Paul Krugman Effect

[GoWest]

This is massive. 

http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/

Biggest press since the Silk Road coverage.

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[N12]

Agree. Reminds me of Schumer.

He basically said Bitcoin is digital gold and a good investment.

[apetersson]

this might hit the right audience for another bubble

[piramida]

What, he basically called bitcoin a failed experiment that has been a good investment so far, and you think that would attract investors?

[N12]

What, he basically called bitcoin a failed experiment that has been a good investment so far, and you think that would attract investors?

Yes.

[hugolp]

What, he basically called bitcoin a failed experiment that has been a good investment so far, and you think that would attract investors?

Also the demographics of the readers of Kruggy is probably one that has not hear much about Bitcoin, so it could bring new users.

[molecular]

I posted a comment. No off-topic or abusive content. Well, I call him childish, is that abusive?. Hope it gets approved.

[hugolp]

I posted a comment. No off-topic or abusive content. Well, I call him childish, is that abusive?. Hope it gets approved.

I posted a comment too. I think it was very polite but I dont know if it will be posted.

Krugman is known for censoring comments he does not like. In fact, he was getting schooled in his own blog (even by other keynesians) so he lowered the size allowed for the comments so people could not elaborate a propper answer to his posts. Krugman's blog at the NYT is more of a political propaganda platform than anything else.

[osmosis]

BitcoinMoney.com did a good reply,
http://www.bitcoinmoney.com/post/9913036774/paul-krugman-bitcoin-op-ed

[molecular]

Krugman is known for censoring comments he does not like. In fact, he was getting schooled in his own blog (even by other keynesians) so he lowered the size allowed for the comments so people could not elaborate a propper answer to his posts. Krugman's blog at the NYT is more of a political propaganda platform than anything else.

This probably means my comment will be censored. Here's what I wrote:

Mr. Krugman,
I'm not a regular reader of you, so I don't know how you spin things or maybe I'm missing some irony here, but I had to jump in.

You're pretty childishly jumping to conclusions, I must say. The bitcoin experiment is in no way over. We're in the "money distribution phase". We have no substantial economy built around bitcoin and our traditional economies do not use bitcoin. It's premature to proclaim failure of the experiment. It's childish to deduct anything about a potential new gold standard from bitcoin at this point.
Please think again.

[Grinder]

Of course it will be censored. By calling your opponent childish you are automatically excluding yourself from any serious debate.

[Elwar]

It is exposure at least.

If someone reading it today wants to invest they would probably take a few days to find out how to do that and then a few more days to get their money from MtGox to BTC.

So perhaps a bump next week with real investors and perhaps a small bump before then based on speculation.

[netrin]

Mr. Krugman,
I'm not a regular reader of you, so I don't know how you spin things or maybe I'm missing some irony here (but was happy to read a post on a topic very dear to me, so) I had to jump in.

You're pretty childishly jumping to conclusions, I must say. The bitcoin experiment is in no way over. We're in the "money distribution phase". We have no substantial economy built around bitcoin and our traditional economies do not use bitcoin. It's premature to proclaim failure of the experiment. It's childish (or) to deduct anything about a potential new gold standard from bitcoin at this point.
Please think again.

[Jixtreme]

Naysaying from Krugman reverberates as a vote of confidence in the ears of the sane-minded... What a lackey.

Regardless, I hope it has a positive effect. I wonder if he actually owns a few coins...

-Jix

[molecular]

Of course it will be censored. By calling your opponent childish you are automatically excluding yourself from any serious debate.

Yeah, that was a mistake.

EDIT: It's a bit sad really: still 0 comments. Surely the topic would be cause for some discussion even amongst his crowd, right?

[piramida]

Mr. Krugman,
I'm not a regular reader of you, so I don't know how you spin things or maybe I'm missing some irony here (but was happy to read a post on a topic very dear to me, so) I had to jump in.

You're pretty childishly jumping to conclusions, I must say. The bitcoin experiment is in no way over. We're in the "money distribution phase". We have no substantial economy built around bitcoin and our traditional economies do not use bitcoin. It's premature to proclaim failure of the experiment. It's childish (or) to deduct anything about a potential new gold standard from bitcoin at this point.
Please think again.

Great! You should provide blog comment editorial service for moneys Few strikes and it sounds adult.

[FreeMoney]

The actual value of transactions in Bitcoins has fallen rather than rising.

Wow! What a claim. Fallen since Jan 09? Since Jun 09? Since Jan 10? Jun 10? Jan 11?

Not likely!

[Piper67]

All right, just posted the comment below, let's see if it gets approved.

"I feel Mr. Krugman has failed to see the essential point in the Bitcoin experiment. Its main strength isn't that it is naturally deflationary (or neutrally inflationary in the long term), but that it is decentralised. There is no government, federal reserve or central bank that determines how Bitcoins are to be "minted", this happens organically through a peer to peer network.

