102 votes

Paul Krugman crushed by Spanish Austrian Economist Pedro Schwartz

Please watch this, and watch the end as they yell at each other 0_0!

http://youtu.be/N8LmE5cfQKA

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Ad hominem

Krugman is correct that the talk began with an ad hominem argument.

The rest of his rebuttal had no substance.

Another title of this post could be...

"Paul Krugman Gives Dramatic Interpretation of Shakespeare's 'Much Ado About Nothing'.

9-11 was a panda job.

Dr. Schwartz to Dr. Krugman: ''I didn't run you down''

Well, somebody sure as hell ought to run down Dr. Krugman.

With a loaded cement truck, for preference.
--

"In this world of sin and sorrow there is always something to be thankful for. As for me, I rejoice that I am not a Republican." [H.L. Mencken]

Speaking of Schwartz, Anna

Speaking of Schwartz, Anna Schwartz, co author to her and Friedman's "The Great Contraction", which is just a subchapter of their "Monetary History of the United States," has actually come out against Bernanke's ungodly intervention. It's way too much she says, and she seemed kind of annoyed that Bernanke continually cites their work.

One thing I'll say about Friedman is this work was written under the assumption that you have to have a central bank. In reality, he was completely against government or CB intervention and believed wholeheartedly in the free market. I strongly suggest looking around YouTube for him. I wouldnt call him an austrian, I dont know if he was considered an austrian, maybe he was maybe he wasnt, but he's really great. Most of his "real" policy worked with the cynical view that government was simply unavoidable due to the political nature of society.

But one of my favorites is his show (Youtube it) on free education.

23

Friedman has occassionally

Friedman has occassionally suggested that the central bank should always look to make access to credit harder.

This belief, IMO, has some merit but ignores the downsides.

Based on the observation that the market tends to get too, optimistic for lack of a better word, malinvestments, and then has to correct itself, if the government is constantly making it so companies and individuals think twice before investing, you will weed out a lot of malinvestment. For example, a monetary policy based on sound money and/or a gold standard would prevent fractional reserve banking and cause access to credit to go down. You basically get slower growth, but growth that is theoretically more sound since it is based on the most sound of investments.

The downside of this, which is not something we have seen, is when the market ends up not investing in things that it SHOULD invest it, but can't because access to money/credit is too hard. The 90s, for example, with the tech boom and everything, wouldn't have happened if credit access had been severely restricted.

Some will argue that the expansion will happen, but it will happen over a longer period; ie instead of from 1990-1999, it would happen from 1990 to 2020 or something, with slow but steady growth.

Its a difficult question. IMO, government appears to hurt more than it helps; generally it will make the wrong calls instead of the right calls. This especially has been the case with corporatism's influence; companies and banks have no interest in getting their credit restricted; they push central banks to expand credit even when it would be prudent not to.

HKMA and MAS are probably the examples of central banks that truly do a great job, but inevitably they will get captured.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

''...government appears to hurt more than it helps...''

"...generally it will make the wrong calls instead of the right calls."

This is because the agents of government always prioritize their policies and actions for political effect rather than the creation of new wealth.

In the private sector - the productive sector, the voluntary sector - of human society, the division-of-labor economy functions to reward those whose actions are conducive to the needs and (more importantly) the actionable demands of their fellow human beings.

When people have the freedom to choose whether or not to spend on your goods and services, the only way you can be "doing well" is by - in your customers' opinions - "doing good."

Oppose this to the public sector - the government sector, the coercive sector (as in "Do what I tell you or Officer Friendly is going to kill you!") - where the feedback loop is nowhere near as reflective of the satisfaction of the real payors' desires) and you get very readily to the conclusion that everything the government does in the way of "investment" is going to be a malinvestment, one way and another.
--

"In this world of sin and sorrow there is always something to be thankful for. As for me, I rejoice that I am not a Republican." [H.L. Mencken]

"This is because the agents

"This is because the agents of government always prioritize their policies and actions for political effect rather than the creation of new wealth"

Right. We cannot trust Ron Paul. Everything he does is for political effect; nothing is genuine and nothing is for the creation of new wealth.

