Paul Krugman is supposedly an economist. He has won a Nobel prize for economics. But he’s really a political commentator that tries to legitimize his politics by couching his views in the pseudo-science of economics.
He’s very confident that he is always correct. Doubt that might accompany humility never appears. He believes himself to be an intellectual giant, a virtual economic policy demigod, who is superior to the great mass of humankind with whom he shares earthly living space by virtue of his vastly superior intellect.
So when he tells you that the reason some Republicans oppose the Fed’s new round of money-printing is because they wish the economy to falter and fail and Americans to suffer so long as Obama is President, you better listen. The Fed is doing God’s work, or at least demigod Krugman’s work, with their strategy of issuing more scrips of hollow promises. The Fed is pushing down interest rates, and everyone knows that interest rates are directly correlated, and thereby causatively related, to employment rates. Here’s what Krugman said about why everyone wishes Mr. Bernanke to quit with the money printing–because they’re afraid it might work, from the New York Times:
So what’s really motivating the G.O.P. attack on the Fed? Mr. Bernanke and his colleagues were clearly caught by surprise, but the budget expert Stan Collender predicted it all. Back in August, he warned Mr. Bernanke that “with Republican policy makers seeing economic hardship as the path to election glory,” they would be “opposed to any actions taken by the Federal Reserve that would make the economy better.” In short, their real fear is not that Fed actions will be harmful, it is that they might succeed.
Hence the axis of depression. No doubt some of Mr. Bernanke’s critics are motivated by sincere intellectual conviction, but the core reason for the attack on the Fed is self-interest, pure and simple. China and Germany want America to stay uncompetitive; Republicans want the economy to stay weak as long as there’s a Democrat in the White House.
I know that it’s sacrilege to worshipers in the church of the Almight Paul Krugman to question his economics (he’s got that Nobel, remember), but could it possibly be that the Fed is powerless here? That the amount of money in the economy, or the level of interest rates in the economy, or really any other policy tool available to the Fed won’t work because Fed policy tools, although helping to cause the unemployment problem are impotent at fixing them.
There isn’t even much of a correlation between interest rates and employment levels, especially during times of employment and economic expansion.
Here’s a couple of charts that might be helpful, though I’m sure Cardinal Krugman is far above ever needing to look at actual data:
Over the time series, it appears employment has basically trended upward, while the ten-year bond yield (one of the ones the Fed is trying to influence with its purchases) initially trended up (first 25 years) and then trended down (since mid-80’s). That’s a dubious relationship at best. Correlation is not causation, but remember, causation requires correlation.
So, maybe, just maybe, the reason those Repubs and Nazi’s and Chinamen wish for the Fed to quit with their policy is because the correlative history indicates that there is no correlation that would imply causation so far as employment levels are concerned, but there is good reason to believe the printing will queer up the international commodities markets, among others, like it did before, in the 70’s, early 80’s and mid-aughts.
The Krugman article can be found here:
The charts can be found here: