Nobel economist praises Brown

thebman

I don't know how much truth is in it but if it is true that Britain took the right decisions then it seems likely we managed to pick all the wrong ones by comparison and must question our leadership (not that we aren't already).

Embattled British Prime Minister Gordon Brown won some backing from a Nobel Prize-winning economist today, who said the UK economy looked to be faring the best in Europe.

Princeton University economics professor Paul Krugman praised Mr Brown's handling of the banking crisis and his economic policies as "intelligent".

"I think the UK economy looks the best in Europe at the moment," he told The Observer. "The fact of the matter is that Britain did manage to stabilise the banking system."

http://breakingnews.ie/business/eykfeyqlgbid/#ixzz0IQGLyWTi&D

http://breakingnews.ie/business/eykfeyqlgbid/

sceptre

Without being a complete arse about it, almost regardless of your economic actions you'll find a Nobel economics laureate to say you're doing a great job if you look hard enough to grab the one that likes your methods. Unless you're truly incompetent.

silverharp

krugman has no clue when it comes predicting how markets or countries will be in the future. Anything he says is best taken with a pinch of salt

thebman

lol I would have suspected as much given the UK's current situation

I thought I'd throw it out there to see if had any substance.

nesf

thebman wrote: »

I don't know how much truth is in it but if it is true that Britain took the right decisions then it seems likely we managed to pick all the wrong ones by comparison and must question our leadership (not that we aren't already).

Our situation and the UK's are not very comparable, so to draw conclusions like the above is a bit pointless.

Permabear

This post has been deleted.

transylman

sceptre wrote: »

Without being a complete arse about it, almost regardless of your economic actions you'll find a Nobel economics laureate to say you're doing a great job if you look hard enough to grab the one that likes your methods. Unless you're truly incompetent.

Well the UK are doing the best out of all the large countries in Europe, that's pretty inarguable. By some measures they have even started to grow again. You have to give them some credit for that.

The economist in question also said Ireland was like a worst case scenario for America.
http://www.nytimes.com/2009/04/20/opinion/20krugman.html

SirHenryGrattan

thebman wrote: »

I don't know how much truth is in it but if it is true that Britain took the right decisions then it seems likely we managed to pick all the wrong ones by comparison and must question our leadership (not that we aren't already).


http://breakingnews.ie/business/eykfeyqlgbid/

I assume you and Paul must be living in some kind of parallel universe. As someone who has to deal with the reality of living in the "real" Britain let me educate you. Brown has managed to bail out the banks and marginally stimulate the economy by mortgaging the future. We are £2,200,000,000,000 in debt. That's two trillion. UK national debt will jump from 44pc of GDP in 2007 to 78pc by the end of 2010. Brown refused to run budget surpluses during the boom years and now he refuses to bite the bullet. He needs to raise taxes and cut public spending fast but he won't because he still has delusions about winning the next election. The village idiot would have done a better job.

Other countries are just not as indebted as we are. There are no 100% mortgages in Germany and interest only mortgages are illegal. The average Garman carries little personal debt. A million Brits use their credit cards to pay the mortgage! As unemployment mounts people will default. The number of people reliant on unemployment benefit and social welfare services will soar just as the Government needs to cut public spending. We are in for a very rough ride. I forecast the rise of extreamist and isolationist parties like the BNP and UKIP and a backlash against foreigners. It's won't be pretty.

silverharp

SirHenryGrattan wrote: »

I
Other countries are just not as indebted as we are. There are no 100% mortgages in Germany and interest only mortgages are illegal. The average Garman carries little personal debt. A million Brits use their credit cards to pay the mortgage! As unemployment mounts people will default. The number of people reliant on unemployment benefit and social welfare services will soar just as the Government needs to cut public spending. We are in for a very rough ride. I forecast the rise of extreamist and isolationist parties like the BNP and UKIP and a backlash against foreigners. It's won't be pretty.

Amen , you will even find if you stand in a dept store Q in Germany they dont even use credit cards, most pay in notes.

markopantelic

Wow.

