patrick.net

Please, somebody comment, isn't it apropos that a legacy prize of the inventor of dynamite should be responsible for blowing up the markets?

I'm starting to think Taleb is losing it. It's just too much of a stretch to say that the Nobel Prize is causing all this.

I think the thesis has merit. I can't be arsed to read the article but as people here should know by now why and how I think the economics field has been corrupted to the core.

The NYT thought they were getting another center-right ideologically made man when they hired Krugman. Oops.

The Science Oscars are to blame?

This is a product of Nassim being on too many talking-head shows. Enough words and sooner or later we all saying something loopy.

The financial markets rewards economists who say the things they want to hear, and that is the crux of the problem. You look down the list of "top economists" quoted in media and used as intellectual backing for public and business policy, and you quickly see that they are nearly all bought and paid for. And there's a lot of them.

You think he's losing it?

"I'm using the money now to finance the destruction of the economic establishment."

This should fall under the SFW(So ephin' what) category, but these same people are treated like Policy Oracles, which then you have to wonder. Is the economy really changing, or are these guys changing it?
Bah, the jig is up, the problem will be the cure, if these are the smartest we've got, and they created this mess, then we've got no body to look to lead us out. We got Papa Buffet the Hut, but he just sits by the Oyster bed eating up all of the good ones for him self.

nosf41 says

What did Obama do to deserve the prize?

This was actually an award to the American people for finally fully booting the neocon warmongers from power.

robertoaribas says

Bonus points for anybody who knows why there isn’t a Nobel prize in mathematics…and NO his wife wasn’t cheating with a mathematician…

Because Novel didn't give a damn about mathmatics. Now, where's the bonus point? ;)

E-man says

I believe you’re probably correct. I got a question for you. What does it mean if the Republicans take back the house this year?

LOL! What do you mean by "IF" ?

What does that blue line labeled "deficit" measure? The deficit certainly hasn't gone down in the last two years. Is it some for of gross tax receipts (being high enough to generate a surplus in '98-'02)?

OK, since the scales are different I ghetto-added the Deficit scale on the left, moving GDP and debt to the right legend. This is a confusing chart because deficits are annual while household debt is cumulative. My purpose with this is to just show that the "recovery" we've had has been solely due to the System pushing immense gov't debt to replace the loss of household debt increases starting when the "recession" hit 4Q07.

This is all just hack analysis but from this chart I get a sense that the true GDP of what our economy can do is really around $12T. Circa 2002-2003 debt growth started supporting GDP growth, which is what drives bubble economies. What we're doing now is just blowing another bubble in government bonds to continue to paper over the fundamental failures of this economy.

Much like Japan is doing, I guess.

The Great Depression ended in 1936. This notion that it continued to the late 40's or was "fixed" by warfare, is simply incorrect. Of course we live in a world where kids think Buzz Lightyear was the first man on the Moon, so our grasp of history is often tenuous.

There was 20% DEFLATION between 1929 and 1937.

Deflation of $100 from 1929:

1929 $100
1930 $97.50
1931 $88.92
1932 $79.76
1933 $75.69
1934 $78.27

yup, your clarification is important, but the deflation also explains how real GDP could increase without helping anyone who was trying to pay the debts they had run up in the 1920s.

That deflation killed a lot of people, and all the monetarists here simply elide the knowledge that the US was on the gold standard at the time from their reasoning processes.

Vicente says

The Great Depression ended in 1936. This notion that it continued to the late 40’s or was “fixed” by warfare, is simply incorrect.

I'm a bit surprised by this statement. I think Krugman is taking the other side of this particular argument. Would you care to elaborate on what is different in his interpretation than yours?

One point that comes to mind is the 1937 balance-the-budget-induced downturn. Another is that there may have been quite a bit of pre-Pearl-Harbor war buildup spending.

thomas.wong1986 says

We always had deflation in the US, more so than inflation over the last 200+ years.

Sorry, Thomas, but you really lost me there, which is an unusual occurrence. There are several things in this thread that I cannot make sense of, and this is one of them.

Troy says

Deflation of $100 from 1929:

1929 $100
1930 $97.50
1931 $88.92
1932 $79.76
1933 $75.69
1934 $78.27

I find the terminology here a bit confusing. It looks like this is some sort of price INDEX, but it is denominated in DOLLARS. This has the unfortunate effect of making it look like something else than what I presume it is supposed to say.

An easy but presumably wrong interpretation would be "Oh, my $100 bill from 1929 is only worth $78.27 in 1934 (measured against its purchasing power in 1929). That would indicate INFLATION, not deflation.See what I mean?

Maybe all I'm saying is that it denominating an index in dollars is not a good idea. No slight of Troy intended at all, generally I find his posts and comments very informative.

justme says

One point that comes to mind is the 1937 balance-the-budget-induced downturn.

Just like today you have to stop borrowing money at some point and let the economy stand on it's own. The Keynesian concept that you can manage stimulation timing to perfection creating a perfectly smooth transition is just garbage. There will always be a transition period where things are going to be rocky.

justme says

That would indicate INFLATION, not deflation.See what I mean?

That's why I added the Deflation in an edit : ) My numbers were coming from http://www.westegg.com/inflation/

Kevin says

unded, you’d still be talking about less than 1% of the population being unable to r

My mistake. But would be about 1% because kids wouldn't be counted in the workforce.

On a side note, their is a huge pile of Keynesian based literature from the 1940s in my university library that predicts that unemployment will return to double digit levels due to the fall in aggregate demand as a result of post war spending cuts.