credit is what fuels malinvestment, or the “cluster of errors.” New money is created to bolster down the interest rate and encourage borrowing. But this new money, through inflationary mechanisms, draws resources out of the old productive sectors into new sectors where projects are started that can only be profitable if funds/credit can be borrowed at the new low interest rate. Once people start defaulting on credit and it is tightened, or the demand for capital outpaces the supply of capital (which it almost always does in a bubble), these businesses will default on their debt and have to liquidate to pay off as much as they can. Resources and labor have to be transferred to new industries before they become lucrative factors of production again. This adjustment is the recession.
So there, now I have explained in concrete terms why it is clearly due to the interest rates that a bubble is ultimately created.
You are clearly confusing the term “greed,” or the intense and selfish desire for something, with self interest, the desire to have ones’ preferences actualized. Regardless, what we can not get rid of is human nature, which is self interest in our actions, but what we can get rid of is poor policy that encourages miscalculation and the nastiest sides of human nature to be shown. The businesses, stockbrokers, etc that borrowed are not of some different class of human endowed with different traits than you or I. Maybe they have a much more intense self interest than us that can be considered greedy (though I would think any projection of such a term onto the intentions of another person where they are not explicitly made known is pompous and contrary to reason), but that self interest may I remind you is what fuels real economic growth as well as illusory growth, or bubbles.
Queen, I invite you to actually read the article and post relevant comments about its content.
That’s what I did. I did a bit of research on you and your web site and have determined that you are living inside your own ‘bubble’ and I would be an idiot to continue this discussion with you. Have a nice day.
He seems to be trolling and if he is not he is probably very economically illiterate. Calling “greed” a primary ingredient in bubbles sounds to me like the rants of occupy wall streeters last year, with no basis in sound economic theory.
You read my mind, dalibertarian.
queen, if you think there are any errors in fact or logic in the article, you are welcome to point them out. Please also review the “Comments” section under your terms of use of this site.
http://www.foreignpolicyjournal.com/terms-of-use/
You are correct in so far that the problem is one owned by us and the responsibility shared by almost everyone. The people who borrow absurd amounts of money for projects or consumption that they can never afford to pay back should be considered just as much at fault as the people who provide the means for them to do so.
However, you have to realize that these means were provided solely by government intervention, control, encouragement, and subsidies in the market. The government willed the bubble into existence the moment it lowered interest rates and began subsidizing lending institutions that offered cheap credit to consumers in the housing market.
So, had the government never interfered, regardless of their selfish intensions actors in the market would never have created the environment to facilitate such lavish borrowing. The moral hazard (private profits and socialized losses through various mechanisms) that the government created is what allowed the bubble to come into existence.
“It’s true: greed has had a very bad press. I frankly don’t see anything wrong with greed. I think that the people who are always attacking greed would be more consistent with their position if they refused their next salary increase. I don’t see even the most Left-Wing scholar in this country scornfully burning his salary check. In other words, “greed” simply means that you are trying to relieve the nature given scarcity that man was born with. Greed will continue until the Garden of Eden arrives, when everything is superabundant, and we don’t have to worry about economics at all. We haven’t of course reached that point yet; we haven’t reached the point where everybody is burning his salary increases, or salary checks in general.”
― Murray N. Rothbard
Exactly, and I would point out that there is a difference in the traditional understanding of the word “greed” and the definition that left-wingers impute onto it. The left-wingers are really attacking, as Rothbard uses the term in their sense, self interest. The traditional understanding of “greed” is intensive selfishness and an almost libertine attitude of material wealth and pleasure.
Self interest is what has motivated all men, for all times past, to get off their butts and improve their situation through labor and other productive activities. Mises pointed out that in this world people have a tendency for leisure, not labor, and they will only forego leisure to labor when they expect future and relatively greater leisure to result from their labor.
Jesus this is bad… There’s a very basic lack of understanding of where interest rates come from. Does the Fed directly set the 10-year rate? Typically, no. But by pushing down short-term rates, it also indirectly pushes down longer-term rates. Sure, the yield curve can steepen and flatten but, generally speaking, when short-term rates are low, 10-year rates are also low. They’re NOT low when markets start to factor in things like expected inflation and drive them up. Which is why low short-term rates now make the opposite of the point you want them to make– if markets were anticipating accelerating inflation, 10-year rates would be quite a bit higher than they are.
Second, you entirely misunderstand how to read the rate in a very basic way. Nominal rates, by themselves, are irrelevant. It’s real rates that matter. So a 5% 10-year rate when inflation is at 2% is higher than a 10% 10-year rate when inflation is at 8%. In other words, read properly, Krugman is right.
This is a pretty horrific butchering of data. It’s a disservice to your readers.
Krugman’s argument was that the Fed didn’t cause the housing bubble because interest rates were “within historic norms”, which is both a non sequitur AND A LIE. It is hard to see how “Krugman is right” when, read properly, he was lying.
