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Prof. Krugman & the failure of mainstream economists

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He comes across as someone caught in the headlights. Either that of the media's, or the brilliance of his own mind. :lol:

LOL. You are right. I always thought that about him.

He looks like someone who was bullied when he was growing up.

Maybe this is why he has learned to live in his own reality.

 

I am sure he would say: "the brilliance of his own mind"

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Posted by Mr Cynical (465 days ago - Dec.9th, 2008)

 

nobel economics prize winner paul krugman said yesterday

 

"the simple mechanics of producing a rescue for the world economy are very hard. the pace at which things are getting worse is so great that its difficult to see how rescue measures can come"

 

Was he Right or wrong?

I'd rather listen to Stephen Roach

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“I’m a little surprised at Steve for saying that,” said Krugman, the Princeton University professor and Nobel laureate in economics, in a telephone interview when asked to respond to Roach. “What I said is actually based on pretty careful economic analysis. We have a world economy which is depressed by China artificially keeping its currency undervalued.”

 

 

We have a world economy in depression which was caused by the artificial inflation of US asset prices. This was achieved with the use of innovative financial instruments that have now lost credibility. China should never have trusted us geeks.

 

Corrected. :lol:

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China should never have trusted us geeks.

PK looks very Geek-like, doesnt he?

 

You could also say: "We should never have trusted them greeks." haha

 

===

 

"We have a world economy which is depressed by China artificially keeping its currency undervalued.” -said PK.

Doesnt the lack of savings, and the massive waste of wealth by the US government (taking advice from

academics like you), have something to do with it, Paul?"

 

Where's that bat?

For good luck, I'd like to give him a few quick taps myself.

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PK looks very Geek-like, doesnt he?

 

You could also say: "We should never have trusted them greeks." haha

:lol:

 

You would've thought Europe would've known better; beware of Greeks bearing gifts. :lol:

 

trojan_horse-fair-use.jpg

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China and Germany unite to impose global deflation

By Martin Wolf

 

http://www.ft.com/cms/s/0/cd01f69e-3134-11...144feabdc0.html

China and Germany are, of course, very different from each other. Yet, for all their differences, these countries share some characteristics: they are the largest exporters of manufactures, with China now ahead of Germany; they have massive surpluses of saving over investment; and they have huge trade surpluses. (See charts.)

 

Both also believe that their customers should keep buying, but stop irresponsible borrowing. Since their surpluses entail others’ deficits, this position is incoherent. Surplus countries have to finance those in deficit. If the stock of debt becomes too big, the debtors will default. If so, the vaunted “savings” of surplus countries will prove to have been illusory: vendor finance becomes, after the fact, open export subsidies.

 

I am beginning to wonder whether the open global economy is going to survive this crisis. The eurozone may also be in some danger. Last week’s interventions by Wen Jiabao, China’s premier, and Wolfgang Schäuble, Germany’s finance minister, illuminate these dangers perfectly

...

Imagine that weaker eurozone countries were forced to contract their fiscal deficits sharply. This would surely weaken the entire eurozone economy. But the result would also be fiscal deterioration in Germany and France. Imagine that Germany then did don the hair shirt. Would it instruct France to do the same? After all, France already has a general government deficit forecast by the Organisation for Economic Co-operation and Development at close to 9 per cent of gross domestic product this year. Does Mr Schäuble imagine France could be fined? Surely not. Yet it is not Greek public finances that threaten the stability of the eurozone. These are a mere bagatelle. The threat is the public finances of big countries. Since Germany could not force such countries to behave and has no chance of expelling any member it disapproves of from the eurozone, it would have to leave itself. That is the logic of Mr Schäuble’s ideas. This must be obvious to him, too.

 

Germany is in a supposedly irrevocable currency union with some of its principal customers. It now wants them to deflate their way to prosperity in a world of chronically weak aggregate demand. Mr Wen has the same idea. But the economy he wants to pursue this goal is the US. Fat chance!

...

