Tag Archives: Paul Krugman

‘Happy Fourth of July to the world’s worst economist — Paul Krugman

Stocks closed at record highs Wednesday as traders bet on a potential rate cut from the Federal Reserve later this month after the release of weaker-than-expected economic data.The Dow gained 179 points, notching intraday and closing all-time highs. The Nasdaq advanced 0.75%.The S&P 500 also rose 0.75% as the real estate and consumer sectors powered the broad index to record levels. Tech boosted the index, rising 0.7% to a record high. The S&P 500 closed just 0.1% below 3,000.

 

 

 

 

 

 

Here is Paul Krugman Nobel Laureate in Economics writing in the New York Times 9 November 2016, the day after Trump was elected

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.

Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.

It’s true that we’ve been adding jobs at a pretty good pace and are quite close to full employment. But we’ve been doing O.K. only thanks to extremely low interest rates. There’s nothing wrong with that per se. But what if something bad happens and the economy needs a boost? The Fed and its counterparts abroad basically have very little room for further rate cuts, and therefore very little ability to respond to adverse events.

Now comes the mother of all adverse effects — and what it brings with it is a regime that will be ignorant of economic policy (Luysii — praise be to God) and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.

So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.”

If that wasn’t enough here’s Krugman in 2010 writing about ‘peak oil

“Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.

So what’s the meaning of this surge?

Is it speculation run amok? Is it the result of excessive money creation, a harbinger of runaway inflation just around the corner? No and no.

What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story.

Some background: The last time the prices of oil and other commodities were this high, two and a half years ago, many commentators dismissed the price spike as an aberration driven by speculators. And they claimed vindication when commodity prices plunged in the second half of 2008.

But that price collapse coincided with a severe global recession, which led to a sharp fall in demand for raw materials. The big test would come when the world economy recovered. Would raw materials once again become expensive?

Well, it still feels like a recession in America. But thanks to growth in developing nations, world industrial production recently passed its previous peak — and, sure enough, commodity prices are surging again.

This doesn’t necessarily mean that speculation played no role in 2007-2008. Nor should we reject the notion that speculation is playing some role in current prices; for example, who is that mystery investor who has bought up much of the world’s copper supply? But the fact that world economic recovery has also brought a recovery in commodity prices strongly suggests that recent price fluctuations mainly reflect fundamental factors.

What about commodity prices as a harbinger of inflation? Many commentators on the right have been predicting for years that the Federal Reserve, by printing lots of money — it’s not actually doing that, but that’s the accusation — is setting us up for severe inflation. Stagflation is coming, declared Representative Paul Ryan in February 2009; Glenn Beck has been warning about imminent hyperinflation since 2008.

Yet inflation has remained low. What’s an inflation worrier to do?

One response has been a proliferation of conspiracy theories, of claims that the government is suppressing the truth about rising prices. But lately many on the right have seized on rising commodity prices as proof that they were right all along, as a sign of high overall inflation just around the corner.

You do have to wonder what these people were thinking two years ago, when raw material prices were plunging. If the commodity-price rise of the past six months heralds runaway inflation, why didn’t the 50 percent decline in the second half of 2008 herald runaway deflation?

Inconsistency aside, however, the big problem with those blaming the Fed for rising commodity prices is that they’re suffering from delusions of U.S. economic grandeur. For commodity prices are set globally, and what America does just isn’t that important a factor.

In particular, today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.

And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.

Also, over the past year, extreme weather — especially severe heat and drought in some important agricultural regions — played an important role in driving up food prices. And, yes, there’s every reason to believe that climate change is making such weather episodes more common.

So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.

But that’s for the future. Right now, rising commodity prices are basically the result of global recovery. They have no bearing, one way or another, on U.S. monetary policy. For this is a global story; at a fundamental level, it’s not about us.  ”

Nonetheless Krugman can currently be found on the editorial pages of the New York Times authoritatively pronouncing on matters political

For the world’s second worse economist please see https://luysii.wordpress.com/2019/07/04/happy-4th-of-july-to-the-worlds-second-worst-economist-larry-summers/

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Back from band camp for grownups

While at band camp, we heard a fabulously intense performance of a piece which must be witnessed rather than listened to on the radio or on a CD while you’re doing something else.  It was Messiaen’s Quartet for the End of Time. You couldn’t ask for a better audience — 150+ raptly attentive amateur musicians with all cell phones off and no program notes.  The piece takes an hour to play and is full of long silences.  In some parts just one instrument plays while the other players sit stock still staring ahead, so the piece really is part theater.