Ummmmm… no it’s not. I already explained that you were fundamentally wrong in the way you looked at that data. In short, you used nominal rather than real interest rates (which is a mistake that would earn you a C in undergraduate economics; it’s not a difficult concept). So it might do you well to figure out how to read the data before accusing someone of lying…? Otherwise you end up making the kinds of laughable errors you made public for the whole internet to see…
You’re blowing smoke. What isn’t a difficult concept to understand is that it factually incorrect to say that “interest rates” were “within historic norms” during the housing bubble when in fact nominal interest rates reached historic lows. As for nominal vs. real rates, apparently, Krugman should have earned a C for making the freshman mistake of misreading the data when he wrote “Millions of Americans have decided that low interest rates offer a good opportunity to refinance their homes or buy new ones”, “Mortgage rates did indeed fall briefly to historic lows”, “Back in 2002 and 2003, low interest rates made buying a house look like a very good deal”, etc.
… Because no one properly talks about nominal interest rates as meaning much of anything. By that measure, a new car today is REALLY expensive compared to, say, 1910 because it costs $15-20K now and it cost less than $1K then. This isn’t a political issue– it’s a common sense issue. It’s why, in the late 90s, Milton Friedman was rightly pointing out that Japanese interest rates actually weren’t very low, and advocated, essentially, massive QE for Japan to escape their deflationary trap. Until you figure out this simple, basic point, you’re not going to get it, and you’ll keep writing things like this piece that are very basically wrong.
So, properly understood, Krugman was right; real interest rates then WERE exceptionally low. And low real rates are, indeed, a good time to borrow money. Which is why it makes a lot of sense for the government to borrow a lot of money right about now.
I defer to my previous comment. Krugman lied. And even if his claim wasn’t a lie, his argument is still a dishonest non sequitur, as I’ve already explained. Until you figure out this simple, basic point, you’ll just keep blowing smoke.
Ummmmm you defer to a statement that I’ve shown a bunch of times is laughably, demonstrably wrong…? Look, you made a really bad basic mistake. I called you on it. You… kept repeating the same statement that I repeatedly showed was demonstrably false. That’s embarrassing. You should probably stop digging in– you’re making a fool of yourself, and doing a disservice to anyone reading this. It’s not a matter of opinion– you’re just flat-out, laughably wrong. Stop.
You can’t have possibly have shown the points I made in my previous comment are “demonstrably wrong” since you didn’t bother addressing them.
“The Federal Reserve manages the federal funds rate, the interest rate at which banks lend to each other, to influence broader financial conditions and thus the course of the economy. As you can see, the target federal funds rate was lowered quickly in response to the 2001 recession, from 6.5 percent in late 2000 to 1.75 percent in December 2001 and to 1 percent in June 2003. After reaching the then-RECORD LOW of 1 percent, the target rate remained at that level for a year.” — Ben Bernanke
Doh! Give that man a “C”.
Oh jeez– you really have no clue what you’re doing here. The federal funds rate is the mechanism by which the Fed influences interest rates in the broader economy. It’s not the “interest rate”. Calling it that is like calculating inflation by using the money supply instead of wages and prices. A low federal funds rate has no direct influence at all on real interest rates– its effect is indirect. Which is why Krugman is fundamentally correct in saying that interest rates in the latter half of the 2000s were within historical norms, and why your entire assertion is utter nonsense.
Before you purport to write for a broad audience about monetary policy, you’d do well to figure out what it is and how it works. These are things you should have learned in Intro to Macro.
a) The fed funds rate is an interest rate.
b) It reached, as Bernanke pointed out in the quote I just gave you, a “record low” during the housing bubble.
c) Ergo, Krugman’s statement that “interest rates” were “within historic norms” during the bubble is false.
Let’s repeat this exercise with another interest rate:
“Mortgage rates did indeed fall briefly to historic lows, extending
the home-buying and refinancing boom that has helped keep the economy’s head above water.” – Paul Krugman, July 25, 2003
a) Mortgage rates are “interest rates”.
b) They reached “historic lows”, as Krugman pointed out in this quote.
c) Ergo, Krugman’s statement that “interest rates” were “within historic norms” is false.
You can continue this exercise on your own.
The interest rate my friend Chuck pays on a loan I have him is an interest rate. The interest rate is higher than any interest rate he’s paid before. Ergo, interest rates are higher than they’ve ever been.
Does that sound stupid? Of course. Because it is. What you’re doing is just as stupid and incoherent.
What is stupid and incoherent is this strawman argument argument of yours. You are welcome to address the facts and logic I actually used.
Let’s be really clear here– you have no clue how to read data, how monetary policy works, or much of anything. That’s why having this discussion will go nowhere. Get an intro Econ textbook, get a clue, then you might start having something worthwhile to say. Until then, you’re not only wrong, you don’t even understand the rules of the game.
Krugman, on the other hand, understands “the rules of the game” very well. That’s how he is able to now claim that the Fed didn’t cause the housing bubble because “interest rates” were “within historic norms” even though at the time he was praising the Fed for pushing rates to “historic lows”, which he credited with fueling the boom in housing. You are right, I really don’t understand the “rules” that apply to this Alice-In-Wonderland “game”.
Not to mention the fact that this argument is a non sequitur, anyway, which point you haven’t even attempted to address.
Krugman can read data. You can’t. Of course a reasonably smart college sophomore can also read data. Of course, the idea that the Fed “caused” the housing bubble is typical nonsense. You’d realize that if you were less clueless. Here’s a hint: Nevada, Florida, Ireland and Spain had housing bubbles. Texas, Maine, Germany and France didn’t. You have to be seriously thick to see that and conclude that the Fed “caused” bubbles in some states and not others. And a few foreign countries too.