Lockstep

Meh, I've seen people on forums use Nobel Economists as a crutch for arguments and any opposing viewpoints are met with "he's the Nobel Economist, not you" etc, only for a Nobel Economist with a completely different viewpoint to surface and the arguments to be reversed.


Economists remind me of historians; they often provide compelling arguments for their case but the truth is usually so subjective that arguments can be used either way.

Permabear

This post has been deleted.

truebluedub

Well his CV shows he's hardly left wing and it would be dishonest to spin it as if he were:

Krugman served on the Council of Economic Advisors during the early 1980s under President Ronald Reagan, not exactly a liberal, during the time when the first steps were taken toward the deregulation and big budget deficits that are drawing so much flak nowadays. He also was an adviser to Enron, but that was in 1999, two years before news of the corporate scandal broke.
With all of America's economic troubles, wouldn't it seem that either Barack Obama or even John McCain would want a Nobel Prize economics winner like Paul Krugman their financial team? Well, Krugman wrote earlier this year that Obama's followers were "cult-like" and that the media were giving him a break, compared to the Clintons. And through the fall, Krugman has regularly belittled John McCain's views. In fact, Krugman gave wings to McCain's oft-quoted Sept. 15 statement that the economy was "fundamentally sound." A few hours later on that day - now four weeks in the past, as of today - the stock market started to tank.

http://www.associatedcontent.com/article/1106520/paul_krugman_nobel_prize_winner_not_pg2.html?cat=3

Time Magazine

donegalfella wrote: »

This post has been deleted.

The Nobel Prize says nothing about actual academic achievement? Come on.
Maskin & Myerson, Mundell, Merton & Scholes, Engle & Granger, Mirrlees, Lucas, Nash, Becker, Coase, Modigliani, Stigler, Arrow, even Milton Bloody Friedman ffs. None of these are known for their left-wing views but rather their insights into economic/mathematical theory.

truebluedub wrote: »

Well his CV shows he's hardly left wing and it would be dishonest to spin it as if he were:

In Irish terms, he's centrist. In American terms, he's left.

Lockstep

donegalfella wrote: »

This post has been deleted.

Didn't Friedman also recieve the award?


Krugman wouldn't fit the general left ideology; IIRC he feels sweat shops are natural etc, critical of Obama etc.

Time Magazine

kickoutthejams wrote: »

Krugman wouldn't fit the general left ideology ... critical of Obama etc.

Lol. You're not left unless you want to bail out car companies that nobody wants, apparently.

silverharp

in 2002 Krugman wrote that the Fed should create a housing bubble to offset the dot com crash. Piano wire and a lampost is too good for this way of thinking.


http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

Dubya's Double Dip?
By PAUL KRUGMAN

Published: Friday, August 2, 2002
if the story of the current U.S. economy were made into a movie, it would look something like ''55 Days at Peking.'' A ragtag group of ordinary people -- America's consumers -- is besieged by a rampaging horde, the forces of recession. To everyone's surprise, they have held their ground.

But they can't hold out forever. Will the rescue force -- resurgent business investment -- get there in time?

The screenplay for that kind of movie always ratchets up the tension. The besieged citadel fends off assault after assault, but again and again rescue is delayed. And so it has played out in practice. Consumers kept spending as the Internet bubble collapsed; they kept spending despite terrorist attacks. Taking advantage of low interest rates, they refinanced their houses and took the proceeds to the shopping malls.

But predictions of an imminent recovery in business investment keep turning out to be premature. Most businesses are in no hurry to go on another spending spree. And those that might have started to invest again have been deterred by sliding stock prices, widening bond spreads and revelations about corporate scandal.

Will the rescuers arrive in the nick of time? Not necessarily. This movie may not be ''55 Days at Peking'' after all. It may be ''A Bridge Too Far.''

A few months ago the vast majority of business economists mocked concerns about a ''double dip,'' a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I've repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.

On the surface, the sharp drop in the economy's growth, from 5 percent in the first quarter to 1 percent in the second, is disheartening. Under the surface, it's quite a lot worse. Even in the first quarter, investment and consumer spending were sluggish; most of the growth came as businesses stopped running down their inventories. In the second quarter, inventories were the whole story: final demand actually fell. And lately straws in the wind that often give advance warning of changes in official statistics, like mall traffic, have been blowing the wrong way.

Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic. Should you be reassured?

Bear in mind that business forecasters are under enormous pressure to be cheerleaders: ''I must confess to being amazed at the venom my double dip call still elicits,'' Mr. Roach wrote yesterday at cbsmarketwatch.com. We should never forget that Wall Street basically represents the sell side.

Bear in mind also that government officials have a stake in accentuating the positive. The administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed. Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble.

But wishful thinking aside, I just don't understand the grounds for optimism. Who, exactly, is about to start spending a lot more? At this point it's a lot easier to tell a story about how the recovery will stall than about how it will speed up. And while I like movies with happy endings as much as the next guy, a movie isn't realistic unless the story line makes sense.

E-mail: krugman@nytimes.com

bernardo mac

Sorry to join the chat on a different note but I found Q and A on RTE last night downright depressing. One question for eg. was not answered.It sought the panel's opinions re.the the directors' role in creating the disaster. The selfish and reckless actions of the directors and major shareholdersof Anglo Irish remain unpunished,unanswered.It seems their outrageous arrogance will continue to mock,sneer at those who lost life savings,the taxpayer who now must pay for their misdeeds. We need more than an economic miracle which is highly unlikely,we need and should demand redress from those who contributed in a major way to the economic ruin of many. The culprits resigned/retired with incredibly large lump sums and pensions! This is Madness,this is Economic treason.This state will sink further down the tubes and into anarchy maybe.This citizen is getting out!:mad:

thebman

Was watching that too.

Didn't know what to make of it all TBH. It was all very depressing.

I can't help but feel that Anglo isn't systematic despite what was said. Kept going on about the market reaction to Anglo being nationalised and being in trouble effecting the other banks proving it was systematic but of course the International community thought it was systematic as the government have been saying it is since last September at least. It doesn't prove its systemtic but merely that the International community was listening to the government saying it was systematic and why wouldn't they think the Irish government should at least know which banks are systematic. However it ignores that the government might have alternative reasons for claiming Anglo is systematic when in reality it may not be that may not be taken into account by International investors.

So many fooking games being played with so much at stake one can't help but feel that the Irish government is trying to play a game it is going to ultimately lose at the moment with their attitude that they can spend whatever money they like on whatever they want and ignore the will of the people and logic whenever it suits them.

bernardo mac

Thanks Thebman.I'm not familiar with economic terms: systematic or systemic? Whatever,it is a total ballsup!

asdasd

We are £2,200,000,000,000 in debt. That's two trillion. UK national debt will jump from 44pc of GDP in 2007 to 78pc by the end of 2010. Brown refused to run budget surpluses during the boom years and now he refuses to bite the bullet.

Presumably the UK is a 3 trillion £ econmy then. Is 70% really that bad? No, not really. The debt is normally 30 years so it is like someone on 30K owing 20K over his lifetime.

He needs to raise taxes and cut public spending fast but he won't because he still has delusions about winning the next election. The village idiot would have done a better job.

No he doesn't. Cutting spending and rasing taxes would be the dumbest move ever in a recession. Ireland *has* to do it. The UK does not.

Other countries are just not as indebted as we are. There are no 100% mortgages in Germany and interest only mortgages are illegal. The average Garman carries little personal debt. A million Brits use their credit cards to pay the mortgage! As unemployment mounts people will default. The number of people reliant on unemployment benefit and social welfare services will soar just as the Government needs to cut public spending. We are in for a very rough ride.

well the credit card use for mortgage repayments is absurd ( although I assume it happens occasionally), but unemployment in the UK is not really all tha high ( in some places like the SouthWest is is still at full employment) while Germany is heading towards a 6% GDP drop this year. That may seem like penalizing the frugal, however economies have to be balanced between consumer and export, and Germany does not do that. It may not have a credit card culture, but it depends on everyone else's credit card culture.

Maybe they should actually introduce credit cards and open a few shops on a Saturday afternoon to stimulate domestic demand.

