Friday, May 29, 2009

For Krugman, Politics > Integrity

Paul Krugman is not a dumb guy; he knows his stuff, and has a wealth is historical knowledge to draw upon when forming opinions. Unfortunately, he's also a supporter of the Democrats, and apparently is more than willing to let his political views compromise his logical integrity. I seem to recall an interesting story about some famous historical figure, who was generally fairly kind to everyone, becoming uncharacteristically angry at individuals who would teach children to do evil; in his mind, the worst "sin" one could commit would be to intentionally lead someone who was innocent, and didn't know any better, astray. Well, today Krugman joins the ranks of people who have committed this transgression, in effect, by using his position and credentials to extol a position motivated by politics rather than logic.

The opinion piece is here. In it, Krugman argues that the country need not worry about inflation, as it is a phantom concern, and that it's more important for the country to continue spending money to "help the economy" than worry about inflation. Now, I'm sure someone smarter than I could dissect each point more succinctly and thoroughly than I, but here are a few things which are obviously wrong with his argument, even to a casual economics observer such as myself:

- The preposition that the government's spending is "helping" the economy is obviously wrong; it's almost entirely motivated by political agenda and rewarding political allies, at the expense of the country's economic health. In fact, in some cases (eg: propping up the housing market), the government's spending is elongating and contributing to the recession.
- The supposition that prices are not rising is also wrong; prices for real-time produced/consumed items (the most accurate measure of real inflation) have been rising, in some cases by well over 10% annually. I'm not sure what measure Krugman is using to justify his assumption (it wasn't listed), if any, but it's clearly misleading at best.
- Then he claims the Fed isn't printing money, because it's buying debt and bonds, and balancing that expenditure by crediting banks with more assets. News flash: that is printing money, on both sides of the book, by driving up asset prices while creating more cash reserves for the banks. Even if the banks don't lend it out, it is used to hide or erase bad debts, which allows the money already distributed through the system to remain there, which is inflationary. It would be like giving someone a loan, then writing it off, then claiming they don't have more net money, because you didn't give them any more while writing off the loan: it's ridiculous, and Krugman is not a complete moron, so he knows it's ridiculous.
- The he compares the US to Japan, which didn't print money, but rather extended unlimited borrowing, which nobody wanted. This is similar to what the US was doing before the Fed started printing money, and not considering the Treasury's actions and the massive deficit spending by the government, which the Japanese government did not do. Again, a distortion of the facts to support a political position, and mislead the people who don't know any better.

I could go on, but the point should be fairly obvious by now. After consideration, I'm inclined to agree with the historical figure: the worst evil someone can do is lead others astray for their own ends. For this, I think it's fair to call Krugman an enemy of the country, or at least the country I would like to live in.


  1. This man is the #1 reason that I do not read the NYT. Krugman in the op-ed on inflation -
    "And I suspect that the scare is at least partly about politics rather than economics"Really? An opinion based on politics? Who would have thought? Krugman absolutely epitomizes to a 't' the terms 'useful idiot' and 'educated fool'.
    As to your historical figure who extolled the evils of teaching children to do evil - "But whoever causes one of these little ones who believe in me to sin, it would be better for him to have a great millstone fastened around his neck and to be drowned in the depth of the sea."

  2. I student of that historical work, I see... :)

  3. Great post and analysis on Krugman! You inspired me to continue your criticism with my own post. I also linked to this post.