You contradict yourself, first asserting that “Krugman can read data” and then that only someone who is “seriously thick” can conclude that the Fed’s low interest rates fueled the housing bubble, since Krugman in fact, as I have shown, praised the Fed’s low rates for fueling said bubble.
Hahahaha. Another meme that’s complete nonsense. If you bothered to actually read that statement, you’d get it through your head that Krugman was NOT, in fact, calling for a housing bubble. Never mind that only a real fool would think that anyone would “call” for a bubble.
But yeah, after you go and realize that your favorite meme is sadly wrong, I’m still waiting to hear how Fed interest rate policies inflated a housing bubble in a few (but not all) states, and a few foreign countries too. You already crossed the line to complete idiocy awhile ago, so this should be fun.
It is ridiculous to deny that Krugman praised the Fed’s low interest rate policy for fueling the housing bubble. Anyone can go back and read his statements and see that this is in fact what he did, even to the point of writing that the Fed needed to create a “housing bubble” — his words, not mine — to replace the dot-com bubble. That quote was just one example of many showing how he advocated the policy of low interest rates that fueled the bubble.
By your logic, Krugman “crossed the line to complete idiocy” when he acknowledged that the Fed successfully created a housing bubble. You can’t have it both ways.
Hahaha no. You’re wrong. Laughably. Again. A bubble is BY DEFINITION a bad thing. No one “calls” for a bubble. If I said, “To kill someone, Tommy would need a gun”, would you say that I was advocating murder or gun use? If your answer is yes, you’re almost as bad at reading comprehension as you are at economics. Oh and I’m still waiting for you to explain how the Fed magically managed to inflate bubbles in some states and countries but not others. You keep ignoring it. Mostly because you have no talking point for it– you’ve done a great job embarrassing yourself as is, but you seem determined to keep digging. It would be funny if it weren’t so sad.
“No one “calls” for a bubble.” — Almas
“To fight this recession the Fed … needs soaring household spending to offset moribund business investment. And to do that … Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” – Paul Krugman
Are you seriously trying to argue that Krugman didn’t really want the Fed to fight the recession?
LOL!
Go read the argument in context. Like pretty much everything, you read it hilariously wrongly. Actually Arnold Kling put it into context for the slow of brain awhile back. You can google that to save me the effort. Of course I’m trying to reason with someone who thinks the Fed can selectively inflate bubbles overseas. So the whole “reasoning” thing may not get much traction…
So you’re sticking to your argument that Krugman didn’t really want the Fed to fight the recession?
LOL!
Yes, clown. It was economic analysis, not policy advocacy. It was analyzing what might fuel recovery from the 2001 recession. He said it somewhat facetiously, which is a mistake when the really really dumb people are gonna misunderstand it. It’s like calling for “death panels” as a cost control mechanism for health care, which is something else you knuckle-draggers have accused him of doing.
Of course that’s not so surprising. With a straight face you’ve claimed that Fed monetary policy could induce a bunch of bad loans in Palm Springs, Las Vegas, Cork and Seville, but not in Dallas or Bangor.
You’re beyond clueless.
LOL! Quoting pretty much verbatim Krugman’s own vain denial that he called for the Fed to, quote, “create a housing bubble to replace the NASDAQ bubble” is not an argument.
It is ridiculous to deny that he advocated a Fed policy of lowering interest rates to fuel the boom in housing. I’ve written a book documenting his record of doing so.
http://www.amazon.com/gp/product/1470070723/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=1470070723&linkCode=as2&tag=forepolijour-20
Almas,
I want to start by crediting you for your commitment to the debate. You certainly have some stamina.
However, the author not only equals you there but does so with far more dignity and grace. Your general tone is aggressive and juvenile (as already noted by Sean O’Keeffe) and you can’t resist ad hominem attacks any more than Ben Bernanke can resist creating more dollars. Why not stop at making your point rather than adding the tirade of personal abuse as an addendum? It not only detracts from your points but also your character… and descends into a downward spiral. (Kudos to J Hammond for consistently retaining his professional composure.)
You do indeed appear well-read but seem to repeatedly ignore Jeremy’s arguments back to you. To reiterate just one: a number of the failings you claim of the author have been clearly displayed by Paul Krugman, with numerous examples cited.
Also, I also don’t understand your repeated implication that the Fed can’t have caused a bubble if it wasn’t geographically ubiquitous. It’s a bit like standing under a tree and saying the raindrops falling from the sky aren’t landing on my forehead so it can’t be raining. The Fed creates the easy-money conditions for a bubble and the money tends to follow the path of least resistance – just like a stream carving out a path down a hillside; gravity is present everywhere but water gathers into discrete channels rather than falling over land uniformly.
Re the Fed’s impact abroad, it may not have caused the various bubbles in certain countries but it certainly influenced them. The largest economy in the world doesn’t set policy in a vacuum, particularly when it also issues the world’s reserve currency. And, again, the same point about the path of least resistance remains: it makes little sense to argue that the lack of a bubble in Germany implies easy Fed policy had no impact in Spain.
The author levels a pretty strong accusation at Krugman. Given the ridiculously simplistic errors and ignorance he displays, he deserves every bit of ridicule I’ve thrown his way, sorry. If he doesn’t want to be called out on the awfulness of his argument, he might start by showing some humility.