So it isn't so much that Bitcoin has created a new gold standard, but that in the digital realm, it has become the equivalent of the actual gold itself. Gold that is instantaneously transmissible through the internet, uncounterfeitable, fungible and infinitely scalable.

But this is hardly the end of digital or cryptocurrencies. Mr. Krugman is possibly correct in the assumption that if all there was was Bitcoin, it would lead to a stagnant economy due to hoarding. But if Bitcoin is the digital equivalent of gold, it is quite reasonable to assume that in the future, another digital currency might appear that will be just as inflationary as any fiat currency today, but based on and backed by Bitcoin.

Bitcoin is a remarkable experiment, a technological answer to the question: what is money? This has philosophical and political ramifications that go well beyond the scope of economics and market forces. The fact that it is distributed across a network that anyone can access, that it is open source and transparent, and that its creation and supply are finite and predictable makes it an eminently democratic experiment as well."

[netrin]

Beautifully written and intriguing.

[Herodes]

Of course it will be censored. By calling your opponent childish you are automatically excluding yourself from any serious debate.

Lol. So we should rather not speak the truth?

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

But there's an element of truth in what Grinder says here. If someone called me an idiot or child for some opinion that I have,
I'd probably not feel like discussing anymore with them. However, if I do have false statements or statements that lack a base
in hard facts, I'd be more than happy to learn about my errors.

Hearing that this blogger does not like to have comments on his blog is not good at all. When ego is bigger than a sincere interest
to learn and grow, the one losing out is the blogger, imo.

[netrin]

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

This blogger is a Nobel prize winning professor of economics and international affairs at Princeton specializing in international trade and finance. He has numerous detractors, but we shouldn't expect him to suffer fools nor undue criticism. Opening with "You're being..." leads to a personal remark. Some humility is in order. Nor is Michael Suede making friends by rebuking with "Krugman is a Keynesian...also a complete lunatic"

[Elwar]

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

This blogger is a Nobel prize winning professor of economics and international affairs at Princeton specializing in international trade and finance. He has numerous detractors, but we shouldn't expect him to suffer fools nor undue criticism. Opening with "You're being..." leads to a personal remark. Some humility is in order. Nor is Michael Suede making friends by rebuking with "Krugman is a Keynesian...also a complete lunatic"

Jimmy Carter also won the Nobel Peace prize...they are not all that selective.

[netrin]

As well as Obama before he did anything. And Kissinger for the Vietnam war and Le Duc Tho who refused. My point was not to glorify and perhaps I should have left out all the titles. But I think we in general need some humility. Bitcoin is not exactly a happy household name. And though we claim bitcoin is an experiment in progress we tend to be quite assertive with our economic conclusions.

[osmosis]

We are being quoted.

http://www.theatlanticwire.com/business/2011/09/paul-krugman-incites-bitcoin-cyber-geek-infighting/42188/

I liked the "Finally, others took on Krugman's arguments on the merits." 

[hugolp]

We are being quoted.

http://www.theatlanticwire.com/business/2011/09/paul-krugman-incites-bitcoin-cyber-geek-infighting/42188/

I liked the "Finally, others took on Krugman's arguments on the merits." 

We are news!

Thats quite amazing. Probably talking about Bitcoin gives them a lot of hit, otherwise they would not create an article out of a forum quotes.

[Grinder]

Lots of comments on the article now. I didn't see molecular's, but there are some others saying similar things.

[molecular]

Thats quite amazing. Probably talking about Bitcoin gives them a lot of hit, otherwise they would not create an article out of a forum quotes.

Actually I think it does make sense. After all, we have no centralized voice that could answer to anything, so if a journalists wants to establish the communities reaction to something, there's not much else to do than to scan the forum, right? If he'd call a single one of us or two he'd likely get a different or at least partial picture. We're quite a diverse crowd nowadays.

[Herodes]

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

This blogger is a Nobel prize winning professor of economics and international affairs at Princeton specializing in international trade and finance. He has numerous detractors, but we shouldn't expect him to suffer fools nor undue criticism. Opening with "You're being..." leads to a personal remark. Some humility is in order. Nor is Michael Suede making friends by rebuking with "Krugman is a Keynesian...also a complete lunatic"

I agree some humility is in order. I didn't know the blogger was such a big shot, usually I listen carefully to people with that kind of credientials, as they posess a lot more knowledge in the field than any of their students. But this is the internet, would be strange if everyone showed humility..

[Elwar]

LOOK AT ME! I AM ON TV!!!

[hashman]

The actual value of transactions in Bitcoins has fallen rather than rising.

Wow! What a claim. Fallen since Jan 09? Since Jun 09? Since Jan 10? Jun 10? Jan 11?