"In the private sector - the productive sector, the voluntary sector - of human society, the division-of-labor economy functions to reward those whose actions are conducive to the needs and (more importantly) the actionable demands of their fellow human beings."

Just like corporations can capture government, corporations can capture the market. People can also demand evil, horrific things; the market according to you would serve that, morality be damned.

Heck, the stock market has shown how publically-owned companies don't act in the best interest of the shareholders; they act in the best interest of the executives. Shareholders are too dumb to figure it out....

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Where's part 2?Anyway, on a

Where's part 2?

Anyway, on a side note, I had sort of a half baked thought related to the 500Eu Baby checks in spain.

I do believe that a fluctuating interest rate has the power to offset inflation and deflation together, and that must be achieved through a fixed monetary aggregate.

But there is one other factor, namely, population increases. Essentially, you cant assume the average family income would flatline under fixed money because eventually there will be less money in the system per person.

Of course, people are always discovering new gold and that may or may not be at the same rate as population increase. So perhaps that might balance price deflation due to population increase, or perhaps the rate would be higher (causing a rise in the price level) or lower (causing a fall in the price level). I don't know.

So here is where my half baked idea comes in. Suppose we live in the world where the monetary aggregate was exactly equal to one monetary unit per person. If we gave each person one unit when they were born, that ought to perfectly balance the equation. I say you give it to the person being born because it seems most equitable, compared to giving it to a bank or the government. Of course there is going to be the unintended consequence of people just coming along and popping out more babies, not to mention the tourist babies.

So maybe it would be more equitable to give that new monetary unit to the government. Im not saying I like it, but in terms of fairness and a desire to avoid unintended babies, it might be best under my half baked scheme.

But there is one other idea I had. What if that one monetary unit was put into a general fund that could not be accessed until you reach a certain age. Perhaps 18, 21, or ...65? Then the parents dont really have the incentive, you balance the population factor of decreasing prices, and the new units dont get given to the people with all of the power.

One thing I do know is that the self balancing interest rate mechanism of stable prices would not cover population increase deflation with a fixed monetary aggregate.

23

The full video can be found

The full video can be found here: http://youtu.be/EX55BH97quk

Leave aside solvency?

"Let's leave aside the solvency issues."

Krugman consistently does this. His economic theory bears no regard for solvency. This is a core problem. It's like he's appraising the value of a Lamborghini. No chips in the paint, rust free, low miles, unblemished upolstery, eight cylynders, etc. Let's leave aside the fact that only two of the eight spark plugs are firing. Hey, let's top off the gas tank with uber-octane premium!

"Would large scale borrowing on the part of the public sector compete with the private sector for funds and therefore lead interest rates to rise? Obviously not, we actually have very close to the lowest rates in history."

There is a disconnect between Krugman and reality made apparent by this question and statement. It would be a legitimately logical line of reasoning if we didn't have a central bank engaged in fixing interest rates to best allow the public sector to borrow.

He arrogantly refers to real scenarios as experiments. Unfortunately he's spot on. The real world has increasingly become a Keynesian experiment since 1930. More unfortunately the experiment has been a waste for the lack of good questions, good definitions, and good goals. He apparently defines 'private sector' far more braodly than most of us. 'Price stability' in the Keynesian model is vastly different from what the real world might consider useful, and its pursuance is in essence a juggernaut.

I could go on and on.

I'm glad he took the time to speak at the end. He really did present a spontaneous nutshell insight into his theories.

Schwartz rocked, and he really did seem to attempt not being offensive. It's an extremely difficult task when dealing with the likes of Krugman.

And add fixing LIBOR to driving interest rates to all time lows

Where is part two? The response?

Yes, please BUY this wonderful libertarian BOOK! We all must know the History of Freedom! Buy it today!

