“After we came out of the church, we stood talking for some time together of Bishop Berkeley’s ingenious sophistry to prove the nonexistence of matter, and that every thing in the universe is merely ideal. I observed, that though we are satisfied his doctrine is not true, it is impossible to refute it. I never shall forget the alacrity with which Johnson answered, striking his foot with mighty force against a large stone, till he rebounded from it — ‘I refute it thus.’” — Boswell, Life of Samuel Johnson
Paul Krugman may be America’s greatest living reactionary polemicist. He is an elegant writer and irredentist adversary to free market proponents of policies of economic-growth-with-an-equitable-Gini-coefficient-distribution-of-income. Krugman’s clever invective-suffused narrative is mesmerizing. Its Achilles heel? His narrative is, fatally, short on facts.
Hartmann: “Another piece of this whole voodoo conspiracy theory … is that … we should never have gone off the gold standard, that the solution to all of our problems in the kind of Ron Paul world is just for the government to create coins made out of gold and that’s it.”
Krugman: “Yeah, That’s another one of those things that is just amazing that people would be believing that. …”
Hartmann: “So what would you say specifically to someone who is promoting the gold standard … ?”
Krugman: “[T]o a young person who is trying to understand you need to tell them, you think that the people who talk like this are on the side of the little guy and against the banks but they’re not, they are actually supporting a policy that rich people, that billionaires have always liked. The reason that the gold standard, that goldbugism, survives in this modern world is because it is a doctrine that has always been subsidized heavily by billionaires, who like the idea that nobody can print money and nobody can inflate away their assets even if a little bit of inflation is what it takes to rescue the nation from mass unemployment.”
Hartmann: “So it’s a scam?”
Krugman: “Of course it’s a scam. John Maynard Keynes, again, called the notion of gold in the economy a barbarous relic. I mean there’s lots of problems with our economy but why should this metal, this not especially useful metal, be the ‘gold standard’ of value? We have an economic problem. It needs to be managed. It needs to be managed through human intelligence not by appealing to something that may have made sense in the 1st century BC.”
Economic historian, and Forbes.com columnist, Prof. Brian Domitrovic addressed an earlier polemic of Krugman’s, calling it “fact-defying” at TheGoldStandardNow.org (an educational portal of the Lehrman Institute which this columnist professionally edits):
“There’s another fact-defying entry from Paul Krugman. His blog post from January 30 is titled, “Recessions Under the Gold Standard,” and the text manages to undermine both terms in that title. A total of one recession is adduced, that surrounding the panic of 1893, which as they used to teach in school, came about specifically because the US had recently balked at the gold standard and permitted the mass monetization of silver. No “recessions” plural and no gold standard.
“You’ve got to look under a lot of rocks to find recessions in the era before the silver purchase act of 1890. For the 1880s, when the US was closest to being on a full gold standard, were the greatest decade of real economic growth in the nation’s history, and the only competition is the 1870s, when the US made the decision to commit to gold. We’re talking 5-6% growth per annum for the long haul.”
“… Paul Krugman is known as the most prominent advocate of big government solutions to almost any economic malady, real or perceived. Whatever bad, historically discredited economic concept exists, from “stimulus” spending to currency devaluation to tax rate increases to reduce the deficits caused by all the government spending he supports, Krugman is always there to defend each as public intellectualism’s walking, talking embodiment of that which won’t, and hasn’t worked.”
In Krugman’s fairy tale world gold proponents are tools of the Plutocracy. Never mind that there are zero (you may check this on Guidestar) billionaires underwriting the advocacy of the gold standard. Real billionaires like George Soros — who made a billion dollars speculating against the Bank of England’s paper pound — are disproportionately aligned with big government liberals … and provide opulent subsidies to that viewpoint. If an advocate’s receiving funding from the superwealthy is evidence of a scam it’s time to send Washington D.C. police out to round up much of the professional left.
One of Krugman’s wittiest sallies was a dismissal of “Austrian” economics (for which Hayek was awarded a Nobel Prize). He termed it “a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire.” The Austrians, of course, widely are supportive of gold money, whether private parallel currencies, as with government-reviling Hayek, or the classical definition of state-issued money as a defined weight of gold, as with the more optimistic Mises.
Krugman’s Fairy Tales would be wonderful entertainment … but for their power to destroy the livelihoods of millions. The confusions Krugman and his progressive colleagues sow in the minds of less astute policy makers have lead, and are leading, to pure misery for millions of working people.
Krugman, himself a member of the nomenklatura rather than a worker, professes to champion labor’s interests. But the evidence is that his prescriptions crush our dreams. Krugman’s prescribed monetary policy is one “managed through human intelligence” to provide “a little bit of inflation … to rescue the nation from mass unemployment.” That has been in effect, now, for 40+ years.
Forbes.com’s Charles Kadlec pointed out in The Wall Street Journal, Gold vs. the Fed: The Record Is Clear, economic growth has been chronically lower and unemployment has remained chronically higher while prices have risen — the inflation prescribed — under the paper standard which Krugman champions.
The problem is not only that of weak job creation. The Krugman recipe apparently also creates wage stagnation. The New York Times’s Economixblog by Cathreine Rampell:
In a study for the Milken Institute… (t)he findings are somewhat terrifying.
After adjusting for inflation, the typical male college graduate earned about 12 percent lessin 2009 than his counterpart did in 1969.
[T]he median man whose highest educational attainment was a high school diploma had his earnings fall by 47 percent in the last four decades.
Workers who didn’t even graduate from high school had a median income decline of 66 percent….
Self-avowed Keynesians and free market conservatives both celebrate full employment, in ever better jobs, as the Holy Grail of good economic policy. Free market economists build their case for job growth by low marginal tax rates and good money on reams of real world data.
The Krugman formula, conversely, is a fairy tale without a Happily Ever After. In spite of the elegant sophistry of his arguments his prescription for a manipulated dollar and Ever Bigger Government stubs its toe on the rock of a reality — currently the boulder of 8.2% unemployment — which says:“I refute it thus.”