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Stagflation Keeps Making A Fool Out Of Paul Krugman

How many times can an Ivy League economist be wrong before they have
to turn in their diploma and their Nobel Prize and move on to a job
better suited for them, such as food service management?  Apparently
in the world of establishment economics the best path to success is to
fail upwards; Paul Krugman is the proof.

Outside of financial circles the majority of people don't know or care
who Krugman is, but it's a mistake to dismiss his influence within the
mainstream media and politics.  You will hear many of his arguments
repeated by human parrots when you least expect it.  His faulty
narratives and illogical conclusions tend to spread into regular
dinner table conversation in the weirdest ways.

His best known terrible prediction is perhaps his internet prophecy.
In 1998 he predicted that the growth of the web would 'slow
drastically' and would have little overall meaning for the global
economy, comparing the internet to the fax machine in terms of
relevance.  This might seem like a harmless fail today, but the
problem is not the prediction, it's the fact that Krugman consistently
proves that he is arrogant enough to venture wild analysis on subjects
he has zero understanding of.  This is a characteristic that has
followed him around for most of his career.

Another habit of Paul Krugman is his propensity to flip-flop on every
economic issue so that when the consequences of events become readily
clear he then searches through his backlog of hundreds of
contradictory editorials and contradictory comments to find the one
prediction that fits the bill; he then proclaims himself the great
prognosticator of crisis or recovery depending on whatever happens
first.

His very limited mentions of the possibility of a “housing bubble” in
articles published in 2006/2007 conflicted greatly with his unicorn
optimism on stocks going to the moon.  When the housing bubble
imploded, he declared that he predicted the whole thing.  In truth,
his analysis was a joke while others like Ron Paul and Peter Schiff
had outlined in great detail exactly what would happen to the housing
market years in advance.  All Krugman did was vaguely predict a
“slowdown” at some point; he never predicted the epic worldwide credit
disaster that actually occurred.

Krugman went on to champion an endless array of bailouts, stimulus
packages, QE and near zero interest rates in response to the credit
crisis.  Keynesians only have one answer to every economic problem,
which is government spending and central bank fiat printing ad
nauseum.  Krugman even suggested that the initial bailouts of
2008/2009 were “too small” and argued in favor of trillions more.  He
was not aware at the time, but a GOA audit of the early bailouts,
pursued only because of the relentless efforts of Ron Paul, would
reveal that the Federal Reserve had actually created over $16 trillion
from thin air.

It is actually the Keynesian arrogance (or perhaps malice?) of central
bankers and economists like Krugman that led directly to the
stagflationary crisis we are witnessing right now.  While supply chain
issues certainly abound, the US was suffering from rising prices well
before the covid pandemic or the war in Ukraine and resulting
sanctions on Russia.

In fact, these events act more like a fog or cover for the REAL cause
of inflation, which is a decade of fiat printing by central banks in
classic Keynesian fashion.  The $6 trillion-plus in covid stimulus in
2020 was nothing more than the straw that broke the camel's back.

Krugman is partly culpable.  This might be the reason why he refused
to acknowledge the stagflation threat for years despite mounting
evidence, calling price inflation “transitory” until the end of 2021.
Then he flip-flopped as usual and noted the “possibility” that prices
might stay high and that he might be wrong.  This was only after
ridiculing many analysts in the alternative economic sphere for
sticking by their inflation predictions.

Inflation/stagflation often takes time to circulate through an economy
and register in a way that noticeably affects the public.  In the
1970s, the process took around 10 years to culminate.  It grew
exponentially until the early 1980s when Paul Volcker finally hiked
interest rates to around 20%, crushing many businesses in the process.
Because America has enjoyed the rise of the dollar as the world
reserve currency since that time, trillions in fiat stimulus was not
an immediate threat because those dollars were sure to circulate into
the coffers of numerous foreign banks and stay overseas.  Now, the
dollar's reserve status is in decline, more and more greenbacks are
staying within circulation in the US, there are more and more dollar's
chasing less and less goods and the party is finally over.

A week ago Krugman once again put his foot in his mouth.  After
admitting that he was wrong on stagflation, he flip-flopped, stating
that the 'stagflation narrative is collapsing' and dismissed concerns
about higher prices.  And, as always he attacked other economists,
saying they were just 'propping up' a threat that's in reversal.

Krugman's claim was that the Fed's 75 bps rate hike along with falling
stocks was an indicator that inflation was over.  He refused to even
entertain the idea of stagflation, which is a combination of rising
prices and declines in other sectors of the economy including GDP and
employment.  Krugman's flip-flop was built on a naive understanding of
inflation/stagflation and what it entails.  For him, plunging stocks
mean deflation, and being a Keynesian, deflation cannot be tolerated.

Then, the CPI print came in on Wednesday and made Krugman look rather
foolish, with official inflation numbers hitting 9.1% and new 40 year
highs, well above market expectations (and Krugman's expectations).
Krugman refused to admit defeat, saying that 9.1% inflation was not
much to be worried about.

His argument?  That the CPI print is “outdated” because of recent
declines in stocks and gasoline.  This is the same idiotic narrative
regurgitated by Joe Biden and the White House recently.  If CPI had
come in lower than last month, would Krugman and Biden be shaking
their heads and telling the public that the numbers are “outdated” and
not a reflection of the real situation?  No.  They would be crowing on
the mountain tops and demanding praise.  They would be ignoring the
fleeting circumstances of stocks or gas prices instead of
hyperfocusing on them.

But what is reality?

CPI is actually a rigged statistic designed to downplay real inflation
rates.  If we were to calculate inflation according to the methods
used by the government in the 1970s and 1980s the actual inflation
rate would be closer to 17%.  But even if we ignore true inflation, a
CPI print of 9.1% is not to be taken lightly.

Stagflation is a fact according to the spread between rising prices
and falling GDP as well as frozen wages.  The only technical factor
that is missing is growing unemployment, but that is a situation
developing now as job growth slows and more companies announce
impending layoffs.

Stock markets have little to no bearing on stagflation status (sorry
Paul).  Stocks are a TRAILING indicator of economic instabilities that
have long been in play, not a leading indicator of what is about to
happen in the future.  As for gasoline prices falling, they have
barely dipped.  And, this minor dip was probably helped along by Biden
once again dumping millions of barrels of oil onto the market from the
US strategic reserves.  This is not enough to dismiss stagflation, not
by any means.

For Krugman, the bigger picture doesn't exist.  He is only interested
in the data of the moment and being right no matter what.  If even one
indicator supports his biased position, he will focus on it and ignore
hundreds of other indicators that contradict his position.  When his
position becomes obviously untenable he shifts stance and acts as if
he saw the danger coming all along.  Again, how many times can an
economist be wrong or flip-flop on his claims before he is no longer
relevant?  It would seem that Krugman's novelty has worn off and now
it's time for him to hang up his hat.