Tag Archives: Paul Krugman

Social Security Defaults Again on Its Promises: No COLA for 2016

Monday, 19 October 2015 08:39

This article appeared online at TheNewAmerican.com on Monday, October 19, 2015:

On Thursday the Social Security Administration announced that for the third time in six years there will be no COLA (Cost Of Living Adjustment) to beneficiaries’ checks next year. There was no COLA in 2010 or 2011, thanks to the government index used to determine whether an “adjustment” (increase) was justified, to offset inflation. This year’s culprit was the price of gasoline, which fell 23 percent, wiping out any chance for an increase in the checks going to more than 60 million recipients.

Heroic and often invisible measures have been undertaken in recent years to cover up the program’s insolvency:

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The Minimum Wage: Economists and Weather Forecasters

Friday, 21 March 2014 15:37

English: Murray Rothbard in the 90's

Murray Rothbard in the 90’s (Photo credit: Wikipedia)

This article first appeared at The McAlvany Intelligence Advisor on Friday, March 21, 2004:

Establishment economists defending interventionist statist policies like the minimum wage really ought to get out more. Weathermen, when they head home after work, are going to be confronted immediately with the reality of their forecasts and the consequences of being wrong. Economists are rarely if ever visited by the consequences of their predictions when they turn out badly.

One such is Jared Bernstein, who has spent his professional life locked up in a cubicle somewhere,

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Latest Survey: Small Business will lay off Workers if the Minimum Wage is Raised

Thursday, 20 March 2014 10:54

Bob Funk, the entrepreneur who founded and now operates Express Employment Professionals (claimed to be the largest privately owned employment service in the country), holds that the best way to determine the impact of a proposed law is to ask those who would be directly affected. It reduces confusion, avoids extended discussions among economists who have never held a real job in their working lives, and eliminates spending on empirical studies designed with the desired outcome in mind. Said Funk:

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Federal Court Rules that the Bitcoin is Money

Friday, 09 August 2013 12:26

When the Securities and Exchange Commission (SEC) charged that Trendon Shavers, the founder of Bitcoin Savings and Trust (BTCST) was running a Ponzi scheme, Shavers challenged the agency by claiming that bitcoins didn’t fall under their definition of securities and so therefore he and his company were exempt from SEC rules. Federal Judge Amos Mazzant ruled otherwise, which was bad news for Shavers but good news for

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One Bear’s Prediction: Massive Market Selloff Coming

Saturday, 17 November 2012 06:04

Bear Market

Bear Market (Photo credit: AZRainman)

Hard-money adviser Marc Faber, best known as publisher of the Gloom, Doom & Boom Report and consequently often referred to as “Dr. Doom,” told CNBC on Tuesday that the stock market could decline by 20 percent. He doesn’t think it will have anything to do with the “fiscal cliff” but instead will reflect poor earnings as bellwether companies struggle to be profitable in the continuing recession:

I don’t think markets are going down because of Greece, I don’t think markets are going down because of the “fiscal cliff” — because there won’t be a “fiscal cliff.”

The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year (or even contract)…

That is the reason why stocks, from the highs of September of 1,470 on the S&P [Standard and Poor’s 500 Index], will drop at least 20 percent, in my view.

Faber noted that shares of Apple, Inc. are already off more than 20 percent since September, while shares of Amazon.com Inc., McDonald’s Corporation and Google, Inc. have each lost more than 8 percent of their market value during that period.

Taking a longer look, however, Dr. Doom is even more bearish. He thinks equities could

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Paul Krugman: People Die Without Mandated Insurance

Friday, 19 October 2012 11:50

Paul Krugman - Caricature

Paul Krugman – Caricature (Photo credit: DonkeyHotey)

Economist Paul Krugman has impressive credentials which, if one looks closely, makes him qualified to expound the virtues (if any) of Keynesianism. He’s written 20 books and has had 700 articles published in the New York Times, including this one. What’s annoying to me is that he used to have a brain that saw things clearly, and then something happened along the way. He now comes up with the idea that not having enforced socialized healthcare kills people:

The reality, to which Mr. Romney is somehow blind, is that many people in America really do die every year because they don’t have health insurance.

He can’t prove his case, of course, and even admits it: “Conservatives love to cite the handful of studies that fail to find clear evidence that [enforced, mandated, government-provided health] insurance saves.” But that’s OK because such studies don’t support his statist ideology, and so it’s OK to ignore them. Instead, he says, without proof, that “The overwhelming evidence…is that

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Feisty, Fearless Economist Anna Schwartz Dead at 96

Thursday, 28 June 2012 06:55

Best known as the co-author, along with Nobel Prize-winning economist Milton Freidman, of A Monetary History of the United States, 1867-1960, Anna Jacobson Schwartz died on Thursday, June 21, in New York City at age 96.