Your analogy is also wrong; it’s more like standing in the middle of the street, remaining dry, and asserting that it’s not raining. Rain doesn’t fall selectively; housing prices also don’t accelerate selectively. You do the same magic hand-waving trick Jeremy Hammond does, where you claim that, by virtue of the US’s “bigness”, somehow an excess of dollars accelerates prices denominated in other currencies. It’s a transparently awful argument.
Frankly, there’s not much “debate” here; it’s more an effort to school poor Jeremy Hammond in basic economics. Unfortunately, it’s like talking to a brick wall… There’s a pretty good reason Ron Paul and his ilk are completely ignored in academic economic settings, and it’s not politics (I can name a host of conservative economists who are very well-regarded)– it’s the fact that they spew nonsense, have a methodology that has as much relation to economics as astrology has to astronomy, and is really a curious laughingstock rather than a serious viewpoint. The fact that they’ve been predicting runaway inflation for 40 years and it’s never happened is the first hint that they’re not to be taken seriously; the fact that, instead of revising their views at some point, they claim that it’s the data that’s lying rather than their views being wrong solidifies them as a complete joke.
Krugman’s record speaks for itself with regard to his dishonesty.
When the Fed inflates the world’s reserve currency, the central banks of other nations follow. Pretty basic.
As for Ron Paul vs. Krugman and whose school of economics has been solidified “as a complete joke”, again, it was Ron Paul warning against the Fed policy that caused the housing bubble while Krugman was advocating that very same policy, and Dr. Paul who warned against doing more of the same in response to the bust while Krugman insists we just keep running the printing presses. Once again, Krugman’s record speaks for itself.
… Clearly you haven’t looked at foreign central banks’ monetary policies. Though that really wouldn’t help much, given that you don’t, you know, understand what a real interest rate is….
To any readers not up to speed, ignore Almas’s bluffs and take a moment to see for yourselves which one of us lacks understanding. I you aren’t already aware of the “race to debase”, go ahead and look at the balance sheets of foreign central banks among the world’s fiat currencies. The European Central Banks, the Bank of England, and Bank of Japan, for example: http://www.pcasd.com/images/cb_balance_sheets_12_13.png
HAHAHAHA you’re the gift that keeps on giving. Notice 1) that the ECB’s monetary policy was substantially tighter than the Fed’s during the bubble years, and 2) that, despite a lot of expansionary monetary policy, inflation has been running BELOW the Fed’s 2% target since 2008. There’s a good reason for that. It’s called the zero- lower bound.
Or maybe you have another of your patented BS explanations for how the Fed has expanded its balance sheet almost fivefold without stoking inflation. Maybe they’re lying a d “real” inflation is higher? (Hint: it’s not). Get your Tim foil hats ready, folks. Jeremy Hammond is set to give (another) lesson in how to reason with your backside.
“When the Fed inflates the world’s reserve currency, the central banks of other nations follow.” — Me
“… Clearly you haven’t looked at foreign central banks’ monetary policies.” — Almas
“go ahead and look at the balance sheets of foreign central banks among the world’s fiat currencies.” — Me
“HAHAHAHA” — Almas
Others may go ahead and look at the balance sheets of the ECB, BoE, and BoJ and notice that what I said is true, Almas’s attempt to deny it (implicit in his vain attempt to snidely condescend) and now to obfuscate the point notwithstanding.
LOL. 1) There’s hardly any convergence in monetary policy before the crisis, 2) you do realize that expansionary monetary policy IS HOW YOU RESPOND TO AN ECONOMIC CRISIS, right…?
Jesus you’re bad… Did you stop and consider that maybe major central banks expanded because… There was a crisis in their countries and not because the Fed did…? More embarrassing stuff. You should probably quit… Actually you should probably have quit a long time ago and gotten an education before opening on these things…
“When the Fed inflates the world’s reserve currency, the central banks of other nations follow.” — Me
“Clearly you haven’t looked at foreign central banks’ monetary policies.” — Almas
“go ahead and look at the balance sheets of foreign central banks among the world’s fiat currencies.” — Me
“maybe major central banks expanded because”… — Almas
Nice to see Almas acknowledge that his comment that I haven’t looked at foreign central banks’ monetary policy was an argument from ignorance and that it was he who hadn’t bothered to look, that indeed central banks have, like the Fed, been expanding their balance sheets.
I urge readers to take a few minutes to just Google “race to debase” or “currency wars”. This is actually really basic. Almas should know since he seems to be fond of Keynesian economics, and Keynesians are fond of arguing that debasing one’s currency makes one’s exports stronger, and debasing their currencies is what central banks around the world have been doing. Fed policy is obviously not the only reason other banks inflate, but it is just plain silly to deny that when the dollar serves as the world’s reserve currency it isn’t one of them.
And Jeremy Hammond, I’m not even gonna bother. You don’t understand the very first thing about how monetary policy works, it’s abundantly clear that you can’t read or interpret a simple chart.
For that reason, I have nothing more to say– the best thing anyone can do to come to a conclusion on this is to read the nonsense you write, point and laugh.
A kindergartner could look at that chart and understand it means central banks are printing more money together. Perhaps you can find a 5-year-old to explain to you that’s what it means for the lines to trend upward over time.
