Archive for June 2009

Krugman Tries to Wiggle But Thornton Nails Him Down

June 17, 2009

In a typically snide response, Paul Krugman tries to deny he advocated a housing bubble in 2002. But Mark Thornton, a Senior Fellow at the Ludwig von Mises Institute, has found further proof that Krugman did indeed call for the creation of a housing bubble – again and again.

jokerburningmoney_tbiKrugman Did Cause the Housing Bubble
by Mark Thornton

Here is Paul Krugman from his blog trying to deny that he was a persistent advocate for the housing bubble and below that are quotes from him just prior to the bubble taking off. ht Benjamin Lee
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“And I was on the grassy knoll, too”

One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy. I was personally responsible for the demise of Enron; my nonexistent son worked for Hillary; etc.. The latest seems to be that I called for the creation of a housing bubble.

Paul Krugman

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German Interview, undated

http://www.pkarchive.org/global/welt.html

“During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn’t you lower interest rates?”

May 2, 2001

http://www.pkarchive.org/column/5201.html

I’ve always favored the let-bygones-be-bygones view over the crime-and-punishment view. That is, I’ve always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly — that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum. That was why I, like many others, was frustrated at the smallish cut at the last Federal Open Market Committee meeting: I was pretty sure that Alan Greenspan had the tools to prevent a disastrous recession, but worried that he might be getting behind the curve.

However, let’s give credit where credit is due: Mr. Greenspan has cut rates since then. And while some of us may have been urging him to move even faster, the Fed’s four interest-rate cuts since the slowdown became apparent represent an unusually aggressive response by historical standards. It’s still not clear that Mr. Greenspan has caught up with the curve — let’s have at least one more rate cut, please — but the interest-rate cuts do, cross your fingers, seem to be having an effect.

If we succeed in avoiding recession, this will mark a big win for let- bygones-be-bygones, and a big loss for crime-and-punishment. And that will be very good news not just for this business cycle, but for business cycles to come.

July 18, 2001

http://www.pkarchive.org/economy/ML071801.html

“KRUGMAN: I think frankly it’s got to be — business investment is not going to be the driving force in this recovery. It has to come from things like housing, things that have not been (UNINTELLIGIBLE).

DOBBS: We see, Paul, housing at near record levels, we see automobile purchases near record levels. The consumer is still very much in this economy. Can he or she — or I should say he and she, can they bring back this economy?

KRUGMAN: Well, as far as the arithmetic goes, yes, it is possible. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don’t know”

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June 17, 2009

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The Obama Stimulus: Predictions vs. Reality

June 16, 2009

Paul Krugman – Menace to Society

June 16, 2009

I have never trusted Paul Krugman, New York Times contributor and Nobel Prize winning economist. He is decidedly partisan in his opinions and I have a problem with that. A true economist should not give his political leanings any weight in his study and analysis of economics. But let’s set that aside for a moment. Because now I have an even bigger reason to distrust and disdain Mr. Krugman.

From Paul Krugman’s op-ed in the New York Times, August 2, 2002 [emphasis added]:

A few months ago the vast majority of business economists mocked concerns about a ”double dip,” a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.

The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

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So how do you like your housing bubble now, Mr. Krugman? I bet there are several million recently unemployed people who’d like to tell you a thing or two about what a great idea you had there.

Karl Denninger picks up this story and expands upon it quite nicely in his Market Ticker blog today. Krugman thought a housing bubble would be just the ticket, but it only happened because Alan Greenspan and Ben Bernanke agreed.

Paul Krugman is a menace to society along with Greenspan, Bernanke, Paulson and Geithner. If you are smart, you’ll never believe a word any of them says ever again.

ABC Becomes American Pravda

June 16, 2009

ABC TURNS PROGRAMMING OVER TO OBAMA; NEWS TO BE ANCHORED FROM INSIDE WHITE HOUSE [updated]

It’s not a joke. If only it were.

The story first surfaced on Drudge this morning and was picked up – and later confirmed – by Karl Denninger on his Market Ticker blog.

Here’s what’s up:

ABC TURNS PROGRAMMING OVER TO OBAMA; NEWS TO BE ANCHORED FROM INSIDE WHITE HOUSE
Tue Jun 16 2009 08:45:10 ET

On the night of June 24, the media and government become one, when ABC turns its programming over to President Obama and White House officials to push government run health care — a move that has ignited an ethical firestorm!

Highlights on the agenda:

ABCNEWS anchor Charlie Gibson will deliver WORLD NEWS from the Blue Room of the White House.

The network plans a primetime special — ‘Prescription for America’ — originating from the East Room, exclude opposing voices on the debate.

