Tuesday, November 5, 2013

Krugman Takes A Poke At Ron Paul & The Austrians

By, Chris Rossini

Krugman makes a mess, as usual. Evidently, Republican Senator Pat Roberts stated something outside of what's acceptable for a Senator to say (i.e., criticizing Yellen) and Krugman comes to the defense of the incoming chairwoman:
What remains notable, however, is just what all Republicans are obliged to say: Ron Paul monetary theory has become obligatory.
First of all, it's good to see that Ron Paul still gets under the Keynesian skin. However, there is no such thing as a "Ron Paul Monetary Theory". It's called The Austrian Business Cycle Theory. Ron Paul merely explained the theory to the masses, which put a gaping hole in the Keynesian fog machine.

Second, Krugman extremely misleads by saying that Republicans are somehow knowledgeable of, as well as supporters of, The Austrian Business Cycle Theory. There may be a few in there that will pay lip service for political reasons, but all-in-all Republicans love the Fed as much as the Democrats. It's their very own piggy bank to finance whatever power grab they want financed.

Krugman then puts up the offensive quote from Senator Pat Roberts:
Vice Chair Yellen will continue the destructive and inflationary policy of pouring billions of newly printed money every month into our economy, and artificially holding interest rates to near zero. This policy has been in place far too long.
Partial kudos must be extended to Roberts, but he makes a BIG mistake by saying "This policy has been in place for too long." This implies that the policy is ok for shorter time periods; that is, if it's not done for "too long".

That's nonsense. Creating money out of thin air, and artificially suppressing interest rates is wrong at all times! It messes with, and distorts the market immediately.

Krugman then points to the government's phony CPI and tells everyone:
It’s not often that you see an economic theory fail so utterly and completely. Yet that theory’s grip on the GOP has only strengthened as its failure becomes ever more undeniable.
Again with the GOP nonsense? The GOP can't even dream of living up to such a claim.

And the Austrians have Failed? !!!

Have we not just gone through multiple bubbles in the stock & housing markets, which Austrian Business Cycle Theory could explain to the letter?

Did we not just go through a period where Lehman Brothers collapsed, Bear Stearns collapsed, Fannie & Freddie collapsed, Merrill Lynch collapsed, Countrywide collapsed...and the bankers pulled off one of the biggest's heists in history with TARP?

The world was told that if the TARP heist didn't happen, that the Keynesian system was going to fall to ruins!

And the Austrians have been wrong?

Krugman finishes up:
Back to the evidence versus the orthodoxy. I can, in a way, understand refusing to believe in global warming — that’s a noisy process, with lots of local variation, and the overall measures are devised by pointy-headed intellectuals who probably vote Democratic. I can even more easily understand refusing to believe in evolution. But the failure of predicted inflation to materialize is happening in real time, right in front of our eyes; people who kept believing in inflation just around the corner lost a lot of money. Yet the denial remains total.

I guess it’s a matter of who you’re gonna believe — Ayn Rand or your own lying eyes.
Ayn Rand? She was no Austrian. But why should Krugman care? He won't dare drop names like Ludwig Von Mises or Murray Rothbard. Go ahead...do a search on Krugman's propaganda site. Notice how many times you see the Austrian giants mentioned.

As for Krugman's "evidence"...I think I just provided ample evidence on how broke and busted the monetary system is. The fact that we haven't experienced massive price inflation yet does not make the Austrian Business Cycle Theory wrong by any stretch of the imagination.

If there are individuals who call themselves Austrians, and who give specific predictions on when prices will rise rapidly, then that's the individual's fault. They shouldn't be making such predictions in the first place. The world is much too complex to make such exact predictions, which subsequently give Krugman fodder to sling.

Krugman, in the end, merely seeks to buy more time. Smearing opposing ideas are part of the job. But it is, and will continue to be a losing battle. The house of cards that he was instrumental in erecting is collapsing, and the understanding of The Austrian Business Cycle theory is being sought by people like never before.

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  1. I cannot even stand reading any dreck written by Krugman. He is just like the crazy old maid w/ her Victorian house full to the attis w/ cats. He's as loony as the NYTimes!

  2. So the CPI is fake. Even if you use Shadowstats fake CPI, you have the same problem. The rate of inflation is lower since the Fed started ZIRP and QE.

    Whatever happened to the claim that gold was the best measure of inflation? 12 months ago gold was 1754. Now gold is 1309. Of course the gold price is fake and manipulated now as well.