Not likely!

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

"Bitcoin has [...], in which the money supply is fixed rather than subject to increase via the printing press."

Maybe he saw that it would be fixed at 21 million bitcoins, but mistook the tense for present and stopped reading there?  Even a casual read through any documentation of "what is mining" would make it clear that the money supply is indeed increasing via the printing press, in direct contradiction to his statement.

[netrin]

People seem upset by a generally fair article. Krugman has now gotten a taste for bitcoin, perhaps he'll look into it further. Chill out. It's not like people read Krugman without a grain of salt. It's economics after all.

[osmosis]

http://twitter.com/#!/bitcoinmedia/status/111617120395214849

@bitcoinmedia
huff.to/oGcULX You get your economic advice from this guy ? #krugman #epicfail #bitcoin

http://www.huffingtonpost.com/2011/08/15/paul-krugman-fake-alien-invasion_n_926995.html

Paul Krugman: Fake Alien Invasion Would End Economic Slump (VIDEO)
http://www.youtube.com/watch?v=E1Fzzs7oVaA

"If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months," he said. "And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better--" "We need Orson Welles, is what you're saying," Rogoff cut in.

[MoonShadow]

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

This blogger is a Nobel prize winning professor of economics and international affairs at Princeton specializing in international trade and finance. He has numerous detractors, but we shouldn't expect him to suffer fools nor undue criticism. Opening with "You're being..." leads to a personal remark. Some humility is in order. Nor is Michael Suede making friends by rebuking with "Krugman is a Keynesian...also a complete lunatic"

Jimmy Carter also won the Nobel Peace prize...they are not all that selective.

They are not the same prize.  The Nobel Prize for Economics is an award granted by a bank in honor of Nobel, not by his own foundation.  The Nobel Prize for Economics is a reflection of the kind of economics that central banks respect and wish to promote.  It's not an award commonly given to real economists.  Think of it this way, if you are a scientist whose job is to study economics, and present predictions; yet a significant portion of your income is directly or indirectly the result of government and/or central bank funding, are you still impartial?

Roughly half of all Economists in America fit the above description.  It is very difficult for even the most intelligent professionals to see the truth when their paycheck depends upon their not seeing it.  Krugman is an example of cognative dissonance in academia and media.  Real economists don't teach economics, nor advise governments as a profession.  Real economists make investments and fund startups.  Peter Thiel is a real economist.  Paul Krugman is a political talking head, who happens to focus on economic issues.  Even mentioning his Nobel Prize in Economics as support for his economic theories, rather than their fundamental logic, is an 'appeal to authority' fallacy.  Krugman is a master at bullsh*tting his readership, most of whom are not thoughtful enough nor well read enough to see through the bs without outside help.  This includes many very otherwise intelligent and educated people.  I would like to see what his own investment portfolio looks like, because I'd wager that his own choices would stand to benefit grandly whenever governments follow his advice.

[hugolp]

People seem upset by a generally fair article. Krugman has now gotten a taste for bitcoin, perhaps he'll look into it further. Chill out. It's not like people read Krugman without a grain of salt. It's economics after all.

You dont know Krugman and thats why you are being naive. But hey, youll discover sooner or later.

Btw, at first read I also though the post was not that bad, but giving it more though the problem of the post is that its very wrong. Kruggy says that there is little trade because there is no inflation. Well, we are in the inflationary phase of Bitcoin so, according to him, there should be a lot of trade. But specially the part saying that a currency should be for trade not ofr making a profit. Thats exactly what Bitcoin is, the Federal Reserve notes are the ones that help a few to profit.

[zby]

The article itself is not that important.  There are many people that don't agree with Krugman - he is one of the leaders of one world view in the very polarized political debate.  But what he posts will be discussed in many places.

[molecular]

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

"Bitcoin has [...], in which the money supply is fixed rather than subject to increase via the printing press."

Maybe he saw that it would be fixed at 21 million bitcoins, but mistook the tense for present and stopped reading there?

I think he saw bitcoin, looked at it and thought: This is awesome support for my thesis that a new gold standard is BS.

Bitcoin is used as an argument here, wrongly, as I think, because our little experiment is in no way over and it's not used as currency for an established economy.

This guy seems to have an agenda and bitcoin is being instrumentalized.

[EhVedadoOAnonimato]

All right, just posted the comment below, let's see if it gets approved.

"I feel Mr. Krugman has failed to see the essential point in the Bitcoin experiment. Its main strength isn't that it is naturally deflationary (or neutrally inflationary in the long term), but that it is decentralised. There is no government, federal reserve or central bank that determines how Bitcoins are to be "minted", this happens organically through a peer to peer network.