MORE

Late Monday night, Republican National Committee Chief of Staff Ken McKay fired off a complaint to the head of ABCNEWS:

Dear Mr. Westin:

As the national debate on health care reform intensifies, I am deeply concerned and disappointed with ABC’s astonishing decision to exclude opposing voices on this critical issue on June 24, 2009. Next Wednesday, ABC News will air a primetime health care reform “town hall” at the White House with President Barack Obama. In addition, according to an ABC News report, GOOD MORNING AMERICA, WORLD NEWS, NIGHTLINE and ABC’s web news “will all feature special programming on the president’s health care agenda.” This does not include the promotion, over the next 9 days, the president’s health care agenda will receive on ABC News programming.

Today, the Republican National Committee requested an opportunity to add our Party’s views to those of the President’s to ensure that all sides of the health care reform debate are presented. Our request was rejected. I believe that the President should have the ability to speak directly to the America people. However, I find it outrageous that ABC would prohibit our Party’s opposing thoughts and ideas from this national debate, which affects millions of ABC viewers.

In the absence of opposition, I am concerned this event will become a glorified infomercial to promote the Democrat agenda. If that is the case, this primetime infomercial should be paid for out of the DNC coffers. President Obama does not hold a monopoly on health care reform ideas or on free airtime. The President has stated time and time again that he wants a bipartisan debate. Therefore, the Republican Party should be included in this primetime event, or the DNC should pay for your airtime.

Respectfully,
Ken McKay
Republican National Committee
Chief of Staff

Very, very, very disturbing. When a news agency gets this cozy with the government, you dare not trust another word they say because it’s more likely to be propaganda than reality. For now at least, we still have a mostly unregulated internet where you can find real information (if you are willing to do the work of sifting the truth from the flotsam). I have to wonder, though, how long the cyber czar will permit that to continue.

UPDATE: ABC responds to RNC letter:

Mr. Ken McKay
Chief of Staff
Republican National Committee
310 First Street SE
Washington, D.C. 20003
Dear Mr. McKay:

I am in receipt of your letter of June 15, 2009 and wanted to respond to a number of false premises you raise regarding our ongoing and upcoming coverage of health care.

I hope we can all agree that a robust debate of health care issues and potential policies is in order.

To that end, ABC News announced plans to broadcast a primetime hour from the White House devoted to exploring and probing the President’s position and giving voice to questions and criticisms of that position. We hope that any American concerned about health care will find our efforts to be informative, fair and civil.  

Second, ABC News prides itself on covering all sides of important issues and asking direct questions of all newsmakers — of all political persuasions — even when others have taken a more partisan approach and even in the face of criticism from extremes on both ends of the political spectrum.  ABC News is looking for the most thoughtful and diverse voices on this issue.   ABC News alone will select those who will be in the audience asking questions of the president.  Like any programs we broadcast, ABC News will have complete editorial control.  To suggest otherwise is quite unfair to both our journalists and our audience.

Third, there already has been extensive coverage of the upcoming health care debates, on ABC and elsewhere, and there will be much, much more. Indeed, we’ve already had many critics of the President’s health care proposals on the air – and that’s before a real plan has even been put before the country.

In the end, no one watching, listening to, or reading ABC News will lack for an understanding of all sides of these important questions.

Thank you for your interest.

Kerry Smith
Senior Vice President, ABC News

Did that actually say anything to contradict the perceived bias of ABC-Pravda? I’m thinking no…

Economic Report Card: Fail, Fail, Fail, Fail

June 5, 2009

Fail, Fail, Fail, Fail
by Llewellyn H. Rockwell, Jr.

How about a bit of reality? Not the ridiculous promises from Washington, the absurd talk of “green shoots” while unemployment soars and investment falls, the silly guarantees that GM has a bright future even as its stock price falls to less than the price of a Snickers bar, the nonsense about how if we spend more and inflate more, recovery will come tomorrow morning.

The war on recession is a flop. Fail, fail, fail.

The full-scale war on recession began in January 2008. Unemployment was climbing and house prices were falling, and George Bush, whose entire persona was the war mode since 2001, decided he wouldn’t tolerate declining economic conditions.

That’s when the Fed started pushing down interest rates to ridiculous lows and started gunning the money supply as much as possible. Bush put on his solemn/determined face and started talking to the American people about how he was going to destroy this recession monster in its crib.

Now, there are things politicians can do in the face of trends they don’t like. If kids aren’t learning to read, bureaucrats can cobble together carrots and sticks and gin up the scores a bit for a while. They can have their hirelings shoot consumers of illegal substances and bomb foreigners who don’t love America. They can pass out goodies to friends and take them away from enemies. From time to time, they can experience moderate success in these actions.

But the economy? Now, here is a force too big even for the biggest government in the history of the world, which is the U.S. government. That’s because economic trends are embedded in the structure of the material world and operate according to laws akin to gravity. They are social laws, if you will, features of the world that operate in all times and all places, and they are generated by the implacable fact of scarcity and the need for a system of production and allocation.

In other words, economic trends are finally beyond the control of the political class. This is the great lesson that economics has been teaching for some 700 years, generation after generation.

As Bastiat wrote, economic laws “act on the same principle whether we take the case of a numerous agglomeration of men or of only two individuals, or even of a single individual condemned by circumstances to live in a state of isolation.”

