As usual Paul Krugman is WRONG on economics

[Daal]

http://www.nytimes.com/2009/01/05/opinion/05krugman.html?_r=1
"Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy."

As usual Krugman is wrong and making biased arguments. He says monetary policy 'failed' this time yet THIS IS NOT the worst recession since WW2 and certainly NOT EVEN remotely close to the great depression, the biggest bears are forecasting a peak to through TOTAL decline in GDP of 5%(compared to 27% of the 30's), which is not a depression, simply a nasty recession. Just when Milton Friedman claimed that monetary policy would prevent recessions or severe recessions from happening ever again?

Krugman just founded a new branch of economics, its based on forward looking opinions that bet on unlikely outcomes and strech reality to the most convinient side then use that as empirical facts to refute theories

 

[MGJ]

Start a petition drive. Convince the Nobel committee to nullify his Nobel Prize.

 

[smilingsynic]

Quote from Daal:

As usual Krugman is wrong and making biased arguments. He says monetary policy 'failed' this time yet THIS IS NOT the worst recession since WW2 and certainly NOT EVEN remotely close to the great depression, the biggest bears are forecasting a peak to through TOTAL decline in GDP of 5%(compared to 27% of the 30's), which is not a depression, simply a nasty recession. Just when Milton Friedman claimed that monetary policy would prevent recessions or severe recessions from happening ever again?

Krugman just founded a new branch of economics, its based on forward looking opinions that bet on unlikely outcomes and strech reality to the most convinient side then use that as empirical facts to refute theories

Do you not agree that both favorable monetary policy in the form of lower interest rates AND increased government spending, even deficit spending, can serve as a successful two-pronged attack against a severe recession?

After all, during the Great Depression, the economy did not start to recover until New Deal spending.

 

[stock_trad3r]

Quote from MGJ:

Start a petition drive. Convince the Nobel committee to nullify his Nobel Prize.

it was more of a lifetime achivement award, which was not the original premice of the nobel prize.

 

[Pa(b)st Prime]

Quote from stock_trad3r:

it was more of a lifetime achivement award, which was not the original premice of the nobel prize.

Yea. A "lifetime" of being a pompous, partisan, big-government douchebag.

 

[Capablanca]

Quote from Daal:

As usual Krugman is wrong and making biased arguments. He says monetary policy 'failed' this time yet THIS IS NOT the worst recession since WW2 and certainly NOT EVEN remotely close to the great depression, the biggest bears are forecasting a peak to through TOTAL decline in GDP of 5%(compared to 27% of the 30's), which is not a depression, simply a nasty recession. Just when Milton Friedman claimed that monetary policy would prevent recessions or severe recessions from happening ever again?

As the Great Depression was unfolding I doubt the analysts of the time were forecasting a GDP decline, or whatever measure was popular back then, of 20%+ either.

Action is being taken now to avoid such a situation. It's called "prevention".

I believe Krugman is referring to the arguments outlined in Friedman's book A Monetary History of the United States, 1867-1960

 

[Daal]

Quote from smilingsynic:

Do you not agree that both favorable monetary policy in the form of lower interest rates AND increased government spending, even deficit spending, can serve as a successful two-pronged attack against a severe recession?

After all, during the Great Depression, the economy did not start to recover until New Deal spending.

I agree that government spending can help, it needs to be the right kind of spending however, I'm fearful that a lot of it will be wasteful pork, handouts and things like that. Thats why I believe it would be better to give a tax cut, its quicker to get it out anyway

Yet monetary policy is probably more important than public spending by a factor of many times. Krugman is the first one to admit that Japan was a failure of monetary policy by the BOJ. There is little doubt that if the Fed had rates at 5.25% and they allowed the money supply to collapse(while Velocity is dropping like a stone) the US economy would make the current downturn look like a boom

Both friedman and keynes were right in some things and wrong in others but krugman tries to portray a biased picture of things to push for his agenda

 

[Angrycat]

Quote from smilingsynic:

Do you not agree that both favorable monetary policy in the form of lower interest rates AND increased government spending, even deficit spending, can serve as a successful two-pronged attack against a severe recession?

After all, during the Great Depression, the economy did not start to recover until New Deal spending.

No, I do not agree. Where do you get your economic history? The New Deal prolonged the depression for a decade. There was no recovery until AFTER WWII. Contrary to popular lore, the war only soaked up unemployment. Real GDP increases did not occur until after the war when many New Deal policies were UNDONE.

The New Deal, like all government spending programs, crowded out private investment, prolonging the downtrend. It also created Cartels by setting labour prices so high that smaller businesses were driven out of business. The entire period was marked by unemployment ranging from 25% in the early part of the 30's to nearly 20% in 1938. Wages were kept at 25% above the market clearing price by government policy to prevent deflation, ensuring high unemployment. Then, as now, the government flailed around and business didn't invest because it couldn't tell where the political wind was blowing. The New Deal succeeded only in growing government and throwing the economy even more out of whack. The economy didn't rebound until most of the New Deal was abandoned. Even then, the New Deal regulations came back to bite America in the ass in the 70's.

Central planning and government intervention has never worked anywhere it has ever been tried, including the United States. If central planning (which is what the New Deal was and what the New Dealers actually called it - most of the New Dealer's on Roosevelt's team were great admirers of Stalin and the Soviet Union) worked, then the Soviet Union's economy would have surpassed the United States' instead of imploding.


Krugman's work in economics is excellent. Everywhere else he commits every economic fallacy known to man (lump of wealth among them) and is nothing more than a slobbering political hack.

 

[Angrycat]

Quote from Daal:

Both friedman and keynes were right in some things and wrong in others but krugman tries to portray a biased picture of things to push for his agenda [/B]

What was Keynes right about?

 

[fhl]

Quote from Angrycat:

What was Keynes right about?

he said "in the long run, we're all dead."

at least he got one thing right.