    1. Care to use a longer term than 12 months Jerry? At 10 years your looking at 250% inflation. At 42 years, its about 3600% inflation. The CPI is up 26% and 475% respectively over those periods. Unless you think it is some sort of bubble still? Though that would be strange, considering how much shit the real market players talk about it.

      I hope you get paid to be this ridiculous.

    2. Jerry, I appreciate your contribution to the comments section. I think it's important to have every idea questioned. I appreciate your ability to make arguments which lack childish name-calling.

      Like you, I find the last 2 years of the gold price to be really compelling. I wouldn't claim to have an explanation for it.

      I'm curious, though, what point are you trying to make overall? You certainly seem unconvinced with the Austrian business cycle theory and go to great pains to expose any perceived flaws in its logic. What do you think is happening in the economy now?

      Do you think this site is full of chicken littles who are rabidly paranoid about quantitative easing? Do you think the quantitative easing helps? Is it your opinion that there just isn't enough of it? How much is enough?

      Are you saying that the economy is strong and it's only going to get better as a result of the Fed's actions?

      If you think that the ABCT is a bunch of nonsense, what economic framework would you use to make predictions about where the markets will go next (assuming it's not just parroting Paul Krugman and Ben Bernanke)?

    3. Great post, Eric!

      I doubt JWolf will answer. Drive by trolling is his MO.

    4. JW says that libertarian gold bugs are really just bible thumping religious fanatics who want to bring back public stoning of heretics.

    5. "JW says that libertarian gold bugs are really just bible thumping religious fanatics who want to bring back public stoning of heretics."

      So wanting to trade in gold instead of paper = religious nut who wants to stone people? Uh.....ok. LOL!

    6. What is really not known is how much the economy is really trying to deflate and reallocate resources. With personal and public debt rampant, what would the price levels do without any monetary inflation? Probably resort to fire sale levels until unsustainable debt was cleared to sane levels....What would interest rates do? Probably go double digital until unsustainable debts were cleared to sane levels....

  3. Chris,

    Great article.

    One minor quibble.

    You wrote, "If there are individuals who call themselves Austrians, and who give specific predictions on when prices will rise rapidly, then that's the individual's fault. They shouldn't be making such predictions in the first place."

    This seems to suggest that you believe that someone who follows ABCT cannot make forecasts about the future. This is false. Rothbard explained quite clearly that there is economics and then there is forecasting (i.e. investing). As an economist I'm trying to discover natural laws that occur among individuals exchanging goods and services and then use these theories to make informed decisions about the future. Robert Wenzel is quite at good at this apparently.

    1. Zach...glad you liked it. Thank you.

      I don't mean to suggest that someone who follows ABCT cannot make forecasts. To the contrary, many Austrians (which include Robert Wenzel) are excellent forecasters.

      However, you won't catch Wenzel making concrete (this is the day, week, month, year) that X is going to occur. He understands that situations change constantly (especially in the short-term).

      There are however individuals, and I've seen them on TV, who do give specifics. They'll give dates or concrete time frames, which immediately boxes them in. They leave no room for short-term changes to prove their forecast wrong.

      If I were Krugman, I'd pounce on it too.

      It doesn't make Krugman right. He's not. But it does give him fodder.

    2. Thank you for clarifying.

      Would you agree that the majority of Austrian writers/forecasters need to start emphasizing that even if inflation stats are low (e.g. CPI, shadowstats, etc) it is irrelevant because prices are still higher than what they would have been absent monetary inflation?

      Also, do you consider the adjustment of the quantity of credit to match the quantity of money to be deflation? I believe it is not. I think there should be a strict distinction made between changes in the quantity of credit and the changes in the quantity of money (e.g. inflation/deflation). This would make it clear that letting the banks go bankrupt in 2008 would not have been deflationary. Rather it would have been a decrease in the quantity of credit to match the money base.

  4. Hmmm... I think we should refer to him from now on as Paul who?

  5. In 2009, I presumed that most of the new funny money would go to re-inflate collapsed asset prices before there would be significant CPI inflation. Didn't that happen just like I thought it would? I've been an Austrian since 1973, before Krugie graduated from college. That means the Austrians were right, right?

    It's obvious that Krugie knows that he is lying about Austrian analysis or else he would not be so compelled to misrepresent it. He would present it in a fair and complete manner and then refute it. Since he knows he cannot refute it via a fair and complete representation, he finds that he must misrepresent it. All Keynesians do this without exception and no Keynesian appears to have even the most rudimentary familiarity with even basic Austrian concepts.

    The battle is over. We've won.