I beg to differ here. The main point of bitcoin, to me, is precisely the fact that it is sound money, ie, that it will stop inflating at a certain point.
Being decentralized is the necessary means to achieve such goal, since centralized solutions can be shut down or strictly controlled.
But, well, I guess that's a matter of opinion. The greatest change brought by bitcoin is for sure decentralized digital money. Sound money existed before.

Mr. Krugman is possibly correct in the assumption that if all there was was Bitcoin, it would lead to a stagnant economy due to hoarding.

He's blatantly wrong on that, as usual.

[Grinder]

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

It's more correct to call it fixed than variable, even though the total number of bitcoins hasn't been trickled out yet. Yes, it's possible to nitpick on this, but only if you're desperatly looking for something so you can write him off as a moron you don't need to listen to.

[flix]

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

Actually Krugman usually does his homework and then plays dumb when he wants to mislead. did you see the metadescription for the article?  "Digital, but still a barbarous relic."

He hates the idea of bitcoin, just as he hates gold and all and any currency competition. Without money monopoly he and his keynesian buddies are nothing.

[Hawker]

The poster said the bloggers actions was childish, not that he is a child. But perhaps it would be interpreted that way anyway.

This blogger is a Nobel prize winning professor of economics and international affairs at Princeton specializing in international trade and finance. He has numerous detractors, but we shouldn't expect him to suffer fools nor undue criticism. Opening with "You're being..." leads to a personal remark. Some humility is in order. Nor is Michael Suede making friends by rebuking with "Krugman is a Keynesian...also a complete lunatic"

Jimmy Carter also won the Nobel Peace prize...they are not all that selective.

They are not the same prize.  The Nobel Prize for Economics is an award granted by a bank in honor of Nobel, not by his own foundation.  The Nobel Prize for Economics is a reflection of the kind of economics that central banks respect and wish to promote.  It's not an award commonly given to real economists.  Think of it this way, if you are a scientist whose job is to study economics, and present predictions; yet a significant portion of your income is directly or indirectly the result of government and/or central bank funding, are you still impartial?

Roughly half of all Economists in America fit the above description.  It is very difficult for even the most intelligent professionals to see the truth when their paycheck depends upon their not seeing it.  Krugman is an example of cognative dissonance in academia and media.  Real economists don't teach economics, nor advise governments as a profession.  Real economists make investments and fund startups.  Peter Thiel is a real economist.  Paul Krugman is a political talking head, who happens to focus on economic issues.  Even mentioning his Nobel Prize in Economics as support for his economic theories, rather than their fundamental logic, is an 'appeal to authority' fallacy.  Krugman is a master at bullsh*tting his readership, most of whom are not thoughtful enough nor well read enough to see through the bs without outside help.  This includes many very otherwise intelligent and educated people.  I would like to see what his own investment portfolio looks like, because I'd wager that his own choices would stand to benefit grandly whenever governments follow his advice.

There is an ongoing dispute between him and Gross of PIMCO about who is calling the market correctly.  So far, Krugman is winning. 

http://krugman.blogs.nytimes.com/2011/08/30/who-you-gonna-bet-on-yet-again-somewhat-wonkish/

He's been very good at forecasting the effects of QE, the prospect for bond rates and I think he is on the money about the Euro. 

[Grinder]

There is an ongoing dispute between him and Gross of PIMCO about who is calling the market correctly.  So far, Krugman is winning. 
http://krugman.blogs.nytimes.com/2011/08/30/who-you-gonna-bet-on-yet-again-somewhat-wonkish/
He's been very good at forecasting the effects of QE, the prospect for bond rates and I think he is on the money about the Euro. 

That's not how it works here. If you agree with someone you just have to find one example of them being right to say that they are really competent and should be listened to, and if you disagree you only need to find one example of them being somewhat wrong to say that they have have no clue and can be ignored.

[hugolp]

There is an ongoing dispute between him and Gross of PIMCO about who is calling the market correctly.  So far, Krugman is winning.  

http://krugman.blogs.nytimes.com/2011/08/30/who-you-gonna-bet-on-yet-again-somewhat-wonkish/

He's been very good at forecasting the effects of QE, the prospect for bond rates and I think he is on the money about the Euro.

More ridiculous, Krugman's predictions have been horrible. He has been predicting deflation and we have not seen any of it. He claimed at the end of 2010 that the biggest thread was deflation, and three months later prices started to raise.

Krugman is notorious by claiming a lot of things and only bring back the ones he randomly gets right. His biggest and most important calls during this crisis have been backwards.

EDIT: And btw, he was not the only one claiming there would be investors going back to treasuries after the fed got out by ending QE.

[netrin]

More ridiculous, Krugman's predictions have been horrible. He has been predicting deflation and we have not seen any of it. He claimed at the end of 2010 that the biggest thread was deflation, and three months later prices started to raise.

