This guy is really something else. In this post, Krugman matter of factly said that he had predicted the housing bubble, in contrast to Bernanke. Apparently some people demanded that Krugman give examples of where exactly he warned that housing prices were too high, because in a subsequent post Krugman wrote:
3. Some commenters ask for proof that I warned early about the housing bubble. As it happens, I ran across this interesting piece from 2005, denouncing the lying liberal media — mainly me — for asserting that there was a bubble in housing.
Now right away my Spidey sense was tingling; Krugman didn’t actually link to his article, but to someone else talking about his articles. Why not cut out the middle man, if there were a smoking gun article?
If we go to the “piece from 2005,” we see that yes indeed, it is from a right-winger who thinks wacko liberals are complaining unfairly about home prices. Yet here’s what they say about Krugman:
Journalists have been talking about a housing bubble since 2001. On September 3 of that year, Forbes magazine warned its readers about the consequences of home equity values starting “to wobble,” while stating, “There are ominous signs that this is about to happen.” On the same day, a BusinessWeek editorial cautioned about a “double bubble” and told its readers, “A housing bubble may be developing – right behind the Nasdaq bubble.” Both indicated that such an event would be devastating to the economy.
What those reports failed to explain was that an investment bubble occurs when an asset appreciates by extraordinary percentages for a short period of time, culminating in a rapid decline that wipes away most of the gains. A perfect example is the NASDAQ stock index, which went from roughly 1,400 in October 1998 to more than 5,000 in March 2000 (a 250-percent gain in less than 18 months), only to fall back to about 1,400 by October 2001 (a 70-percent decline in about 18 months). The housing market is less liquid and prices don’t usually change quickly like stocks do.
Four of 16 media reports in 2001 that referenced a housing bubble were either written by or cited New York Times economic columnist Paul Krugman. Of particular note was a September 30 Times article by Krugman entitled “Fear Itself” where he wrote: “Housing was doing better, thanks to low interest rates, but some analysts were warning about a housing bubble – and even if they were wrong, how solid a recovery could we have from housing alone?”
Unfortunately I can’t find the particular article they are talking about; maybe someone can help me out. (I’ve check the NYT archives both by title and by searching for “Fear Itself,” and I don’t see anything close to what these people are talking about.)
However let’s look at a Krugman NYT piece from August 14, 2001 where he said:
The driving force behind the current slowdown is a plunge in business investment. It now seems clear that over the last few years businesses spent too much on equipment and software, and that they will be cautious about further spending until their excess capacity has been worked off. And the Fed cannot do much to change their minds, since equipment spending is not particularly sensitive to interest rates.
Still, as former Treasury Secretary Larry Summers says, you don’t have to refill a flat tire through the puncture. To reflate the economy, the Fed doesn’t have to restore business investment; any kind of increase in demand will do.
How might demand increase? Consumers, who already have low savings and high debt, probably can’t contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery. Even more important would be a turnaround in the U.S. trade balance. America’s deficit has lately been running at 4.5 percent of G.D.P., three percentage points higher than it was as recently as 1997. Reversing that trend — which would mean both exporting more and buying domestic instead of imported goods — could deliver a big boost to the economy.
Sooner or later, of course, investors will realize that 2001 isn’t 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place. But for the time being delusions of an instant return to prosperity stand in the way of a real economic turnaround.
Hmm that doesn’t sound exactly like he’s warning everyone of the dangers of artificially high home prices. And let’s not forget his now-notorious 2002 NYT column which even the NYT archive summarizes this way:
Paul Krugman Op-Ed column on role of American consumers who have rushed into fray, fending off recession’s worst effects time and again; suggests that recession of 2001 was not typical postwar slump but prewar-style recession, ‘morning after’ brought on by irrational exuberance; says Fed needs to fight back with soaring household spending to offset moribund business investment, for which Alan Greenspan needs to create housing bubble to replace Nasdaq bubble.
OK let’s pause in our victory lap, I’m pretty sure there are some 2005 columns where Krugman is talking about there being an ominous housing bubble. It’s late and I have to crash; I just saw these titles now as I was looking for the notorious 2002 one. If any readers find a smoking gun where Krugman clearly calls it, let me know and I’ll do a new post.
Arnold Kling links to this TNR article showing allegedly absurd warnings from the past, which are supposed to make current Obama-haters rethink their rhetoric. Funny thing is, a bunch of those warnings strike me as confirmed, or at the very least still open for debate. The TNR writers don’t actually give a “The Claim…The Reality” type analysis, but instead list these quotes as self-evidently dumb. Here is what the TNR writers say about it in the intro:
Conservatives have lined up in near-unanimous opposition to any progressive legislation introduced during President Obama’s first year in office. Whether they’ve been railing against health care reform, a climate bill, or financial regulation, their ire has stemmed less from legislative specifics than from a generalized prophecy of doom: Obama’s proposals will move the country toward socialism, bankrupt entire industries and small businesses, and deny Americans their basic freedoms. These arguments, however, aren’t new. Conservatives—not just Republicans, but various politicians and groups who’ve resisted major social changes—recycled them throughout the twentieth century. They used them to oppose numerous progressive measures that Americans now take for granted, from women’s suffrage to child-labor laws to Medicare.