You aren’t worth the breath. Your ignorance is both hilarious and kind of funny. So I’ll repeat what I pointed out the first time: 1) that there was no massive balance sheet expansion when the bubble was inflating (and the chart, if you knew how to read it, shows the exact opposite of what you want it to– that ECB policy was quite a bit tighter than the Fed’s I’m those years), and 2) that the big spike was TO FIGHT A MASSIVE ECONOMIC CONTRACTION. The fact that you think that the Fed, BoE and ECB expanded monetary policy in 2008 to “debase their currency” is prima facie evidence that you have the IQ of a cheese and don’t understand the very first thing about basic macro. Which is why this isn’t something I have any interest in discussing with you– you’re hopelessly ignorant and incapable of understanding data or reasoning.
AImas apparently holds the paradoxical belief that engaging in ad hominem and strawman argumentation illustrates his own intelligence and ability to reason. To his two points:
1) Strawman fallacy. The Fed’s policy was undeniably one of monetary inflation in order to lower interest rates (and the chart shows exactly what I “want it to”, which is that foreign central banks have all been following suit and inflating, too).
2) Strawman fallacy. I didn’t say that ‘the Fed, BoE and ECB expanded monetary policy in 2008 to “debase their currency”‘. I said that Keynesians argue that debasing one’s currency makes one’s exports stronger, which they do (just read Krugman), and urged readers to Google “race to debase” or “currency wars” to find information about how the dollar as the world’s reserve currency means that when the Fed inflates, foreign central banks follow suit. And regardless of whether debasement is the purpose or not, currency debasement is a consequence of printing more money.
As for 2008, yes, the Fed responded by doing more of what caused the crisis in the first place, only on a vastly greater scale. People should prepare themselves for the devastating consequences of this insane policy.
AImas was warned against casting insults in lieu of arguments and has consequently been banned for violating the commenting policy in the terms of use of this site. Readers are invited to participate in meaningful and respectful discussion and support their views with valid arguments rather than dishonest strawman argumentation, personal attacks, etc.
I think we’ll have to agree to disagree on my analogy. House prices do accelerate at different speeds and for a variety of reasons; some tangible, some intangible. Local laws, regulations, institutions, various aspects of population/society, wealth, culture, climate, history and many more all have effects. But, by stimulating the dynamic, a positive force adding upward pressure to those prices will be added in all areas.
I actually do think US “bigness” has impact. Are you trying to argue that the huge pools of excess dollars stay onshore and don’t venture out hunting returns abroad? You need only look at emerging markets this year to see how almost-free, ‘hot’ money flows around the globe in search of ‘yield’… and back again.
“The fact that they’ve been predicting runaway inflation for 40 years and it’s never happened… [and] … they claim that it’s the data that’s lying rather than their views being wrong…”
I have to disagree with this statement, and on numerous levels. With globalisation (of both trade and corporate operations – i.e. jobs), inflation has been exported and deflation imported. Technological progress and increased productivity in many areas of the economy have also caused many prices to fall. And I’d argue they would have fallen further were it not for money-supply inflation. Re the data: it’s not necessarily that it’s “lying” (although it may be) but more that it has been constructed in a way to hide/exclude inflation. If memory serves, CPI has been changed 20 times in the couple of decades, with the calculation now yielding vastly lower numbers than before. (Yes, I believe John Williams at Shadowstats does have some valid points.)
Anyway, it would seem that your views are well-formed and little that I might say (or probably anybody in the world) will likely change them. You will, no doubt, disagree with a lot of the above so it might be best that we leave it here.
Jack, with regard to the canard that says “there hasn’t been hyperinflation, so Austrian economists are idiots” is just more argument from ignorance. You hit on one important factor, that the U.S. can export its inflation. You might like to see here for others:
http://www.jeremyrhammond.com/2013/05/09/paul-krugman-vs-austrian-economics-his-fallacious-inflation-gotcha-argument/
We can “agree to disagree”… but the issue is you’ll still be wrong. Sorry if you don’t like the tone, but it’s just accurate. On just two points, so you get a sense of why what you’re arguing is silly:
1) U.S. dollars may go abroad chasing yield. That DOESN’T have anything to do with the price of loans denominated in other currencies. There’s no way, in other words, for cheap dollars to lower the cost of Euro-denominated loans.
2) John Williams at Shadowstats is a complete buffoon, for very simple reasons. Yes, the calculation of CPI has changed… because what we buy changes. He’s also demonstrated numerous times that he has no clue what substitutions, for instance, actually go into CPI (hint: it doesn’t assume that hamburger will be substituted for steak). But really all you need to know about Johm Williams is that, if you believe his numbers, there was no housing bubble in the 2000’s. If you deflate the Case- Shiller housing index by his numbers, you find that house prices were allegedly rising at about the rate of “real” inflation. Which means that, according to him, there was no housing bubble at all. You can judge for yourself if that passes the laugh test.
Answers:
1) We were arguing whether the Fed contributes to bubbles abroad, not to the price of loans in foreign currencies. The latter isn’t a prerequisite for the former. But the ECB also happened to lower rates and keep them low (longer than the Fed), providing further fodder for asset bubbles.
2) I didn’t say I agree with all of John Williams’ points, just some. But, using his inflation numbers you cite, real GDP would have been in the gutter so, relatively speaking, housing would still have been booming.
