Bob Murphy Destroys Krugman (and Keynes)

according to Krugman, the economy is stuck in a rut because (a) the federal government has been unwilling to run large enough budget deficits, while (b) the Federal Reserve has been unwilling to create enough new money...

Look again at the two charts above. Anyone with common sense will admit that the last two years have seen unprecedented budget deficits and monetary expansion. Krugman is correct; that hasn't been working at all. It's time to let the free market end this agony and bring us genuine recovery.

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Stimulus Failure

In the world’s leading economy, 8 million jobs have been lost. The US government disappeared almost a million jobseekers from the unemployment lists in the last two months to try to make the numbers look better. Still, fewer people have jobs now than when the stimulus began. Those workers with jobs earn less than they did then. And those who lose their jobs wait longer than ever to find a new one. Housing is sinking again, too, with nearly half of all the mortgaged houses already worth less than their mortgages. Illinois has stopped paying its bills. California is laying people off wholesale...

Spend now; cut later,’ is still his advice. But with so much spending…and so little to show for it…you’d think he’d be shy about proposing more. At least, he might feel the burden of proof more heavily upon his shoulders. Is there any evidence that increased government spending – even in time of private sector retrenching – makes people better off? And even if ‘spend now, cut later’ were good advice, is there any evidence that they can actually do it? None that we know of.

Based on the experience of the ’80s and ’90s, we observed last week that it didn’t seem to matter what governments did or what they said…the markets went about their business. Today, we add a further provocation.

Let us take a look back at the penultimate budget of the Clinton years:

“Eight years ago, our future was at risk,” Bill Clinton congratulated himself on Sept. 27, 2000. “Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion.”...

The Clinton era boom is now the Obama era bust. When the contraction hit, the feds followed the formula. They mustered their fiscal and monetary stimulus. But they got no recovery. Spending more now won’t help. Not because the Obama team is less competent than the Clinton crowd. They are just unluckier. Credit is contracting.

So Krugman will be proven right after all after all. Austerity will not bring prosperity. But then, neither would stimulus. Krugman will say ‘I told you so’…and spend the rest of his career in darkness and confirmed delusion.

source

Mankiw Calls Out Krugman

The Obama administration is basing its budget forecasts on the economy growing an eyebrow-raising 15.6 percent above inflation between 2008 and 2013 - a drop of 1.2 percent this year followed by an average of 4 percent growth over the following four years. That's very impressive growth for any period of time. Even small deviations in growth rates can mean hundreds of billions or even trillions of dollars in the federal budget deficit...

If President Obama is correct that the economy will only shrink by 1.2 percent this year, despite all the rhetoric comparing our current plight to the Great Depression, this will be a relatively moderate recession. During the first four years of the Depression the economy shrank by 27.5 percent. For a more recent example, the economy shrank by 1.9 percent in 1982.

Harvard economics Professor Greg Mankiw thinks that Mr. Obama's growth forecasts are overly optimistic and that the federal deficit will be a lot larger than Mr. Obama thinks. He was chastised by Princeton's Paul Krugman, a Nobel Prize winner in economics, who on his New York Times blog claims that Mankiw can only make the predictions that he does because of "more than a bit of deliberate obtuseness." He titled his post on Mankiw, "Roots of Evil."

Last Wednesday, Mankiw responded to Krugman's attacks by suggesting: "Well, Paul, if you are so confident in this forecast, would you like to place a wager on it and take advantage of my wickedness?" Krugman has still not responded. It seems even a Nobel Prize winner isn't willing to lay money on Mr. Obama's rosy projections.

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My thoughts: Krugman does not have a leg to stand on. He is a partisan hack.

Paul Krugman Wins the Nobel Prize in Economics

"for his analysis of trade patterns and location of economic activity"

link

My thoughts: A Keynesian hack. "How much you would you bet that Hayek would list his Nobel on eBay now if were alive? The Nobel in economics is now, officially, a bad joke." Anon. blogger

Update: William Anderson on Krugman