Dr Krugman’s Magic Dogma

May 5, 2012   By James Lewis

Harry Truman famously complained about his economic advisers, who wouldn’t give him  simple, straight answers.

“All they say is ‘On the one hand this, and on the other hand that,'” he was quoted. “I’m looking for a one-handed economist!”

Well, ol’ Harry could have found economists who were absolutely cocksure — and wrong.

Take Paul Krugman, the Jeremiah of the new New York Times Agit-Prop page.  Dr K is absolshshtutely, posilutely sure that another trillion bucks of deficit spending will fix the US economy.  Other economists may have their doubts, but Dr K knows the answer in his bones.  Krugman never doubts his own prescriptions, except when he changes his mind, and decides to order more of the same.  If we aren’t swallowing enough cod liver oil, double the dose! That’ll fix ’em.

Other than this curious fixation Dr. K has a marked tendency to rant, and rail, and rage at various folks who take exception to his medicine. This is a suspicious sign. Real physicians don’t rant. They just do the job.

Krugmanite dogmatism is a lesson in medicine before 1900 — before antibiotics and all the rest.  Before scientific medicine, when the doc walked into your home with that little black bag it was filled shiny plumber’s tools, along with pills and potions  — placebos that did nothing and poisons that made you sicker. In the famous Aubrey-Maturin seafaring novels by Patrick O’Brian, physician Stephen Maturin always brings plenty of chalk on their sailing voyages — blue and white colored chalk — to turn into placebo pills. The most effective placebo were powerful laxatives, and many a sailor spent the day sitting in the head of the ship convinced he was purging the bad humors. It worked better than the poisons — mercury, antimony, Chinese Water Snake potion.

Dr K can’t prove that super-Keynesian hyperstimulation actually works for the economy. Nobody can.

All he has is that superhuman faith.

Experts tend to turn into Krugmaniacs when they are baffled and the patient is near death. Everybody is looking to save Mom or Dad. What’s the answer, Doc? More bloodletting? Less? More mercury? Less?

Surprise! Half the docs say more bloodletting will save the patient. The another half swear by less. After the patient dies they all point the finger at each other. Their cure woulda worked, and they honestly believe it.

Just like Dr. K.

But Krugman has a Nobel Prize in economics! He’s famous !

Milton Friedman got the same prize and he always said the opposite.

Who is right? There is no agreement among economists. The economy is way too complicated. Like the climate.

Economics isn’t physics.  Not even close.  The Econ “Nobel” prize is a ripoff from the real prize, not even given by the Nobel Foundation but the Swedish Central Bank.  Like Obama’s ridiculous Nobel Peace Prize, awarded for running while black — the faux-Nobel in Economics is also a spinoff.

The financial crisis of 2007-2012 was triggered in part by economists who wrote “the formula that killed Wall Street” — based on work by mathematician David X. Li.

“With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

“His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched-and was making people so much money-that warnings about its limitations were largely ignored.

“Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li’s formula hadn’t expected. The cracks became full-fledged canyons in 2008-when ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.”

Oops.

Today the traders are blaming the professors and vice versa. The fact is, however, that eye-popping sums of money were bet on a mathematical formula that didn’t work. The madness of crowds prevailed over common sense and very basic history.

So the New York Times hired Dr. K to peddle his faith from their agit-prop page. Why did they pick Dr. K? It wasn’t based on facts, because they don’t have the facts either.  No, Dr. K had the answer they wanted to hear.  Paul Krugman’s  “scientific certainties” are like global warming — agit-prop dogma parading as science.

Liberalism is the blind faith of the ignorant. Obama is playing God (temporarily), and Krugman is his  prophet.

Harry Truman didn’t know how lucky he was with his two-armed economists. They didn’t know the answers, but they were smart enough to know they didn’t know the answers. At least they didn’t make things worse.

You can’t say that for Obama and Krugman. Obama admits he doesn’t know if his economic policies work. But he believes with the fervor of a fanatic that they are “fair.” So it doesn’t matter if they work or not. Black unemployment is around 24%. Who cares? It’s not science that matters, but fairness to all.

Like Obama, Dr K has lost the unknown unkowns. So he makes it up in his head, and creates such a fearful racket on the NYT agit-prop page every day that the other mediots are scared into believing him, like Elmer Gantry, who was running another religious scam, but really the same one.

Should we spend another ten trillion on Obamacare? Or just a few trillion on Krugmanism?

I don’t know. But I’m pretty sure that Krugman and Obama don’t either.

They are just telling 300 million people to follow them over the cliff.

Not me, buddy.