EDIT:

The UK is in a good position because it is cheap. The pound has increased in value but is still historically quite low against the Euro. Around Christmas the average UK MP's basic wage was close to the cutoff point for affordable housing in Dublin ( 60K sterling vs 58K euro). I bet that thousands of micro decisions are taken everyday which bring jobs to the UK rather than the Eurozone: the British buying British more oftern, exports increasing ( like food to Ireland, for instance), in-sourcing, reduced out-sourcing, and so on.

silverharp

here is another clown very funny if it wasnt so serious

https://www.youtube.com/watch?v=INmqvibv4UU

Lockstep

The Economist wrote: »

Lol. You're not left unless you want to bail out car companies that nobody wants, apparently.

This reminds me of The Phantom Tollbooth where Milo goes to the house with all the doors (Fat Man, Thin Man, Giant, Midget) but it's the same guy each time as to a short man he's a giant, to a fat man he's skinny etc etc.

Krugman is a centrist from what I see of him (given that I would be centre left)

Time Magazine

silverharp wrote: »

here is another clown very funny if it wasnt so serious

Yep. Ben Bernanke, 36th most cited economist in history, "a clown". Of course.

kickoutthejams wrote: »

This reminds me of The Phantom Tollbooth where Milo goes to the house with all the doors (Fat Man, Thin Man, Giant, Midget) but it's the same guy each time as to a short man he's a giant, to a fat man he's skinny etc etc.

Krugman is a centrist from what I see of him (given that I would be centre left)

My point is that the left sometimes associate themselves with what are quite stupid ideas and claim anyone who doesn't support them isn't left. (This tendency exists on the right, though it's nowhere near as strong.) A true left-wing position would be to support the shutting down of all those stupid factories the output of which nobody wants and instead spending the money on early education programmes.

Lockstep

The Economist wrote: »

My point is that the left sometimes associate themselves with what are quite stupid ideas and claim anyone who doesn't support them isn't left. (This tendency exists on the right, though it's nowhere near as strong.) A true left-wing position would be to support the shutting down of all those stupid factories the output of which nobody wants and instead spending the money on early education programmes.

Ah now, that sounds more like the extreme left (Socialist Party claiming that Labour are a bunch of right wing capitalists etc)

Both the left and right have extreme wings with a load of shades in between.


Krugman strikes me as a centrist (leaning more towards the left than anything else). but even by American standards he wouldn't be what I'd call left; more centre than anything (and within the left of the centrist position)

Permabear

This post has been deleted.

silverharp

The Economist wrote: »

Yep. Ben Bernanke, 36th most cited economist in history, "a clown". Of course.

well how would you describe someone who couldnt see that the titanic was powering into an iceberg?

Edit- I'm sure he is a brilliant academic , although I hope his work on the great depression will be discredited but he is setting himself up to join the club that has John Meriwether of LTCM as a member.

Lockstep

donegalfella wrote: »

This post has been deleted.

From my limited knowledge of the Nobel Prizes, it tends to go to people who achieve something and these people usually have a political stance. Be it left or right.

Hasn't the university of Chicago won the most Economics prizes? Certainly not a paragon of left wing views.

Time Magazine

silverharp wrote: »

well how would you describe someone who couldnt see that the titanic was powering into an iceberg?

Fallible.

Edit- I'm sure he is a brilliant academic , although I hope his work on the great depression will be discredited but he is setting himself up to join the club that has John Meriwether of LTCM as a member.

Why do you think his work on the Great Depression should be discredited?

