Bitcoin Forum

""

So, Krugman didn't say anyting?

Hmmm, it sounds like Krugman was able to keep his opinion short and concise this time.   So is "" logically consistent?

Joking aside, I would very much like to hear about Krugman's opinion on Bitcoin.   The title of this thread is comparable to the time I heard the Bitcoin.org founder was going to meet with the CIA (or whoever) to talk specifically about Bitcoin; I have no other info on the meeting with CIA nor its accuracy.

Krugman's opinion would be similar to Cowen's or any of the other mainstream guys who refuse to think it is viable:

a wise man once said, "It is difficult for a man to understand something when his job depends on not understanding it."

I, for one, am very much curious about what Krugman would say about the economic aspects of Bitcoin.

And by the way, why all the disdain for Krugman expressed in this thread?  As far as mainstream economists go, I have the utmost respect for him.  He has been consistently been correct on his predictions and he has always been coherent with his arguments.

USD inflation is extremely low? What parallel universe are you in?

Must be that "crazy" parallel universe that relies on hard data instead of conspiracy theories.
Check out the stats (http://stats.oecd.org/) from the OECD and verify for yourself.

Must be that "crazy" parallel universe that relies on hard data instead of conspiracy theories.
Check out the stats (http://stats.oecd.org/) from the OECD and verify for yourself.

The problem with economists is that they have no way conduct scientific experiment on monetary policies. Yes, there are data, but interpretation is everything.

Economists can have interpretations that fit the data but it turns out to be bollock.

LOL!  What nonsense!  There has been numerous articles from real economists pointing out Krugman's poor prediction record!  One I've seen actually demonstrated how Krugman is only slightly better than throwing darts at a dartboard blindfolded.  If you want to see an economist with a real track record for accuracy, try Mish (http://globaleconomicanalysis.blogspot.com/)  Peter Schiff (http://www.europac.net/) or Rich Maybury (http://chaostan.com/).  All of these guys actually make money, real fortunes, based upon their predictions.  Krugman makes money selling advice to readers of the NYT.  He's the economic version of "ask Nancy".

If you are taking your advice from someone who doesn't make a living from his own advice, you are an idiot.

Must be that "crazy" parallel universe that relies on hard data instead of conspiracy theories.
Check out the stats (http://stats.oecd.org/) from the OECD and verify for yourself.

Yes, Economists may not like to hear this, but Economics is at best a proto-science. Beside the practical difficulty of performing controlled experiments with economic policies (as you pointed out), there's also the problem that Economics is not yet grounded on any meaningful substrate in the "great stack of science".  Unlike Chemistry, for instance, which is firmly grounded on the Physics substrate.

Nevertheless, my opinion is that when eventually Economics does become a science it is more likely to resemble Keynesianism than the Austrian school so favoured by this forum's hivemind.

Nevertheless, my opinion is that when eventually Economics does become a science it is more likely to resemble Keynesianism than the Austrian school so favoured by this forum's hivemind.

So somehow a group of 13000 or so forum users are effectively indulging in hivemind thinking when they reason that the economic model adopted by the entire world, with several documented records of horrible failure, is flawed?

At this point I'd rather be on the hivemind side...

LOL!  What nonsense!  There has been numerous articles from real economists pointing out Krugman's poor prediction record!  One I've seen actually demonstrated how Krugman is only slightly better than throwing darts at a dartboard blindfolded.  If you want to see an economist with a real track record for accuracy, try Mish (http://globaleconomicanalysis.blogspot.com/)  Peter Schiff (http://www.europac.net/) or Rich Maybury (http://chaostan.com/).  All of these guys actually make money, real fortunes, based upon their predictions.  Krugman makes money selling advice to readers of the NYT.  He's the economic version of "ask Nancy".

If you are taking your advice from someone who doesn't make a living from his own advice, you are an idiot.

It is a self-selecting effect

I don't know ... could "hivemind" be seen as a compliment when leveled at a bunch of anarchists by a practitioner of groupthink and indulgent hive behaviour?

Inflation is low provided you dont eat or drive a car - and you use candles instead of electricity for lighting.

 :)

Inflation is actually low if one considers M3 (known monetary base + credit issued, etc) as opposed to simply M1 (monetary base).  The reason here would be because of the large amount of debt that was destroyed due to the real estate crash.  Even with the doubling of M1 since 2007, the paper value destroyed by the forclosures and general drop in home values exceeds the rise in M1.

