Sunday, January 19, 2020

Trump Goes After Paul Krugman

President Trump tweeted last night:
And Trump is correct. Politico reported right after the election:
The economic fallout of a Donald Trump presidency will probably be severe and widespread enough to plunge the world into recession, New York Times columnist Paul Krugman warned in a New York Times opinion piece published early Wednesday.

Calling Trump the "mother of all adverse effects," the Nobel Prize-winning economist predicted that the GOP nominee's administration could quickly undo the progress that the markets around the world have made in the eight years since the financial crisis.
In other words, Paulie blew the call big time. Krugman's problem is, of course, that he doesn't understand Austrian School Business Cycle Theory and that the fact that the Federal Reserve is the primary driver of the boom-bust business cycle, not whoever happens to be sitting in the Oval Office at 1600 Pennsylvania Ave.

It's not that other economic policies don't have impact, they do, but the Fed is generally the most important factor unless the President or legislators take truly draconian policy steps.

The Fed is been pumping the money out to keep the economy in the manipulated boom phase now as it was when Trump was elected.



  1. Bob, Does Trump lean on the Fed to keep the pump going?

  2. RW - I agree with your assessment of Krugman and agree that the FED is more impactful than the president or legislators but none of these entities is the most impactful on the economy. The human activity that makes up the free market, including the division of labor, price seeking in a free market, voluntary exchange between competing individuals and organizations is the most impactful by far. There will be economic recessions because humans are not infallible and they will be made worse by the politicians, particularly by the FED. But human nature will always lead us back to the free market. The progress in human wealth and well being during the last several hundred years is evidence that the free market over whelms and marginalizes the petty thievery of politicians.

    But your post was about economic policy and I am not sure the free market fits that category. The free market is more successful to the degree political activity like economic policy is absent. I am in complete agreement with your critique of Krugman and your advancement of ASBCT.