Read more: http://www.americanthinker.com/2012/05/dr_krugmans_magic_dogma.html#ixzz22ZIjlzmk

George+S

It’s more desperation than dogma. Poor ole Dr K. When he saw Democrats take control and pass that 800 billion dollar stimulus back in ’09, it was finally the chance he was waiting for — the repudiation of Reaganomics once and for all, put on display for all the world to see. Ah, the anticipated smugness was just so exhilarating. But when things got worse instead of better (or at least unchanged), he could not accept the obvious. It’s one thing to be wrong, it’s another to be exposed as an intellectual fraud. If Krugman was a physician and prescribed poison to a patient who then immediately died, his only conclusion would be… not enough poison. What else could it be?

Ovidiu Stoica

Ron Paul has written extensively about this “Mississippi Company” global-scheme. Worth reading :
The End of Dollar Hegemony, by Ron Paul .
Before the US House of Representatives, February 15, 2006″

It has goods and bads, the benefits of welfare, and the consequences of it :
RP :

“It is an unbelievable benefit to us to import valuable goods and export depreciating dollars. The exporting countries have become addicted to our purchases for their economic growth. This dependency makes them allies in continuing the fraud, and their participation keeps the dollar’s value artificially high. If this system were workable long term, American citizens would never have to work again. We too could enjoy “bread and circuses” just as the Romans did, but their gold finally ran out and the inability of Rome to continue to plunder conquered nations brought an end to her empire.
The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can’t last.

Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people — just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.”

Stuart+MacLean
“Since printing paper money is nothing short of counterfeiting…..”

Absolutely! On March 3, 1884 the Supreme Court made ‘counterfeiting’ ‘legal’ (Julliard vs Greenman) which prompted former Secretary of the Navy, George Bancroft, to write “A Plea for the Constitution – Wounded in the House of Its’ Guardians” – “The United States of America cannot make its shadow legal tender for debts payable in (paper) money without ultimately bringing upon their foreign commerce and their home industry a catastrophe, which will be the more overwhelming the longer the day of wrath puts off its coming”

Michael Bruce Combs, Retired Air Force Major, conservative-libertarian, and a ceaseless critic of man-caused global warming.

The only European nation doing well, Germany, is the only one practicing austerity. Only a decade ago Germany was the “sick old man of Europe,” but then Germany eased off on labor regulation (making it easier to fire or lay off workers) and reduced spending and taxes. Greece and the rest have been and are doing just what Krugman recommends. Gamblers call it “doubling down,” Krugman and Liberal economists call it Keynesian, and the rest of us call it losing, Experience is a great teacher only if we learn from it.

purple_persuader
Krugman is interested only in his own fame, truth or fact be damned. Recently he debated Ron Paul on Bloomberg, and denied that he had said the FED created the housing bubble, yet there was no denying he had said this, as it in print. His own former editor ( a progressive like him) tore him a new one when he left, exposing times that Krugman had falsified or used incomplete data.

pt39

Getting a Nobel in Economics is like getting a Obama and Yasser Arafat getting Nobels in Peace. In 1997 the Economics Nobel went to Myron Scholes and Robert Merton. In 1994 they had founded an early hedge fund: “Long Term Capital Management”, a misnamed item if ever there was one. In 1998, their fund went spectacularly bust, threatening to take down a number of “too big to fail” money center banks. This precipitated an emergency meeting of said banks with Alan Greenspan orchestrating the bailout.

Randy+Fardal

LTCM is a fascinating case study that should have served as a warning to the Fed and the rest of the financial industry. LTCM obviously was not blameless, but the way its “crisis” was handled probably contributed to the far more serious crisis that arrived a decade later.

LTCM was said to be “too big to fail” but actually was too big to succeed. Initially, it did highly-leveraged long term government bond arbitrage, with annual returns of 40-50 percent. But arbitrage not only exploits a temporary price aberration; it also eliminates it. And since LTCM was so large, it self-corrected the price aberration quite rapidly. In other words, it became a victim of its own success. In contrast, a few small fries probably could have made a million bucks annually for decades doing this arbitrage.

At that point, LTCM probably should have returned its investors’ capital, with the note, “Well, we had a nice run. Here’s your initial investment, plus a 178 percent capital gain.” But no organization voluntarily shuts down, so the managing partners began searching for other investment opportunities. (The EPA is a similar example of an obsolete organization that refuses to die. It essentially completed its charter within a few years of its formation, and now is a gigantic, unaccountable Leviathan, inventing problems for it to solve)

As I recall, LTCM invested in leveraged Asian real estate and equity derivatives. Remember how Thailand, Japan, and the rest of the “tigers” were going to rule the planet by the year 2000? With the Asian and Russian financial collapses in the late 1990s, LTCM lost money, but mostly got caught by panicked investors seeking liquidity. (After that, the boutique funds for high net-worth investors began to limit their investors’ ability to liquidate their holdings)

In late 1998, the money center banks each kicked in about $300M for equity in LTCM. The New York Federal Reserve Bank organized the bailout, but invested none of its own assets, nor did it ask the US Treasury for bailout money. LTCM became profitable again in 1999. Not only did the rescuers get their money back; they also made a small profit.

