Keynesian economist Paul Krugman is one of the most celebrated financial minds in the world today. The mainstream media immediately seeks Krugman for a quote, he is invited to television talk shows, he publishes frequent columns in the New York Times and liberals usually cite Krugman to put forth their agendas.
One thing is wrong with that, though: he has been wrong on mostly everything on the economy for the past decade. Remember him calling for a housing bubble? That was him. Remember him calling for a disaster (I.E. space invasion/Broken Window Fallacy)? That was him. Remember him urging for the government to spend more than its astronomical numbers already? That was him.
It appears that Krugman, a grown kibitzer over the years, is just as bad, if not worse, as Federal Reserve Chairman Ben Bernanke, President Obama, Massachusetts Senator Elizabeth Warren, California Congresswoman Maxine Waters and other esteemed officials espousing the liberal or Keynesian mantra.
Even prior to the economic collapse in 2007 and 2008, adherers to Austrian Economics, such as retired Texas Republican Congressman Ron Paul, Peter Schiff, Jim Rogers, economist Robert Murphy and so many others, knew what was going to happen before the establishment continued to assure Americans there was no recession.
What did Krugman do? He continued to cite the failed economic myths that debt isn’t bad, deficit spending is great, bubbles are needed and so many other unnecessary diatribes that people should ignore.
Despite everything, Krugman remains a crucial figure on the political front and in the economic realm. Perhaps it’s our fault because we continue to report on Krugman’s failed concepts and suggestions and his past projections. If some random person on the Internet in the late-1990s were to predict that it would fail by the mid-2000s, would it be something worth reporting? No, because that random person is just that: a random person.
With that being said, here are six ways Paul Krugman has been wrong on the economy for the past decade.
1. Housing bubble
What perhaps might be the biggest blunder of Krugman’s career, this 2002 New York Times piece titled “Dubya’s Double Dip” may have ruined the economist’s credibility. In his op-ed, he urged then-Federal Reserve Chairman Alan Greenspan to stimulate the economy through a housing bubble.
“To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
The discovery of this piece can be accredited to libertarian writer and publisher Lew Rockwell. However, Krugman’s ardent supporters came to his defense and claimed that he wasn’t actually supporting a housing bubble, but was just posting economic analysis rather than advocating for specific policy (imagine if the Austrian Economists wrote about urging the federal government to initiate a dot-com bubble!)
Although this was one of the worst pieces of writings, this next one might be one of the worst statements coming out of Krugman’s mouth.
2. Space invasion to grow economy
Aliens to save the global economy? The analogy is a big fail again. Essentially what Krugman was advocating for in the 2011 interview on CNN was that war stimulates the economy. This tired old argument has been taught for decades in classrooms across the globe. Frederic Bastiat proved this theory wrong with his Broken Window Fallacy.
So, who will lead the defense against a space invasion? Orson Welles? Captain James T. Kirk? John Maynard Keynes? Krugman himself? The concept is preposterous because World War II did not end the Great Depression, but rather it was the cut in government spending that did.
Sure, in war, some benefit, such as the weapons manufacturers, but everyone else suffers because all the resources get sent to the war effort. This fact is a constant reminder in motion pictures during the 1940s and even in the “Burns & Allen” radio show in which they continually made jokes about the price of meat and the paucity of its availability.
In the end, Krugman just wants to waste billions (or trillions) of dollars on uselessness. As the host in the clip below, Fareed Zakaria, noted, Keynes talked about workers being productive by digging ditches and refilling them. This would be Krugman’s dream if every single American dug a hole and refilled it again.
Does Krugman get all of his economic thoughts from the Twilight Zone? Maybe.
3. Gold, sound money brought Adolf Hitler
Why does Krugman always distort history? Earlier this year, Krugman wrote in his column that it was the policy of gold and sound money that brought Adolf Hitler to the Chancellorship of Germany – of course, not the consequences of the Versailles Treaty and an economic depression in Berlin.
“No, the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation and depression. Hard money and a gold standard obsession, not excessive money printing, was the proximate disaster.”
Indeed, there were various social, economic and political reasons for Hitler’s rise to power, but a sound money policy and the yellow metal standard were certainly not the causes for Hitler’s tyrannical reign.
4. More spending, more stimulus, more of everything!
The federal government has already spent hundreds of billions (or trillions) of dollars in order to supposedly stimulate the economy. A key question is: has anyone actually seen any stimulation in the overall economy? Of course, governments are doing fine and companies that have government contracts but the remainder of the population is suffering.
How does the United States get out of this slump? According to Krugman, the government must initiate even more deficit spending endeavors. Rolling Stone profiled Krugman’s proposal and treated him like the absolutely authority when it comes to economics.
“Well, the Obama administration’s stimulus didn’t work as well as many people had hoped – but it didn’t work any worse than other people, myself included, predicted,” explained Krugman. “When the stimulus was being promoted and discussed, I was very publicly tearing my hair out, saying this is way inadequate. And sure enough, it was.”
Since Krugman is calling for more spending then why doesn’t the federal government and the Fed start doing a whole lot more? Here’s an idea that would wet Krugman’s appetite: Bernanke prints $1 trillion a day for 10 years, the president, both Obama and his successor, enhances the budget to $25 trillion each year and taxes on the wealthy soar to 99.5 percent.
5. Debt is no big deal
Don’t tell Krugman that the government has to tighten its belts and get its fiscal priorities under control, much like families and households have had to do since the collapse of the U.S. economy. He disagrees with this premise and criticizes those who want less government rather than more.
Right now, the national debt stands at close to $17 trillion. The Congressional Budget Office (CBO) projects that figure to increase to $25 trillion in several years (this does not include the excessive interest payments). To some, this is bleak news, but to Krugman he is most likely disappointed that it’s not big enough – $50 trillion is more of a number he’d be happy about.
What’s interesting to note is that even if Krugman wants the government to stimulate the economy through digging ditches and spending on valueless programs, how can it do so when it is engulfed with debt and interest?
6. Minting a $1 trillion coin
This is just laughable, ludicrous and idiotic. The premise seemed absurd when it was first proposed earlier this year, but it was endorsed by Krugman and New York Congressman Jerrold Nadler.
“It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically,” wrote Krugman. “That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.”
Economic Collapse News reported that former CBO director Douglas Holtz-Eakin believed that minting such a coin would be the implication of a default because it would show to the markets and the rest of the world that the U.S. government can’t properly manage its finances.
In the end, I beg Krugman to debate Murphy on economics! Not only does it benefit a great cause, it will entertain millions around the world and prove that Austrian theory is superior to Keynesianism.