Really, with that intro, you’re expecting to see all manner of crazy, bigoted things. Don’t get me wrong, some of the quotes ARE just that, but several of them are not only understandable, I think they are confirmed.
I’m not sure if I blogged about this before, but it’s been very interesting to watch “The Rock’s” transition from wrestling to film stardom. Today I took my son to see Alvin and the Chipmunks (the only non-scary kid movie available, though it featured wedgies) and here was one of the trailers (just move the pointer to the 2:10 mark if you want):
Now when this particular guy first started in films, he was billed in the Previews as “The Rock.” Then in subsequent films he was referred to as “Dwayne ‘the Rock’ Johnson,” and there might have also been a period where they used both names separately.
Now, in this film (and I believe his previous one) they don’t even use “The Rock” at all. He is trying to put that behind him so he can become a real movie star, a la Marky Mark and the Fresh Prince.
Mr. Johnson’s transition will not be complete until he can star in a movie without taking his shirt off.
Last point, I actually like him a lot. I love the self-deprecating comedic roles he takes, in particular in Be Cool (sequel to Get Shorty). This is one of his best parts, where he’s auditioning by re-enacting a scene from Bring It On. (Sorry I couldn’t find a better video.)
Has this author ever even taken macroeconomics in college? This crap was on my freakin midterm; Krugman is 100% right. Increasing or decreasing the amount of trade we do via protectionism or trade liberalization only changes the volume of trade, but not the balance of trade, ergo it doesn’t affect short run GDP. That’s what Krugman is saying, and it’s extremely obvious to anyone who knows that NX = Savings – Investment. Maybe if the author actually went over NX = S – I, he’d realize why what he’s saying is wrong.
OK, criticizing Krugman on general economics is one thing, but you’d have to be a damned fool to criticize him on trade theory. That’s all Krugman does, academically speaking. The author of this piece is WAY out of his own league. To say that “Krugman is wrong even within the Keynesian framework” is completely laughable; take it from someone who just studied most of this junk.
If you are interested in using Keynesian macro variables to express sound economics, I think you will enjoy clicking the link and watching this guy (?) and me debate. For example here is part of his follow-up:
You’re 100% right; trade barriers adversely affect C and I. But it’s more of a long run effect than a short run effect.
Trade in itself does not contribute to output, it just turns your output into something else that you want. If I’m making 40 bushels of corn and trading them with China for 40 teddy bears (backwards, I know), and all of a sudden a barrier is put up so I can’t trade for teddy bears anymore, if I’m still producing 40 bushels then my output hasn’t changed; it is and always has been 40 bushels. So GDP remains the same.
This is–I believe–totally totally wrong, but it’s a very interesting mistake that I’ve never encountered before. So if you want to see me pick it apart, follow the link.
Last point: I’m almost glad that this guy (?) made this confident comment about my article. Kevin Donoghue and some others had me doubting myself, and thinking that Krugman wasn’t misleading his readers. Well, he certainly fooled this person.
* It’s the clash of the titans over at Crash Landing, concerning a popular and allegedly circular argument against the State.
* A naive economist allows his anti-Fed arguments to be used by above-mentioned WSJ.
* M4liberty passes along this interesting board game trivia. I’m glad to see I’m doing my share to save the planet.
* Mankiw sees the wisdom in economists adopting the medical analogy for the failures of Keynesianism.
* Gary North writes favorably of Oral Roberts (no surprise) and Frank Zappa (huge surprise). (HT2 Lew Rockwell)
* Tyler Cowen linked (with bemusement I think) to this Italian song about what Americans sound like to foreigners, but I thought the song was awesome. USA! USA! In any event, I’m not sure when this was released, but if it came after Austin Powers, then this guy’s got nothing on Mike Meyers. Seriously, isn’t this video just the opening of Austin Powers II?
Merry Christmas! And as part of our ongoing series, “Why does God let bad things happen?” here we explain that if King Herod and Caesar had become Rothbardians, the Scriptures wouldn’t have been fulfilled.
The Jews in Jesus’ day were waiting for their Messiah, but the prophecies said he would come from Bethlehem. So you can understand Nathanael’s confusion when Philip tells him the good news:
Jesus Calls Philip and Nathanael
43The next day Jesus decided to leave for Galilee. Finding Philip, he said to him, “Follow me.”
44Philip, like Andrew and Peter, was from the town of Bethsaida. 45Philip found Nathanael and told him, “We have found the one Moses wrote about in the Law, and about whom the prophets also wrote—Jesus of Nazareth, the son of Joseph.”
46″Nazareth! Can anything good come from there?” Nathanael asked.
“Come and see,” said Philip.
So the confusion here is that this guy Jesus is the son of a carpenter who grew up in Nazareth. Hence, he couldn’t possibly be the promised Messiah, since all educated Jews knew the Messiah was supposed to come from Bethlehem (from the line of King David).
Of course, the wrinkle is that Jesus really was born in a manger in Bethlehem–his earthly parents Mary and Joseph had to make the trek there for a census being conducted for tax purposes:
The Birth of Jesus
1In those days Caesar Augustus issued a decree that a census should be taken of the entire Roman world. 2(This was the first census that took place while Quirinius was governor of Syria.) 3And everyone went to his own town to register.
4So Joseph also went up from the town of Nazareth in Galilee to Judea, to Bethlehem the town of David, because he belonged to the house and line of David. 5He went there to register with Mary, who was pledged to be married to him and was expecting a child. 6While they were there, the time came for the baby to be born, 7and she gave birth to her firstborn, a son. She wrapped him in cloths and placed him in a manger, because there was no room for them in the inn.
So when earthly rulers seek to rip off poor people, they unwittingly fulfill the Scriptures and allow the rise of the true King whose majesty renders them paupers. And later on, when earthly rulers have Him killed, they unwittingly fulfill the Scriptures yet again and allow Him to save the world.
You and I are dirty sinners, but the reason we should feel down is that we’re not doing what God wants. We don’t need to worry that we’re going to screw up His plans. He knew you were going to do that before you were even born. He’s disappointed, but don’t worry–He was ready for it. Good will still triumph, sometimes in spite of us.
* I am on vacation and am not getting out my Rosetta Stone, but I frankly don’t know what Mish is even talking about in this response. It seems he is using a variation of the legal defense, “My client wasn’t at the murder scene, and if he were he doesn’t own a gun, and if he did he is legally blind and so couldn’t possibly have been the shooter.” Naturally Mish doesn’t explain why we will have about 2.9% CPI inflation in 2009 if his analysis is the correct one.
* I walk through Krugman’s (apparent) goof on international trade and the Keynesian accounting identity.
* I quintuple-down on my inflation bet, this time with David Henderson. If Arnold Kling wants a piece of it, I will have to buy a credit default swap on EconLog.
* I have been waiting since the summer for this: The YouTube of my appearance on a TV show in the Bahamas. Like Obi-Won, I easily fend off anticapitalist attacks from two assailants.
If you want to see the rest go here and scroll down in the “Related Videos” to see Parts 2 etc. of “Dr. Robert Murphy on Platform TV.” Note that I am at my parents’ house and I can’t figure out how to turn on the volume on their computer, so I hope it sounds OK.
I am at my parents’ house so blogging will be sparse for a while. In the meantime check out this passage (2 Chronicles 26: 1-15) which illustrates the way I think God works in history:
1 Then all the people of Judah took Uzziah, [a] who was sixteen years old, and made him king in place of his father Amaziah. 2 He was the one who rebuilt Elath and restored it to Judah after Amaziah rested with his fathers.
3 Uzziah was sixteen years old when he became king, and he reigned in Jerusalem fifty-two years. His mother’s name was Jecoliah; she was from Jerusalem. 4 He did what was right in the eyes of the LORD, just as his father Amaziah had done. 5 He sought God during the days of Zechariah, who instructed him in the fear [b] of God. As long as he sought the LORD, God gave him success.
6 He went to war against the Philistines and broke down the walls of Gath, Jabneh and Ashdod. He then rebuilt towns near Ashdod and elsewhere among the Philistines. 7 God helped him against the Philistines and against the Arabs who lived in Gur Baal and against the Meunites. 8 The Ammonites brought tribute to Uzziah, and his fame spread as far as the border of Egypt, because he had become very powerful.
9 Uzziah built towers in Jerusalem at the Corner Gate, at the Valley Gate and at the angle of the wall, and he fortified them. 10 He also built towers in the desert and dug many cisterns, because he had much livestock in the foothills and in the plain. He had people working his fields and vineyards in the hills and in the fertile lands, for he loved the soil.
11 Uzziah had a well-trained army, ready to go out by divisions according to their numbers as mustered by Jeiel the secretary and Maaseiah the officer under the direction of Hananiah, one of the royal officials. 12 The total number of family leaders over the fighting men was 2,600. 13 Under their command was an army of 307,500 men trained for war, a powerful force to support the king against his enemies. 14 Uzziah provided shields, spears, helmets, coats of armor, bows and slingstones for the entire army. 15 In Jerusalem he made machines designed by skillful men for use on the towers and on the corner defenses to shoot arrows and hurl large stones. His fame spread far and wide, for he was greatly helped until he became powerful.
So of course the writer attributes Uzziah’s (initial) success to his obedience to the Lord’s ways, but an atheist could say, “No that had nothing to do with it. Look the guy was a smart military commander and even spent money on R&D for advanced weaponry.”