A brilliant economist in her own right, she provided the background, the research, and so much of the thinking behind the 859-page A Monetary History that Friedman claimed that “Anna did all the work, and I got most of the recognition.” Considered by many classical economists as the magnum opus on monetary policy (the impact of money supply on economic behavior), by itself it shifted the blame for the Great Depression from the statists’ claim that it was due to excessive laissez-faire capitalism in the 1920s to the interventions by the Federal Reserve that caused the Great Depression and that greatly exacerbated both its depth and duration. So powerful were the conclusions that one of the book’s chapters, “The Great Contraction, 1929-33,” was published as a stand-alone paperback in 1965, and the book itself was hailed by the Cato Institute as one of the most influential economics books of the 20th century. Even Federal Reserve Chairman Ben Bernanke admitted that A Monetary History “transformed the debate about the Great Depression.”

Accolades abounded following the announcement of her passing, even from those who parted ways with her on the role of central banking in a modern economy and the Federal Reserve in particular. George Selgin, a senior fellow at Cato, remembers Schwartz as being candid and uncompromising: “Anna never held a punch, and when she threw one, it landed square on target.” Robert Higgs, a scholar at the Independent Institute, noted,

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Iceland Says “No” to Bank Bailouts, Enjoys Economic Growth

Thursday, 26 April 2012 04:17

To look at the streets of Reykjavik, Iceland, an alien would be hard-pressed to see any aftereffects of the banking crisis that nearly bankrupted the country in 2008. The capitol of the 40,000-square-mile island just below the Arctic Circle between Greenland and the United Kingdom is the country’s largest city where nearly two-thirds of the island’s 320,000 inhabitants reside. Unemployment is down, economic growth is positive, and its streets are calm.

But it was the center of the financial crisis precipitated in 2008 when one of its three largest banks had a big loan payment coming due and couldn’t come up with enough krona to make it.

As Iceland’s President, Olafur Ragnar Grimsson, said in an interview with Business Insider International:

If a collapse in the financial sector can bring one of the most stable and secure democracies and political structures to [its] knees as happened [here] in Iceland, then what could it do in [other] countries?

When Iceland’s legislature decided to take over the country’s three largest banks—Glitner, Landsbanki, and Kaupthing—it was discovered that, despite all four credit rating agencies giving them A or better credit ratings, the banks owed an amount that approached six times Iceland’s gross domestic product (GDP). Grimsson, who has been President of this parliamentary republic since 1996, had a decision to make: pump government (taxpayer) funds into them to keep them afloat, or

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Printing Money Doesn’t Work in Britain Either

Wednesday, 08 February 2012 04:17

The long-awaited announcement of another bout of money printing in England on this Thursday will prove once again that experience doesn’t modify behavior on the other side of the pond either. The initial round of money expansion, called Quantitative Easing (QE) in the States, of some $320 billion last year in the United Kingdom had little measurable effect.

And so another boost of $80 billion is expected in Thursday’s announcement. This round, according to George Buckley, a UK economist at Deutsche Bank, might not be the last: “If sentiment and activity hold up this could…be the last round of QU, although the fragile nature of the recovery and the situation in Europe could mean [that] the programme continues after May.”

The trouble is that “sentiment and activity” is slowing, pushing England’s GDP into negative territory with downward revisions for the balance of the year expected. The British Office for National Statistics reported “negative growth” (American translation: decline) of 0.2% in the last three months of 2011, and there is little hope for any change in direction for at least the next two years.

Roger Bootle, writing for the British paper The Telegraph, wondered out loud what good additional printing would do. He asked rhetorically three weeks ago, “Once it has completed the current authorized dollop, the Bank of England (BoE) may soon conduct yet more QE. But

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Keynesian Economists Finally Catch Up and Agree: China to Have Hard Landing

Wednesday, 25 January 2012 04:31

Mainstream economist Robert Samuelson admitted last week that the case for the ending of the economic boom in China has some substance. Keynesian economist Paul Krugman also confirmed that China is in trouble and questioned its ability to avoid a hard landing.

Samuelson raised rhetorical questions about China’s economic future, all with the same answer: “Could the world’s economic juggernaut, having grown an average of 10 percent annually for three decades, face a slowdown…or a recession?” Yes, it could. “Does it have a real estate ‘bubble’ about to ‘pop?’ ” Yes, it does. Could that have “global consequences?” Yes, it will.

Noting that Nomura Securities is predicting a one-in-three possibility of a hard landing—defined as a drop in China’s GDP to five percent or less—Samuelson said that such a sharp slowdown “would raise unemployment and social discontent” with consequences similar to the start of the Great Recession between 2007 and 2009 in the United States. Samuelson admitted that the Chinese government has created

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Back-Door Bank Runs in Europe Have Started

Wednesday, 14 December 2011 11:37

In his interview at King World News, James Turk, founder of GoldMoney and author of The Coming Collapse of the Dollar, noted in his travels around Europe that “there is one common trait, regardless of which country I am in: people are really frightened about the possibility of the collapse of the euro. Money continues to move out of the European banking system, which explains why central banks stepped in with some money printing last week.”

