Ep. 18 Krugman on China: No Matter What Happens, He’s Proven Right!

15 January 2016     |     Tom Woods     |     15

This week’s column is classic Krugman. No matter what happens, he can claim to have predicted it. Or when a country obviously follows his advice, he finds some loophole on which he can blame the ensuing disaster. In this column Krugman discusses the recent plunge in Chinese stock markets, and what if anything it portends for the rest of the world. Finally, a column about economics, at least!

Krugman Column

When China Stumbles” (January 8, 2016)

Related Graphics

Yuan vs USD

Treasury Dump

China Output

China Export

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  • Lucien

    Krugman’s whole life mission is to make excuses for the growth of government. He is a little smug stool pigeon.

    • Luke Perkins

      I think you made a typo… I’m just sure you meant to reverse “stool” and “pigeon” =P

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    I actually disagree Bob here; my interpretation of the empirical evidence shows that growth (caused by innovation or regulatory reform or trade openness or somesuch) causes high investment rates, but not visa versa. Krugman’s certainly being misleading here, but he’s not clearly wrong on this point.


    • Tyler Wombat

      vice versa

    • Levi Russell

      Empirical studies can’t determine causality of this kind. “Granger causality” is not the same as actual real-world causation; it only speaks to prediction.

      • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

        That’s why I said “my interpretation of”.

  • Tyler Wombat

    in the 80’s and 90’s, the knuckleheads at American magazines such as Forbes and Fortune were using the “Purchasing Power Parity Index” to prove that the U.S.A. is totally awesome and better than Japan and Germany, et cetera. I noticed that this schtick has disappeared from the typical Keynesian analysis. Maybe they don’t use it anymore as it now proves that China is richer than the totally awesome country. But it may somehow make a comeback. After all, some “economists” at American “universities” are still using the Phillips Diagram.

  • Jan Masek

    In chess Krugman would move his rook to J9 to score the first ‘out’ in the history of the game.

  • David A Galler

    Krugman is so radical ,but he is in total support of the status quo.

  • Tyler Wombat

    Murphy still has a cold.

  • Lance Winslow

    There is actually a principle in Philosophy Logic Circles that if a theory can prove itself right or wrong, or if the results regardless of what they (positive of negative) are confirm the theory then the theory is false.

  • P_W1


    I posted this to RPM’s facebook, but couldn’t attach the graph/picture:

    I just learned that, because of the exchange rate regime of China, the US persuaded (forced?) the Chinese to raise the value of the currency in order to raise the price on Chinese goods in the domestic US, moving the supply curve left. The US consumers now pay more, however the Chinese suppliers apparently reduce the price of their goods, but not all the way to the original US consumer demand/China supply price before the shift. So are the Chinese suppliers just devaluing their goods after the Renminbi appreciates in the foreign exchange market? And are the suppliers giving away some value by reducing the price?

  • Luke Sacher

    The two smartest guys in any room have raised the sarcasm bar to new heights… and it’s dripping with condensation! I’m so loving this… Bravo, good doctors. Pop goes Krugtron the weasel! <3

  • Willy1964

    – On the topic of the “Sequester”: It didn’t have such a dramatic impact as Krugman wants uo to believe. Yes, the plans on its own were good to reduce spending. Becauseit was in response to the downgrading of the US/US debt some 6 months before.
    But, as David Stockman has pointed out, after the “Sequester” was approved, Congress passed a bunch of (spending) laws that effectively almost completely repraired the (spending) damage that was done by the “Sequester”.

  • Willy1964

    – On the topic of China: Here the austrian school follower called Bob Murphy doesn’t know the facts. By applying the austrian school of thoughts he completely overlooks the ACTUAL facts and situation and makes a complete fool of himself.
    – Krugman is actually right. He already pointed out in the mid 1990s that the chinese growth model was based on emphasizing chinese production at the expense of chinese labour. It was a wonderful combination to turbo charge chinese growth in the 1980s and 1990s. As a result China saw its Trade Surplus grow year after year. It also meant that chinese households/workers had to (financially) foot the bill (think: low/reduced wages) of that chinese growth. Chinese workers/households saw their income share of GDP shrink every year since – at least – the early 1990s. So, when Bob Murphy starts yapping about “high savings” then he’s missing the point.
    The result of that overemphasizing on growth/production was that the chinese economy had – at least – one financial crisis (read: debt crisis) in the 2nd half of the 1990s. And this crisis occurred in the corporate sector !!!! Not the household sector !!! But the household sector was FORCED to foot the bill of the rescue of that same corporate sector by accepting an even lower income share of GDP (=wages).
    – Remember: an economy is about “Supply & Demand”. If you over-emphasize either “Supply” or “Demand” too much then that’s one reason why you – sooner or later – run into financial trouble. See the US in the 2000s (and 2008).
    – By empasizing production over comsumption China has already in the late 1990s too much production of a whole range of goods. And that’s why China started to build those empty ghost cities in the early to mid 2000s. If China wants to build a more stable and sustainable economy then MUST increase wages and allow interest rates to rise. In order to stimulate demand.
    – A person who has written extensively on this matter is one Michael Pettis who lives and works in China (among others as an associate professor at a university in Beijing).