Sunday, August 2, 2015

Positively Bizarre: Paul Krugman Likens Ron Paul to Bernie Madoff

Paul Krugman's obsession with Ron Paul has not stopped.

In a new post at NYT, he doubles down on his charge that Ron Paul's warning about price inflation makes him Bernie Madoff-like:
It seems increasingly clear to me that what we’re looking at here has nothing to do with intellectual discourse as we normally understand it. It is, instead, about tribal identities: there’s a certain kind of person who rails against policies that debase the dollar, and that kind of person admires others who do the same no matter how wrong their predictions and disastrous their financial advice. As I said in a brief note on Ron Paul, it’s a form of Madoff-style affinity fraud, even if the perpetrator of the scam believes his own derp.
For the record, Dr. Paul has made clear his warnings about future inflation are based on the theories developed by economists such as Ludwig von Mises,Nobel prize winner F.A. Hayek and Murray Rothbard, who draw link increases in money supply with a tendency toward price inflation.

You can agree, or disagree, with this line of thinking. I happen to agree, but to call such a perspective lacking in intellectual discourse is simply bizarre, More accurately, calling such a theory Madoff-style affinity fraud seems to be lacking a bit on the intellectual discourse front,



  1. As I explained to Krugman in his comments last week, Austrians have ALWAYS understood that the new funny money need not appear in the CPI:

    [I]f the housing bubble was a consequence of the interference of a government agency, the Fed’s interference in the free market by artificially keeping interest rates low, how then could “capitalism” and “the imperfections of markets” be identified as the chief culprit? The culprit was obviously the very government interference in the market that Krugman constantly advocates: More funny loans diluting the fiat money supply which creates false, distorted and unsustainable prices and capital structure. Austrian theory is quite clear that this new money need not to go into the CPI and more often manifests itself in asset and stock bubbles due to artificially inflated and unsustainable prices.

    There is no mystery here. Krugman is a completely dishonorable lying partisan statist hack.

  2. We shall see if Krugman posts my comment:

    "[T]hey surely think of it as a plot to take away their completely earned gains and give them to THOSE PEOPLE". As someone two years older than Krugman who had a low draft number (and who has been an Austrian since 1973), THOSE PEOPLE have always been the military industrial complex and the 1%. This has been THE central Ron Paul theme for over four decades. Krugman should take note.

  3. Krugman once cited Daniel Kuehn's article on the Austrians and 1920:

    However, I later explained that Kuehn's analysis was purely Rothbardian:

    "In his paper A Critique of the Austrian School Interpretation of the 1920-21 Depression, Daniel Kuehn claims to have refuted the Austrian School analysis of the 1920 depression. Instead, he unintentionally demonstrates the veracity of the long held Rothbardian/libertarian explanation of that depression and even the Great Depression. Further, he helps demonstrate that there is no factual or theoretical basis for the Keynesian explanation of either the 1920 and/or the later Great Depression. Or of virtually anything Keynesian for that matter. The market did not fail. The market does not fail. Price distortions were caused by the Fed, not the market.

    Kuehn first demonstrates that it was the Fed's funding of WWI that caused an artificial boom and inflation. The problem was not caused by any failure of "the free market".

    2. The austerity depression of 1920–21

    During World War I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930) [emphasis added}

    This is the pure Rothbardian explanation. Wars are funded with fiat money which robs average people of purchasing power without the victims understanding exactly what is being done to them and without any due process of law. If the citizens had to make an immediate sacrifice in the form of a forced contribution of tax money to fund wars on a pay-as-you-go format, there would be far fewer wars. Kuehn then notes that the inflation encountered by the populace had been caused by the “expansionary policy of the Federal Reserve” and thus not any alleged “market failure”. After the war, such policy was “sharply curtailed” as was government spending leading to the predictable bust:

    However, after the war ended the deficit spending of the Wilson administration and the expansionary policy of the Federal Reserve were sharply curtailed to bring a halt to the inflation. By November 1919 the Wilson administration balanced the federal budget, slashing monthly expenditures by almost 75% in a matter of months.4 The New York Federal Reserve Bank raised the discount rate by 244 basis points over the course of eight months, with other Reserve System banks following suit. Shortly after these austerity measures were taken, the 1920–21 depression was under way. Postwar industrial production in the USA peaked in January 1920 as the economy moved into a major depression, with production levels dropping by 32.5% by March 1921.5 This loss in output is second only to the Great Depression in American economic history (Romer, 1999), although its duration was considerably shorter. Declines in output were matched by precipitous drops in employment and the price level. The proximate cause of the 1920–21 depression was a deliberate fiscal and monetary retrenchment following World War I."

    I repeat myself. No non-Austrian understands the first thing about basic Austrian concepts or analysis. And they don't want to know.

  4. “Ordinarily he was insane, but he had lucid moments when he was merely stupid.”
    ― Heinrich Heine

  5. Dec-27-2000: "Cut interest rates a couple of percentage points, provide plenty of liquidity, and call me in the morning." - Paul Krugman

    Feb-14-2001: "The excess credit may well go into stock market and real estate speculation…" - Ron Paul

    May-05-2001: "Millions of Americans have decided that low interest rates offer a good opportunity to refinance their homes or buy new ones." - Paul Krugman

    Sep-06-2001: "The newly inflated money… now finds its way into the rapidly expanding real estate bubble. This, too, will burst as all bubbles do." - Ron Paul

    Oct-07-2001: "Low interest rates, which promote spending on housing and other durable goods, are the main answer." - Paul Krugman

    Aug-08-2001: "Printing money is not an answer." - Ron Paul

    Dec-28-2001: "The Fed's dramatic interest rate cuts helped keep housing strong." - Paul Krugman

    Jul-15-2002: "Like all artificially-created bubbles, the boom in housing prices cannot last forever." - Ron Paul

    Aug-02-2002: "To fight this recession, Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble." - Paul Krugman,

    Sept-05-2003: "Lowering interest rates… will produce the desired effects and stimulate another boom-bust cycle." - Ron Paul

    May-27-2005: "Now the question is what can replace the housing bubble… But the Fed does seem to be running out of bubbles." - Paul Krugman

    Apr-25-2006: "Once inflation is recognized as a tax, it becomes clear that the tax is regressive: penalizing the poor and middle class more than the rich and politically privileged." - Ron Paul

    Aug-17-2007: "This looks to me like a clear case for government intervention. There's a serious market failure." Paul Krugman

    Sept-20-2007: "I urge my colleagues to strike at the root of the problem and address the Federal Reserve's inflationary monetary policy." - Ron Paul

    1. Wow, a beautiful, concise little history. I'm cuttin' and pasting, if you don't mind.

    2. I tried posting a slightly shorter version of this (due to size constraints) on the Krugman blog. It has failed to appear. However, my post about us RonPaulians being tribal and fearing inflation because of THOSE PEOPLE was published.

      There were some guys who accused us of being Supply Siders and Republicans. I asked them if they also confuse The Who with Rick James. You know, THAT MUSIC. That post has not appeared.

      The utter ignorance AND arrogance of the Krugman blog comments is astonishing.

    3. My shortened version of the Brutus post made it into Krugman's comments.

  6. There are many people who should be sharing a cell block with Bernie Madoff: Bernanke, Pelosi, Barney Frank, Chris Dodd, just to name a few. Maybe even Krugman himself. But Ron Paul would not be one of them.

  7. Krugman recognizes Ron Paul and the liberty movement as the only real threat to the Establishment.

    1. He also realizes Ron Paul and the Liberty movement are a threat to his paycheck.

  8. This guy confused us with "supply side economics":