Also, back to your point that housing prices “don’t accelerate selectively”, here’s another quote from Paul Krugman in 2005:
“Even Alan Greenspan now admits that we have “characteristics of bubbles” in the housing market, but only “in certain areas.” And it’s true that the craziest scenes are concentrated in a few regions, like coastal Florida and California.”
http://www.nytimes.com/2005/05/27/opinion/27krugman.html?_r=0
“A bubble is BY DEFINITION a bad thing. No one “calls” for a bubble.” — Almas
“The Next Economic Bubble: The Coming Green Tech Mania — And Why It’s a Good Thing” — William H. Janeway, Foreign Affairs, August 28, 2013
Almas, apologies for an unsolicited interjection, but can I respectfully suggest that you reflect and take stock of preceding discourse.
As a neutral observer your rhetoric has increasingly relied on ad hominem counter-arguments and appears increasingly juvenile.
I’m sure you are well read and clearly hold passionate convictions, but to an outsider your discourse appears to rely increasingly less on debating factual issues and makes for car crash reading for neutral observers.
Incidentally it’s also funny that for all the Fed’s “inflationary” policies, inflation in the last decade was still running far below where it was in the 70s, 80s, AND 90s.
Ah, yes, parroting Krugman’s inflation “gotcha” argument: http://www.jeremyrhammond.com/2013/05/09/paul-krugman-vs-austrian-economics-his-fallacious-inflation-gotcha-argument/
HAHAHAHAHA!! I have nothing to say to you. You’re one of the tin- foil hat wearing Shadowstats types. There’s no use even trying– you have no clue and no interest in getting a clue.
Good luck with that… arguing with you does me about as much good as beating my head against a wall.
Ah, a “tin-foil hat wearing” type. That’s a brilliant counterargument to the facts I presented you in that post.
As for the part about beating your head against a wall, the feeling is mutual, I assure you.
You make no coherent arguments. All you do is prove that you laughably can’t read data. Or understand what the Fed does. Until then, you should probably retire from writing about anything economic. It’s a joke.
An ironic comment, considering that it doesn’t present ANY argument, much less a “coherent” one.
To complete this medley of stupid, I’m fully expecting you to claim that Krugman wants the government to break windows and fake an alien invasion next– that’s how you clowns usually proceed.
Ah, another brilliant strawman argument. Not surprising. That’s how you clowns proceed, after all.
Still waiting for you to tell me about how the Fed managed to inflate a housing bubble in Spain but not in Texas. Or do you not have talking points for that?
Why don’t you go ask Paul Krugman?
“[T]he Federal Reserve successfully replaced the technology bubble with a housing bubble.” – Paul Krugman, August 7, 2006
LOL! It’s not difficult to understand why housing prices rose higher in some places than others. The Fed didn’t go around dropping its newly printed money from helicopters, distributing it evenly to everyone in the country. And surely you must be aware that other countries are affected by the U.S. economy? The Fed monetized mortgage-backed securities, for instance, sending the signal to foreign governments and banks that they were as good as Treasury securities. And surely you must know that the dollar serves as the world’s reserve currency, such that when the Fed inflates, other central banks, like the ECB, follow suit?
You have no clue what you’re talking about. So the Fed “dropped money” in Florida but not Texas…? And somehow the dollars went into Spanish real estate (but not German) too…? Even though those loans were Euro-denominated and the ECB kept interest rates reasonably high…? And somehow the Fed “monetized” MBS…? (You clearly have no clue what that word means, or even what you’re saying). Give it up, bud. You’re throwing around verbal diarrhea. I don’t even think you know what you’re trying to say at this point.
Here’s a hint: you’ve demonstrated that you’re a giant fool. That’s the time to give up -‘d concede that you’ve been really really wrong, not dig in and prove that you’re even dumber than you’ve already shown. Stop.
I defer to my previous comment, which you are welcome to actually address rather than engaging in strawman argumentation, feigning ignorance, using ad hominem arguments, etc.
What previous argument…? YOU MAKE NO PREVIOUS ARGUMENT. You say that the dollar was the world’s reserve currency (so what…?) and that the Fed somehow “monetized MBS” (demonstrating that you have no clue what the word monetize means; I have no clue what you were even trying to say with that) and this… caused Spanish cajas to make too many EURO-DENOMINATED loans to Spanish people…?
That’s not an argument– that’s verbal diarrhea that makes negative sense. I’ll give you this– you’re really great at spewing nonsense.
So let’s see– in a few paragraphs, you’ve managed to 1) show your complete ignorance of how monetary policy works, 2) show that you can’t tell the difference between a real and a nominal rate, 3) claimed that the Fed somehow inflated a housing bubble in parts (but far from all) of the US, and some (but not all) of Europe. In short, you’ve consistently demonstrated mind-numbing idiocy. You should really get a trophy for it.
And the fact that any publishing house would put out this kind of idiocy is pretty damning– you don’t just have wrong views, you don’t just come to wrong conclusions, YOU CAN’T DO BASIC DATA ANALYSIS THAT A COLLEGE SOPHOMORE SHOULD GET. Oh, and there’s no ad hominem mode of argument here– I’m not saying you’re wrong because you’re stupid, I’m saying you’re so laughably wrong that it’s very clear that you’re really really freaking stupid.
You ask “so what?” Again, I defer to my previous comment, where I gave you the “what”.
