Paul Krugman Gotcha

As many of you may already know, Paul Krugman is one of my least favorite people. Ever since Bush got elected he’s written books and columns in the NYTimes that breathlessly foretell a grim future where the US dollar collapses like the Argentinean peso because of the “unjust” tax cuts. Well those tax cuts which certain media outlets would like to portray as completely discretionary might be the biggest factor behind the current economic growth we’re now seeing. As this guy will likely be as close as progressives will get to winning a Nobel in Economics it should come as no surprise that virtually everything Krugman has written over the last 5 years has been completely wrong.


Roll the tape from March 11, 2003, please; his lead:

With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

Well. Per the Federal Reserve, I see that mortgage rates were 5.67% on March 7, and 5.61% on March 14, 2003.

Today, despite the war, financial markets continue to slumber - as of March 3, 2005, the Federal Reserve tells me that fixed rate mortgages were at 5.79%. Robert Samuelson puzzled over this a few days back.
Perhaps the Earnest Prof is a bit stronger when forecasting equities? Let's check his stock market call of
June 20, 2003; with the S&P 500 closing at 994.7 on June 19, 2003, Krugman wrote this:

The big rise in the stock market is definitely telling us something. Bulls think it says the economy is about to take off. But I think it's a sign that America is still blowing bubbles — that a three-year bear market and the biggest corporate scandals in history haven't cured investors of irrational exuberance yet.
Or, to put it another way: it's hard to find any real news to justify the market's leap. Instead, investors seem to be buying stocks because they are rising — which is pretty much the definition of a bubble.

As of this writing on March 4, 2005, the S&P is at 1221, up 11 on a good jobs report.

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