I'm no nobel prize winning economist, but is it not possible that 2008 brought such massive deflationary pressure, contraction of M3, that the various bailouts and quantitative easing brought us relative stability? The Fed began in December 2008 to purchase and hold $2.1 trillion of bank debt, MBS, and UST through June 2010. The Fed announced QE2 in November 2010.

Inflation	J	F	M	A	M	J	J	A	S	O	N	D
2008	4.3	4.0	4.0	3.9	4.2	5.0	5.6	5.4	4.9	3.7	1.1	0.1
2009	0.0	0.2	-0.4	-0.7	-1.3	-1.4	-2.1	-1.5	-1.3	-0.2	1.8	2.7
2010	2.6	2.1	2.3	2.2	2.0	1.1	1.2	1.1	1.1	1.2	1.1	1.5
2011	1.6	2.1	2.7	3.2	3.6	3.6	3.6

Granted, opinions vary greatly on the CPI, but given the numbers above, I'd have to say QE2 brought inflation if not employment and QE3 won't happen this year. Perhaps Krugman would have been right if the Fed hadn't printed 20% of US GDP.

[hugolp]

More ridiculous, Krugman's predictions have been horrible. He has been predicting deflation and we have not seen any of it. He claimed at the end of 2010 that the biggest thread was deflation, and three months later prices started to raise.

I'm no nobel prize winning economist, but is it not possible that 2008 brought such massive deflationary pressure, contraction of M3, that the various bailouts and quantitative easing brought us relative stability? The Fed began in December 2008 to purchase and hold $2.1 trillion of bank debt, MBS, and UST through June 2010. The Fed announced QE2 in November 2010.

Inflation	J	F	M	A	M	J	J	A	S	O	N	D
2008	4.3	4.0	4.0	3.9	4.2	5.0	5.6	5.4	4.9	3.7	1.1	0.1
2009	0.0	0.2	-0.4	-0.7	-1.3	-1.4	-2.1	-1.5	-1.3	-0.2	1.8	2.7
2010	2.6	2.1	2.3	2.2	2.0	1.1	1.2	1.1	1.1	1.2	1.1	1.5
2011	1.6	2.1	2.7	3.2	3.6	3.6	3.6

Granted, opinions vary greatly on the CPI, but given the numbers above, I'd have to say QE2 brought inflation if not employment and QE3 won't happen this year. Perhaps Krugman would have been right if the Fed hadn't printed 20% of US GDP.

If by stability you mean that QE avoided the re-structuration of the economy and prolonged the crisis, then yes. It did that.

Also keep in mind that Krugman is of the opinion that the Fed and the government have done too little. For Kruggy the Fed has been tame and the increase of government spending not enough. Therefore I hardly see how he could have been surprised by the government doing too much.

And I specifically mentioned his prediction of final 2010 that deflation was the big danger. Nothing notorious has changed in monetary policy since then, and Krugman has been utterly wrong. This mistake is so big that he has done something he rarely does, admit a mistake. But he has done it by saying that his adversaries were also wrong becuase they said that M0 or M1 (cant remember which one) was the driver of price inflation. Problem is this is a lie. Everybody I read says that M0 and M1 are just the first stages of monetary inflation and that M2 and M3 are more closely correlated to the CPI.

If you try to make sense of what Krugman says you are going to end un with a headache becuase his blog is just a political platform. Some of his early books are worth reading. Not his blog.

[netrin]

If by stability you mean that QE avoided the re-structuration of the economy and prolonged the crisis, then yes. It did that.

I don't deny that central banks are putting out a fire with blowtorches. I'm just pointing out the 2009 was deflationary at least according to the Fed's own CPI and that QE1 most likely did reflate prices, likewise with 2010 and QE2 to the 2008 average.

Also keep in mind that Krugman is of the opinion that the Fed and the government have done too little.

I was not aware of that. Is/was that his opinion before or after QE2?

And I specifically mentioned his prediction of final 2010 that deflation was the big danger. Nothing notorious has changed in monetary policy since then, and Krugman has been utterly wrong. This mistake is so big that he has done something he rarely does, admit a mistake. But he has done it by saying that his adversaries were also wrong becuase they said that M0 or M1 (cant remember which one) was the driver of price inflation. Problem is this is a lie. Everybody I read says that M0 and M1 are just the first stages of monetary inflation and that M2 and M3 are more closely correlated to the CPI.