You deny that the Fed monetizes MBS, which actually shows that you are the one who is ignorant about what “monetize” means. Here, you can learn what it means from the Fed: http://research.stlouisfed.org/publications/es/10/ES1014.pdf
As for the rest, no need for me to reply to ad hominem argumentation.
Yes, I know what monetizing the debt means. “Monetizing MBS”, on the other hand, makes no sense. What’s hilarious, though, is that you seem to be claiming that the Fed buying MBS AFTER THE CRISIS somehow caused a housing bubble THAT HAD ALREADY POPPED.
And again, your previous comment SAYS ABSOLUTELY NOTHING. Yes, the US economy affects everyone– that in no way implies that expansionary monetary policy in the US can expand EURO-DENOMINATED credit in foreign countries. It lowers the cost of credit in the US, yes; it does NOTHING to the cost of credit in other currencies. What you make is an assertion that doesn’t make any sense at all.
If you’d made an argument, I’d address it. But what you throw out isn’t an argument– it’s complete nonsense. Explain, please, how the Fed’s monetary expansion could possibly inflate a housing bubble denominated in Euros. Go.
Dude, if you say that it “makes no sense” to say that the Fed monetizes MBS, then you ipso facto do not know what monetizing debt means.
The Fed was monetizing MBS before the bubble burst.
“The Federal Reserve credit created during the last eight months has not stimulated economic growth in technology or the industrial sector, but a lot of it ended up in the expanding real-estate bubble, churned by the $3.2 trillion of debt maintained by the GSEs. The GSEs, made up of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank, have managed to keep the housing market afloat, in contrast to the more logical slowdown in hotel and office construction. This spending through the GSEs has also served as a vehicle for consumption spending. This should be no surprise, considering the special status that GSEs enjoy, since their implied line of credit to the U.S. Treasury keeps interest rates artificially low. The Clinton administration encouraged growth in housing loans that were financed through this system.
“In addition, the Federal Reserve treats GSE securities with special consideration. Ever since the fall of 1999, the Fed has monetized GSE securities, just as if they were U.S. Treasury bills. This message has not been lost by foreign central banks, which took their cue from the Fed and now hold more than $130 billion of United States GSE securities. The Fed holds only $20 billion worth, but the implication is clear. Not only will the Treasury loan to the GSEs if necessary, since the line of credit is already in place, but, if necessary, Congress will surely accommodate with appropriations as well, just as it did during the Savings and Loan crisis. But the Fed has indicated to the world that the GSEs are equivalent to U.S. Treasury bills, and foreign central banks have enthusiastically accommodated, sometimes by purchasing more than $10 billion of these securities in one week alone. They are merely recycling the dollars we so generously print and spend overseas.”
— Ron Paul, September 6, 2001
That’s in my book. Maybe you should pick up a copy.
HAHAHAHAHAHA now you’re quoting Ron Paul as a source of economic wisdom. You’re the gift that keeps on giving.
As always, you’re completely wrong. “Monetizing” debt means buying it as it’s issued. The Fed bought MBS to support the mortgage market AFTER the bubble burst. Before the acute phase of the crisis, the Fed did open market operations the normal way– through Open Market operations involving short-term US government debt.
Ron Paul is an unholy combination of wrong and stupid. Just like you.
But the key here is how foreigners buying AMERICAN MBS is supposed to inflate a housing bubble denominated in EUROS. Quite frankly, you have no answer beyond hand-waving and verbal diarrhea.
But, given that you think Ron Paul is a source of economic knowledge, well, arguing with you is useless. You’re a “true believer” that knows nothing and wants to know less. So I’ll send you on your way.
I’d just advise you to please stop disseminating this steaming garbage to a reading public– it’s actively damaging to real economic discourse to have this kind of idiocy floating around.
Unthinking dismissal of anything Ron Paul says is not an argument, and seems downright foolish, considering the fact that he correctly predicted the housing bubble and its consequences and warned against the Fed policy that created it, while Paul Krugman, the guy you trust for “economic wisdom”, was advocating for that very same policy.
Oh, it’s very thinking dismissal. He’s a demonstrable moron. Who thinks the gold standard counts as a good economic policy idea. Here’s a hint: that’s a prima facie sign that someone shouldn’t ever be allowed to talk about the economy because they’re clueless.
Well, again, its funny how the guy you think is a “moron” was somehow still able to accurately predict the housing bubble and was warning against he Fed policy that created it while the guy you look to for economic “wisdom” was advocating the very same Fed policy with the explicit purpose of fueling the housing boom.
Very instructive, indeed.
Nice bait and switch.
After you made a fool of yourself spewing verbal diarrhea when I asked you how the Fed managed to inflate a housing bubble overseas and in only a few states in the US but not others, you keep insisting that, somehow, the Fed “inflated a housing bubble.”
… Just stop, man. You’ve embarrassed yourself enough for a long, long time.
Hey, you don’t have to take my word for it.
“[T]he Federal Reserve successfully replaced the technology bubble with a housing bubble. But where will the Fed find another bubble?” – Paul Krugman, August 7, 2006
Give it up, man. You can’t win. The facts just are not on your side. Nor is logic.
Nice try. Tell me again how the Fed inflated a Euro-denominated housing bubble (but only in Spain and Ireland), and how it inflated a housing bubble hugely in Nevada but not at all in Texas. You’vesaid nothing coherent.
So, you are arguing that Krugman was wrong?
