Paul vs. Krugman

posted by Nima

May 1, 2012 · Posted in General Economics, History 

Ron Paul debates Paul Krugman on monetary policy and economic history:

The most instructive point in this discussion, in my opinion, is where Krugman flat out exposes his ignorance about the essence of the concept of fiat money:

At 8:55:

Ron Paul: “People today, if they use gold and silver, you can go to jail.”
Paul Krugman (chuckles): “That’s not what I’ve … that’s not MY understanding of the law.”

Well, then it might behoove him to be a bit more open and curious about cases like that of Bernard von NotHaus:

Bernard von NotHaus, 67, was convicted today by a federal jury of making, possessing, and selling his own coins, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Following an eight-day trial and less than two hours of deliberation, von NotHaus, the founder and monetary architect of a currency known as the Liberty Dollar, was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States.

I can can already guess what Krugman is going to proclaim in his defense: That of course he’s well aware of the case and that said individual was only sent to jail because he was ripping of the “Dollar” brand or that he was committing acts of conspiracy or something along those lines.

At 6:23 Ron Paul talks about the policies that laid the foundation for an end to the Depression and the post WW2 era boom which Krugman himself admits he wants to go back to:

“… we cut spending by some 60 percent, we slashed taxes, finally the Depression ended. It was the liquidation of debt that made it available that we could go back to work again.”

Here are some charts for the period in question:

Government spending 1945 – 1950 in pct of GDP:

US Government Spending 1945 - 1950 in pct of GDP

Government debt 1945 – 1950 in pct of GDP:

US Government debt 1945 - 1950 in pct of GDP

Taxes from 1945 – 1950 in pct of GDP:

US taxes as pct of GDP 1945 - 1950

It is, then, a pretty arrogant, self centered, narcissistic, and most importantly false way of debating when all you can respond to someone confronting you with such historical facts is “That’s not my version of history”.

It’s actually quite irrelevant what “my” or “your” version of history is, as much as it is indeed relevant what the correct version of history is. But it takes a certain level of humility to subjugate your own opinion to this annoying thing called reality.

Tenured economics professors are unfortunately a so tied up with internal he-said-she-said gossip and with debating the inconsequentialities of whether the target inflation should be 2 or 3 percent and whether rich should be taxed more or less, that they really seem to have no time to delve into a comprehensive, detailed, and honest analysis of historical and economic facts.

It is thus up to you, dear reader, to tune out when you hear such clowns spout out irresponsible, boring, and oft-repeated and refuted nonsense, and to seek out those who take the pursuit of truth more serious than childish ad-hominem attacks, gossip, and prestige amongst the influential and well connected.

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Comments

3 Responses to “Paul vs. Krugman”

  1. qwerty_ca on May 1st, 2012 1:19 pm

    Using charts such as these makes no sense.

    For one thing, you start at 1945 – at the end of a big, huge, expensive war after which govt spending was bound to fall no matter what.

    For another, all the figures you list are as a percent of GDP rather than absolute numbers. Increased spending due to family formation by GI’s coming home from war (aka the baby boom) caused significant increases in baseline GDP, causing all relative-to-GDP figures to fall.

    Whatever impact the actions of the government might have had then, we are in a significantly different position now – we have no likelyhood of significantly cutting the budget automatically right now, nor do we have any potential positive demand shocks on the horizon. Last but not least, we are recovering from a financial crisis – a fundamentally different beast than war – and one that is harder to solve even on paper without creating significant moral hazard.

    Looking to the past therefore has no bearing on what our policies should be right now. So why are you even talking about this?

  2. Nima on May 1st, 2012 1:41 pm

    @qwerty_ca: Just out of curiosity before I waste mine and your time: If I posted absolute numbers for those same periods, and they showed the same trend, would that change your opinion on this matter?

  3. qwerty_ca on May 22nd, 2012 3:16 am

    Sure! More data is always good. :-)

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