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« Loosening the standards | Main | Alcoa can wait »

Jul 17, 2010

Comments

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bubba

"And he's still on teevee."

And you're still blogging about this subject without understanding most aspects of the issue.

Cue the expected response......

Andrew Brod

Oh, I think Ed understands just fine.

Well, except for one thing. Ed, I think you're too hard on Kudlow. He had the bad luck to be saying those things while a Republican was president. If a Democrat had been president in July 2007, Kudlow would have been predicting imminent doom and obviously he would have been right. Kudlow is less a naive and false prophet of free markets than he is a loyal hack of Republican politics.

Bubba

"Oh, I think Ed understands just fine."

Given my previous experience with you, that's exactly what I would expect you to say.

In addition to clearly not understand the issue in question here, anyone who idolizes Krugman and Roubini has no business talking smack about Kudlow.

Andrew Brod

I'm glad that my common sense is predictable.

Spag

But Ed, you said subprime mortgages weren't the problem so why are you getting on Kudlow's case other than he has the bad luck of being published in a conservative magazine?

Spag

Also noteworthy: the absence of any accountability for all of the incorrect predictions made by the little creep, Paul Krugman.

Andrew Brod

"All of the incorrect predictions made by Krugman"? Really?

Well, there was this one. Oh, right--that one wasn't incorrect. Okay then, what's the list of Krugman's prediction errors? It seems to me that he's been disturbingly prescient.

Andrew Brod

Of course the "little creep" remark makes Spag sound small. All Ed's post is doing is holding Kudlow accountable for his predictions. Spag's preference is to take his usual route down Ad Hominem Street.

New Low

kudlow's problem was not that he was wrong about the market or the underlying health of the global economy or the flow of information but that he wrote at nro? that is some aggressively stupid logic even considering the source.

Ed Cone

NL, Kudlow's whiff three years ago was not pretty, although anyone who predicts the market gets it wrong sometimes. His follow-up from early '08 does suggest a certain indifference to reality.

It's his gross misunderstanding of the underlying conditions that I find more damning. Markets were highly opaque, and the fundamentals had been swamped by bubble logic, but he got those things exactly wrong, and in a way that suggests the fundamentals were not really what he was writing about in the first place, which makes him even more unreliable. He's a shill, a pitchman, not an analyst.

You're right that where he got it wrong is irrelevant. "Agressively stupid" sums that particular argument up pretty well.

Spag

Then perhaps he should hold Krugman accountable for all of his erroneous predictions. You sound like a shrill little girl, Andrew. Really, this game isn't for you.

"We're at the tail end of the largest economic intervention since World War II, and even on its own narrow, nebulous terms, it has been a colossal failure. The failure is obvious to working people. It's obvious to unemployed people. It's obvious to kindergarteners, to dogs and cats. Only Paul Krugman persists in thinking good things will happen if we just throw more money on the barbecue." - Tim Cavanaugh, Reason.

That last one was just for fun. Krugman has been predicting recessions every year since Bush took office. Like they say, even a broken clock is right twice a day.

bubba

" 'Agressively stupid' sums that particular argument up pretty well."

I refer readers back to my first comment on this thread.

Andrew Brod

Ah yes, again Spag goes for the ad hominem rather than address the issue. Well, that's our Spag.

Apparently as evidence, Spag quotes Reason to argue that Krugman is a dummy. Well, that's as useful as quoting the Socialist Worker as evidence that Bush was evil. Moreover, the Reason writer is demonstrably wrong in claiming that Krugman is alone in his views. No one said that the interventionist view is universal, but it's widely held among economists. Spag is free to argue that economists are boneheads, but not to claim that economists generally think the stimulus didn't work.

One may think Krugman's wrong, and one may believe that his Nobel prize accords him no particular respect (N.B. "the little creep"). But one may not, at least if one wants to be taken seriously, make up facts. Of course, perhaps being taken seriously isn't Spag's goal, so it may be unfair to hold him to that standard.

But none of this is on-topic, is it? Attentive readers will recall that Spag's claim was that Krugman had many "incorrect predictions." As smart readers will note, a prediction is when one makes a statement about what will happen in the future. Spag's attempt to change the subject to talk about his belief (and the belief of writers at Reason!) that Krugman is a dummy was a nice try to divert attention.