Behind all this is a fundamental divide. Surplus countries insist on continuing just as before. But they refuse to accept that their reliance on export surpluses must rebound upon themselves, once their customers go broke. Indeed, that is just what is happening. Meanwhile, countries that ran huge external deficits in the past can cut the massive fiscal deficits that result from post-bubble deleveraging by their private sectors only via a big surge in their net exports. If surplus countries fail to offset that shift, through expansion in aggregate demand, the world is inevitably caught in a “beggar-my-neighbour” battle: everybody seeks desperately to foist excess supplies on to their trading partners. That was a big part of the catastrophe of the 1930s, too.

 

In this battle, the surplus countries are most unlikely to win. A disruption of the eurozone would be very bad for German manufacturing. A US resort to protectionism would be very bad for China. Those whom the gods wish to destroy, they first make mad. It is not too late to look for co-operative solutions. Both sides have to seek to adjust. Forget all the self-righteous moralising. Try some plain common sense, instead.

 

How about trying a new Bretton Woods....

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NIALL FERGUSON comes to London School of Economics

 

His chair or whatever starts Sept 2010. This should mean some interesting lectures coming our way !!

 

http://www2.lse.ac.uk/newsAndMedia/news/ar...9/ferguson.aspx

 

One of the world's most eminent scholars, Professor Niall Ferguson, is joining the staff of the London School of Economics and Political Science (LSE). Professor Ferguson will take up the Philippe Roman Chair in History and International Affairs, for 2010-2011

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Apparently Krugman has been bashing Germany recently. He doesn't seem to like Axel Weber's (Bundesbank director) stance that bailing out everyone and their dog might be a bad idea. He sees a risk for the Euro in him. He thinks the German and French are whackos because they don't want higher deficits & loose money. Americans would see it differently. Oh, and should the Euro go to parity with the Dollar, he will support congress with sanctions against booming exporters like Germany. He doesn't want anyone to export their politics of saving.

 

Now, I am confused, does he want more QE, a weaker Euro, and more German exports, or does he want a stronger Euro and less German exports? Or does he want a weak Euro and weak German exports?

 

I think it is the latter one. Krugman is mean. ;)

 

In German: http://www.spiegel.de/wirtschaft/unternehm...,701943,00.html

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Apparently Krugman has been bashing Germany recently. He doesn't seem to like Axel Weber's (Bundesbank director) stance that bailing out everyone and their dog might be a bad idea...

Krugman may be underwater on his Manhattan Co-op,

and I think this is fair justice. The King-of-Stimulus may get whacked by "surprise deflation."

 

Maybe I should start up a Krugman Apartment Watch chart for this thread

 

The man is wrong about almost everything, so it would only make sense if he lost money.

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He got the Nobel, man!

;)

And that DEVALUED the prize, without lifting Krugman

 

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Here's High-en'-Dry / Is he talking about Krugman ?

 

If emotion is one luxury Hendry can rarely afford, he says it's because, in global finance, it comes at too high a price. He springs from the table back over to the window, where the dictionary is now closed, and pulls out a copy of The Economic Consequences of the Peace, by the visionary British economist, John Maynard Keynes. Published in 1919, the book argues that the massive reparations demanded of Germany after the First World War jeopardised the European economy. Keynes prescribed forgiveness, economically at least. Hendry draws parallels between the Allies and today's banks. "They should be generous," he says. "By insisting that Greece, for example, should repay everything they are impoverishing us all."

. . .

So, what, just let everything go up in flames – savers, bankers, Greeks be damned? "I believe in tough love. Let's look at Iceland. I didn't invest money in Icesave because they took risks I would never take to offer very high interest rates. You take a risk, you get it wrong, you pay. Instead the government says, don't worry, here's my friend the taxpayer with a cheque. You're impoverishing us all to bail out people who make bad decisions." Hendry says it's the same in Greece, where "the champagne socialists I refer to want to bail out the bankers not the people. But they can confuse the people by saying, look, here are these evil speculators – it's their fault."

