Larry Summers is the man and a new I was wrong mea cupla

Krugman is really, really jealous of Larry Summers -- basically at a recent very important economics conference, Summers gave a presentation that knocked the socks off of everyone -- including Krugman. Krugman says he has hinted at some of the points in previous works but Summers but it all together in a way that is now getting a lot of attention. The jist of it is that the economy's current depressed state may be the new normal and the only way to get higher employment is through bubbles. The reason for this is that declining population growth which reduces demand. The only way out of this situation is to force more demand -- through government spending and/or aim for higher inflation target.

It is fun to follow Krugman as he bashes others. Three years ago a number of economists signed an advertisement warning of bad things (inflation) if US government didn't stop spending so much money. Krugman now points out that no inflation happened but rather than saying we should just not listen to those who warned, we should see how they reacted. What's especially interesting is that Krugman points out that he has been wrong over the years and he gives a new example that he has not previously mentioned and it's a response to Nigel's long critism of him. He admits he was wrong on the euro coming to an end - back in mid 2012 he said it would just be a matter of months. Krugman ends his point by pointed out that none of the academics who signed the letter have admitted their error and this is a sign of poor character.

For European recovery higher inflation is needed and Ted Cruz is so crazy that no one dares be crazier!

Krugman continues to pound away at the need for greater inflation in the Euro zone. Interestingly enough the European Central bank actually cut their interest rate which of course Krugman applauded, since that should allow for greater inflation.

Krugman makes the point that higher inflation in the late-90's in southern Europe helped Germany recover from its doldrums. But now Germany is advocated low inflation which will not let southern Europe recover. Krugman calls out this hypocrisy - since Germany is now telling southern Europe to recovery through austerity which it never had to do.

On the political scene Krugman points out that no one wants to be seen at crazier than Ted Cruz. You would expect a wide range of viewpoints but it seems right wing stops at Ted Cruz.

Krugman and inflation

One of things that struck me very early on in my following of Krugman is his counter-intuitive embrace of inflation. Like most of the world I think, I had always assumed that inflation was always evil and the lower the better. Krugman however believes some inflation is good and necessary especially when an economy is in recession. One of his reasons is that it allows debts to reduced automatically since a future dollar (or euro) would worth less than one that is borrowed today. For people who are hugely indebted, unfairly in his opinion (think US sub-prime homeowners or Europeans economies which grew to fast due to German's pushing exports), this allows them to get back to normal spending quicker in order to get economies growing again.

Krugman also has a post where he explains (or should I say shouts!) that he has been right for five years now that stimulus spending and expansion of the money supply would not lead to inflation. He points out two Fed presidents who have admitted they have been on the wrong side of the argument and then ponders why this has not led to more pronouncements from other individuals who have been very wrong about inflation.

Niall shoots one over the bow towards Krugman

Niall Ferguson has a couple long posts where he takes apart Krugman. Basically he calls out Krugman for saying he has only been wrong two times. Niall proceeds to explain in great detail how Krugman said the break-up of the Euro was imminent but yet it has still not happened. Niall wonders why Krugman fails to acknowledge this since this is arguably the biggest issue in international economics in the past 5 years.

Niall then moves on to call out Krugman for not predicting the 2008 financial crisis while Niall gives proof that he/himself did. He then gives a couple examples of Krugman's smugness and impoliteness. He can't believe Krugman has the gall to claim to be right about the importance of stimulus spending when his other predictions did not pan out so why should people believe him?

Niall finishes up his piece by saying that Krugman's lack of civility hurts the economic discourse because people are afraid to oppose him. He published his piece to show how wrong Krugman has been so others can feel safe bring arguments that counter Krugman.

Krugman's response to all this is that he would never respond. I assume that is because he doesn't have any respect for Niall but he really doesn't explain. This is especially surprising since Krugman has gone out of his way previously to call out Niall. Very strange, maybe Niall is onto something?

Contratry to what they think - Republicans don't have new ideas, Obamacare will not give the Republicans victory, you don't need a fancy degree to have influence, and five years of low interest rates and no change in policy

Krugman was on This Week with George Stephanopoulos and couldn't believe that Peggy Noonan said that the Republicans are the party of ideas. Krugman wonders what examples there are of new ideas since if it is Medicare and slashing tax rates for the rich - then those come from Newt!

Krugman also finds someone who is happy with the health-care exchanges. He is surprised the Obama administration messed up the web-site programming but says this will get fixed and most importantly there is no way the Republicans will be able to run against it next year since it will be popular.

Krugman makes it clear he doesn't much care for academic prestige if the person is an idiot or fool. If you don't have fancy degrees but your ideas and work are sound then you will get respect. The degree and reputation will still give you a larger audience but you had better still have good quality work.

Krugman is pointing out that we are coming up the 5 year anniversary of interest rates bottoming out. This, he explains, has enormous implications that policy makers have not grasped. Namely that since you can't force interest rates lower than zero than other fiscal solutions must be tried to try and get the economy growing again. But these other solutions (higher stimulus spending) are not being tried.

Krugman came right out and says it - Republican leadership is 'stupid'

Krugman flat out calls Boehner and Cantor stupid for backing themselves into a corner on the shut down/debt ceiling. He says Obama won't back down, his cave-in over the debt ceiling in 2011 was his worst decision, and he won't repeat that again according to Krugman. Boehner and Cantor are stupid because they know Obama won't give ground and Obama is winning this politically so there is no way Boehner and Cantor can come out of this positively. Krugman's 'stupid' remark is quite noteworthy since he says he never believed George W Bush nor his advisers were stupid just 'incurious' and 'dishonest'.

Krugman ends the post very concerned since he thinks the country / world may pay the price for this stupidity since it could lead to a default.

Shutdown, Debt Ceiling, Obamacare, and a new look???

Krugman explains that the biggest worry is not the shutdown but hitting the debt ceiling. He uses the phrase "God help us all". He mentions that he would not be surprised if we get right to the edge and perhaps there is a free pass that the lawyers know about but if not - it will not be pretty.

Krugman talks about how Obamacare will be popular because of the glitches since since so many people were trying to sign up. This has got the Republicans panicking because now they know they won't be able to repeal it.

Also for fun - seems Krugman has lost some weight -- maybe he thinking of running for office???

April 2013

Sept 2013