That sounds like a happy ending — especially compared to what the leftist media claimed. But wiser analysts wrote that LTCM was not too big to fail and clearly should have been allowed to do so. (In fact, LTCM could have accepted a private $4B bailout by Warren Buffett and two other large investors) The analysts ominously warned that the Fed intervention would encourage other financial firms to make even more irresponsible investments because they now were assured that the Federal Reserve Bank would mitigate their downside risk.

Of course, that prediction came true a decade later. And worse, in the 2008 panic, the Fed overreacted by investing its own funds, plus hundreds of billions in taxpayer funds. Then Dodd-Frank caused the banks to become even bigger, making the moral hazard even worse. Will the next bailout come in 2018? Will that one require ten trillion? Perhaps it’s time to move to Costa Rica and stockpile coconuts.

Read more: http://www.americanthinker.com/2012/05/dr_krugmans_magic_dogma_comments.html#disqus_thread#ixzz22kXshT75

physicsnut

and the question is – how come LTCM was not more of a learning experience ? Nope, Credit Default Swaps must be the answer. Risk management by slicing and dicing and dumping it down the line well away from the clowns who created the mess to begin with. People are baffled by the quantitative baloney and think these guys must know what they are talking about. It looks like a huge swindle to me.

Stuart+MacLean

“They didn’t know the answers, but they were smart enough to know they didn’t know the answers. At least they didn’t make things worse.”

We do know the answer!!;

“Good money must have an intrinsic value” – George Bancroft – A Plea for the Constitution – Wounded in the House of Its’ Guardians” – 1886

“Paper money is Poverty” – Thomas Jefferson – 1788

On a proposal by the American Bankers Association to issue Silver certificates (paper money to redeem ‘greenbacks’ issued during the Civil War ) in 1889 B.R. Corwin said; “Do the gentlemen of the convention know that the proposition giving the legal-tender quality to circulating notes was discussed by the people of this country previous to the adoption of the Constitution: and that it was, perhaps, the most difficult question that was considered by the Fathers in the convention that prepared and finally adopted the Constitution of the United States?” – A Trip to the Rockies – 1890.

We do know!

“Paper money is a corruption of the blood……the dry rot, which silently and unseen consumes the beams and joists which support the house and its floors” – A Plea for the Constitution.

“Paper money is unjust….it is unconstitutional….it is perniciuos, destroying confidence between individuals; discouraging commerce: enriching sharpers; vitiating morals; reversing the end of government; and conspiring with the examples of other states to disgrace republican governments in the eyes of mankind” – James Madison – 1786

We do know! ‘Krugman is a ‘close-minded’, ignorant scoundral!’ -Stuart MacLean – 2012

Liberty+Tom

The real tragedy of this economic nightmare is that debasing the currency is now inevitable. Any attempt to reduce spending and liquidate bad debt is derided by the leftist economists. The politicians fear the pitchforks and torches that follow “austerity.” Keynesianism+Monetarism=Stagflation (at best).

historicus

They are ‘degreed’ from the Ivy League…..but have no common sense…

Bernanke and Krugman…Princeton boys…’all in’ on their theories….with OUR Chips!! The Phillips Curve on Bernake’s part…Keynesian economics on the other….

They are betting all the chips on these theories…..that applied to another era…and in other circumstances…

Does Bernanke REALLY believe that keeping interest rate 3-4% below market levels will reignite manufacturing in the US? Its IN CHINA STUPID! Not here. Low rates will only beget MORE FEDERAL SPENDING…as the market is not there to discipline the irresponsibilities of the Pelosi House and the Reid Senate….

And now the borrowing…in response to these FAKE rates…..have created a DEBT that the Federal government cannot service at real rates.

Wramblin%27+Wreck

My grandmother, an Oklahoma rancher, always gave her animals (and her children & grandchildren) turpentine when they were ill. If they died, it was because they did not get enough turpentine. If they got better it was because of the turpentine. A win-win situation.

This reminds me so much of Paul Krugman and his Keynesian policies. Just financial turpentine! Bah!!

grich

Fairly recently, there was a column on Art Laffer. He was on a committee, I think it was for the University of Tennessee. He was asked if he approved of teaching creationism at the university. His answer? “Why not, they teach Keynesian economics don’t they?”

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