Besides that, from what I can see (I'm not a monetary economist) his main contributions have been in the effects of monetary policy at very low interest rates and the inter-play between asset prices and monetary policy. From his listings page, the articles he's published in the absolute best economics journals are:

"Measuring the Effects of Monetary Policy: A Factor-augmented Vector Autoregressive (FAVAR) Approach" (2005)
"What Explains the Stock Market's Reaction to Federal Reserve Policy?" (2005)
"Conducting Monetary Policy at Very Low Short-Term Interest Rates" (2004)
"Should Central Banks Respond to Movements in Asset Prices?" (2001)
"Comment on America's Historical Experience with Low Inflation" (2000)
"Measuring Monetary Policy" (1998)
""Nominal Wage Stickiness and Aggregate Supply in the Great Depression" (1996)
"The Macroeconomics of the Great Depression: A Comparative Approach" (1995)
"The Federal Funds Rate and the Channels of Monetary Transmission" (1992)
"Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries" (1991)
"Financial Fragility and Economic Performance" (1990)
"Agency Costs, Net Worth, and Business Fluctuations" (1989)
"Unemployment, Inflation, and Wages in the American Depression: Are There Lessons for Europe?" (1989)
"Credit, Money, and Aggregate Demand" (1988)
"Employment, Hours, and Earnings in the Depression: An Analysis of Eight Manufacturing Industries" (1986)

and so on. So his experience is in business cycles, monetary policy at low rates, the effect of monetary policy on the financial sector, and the Great Depression.

Can you think of any combination of academic interests that are better suited to the current crisis than Prof. Bernanke? To compare him to a finance guy who didn't understand tail risk is stupid.

kickoutthejams wrote:

Ah now, that sounds more like the extreme left

I don't think so. I think it's distinctly (exclusively?) the centre-left that support bailing out non-vital industries. The centre-right have more sense and the far-left want complete nationalisation.

SkepticOne

Maybe he's good at analysing things after the fact rather than predicting them?

silverharp

The Economist wrote: »

Can you think of any combination of academic interests that are better suited to the current crisis than Prof. Bernanke? To compare him to a finance guy who didn't understand tail risk is stupid.

I don't think so. I think it's distinctly (exclusively?) the centre-left that support bailing out non-vital industries. The centre-right have more sense and the far-left want complete nationalisation.

It's the conclusions he drew , his basic idea if I understand it is that the Fed and gov. didnt act quickly enough and casued the great depression (Debatable), the Japanese didnt act quickly enough and their economy slumped, he (the Fed) will get ahead of a downturn and prevent a recession turning into something worse. Its a huge experiment which will fail as it has failed so far. Every step along the way they have taken measures that havnt worked. Simple logic dictates you cant solve a problem created by easy credit with easy credit.

here is his 2002 speech

Deflation: Making Sure "It" Doesn't Happen Here.
http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm

and here are the scores on the door so far (from the Mish blog)

Bernanke's Scorecard

Here is Bernanke’s roadmap, and a “point-by-point” list from that speech.

1. Reduce nominal interest rate to zero. Check. That didn’t work...
2. Increase the number of dollars in circulation, or credibly threaten to do so. Check. That didn’t work...
3. Expand the scale of asset purchases or, possibly, expand the menu of assets it buys. Check & check. That didn’t work...
4. Make low-interest-rate loans to banks. Check. That didn’t work...
5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work...
6. Lower rates further out along the Treasury term structure. Check. That didn’t work...
7. Commit to holding the overnight rate at zero for some specified period. Check. That didn’t work...
8. Begin announcing explicit ceilings for yields on longer-maturity Treasury debt (bonds maturing within the next two years); enforce interest-rate ceilings by committing to make unlimited purchases of securities at prices consistent with the targeted yields. Check, and check. That didn’t work...
9. If that proves insufficient, cap yields of Treasury securities at still longer maturities, say three to six years. Check (they’re buying out to 7 years right now.) That didn’t work...
10. Use its existing authority to operate in the markets for agency debt. Check (in fact, they “own” the agency debt market!) That didn’t work...
11. Influence yields on privately issued securities. (Note: the Fed used to be restricted in doing that, but not anymore.) Check. That didn’t work...
12. Offer fixed-term loans to banks at low or zero interest, with a wide range of private assets deemed eligible as collateral (…Well, I’m still waiting for them to accept bellybutton lint & Beanie Babies, but I’m sure my patience will be rewarded. Besides their “mark-to-maturity” offers will be more than enticing!) Anyway… Check. That didn’t work...
13. Buy foreign government debt (and although Ben didn’t specifically mention it, let’s not forget those dollar swaps with foreign nations.) Check. That didn’t work...