On November 8th at 12:42, Paul Krugman melted down in the “What happened on Election Day” sub-section of the New York Times Opinion section.
So who is Paul Krugman: He’s a Keynesian economist who’s ranting regularly graces the NYT pages. His shtick seems to be “continuous hyperbole and absurdly statist nonsense.”
After reading some of the articles, I can say he’s very good with “hyperbole and statist nonsense” but is a lousy economist.
Let the fisking begin: The Economic Fallout
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
At the time of this writing, the NASDAQ is up almost 15 points, the DJIA up over 100, the S&P 500 and Russell 2000 are both up nearly ten.
Paul considers this “plunging”? To paraphrase Inigo Montoya, “I do not think that means what he thinks it means”.
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Wait. Paul knows he’s an economist? And that his job is to care about the economic ramifications and the markets?
Lucky for us, though, he does manage to fight off the apathy and offer the following:
Still, I guess people want an answer: If the question is when the markets will recover, a first-pass is never.
This seems too easy. Never? Really?
Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news.
Wait, let me check the date and make sure this isn’t an article from 2008 or 2012…
No, he’s apparently not talking about President Obama.
What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.
The take away here is that thanks to the mismanagement of the US economy over the last eight years, President-elect Trump is going to face serious economic challenges.
It’s true that we’ve been adding jobs at a pretty good pace and are quite close to full employment.
Per the Gallup Daily tracker, the Real Unemployment Rate (U-6) is 9.7% and the “Good Jobs” rate (Percent of Adult Population who is engaged in full-time employment) is 46.6%. In November of 2008, the U-6 was 8.1%, and the “Good Jobs” rate was 61.4%.
Paul considers this “adding jobs at a pretty good pace” and “quite close to full employment”.
But we’ve been doing O.K. Only thanks to extremely low-interest rates. There’s nothing wrong with that per se. But what if something bad happens and the economy needs a boost? The Fed and its counterparts abroad basically have very little room for further rate cuts, and therefore very little ability to respond to adverse events.
So, the only tool, or the only useful tool that governments have to simulate or influence the economy, is…interest rates?
So, Paul, tax rates, regulation/deregulation, energy policy, and immigration play no role in the economy?
And if that’s the case, wouldn’t this situation be the same, even if Secretary Clinton had were elected? Wouldn’t we be just as screwed?
Now comes the mother of all adverse effects – and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence and be bullied by cranks.
Paul should be careful when throwing around the phrase “ignorant of economic policy” when his own grasp of economics seems so tenuous.
I really like the phrase “Fed will lose its independence”; it implies that the Federal Reserve has for the last 100 years been beholden to none, especially President Obama. He is implying that the current state of the economy isn’t his responsibility.
So, we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.
Is this what passes for hope? We are probably only looking at the end of the word. We might get lucky.
What happened to the absolutes Paul was dealing with earlier? Is he trying to cover his ass with this paragraph so that if the markets don’t plunge, if the economy strengthens, if the world doesn’t become trapped in a never-ending recession, he can always say he was right and that “We got lucky”.
That’s what I want from an economist. Someone who explains economic events and uses the word “luck.”
Paul, great job on the “hyperbole and absurdly statist nonsense”, not so much on the economics though.