Monday, April 16, 2012

Has Paul Krugman Turned Austrian?

He would never admit it if he did, but he probably realizes that if he wants to make better forecasts he will have to turn Austrian. Check out his explanation for the current Spanish crisis (My bold):
What happened to Spain was a housing bubble — fueled, to an important degree, by lending from German banks — that burst, taking the economy down with it. Now the country has 23.6 percent unemployment, 50.5 percent among the young.
This sounds an awful lot like an Austrian explanation to me, i.e. bank lending caused the boom and ultimate bust. What happened to Krugman's usual Keynesian claim that demand simply collapses causing a downturn? Bottom line: His Keynesian facade is crumbling. He can only use it to force feed nonsense to clueless members of the Occupy movement (See my upcoming post). But, when it comes to forecasts, he knows he has to take the Austrian view and look at bank money creation.


  1. MY response to Krugman would be: think? Talk to Bob Wenzel Krugman and learn something for once.

  2. Will he be returning his Nobel prize? After all, he will soon find out that all the thought he knew... it was all wrong. So technically, he should return the Nobel prize (or better yet, have it sent to you, Bob).

  3. Hopefully he is cracking. The economic damage that he has championed is historical.

    But he's still only superficial.

    "Lending," in and of itself, is not an issue. With sound money, the lending out of savings, *restriction* of consumption, and market generated interest rates, are crucial.

    But such does not exist.

    It's the creation of fiat money out of thin air (which is then lent out) that is the problem. Market interest rates are artificially suppressed, and malinvestments ensue.

    Krugman is not ready to get that deep.

  4. Maybe he finally figured out there was a reason his predictions were wrong over and over again?