He then went on to explain that there are only three sources of funding available to a bank: its customers lending it capital through checking and savings accounts, the issuing of long-term bonds which it sells to bond investors, and short-term financing provided mostly through money market funds. If any of these sources dries up, it puts the bank almost immediately into

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Latest Economic Surveys Show Little Optimism

Tuesday, 29 November 2011 04:09

The Republican Small Business Committee reported on November 8 that small-business optimism “remains extremely low,” and that business owners “simply are not hiring because they are pessimistic about consumer sales, the nation’s economic climate, and the amount of regulations to comply with.” Committee Chairman Sam Graves (R-Mo.) added, “The overall mood of the nation’s job creators is still at historic lows. The [Optimism Index of the National Federation of Independent Business] shows that over the next three months, only 9 percent of small business owners plan to increase employment [while] 12 percent plan to lay off workers. These numbers are…worse than the previous two months.”

NFIB’s Optimism Index has shown precious little change going back to January of 2009 and is matched by the University of Michigan’s Consumer Sentiment Index, which noted that “more households reported that their finances had worsened rather than improved for the 48th consecutive month [and that] just

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Is Rick Perry Right? Is Social Security a Ponzi Scheme?

Wednesday, 14 September 2011 21:17

Rick Perry shows us around his office. He's Te...

Image via Wikipedia

Presidential candidate Rick Perry opined in the first Republican debate that Social Security is a “failure” and a “Ponzi scheme,” and then reiterated the charge in the second debate on Monday night. At the first debate, Perry said Social Security is a “Ponzi scheme for these young people. The idea…that the current program is going to be there for them is a lie.” When pressed by the moderator, Perry reiterated, saying Social Security is a “monstrous lie to our kids.”

On Monday night Perry refused to back down: “It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you’re paying into a program that’s going to be there. Anybody that’s for the status quo with Social Security today is involved with a monstrous lie to our kids, and it’s not right.” But in his op-ed piece in USA Today on Sunday, Perry backed off, writing instead that

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Bloodbath Coming?

Wednesday, 24 November 2010 10:59

Mel Gibson as William Wallace anachronisticall...

Image via Wikipedia

White House deficit commission co-chairman Alan Simpson spoke at a Christian Science Monitor roundtable on Friday morning saying, “I can’t wait for the blood bath in April. It won’t matter whether two of us [on the commission] have signed this or 14 or 18. When debt limit time comes, they’re going to look around and say, ‘What…do we do now? We’ve got guys [House freshmen] who will not approve the debt limit increase unless we give ’em a piece of meat, real meat, off of this package.’ And boy the blood bath will be extraordinary.”

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Great Depression II: Here We Go Again?

Saturday, 24 July 2010 13:55

The Causes of The Great Depression / FDR Memor...

Image by Tony the Misfit via Flickr

The unremitting flow of negative news about the economy has finally caught the attention of the mainstream media, causing an increasing number of economists to make comparisons between today’s recession and the Great Depression.

David Rosenberg, Gluskin Sheff’s chief market economist, commented to his clients that the monster drop in new home sales in June compared to May was not exactly “a one-month wonder” but instead invited comparison of the current recession’s similarities with those of the Great Depression. He said they include:

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Weak Dollar Obama’s Fault?

Thursday, 14 January 2010 14:34

Various Federal Reserve Notes, c.1995. Only th...

Image via Wikipedia

According to Newsweek, the dollar isn’t weakening, and even if it is, it isn’t Obama’s fault. On Tuesday, Daniel Gross iterated all the reasons that, according to conservatives, the American dollar should weaken. Conservatives, he said, blame the actions of the Federal Reserve with the lowering of interest rates to zero, printing money, and expanding the monetary base. They also blame the Obama administration for running up huge deficits in its efforts to restart the faltering economy.

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The Fed: Forever Blowing Bubbles

Monday, 11 January 2010 13:53

Girl blowing bubbles

Image via Wikipedia

An article in the New York Times asked that since the Federal Reserve “failed to recognize the last bubble…why should Congress, or anyone else, have faith that future Fed officials will recognize the next [one]?”

The roots of the present Great Recession stretch back to the bursting of the last bubble—the tech bubble—in the late 1990s. As the stock market declined sharply, the Fed under then-chairman Alan Greenspan lowered interest rates in an attempt to keep the economy from collapsing. The Times succinctly noted in its overview of the credit crisis that “lower interest rates make mortgage payments cheaper, and demand for homes began to rise, sending prices up. In addition, millions of homeowners took advantage of the rate drop to refinance their existing mortgages. As the industry ramped up, the quality of the mortgages went down.”

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