"The System of Liberty: Themes in the History of Classical Liberalism" ...by author George Smith --
Buy it Here: http://www.amazon.com/dp/05211820

Why Do People Still Listen To Paul Krugman?

He been dead wrong on past predictions and is constantly beat whenever someone debates him. I don't understand why certain people still respect his opinion so much.

The Austrian Weak Spot

They keep harping about inflation and the Keynesians merely point out how mild inflation has been despite all of the Fed's quantitative easing. The supply of money and credit is about to drop off the cliff and modern Austrian school followers continue to scream "inflation, inflation!". They look ridiculous when all a Keynesian hack like Krugman has to do is point to reality and say "but look".
Japan was a great example for Schwarz to use to indicate where the USA is headed as a result of its debt, but Japan is experiencing deflation, not inflation (and it's been going on for decades despite the Japanese having one of the highest personal savings rates in the world).

Heart attack? What heart attack?

Said the 400-lb man as he shoveled down his third big mac of the night.

Currently we're seeing credit contract faster than banks can loan out freshly minted FRN's right now, but conditions can and will change in the future.

That said, I, like many others of Austrian persuasion, are expecting severe, crushing deflation, rather than a complete loss of faith in the USD. It's not at all true that we're all saying that a systemic inflation is right around the corner.

Mike Shedlock is a good example of an Austrian who has figured this out.

http://globaleconomicanalysis.blogspot.com/2012/06/is-there-...

They are redefining the basket of goods to say inflation is not

there, but its there.

Do the 30 year model yourself. Pick the 30 things you buy in a given month, for me I picked the month of June1st the day I moved into my new 2 bedroom/ 1bath 960 sq ft Orlando Florida condo, finally away from Mom and Day - so think I remember it well. Lets track those purchases list our prices over the years since graduating high school. For me, this is 1980. Take Peanutbutter n Jelly (skippy and smuckers, a Gallon of Gas, electric, milk, cerel, 501 jeans, nikes, bannas, etc-- 30 items.

Items-- PB,Jelly, Gas, Ele, Milk, Cerel, 501s, Nikes, Bannanas, Condo
1980 -- 1.25, .98, .89, 25, 1.29, .67, 9.99,12.75, 1.00, 19,500
2010 -- 7.89, 3.99, 3.49, 110, 2.89, 4.99, 49.99, 45, 4.00, 33,000

Perhaps you can assist me in researching those prices and fill in the table. Then we can either see inflation or deflation. Now I can help you with the condo. I paid exactly $19,500 for it. And I looked it up on zillow today, and it has a valuation on it for $33,000. It seems its highest sale price was 2005 for $134,000.

Well, it sure looks like inflation to me.

Check out these prices in the 1980's... http://www.thepeoplehistory.com/80sfood.html

Treg

Yes, please BUY this wonderful libertarian BOOK! We all must know the History of Freedom! Buy it today!

"The System of Liberty: Themes in the History of Classical Liberalism" ...by author George Smith --
Buy it Here: http://www.amazon.com/dp/05211820

11:02

Scwartz to Krugman: "How's the U.S. doing?"

...checkmate.

Everyone who is posting here,

Everyone who is posting here, by criticizing Krugman for his so-called personal attacks, instead of criticizing his ideas, you are doing exactly what you accuse Krugman of doing.

Personally, what I find interesting is that both Schwartz and Krugman can find examples of "their" side being right and the "other" side being wrong. Yet they continue to insist that only "they" are right.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

But why did Schwartz kiss Krugman's butt in the opening?

I sure didn't get that.

It's surprising that any Austrian economist could praise him like that while disagreeing with him so fundementally.

Krugman doesn't deserve it and he certainly didn't deserve any Nobel prize in economics.

The Nobel prize is a joke of jokes - just like Krugman himself.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Because it is polite to be

Because it is polite to be nice to people, particularly when you invite them to a conference and they accept. You always want them to come back for more butt kicking.

