Ep. 204 Krugman’s Worst Blunders

7 September 2019     |     Tom Woods     |     8

We take listener questions in this episode, from Krugman’s worst blunders, to how the Fed might return interest rates to their natural level, to a former Fed official’s implication that the Federal Reserve ought to make Trump’s reelection more difficult.

Related Links

More Than Quibbles: Problems with the Theory and History of Fractional Reserve Free Banking,” by Bob Murphy

Isn’t the Capital Surplus a Good Thing?” by Bob Murphy

The 19th-Century Bernanke,” Dan Sanchez

Need More Episodes?

Tom and Bob have their own podcasts! Check out the Tom Woods Show, the Bob Murphy Show, and the Lara-Murphy Report.

Audio Production by:
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  • LP

    I think Bob’s wrong on Simon’s second question, at least potentially. If the interest rate is lowered by prohibiting loans above 4%, the competition for 4% loans will increase, as everyone that would qualify for a 6% loan will have to make their case to the loan originators for why they should be given a loan at 2/3 the rate they *should* get. By and large, they won’t be granted the loan (assuming no requirement to make loans to ‘underprivileged’ people), so there won’t be a boom-bust-cycle. Consider the possible prohibition on ‘payday’ lending, or capping credit card interest at 15%. We wouldn’t expect this to lead to *more* lending. I suppose this would leave the banks holding slightly higher balances, which might lead to them offering a few more loans at 4% than they otherwise would, but I don’t think it would lead to the same yield-chasing behaviour we see under the FRS.

  • martinbrock

    If Barack Obama or another “leftist” President were publicly threatening to fire the Fed chairman for failing to print enough money to paper over the financial effects of his massive deficits, tariffs, sanctions and generally protectionist trade war, Tom and Bob would cheer anyone declaring the President a menace, particularly a Fed official “threatening to crash the economy” by refusing to go along with printing the money. I know they would, because I know what’s in their heart of hearts.

    • Drew

      Why do you think that is what he would do?

      • martinbrock

        Because he’s ordinarily a consistent libertarian.

        In case the sarcasm wasn’t clear, I obviously don’t know what’s in Tom’s heart of hearts, but I can pretend to know just as Tom pretends to know what’s in Dudley’s.

  • SirThinkALot

    Wait the fake alien invasion? Wasnt that literally the plot of the bad guy from Watchmen?

    • http://ludwigvanel.wordpress.com Ludwig van El

      In some SF-scenarios, the invasion has already taken place. That’s how the politicians came to earth; they were dumped here, with earth serving as a sort of galactic Austraila (where Britain dumped some of its criminals, when the prisons were overcrowding.)

  • davegrille

    There can be disadvantageous trade deals. Whether or not they are deficit doesn’t determine whether they are good or not.

  • martinbrock

    Now, Trump is demanding negative interest rates to paper over his massive budget deficits and trade war. If the Fed doesn’t deliver the negative rates, is it politicizing monetary policy to dump Trump, or is it politicizing policy by delivering the negative rates? Is there any scenario in which Trump is politicizing monetary policy and the Fed is not?