Thursday, September 13, 2012

CNBC Host Calls Paul Krugman and Dean Baker ‘Co-Communists’

On Tuesday, Joe Kernan, host of the the CNBC show “Squawk Box” called Paul Krugman and  Dean Baker “co-communists.”

Kernan did so a part of a defense of the thinking of CNN's Erin Burnett after a Huffington Post piece attacked her using Krugman and Baker quotes.

Kernan said on CNBC:
They quoted Paul Krugman and this other idiot, Dean Baker, who’s some guy, I don’t even know who he is, he always writes for The Huffington Post. Basically co-communists in a lot of different economic circles.
On Friday, Burnett said on her CNN show “Out Front” that the Federal Reserve has made items like food and gasoline more expensive through quantitative easing.

“Easy money has also sent commodity prices higher. This is the rub,” Burnett said, “Gas prices, as you can see, about double. Regular unleaded was $1.89 in November of 2008. It’s now $3.82 a gallon. And food prices are up 54 percent over that same time frame. So easy money isn’t so easy.”

HuffPo came back with the Krug and Baker.

his is nonsense,” Dean Baker wrote in an e-mail to HuffPo. “These prices have been moving largely in response to real conditions of supply and demand (e.g. the Libyan civil war raised oil prices by taking supply off line, the summer drought in the U.S. has raised corn prices) often amplified by speculation.”

HuffPo also quoted a 2010 Krugman piece:
What the commodity markets are telling us is that we’re living in a finite world. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies. And those supplies aren’t keeping pace.
Kernan's response to all this was a mighty defense of Burnett, including the commie quote and this:
You know, fact-checkers need fact-checking now. They’re so full of crap. These fact-checkers lie more than the people that they’re fact-checking. In the blogosphere, you can write what is libelous, you can lie and it’s taken as fact by the readers.
Let's go to the videotape:

Now, there are a few things to note here: Burnett is clueless, Kernan is clueless, Krugman, naturally, is clueless and Baker goes beyond the truth.

Food prices, at present, are climbing mostly because of the drought. I have regularly been pointing out such in the EPJ Daily Alert. Just yesterday, I wrote in the Alert:
The latest data from the USDA now shows U.S. soybean crop expected at 2.634 billion bushels, down 2.2% from August. U.S. corn crop is at its lowest level in 6 years...

Regardless of how the exact numbers turn out, farm prices will remain high and result in an added upside to price indexes over coming months. The PPI due out tomorrow and the CPI due out on Friday will spike due to the drought conditions. This I repeat will not be an indication of overall price inflation, it's a supply caused situation. The Fed money printing induced price inflation is mostly down the road.
 I explained the coming climb in gasoline prices in the Alert, a few days before Labor Day:
Expect a spike in upcoming price inflation indexes, as both the drought and climbing gasoline prices will push the indexes higher. 
Gasoline advanced yesterday as refiners including Exxon Mobil Corp.,Phillips 66  and Valero Energy Corp. said they are temporarily shutting down Gulf Coast plants as Isaac churns toward the Louisiana coast. 
Six plants with a combined ability to process about 1.15 million barrels of crude a day are shut. That’s 6.7 percent of U.S. capacity. 
Futures jumped yesterday in New York on the developments. The gasoline market is also reeling from an Aug. 25 explosion in Venezuela that killed at least 48 people and closed the country’s largest fuel-making plant. Futures are up 23 percent since their 2012 settlement low of $2.5501 a gallon on June 21.

As a result of all this,  prices at the pump will be the highest ever
for the U.S. Labor Day holiday, AAA said yesterday...
This I repeat will not be an indication of overall price inflation, it's a supply caused situation.

 In other words, Fed money printing is fairly slow right now, so that isn't pushing up commodity prices. It's really supply side problems. Burnett is way off base.

Baker is closest to reality, he is aware of the current supply-side shocks, though he has no clue as to the specifics that caused the gasoline spike and for no reason he attacks speculators, in his comment. That's just nutty---and dangerous. Speculators are focused on ag products because speculators flow to where the most volatility is and thank the heavens they do, it provides the opportunity for farmers to lay off the risk to speculators in hedge transactions.

Kugman is typically off the wall. He says "commodity markets are telling us is that we’re living in a finite world." This is an idiotic statement in the sense that all products that have a price have a price because there is a finite supply. If something is over-abundant, such as in, most cases, air. No one could get away charging for it. Thus, there was nothing special about the 2010 commodity spike Krugman discusses that proved finite supplies.

As for Kernan, Krugman and Baker are mostly apologists for the interventionist state,rather than commies. Neither, apologists for the interventionist state or commies are any good, but Kernan's attack on them to defend the clueless Burnett just confused the matter even more.


  1. Before the drought became an issue, food and gasoline prices were skyrocketing. That dovetailed almost seamlessly into the drought-related increases. You almost can't blame a journalist for those comments.

    And, in the overall scheme of things, price increases ARE the fault of the FED, so it's a good thing that journalists are waking up to that fact. I wouldn't hammer on them too much just because the current short-term increases are drought-related.

  2. You are saying recent spikes in food and gasoline prices are due to supply issues, but that's not a direct response.

    Here's what Burnett said: "Regular unleaded was $1.89 in November of 2008. It’s now $3.82 a gallon. And food prices are up 54 percent over that same time frame." So fellow commenters, what % of THAT increase over the last 4 years would we predict is due to supply/demand issues and what % is due to inflation?

    1. It's nigh impossible to really know because we don't know how much of the new money was spent here or in re-inflating stock market asset bubbles.

      This is the whole problem with using the CPI as a guideline for the damage caused by inflation. Yes, CPI will go up due to inflation in some scenarios, probably in most scenarios, but we don't know how much it may be counteracted by other forces many of which we can't easily measure (change in consumer preferences).

  3. Surely there's a behavoural aspect to this question on the part of traders and investors that you're ignoring Robert. I.e., the Fed announces more QE yesterday, and commodities shoot higher, despite the fact that the new money has not entered the wider market yet (and may end up sitting in excess reserves for some time to come). But this still means the Fed is having an inflationary impact on commodities; these prices are rising because of traders' expectation of future inflation, and that Bernanke's easy money policies will continue for the foreseeable future.