Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Sunday, January 10, 2010

Deep Stupid #14

Photo credit: http://seeker401.wordpress.com/2009/08/02/ron-paul-attacks-cap-and-trade-bill/

Ron Paul, former champion sprinter and flight surgeon turned congressman, well known racist, gold standard enthusiast, and conspiracy thoerist, issues a weekly newsletter, under the sponsorship of his Congressional Office.  Let's have a look at a recent offering

Texas Straight Talk
A weekly column

Keynesianism Delivers a Decade of Zero

This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that “there was a whole lot of nothing going on in measures of economic progress or success” which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.

Paul couldn't make it through the first paragraph without veering into a land that exists only in his imagination. We'll delve into his Krugman mistakes more deeply as we go along. As for "supposed lack of regulation," is the good Dr. suggesting that meaningul regulation still exists? Thanks to Phil Graham, Glass-Steagall was abolished, and any regulation of sophisticated financial derivatives was explicitely prohibited.

Since Paul doesn't bother to cite references - somebody might follow them and see how horribly dishonest he is -  I'll do it for him. Here is Krugman's Big Zero Column.

It was encouraging that he admitted that blowing economic bubbles is a mistake, especially considering he himself advocated creating a housing bubble as a way to alleviate the hangover from the dotcom bust.

OK, hold it right there, Congressman. imagination is one thing, but, as we are often reminded, one cannot be permitted to generate his own facts. That is simply lying.   Here is an expose  of Paul's lie about Krugman, via our old friend Mish.  As you can see in the expose link, Krugman did nothing of the sort.

But we can no longer afford to give prominent economists like Krugman a pass when they completely ignore the burden of taxation, monetary policy, and excessive regulation.

Here Paul treats us to loaded language: "The burden of taxation" after 50 years of reducing the tax rates on the rich; "excessive regulation" at time when regulations were decreased to 1929 levels. He also inserts another lie "ignore . . . monetary policy." Feel free to disagree with Krugman on monetary policy, if you think siding with a proven liar over a Nobel Laureate in economics makes any sort of sense. But to say Krugman ignored it is idiotic, as a cursory search reveals a combined 110 references between his Blog and Op Ed columns.  In fact, in the NY Times Magazine article quoted below, Krugman says this about monetary policy:

So by late 2008, with interest rates basically at what macroeconomists call the “zero lower bound” even as the recession continued to deepen, conventional monetary policy had lost all traction.

After all, Krugman is still scratching his head as to why “no” economists saw the housing bust coming. How in the world did they miss it?  Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.

Far from scratching his head, Krugman offers a detailed analysis of what went wrong.  In a nutshell, neoclassical Chicago school economists and New Keynesians alike drank Alan Greenspan's pseudo-rational, efficient-market Koolaid.  And he offers some suggestions for improvement, which involve re-embracing Keynes - no surprise to people who actually read Krugman and live in the real world.  Here is Krugman's NY Times magazine article. And, unlike Paul, Krugman actually names somebody who got it right: Robert Shiller. And if he's an Austrian, then I'm an ostrich.

The Austrian free-market economists use common sense principles.

Which is no guarantee of of correctness, or even raionality. Flat earth, anyone?

You cannot spend your way out of a recession.

A naked assertion, and naked New Deal Denialism.

You cannot regulate the economy into oblivion and expect it to function.

True, but irrelevant, as there is no such set of circumstances.

You cannot tax people and businesses to the point of near slavery

Reapeat after me: Lowest taxes in 80 years.

and expect them to keep producing.  You cannot create an abundance of money out of thin air without making all that paper worthless.  The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them  unemployment checks forever.

A litany of onerous policies which nobody has ever proposed.

You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.

Another naked assertion, and patently false. Pass the Koolaid

Bureaucrats are loathe to face these unpleasant, but obvious realities. It is much more appealing to wave their magic wand of regulation and public spending and divert blame elsewhere. It is time to be honest about our problems.

This, in the middle of a lie-filled diatribe. Do Libertarian have any sense of irony?

The tragic reality is that this fatally flawed, but widely accepted, economic school of thought called Keynesianism has made our country more socialist than capitalist.

Clearly, Paul (or whoever wrote this thing for him) has either never read either Krugman or Keynes, or simply does not care about the facts. Nor does he have even the most basic understanding of what either Keyenesianism or socialism is. Keynes was never about socialism. He was intent on making necessary corrections so that capitalism can work. Now, with economic disparity the greatest it's been since 1928, and finance executives raking in multi-million dollar bonuses, I don't thing we can seriously talk about socialism in our country.