23

No kidding!

I think the simple answer is that Schwartz is not an 'austrian school' economist

itsallaboutbalance's picture

Take a good look

When you want your IDEAS to have the front stage in a debate, you show respect and praise for the very small things you can point out that you agree with and by doing so you are showing that you will not enter in a personal attack on the other person and will let the strength of your ideas take the stage.

When you have weak ideas, you immediately enter in a ridicule or personal attack on your opponent to make whatever bullshit that is about to come out of your mouth sound intelligent.

Schwartz has strength in his ideas so he can easily praise his counterpart. Krugman has weak ideas so he has to resort to false personal attacks right out of the gate. That's what I meant when I said he has been trained in debating.

Debating Krugman is as useful as hammering yourself in the face repeatedly. Educate yourselves, educate others and in the end, the truth will always come out.

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

So true

And the weak ideas argument is a great way to illustrate Paul Krugman's style as well. When Ron Paul destroyed in him a debate, his only response was to release to the press a statement, afterwards, saying that "If Ron Paul got on TV and said 'Gah gah goo goo debasement! Theft!' - which is a rough summary of what he actually did say - his supporters would say that he won the debate hands down;"

This arrogant jerk didn't even have anything intelligent to say in response, because his ideas are so weak, so he resorts to saying that Dr. Paul is conducting baby talk, with no substance to back up this patronizing insult whatsoever because he has nothing to back it up with.

itsallaboutbalance's picture

Although it doesn't help the situation....

I have a severe hate for Krugman.

As people here seem to be asserting, it is 100% clear to me and I have NO doubt whatsoever, that Krugman is a manufactured spokesperson for the central bankers.

Lets get him a nobel prize, lets hail him as a foremost expert and have him go around the world telling everyone that printing money to infinity is the answer to all economic woes and then lets train him in debating semantics, lies and incoherent useless words that sound good so that we can buy ourselves a little more time until the SHTF.

It is clear to me that nobel prizes are completely meaningless and just another tool the powers that shouldn't be use to manipulate public perception. If Obama can win a peace prize, do I even need to continue here...?

I just want to add that having a manipulative "economist" go on all tv shows and forums such as these to bla bla people into false confidence is a very common tool used by governments all over for propaganda and public manipulation. Krugman is their choice for the world stage, that is all he is.

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

Re: Nobel Prize integrity

I look at it as having a diminishing value in our time. For example, giving President Obama the Nobel Peace Prize was extraordinarily presumptuous and ridiculous. When looking carefully at why Obama was given the prize, it was clearly a shot at the previous administration. Even President Obama claimed he did not deserve the prize!

"On Oct 9, 2009, the Nobel Committee announced Obama won the 2009 Nobel Peace Prize 'for his extraordinary efforts to strengthen international diplomacy and cooperation between peoples.' Critics said he did not deserve the prize, but received it for simply changing diplomatic course from the previous administration. The President also said he did not deserve the prize."

Why wasn't someone like Carter given the prize? If you watch a documentary about him, "Man From Plains", Carter is obsessed with his failed bid to bring peace to the Middle East region, and obsesses over it constantly. He goes into a barn on his farm/plantation in Georgia with maps of the Middle East, even at his old age, and obsesses over it endlessly. He has made numerous attempts to resolve the Israel/Palestine issue since he left office, and has nothing political to gain from it. The documentary was actually a shockingly interesting look into the former president's life. He lives a fairly rudimentary and spartan lifestyle and BBQ's with his family, living off the land. He truly cares about his foreign policy efforts and talks candidly about the hostage situation in Iran, and all sorts of stuff. The media stereotype of him is broken when you actually see what he's been doing for the last 30 years.

Fast forward to Obama receiving the award, and it diminishes the value of the award. The drone bombings going on and efforts to scale back US military presence in Iraq and Afghanistan are piecemeal/token attempts used for political posturing. While I think Obama is surely not one of the worst presidents we have had from a non-partisan view, it is abundantly clear he did not deserve the prize, since he had hardly done anything to achieve it.

