The video is of Hayek discussing Milton Friedman, but what should be noted is that is it is Hayek promoting the idea of competing currencies, a concept that Congressman Paul has adopted and mentions frequently during interviews. Congressman Paul clearly respects Hayek's thinking.
On page 51 of End the Fed, Congressman Paul writes:
I had the pleasure of hearing Hayek lecture in Washington, D.C., around 1980. Following that meeting, we had a private dinner together and spent several hours visiting. This dinner, which I remember well, further solidified my interest and confidence in Austrian economics.When Krugman writes:
It’s kind of terrifying, in a way, to realize that the politically dominant faction in America right now has a view of money, what it is, and how it works that hasn’t been true since the early 19th century, if it ever was.He is attacking not only Paul but a line of thinkers from the 19th century, but also such 20th century thinkers as Ludwig von Mises, Murray Rothbard and Friedrich Hayek. And it is through this Krugman linkage that Krugman's attack on Paul can be seen to be even more absurd than if he was only attacking Paul. While Hayek, Rothbard and Mises would most assuredly understand that the monetary base was not the money supply, in the clip below, Hayek specifically says he doesn't know what the money supply is AT ALL, meaning that money depends upon how people use various financial instruments and that to attempt to define a very concrete money supply is bound for failure. In other words, Ron Paul, as an Austrian, is not going to hold to a specific hardcore definition of money supply, certainly not the monetary base. Note also that Hayek specifically attacks Friedman for seeing a very strict correlation between money supply and price inflation. Thus, he slaps Krugman, once again, for attempting to put a bizarre monetary base-price inflation correlation view on Congressman Paul.
By pointing out the lineage of Congressman Paul's thinking, Krugman has dug himself into an even deeper whole, which clearly shows that he does not understand economic history, or is an evil bastard who chooses to ignore it.