They are unavoidable features of the world, ones which the political class is forever attempting to override. The economy had been on a false foundation for some years, and the housing sector in particular had become wildly overbuilt and rested on bad debt. What can politicians do about this? Absolutely nothing. Economic foundations are built by private investment. Government has no resources of its own to build a foundation. It can only rob people of their property and thereby divert resources from where they belong to where they ought not to be.

When prices of houses started falling, we began to see only the most conspicuous sign of the rot underneath it all. But the political class blamed the symptom instead of the disease, and started trying to prop up prices, which is probably the stupidest thing these birds could ever attempt. It is utterly futile to attempt to change the direction of prices. It is about as successful as attempting to replace the water in one ocean with another or rearranging the order of the planets. It is beyond their capacity.

Bastiat said of the attempts of his time: “Modern reformers! when I see you desiring to replace this admirable natural order by an arrangement of your own invention, there are two things (although they are in reality one and the same) that confound me – namely, your want of faith in Providence, and your faith in yourselves – your ignorance, and your presumption.”

It’s not just that the attempt to undo economic law doesn’t work. It ends up mucking up the system even more, and prolonging the suffering. That is precisely what has happened. There can be no question that we would have been out of this recession by now had the politicians not intervened. But an election was coming and Bush tried to rig the system. Not only that, but after seven years of ridiculous marauding around like King of the Universe, he was flush with power and arrogance.

Bush attempted to reverse the economic river by waging a war on recession, about which I was writing back in March 2008: “All this nonsense about digging ourselves out of recession through government intervention began with the New Deal. But here is the amazing fact: not once has this strategy worked.”

By the fall and winter, it became clear that the War on Recession was not working and the economy was sinking further. Rather than give up, Bush pushed so hard that he managed to throw us all in the arms of a socialist who knows nothing about economics and has surrounded himself with big shots who affirm him in his ignorance – people like Paul Krugman, who are wedded to antique mythologies about the glories of government power.

And so we live through it again. We see the fools trying this and that with our lives and liberty, promising glorious results around the corner. Well, by now, we’ve been around the corner, the next one and the next one, and it gets worse with each turn. These people are driving us right into the abyss, and let’s be clear that this is not the fault of private investors or savers or foreigners or stock jobbers. It is the fault of the managers of this recession: the government, whoever is or has been in charge, and the Fed that operates on government authority.

They are strangling free enterprise just as surely as a mugger chokes his victim, and with it the capacity for the American worker and producer to do the hard work of restoring prosperity.

We are a generation that proudly shows off its accomplishments in all areas of science, and we preen about our love of facts and our detachment from mythology. Yet our culture is imbued with the most ridiculous faith in government to turn stones into bread, to accomplish miracles with a printing press before our very eyes. This is the age of folly.

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New Unemployment Numbers – Highest Rate in 25 Years

June 5, 2009

The Bureau of Labor Statistics released its report of the May unemployment situation today. The official unemployment rate is now 9.4 percent – a 25 year high – which translates to 14.5 million Americans out of work.

But that 14.5 million does not account for millions of others who are also unemployed or (at best) underemployed.

The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn’t include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.The official rate also doesn’t include “marginally attached workers,” or people who have looked for work in the past year but stopped searching in the past month because of barriers to employment such as child care, poor health or lack of transportation. Add those 1.4 million people, and the unemployment rate would be 10.6 percent.

_The official rate also doesn’t include “involuntary part-time workers,” or the 2.2 million people like Noel who took a part-time job because that’s all they could get, plus those whose work hours dropped below the full-time level. Once those 9.1 million workers are added to the unemployment mix, the rate would be 16.4 percent.

All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in May.

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Even the more realistic rate of 16.4 percent given above does not include all the unemployed. Consider as well the people who didn’t even qualify to get on the unemployment rolls in the first place – small business owners who have had to shut down, those who were part-time workers to begin with, those who did not work the minimum length of time required for benefits prior to losing their job, and those who may have been part of the “underground” cash-only economy.

If you actually counted every unemployed and underemployed person in the US, you’d probably come up with a figure just over 20 percent unemployment – like this data from ShadowStats.com.

If there is any “less bad” news to be found in the BLS report, it is that only 345,000 jobs were lost in May, the lowest number of monthly losses since September ’08.  This is still a horribly huge number of lost jobs but if the losses are decreasing each month it may mean that a bottom is somewhere on the horizon.

The report also indicated that the number of people continuing to draw unemployment benefits dipped for the first time in 20 weeks despite the record number overall. But this may not actually be “less bad” news. The tsunami of layoffs was surging at its highest levels in late fall of ’08, just over six months ago. I think it would be a safe bet to say that a large percentage of those who have fallen off the rolls may have exhausted their benefits without yet finding work.

The six to nine month window for drawing unemployment benefits is closing for those who were hit earliest. With millions of unemployed overall, millions of them no longer able to draw benefits, and the heat of July and August approaching, we may be in for an ugly summer.