US Markets “Feel Sick” After Bernanke/Krugman Bet on Bull

Below is a short scene from Paul Krugman’s recent visit to the funny farm where they send Federal Reserve Chairmen when they retire. It’s an odd place, where the plants are overwatered until the ground is bare (but at least the gardeners are never out of a job). Meanwhile, the cows are shipped to China to be milked, then shipped home again. Such inefficiencies might be puzzling, but to a Keynesian they are the hallmarks of a well-regulated economy.

While riding a bull market, investors are more than happy to eat up the stories fed to them by government economists and the Fed. It might seem like a good bet at the time, but as some investors are learning this week, you won’t end up any richer. Peter Schiff has responded directly to Krugman’s bull in the past, calling him out on his terrible track record:

In the aftermath of the bursting of the stock market bubble, [Krugman] was advocating that the Federal Reserve do what it could to inflate a housing bubble… He didn’t forecast the housing bubble, he advocated for one. He wanted one. He thought it was good monetary policy. He thought what we needed was another bubble. We needed the wealth effect and if we weren’t getting it from the stock market, we needed to get it from the real estate market. So Krugman thought it was a good idea to have a housing bubble. He didn’t understand the ramifications. He didn’t understand the concept of malinvestments, that’s why he doesn’t know the word…”

If you want more, listen to some of Peter’s old podcasts about Krugman here and here. Earlier this year, Tom Woods recorded an excellent podcast refuting the major ideas of Keynesians. Listen here.

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Jon Pawelko publishes the web comic Lampoon The System to poke fun at insane economic policies and educate the public on sound economics.
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