While the private sector in the last ten years has experienced a roller coaster of booms and busts and ended up, nominally, about where we started in 2000, government has been steadily growing, because Keynesians told politicians they could get away with a tax, spend and inflate policy. They even encouraged it! But we cannot survive much longer if government is our only growth industry.

This is a grotesque misrepresentation of both Keynes and the last 10 years. Anyone who wants us to beieve that Bush administration economic policies were Keynesian, rather than gross and stupid economic irresponsibility is telling one more nose-growing lie.

As for a lack of regulation, the last decade saw the enactment of the Sarbanes-Oxley Act, the largest piece of financial regulatory legislation in years.

Correction: the ONLY piece of financial regulatory legislation in years.

This act failed to prevent abuses like those perpetrated by Bernie Madoff,

Action to make corporations more truthful and accountable, in the wake of Enron, Wolrdcom, etc. failed to stop an audacious scam artist with a highly attractive pyramid scheme. Therefore it must be damned. That is nothing short of idiotic.

and it is widely acknowledged that the new regulations contributed heavily not only to the lack of real growth, but also to many businesses going overseas.

I'm pretty sure that at this point he is just making shit up.

Americans have been working hard, and Krugman rightly points out that they are getting nowhere. Government is expanding steadily and keeping us at less than zero growth when inflation is factored in.

It must be the government. Why? I dunno. Mr. Paul didn't tell us that part.

Krugman seems pretty disappointed with zero, but if we continue to listen to Keynesians in the next decade instead of those who tell us the truth, zero will start to look pretty good.

Well, first off, nobody has listened to the Keynsians in the last 30 years. Second, Dr. Paul is one of those who wants to define his own truth - you know: a fruitcake.  His policies: abolishing regulations, balancing the budget, and returning to the gold standard will guarantee the economy stays below zero for a long time - possibly forever.

The end result of destroying the currency is the wiping out of the middle class.

 Uh - the currency is in no danger.

Preventing that from happening should be our top economic priority.

At last something we can agree on. Too bad what Paul wants will assure that is happens.

Posted by Ron Paul (01-04-2010, 01:36 PM) filed under Monetary Policy

So, here we have what we always get from Libertarians, and conservatives of every stripe. Paul doesn't waste much time with cherry-picked data or quotes out of context.  Hell he doesn't bother himself with quotes at all.  Instead, he misrepresents and makes up lies.

Why do people lie?  The generalized answer, applicable to any and all lying examples, is that the truth doesn't serve their purposes very well.  With Libertarians and neo-cons, when ideology comes up against reality, it's always reality that is wrong.

We are SO screwed.


J said...

Thanks to Phil Graham, Glass-Steagall was abolished, and any regulation of sophisticated financial derivatives was explicitely prohibited.

Yes, JzB but let's not forget Billy Bob Clinton also signed off on it and agreed to most of the Gramm-Gingrich de-reg schemes.

Economically squeaking, Ron Paul's a nut, though Paul may deserve some credit for his views on civil liberties. He at times quotes the US Constitution, and the Founding fathers, however quaint and hypocritical they may have been--in regards to civil liberties, a
few more Jeffersonian libertarians deserve some credit. Most of 'em hate the judiciary at least.

Really, Krugman, like most Keynesians is not that far removed from the conservative supply siders. Keynes at times argued for intervention; at other times he seemed to favor de-reg type of policies (and didn't JMK bless Hayek, one of the gold-standard/Austrian nuts? yo se pienso ).

Dale B. Halling said...

It is impossible to consume you way to prosperity. The only way to have real per capita increases in income and GDP are through technological inventions. Unfortunately, since 2000 we have passed a number of laws and regulations that are killing innovation in the US. The incredible innovation of the 90s was based on technology start-up companies built on intellectual capital, financial capital, and human capital. All three of the pillars have been under attack since 2000. Our patent laws have been weakened reducing the value of intellectual capital. Sarbanes Oxley has made it impossible to go public reducing financial capital for start-ups and the FASB rules on stock options have made it harder to attract human capital to start-ups. The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation http://www.amazon.com/Decline-Fall-American-Entrepreneur-Regulations/dp/1439261369/ref=sr_1_1?ie=UTF8&s=books&qid=1262124667&sr=8-1, explains these problems in more detail.

Jazzbumpa said...

That's quite the Libertarian litany there, Dale, and, as always, long on dogma, short on facts.

From Wikipedia SOX:
"Previously the number of IPOs had declined to 87 in 2001, well down from the highs, but before Sarbanes–Oxley was passed.[42] In 2004, IPOs were up 195% from the previous year to 233.[43]. There were 196 IPOs in 2005, 205 in 2006 (with a sevenfold increase in deals over $1 billion) and 209 in 2007.[44][45]"

We have a consumer based economy. The current depression is due to a lack of consumption capability, now that the bubble has burst, because of the long, slow squeeze on the middle class since Reagan, exporting jobs, and the funneling of wealth into a small number of hands at the top.