I’m arguing that when you “reason” in quotes, you’re clearly clueless. Krugman often writes in facetious terms– if you could read and understand things he writes, you could argue on the merits. As you’ve repeatedly shown, you can’t. Because you’re a buffoon.
Krugman certainly isn’t infallible. But there’s no collectively dumber group in American political discourse than Ron Paul supporters. Your almost unbelievable idiocy in this article and comments underscores that.
A) Things Krugman has said are relevant.
B) Krugman wasn’t being “facetious”. He said it was, quote, “accurate” to say that “the Federal Reserve successfully replaced the technology bubble with a housing bubble.”
C) If you violate the terms of use of this site once more with personal insults in lieu of arguments, you will be banned for trolling.
Go ahead and ban me. It’ll make you look better, for sure.
Now, because I feel bad for you, here’s a hint. Go compare mortgage underwriting standards in Florida and Texas. Then compare zoning laws. If, after that, you still can’t figure out why it was those policies that help explain the question you constantly fail to answer, read a book.
You’re welcome, bud. Now, if you have a bit of sense or intellectual honesty, you’ll be a whole lot smarter today than you were when you wrote this symphony of nonsense.
Peace.
You are back to implicitly arguing that Krugman was wrong when he said that it was “accurate” to say that “the Federal Reserve successfully replaced the technology bubble with a housing bubble”. You are arguing that in all of those quotes I provided in the article, Krugman was wrong, that they show he lacks sense and intellectual honesty.
Well, at least we agree with that latter part.
Stop changing the subject. Let’s ignore what Krugman said. I’m calling you in YOUR BS. So, for the 50th time, answer it. You’ve done nothing but ignore it because you have no clue.
So answer it. Please.
But what Krugman said IS the subject. If you’ve forgotten that, perhaps you should reread the article. So, you see, in fact, it’s you trying to change the subject.
Jeremy – In having a discussion based on facts with the likes of Almas you truly are dealing with a mental amoeba troll.
So, for the 50th time, tell me how the Fed inflated bubbles in some states and countries but not others. And don’t reference your above posts– as I’ve already demonstrated, those are a joke.
If we get that runaway hyperinflation Ron Paul’s been predicting for the better part of 40 years, I’ll reconsider my views. Until then, it’s pretty clear that he’s completely and utterly clueless, and the best way to treat his economic policy “ideas” is to do the opposite.
Again, funny how the guy you think is “completely and utterly clueless” was accurately warning of the housing bubble and its consequences as early as 2001, warning against the policy Krugman advocated that caused it.
“The Federal Reserve manages the federal funds rate, the interest rate at which banks lend to each other, to influence broader financial conditions and thus the course of the economy. As you can see, the target federal funds rate was lowered quickly in response to the 2001 recession, from 6.5 percent in late 2000 to 1.75 percent in December 2001 and to 1 percent in June 2003. After reaching the then-RECORD LOW of 1 percent, the target rate remained at that level for a year.” — Ben Bernanke
Doh! Give that man a “C”.
Though this is a very old post I find it strangely amusing when I find those who supposedly defend free markets ignore its underpinnings.
Economists widely believe (and routinely assume in their models and policy prescriptions) that people are rational and therefore look at REAL (and not nominal) magnitudes. Otherwise, they would not make efficient decisions, e.g. invest money at a 5 percent rate when the inflation rate is 10 percent.
Therefore, an argument based on nominal interest rates means NOTHING because individuals use real interest rates, unless you specifically claim people suffered from money illusion. However, to make that claim you will have to provide empirical evidence
If you go down that path, you will have several University of Chicago economists’ butchering you – including several Nobel Prize winners in Economics. Good luck
What are you trying to respond to?
“- if markets were anticipating accelerating inflation, 10-year rates would be quite a bit higher than they are.”
That assumes you’re in a free market, of course, not a market where the Fed is buying 30+% of the bonds being issued.
You seem highly inversely correlated with the data. Do you really mean,what you said, or is it that important to adjust krugman?
In 2002 Krugman said that,
“Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html
In 2005, Krugman admitted that the Fed *had* created a housing bubble and that it wasn’t surprising because…
“After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.”
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
But by 2010 Krugman completely changed his story and tried to absolve the Fed by saying…
“These considerations suggest that it would be wrong to attribute the real estate bubble wholly, or even in large part, to misguided monetary policy.”
http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/?pagination=false
And then by 2012 Krugman started flat-out lying about what he said in the past by claiming he “never bought the story” that the Fed was the cause of the Housing Bubble. I guess it was the other Paul Krugman at the NYT who wrote that column in 2005.
http://www.youtube.com/watch?v=KrfRS07CAHc (video: 32:40 mark )
And most recently Krugman has said that the housing bubble was “just one of those things that happens” every once in a while.
http://www.youtube.com/watch?v=PD-EWxl_s4o&feature=plcp
Stupid people are exactly what the word says…stupid. Sadly, these stupid people have a tendency to make policies that affect the entire planet.
You can write page up, page down and pages left and right about what is really happening in the markets and how Feds intervention affects the markets and creates booms and busts. It really doesn’t matter. People have been exposing Fed for years now. Alas, no one seems to care. Those who do care about these things don’t have the firepower to do anything about it. And if someone attempts to do something about it chances are they’ll end up…well, how should I say this…removed. Either forced out of their positions or even worse, wiped out from the face of the earth.