The Paul Krugman Thread


It’s disingenuous to skip the Fed and easy money policies when figuring out who to blame for bubbles. The Fed can spot and should do something about bubbles.

It’s an outright lie to say that Mr. Krugman called for a housing bubble and ignores much of what he did to expose the bubble and the likely consequences of it.

Mr. Krugman has a blind spot when it comes to the effects of easy money.


Well. I wouldn’t completely agree.

First look to the dot-com burst for example.

We had corporate corruption - Drawing down profits by illegal means; Serious loopholes in published accounts; Debts not properly shown in accounts; Stock options diluting the companies…

Investment bankers with insider connections to research firms.

Then look at the core phenomenon of internet technology mania driving the overvaluation of stocks and crazy P/E ratios.

Also look how the internet suddenly opened up access to trading for a lot of traders who lacked the required experience. (which phenomenon is even more marked today imo).

Could all of that have been successfully reined in by monetary means (or might it indeed have served to fuel it?)

And looking to the housing bubble there were a quite similar set of phenomena operating alongside the monetary phenomena.

Corruption. Technology. Media feeding a mania. Sophisticated marketing and FIRE sector professionals wining and dining public sector officials, and so on and so forth.

There is only so much the Fed and Central Banks can do with respect to “controlling” bubbles. - Really, they are mostly limited to stepping in afterwards to work to try and mitigate the ensuing fall-out.

EDIT - Not forgetting tax incentives either.


It doesn’t need to rein all that in. It just needs to make it unprofitable to borrow to speculate. The fallout from both the dotcom bust and the housing bust is most severely about borrowing gone bad. Assets with no basis to back up their borrowings. Cheap money drives this and that is what the Fed should be worried about. If some rich guy wants to pump a million dollars of savings into a penny stock, who cares. He’ll eventually get bent by the trend. The Fed, though, should care if some guy wants to borrow a million dollars to sink into a penny stock because borrowing is cheap and his risk is low.

Central Banks are, or should be, in the risk management game. They should be setting the outside parameters for borrowing/insurance risk. Which means they can’t stop bubbles, but they can stop bubbles from damaging the financial system.


You mean raise interest rates right across all economic activity to near the level of the kind of returns that were being generated by the housing bubble / dot-com bubble?!

Ah come on.

Anyway I don’t think it’s interest rates that are important in what we are discussing. They are a driver of everyday economic activity right across and economy. That is their primary importance.

Rather what is important, and what would be much more effective - is adequate regulation of key bank ratios and lending permitted, and ‘products’ permitted, etc.

No more allowing banks or privately owned profit-seeking corporate entities to regulate themselves, with their spurious “risk management” activities and the like.

In the same vein as the majority of the inflationary type phenomena that can be observed these days, again, it is not monetary phenomena we are primarily dealing with here. - It is something else.

  • I think we need to properly regulate banks and the media as a priority. Both the purposes that drive them, and their actual activities. - Regulate the institutional values that impact on the life of the country in any way. - Find some way to regulate the cynical spin and outright lies in marketing messages fed to the public. - Regulate the proportions of lending to the non-productive (land, property, shipping and marketing of goods already produced etc.) and productive parts of the economy (I.e. financing of new capital investment by manufacturers and producers etc.).

Of course, there is an agenda that wants to ensure the status quo is kept at the very opposite of this. Thus all the rhetoric about the Fed and Central Banks and the like.

I think we need to deal with that insidious agenda. Take it apart. Show up the ignorance pervading it. Send it scurrying back under the rock it came from.


Of course I don’t mean that. Do think about both sides of a return (cost and benefit versus risk-free rate).

They are absolutely important and rather than change the subject, I wish you’d stick to it and understand why interest rates are important, indeed, you allude to it - because they are a driver of economic activity right across the economy.

The rest of the stuff you talk about is related, but it’s motherhood and apple pie stuff. There is only resistance from those making profits from it. The role of interest rates and the drivers of bubbles (and inflation) are much more complex. What’s important, as I said, is protecting the financial system from exposure during the bust of bubbles. Not because anyone likes the financial system, but because it is perceived as essential and so will be saved by the state. And that has a cost to all of us hence the organ of the state (Central Bank) that runs the financial system should seek to do something about it.

Having a Central Bank say “sure we can encourage economic growth, but we don’t look at the consequences” is an abrogation of responsibility. For all their talk, the BoE has fallen into this trap, not by doing QE necessarily, but by keeping interest rates as low as they are. It is growth now at the expense of calamitous failure later.


Anyone care to take this on? Boyracer?

Soup Kitchens Caused the Great Depression, AFF Edition

That’s AFF for “Austrian founding fathers.”**


But please, no more erstwhile “merchants” trading across small isolated communities. Or, moral sagas about evil governments inhibiting the purity of individual and enterprising august capitalists etc. :wink:


Supply-side tax cutters in the fantasy land of Oz … -1.1850444



Are bubbles good or bad and do we need them to create strong economic growth and reach higher levels of employment?
Bubbles are bad if you have an economy near full employment, where they divert resources from their proper use and set the stage for financial instability. In a depressed economy, even ill-conceived spending can help create jobs, so bubbles aren’t necessarily bad. There are reasons to believe that we’re facing an era of persistent economic weakness, which means that we’ll only feel prosperous during bubble periods.*


He was on the Ch4 News yesterday advocating a No vote for Scotland…saying if their banks went bust (again) they could run to Westminister for help if part of the Union or if independent, could load the bailout on to their citizens as happened in Ireland.
He basically referred to us a few times as the bad poster boys!


If Scotland goes independent they won’t have any banks.


Clydesdale owned by NAB
BOS owned by LLoyds
RBS owned by UK GOV

Dunfirmline BS - Nationwide BS after less well known clusterfuck
who’s left?


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Time and time again polls have shown that British people trust the Tories with the economy over Labour any day.


No one buying it in the comments, indeed the very opposite. :icon_neutral:


Is it possible to use someone else’s IP to download something onto their device?


You can spoof an IP address – it’s just a number that appears in network packet headers. You wouldn’t end up downloading anything on the other persons device, you would just make it look like your traffic had come from there. It’s usually used to cover your own tracks rather than to impersonate someone else. You wouldn’t have any way of knowing that someone else had used / was using your IP address unless someone – like the cops – had already taken an interest in your traffic.So you wouldn’t be ringing your “internet security service” (what that even means) nor would they be ringing you. Smells fishy.


My reading of this would either be:

1: Someone’s proxying through his network (either they got onto his wifi, or onto a device), and they’re using his Internet connection to download the bold stuff. If this were the case you’d probably find out about it when the cops knock your door down.


2: He got a spam pop-up saying that illegal downloads have been detected from his IP address (and maybe that he should call an “internet security service” for help). These are quite common.

My guess is 2, and that it’s all pretty innocent if embarrassing.