Not surprisingly, Daniel Kuehn (and others) was not impressed by my highlighting of an apparent Krugman Kontradiction regarding Italy. To refresh your memory, in November 2009 (to take just one example) Krugman was (typically) making fun of people who were warning that the US had better get its deficit under control, lest interest rates quickly spiral up out of control and bring us to our knees.
To prove how misguided this fear was, Krugman had constructed a chart showing that the US debt-to-GDP ratio had recently risen higher than Belgium’s, but was still below Italy’s. Some people balked, and Krugman clarified:
Why, people ask, would I want to compare us to Belgium and Italy? Both countries are a mess!
Um, guys, that’s the point. Belgium is politically weak because of the linguistic divide; Italy is politically weak because it’s Italy. If these countries can run up debts of more than 100 percent of GDP without being destroyed by bond vigilantes, so can we.
So now in the comments of my post, Daniel says:
The guy that basically launched the currency crisis literature thirty years ago introduced the fact that he was concerned about the role of currencies during crises in November, 2011?
I don’t buy it Bob.
Then Daniel goes on to provide some quotations where Krugman is talking about the problems with the euro, well before 2011.
OK that’s fine, but it doesn’t change the fact that this is a Krugman Kontradiction. Let me put it to you like this:
==> If Italy had continued to be fine, Krugman would (presumably) have continued to cite Italy as proof that he is right, and the WSJ is wrong, about the dangers of high debt.
==> When it turned out Italy wasn’t fine, Krugman cited Italy as proof that he was right, and the euro-optimists had been wrong.
Isn’t that convenient? No matter how Italy turns out–whether it’s humming along nicely, or on the verge of defaulting because it’s being attacked by bond vigilantes–Krugman’s models “called it” in both cases? Reality really does have a Keynesian bias.
Let me drive home the point. Just today, Krugman wrote:
Brad DeLong sends us to a piece by Nouriel Roubini from almost six years ago, describing how Giulio Tremonti, Italy’s economy minister, threw a hissy fit when Roubini suggested that Italy might have problems with its euro membership. And no, I’m not being unfair — read Roubini’s piece. It was quite something.
What I would say is that this incident exemplified something that was going on all along the march to the eurodebacle. Serious discussion of the risks and possible downsides was simply not allowed. If you were an independent economist expressing even mild concerns about the project, you were labeled as an enemy and shut out of the discussion.
In a way, the remarkable thing is that it took until now for disaster to strike.
Does everyone see what a I-don’t-know-what Krugman is being here? If the above quote is right, that means that Paul Krugman in, say, November 2009 was sitting around thinking, “Man, I can’t believe Italy has hung on for this long, without being attacked by bond vigilantes. This is really surprising to me, but I’m so confident in my understanding of optimal currency areas that I really think disaster will strike any day now.”
And yet, when some Republicans that month said the US needs to cut spending to get our fiscal house in order, Krugman wrote, “If [Italy] can run up debts of more than 100 percent of GDP without being destroyed by bond vigilantes, so can we.”
Nobody sees a problem with that?
Well, I do. Either Krugman was flat-out wrong in November 2009, and didn’t realize Italy was on the verge of disaster. Then now, he is making up stuff when he pretends that he did realize it in November 2009.
Or, Krugman knew full well Italy was on the brink of disaster in November 2009, but went ahead and used it as a quick zinger to make fun of the austerians, because he knew nobody cares about the validity of arguments, the blogosphere is a team sport, and he’d have his useful smart guys (not useful idiots) defending him in comments across the globe.
Either way, that’s not cool.
Last complaint: Just like I don’t like the current situation in Europe being blamed on the gold standard, I also don’t like it being described as Italians wanting German central bankers, when right now the head of the ECB is Italian. I don’t care about the ethnicities, it’s just that I can only process so much Orwellianism per day.
(For the record, I get what both claims mean, and I’m just pointing out how they have a problem in that they don’t accord with the actual reality. It is truthiness as Stephen Colbert would use the term, to say Europe is suffering right now because it has a gold standard as the Italians are being dominated by German central bankers.)