Thanks for playing.

J - Billy Bob was complicit, sure. Though, by that time he was the lamest duck ever, I'm not going to defend him.

Libertarianism has enough good stuff in it to attract people, no doubt. But its economic ideas are based on dogma derived from abstract concepts that bear no relationship to the real world.

Do you know the Chicago School idea on why unemployment is high? People are choosing not to work. Read that again. While that's true in my case - I took an early out to go the hell away - most out-of-work people are not collecting SS and a shitty pension. I'll guarantee they have not decided to starve.

Keynes was above all a realist. I think Krugman is far, far from supply-siders, and about as close to a Keynesian as we have today. Realism about regs can lead to either more or less regulation. Depends on what's going on, where you're coming from, and the specifics of the regulation.

Don't know about the JMK-Hayek connection, so can't comment.


Dale B. Halling said...


Sure we have a shortage of consumption. You realists live on a deserted island and try out that consumption theory of wealth creation and see just how well it works for you.

Short on facts? I did not provide you with the whole book. As far a SOX is concerned you might want to note that the percentage of worldwide IPOs in the US was 60% in 1996 and was just 20% in 2005. Hundreds of companies went private after SOX was passed. SOX cost almost $4M per year per company. Its great legislation if you are a large company that does not want any competition and believes that your most competitive asset is your political connections. It has not met any of its goals but it is incredibly expensive.

J said...

Krugman, like most neo-liberals (or "Keynesians") refuses to take on corporate oligarchies,for the most part (or "technostructure" as Galbraith called it). He might discuss regulation, or raising capital gains taxes, etc. He doesn't, however, say discuss Walmartization, or silicon valley executive salaries, or ...the L-word (Labor). He's about like a DeLong.

I don't pretend to be a De-Long like expert at macro-econ-- Holy Stagflation batman. History is generally a better guide to economic matters (and disasters) than pages of indexes, I believe--the current crisis in ways quite similar to great depression (ie, speculators, investors gambling away the public's shekels).

At the same time, I understand the small businessmens' gripes to some extent (which are not the same as corp. executives). Walmart arrives in town, and all the Ma and Pa shoppes close. So, as some of the Counterpunchers realize, rural folks, even conservatives, are victimized by global capital as well. It's just that the usual idiotic teabagger--or Paul-tard-- thinks it's all the Gub-mint's fault, when really it's....the power of capital.

Jazzbumpa said...

Dale -

The desert island analogy is irrelevant. We tried the consumption theory in the real world from about 1933 to 1980, and it worked rather well. Except for that glitch in '38 when FDR decided to balance the budget, prior to full recovery. Ooops.

Saying: "Here, go read this," is not presenting facts, nor is it an argument. BTW - I don't accept homework assignments from people who have not earned my confidence.

Picking two points in time, drawing a line and comparing the numbers might or might not be valid. It all depends on context. But "A precedes B, therefore A causes B" is always suspect. I'm especially skeptical of linear examples in a multivariate universe. Consider the totally nonproductive funneling of capital into financial instrumentation, rather than worthwhile industry; and a mad rush to replace domestic manufacturing with Chinese and Indian imports, just to name a couple of possibilities.

J -

Good points.


J said...


I couldn't help but note you linked to Crooked Timber, and the mighty Holblo.

Holblo's philosophaster schtick doesn't impress me (and I'm not the only one not impressed). He spews some jargon, attempts the usual cutie-pie academic irony (or is it "snark" as they say) and drops the names of the Greats, but rarely produces any real arguments--and scroll back two or three years, and you will note he generally sided with the GOP on Iraq (tho' waffled, as most philosophasters do).

His supposed mastery of "analytical philosophy" also bogus: note he rarely takes on the weightier issues of AP, Frege/Russell/Goedel, etc. About any clever fool may learn syllogistic form--or predicate logic for that matter-- in a few days.

A few months back , he called VI Lenin a utilitarian. Heh.

Phony wit' a capital Ph. And most of the CT crew belong in that class....

Jazzbumpa said...

J -

I am a humble refugee from the physical sciences. Phisosophy with or without a cutie-pis schtick is pretty foreign to me. Sometimes I read for amusement. I do keep my skepticism in high gear. I also link to Mish, FWIW

Dale -

I've only had a little time to do any research today, but what I've seen has me tending to believe your assessment of SOX isn't worth a load of dingo's kidneys. I'll put up another post when I have my ducks in a row. Meanwhile, I have to say using 1996 as a benchmark is cherry-picking of a very high order. Not cool, amigo.