Can I get a PHD under the assumption I'll eventually earn it in the future? Or maybe make complex derivative put/call investments on subprime loans. This is the kind of 21st century logic that is starting to get us into an enormous amount of trouble.

So, yes, I believe the integrity of the award is in question. It is very clear that the award is the focal point for political posturing as we have seen a lot of dissidents in China receive it when they have been censored so much they have hardly done anything to deserve it. Roosevelt ended WW2 but he was also responsible for making sure the US entered the war, by asking for the declaration. Thus, how could he win a peace prize? He didn't. But in todays day and age, he would have gotten one.

itsallaboutbalance's picture

There is one thing that

There is one thing that stands out in what you wrote here... I believe you are giving too much credence to the Presidents and their potential influence over matters such as the middle east. They dont run the show, the military industrial complex and central bankers run the show so as much as Carter would want to bang his head against the wall, he was looking at the symptoms rather than the cause.

If you want to try and change things for the better: END THE FED. End the central banks and the people running them and their surrounding agencies.

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

Krugman's opening retort

The opening retort whereas Krugman claimed Pedro Schwartz questioned Krugman's credentials was the building of a straw man argument right away. If you do not know what this means, go look it up. It is possible that Krugman didn't mean to do it, since this is his profession, his art, his science, and he takes it very personally. But look at what Schwartz said and it was about Nobel Prize winners pontificating in areas where they don't know what they are talking about. In this case, Schwartz was talking about Krugman constantly addressing the Austrian school and putting it down, when Krugman himself does not believe, or study extensively in, the Austrian school of economic theory. So Schwartz brought up a valid point, whereas Krugman took it to the next level and used it as a basis for his response. It was unfortunate to see that Krugman could not maintain civility with Schwartz when he gave his response, as Schwartz repeatedly, and not in sarcastic or sardonic way, complimented Krugman on his intellectual arguments. The book he is referring to, by the way, is probably "End This Recession Now (2012)" or less likely "The Return of Depression Economics and the Crisis of 2008" (2009 NYT Best Seller).

Krugman should be insulted

It was not credentials that Schwartz questioned, it was his actual education and reasoning ability.

Krugman chooses to be a Keynesian stooge and zealot. He should not be insulted that Schwartz berates him for being shallow and mentally unqualified.

I believe Krugman should have been insulted and not over credentials but over his intellect and intentional ignorance.

Krugman's straw man is used to divert attention away from his intellectual errors and on to credentials. Krugman is a coward and knows that he cannot win the debate so he resorts to diversion.

Finally Krugman justifies Keynes with a double fallacy one of single cause claiming that low inflation is due to Keynesian policy (ignoring real market deflation) and two a false generalization essentially cherry picking today's low net inflation rate and ignoring data from the last two centuries that point to the exact opposite.

Deflation

We should be in the midst of the greatest price deflation ever.
Productivity continues to rise, salaries are stationary or falling. World competition and high unemployment are driving down wages in the US. Lower demand and higher inventories are cutting margins.

So why no deflation?

Interest rates have been a joke for decades, so the current zero interest rate continues to encourage short term spending and long term illness.

The FED is devaluing the dollar as fast as they can trying to stop deflation and trying to buy our way out of debt and a wounded economy.

So...
1) Inflation (cause by monetary policy and interest rates) IS high.
2) It is masked by real market deflation based on the low cost of labor, low demand for products and high productivity.
3) The price index is also being manipulated to hide inflation where prices are not elastic - e.g. food.

We're In Transition

The intermediary stage between inflation and deflation is a period of disinflation. The fact that the rate of inflation continues to slow in the face of massive attempts by the Fed to pump more liquiity into the system is a sign that the next stage is about to begin (and has already begun in some sectors).
The money/credit pyramid is beginning to collapse (deflate).

This is so

awesomeeeee