05 Jun 2015

Tom Woods and I Discuss Krugman’s Flawless Model

Krugman, Shameless Self-Promotion, Tom Woods 17 Comments

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17 Responses to “Tom Woods and I Discuss Krugman’s Flawless Model”

  1. guest says:

    You mentioned that the sequester did, in fact, result in “flat” spending, even given, as Ron Paul has noted, that it was just a cut in the rate of increased spending.

    Could you help me with this, please? I’m confused.

    • Bob Murphy says:

      My actual words may have been sloppy, but I was trying to say it was *not* merely a cut in the rate of growth. According to the White House official budgets, this is what happened to “total outlays” from 2011-2014 (I’m not sure if these are fiscal or calendar years though), and it’s in millions:

      2011… $3,603,059
      2012… $3,536,951
      2013… $3,454,647
      2014… $3,506,089

      • guest says:

        On March 4, 2013, Ron paul said:

        Ron Paul: The Sequester ‘Crisis’ And What Should Be Done

        “Under sequestration, government spending increases by $2.4 trillion over the next 10 years rather than $2.5 trillion without it.

        “So we are speeding toward collapse at only 100 miles per hour instead of 110 miles per hour.”

        Are you two perhaps talking about two different things?

        (I did notice that “total outlays” included “Off Budget” outlays, so, maybe that has something to do with it.)

        Here’s another video, if it helps:

        Ron Paul: No Real Cuts In Sequester ~ CNBC 3/1/2013

        • Bob Murphy says:

          I think the big difference is “over the next 10 years.”

          • guest says:


            Thank you, sir.

          • Matt M says:

            Also, isn’t Ron speaking before the fact about the government’s predicted numbers, while Bob is speaking after the fact about the actual results?

            • guest says:

              Well, yes; But Ron has said the same things about past so-called government cuts, that they were just a cut in the proposed rate of increase in spending.

  2. Innocent says:

    Fun listen Dr. Murphy,

    One thing to note, while CPI did not rise, which I would agree with is due to aggregate demand issues, which is a good thing, the same could not be said of Stocks and financial institutions. If you think about where the money that was ‘printed’ was placed it was not meant to get into the hands of people. Rather it was meant to shore up the Financial institutions and that in turn means that it went to shore up the market.

    So while there was little increase in CPI if you look at the costs of stocks we have gone back to the pre-recession levels ergo there has been inflation in these valuations. I feel this is one of the failings of most economic models. Since stocks are ‘goods’ just not ‘consumer goods’ why are they not counted as being inflated as well? Because they are investment vehicles? The companies would do business if you owned stock or not, and the value of said stock is based off of demand and believed future performance which is the same for any other good.

    The point being I have always felt bad that you were wrong about CPI ( which you were in a bad way ) but not wrong in that QE would cause inflation, it was just in a separate area from CPI.

    Other than that I dislike how Krugman never admits he was wrong. He never says, oh this lead to something bad. Because to do so would mean that no one has all the answers. Economics is meant to help us understand the business cycle and the way people think about money. It is not meant to make it so that there will never be another recession, never be an over reach of belief or malinvestent of resources. It is impossible to know what is going to do what in this day and age. One invention can destroy a whole industry. One regulation can destroy a whole industry. Yet the economy moves forward.

    In the last 20 years we have had two of the three worst economic periods out of the last 85 years. But we are told these were aberrations. Krugman is running victory laps claiming that the recovery, which took over 6 years to materialize is a victory for the Obama and monetary policies without having anything concrete to compare it to. It is hard to show how well an economy in the USA would have done without these policies ergo claiming that they worked better than the alternative is pretty hard to do. Finally a recovery ALWAYS happens. The question is not WILL the economy recover but how long will it take for the economy to recover.

    I could have done NOTHING as a policy and eventually the economy would have recovered. People are resourceful and figure out how to make a living. It is a a wonderful and shocking thing to behold. sorry I am ranting I just get so mad when I read Krugman, he makes things so partisan. The truth is that even the Soviet Union saw consistent growth year over year in their economy it does not mean that it was a moral or good system of governance or conducive to the kind of lifestyle that I would like to participate in.

    • Tel says:

      People don’t typically buy stocks for the fun of holding stocks. They one day intend to live on the income, either the dividends or by selling shares.

      That means all that money pumping in the stock market (presuming the whole thing doesn’t crash badly, which it could) is going to end up turning into consumer spending… but not immediately. The inflation is still coming, just more drawn out.

      Also, debt deflation has pretty much ended in the US housing market, and this is what was the counterbalance against QE… mind you, officially QE has also ended. We will see how those student loans go, might need more QE as they also go bad.

    • guest says:

      “Since stocks are ‘goods’ just not ‘consumer goods’ why are they not counted as being inflated as well?”

      That’s a point that Mark Thornton makes in the following video:

      [Time stamped]
      So Where’s the Inflation? Tom Woods Talks to Mark Thornton

    • Major_Freedom says:

      The CPI did in fact rise.

  3. Major_Freedom says:

    Krugman’s predictions regarding interest rates, prices, and the 2013 “test”, were all wrong, as Murphy trenchantly pointed out.

    Krugman will likely never admit that he was wrong about anything, likely because if he does admit that he was wrong, then he would encourage his intellectual opponents to unmercilessly. He knows he has created a sizable population of enemies, and as all political strategists who are afraid, he cannot show weakness, even if it comes at the expense of logic, reason and good economics; at the expense of science.

    He is sacrificing scientific rigor for the sake of his own selfish goals.

    • Major_Freedom says:

      …to attack him unmercilessly.

      Forgot a few words there…

  4. Jan Masek says:

    So what’s up with that debate Krugman pledge thing? I donated a few bucks (well I didn’t because they only take it if it happens) but what happened, the 100k wasn’t reached or Keugman passed or what? I don’t remember it being called off.

    • guest says:

      Oh, man, was it epic!

      Krugman tried to argue from the so-called Moniness of Bitcoin that the USD doesn’t really need to mean anything at all, and that you just assign values to paper like you do to bitcoins; Why, we’re the ones assigning values to them, so why blame the Fed for the malinvestments, right?


      So then Murphy remembered that since people employ real means to satisfy subjective ends, that money HAD to have a link to use-value.

      That’s when he dropped bitcoins like a bad habit, and dropped that knowledge bomb on Krugman.

      LK was like, “I was SO close to turning Murphy”.

      And Murphy said, “Suck it, Fetz”.

      It was awesome.

    • Bob Murphy says:

      Jan, Krugman publicly said he wouldn’t do it (somebody called in to a radio show when he was on). At some point the website hosting it went defunct, and my old contact at the food bank had moved on. So I decided to drop it.

      • Jan Masek says:

        Oh, interesting that he publicly declined. Says something. It’s a shame but I’m sure you’ll get a shot eventually 🙂

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