You can always tell when a string player or a pianist starts to play as something moves and your mind expects a sound.  No so with the many long silences of the clarinet solo.  Parts begin so softly that you can’t even be sure the clarinet is playing, as there is no motion to clue you in.  Then, suddenly you realize you’ve been hearing a sound for a while.   The piece ends with a violinist ascending slowly into the tonal stratosphere while producing a prolonged decrescendo.  She was in tears at the end.

The players (correctly) decided on no descriptive program notes (which were read aloud at the beginning) as they didn’t want to break up the intensity with rustling paper (or the spoken word).  Probably it’s better to hear the piece not knowing the background, but there’s a Wiki page for it which is pretty good if you already know its provenance.

Pianists don’t have to count.  When we get stuck we just stop and then start over.  Even with chamber music we have the score so we always know what the other players should be doing, so we can pretty much fake what we can’t play and keep things going.  Our only problems are the incessant page turns, sometimes with all the other instruments cutting out leaving us alone playing with both hands, turning the page and trying not to miss a beat.  All this was true until I got to play a piece with bassoon, clarinet, oboe, violin and cello by Martinu — https://en.wikipedia.org/wiki/La_revue_de_cuisine, which had only the piano part, and long 9 and 10 measure rests which I was supposed to count.  I thought it would be a total disaster, but the coach conducted it, and shouted out numbers when I was supposed to play. I bought him a beer later that week.  An interesting piece with a tango, and a Charleston in it.

Participants at the camp decided that there would be no talk of politics, just music, and the world did manage to spin on its axis for a week without our help.

I spent 300 miles or so of the 1,100 mile drive back on backroads through the verdant midwest countryside.  I made it a point to pace off a mile or so every now and then in a particularly beautiful stretch of country and then get out and walk it.  Typical of the midwest, each time I did, someone would stop and ask if I needed help.

The many miles of the country I went through on the way back look very good.  The stores and  restaurants and malls were full, the campgrounds crowded, and help wanted signs were everywhere. Much better than the previous trips of the past 5 years.

So then I get back to Massachusetts and the alternate universe of the New York Times.  When the Times talks about the longest bull market in history, they note in the same breath that it is only for rich people, ignoring the fact that all pension plans, IRAs and 401k’s have been beneficiaries.  Also on the front page was a story about a payoff to a porn star, something of minimal consequence to the daily lives of those outside the bubble.

Paul Krugman, Nobel Laureate in economics, appears on the opinion page, despite having declared election night the stock market would never recover, and a few years ago informing us that we were at peak oil production.  At least no articles by Larry Summers (smartest guy in the room and former president of Harvard) about secular stagnation and the impossibility of 3% economic growth.

Linus Pauling was one of the great chemists of the 20th Century — electronegativity, the nature of the chemical bond, the alpha helix etc. etc.  Yet when he said vitamin C could cure colds and cancer, he was proved wrong and his pronouncements on the subject roundly ignored.  No so with political and economic pundits.

The disconnect between the bicoastal mainstream media and the center of the country is profound.  The November elections should be fascinating.  Help stamp our minority employment — vote Democratic.

Saepe falsus, sed numquam dubitans

Saepe falsus, sed numquam dubitans — “Sometimes wrong but never in doubt” should be on the Heraldic crest of Paul Krugman. He certainty came to mind at around noon today 20 Jan ’16 with oil breaking $27/barrel and the Dow down 550.

Here are two direct quotes from him as he held forth on the Opinion pages of the New York Times back in 2010.

“Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived.”

“So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding.”

Name a commodity price that’s been rising.

He is, after all, a Nobel laureate in economics, a tenured Princeton professor, blah, blah, blah. You should take everything he writes with much salt even though, despite all this, he’s as certain as ever. It seems with such a disastrous track record that the Times could find someone better.

Here is a link to the entire column — see for yourself. http://www.nytimes.com/2010/12/27/opinion/27krugman.html?_r=0

A thank you to my niece Ruth Loop for providing the translation

Addendum 20 Jan ’16 — An unenviable economic prediction from the laureate in economics

https://en.wikiquote.org/wiki/Paul_Krugman

    • “Ricardo’s Difficult Idea,” in G. Cook (ed.), Freedom and Trade: The Economics and Politics of International Trade, Volume 2 (1998)
  • By 2005 or so, it will become clear that the Internet‘s impact on the economy has been no greater than the fax machine’s

Thanks Joe