Using price increases as your measurement for inflation, whether you include food and energy or not, is a fundamentally flawed method.

My impression of the situation is this...

From 2008, the monetary base (M0, I thought) has tripled. The reason we haven't seen increased prices due to this inflation is because banks have increased their reserves, which means they are not lending. In fact, I have heard (though have not found sources) that the Fed is paying banks interest on their excess reserves as an incentive.

This seems strange to me, as the stated point of the bank bailout was to increase the availability of credit. But as soon as the banks start loaning again, that tripled monetary base is going to be multiplied by the effect of fractional reserve lending, and... prices increase?

What do you think?

LOL!  What nonsense!  There has been numerous articles from real economists pointing out Krugman's poor prediction record!  One I've seen actually demonstrated how Krugman is only slightly better than throwing darts at a dartboard blindfolded.  If you want to see an economist with a real track record for accuracy, try Mish (http://globaleconomicanalysis.blogspot.com/)  Peter Schiff (http://www.europac.net/) or Rich Maybury (http://chaostan.com/).  All of these guys actually make money, real fortunes, based upon their predictions.  Krugman makes money selling advice to readers of the NYT.  He's the economic version of "ask Nancy".

If you are taking your advice from someone who doesn't make a living from his own advice, you are an idiot.

Come on. Everyone must have realized the Nobel Prizes have become worthless when they gave the Nobel Peace Prize to a warmonger.

Come on. Everyone must have realized the Nobel Prizes have become worthless when they gave the Nobel Peace Prize to a warmonger.

The Nobel Prize for Economics is not granted by the Nobel Prize Committee.  It's not really even related to the Nobel Prize.  It's given out by the Central Bank Board in honor of the Nobel Prize.  Basicly, if your economic theories are favorable to the central banks of the world, you're in the running.  Otherwise, you will never win.

Swedish economist Gunnar Myrdal (who was a recipient of the prize himself) and former Swedish minister of finance Kjell-Olof Feldt have also advocated that the Prize in Economics should be abolished. Myrdal's position of wanting the prize abolished was based in the fact that it had been given to such "reactionaries" as Friedrich Hayek (whom Myrdal shared the 1974 Prize in Economics with) and afterwards to Milton Friedman in 1976.

My impression of the situation is this...

From 2008, the monetary base (M0, I thought) has tripled. The reason we haven't seen increased prices due to this inflation is because banks have increased their reserves, which means they are not lending. In fact, I have heard (though have not found sources) that the Fed is paying banks interest on their excess reserves as an incentive.

Release Date: October 6, 2008

For release at 8:15 a.m. EDT


The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions' required and excess reserve balances. The payment of interest on excess reserve balances will give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target established by the Federal Open Market Committee.

Federal Reserve officials are staking their inflation-fighting credibility on an untested tool: the power to pay interest on bank reserves.

Congress granted the Fed this ability in 2008, and Chairman Ben S. Bernanke, Vice Chairman Janet Yellen and New York Fed President William Dudley have all cited it as a main reason why they’ll be able to keep the U.S. economy from overheating after pumping record amounts of cash into the financial system. Raising the rate, currently at 0.25 percent, is intended to entice banks to keep their money on deposit at the Fed instead of loaning it out and stoking inflation.

With the benchmark overnight lending rate trading at 0.1 percent, less than half the deposit rate, it isn’t clear how much control the central bank can exert over borrowing costs by raising the interest on reserves, said Dean Maki, chief U.S. economist at Barclays Capital. Internal critics also have cast doubt on the tool’s effectiveness. Philadelphia Fed President Charles Plosser said last month it isn’t a cure-all because it doesn’t address the need to shrink the central bank’s balance sheet and reduce the amount of reserves in the system.

“There is some concern in markets about whether the Fed will keep inflation under wraps as it goes through this exit strategy,” Maki said in a telephone interview from his New York office. “It’s unknown exactly what interest on reserves does to the economy.”

Cash in the banking system has ballooned since the credit crisis began in 2007, when the Fed embarked on its unprecedented monetary accommodation, which includes two bond-purchase programs that have swelled the central bank’s balance sheet to a record $2.69 trillion.

The amount of excess reserves climbed to $1.47 trillion this month from $991 billion at year-end and $2.2 billion at the start of 2007, Fed data show.

The Federal Open Market Committee begins a two-day meeting tomorrow and will decide whether to continue with its planned $600 billion of bond purchases through June.