Given that Spag's first attempt to support his claim failed (well, I'm sure Bubba thought it was great), perhaps he can try again. What are "all of the incorrect predictions" Krugman has made? I presume there have been one or two, maybe more. But Spag's claim was "all of the incorrect predictions," implying that there have been many. So speak up.

It's also wrong to say that Krugman has been predicting recessions every year. To be sure, he's a Cassandra. But the thing about the Cassandra of Greek myth was that she was right. Ignored, but right.

Spag

Andrew, I predict it will rain again. Eventually I will be right.

I call Krugman a little creep because he is an arrogant little creep. That's my opinion, just because I put it into the written word alongside my premise about Krugman being wrong a lot doesn't make it an ad hominem attack.

I also think OJ Simpson is an asshole.

Bubba

Where should we start on Krugman?

Let's try this, straight from the horse's....mouth.

"Furthermore, while Fannie and Freddie are problematic institutions, they aren’t responsible for the mess we’re in.

....So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works.

....Fannie’s and Freddie’s political machinations didn’t play a significant role in causing our current problems."

To which Conn Carroll aptly repudiated here concluding with

".....Krugman is trying to convince his readers that Freddie and Fannie are only innocent bystanders in the housing bubble. Fannie and Freddie purchased 44 percent of the subprime securities in 2004. Does that sound like the behavior of an innocent bystander to you?"

I'm tempted to summarize in advance certain replies this comment might receive, but I don't want to deny those certain repliers their small pleasure in making it themselves.

Bubba

And then there's Former Enron advisor Krugman's clear advocacy in favor of a housing bubble in 2001.

Noteworthy:

"Many of Krugman's own quotes from that era suggest that he was an aggressive advocate of low-low interest in order to bring the housing market to a broil, thus bringing us out of the recession."

Well golly gee whiz!

Somehow, that particular fault of Krugman's was never the subject of a thread on this blog, was it?

Andrew Brod

More misdirection attempts...

Spag can't back up his own claim, and so he starts talking about O.J. Ohhhkay.

Bubba accuses Krugman of being an "Enron advisor," which is technically accurate but a bit weird given that Krugman was a huge critic of Enron back in the early 00's. Some economists thought that California electricity rates were caused by systemic problems and policy errors. I don't think they were entirely wrong, but Krugman thought it was manipulation by Enron. He was proved right. And yet his being an "advisor" to Enron brooks no common sense. (And never mind the numerous Bush administration officials, like Lawrence Lindsey and Robert Zoellick, who did the same kind of work for Enron that Krugman did.)

As for Krugman's alleged promotion of low interest rates and hence the housing boom, one can only sigh upon seeing Bubba's "evidence." The first piece is an undated German interview, but it says it was done about the time the euro was launched. Well, that was 1999. The federal funds rate hovered around 5% in 1999. It was a very different economy than we saw in 2001, let alone the years thereafter when the Fed (not Krugman) kept dropping the fed funds rate in the face of a weak recovery. I realize that the conservative blog posts that Bubba reads (apparently exclusively) believe this means something, but it really doesn't. And therefore there's no point in further trying to check Bubba's math, because he's answering the wrong question.

Again, guys like Spag and Bubba are free to think Krugman or anyone else is a dummy. And while I said before that they shouldn't make stuff up, it's obvious that no one can shame them into stopping.

But one thing is quite clear: they have no examples of that which Spag claimed, which was numerous examples of Krugman making inaccurate predictions. Therefore, Ed wasn't slanting things by mocking Kudlow's all-glory-to-the-bull-market prediction and leaving out Krugman's allegedly more numerous errors. There were no such errors.

Q.E.D.

Bubba

"I realize that the conservative blog posts that Bubba reads (apparently exclusively) believe this means something, but it really doesn't."

One can only sigh at responses like Brod's.

What the previous post tells us is so-called "educated" people like Brod will spin almost anything to mean something which fits their not so carefully crafted narrative, but demonstrates nothing. It's usually follwed up by their own little victory dance.

"Q.E.D."!

As if......

Meanwhile, the legacy of Krugman the Clown grows:

"We're at the tail end of the largest economic intervention since World War II, and even on its own narrow, nebulous terms, it has been a colossal failure. The failure is obvious to working people. It's obvious to unemployed people. It's obvious to kindergarteners, to dogs and cats. Only Paul Krugman persists in thinking good things will happen if we just throw more money on the barbecue."

How much more of this discussion do you want to have, Brod?

