At the behest of several readers, today at Mises.org I tackled once again Mish’s credit-deflation paradigm. Here’s a good excerpt:
When Mish wrote the above, the S&P 500 was 935. As the quote above tells us, at this time Mish was predicting that stocks would then fall down to 600 or maybe even 450. Instead, the “sucker rally” kept going, such that exactly one year later, the S&P 500 stood at 1137. To switch to percentages, this means that in early 2009, Mish was calling for stocks to drop anywhere from 35 percent to 52 percent. Instead, stocks steadily rose 22 percent. That’s a phenomenally bad prediction.
I said it twice in the article, and I’ll say it again here: I am not claiming that the deflationists are totally wrong, and that people like Gary North and me–who have been faithful to our heritage as economists, in worrying about new money creation leading to rising prices–have been totally right.
In fact, Paul Krugman and Scott Sumner could understandably claim that they have called things much better than the Mishian inflationistas or deflationistas.
So, my point in writing this Mish piece was to make sure that his fans understand just how much his mantra has been wrong, since early 2009.