== ==

 

reviews_logo.gif

"Champagne Socialist"?

paul-krugman_large.jpg

Krugman

0198_opt@feature.jpg

The real stuff, to be sipped after the taxpayers gets stuffed

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You mean Krug-man? :)

It all fits

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KRUGMAN ON THE DEPRESSION - his ideas have helped to bring about

 

The Third Depression

By PAUL KRUGMAN

Published: June 27, 2010

 

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

 

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

 

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

 

And this third depression will be primarily a failure of policy.

(Right! Policies of stupidly low rates, and reckless lending.)

 

Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

 

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

 

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

 

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

 

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

 

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.

 

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

 

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

 

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

 

/see: http://www.nytimes.com/2010/06/28/opinion/28krugman.html

 

== ==

 

ONE Vital job needs to be lost!

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I agree with Krugman, a depression it is [for better or worse]. My holiday reading these days consists of flitting between "Hoover's Memoirs" and Kindleberger's "The World in Depression". Parallels jump out everywhere.

 

Edit: doesn't mean I agree with everything Krugman. He seems to be getting a little shrill..... due to the world not allowing him to save it no doubt. :lol:

The rationalist's delusion of grandeur.

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Edit: doesn't mean I agree with everything Krugman. He seems to be getting a little shrill..... due to the world not allowing him to save it no doubt. :lol:

The rationalist's delusion of grandeur.

Haha.

Who is going to save us from the ideas of economists like Krugman?

 

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Haha.

Who is going to save us from the ideas of economists like Krugman?

.... old ideas near consigned to the dustbin of history already. I think a new breed of more pragmatic economists will be required. Novel ideas forged from new pressing circumstances.

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.... old ideas near consigned to the dustbin of history already. I think a new breed of more pragmatic economists will be required. Novel ideas forged from new pressing circumstances.

Im hoping that will put Krugman out of work,

and maybe on the same sinking ship as Greenspan

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On the one hand is the idea that the problems of today can be solved by enforcing high market liquidity through printing and low rates and on the other hand the idea that quite enough of that has been done already and a more prudent approach to reducing deficit spending and money creation needs to be adopted.

 

Unlike many theoretical ideas this is an either/or concept - neither ideology can be supported without exclusion of the other. However not all economies are in the same circumstances. Those nations with already massive debt/GDP ratio's such as the UK need to take drastic and immediate actions to maintain their debt ratings whereas nations with lower total debt/GDP can afford to wait a little longer.

 

The US Fed is in a precarious position along with the ECB because they are federal agencies and there is huge diversity between the highest debt nations/states (Greece/California) and those with low growth vs. those nations or states with better debt/GDP ratio's such as Germany. In those situation the 'one size fits all' fiscal policy planning must take into account the lowest common denominator and it's issues rather than look at averages accross the federal estate. This is really a case of the weakest link in the chain pulling the rest down as we have seen with Greece and will no doubt see if California starts to default on its debts - there is a huge knock-on implication to failure to service debts when a single country/state fails to meet its obligations within the federal estate.

 

This to me is why Krugman is a barking madman who hasn't caught on that it's all gone tits up and QE and low rates policies will only delay and exacerbate the inevitable - what a tool! :D

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...Krugman is a barking madman who hasn't caught on that it's all gone tits up and QE and low rates policies

will only delay and exacerbate the inevitable - what a tool! :D

A non-capitalist Tool, who is a Fool besides

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Looking at the event venue - time to pray ??

 

dont forget Ferg is joining LSE in some capacity this sept.

 

http://www.independent.co.uk/news/uk/polit...me-2016350.html

 

On Tuesday 6 July at 7pm, Niall Ferguson gives a talk at St Paul's Cathedral, London. Doors open 6.30pm. The event is free and unticketed and all are welcome

 

 

"High Financier: The Lives and Time of Siegmund Warburg" is published by Allen Lane, priced £30 To order a copy for the special price of £27 (free P&P) call Independent Books Direct on 08430 600 030, or visit www.independentbooksdirect.co.uk

 

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