I'd like to read his admission, if you have a link. I agree that base money and M1 have very little to do with inflation directly. Those aggregates can be multiplied through weaker money (M2, M3) but thus far, most of it is just sitting in Fed reserves doing nothing but backing the collapsing credit. A bank is required by law to hold a 10% fraction of M1 from which it lends out (creates M2) money for business, housing, etc. When people start paying off their mortgages, defaulting, bankruptcy, etc, M2 evaporates. The central banks (Fed) are generating more M1 and giving it to banks at 0% interest in the hope that banks through lending will then reinflate M2, but it's not working. So in addition to giving base money away for free, the Fed is buying government bonds and devaluing the currency, driving real price inflation up (food and energy) while the bogus consumer price index (housing, transportation, gadgets) is theoretically going down.

[hashman]

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

Actually Krugman usually does his homework and then plays dumb when he wants to mislead. did you see the metadescription for the article?  "Digital, but still a barbarous relic."

He hates the idea of bitcoin, just as he hates gold and all and any currency competition. Without money monopoly he and his keynesian buddies are nothing.

Hmm, yes you might be right about this but I still don't get the angle.  If he really disliked bitcoin then why bring all the press to it with the article in the NYT?  It didn't come across to me as entirely negative..   Most likely I don't see all the politics involved      

[MoonShadow]

If by stability you mean that QE avoided the re-structuration of the economy and prolonged the crisis, then yes. It did that.

I don't deny that central banks are putting out a fire with blowtorches. I'm just pointing out the 2009 was deflationary at least according to the Fed's own CPI and that QE1 most likely did reflate prices, likewise with 2010 and QE2 to the 2008 average.

There is the key piece of data right there.  The Fed's own statistics confirm that the Fed was doing the right thing!  Ever consider the possibility that those stats are intentionally manipulated to make the government/federal reserve look like they know what they are doing?  If the CPI were calculated in the same manner that it was in 1970's, the CPI would be over 6% right now and would never have shown a negative number.  But it's not calculated the same way.  M1 isn't even reported anymore, and has to be guessed.  Shadowstats.com, which does have it's own biases and issues I admit up front, does a much better job producing metrics that compare to those that we used to use.  For example, if we were still using the unemployment metrics that we still use in history books for the Great Depression, U6 would be the closest number to that metric.  Last I checked, U6 was over 16%; and that is even with the lowest participation rate in the recorded history of the US labor force.

[Jixtreme]

Hmm, yes you might be right about this but I still don't get the angle.  If he really disliked bitcoin then why bring all the press to it with the article in the NYT?  It didn't come across to me as entirely negative..   Most likely I don't see all the politics involved      

People who find themselves important often will denounce things, thinking people will simply follow their all-important guidance. Unfortunately for them, some people still think for themselves.

I cheer every time a Chuck Schumer or Paul Krugman denounces something I endorse. It usually means I am endorsing the right thing.

-Jix

[netrin]

Ever consider the possibility that those stats are intentionally manipulated to make the government/federal reserve look like they know what they are doing?  If the CPI were calculated in the same manner that it was in 1970's, the CPI would be over 6% right now and would never have shown a negative number.  But it's not calculated the same way.  M1 isn't even reported anymore, and has to be guessed.

Yes, I am quite aware of that, and made several allusions to that point in my previous two posts, including the SGS chart comparing Fed CPI with SGS traditional calculation. The new CPI specifically eliminates food and energy because these are considered too volatile to be meaningful. Never mind the fact that monetary volatility drives commodity price volatility: Oil, food, and gold are stable relative to each other, but not paper. Furthermore, since government obligations are adjusted according to the new CPI, it is to the creditors advantage to suppress CPI, including government salaries, Social Security beneficiaries, veterans, and food stamps, to name a few.

It is M3 that is no longer reported by the Fed.

[hugolp]

I don't deny that central banks are putting out a fire with blowtorches. I'm just pointing out the 2009 was deflationary at least according to the Fed's own CPI and that QE1 most likely did reflate prices, likewise with 2010 and QE2 to the 2008 average.

And I agree that it would have been even more deflationary without the cental bank actions. The point I was trying to make is thats exactly what the economy needed. Also, the central banks have always avoided deflation, so it was not that hard to predict that they would avoid deflation this time around again.

I was not aware of that. Is/was that his opinion before or after QE2?

Before and after QE2.

I'd like to read his admission, if you have a link.

I cant find the link but it was in response to this one: http://krugman.blogs.nytimes.com/2011/06/14/the-power-of-minus/ Read the comments, its hilarious.

I agree that base money and M1 have very little to do with inflation directly. Those aggregates can be multiplied through weaker money (M2, M3) but thus far, most of it is just sitting in Fed reserves doing nothing but backing the collapsing credit. A bank is required by law to hold a 10% fraction of M1 from which it lends out (creates M2) money for business, housing, etc. When people start paying off their mortgages, defaulting, bankruptcy, etc, M2 evaporates. The central banks (Fed) are generating more M1 and giving it to banks at 0% interest in the hope that banks through lending will then reinflate M2, but it's not working. So in addition to giving base money away for free, the Fed is buying government bonds and devaluing the currency, driving real price inflation up (food and energy) while the bogus consumer price index (housing, transportation, gadgets) is theoretically going down.

