Monday, November 25, 2013

Krugman's Bizarro Post About Sweden

Krugman has a blog post about Sweden's monetary policy, whose message can be summarized in four points as:

-The Swedish central bank is holding interest rates higher than they otherwise would have to prevent a housing bubble.
-This supposedly amounts to "bubblephobia" and at the same time also a puritan "haunting fear that someone, somewhere, may be happy."
-Bubbles are supposed to be created, and besides they can't really be prevented.
-The aforementioned policy is somehow the equivalent of an Ayn Rand-style gold standard.

The first point is sort of true, though interest rates at 1%  are still being held too low to prevent continued debt build up because of the fear of consumer price deflation and an excessively strong exchange rate.

The second point just illustrates how nut Krugman has become. It is somehow irrational to want to avoid bubbles? That of course completely ignores the negative after effects of bubbles, which means that people won't be happy.

Krugman may think that the negative after effects can be avoided by constantly inflating more and more, but that is as misguided as an alcoholic that thinks the hangover can always be prevented from happening by being constantly drunk, 24/7.

The third point consists largely of the same bubble-loving nonsense and is also self-contradictory since he both argues that it is proper to pursue policies that leads to bubbles and at the same time asserts that the bubbles have nothing to do with them.

And the idea that the Riksbank policy, which still implied money supply growth of 5%, is equivalent to an Ayn Rand-style gold standard, that is just plain silly.


Blogger Kapitalist said...

Krugman doesn't need economic analysis. He needs psychoanalysis! That is a "science" which is at least as failed as his own, so they might find themselves in such therapy and live happily ever after.

9:02 PM  
Blogger Roger McKinney said...

Enjoy your blog! Krugman doesn't do analysis any more. He became lazy after winning the Nobel. He does nothing but ridicule. Very sad. I don't know anyone in the US who pays attention to him any more.

6:17 AM  

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