Krugman and Yglesias Get Tough on Bankers–After It Doesn’t Matter
Matt Yglesias recently posed as brave battler of bank bailouts (referring to the case of Iceland), and Krugman high-fived him. Yglesias literally wrote an article titled, “In Praise of TARP.” Here’s an excerpt of my latest at Mises CA:
It’s ironic that they now strike this pose, given their behavior since 2008. There was a person with some political influence articulating a very minority-viewpoint when the financial crisis hit the U.S. That person was Ron Paul. He definitely took a hard line against the financial elites, rejecting bailouts. Far from welcoming his challenge of the orthodox, Krugman and Yglesias mocked him and his ideas, saying they would lead to disaster. Krugman and Yglesias are the Very Serious People, when it really matters.
Also, Krugman argued that letting Lehman fail was the cause of the crisis, and of course called anyone who disagreed with him names.
https://www.google.com/search?q=lehman+krugman&rls=com.microsoft:en-US:IE-Address&ie=UTF-8&oe=UTF-8&sourceid=ie7&rlz=1I7MERD_enUS497&gws_rd=ssl
Bad things happened after the Lehman failure, so assuming that nothing else important happened, we can conclude that the Lehman failure was the cause of the late 2008 collapse. Science!
Good catch, and thanks!
I meant to also say, great piece.
“There was a person with some political influence articulating a very minority-viewpoint when the financial crisis hit the U.S. That person was Ron Paul.”
2001, people!:
Ron Paul: “This real-estate bubble will burst, as all bubbles do” (part 3)
https://www.youtube.com/watch?v=KONpt9a6HrI
And 2003, too!:
Ron Paul Calls the Housing Collapse in 2003
[www]https://www.youtube.com/watch?v=9S3lXDOQ7ec
guest, if you had invested in real estate in 2001 or 2003, you would have done very well, and today you would have capital gains plus a healthy real income compared to historical returns. On a total returns basis, you would never have been at a loss.
In 2001, probably, in 2003, it depends on the area. Detroit area housing prices peaked in 2003 in real terms.
For those that got out before the crash, they certainly benefitted from the Fed’s theft of others’ purchasing power.
At any rate, if there were no bubble, we would also have less Dodd-Frank-ish interventions.
So, I get to enjoy other people’s money, but now the government has creeped that much more into my affairs.
That’s a net loss; Just have the government get out of my way, and I’ll rent crappy apartments to low-income tenants, and I’ll have money AND liberty, and the poor will have a place to start building their wealth so they can finally escape the hell-hole they have to rent.
Better than living in your car and pissing in the gutters, I think.
Aside: Walter Block is awesome in the “Slumlord” chapter of his book, “Defending the Undefendable” (which you can listen to, online).
http://www.tradingeconomics.com/charts/iceland-gdp-per-capita-ppp.png?s=islnygdppcapppcd&d1=19970101&d2=20151231&URL2=/ireland/gdp-per-capita-ppp&H=500
The Ireland vs Iceland challenge…
They started neck-in-neck around 1998 and Ireland got off to a great start with unbelievable growth in the late 90’s and early 2000’s which started to slow down but continued healthy growth up to the sharp peak in 2008. Clearly a boom economy, with some elements of bubble in it (mostly real estate bubble). Sharp crunch in 2008 followed by consolidation, but all things considered (look at the right hand scale) the average Irishman is better off right now than the average Icelander even after the dust has settled (if you believe that GDP is a good thing to have, and well Krugman does, and GDP is the conventional wisdom).
In comparison, Iceland struggled around 2002 and had a bit of a slump there, tried to catch up, never did properly catch up and then had a crunch just slightly later than Ireland, but rebounded from that crunch slightly better (but not spectacularly well in any case).
Conclusion: there was an Irish economic miracle, but it happened from 1995 to 2008, some sort of a crash and consolidation is pretty much inevitable there but all things considered they have done OK.
There never was an Icelandic miracle, but their recovery has been a touch better than the Irish, they are still playing catch up and right now they are coming from behind and closing that gap.
Here’s what really gets me. Lookup in Wikipedia and check the meaning of “Austerity” and you get this:
OK, that’s pretty cut and dried, you won’t find a single Keynesian who can stick to that definition, they twinkle it and winkle it and shuffle it around faster than any normal person can change their shoes. But let’s just run with the “standard” definition of Austerity, and check that against the chart.
http://www.tradingeconomics.com/charts/iceland-government-budget.png?s=wcsdisl&d1=19980101&d2=20151231&URL2=/ireland/government-budget&H=500
So up to the “financial crisis” Iceland were running a decent surplus, then they flipped over into a deficit very sharply in one year… that’s a burst of stimulus, for one year. After that, what did they do… by gum they have been “reducing government budget deficits”. Yes, that’s right, Iceland have spent the past five years doing the teeerrrrrible ausderedy that Krugman warned us about (again, and again, and again).
Ireland on the other hand spend three years increasing their deficit with deficit going slightly beyond -30% of GDP for one year. That is to say, for one year a third of the entire production of Ireland was running fully on new government borrowing! But apparently Krugman can’t read a chart or something. Go figure.
Conclusion: it’s all freaking bunk… they just make stuff up, any old stuff, crank the handle and out it comes. None of it adds up. Try to make sense of it, and you can’t and you never will, and that’s the general idea. We are at war with austerity, we are at war with Eurasia, we are at war with men from Mars, we can be at war with any old thing, just as long as those dumb schmucks keep paying for it. Here’s a definition I found for “cyclically adjusted deficit”:
Seriously?