Exactly.

Just one thing, the banks are not required to have a 10% in reserves any more. Now its variable depending on the assets they have and in practice is way lower than 10%.

[netrin]

Coming back to OP, whether Krugman is wrong or right, he has a large readership who may and often do not agree with him. Furthermore, Krugman has stated that bitcoin has been a good investment but bad for trade. All together, Krugman has done bitcoin exchanges a favor and the merchants will follow. Gentlemen, bitcoin is going mainstream!

[payb.tc]

Gentlemen, bitcoin is going mainstream!

in america.

barely a peep out of aussie journos yet in comparison.

[netrin]

Just low on the sigmoid curve...



In the trough of disillusionment...

[hashman]

Good point.  Looks to me like he didn't spend 20 seconds to even read the wikipedia article about bitcoins.  The most directly false statement was:

It's more correct to call it fixed than variable, even though the total number of bitcoins hasn't been trickled out yet. Yes, it's possible to nitpick on this, but only if you're desperatly looking for something so you can write him off as a moron you don't need to listen to.

I don't feel so desperate to nitpick, sorry if it came across like that.  New bitcoins are now being printed (issued really) at 50 every 10 minutes.  A quick read through his article might lead people to believe that no new bitcoins are issued.  In my mind that's an important difference and one that should be checked before going in the NYT.  If it were my article I would feel the need to publish an erratum.  However, I do agree with zby and netrin..  these are technical details and people will know to take them with a grain of salt from economists.  And you are right: the monetary inflation (of BTC) is fixed not variable.    


  

[julz]

And now the bitcoin haters on slashdot are on to it: http://news.slashdot.org/story/11/09/08/2134242/Krugman-On-Bitcoin-and-the-Gold-Standard

[netrin]

And now the bitcoin haters on slashdot are on to it

Speaking of slashdot morons, why is it so common to confuse Greenland with Iceland? http://science.slashdot.org/story/11/09/08/200205/Icelandic-Rocks-Suggest-Meteorites-Brought-Gold-To-Earth (4 B year old Isua is a hike away from here)

[osmosis]

http://www.libertariannews.org/2011/09/08/krugman-inception/

[Nagle]

Krugman must have written that article before the price started to collapse.

[molecular]

my comment actually did make it in after all: http://community.nytimes.com/comments/krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/?permid=33#comment33

Nice to see the censoring is not as bad or even non-existant.

[TheMalon]

Agree. Reminds me of Schumer.

He basically said Bitcoin is digital gold and a good investment.

LOL
Thinking of Bitcoin as an investment is as stupid as thinking of dust as an investment.
Read this article: http://www.technologyreview.com/computing/38392/ ... the guy doesn't make any "predictions" he only analyze the current situation.

[Boussac]

It's interesting to witness how difficult it is to think out of the box even for a Nobel prize winner in economics.
He cannot help it but project on bitcoins his outdated vision of what a "monetary system" was before the invention of bitcoins.

Perhaps, Krugman new claim for fame is the definition of a new profession: bitcoin-basher.
Given the amount of reaction his moronic article generated, I am convinced that pretty soon some journalists or "economists" will be able to make a reasonable living out of it..

[The_Duke]

what a "monetary system" was before the invention of bitcoins.

Jesus F. Christ, the megalomania of some people never stops to amaze me. The monetary system before bitcoin? Really? Bitcoin has already changed all of that?

[cbeast]

what a "monetary system" was before the invention of bitcoins.

Jesus F. Christ, the megalomania of some people never stops to amaze me. The monetary system before bitcoin? Really? Bitcoin has already changed all of that?

There have been smaller money systems than bitcoin. Bitcoin is in an early phase, but it is global. Some people don't think it is revolutionary, yet. Time will reveal to them what the geeks already believe.

[iprivately]

While I don't like Krugman, having him mention Bitcoin in the NYT is huge. You'll see new entrants to the market.

[molecular]

While I don't like Krugman, having him mention Bitcoin in the NYT is huge. You'll see new entrants to the market.

... who will be able to buy at competitive prices!

[iprivately]

While I don't like Krugman, having him mention Bitcoin in the NYT is huge. You'll see new entrants to the market.

... who will be able to buy at competitive prices!

does it matter?

[molecular]

While I don't like Krugman, having him mention Bitcoin in the NYT is huge. You'll see new entrants to the market.

... who will be able to buy at competitive prices!

does it matter?

I didn't mean that in a bad way (envy). I'm not sure wether or not it makes any difference or what kind of difference that would be.

