The Paul Krugman Thread


Stop talking about things you don’t understand.

They will raise interest rates by raising the IOER. You can basically look at the IOER now as the base rate.

They’ll hold their Treasuries and MBS to maturity - the mark to market makes no difference to an establishment with an infinite balance sheet. They will not be billing the Treasury any losses! That is factually incorrect. They record it as a “deferred asset” … so it means the Treasury doesn’t get profits from the Fed until the mark to market “loss” gets back above water. Which means absolutely nothing because the payments are only one hand giving to the other anyway.
You’re completely wrong in everything you say. Just because you keep repeating it doesn’t actually mean you’re making any sense.

  1. The Fed will exit by holding their bonds and MBS until maturity. That is a long term exit plan (i.e not short term) , which won’t work anyway (see point 2).

  2. Think for a second. What is happening to maturing bonds right now? They are being rolled over and bought in the main by the Fed. Who will buy the Fed’s portfolio of rolling over bonds when they mature, if the largest buyer is out of the market?

  3. When the Fed’s profit turns to a loss you seem tothink there will be no negative effects. I find that strange. With an endless balance sheet you seem to suggest that tthey can just create money to mitigate against those losses. Surely you don’t believe there’s no negative side effects of the Fed increasing its balance sheet ?

  4. Don’t be such a condescending prick.


On radio 1 now


The Fed’s exit is just to stop buying. It’s when they try to unwind their balance sheet that the fun starts. It’ll be interesting to see if they can deflate a bubble in private sector asset prices by selling Treasuries and MBS…


So a couple more years to run then as instability elsewhere in the world causes capital to concentrate in the USA with the dollar rising, the Federal reserve gets panicky and interest rates start to rise, everyone starts to unwind their investment and then they have another bust in the latter part of this decade. The consequence of all that capital flowing to the US means more instability for the rest of the world starved of investment.

  1. Wrong. The IOER is the base rate. Forget the other nonsense.

  2. Nonsense. a.) As the chart below shows, the Fed’s stock of T-Notes is nothing particularly out of the ordinary. b.) When QE2 ended, the Fed stopped buying, and yields dropped - because QE doesn’t work like you (and most others) think it does. When QE eventually ends, rates will do as they’ve always done, remain an expectation function of the base rate (IOER now).

  3. Find it as strange as you want. The composition of their balance sheet is what matters, if/when rates rise they take a mark to market loss - which doesn’t matter a jot - whether you think that’s strange or not, it’s a fact.

  4. It’s an internet forum; keep your knickers on.




Hi Daniel

Your graph appears to show t bills only. Do you have one showing all US bonds regardless of maturity? The drops in your gtraph would seem to correspond to “operation twist” when the fed was selling t bills to buy long bonds.



The mathematical menace - Martin Hutchinson -> … 70513.html


Pull the other one. You haven’t the foggiest what you’re talking about Hutchison.
When he discusses VAR he has a point, but leave political monetary biases out of it.


For a layperson such as myself I found this article very good reading. Shades of the ‘debt supercycle’ theory of Maudlin, there’s a very persuasive logic to it.



Japan posts trade deficit for 15th consecutive month

Wow, who could have predicted this?

Meanwhile, the purchasing power of the savings of Japanese retirees is getting pummeled.

What a disaster.


Trade deficits don’t really matter but yes Japan’s economic policies are bat crazy.


There’s more here: … ef=opinion

There’s a view you rarely hear expressed on the Pin, where the Olli Rehn snake oil is the preferred tipple. Tax increases better for the economy in recession than spending cuts!

Cue Pat Kenny: “but then they’ll leave!” Please.


**When Someone Says Paul Krugman Called for Greenspan to Create a Housing Bubble Back in 2002, They are Trying to Say That They are Either a Fool or a Liar
** … -or-a-liar


Krugman’s Call for a Housing Bubble - Daniel J. Sanchez -> … ing-Bubble

Denying Fed’s Role in Housing Bubble, Paul Krugman Exposes His Intellectual Dishonesty - Jeremy R. Hammond -> … ishonesty/

Blowing Bubbles With Paul Krugman - Mike Whitney -> … l-krugman/

Krugman’s Caught in Lie on Housing Bubble -> … using.html


So do any of those articles actually get round to printing the exact extract where Krugman calls for a housing bubble?

Or is it just more libertarian hand waving?


FFS. These Mises guys are a total joke. Are there any who are not both fundamentalist 7th day type christian and staunch republican? Who exactly is this Daniel J. Sanchez character anyway?

But you have to ask yourself their motivation for writing such tripe.

I suggest it may be the book Krugman wrote during 2002, 2003 - “The Great Unravelling”, where he was scathingly critical of the Bush administration, and the Republican party at that time.

In it he argued that the large deficits generated by the Bush administration as a result of decreasing taxes on the rich, increasing public spending, and fighting the Iraq war, were unsustainable in the long run, and would eventually generate a major economic crisis.

A couple of his columns from the time: … 064193.htm … wanted=all

Listen, no doubt around 2001 and early 2002 he pointed out some very obvious analytical conclusions (drawing on properly peer-reviewed science), in terms of the repercussions of the bursting of the dot-com bubble, and the dis-equilibrium brought about in the economic system at the time. But the nature of economic feedback mechanisms is that they need to be switched at certain points. E.g. around 2003, when Krugman was very publicly engaged in trying to push back hard against Republican economic policies.

At the end of the day, who was driving policy January 20, 2001 – January 20, 2009? It certainly wasn’t Krugman. And ask yourself who were the fuckwits who voted in the guys who drove those policies? Yes, the same guys who now are hanging around together in the von Mises institute and readying their guns and beans this last six years or so.

There is something seriously wrong with perception of cause and effect around here. It seems to be a middle America thing, and there is a lot of it coming onto this board - for example look to some of the inflation or gold related threads, and see how a causal chain is constructed from increasing energy costs and environmental pressures, insider rent-seeking-friendly government policies, domestic SME-level business cronyism and reduced *overall *consumption due to certain price pressures related to the foregoing etc… to the conclusion “the Fed is flooding the system with newly printed dollars… the end is nigh… listen the hedge funds say it is so… down with the central banks, up with the hedge funds…” etc.

What a fucking joke.

Maybe those von Mises guys shouldn’t have voted George W Bush in twice in a row. How’s that for cause and effect.