The effectiveness of using interest on reserves, or IOR, as a main policy tool may depend on how closely the federal funds rate, or overnight inter-bank lending rate, follows its movements. The Fed has kept its target for the fed funds rate at zero to 0.25 percent since December 2008.

“The big unknown is how tight the spread between the IOR and effective fed funds rate will be,” said Dino Kos, a managing director at economic-research firm Hamiltonian Associates Ltd. in New York. “If the fed funds rate trades at a stable, and preferably narrow, discount to the IOR, then tightening policy through the IOR is doable. But a wide and unstable spread undermines the strategy.”

Kos is a former executive vice president and markets-group head at the New York Fed. The central bank has historically moved the federal funds rate by buying or selling Treasury securities, adding or withdrawing cash from the system.

The Fed probably would like to mimic the so-called corridor system in Europe, where the deposit rate acts as a floor to the overnight lending rate, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. The U.K. central bank’s benchmark, now at 0.5 percent, is the rate it pays on the reserves it holds for commercial banks. That’s below the overnight sterling London interbank offered rate of 0.57 percent.

The Frankfurt-based European Central Bank pays a rate on the deposits banks park with it overnight. The ECB raised this rate a quarter point to 0.5 percent on April 7, the same day it increased its benchmark refinancing rate by the same margin to 1.25 percent.

Ah, no.  Economics is, indeed, a science.  It's just that it's not that kind of science.  It's a social science, not a physical science.  As such, it's laws are based on how humans act, and therefore how they think.  Hence the name of the Austrian classic, Human Action.  Anyone who trys to tell you that mathmatical formulas can be derived from the economic data, or that the laws of economics drive the public and not the other way around, (*cough* Keynes *cough*) is full of crap.  Economics is the "dismal science" because it's a social science.  Physics is easy, your experiments (above quantum) are not affected by observations.  Humans don't act that way, they respond differently to the same stimuli, and moreso when they are aware that they are the experiment.

And by the way, I think you have a cartoonish view of Keynes.  One reason why I lean more towards Keynesianism than other schools is because it acknowledges that there is no such thing as a perfectly rational Homo economicus.  Coupled with information asymmetries in markets, this means that a pure market-lead economy will result in sub-optimal global outcomes.

This is obvious with even a moment's thought, and you aren't likely to find an Austrian denying it. The problem is, Keynes didn't have a better solution. And "sub-optimal" is subjective anyway.

This is obvious with even a moment's thought, and you aren't likely to find an Austrian denying it. The problem is, Keynes didn't have a better solution. And "sub-optimal" is subjective anyway.

I would consider a world wide depression caused by over allocation of money into a few sectors a sub optimal outcome. But maybe if we had more central bank intervention and more of government encouraging lending for homes we would be better off.

Dammit now I don't even know whether this is sarcasm or stupidity.

Surely everyone understands the real estate crisis by now.  Are you saying it was not a Keynesian phenomenon?  Individual investors blew up the housing bubble?

Nevertheless, my opinion is that when eventually Economics does become a science it is more likely to resemble Keynesianism than the Austrian school so favoured by this forum's hivemind.

And by the way, I think you have a cartoonish view of Keynes.  One reason why I lean more towards Keynesianism than other schools is because it acknowledges that there is no such thing as a perfectly rational Homo economicus.  Coupled with information asymmetries in markets, this means that a pure market-lead economy will result in sub-optimal global outcomes.

I, for one, am very much curious about what Krugman would say about the economic aspects of Bitcoin.

And by the way, why all the disdain for Krugman expressed in this thread?  As far as mainstream economists go, I have the utmost respect for him.  He has been consistently been correct on his predictions and he has always been coherent with his arguments.  Case in point: he clamored against the irresponsible build up of the deficit during the Bush years, because the Keynesian doctrine argues (correctly in my view) that during the "good times" one is supposed to reduce the debt so that a larger margin of maneuver is gained for increasing government spending during the "bad times".  Remember that many other economists (Greenspan et al) were actually against having a government surplus and cheered on the irresponsible Bush tax cuts.

Another point of reflection for this forum's hivemind: despite goldbugs having for many years been constantly raving about hyper-inflation, the fact is the US continues to have a rate of inflation that is extremely low by historical standards.  A rate so low that deflation is actually a bigger worry.  This is exactly the sort of outcome that Krugman predicted given the liquidity trap situation the US found itself in after the 2008 crisis.