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Paul Krugman one year ago: Trump's election has the markets plunging and they will probably never recover
Oh, and a global recession too. Oops.
Being wrong is Paul Krugman's specialty. Yeah, I know he won a Nobel Prize in Economics. And Yassir Arafat won a Nobel Peace Prize. Your point?
The fun thing about Krugman is that he's willing to make such brash predictions, usually having to do with economic disaster being created by Republicans. And when he turns out to be wrong, since the Internet is forever, we get to do what I'm going to do right now.
It's a year ago: Election night 2016. You remember how caught off guard everyone was by the results, and the oh-so-wise pundits of our society were scrambling to tell us what it all meant. Late at night, as it became clear that Donald Trump was going to win, Krugman fired off a blog post for the New York Times that foretold great calamity:
It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.
Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.
It’s true that we’ve been adding jobs at a pretty good pace and are quite close to full employment. But we’ve been doing O.K. only thanks to extremely low interest rates. There’s nothing wrong with that per se. But what if something bad happens and the economy needs a boost? The Fed and its counterparts abroad basically have very little room for further rate cuts, and therefore very little ability to respond to adverse events.
Now comes the mother of all adverse effects — and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.
This is just beautiful. Let's go through it point by point.
The Dow Jones Industrial Average as of today is 23,461.94. That's actually down more than 100 points from yesterday because traders are nervous the Senate will delay the corporate tax cut. But on the day Krugman wrote that column the Dow was 18,808. So I think it recovered.
Global recession? Er, we've just had two consecutive quarters of 3.0 percent growth. That didn't happen a single time under Obama. So: No global recession.
As for the independence of the Fed, contrary to Krugman's apparent expectation that Trump would appoint a wild-eyed right-wing supply sider to chair the Fed, he appointed Janet Yellin BFF Jerome Powell, who is likely to steer the Fed pretty much the same way Yellin did. Here is an area where I wish Trump had done what Krugman thought he would do. But he didn't.
So how wrong is Paul Krugman? Completely wrong. About everything. As usual.
Then again, it was late at night and he said he didn't really care all that much. The rest of us don't really care what he thinks either.
Dan's new novel, BACKSTOP, is a story of spiritual warfare and baseball. Download it from Amazon here!