[netrin]

Maybe Krugman is more devious that we give credit. Who is going to look at this chart and say, "Hey, now doesn't that look like fun?"

[bitcon]

cant go anywhere but up now.

[iprivately]

take a look at this one, yikes!

http://i56.tinypic.com/9i94dk.png

[Grinder]

It's interesting to witness how difficult it is to think out of the box even for a Nobel prize winner in economics.
He cannot help it but project on bitcoins his outdated vision of what a "monetary system" was before the invention of bitcoins.

Reality seems to have the same outdated vision, but who cares?

[mobodick]

And now the bitcoin haters on slashdot are on to it: http://news.slashdot.org/story/11/09/08/2134242/Krugman-On-Bitcoin-and-the-Gold-Standard

Give slashdot some credit. The first post was:
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.

[dserrano5]

take a look at this one, yikes!

There's a subtle difference tho: DJI shows a ≅10% fall—mtgox has fallen 50% since the netrin graph highs.

[hightax]

And now the bitcoin haters on slashdot are on to it: http://news.slashdot.org/story/11/09/08/2134242/Krugman-On-Bitcoin-and-the-Gold-Standard

Give slashdot some credit. The first post was:
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.

For some stupid reason people who call themselves "austrian economists" are still given credibility despite their continued track record of failure, so in this case the distinction is prudent.

[kjj]

Give slashdot some credit. The first post was:
Qualifying Krugman as a "prominent Keynesian economist" is like calling Stephen Hawking a "prominent Einsteinian physicist". I call shenanigans.

For some stupid reason people who call themselves "austrian economists" are still given credibility despite their continued track record of failure, so in this case the distinction is prudent.

Heh.  Track record of failure.

If you want a real track record of failure, consider that all evidence in favor of Keynesianism is in the form of "well, sure, this was a fucking disaster, but think how much worse it would have been if we hadn't stepped in".

You wouldn't trust a doctor that killed each and every patient he ever treated just because he claims that they would have turned into bloodthirsty zombies if he hadn't helped.

[mrb]

The most insightful comment to Krugman's blog so far is the one suggesting that a very simple Bitcoin fork could address the only "flaw" that Krugman noted: one could change the cap from 21M coins to a slightly inflationary model where, for example, the coins supply would inflate by +2% every year. (I put "flaw" in quotes because the cap was specifically not seen as a flaw by Satoshi.)

Think about it people. If all it takes for a decentralized crypto currency to be successful (according to this prominent economist), then this fork of Bitcoin is bound to happen.

[molecular]

The most insightful comment to Krugman's blog so far is the one suggesting that a very simple Bitcoin fork could address the only flaw that Krugman noted: one could change the cap from 21M coins to a slightly inflationary model where, for example, the coins supply would inflate by +2% every year.

Think about it people. If all it takes to get a decentralized crypto currency validated by a prominent economist like Krugman, then this fork of Bitcoin is bound to happen.

KruggieCoin, yay! Do you think he could get major nationstates to use it? That would be quite a bit better than XYZScamCoin, although it also only has a slight modification of the code, too (most prevalent criticism towards OtherCoins)

[hugolp]

The most insightful comment to Krugman's blog so far is the one suggesting that a very simple Bitcoin fork could address the only "flaw" that Krugman noted: one could change the cap from 21M coins to a slightly inflationary model where, for example, the coins supply would inflate by +2% every year. (I put "flaw" in quotes because the cap was specifically not seen as a flaw by Satoshi.)

Think about it people. If this is all it takes to get a decentralized crypto currency validated by a prominent economist like Krugman, then this fork of Bitcoin is bound to happen.

Please go ahead and good luck.

Im really looking forward to someone to create an inflationary version of Bitcoin, so when it fails we can point at it and end up the nonsense.

[wumpus]

Im really looking forward to someone to create an inflationary version of Bitcoin, so when it fails we can point at it and end up the nonsense.

Bitcoin is extrememly inflationary at the moment, so the best example is itself. Much more than 2% of the current number of coins are generated per year. Yes, this won't be true some point in the (long) future, but that's so long away I doubt it has any influence on the market.

[Lupus_Yonderboy]

The Real Krugman Effect




I am really looking forward to the failure of Bitcoin so we can all point at it and end this nonsense

Nobel economist > armchair forum economists

[labestiol]

If the fall last week is really because of Krugman article, then i'm felling better. I was afraid something important happened.

Paul Krugman is a perfect example of someone who is either

a) Intellectually limited, not able to think outside of the box
b) Intellectually dishonest

If you want a good laugh, just read his July 11 explanation for rising gold price : http://krugman.blogs.nytimes.com/2011/07/19/the-glenn-beck-debeers-connection/. I think that's a good example about how he thinks.
If people are stupid enough to sell the btc if he says so, then thanks, i'll buy that dip.