Bubba

Nassim Taleb:

"The definition of a robust society: where Paul Krugman could exist without harming others."

Andrew Brod

How much more of this discussion do I want to have? Well, none. It's not a discussion when one party doesn't answer the question but keeps talking anyway. If Bubba really thinks that Spag's Reason quotation is proof of a failed prediction, then (as is so often the case) there's no point continuing. You win!

Ed Cone

"How much more of this discussion do I want to have?"

But you haven't even gotten to the part where Krugman forced Kudlow to say all that stuff about the endless bull market and the underlying awesomeness of the global economy, all while hiding behind his own housing-bubble warnings. Evil freaking genius, he is.

Seriously, if you argue with a crazy person a passerby can't tell who's crazy.

Andrew Brod

I know, I know. I'm done now.

cheripickr

Krugman-constant pessimist, fans ignore long periods of prosperity. Eventually is right=genius.

Kudlow-constant optimist, bashers ignore long periods of prosperity. Eventually is wrong=moron.

Andrew Brod

Kudlow's not an optimist these days. A Democrat's in the White House!

cheripickr

Even morons get it right every now and then.

Ed Cone

Kudlow "eventually is wrong."

No -- he was very wrong at the time on the fundamentals of the economy and the nature of global markets, and horribly wrong on the Dow within two weeks, and again a few months later.

That "long period of prosperity" was built on sand. Kudlow said it was stone.

You can argue that it doesn't matter if he was wrong or right -- I think it matters when shills are passed off as analysts -- but arguing that he wasn't wrong in the first place is a non-starter.

cheripickr

I hate it for all those people who just thought they were doing well all those years. Horrible, horrible.

Bubba

"How much more of this discussion do I want to have? Well, none."

Of course not.

You and Cone have nothing of substance that supports your "Kudlow=Bad", "Krugman=Good" meme you consistently support.

I can understand Cone not knowing what he's talking about here, but you, quite frankly, shouldn't have any excuse on this subject.

The only thing Cone has gotten right on this issue is his "I think it matters when shills are passed off as analysts", but it was directed at Kudlow, instead of Krugman, where the label is truly deserved.

cheripickr

I don't understand all the idolatry and villainizizing of these economic fortunetellers anyway. Smacks of team play. I'm more interested in those who shape the future than predict it. I've never found any practitioner of the latter who was good enough to be of much use anyway.

JC

There were dangerous ideas during the housing bubble that need to never come back. For example, the AAA ratings on securities by lumping a bunch of junk together. The glue that held those together was an ASSUMPTION of continued house price appreciation. I have linked this piece, "Absence of Fear" by Robert L. Rodriguez, CFA, First Pacific Advisors numerous times, but am unsure if anyone follows the link or reads it.

“What are the key drivers of your rating model?” They responded, FICO scores and home price appreciation (HPA) of low single digit (LSD) or mid single digit (MSD), as HPA has been for the past 50 years. My associate then asked, “What if HPA was flat for an extended period of time?” They responded that their model would start to break down. He then asked, “What if HPA were to decline 1% to 2% for an extended period of time?” They responded that their models would break down completely. He then asked, “With 2% depreciation, how far up the rating’s scale would it harm?” They responded that it might go as high as the AA or AAA tranches. Adding

You can play with the math all you want, but if you bake in assumptions, you can get it to spit out whatever numbers you want. If you assume home prices go up 10% a year, you don't care what the mortgage default rate is, you just foreclose and sell the home for more than what the mortgage was.

We just had financial reform legislation pass. How people view the causes of problems makes a big impact on how they view solutions, and why post-mortem discussions can be useful.

JC

By June 2007, the Case-Shiller index composite 20 had been flat for two years: Links to data. The degree to which the doubling of that index from Jan 2000 to late 2005 was underestimated, as were the impact of the ceasing of the increase, and the eventual decrease. In 2007 home prices had been stagnant for two years, so people should have been paying attention to and talking about that, but unfortunately, few were.

JC

Defending Kudlow Complete with The Modern Kudlow To Standard English Translation Guide.

Andrew Brod

As can be read above, the claim made here was that Krugman has made many "incorrect predictions." No one who believed that (and was commenting on this blog) could come up with even one example, whereas I (without much looking) came up with an example of a right-on-the-money prediction by Krugman.

Here's another. More precisely, Krugman said in late 2009 that he didn't believe the widely held prediction that interest rates would rise sharply. He was right.

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